Amazon.com, Inc.’s AMZN advertising business grew at the slowest pace in five quarters but still delivered a higher growth rate than those of key big-tech rivals Alphabet Inc GOOG GOOGL and Facebook, Inc. FB as it did a better job facing privacy changes by tech giant Apple Inc AAPL.
What Happened: The e-commerce giant made $8.09 billion from its advertising business in the three months ended Sept. 30, 2021, growing 50% year-over-year.
Amazon's advertising revenue in the latest quarter represented about 7.2% of its $110.8 billion total revenue. It is gradually turning out to be a key source of growth for the company as momentum in other businesses slows.
The Seattle-based tech company does not break out specific financials for advertising, but its “Other” category “primarily includes sales of advertising services, as well as sales related to our other service offerings,” as per the company’s earnings statements.
See Also: Apple Is Shaking Facebook's Revenue
How Do Rivals Stack Up? Amazon’s advertising arm is still small when compared with its peers.
At the end of the third quarter, Google’s advertising revenue was more than six-and-a-half times larger than Amazon’s, while Facebook's ad revenue is more than three-and-a-half times larger.
Google and Facebook together command more than 50% share of the digital advertising market and have in the past few quarters seen a sharp uptick in revenue growth.
That pace of growth has however slowed for these tech companies in the first full quarter since Apple started asking app users whether they want to be tracked.
Facebook on Monday blamed privacy rules for posting slower sales growth while it had a modest impact on Google-owned YouTube revenues.
Google’s ad revenue increased 43.2% to $53.13 billion in the third quarter. YouTube advertising revenue amounted to $7.20 billion, below the expected $7.4 billion but still 40% higher year-on-year.
Facebook's total advertising revenue rose 33.24% from a year earlier to $28.27 billion in the third quarter, contributing a lion's share to the company’s total revenue.
Why It Matters: In April, Apple introduced a change to its privacy policy that requires apps to ask users if they want to be tracked. The impact of the privacy crackdown was a key highlight heading into the quarterly numbers and results show it has had a different impact on the online advertising business for each player.
On Thursday, Amazon delivered a 15% rise in third-quarter revenue — much lower than compared to the same period a year ago — as it navigates through lingering supply chain issues and slowing growth rates as consumers head back to physical stores. The company forecast sales between $130 billion and $140 billion, representing growth of just between 4% and 12%.
Amazon’s ad revenue is expected to account for 10.7% of the U.S. digital ad market in 2021, as per eMarketer's estimates, and the share could grow to 12.8% by 2023.
AMZN Price Action: Amazon shares are down 3.98% at $3,309.42 Friday morning at publication.
Photo: Christian Wiediger via Unsplash
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