- This story was delivered to Business Insider Intelligence Digital Media Briefing subscribers earlier this morning.
- To check to see if you already have access to Insider Intelligence through your company, click here.
Amazon’s “Other” segment, which consists primarily of revenue from advertising sales, reached $4.8 billion in Q4 2019, up 41% year-over-year (YoY), per the company’s Q4 2019 earnings released last Thursday. This marks a decrease from the 97% YoY growth seen in Q4 2018. Amazon’s ad business growth decelerated markedly from its 2018 highs last year, but growth has begun to stabilize in recent quarters.
Business Insider Intelligence
To more significantly reaccelerate growth of its advertising business, Amazon is playing the long game by looking to deepen its relationships with brands and move up the purchase funnel.
When asked about the company’s growing advertising push on the call with investors, Amazon’s director of investor relations referred to the e-commerce giant’s new branding products designed to help brands build a more curated and engaging presence on the platform.
Those include “Stores,” which let brands customize and curate a multipage storefront on Amazon’s platform, and “Posts,” (currently in beta) which let brands curate shoppable product feeds that link to product detail pages. Beyond encouraging Amazon sellers to buy into the Amazon ad opportunity, the company is aiming to appeal to larger brands by transforming into a branding vehicle that marketers can use to create a richer customer experience over time. “We need to open up the experience beyond ‘I need this item today,'” said Colleen Aubrey, Amazon’s VP of performance advertising, at an AdExchanger conference last week.
Enabling brand marketers to develop their own branded landing pages on the site could translate into ad sales down the line — particularly if Amazon can become a more meaningful source of product sales within key categories.
Amazon’s branding products like Stores and Posts aren’t advertising products, but they could encourage brands to spend more aggressively on ads across the platform as customers begin to engage with these landing pages in ways that drive sales growth.
In particular, accelerated spending is likely to flow toward Amazon’s most popular ad format, Sponsored Products ads, which accounted for 79% of advertiser spending on Amazon’s performance ad products in Q4 2019, with spending growth on the format accelerating to 63% YoY, up from 35% YoY growth in Q3 2019, per Merkle.
Sponsored Product ads, which run in multiple locations on the site, are high-performing — sales generated by the format rose 106% YoY in Q4 2019, per Merkle — and could be used to drive customers back to product pages or landing pages to engage further with the brand.
Further, big brands that develop a more robust presence on Amazon’s platform using Stores could increasingly be incentivized to buy on Amazon’s OTT video channels on Fire TV devices — including Amazon’s AVOD service IMDb TV, Twitch, and Amazon Prime Video, where Amazon has streamed live NFL games and Premier League matches. So far, those opportunities are likely to be incremental, per an Amazon pitch deck for Fire TV obtained by Digiday, but could attract higher spend as they begin to scale their reach.
Want to read more stories like this one? Here’s how:
- Check to see if you already have access to Business Insider Intelligence through your company, or inquire about access if you don’t. >> Check If You Have Enterprise Access
- Explore related topics in more depth. >> Visit Our Report Store
- Current subscribers can log in to read the briefing here.
