Amazon Hopes To Free Up More Ad Inventory – Just Not On Prime

Amazon’s “Other” category, its miscellaneous revenue segment that consists primarily of advertising, made $3.4 billion in Q4 2018, almost doubling from Q4 2017.

The “Other” category also grew by about $900 million from the prior quarter, for the first time outpacing the growth of Amazon Web Services, the cloud infrastructure business, which added $700 million, according to the company’s earnings report.

As Facebook has proven, big revenue gains can be made by improving targeting and attribution even if there isn’t much new inventory.

Though lack of inventory is the biggest hindrance to Amazon Advertising’s growth. GroupM Global CEO Kelly Clark said as much on stage during AdExchanger’s Industry Preview event last week: “The only thing that provides a check on Amazon’s growth is supply – access to high-quality video inventory on Amazon’s platforms.”

So Amazon is working on the inventory front. The company added new sponsored listings to its own site and app this quarter, said Dave Fildes, director of investor relations, as well as an ad-supported streaming video service called Freedive from its media subsidiary IMDb. And Amazon is increasing the data and inventory it brings to non-owned media, expanding its presence in ads across the web.

Many areas for ads – but Prime Video isn’t one of them

Amazon has growth opportunities for its ad business aside from adding inventory. Amazon is focused on improving its ad platform products and reporting capabilities for brands and agencies, said Dave Fildes, director of investor relations.

Don’t expect Amazon to open up Prime Video, the ad-free library where most of its media consumption occurs. Amazon’s share of attention hours for TV and streaming video is increasing, but the Prime Video library is too strong of a performer for the overall loyalty program, improving renewal rates and overall platform engagement (aka ecommerce sales) when subscribers are regular viewers.

Amazon’s overall sales increased 20% annually to $72.4 billion in Q4. Its profit in the quarter jumped to $3 billion, and its full-year profits rose from $3 billion in 2017 to $10.1 billion last year.

Amazon is also making strong headway with smart devices and the Prime subscription program, which added more new sign-ups last year than any previous year, though Amazon doesn’t break out its Prime membership numbers.

The number of devices with Alexa built in doubled last year, according to Amazon’s earnings release, with Amazon’s Echo Dot the best-selling item on Amazon worldwide, selling millions more devices than the year before, when it was also the top seller. Amazon did not specify how many devices it sold.

 

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