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Amazon’s $47B Side Hustle 🛒
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Amazon’s $47B Side Hustle 🛒
Side hustles are great.
My nephew sells pokemon cards to make an extra $1K/mo.
My cousin flips Jordans online to rake in $3K every month.
Amazon has an advertising business that did $47B in 2023.
Yes, you read that correctly. Amazon’s advertising side hustle raked in $47B for the E-commerce behemoth and it doesn’t have plans to stop anytime soon.
Other Revenue
Amazon has been stealthily building a behemoth of an advertising business which now trails only Google and Meta, threatening the digital advertising duopoly for the first time in years.
With Amazon’s scale, it may be difficult to believe they can do anything quietly.
However, Amazon strategically masked the true size of their rapidly growing $30B+ ads business, portraying it as “Other” until 2022.
It was only after the “Other Revenue” had bloated up to $31B - a figure more than the revenues of multiple advertising companies combined did the company break out a separate column for Advertising.
Its ad revenue of $47B in 2023 was more than Youtube, Snap, Pinterest and Bing combined.
Everything on Amazon is an Ad
In 2003, then Amazon researchers Greg Linden, Brent Smith, and Jeremy York published a seminal paper - “Amazon.com Recommendation: Item-To-Item Collaborative Filtering”.
The paper advocated the use of a non-monetized recommendation engine, rather than ads.
“At Amazon.com, we use recommendation algorithms to personalize the online store for each customer. The store radically changes based on customer interests, showing programming titles to a software engineer and baby toys to a new mother. The click-through and conversion rates — two important measures of Web-based and email advertising effectiveness — vastly exceed those of untargeted content such as banner advertisements and top-seller lists.”
However, fast-forward two decades, Amazon’s organic recommendations have been replaced with ads.
1/ Search Results
Just like how any search engine would surface sponsored listings at the top, Amazon search has the first 3-5 spots ready to be bought by the highest bidder.
2/ Product Page
“Sponsored products related to this item,” “Four stars and above” and “Brands related to this category on Amazon” advertising sections have all but replaced organic “Customers who bought this item also bought” and “Customers who viewed this item also viewed” suggestions.
Everything highlighted in blue is an AD.
Source: MarketPulse
The last remaining recommendation functionality is “Frequently bought together.” Everything else on the product page, including additional display advertising, is an ad.
Clicks are Dead ; Long Live Sales
In 2009, Jeff Bezos famously said: “Ads are the price you pay for an unremarkable product”.
Amazon surely ain’t an unremarkable product, but because the company owns one of the most valuable pieces of digital real estate on the planet, in this case, “Ads ARE the price you pay for a remarkable product; along with a $14.99/mo prime membership”.
Google and Meta, of course, occupy a lucrative part of the customer’s buying journey in the traditional marketing funnel.
Amazon, however, owns the last action of the transaction: the purchase itself.
Unlike other digital advertising platforms that infer user interests based on browsing history or social media activity, Amazon’s insights are based on actual purchase data.
Advertisers on Amazon are not simply buying clicks; they’re buying sales.
Ads With A Chance of Organic
Amazon has a lot more real estate than Amazon.com to bombard the users with their ads.
1/ Prime Video
Amazon’s streaming service has 250M+ users and the company announced that it will roll out an ad-tier in 2024, following suit in the streaming wars.
2/ Fire TV
Amazon’s Fire TV sticks are in over 100M+ households creating more inventory for smart TV OS advertising like Roku and Vizio.
That’s not all. The E-commerce behemoth is also making a huge play for traditional TV advertising budgets by buying up sports media rights.
It already has a $10B deal with the NFL for streaming Thursday Night Football and is looking to bid on more live-sports deals.
All of this potential ad inventory is ready-made for Amazon’s incredibly valuable first-party purchase data.
Advertising is now one of the biggest profit generating business lines at Amazon and might even (have) surpass(ed) AWS, Amazon’s cash cow.
This digital ad pivot is one of the most successful versions of what is becoming a norm due to seismic shifts in the digital ad landscape.
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