Amazon’s ad sales continue to be a powerhouse, showcasing robust growth in a competitive digital advertising space. 

Although Amazon’s ad sales segment did not grow at its previous record pace, with a 19% year-over-year growth in the most recent financial period compared to 26% year-over-year growth in Q3 2023, it remains a leading player in retail media. 

The company’s advertising gains met Wall Street’s expectations in Q3 following a rare miss in Q2, reaffirming Amazon’s strength in this arena.

Retail Media and Ad Relevancy: A Strategic Focus

Amazon’s sprawling e-commerce platform, with a large advertiser pool and extensive sponsored product listings, continues to be a prime growth driver in the retail media advertising market. 

In response to advertiser demands, Amazon is actively refining its ad relevancy and expanding optimisation controls. As the CEO mentioned during the Q3 earnings call, these enhancements aim to boost ad performance and improve the experience for both consumers and advertisers alike. 

This focus has contributed to Amazon’s steady growth, though it’s clear that the company is prioritising more than just sales volume in its advertising strategy.

Heavy Investment in AI Fuels Advertising Innovations

Amazon’s Q3 earnings report highlighted a substantial leap in capital expenditures, which surged 81% year-over-year to $22.6 billion (£17.5 billion). 

This increase reflects Amazon’s heavy investments in generative AI, which have not only spurred innovation in advertising tools but also empowered advertisers with more sophisticated, cost-effective options. 

Notably, Amazon debuted a new tool in September that converts product images into video ads using generative AI, a move that could appeal to small- and mid-sized advertisers who seek high-quality ad formats but lack the resources for custom video production.

This video generator follows Amazon’s image generator, introduced last year, allowing marketers to create numerous campaign assets with just a click. Additionally, Amazon unveiled an AI-powered solution at its UnBoxed conference, which generates audio ads at no extra cost to U.S. advertisers using Amazon’s demand-side platform. 

Together, these tools are united under Amazon’s creative studio, a hub that supports marketing efforts across Amazon’s platforms, including Prime Video and Twitch. According to the CEO, Amazon is committed to enabling brands of all sizes to leverage its AI-powered creative suite, which spans display, video, and audio assets.

Video Advertising Gains Momentum with Prime Video

A significant area of expansion for Amazon’s ad business is its push into advertising on Prime Video, a platform that hosts popular live programming such as NFL “Thursday Night Football,” as well as original movies and series. 

This move solidifies Amazon’s entry into video advertising, a valuable segment within the ad market. In a landmark moment, Amazon held its first advertising upfronts earlier this year, offering advertisers the chance to secure deals on upcoming video content. 

Amazon surpassed its $1.8 billion (£1.39 billion) advance commitments goal, underscoring strong advertiser interest in Prime Video’s offerings.

Competition with Meta’s AI-Driven Advertising Solutions

Amazon’s progress in AI-driven ad products comes as other digital ad platforms also emphasise their AI advancements. 

For instance, Meta recently reported notable traction for its own AI image and text generators, which were used by over one million advertisers to create more than 15 million ads in the last month. 

Meta’s CEO, Mark Zuckerberg, highlighted the potential of these tools, hinting at further growth for generative AI in advertising – a sentiment that echoes Amazon’s CEO for the future of their own offerings.

Conclusion

Amazon’s advertising segment continues to stand out as a formidable force in the digital ad industry, driven by a focus on ad relevancy, AI-powered creative tools, and strategic expansions into video. 

While year-over-year growth has tempered compared to past performance, Amazon’s alignment with the needs of small and mid-sized advertisers, paired with the impressive advancements in AI-based ad creation tools, points to significant growth potential. 

The integration of these innovations, from video and image generation to audio ad solutions, underscores Amazon’s commitment to supporting advertisers of all sizes. 

As the ad space becomes increasingly competitive with major players like Meta also expanding their AI capabilities, Amazon’s advancements in retail media and Prime Video advertising keep it well-positioned for continued impact and future growth.