Published - September 1st, 2023 @ 10:20 AM (GMT+2)
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Amazon's (NASDAQ:AMZN) advertising sector, although in its infancy, is poised to become the company's next significant revenue stream. Surprisingly, this burgeoning business has largely gone unnoticed by investors.
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According to Andrew Lipsman, an analyst at Insider Intelligence, Amazon's advertising business could soon rival its cloud computing segment, AWS, in terms of profitability. Lipsman states that the advertising arm has "exceptional margins" and could be "as important as AWS."

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The Data-Driven Approach:
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Amazon's Q2 report revealed a staggering $10.6 billion in advertising revenue, a 22% YoY growth. The company's focus on data analytics has been a key driver of this success. Swiftly's Chief Revenue Officer and a former Amazon executive, Andy Friedland emphasized that data is the "North Star ''of Amazon's advertising business.

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From Browsing to Buying: The Amazon Advantage
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Amazon's unique position in the e-commerce landscape allows it to solve a long-standing issue: converting browsers into buyers. The company's advertising strategy focuses on retail media, targeting consumers at or near the point of purchase.

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The Integration Strategy:
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Amazon's advertising business benefits from its diverse portfolio, including retail and cloud computing. Ikkjin Ahn, CEO of Moloco, believes that Amazon's "performance-driven advertising" is setting new industry standards.

As Amazon expands into physical locations, it is integrating advertising and data analytics into its architectural plans. This approach allows Amazon to measure the effectiveness of in-store advertising with unprecedented accuracy.

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Media Assets and Future Potential:
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Amazon's media assets, such as Alexa, Amazon Studios, and Twitch, offer additional avenues for advertising. Lipsman suggests that Amazon's cloud capabilities could further enhance its advertising prowess.

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A Marketing Machine in the Making:
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Amazon is increasingly being viewed not just as a retail giant but as a marketing machine. Brian Mandelbaum, CEO of Attain, stated that retail is almost a "loss leader" to Amazon's core business of driving conversions.
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According to Friedland, Amazon's advertising business could "easily reach $100 billion," maintaining a growth rate that parallels its retail sector.

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