Amazon’s Advertising Services segment is delivering the dough.
It generated $12.8 billion last quarter, up by a cool $2 billion year over year.
Meanwhile, Amazon’s net sales increased by 10% in Q2 and profitability doubled from $6.7 billion to $13.5 billion, according to the company’s earnings report on Thursday.
Making more than $12 billion in a single quarter sounds pretty good. But the numbers are even more eye-popping if you zoom out. As CEO Andy Jassy flexed to investors, Amazon Advertising has now earned $50 billion over the past twelve months.
“Advertising remains an important contributor to profitability,” said CFO Brian Olsavsky.
However, unlike in previous quarters, when it appeared that almost all of Amazon’s profit margin was being driven by ads growth, this time the profit growth is so extreme that there must be sources other than advertising.
To wit, there was another factor contributing to Amazon’s revenue surge this past year. If you were to scour the earnings call transcript for instances of the word “ads,” what you would find are far more references to “workloads” – because everything is about generative AI tech nowadays.
No investor asked about the advertising or media business. By comparison, Project Kuiper, Amazon’s plan for global broadband distribution by satellite, surfaced constantly, since it’s a strain on the overall profit margin.
But there’s a lot more juice to squeeze from the ads business. Jassy gave some indication that Amazon is far from satisfied with its $50 billion run rate on advertising.
Today, straightforward sponsored product listings drive the majority of Amazon’s ad revenue, he said, which the company doesn’t break out by channel or format. But despite how huge that business is, it may someday soon not even be Amazon’s top ad product.
“Even with this growth, it’s important to realize we’re at the very beginning of what’s possible in our video advertising,” Jassy said.
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The most “exciting opportunity” for brands, he said, will be to directly connect business outcomes, such as a product sale or subscription signup, to advertising that’s traditionally been focused on driving awareness, such as TV.
“We’re able to do that through our measurement and ad tech,” Jassy said.
