Amazon Advertising is plotting its move to grab upper-funnel ad budgets.
The advertising services group earned $17.3 billion in Q4 2024, up 18% year over year.
“We remain pleased” with the steady double-digit growth of the ad business, now coming off a “very large base,” as CEO Andy Jassy put it to investors during the company’s quarterly earnings report on Thursday.
The company is also “quite pleased” with the first year of Prime Video with ads, Jassy said.
Expanding its streaming ad business has “made it easier to do full-funnel advertising with us,” he said. Amazon already had the ad units and data close to the point of sale. Now the company can consolidate the upper-funnel video and branding budgets.
The ad business has now reached a $69 billion annual run rate, he added.
For most ads businesses, multiplying the holiday season by four is hardly indicative of an actual annual run rate. Q4 is usually disproportionately stuffed with ads budget.
But there’s everyone else, and then there’s Amazon Ads. Amazon came darn close to catching its Q4 2023 run rate during its full-year 2024 earnings – a couple billion dollars shy on a $56 billion total.
Speed to action
Amazon is also spending heavily to continue speeding up its delivery rate and increase the products and places where online sales can be delivered within an hour, a cost Jassy justified to investors on the call.
“We have not yet seen diminishing returns of being able to continue to improve the speed of delivery,” Jassy said. And Amazon has tested the matter closely, including testing the other end of the barbell with services like Amazon Haul, which launched in Q4 and offers very cheap merchandise at slower overall delivery rates (i.e. its version of Temu).
Jassy said Amazon tested the effect of speedy delivery guarantees on its product pages. But Amazon also looks at “what we see downstream from customers once they bought with a fast promise, and what they end up buying throughout the year.”
In other words, customers who shop for things when they need it fast end up becoming much more regular purchasers across categories. The pharmacy business has proven the importance of speedy delivery in particular, Jassy said, since those shoppers accrue more of their purchases over the year to Amazon.
Some people take advantage of offers to package and deliver purchases over a week – a more environmentally sustainable option, though slower.
“Time in and time out, we see that people choose to buy from us more frequently when we’re able to deliver to their homes or wherever they are much more quickly,” Jassy said. “And they’re actually using us for more of their everyday purchases.”
