Amazon's Ad Business Nears $7B In Quarter As It Readies Digital NewFronts Debut

Amazon is using deep-learning models based on algorithms to improve on the sponsored product ads that serve up at the top of the query page, said Brian Olsavsky, Amazon CFO, during the company’s first-quarter 2021 earnings call on Thursday.

“We continue to improve the relevancy of the ads being shown on the product detail pages,” he said. “And we've seen rapid adoption of the video creative format for sponsored brands, among other things.”

This not only helps consumers find products more easily, he said, but helps them discover new brands.

Amazon’s advertising business -- part of its “Other” unit, but primarily made up of advertising -- grew revenue by 77% year-on-year to $6.9 billion in the first quarter as the company continued to leverage its first-point position to search for millions of products.



Olsavsky said traffic to the site has been a major driver for its advertising business, but acknowledged that ad relevancy and new ad products also helped. “The advertising team has done a great job of turning clicks into productive sales,” he said.

As part of its push into advertising, on Monday, Amazon will present to advertisers during the Interactive Advertising Bureau's NewFronts -- digital media's take on the traditional TV upfronts, when advertisers commit their yearly TV spending.

Amazon reported that overall revenue rose 44% to $108.5 billion in the first quarter compared with $75.5 billion in first quarter of 2020. About $4.2 billion -- nearly half Amazon’s operating income -- came via its cloud division, Amazon Web Services. Subscription services rose 36%.

Amazon also announced that The Walt Disney Company is leveraging AWS for the global rollout of Disney+, which surpassed 100 million subscribers in 16 months since its launch in November 2019.

When Olsavsky gave Q2 2021 guidance, he said the company still expects to see rising sales as stores re-open -- predicting between $110 billion and $116 billion in overall revenue for the quarter.

Prime Day, estimated to take place this year in June, will boost that number. This guidance assumes that no additional business acquisitions, investments, restructurings, or legal settlements will be included.

An analyst also mentioned Amazon’s Thursday Night Football deal. Olsavsky said he was not prepared to “size the advertising opportunity right now" but said "we're very excited to have the exclusive content for Thursday Night Football.“

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