Amazon Earned Over $600 Million in Ad Revenue Last Year - eMarketer

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Amazon Earned Over $600 Million in Ad Revenue Last Year

Analysis of figures from many research sources suggests Amazon’s WW ad revenues will top $835 million this year

June 4, 2013

Amazon has ramped up its advertising strategy in recent years, and the site is reaping the benefits. In figures from eMarketer's new estimates on Amazon ad revenues—the first time eMarketer has ever forecast Amazon’s advertising revenues—the ecommerce giant took in nearly $610 million last year worldwide in net ad revenues.

That figure was up 45.5% over 2011, and Amazon’s worldwide ad revenues after traffic acquisition costs (TAC) will increase a further 36.9% this year to $835.05 million.

Amazon Net Ad Revenues Worldwide, 2011-2013 (millions and % change)

eMarketer estimates the bulk of Amazon’s ad revenues come from ads placed in or near search results that appear when a person searches Amazon for a product. The company also earns substantial revenues from display ads served on Amazon-owned sites and through its ad network.

Overall, eMarketer expects strong and consistent growth in Amazon’s ad revenues as it continues to develop its strategy. Key to further growth will be the plethora of consumer purchasing data Amazon gathers through its core business, retail sales. Ad-selling competitors such as Google and Facebook lack such data—and therefore its targeting potential.

Amazon has already developed its targeting technology, along with creating its own demand-side platform (DSP) to improve targeting of Amazon buyers on other web properties and devices like Kindles—something that may help position them as a more attractive site for both brand and direct response advertisers.

The bulk of those revenues are from the US, where eMarketer estimates Amazon took in $450 million in ad revenues last year. In 2013, Amazon will net $660 million in US ad revenues, rising to $1.1 billion by 2015.

Net US Ad Revenues at Amazon, 2011-2015 (millions and % change)

eMarketer bases its estimates of Amazon’s ad revenues on information in company reports and an earnings breakdown model that accounts for advertising and usage trends worldwide, as well as developments and assumptions about the company’s advertising strategy and interviews with people familiar with Amazon’s business.

eMarketer made several assumptions about Amazon’s advertising revenues to build our model:

  • A number of firms estimate Amazon’s revenues across categories, though few offer breakouts of advertising revenues. The estimates that do exist differ dramatically. Barclays estimated in March 2013 that the company earned $550 million in global ad revenues and co-branded credit cards. Jefferies offered a more conservative forecast, estimating in January that Amazon would earn just $350 million in 2013, up from $235 million in 2012. Other firms’ estimates have ranged as high as $1 billion in global Amazon ad revenue this year.
  • In its public reporting, Amazon does not break out ad revenues, but includes it in the category of “Other” revenues—which also includes revenues to Amazon Web Services (AWS). eMarketer assumes AWS revenues still account for the vast majority of Amazon’s “Other” revenues, something we expect will continue to be the case for the foreseeable future, based on our understanding of Amazon’s operations and the advertising market. This is substantiated by research estimates from multiple firms, which attribute between two-thirds and 90% of Amazon’s reported “Other” revenues to AWS.
  • eMarketer also assumes that Amazon does not pay substantial TAC to partner sites, unlike major competitors like Google.

Key variables in the outlook for Amazon ad revenues include the following:

  • How quickly Amazon will scale its advertising business. The company has been quiet about its advertising business, though it does have a vast audience accessing Amazon content across a number of devices. Amazon also appears to have scaled advertising operations significantly over the past few years.
  • The shift to mobile. Numerous publishers have struggled to keep pace as consumers have shifted time away from desktop devices to smartphones and tablets. Amazon, along with the rest of the marketplace, will likely face continued challenges as digital ad dollars shift with them to the few companies with strong mobile ad offerings—Facebook, Google and Twitter, to name a few. Still, Amazon does already have a strong retail presence on both sets of devices, and accounts for a large share of US retail mcommerce sales, which could give it an advantage over competitors. At the same time, consumers remain far less likely to make purchases on mobile devices—something that has historically kept cost-per-click (CPC) ad rates on mobile search ads relatively low compared with desktop CPCs, and likewise for mobile search ad revenues as a whole.
  • How aggressively competitors with interest in product-listing ads, like Google, will pursue relationships with retailers that compete with Amazon. This competition could contribute to market growth, or potentially stymie it.

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