Amazon Q3: Ad Revenue Category Up Amid Weak Earnings

Amazonq3Amazon remained tight-lipped about its developing ad network during the company's Q3 earnings call, about which CFO Thomas Szkutak only said: "There's not a lot I can say there."

Amazon's "Supplemental Revenue" category, which includes advertising, Web services and co-branded credit cards, raked in $1.3 billion in Q3, up 40% YoY from $960 million. Amazon's supplemental revenue fared less favorably in international markets, as the company reported a 17% decrease to $42 million in that category.

A number of analysts called out the "vast difference" in growth rate between domestic and international markets. Szkutak acknowledged "the softer growth rate across a number of geographies," despite Amazon's interest and investment in global expansion.

Amazon, which in the last quarter, launched the Fire Phone and dropped about $1 billion on live gaming platform Twitch, reported operating losses that were close to $550 million, citing a $170 million charge for supplier commitments due to weak Fire Phone sales (it had $83 million in unsold inventory in Q3).

Szkutak didn't offer much about Twitch, saying: "It’s a really creative team doing innovative things on behalf of their customers and we are excited to have them as part of Amazon." 

Last quarter, Amazon invested $100 million in original video content. Szkutak alluded to a "very competitive environment both online and offline, which isn't anything that’s new, but we are seeing a lot of new competition" in programming, which seemed like a call-out to CBS and HBO, which both revealed new streaming services just days ago.

"We have a number of pilots and series we launched," he said, adding the series "Transparent" has performed well. "We continue to invest heavily in video content, and there are number of different metrics we’re looking at … We’re seeing customers who stream through Prime, renew, and we're seeing parallels between streaming and physical purchases from customers tuning in to original or licensed content."

He insisted Prime is doing well, and said - in response to an analyst's question - the fact that Target offers free shipping automatically whereas Amazon requires a $35 minimum threshold isn't an indication that Prime is underperforming.

Amazon's holiday sales projections were weak. Analysts expected upwards of $31 billion, while Amazon's projection was in the $27.3 billion to $30.3 billion range.

 

 

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