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Amazon Q2 2018 results (focus on Amazon Advertising)

 

So Amazon released their Q2 reports, presenting a very nice growth especially in the AWS and advertising activities.

We have gathered some highlights from the earnings call that was held On July 26 and relates to the advertising business in order to see where it stands and where this is going to (and our apologies to the cloud and IT savvys for hardly mentioning AWS from now on – we are just not big fans of infrastructure illustrations with clouds and servers and arrows).

 

1. who are the advertising customers?

” I’ll start with advertising. So conceptually stepping back, it’s now a multi-billion dollar business for us. We’re seeing strong adoption across a number of fronts. Amazon vendors, sellers, authors as well as third-party advertisers who want to reach Amazon customers.

So we have hundreds of thousands of emerging and established advertisers. And they’re using our services to achieve their marketing goals to – whether that’s to drive new brand awareness, discovery or ultimately purchase decisions on our site.

Pain points and improvements, I would say, our priorities include improving the usability of our tools for advertisers, helping make smarter recommendations for customers. Automating, we’re doing a lot of work on automating the activities that the advertisers need to do, and continue to invent new products for those advertisers.

We also think measurement is going to be important so we’re focused on our measurement capabilities, so advertisers understand what outcomes they’re driving on our properties. And we think that we’re uniquely positioned to show them the direct benefit of their advertising.”

 

Notes:

(1) Are you offering your sellers/brand partners good usability tools to run their campaigns?

(2) Is your algorithm choosing the most relevant ads for the shoppers?

(3)  Do you offer your advertisers/sellers transparent reports and measurement?

(4) Do you, as a store, have transparent reports and measurement of your Sponsored Products offering?

 

2. Growth. Profitability.

“So it was a strong quarter. We had – what I attribute it to is continued strength in our – some of our most profitable areas. AWS had its third consecutive quarter of accelerating growth, 49% FX-neutral growth. Advertising also had strong growth.”

Note:

eCommerce media in general can be very profitable: (1) It uses existing inventory to generate incremental revenues, (2) almost 100% of the revenues go straight to the bottom line (unless you share too much with third parties along the way).

 

3. Growths awaits for Europe.

“Internationally, a lot of the same factors hold. I would say that, in addition to the operating efficiencies, advertising is also starting to make an impact on gross profit, although advertising is smaller in International segment than it’s in North America, it’s growing at a same rapid clip year-over-year.”

“I would also say that, although it’s smaller internationally the impact of advertising is starting to show up more and more internationally. It’s growing quite quickly just as it is in North America.”

 

You can read the full transcript here.