February 6, 2023: Amazon’s advertising business continues to increase despite a general slowdown in digital ads, hurting firms such as Google parent Alphabet, Facebook parent Meta and Snap.
According to its earnings report, the online retail giant’s advertising services unit brings in $11.6 billion in sales for the fourth quarter, showing a 19% year-over-year increase.
Although Amazon’s advertising unit still constitutes a tiny fraction of the company’s $149.2 billion in revenue in its fourth quarter, it shows a fast-growing area that analysts think could be a crucial player in the digital advertising market.
Indeed, while investors are pleased that Meta is cutting costs, sales in the fourth quarter decreased 4% yearly to $32.17 billion.
Meta executives explained during a call with analysts on Wednesday that they are still waiting for an immediate rebound in the digital advertising business. The chief financial officer, Susan Li, said, “Consistent with our anticipation, Q4 revenue remained under pressure from weak advertising demand, which we think continues to be affected by the uncertain and volatile macroeconomic landscape.”
Therefore, Alphabet reported fourth-quarter advertising earnings of $59.04 billion, from $61.24 billion in the year-earlier quarter.
Alphabet’s YouTube advertising unit, facing competition from TikTok, brought in $7.96 billion in the fourth quarter, which shows an 8% drop from a year ago.
Tech companies powered by digital advertising have been under pressure from several factors, which include a tough economy, surged competition from TikTok, and the changing effects of Apple’s 2021 iOS privacy update.
The recent Insider Intelligence survey of digital advertising revenue share worldwide revealed that Amazon holds 7.3% of the overall online ad market, which trails Alphabet’s Google and Meta-owned Facebook and Instagram, nearly 28.8%, 11.4%, and 9.1% of the digital ad market.
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