Advertising and Streaming: Amazon's Focus on the Positive
In mid-October, Amazon released it’s much anticipated quarter three earnings. The response was quick and firm with observations. Profit margins dropped by nearly 30%, threatening Jeff Bezos’ title of the richest person in the world. Most of this can be attributed to Amazon’s investment in one-day shipping. However, there are two areas of focus that allow Amazon to remain confident in its future. Continue reading for Marketplace Strategy’s perspective on Amazon’s third-quarter earnings. We explain how advertising and streaming could shape Amazon's future.
Third-Quarter Earnings in a Nutshell
As mentioned, a major topic of Amazon’s third-quarter earnings report was its investment in one-day shipping. At first, Amazon invested $800 billion to spearhead this initiative. This drastic shift wi likely pay off for Amazon in the long-term. But, its short-term side effects surfaced in this report.
For example, Amazon’s profit margins were thinner than expected. Projected holiday revenue is also slim and consequently drove down stock value.
On the other hand, Amazon’s revenue increased by 24% since last quarter. Analysts say this growth is a result of one-day shipping leading to an influx of purchases. Fortunately for Amazon, there were more positive aspects to the quarterly earnings report that could bode well for its future.
Advertising’s Impressive Results
Amazon’s advertising segment reported a 40% increase in revenue compared to last year. This is especially significant for the marketplace giant since the growth of the advertising platforms of its main competition, Facebook and Google, are slowing down.
Amazon’s strong search and programmatic advertising platforms play an important role in its success. But, Amazon also sells advertising for a large number of content apps. Additionally, Amazon extends its advertising strategy to IMDb, which has plans to grow through its new streaming channel that includes popular shows and movies.
Advertising is a priority for many brands that work with Marketplace Strategy (MPS). Across accounts managed by MPS, average ad spend grew by 64% the day before Prime Day when compared to ad spend on an average day. Amazon’s quarterly report and the results we see with clients make us confident in the value and future of Amazon’s advertising capabilities.
Streaming’s Strong Position
Next to Amazon’s optimistic advertising numbers is its streaming presence. The two are successful arms of the business and also intertwine well. For streaming, Amazon is one of the only companies that masters content, distribution, and advertising.
It has a heavy investment in content creation and its reach is impressive through Amazon Prime Video. When it comes to advertising, Amazon has successfully turned the long-standing duopoly of Facebook and Google into a triopoly. Amazon’s advertising strength layers into its streaming presence to establish itself as an extremely powerful player.
Strategists at MPS understand the importance of introducing new concepts to brands to drive results. We’ve worked with brands to test over-the-top (OTT) advertising and saw exciting results. We’re optimistic about the potential results brands can see when they embrace advertising and streaming.
Due to Amazon’s shift to one-day shipping, costs have increased and profit margins have shrunk. But, the marketplace giant will remain a leader with its strong advertising and streaming presence. We look forward to what will happen over quarter four and how brands will be affected.
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