How Much Is Amazon Advertising Business Worth?

What Is Bounded Rationality And Why I... Revisiting The Apple-NeXT Deal And Wh...

How Much Is Amazon Advertising Business Worth?

Amazon more than doubled its advertising revenues from the first nine months of 2017, compared to 2018. Indeed, the revenues went from $2.92 billion in 2018 to $6.72 billion in 2018.

Compared to Facebook $38.37 billion and Google $83.68 billion for the same period, Amazon is still a small player. However, if we take into account that Amazon runs a diversified business model, with several revenue streams, it also gives the company more space to experiment with advertising!

Entering the winner-take-all digital advertising business

In a digital advertising market dominated by Google and Facebook, there might be a third entrant. Conquering that place would a hard if a not impossible enterprise, for any company, except one: Amazon.

In a scenario, of winner-take-all effect, the duopoly Google-Facebook control the market.

Just to give you a bit of context, you can appreciate from the infographics below how the digital advertising business looks like between the two tech giants.

Below Facebook advertising money-making machine:

[image error]

And Google advertising business dissected:

[image error]

How does Amazon stand in comparison?

Amazon advertising business

I dived into Amazon financials and looked at an item called “Other revenues” which primarily comprises revenues from Amazon advertising business. And this is what I figured.

If we look at the third quarter of 2018:

[image error]

Amazon advertising revenues have grown from over a billion dollar in the third quarter of 2017, compared to almost two and a half billion dollars in the third quarter of 2018!

If we change perspective and look at the first nine months of 2017, compared to 2018:

[image error]

Year over year there was about a 230% increase. So the revenues that come from Amazon advertising business more than doubled (assuming that the advertising business of Amazon represents most of the “other” revenues).

How does Amazon compare to Google and Facebook?

Amazon vs. Google vs. Facebook: the advertising business compared

How does Amazon compare to Goole and Facebook?

[image error]

By looking at the size of the Amazon advertising business, that is still about six times smaller than Facebook and over twelve times smaller than Google.

However, if we look at Amazon overall business model you realize that (as of now) advertising is a small chunk of its revenue:

[image error]

It is also interesting to notice how Amazon is diversifying its revenues toward the physical store and how other parts of the business, like subscriptions and AWS, have a different logic compared to the core business.

Where online stores have a very low-profit margin yet operate with the logic of the cash machine.

Instead, Amazon Prime operates with the logic of a subscription business model. And AWS has still a different logic compared to other units of the business, yet it runs at high margins compared to the online stores.

Amazon would be what can be defined as a multimodal business model. Compared to Google which, as of 2017 still relies mostly on advertising:

[image error]

And Facebook that entirely relies on advertising:

[image error]

Amazon has more space to maneuver and experiment with new revenue sources.

Will Amazon become the next giant to dominate the digital advertising space?

References:

Amazon 10-Q Form
Google 10-Q Form
Facebook 10-Q Form

How Does Facebook Make Money? Facebook Hidden Revenue Business Model Explained

Other resources for your business: