Andy Jassy, chief executive officer of Amazon.Com Inc., during the GeekWire Summit in Seattle, Washington, U.S., on Tuesday, Oct. 5, 2021.
David Ryder | Bloomberg | Getty Images
Social media giants Meta and Snap are telling investors that the online advertising market is experiencing some turbulence due to the economic slowdown. Amazon is sending a very different message.
While the bulk of its business comes from e-commerce and cloud computing, Amazon has built a robust online ad division by getting brands to pay big bucks to promote their products on the company’s website and app.
As of late last year, Amazon commanded 14.6% of the U.S. digital ad market, third to Google at 26.4% and Facebook at 24.1%, according to Insider Intelligence.
In the second quarter, Amazon grew faster than either of its larger peers in the market and also beat out the rest of the major players. Amazon’s ad revenue rose 18% from a year earlier to $8.76 billion, topping analysts’ expectations and underscoring the unit’s rapid ascent and increasing importance to brands.
By contrast, Facebook’s ad business shrank for the first time ever, missing analyst estimates, and the company forecast a second consecutive decline in revenue in the current period.
Here are the growth rates in descending order for the top online ad platforms.
- Amazon — 18%
- Snap — 13%
- Google — 12%
- Pinterest — 9%
- Twitter — 2%
- Facebook — (1.5%)
It wasn’t just the social media companies calling out the challenging ad environment. Streaming service Roku reported disappointing second-quarter results and said in a shareholder letter that the current ad market is reminiscent of the onset of the Covid-19 pandemic, “when marketers prepared for macro uncertainties by quickly reducing ad spend across all platforms.”
Meanwhile, Amazon provided a level of reassurance to Wall Street in giving guidance for revenue growth in the third quarter of 13% to 17%. That’s going to be a boon for the ad division, because “the ads business goes as the commerce business goes,” said Andrew Lipsman, an analyst at Insider Intelligence.
“Long term I think Amazon is building an absolute advertising juggernaut,” Lipsman said. “That engine is going to become transformative to advertising.”
Amazon has a distinct advantage over several of the …….