Amazon beat analyst estimates yesterday, reporting $158.9 billion in revenue for Q3, an 11% increase from $143.1 billion in Q3 2023.
A key driver of the growth was Amazon’s advertising and adtech business, which shot up 19% year over year to reach $14.33 billion compared to “just” $12.06 billion in Q3 2023.
On the earnings call, President and CEO Andy Jassy talked up the ad segment’s strong performance: “Our expansive reach, ability to serve relevant offers to our customers, opportunity to engage customers from the top of the funnel to point of purchase, and leading capabilities around measuring outcomes at every touch point provide all types of brands with full-funnel advertising at scale.”
He also predicted, “While we’re generating a lot of advertising revenue today, there remains considerable upside.”
Why This Matters:
Amazon delivered a strong report, with its stock up over 6% today. However, it’s worth noting that Amazon’s Q3 ad revenue growth in 2024 was lower than in Q3 2023.
This quarter, Amazon’s advertising services revenue grew by 19%, down from 26% growth in Q3 2023. The slower growth is surprising, especially given Amazon’s relatively new entry into the ad space and its strong position in fast-growing segments like CTV and retail media. So, what gives?
A similar trend appeared in Meta’s Q3 results, where ad revenue growth slowed from 24% in 2023 to 19% in 2024. Though, Meta’s ad business is obviously a bit more mature. Could this be a result of intensifying competition in digital advertising from Roku (CTV) to The Trade Desk (DSP) to Target (retail media)? Or are other factors at play?
Experts React:
Erez Levin, Head of Product at Good-Loop, had some thoughts about the deceleration, which he shared on X in response to a post by AdTechGod:
“So a deceleration for Amazon relative to all other players compared to their growth rate last year? Not sure how big their CTV business is but could be partially driven by their drop in CPMs which didn’t fully offset with higher volume in the near term? Or maybe they just can’t stuff any more Sponsored listings on their SERP?”
Levin is speculating that Amazon’s slower ad growth might be due to lower ad prices, limited growth in ad volume, and a potential saturation of ad slots on its own platform. Perhaps all of the above?
Our Take:
Amazon, as Jassey mentioned, has ample room for growth and the growth is still impressive. The company is also investing heavily in AI to support new solutions for both large and SMB advertisers, which could boost and accelerate that progress in the future.
For example, at Amazon’s big unBoxed conference last month, the company’s ads group announced several big updates to the company’s DSP, including a refreshed UI with AI woven throughout, from optimization to insight cards.
