The Q4 online advertising rout hit Snap, Meta, Alphabet and others, but Amazon and Apple continue to gain ground.
Amazon’s advertising revenue grew by one-fifth year over year to $11.6 billion in Q4 2022.
Brian Olsavsky, Amazon’s financial chief, corroborated the idea of a general advertising pullback but also pointedly said the Amazon Advertising business grew “even as the macro environment required (advertisers) to scrutinize their own marketing budgets.”
Where the ad spend pullback does show up on Amazon’s balance sheet, funnily enough, is the AWS cloud business. Multiple investors asked why the company has a conservative growth forecast for AWS – one went so far as to call it “flattish.”
There is a spending malaise across all industries, Olsavsky said. But a few hits to overall compute costs came from lower crypto trading volumes, mortgage computing (fewer people buying homes) and — a big one — advertising.
“As there’s lower advertising spend, there’s less analytics and compute on advertising spend as well,” he said.
That trend signals why building out services like data clean rooms for the marketing industry has been a major priority for AWS.
At your Services
For Apple, which doesn’t report advertising revenue and doesn’t candidly acknowledge that it has an advertising business, the impact of digital advertising is harder to unpack.
Apple CFO Luca Maestri mentioned advertising twice, when he cited that in-app revenues “face macroeconomic headwinds in areas such as digital advertising and mobile gaming.” Though those very companies would likely say Apple is the bigger headwind than macroeconomics.
And despite any headwinds for apps that compete with Apple on mobile advertising and analytics, Apple’s Services revenue set an all-time record of $20.8 billion in Q4, “which was better than what we had expected,” said CEO Tim Cook.
That line will be sure to enflame app developers, especially in mobile gaming and advertising, which have lost revenue or outright viability since ATT.
Investor Jim Suva of Citigroup pressed Cook about where the Services growth came from since there were unexpected supply constraints.
“What was the bridge factor of Services being better than expected on upside?” he said. “Was it advertising or apps or paid monthly subscriptions?”
Maestri said the better-than-expected results came primarily from paid subscriptions to Apple products like Apple Music and cloud services.
“And that was on top of a 24% increase a year ago,” he said. “So it’s very sustained growth that we’re seeing.”
