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Marcus Johnson (00:00):

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(00:29):

Hey gang, it's Friday, May 23rd. Scared myself a little bit there. Jeremy, Rachel, and listeners, welcome to Behind The Numbers, an EMARKETER video podcast made possible by Giphy. I'm Marcus, and today we'll be discussing Amazon's new agentic Buy For Me feature, how tariffs are affecting the shopping giant, and some new TV ad formats they're rolling out. Join me for that conversation. We have two people. We start with our retail analyst in New York, the Rachel Wolfe.

Rachel Wolff (00:58):

Thank you for that introduction.

Marcus Johnson (00:59):

You're very welcome. We also have senior director of briefings, also calling New York home, Jeremy Goldwyn.

Jeremy Goldman (01:06):

Great to be with you. Happy Almost Memorial Day. It's an American holiday where we buy mattresses and barbecue.

Marcus Johnson (01:16):

We have the same holiday, but we don't buy those things. You can't barbecue in England. It's never warm enough. Anyway, today's fact.

(01:29):

What are the oldest companies in America? Well, Marcus Lu of Visual Capitalist wrote a piece about this, thank goodness. And he notes that ... Do you guys know? Is this like a thing Americans know?

Rachel Wolff (01:41):

Well, I know what the oldest one was, but it just went bankrupt, so I don't know if that counts.

Marcus Johnson (01:47):

Okay.

Rachel Wolff (01:48):

Well, I think it was Hudson's Bay, which is now no more, or at least is in bankruptcy proceedings.

Marcus Johnson (01:54):

Founded.

Rachel Wolff (01:56):

Founded, I want to say in the 1600s, but I could be totally wrong.

Marcus Johnson (02:01):

Wow. Okay, let's do a quick check.

Rachel Wolff (02:04):

Quick Google.

Marcus Johnson (02:05):

Hudson Bay founded.

Rachel Wolff (02:09):

Now that I think about it, it can't possibly be that old.

Jeremy Goldman (02:12):

There have to be-

Marcus Johnson (02:13):

Wait, but this says it was founded in England.

Rachel Wolff (02:18):

Does it?

Jeremy Goldman (02:19):

And then it's headquartered here, so that's like a little cheat.

Marcus Johnson (02:24):

So this says founded in England, so this probably wouldn't have counted, 1670. So yeah, you're right, in the 1600s.

(02:32):

But ones founded in America ... Well, kind of because technically these companies are older than America, but they were founded here in America before it was America. You have Caswell-Massey, the first perfume and soap company in the US, established in 1752. Still going strong, 273 years old. America's second-oldest company is the Hartford Courant, the largest daily newspaper in Connecticut, established in 1764, holding the title as America's oldest newspaper. And in third place is Baker's Chocolate, established the next year, 1765, now owned by Kraft Heinz. But America's only 249 years old, so they're older than America, so not really at the oldest companies in America.

Jeremy Goldman (03:25):

If you want to build a company that will last forever, start a local newspaper in the middle of Connecticut.

Marcus Johnson (03:33):

Apparently. A few other familiar names, Jim Beam, Cigna, JP Morgan Chase are some other familiar faces in the top 10 oldest companies. Anyway, today's real topic.

(03:50):

Amazon looks to AI agents and new CTV formats to propel it forwards. Will it work? All right folks, how is Amazon doing? Let's set the table. They made $156 billion in the months of January, February, and March combined. That's up 9% year-on-year. Online store net sales, that's the largest slice of Amazon's business, grew 5%, down from 7% last Q1.

(04:20):

Rachel, what to you was the most noteworthy thing about Amazon's earnings?

Rachel Wolff (04:26):

So there are a few things, but I think I'm going to focus less on the earnings themselves and their-

Marcus Johnson (04:33):

Okay, it's kind of integral to the question but fair enough.

Rachel Wolff (04:34):

That is true. But this came out in the earnings, so I think it counts.

Marcus Johnson (04:37):

She's gone rogue. All right, stay safe.

Rachel Wolff (04:39):

So I think the really crucial point was actually their guidance, especially looking at the profit side. Because I think that's a pretty clear indicator about where they consider the headwinds to be with all of this tariff uncertainty and how that's going to impact the consumer and their ad business and their bottom line in general.

(05:01):

So they gave a huge range for profits in the next quarter, I think it's between $13 billion and $17.5 billion. So that's a $4.5 billion difference. Basically they think it's either going to gain 19% year-on-year or fall by 11.6%. So again, that just tells you that everybody's operating with this high degree of uncertainty.

Marcus Johnson (05:30):

Yeah, that's a great take. We just put out some new forecasts on ad spending, on retail sales, and we have a significant range as well. We have the best case scenario for ad spending this year, we think it could grow 7%, 8%. Worst case, flat to slightly falling. So I think that does speak to a trend where people are trying to scenario plan, and within that scenario planning you have a big range of where things could end up landing. Jeremy, how about you?

Jeremy Goldman (05:54):

First off, I'm glad that you mentioned that, Marcus, because I think that it's smart to do scenario planning and to be upfront to some degree about this is what you're expecting if you're Amazon. You're expecting a few different potential scenarios and it's a very, I guess you could say fast-moving situation certainly, and that's why we've published all these updated forecasts with these numbers. But I think if you're Amazon, if you look to see cloud revenues going up 17%, advertising revenues which we cover quite extensively going up 18%, there are these really nice growth levers that the company, on one hand, everybody is really concerned about the uncertainty clouding the rest of the year. On the other hand, it is kind of nice to see that was clouding a little bit of Q1 and you saw they did perform quite well and grow that pie quite nicely in a few different areas despite that uncertainty. So that gives me a bit more of an optimistic hope that their Q2 is going to be able to fight against some of these issues that everybody else is concerned about.

Rachel Wolff (07:10):

Yeah, I think from a retail fundamental point of view, they still have a pretty hefty advantage over everybody else. We talk a lot about value. They have their fast shipping, they have Prime, they now have all of these sales including potentially four-day long Prime Day sale, which is basically perfectly primed, no pun intended, to win over people who are going to be increasingly worried about their budgets. So from that perspective, I think Amazon is certainly much better equipped than most companies out there.

Marcus Johnson (07:43):

Yeah. Weren't you writing about fast shipping and how they're putting a ton of money into the rural delivery?

Rachel Wolff (07:49):

Yes, something like $2 billion over the next two years I want to say. And yeah, this is part of their master plan to get everybody to order as much as they can from Amazon. If you can get your toothpaste or shampoo in a couple of hours, then you're going to go to Amazon more often instead of driving however long it takes to your local Walmart or wherever else.

Jeremy Goldman (08:15):

Yeah, we've even talked about this before about the really nice flywheel that they have going on where it's a really great marketplace to sell your products, but then also you're supplementing that with an ad buy, and then also all of the extra value that the average consumer gets from their Prime membership, which obviously Prime Video is a big component of that. They're going to be making more from an advertising standpoint year in year out. They just pitched a whole lot of really interesting ad formats, which I know we'll talk about, but then also the content that's coming out that's making people lean in to take in all those ads that then Amazon can monetize. So it's a really nice flywheel.

Marcus Johnson (09:00):

Yeah, let's talk about that. You mentioned the ad revenue grew a healthy 18%, that's down a bit from last Q1, 24% to 18%, but still very, very good. That slice, I think it's worth noting, is approaching 10% of Amazon's business, so a really significant portion at this point. And as Jeremy mentioned, they're trying to add to it with these three new CTV ad formats, one, contextually relevant pause ads, two, viewers can add products to their Amazon cart whilst an ad is playing on their streaming devices, and three, folks can click a Send To Phone button if they want more information sent to their device to check out later. Jeremy, which of these new ad formats do you think is going to have the biggest impact?

Jeremy Goldman (09:46):

I think over the longterm, getting people used to converting basically and bridging the gap between what's advertising and what's commerce, and this is something we've talked about a lot. If there's anybody who has the heft who's able to really make that happen and change the way that consumers actually operate and live their lives and spend their time with media, it's Amazon. So I think that that's probably it. All of them have a huge chance to be impactful to the bottom line and to let Amazon collect more and more data, which then informs its ability to serve you targeted ads next time.

Marcus Johnson (10:23):

Rachel?

Rachel Wolff (10:24):

Yeah, I think what I'm most interested in is how Amazon is trying to get brands or companies that don't sell on its marketplace to spend money on advertising. So that last format that you mentioned, basically it allows any brand to get in front of the consumer. And I think that plays into how Amazon is sort of rethinking the entire e-commerce experience to become that everything store. And you mentioned this earlier, but their new Buy For Me feature especially does that by making it possible for people to buy products using Amazon's services that Amazon itself does not sell.

Marcus Johnson (11:04):

Yeah, it's an engaged reach that they have for Prime Video, 130 million viewers each month. They said close to 90% of them are also Amazon shoppers. And our Marissa Jones was pointing out, it seems to be working. Amazon's early prime advertising efforts, she says, that they introduced Prime ads, Prime Video ads just over a year ago. She was saying we expect Prime Video ads to grow 56% this year across the $3 billion mark next year. Amazon's total share of US CTV ad spending already surpassing Roku she points out according to our forecast team.

(11:41):

You mentioned the Buy For Me feature, which I quickly mentioned at the top, you referenced it here. What are we talking about? Amazon testing a new feature in its mobile app called Buy For Me, where people buy select products directly from other brand sites when those items aren't available on Amazon. So our colleague, I was a bit confused about how this works exactly, so I spoke to Zak Stambor, our colleague, yesterday about this. He was explaining to me that if you're searching for branded items like Samsonite luggage, you'll get the usual Amazon listings. And then, a new section called Shop Brand Sites Directly with links, and in some cases a Buy For Me button, which opens to a high level product detail page. From there, shoppers can ask Amazon to make the purchase on their behalf, he says, using an AI agent. A customer gets an order confirmation from the brand, but tracks their purchase within Amazon's app under a new Brand Direct Orders tab.

(12:36):

Jeremy, what's your take on Amazon's new Buy For Me feature?

Jeremy Goldman (12:39):

First off, this is small right now, but it's very impactful because the whole entire goal ultimately for Amazon is this is the place that you go to pretty much do everything, whether or not it's watch a show or purchase tube socks. And we have historically bought a lot of random things on Amazon, but if anybody has the agentic power to do something like this and to, A, be a major customer convenience, it is an amazing CX move from Amazon, but also think about all of the data that then they get by taking in all these queries and being able to be more useful to you. So it's a win-win. But again, this is something that we have to stress, I think time will tell. It's not one of those things that it's going to change the e-commerce landscape overnight. Certainly, it's small for now.

Marcus Johnson (13:32):

Yeah, Rachel, to Jeremy's point, Amazon is where people start their shopping searches. We have some research from last March, Jungle Scout data showing 56% of Americans started their online shopping search on Amazon with 42% starting on a search engine, something like Google, and being 29% on Walmart. So by far and away the place where people go, what do you expect from this new Buy For Me feature?

Rachel Wolff (13:57):

I think to Jeremy's point, adoption is going to be limited at first just because people are unsure really of how you use this function and maybe they're not entirely comfortable with giving the agentic AI the authority, I suppose, to complete the purchase. Yeah, and I think I agree with what Jeremy said. I think this fully plays into Amazon being the everything store and really becoming the first port of call for whatever it is that a consumer is looking for.

Marcus Johnson (14:29):

Yeah. It does appear as though shoppers are interested in agentic AI for buying things. Two-thirds of shoppers are interested in AI that can buy items when they reach a target price according to Salesforce. So the interest is there, but adoption is often slow-going.

(14:50):

Let's circle back to end the show. One of their line items for their earnings, which I thought was interesting. I mentioned the advertising revenue line item, 10% of their business now online and they've got a significant point, I think close to 20% of their business now is AWS. So online net store sales, but it's significant because it is the biggest slice of their business still.

(15:17):

What's interesting though is that it's shrinking quite quickly. Three years ago, Amazon made half of its money from online store sales. Today it's just 37%, so from half to close to a third in the last couple of years. If you add up the AWS money and the advertising money, they account for a similar share actually of online store sales. But it's probably a good thing. They're diversifying, which means they're protected if one of the line items isn't doing as well as some of the others. But they're all going to be affected by tariffs in their different ways, some more than others. Rachel, for right now and for the next couple of months, how are tariffs impacting and going to impact Amazon?

Rachel Wolff (16:03):

That's a big question.

Marcus Johnson (16:06):

Figure it out, Rachel.

Rachel Wolff (16:07):

In 30 seconds or less. So I think the big question that nobody really knows the answer to is how exposed is Amazon to the tariffs on China? A lot of their sellers are based in China's, I think more than half, depending on which source you look at. A lot of the products that it sells itself, something like 30%, are also sourced from China. And so those products are going to be getting more expensive just because there's no way really for suppliers to swallow the tariff increase. So if prices go up, will shoppers buy less?

Jeremy Goldman (16:44):

And by the way, sorry Rachel, the other thing is, as you know, it's not just where is the seller. It's like where are people getting the raw materials. Even if they're not in China, they're getting ... So supply chains are exposed.

Rachel Wolff (16:59):

Exactly. And so there is the sales component of that, people will buy less if prices go up. But I think to your point, a lot of Amazon's revenues comes from third party services, from advertising. And if sellers costs are going up, that probably means they're going to be allocating less of their budget toward maybe paying for Amazon's fulfillment services or advertising on Amazon. So this could be a spanner in the works for a lot of the strong growth in the advertising space that it's been seeing.

Marcus Johnson (17:33):

Do you guys, I didn't think that phrase was understood in America. Because we say spanner, you call it a wrench. But do you say spanner in the works?

Rachel Wolff (17:41):

I thought that was the saying.

Marcus Johnson (17:42):

Or was that just for me?

Rachel Wolff (17:42):

No, I thought I-

Marcus Johnson (17:44):

That's right, UK audience. You're welcome. We are international, barely.

(17:50):

What did you make quickly of, because I think you made a really good point in the previous episode, you were saying about what should retailers be doing, be thinking about in this moment. You were like, "Be transparent. Explain why costs are going up." Amazon reportedly was thinking about that, and then they got a real talking to from the White House and they were like, "Actually, no, that was never actually going to happen." What do you make of that interaction and what retailers, other retailers, not what Amazon should be doing?

Rachel Wolff (18:18):

Yeah, it's kind of a minefield for retailers. I think Amazon, certainly because of its size, is getting outside attention from the government. But I think that retailers are trying to communicate those price increases in different ways. You had Walmart last week, I guess by the time that this episode airs, saying that they do expect prices to go up and pretty much squarely putting the blame on tariffs. So I think that retailers are trying to be open about where these prices increases are coming from, pointing to tariffs at the cause. But maybe the way that you communicate those increases is a little more circumspect now that there's a chance of scrutiny from the Trump administration.

Marcus Johnson (19:05):

Yeah. You said that Amazon, they're in the headlines right now, and I feel like they have an outsized impression on who we think dominates shopping because they're talked about a lot, as I mentioned before, it's the place people go to start their shopping search. But I was looking through some of our estimates and I thought it was fascinating that, yes, Amazon accounts were 40% of online shopping in America, but less than 4% of total retail, which I thought was just fantastic context. Brilliant job from our forecasting team.

(19:35):

That's all we've got time for this episode. Thank you so much to my guests for hanging out with me today. Thank you first to Rachel.

Rachel Wolff (19:40):

Thanks, Marcus.

Marcus Johnson (19:41):

And then to Jeremy.

Jeremy Goldman (19:42):

Pleasure as always.

Marcus Johnson (19:44):

And thanks of course to the whole editing crew, Victoria, John, Lance, and Danny, Stewart who runs the team, and Sophie who does our social media. And thanks to everyone for listening in to Behind The Numbers, an EMARKETER video podcast made possible by Giphy. Make sure you subscribe and follow if you can, leave a rating and review if the mood takes you. We'll be back on Tuesday to discuss if X is making a comeback. Happy long Memorial Weekends.