Amazon’s ad business cracks $3 billion, but is growing slower
Amazon reported 4th quarter earnings Thursday after market close. Here are the key things you need to know.
1. Advertising is growing, Cheap Omega Replica but two caveats
Advertising remains one of the fastest-growing parts of the Amazon business. The company reported that ad revenue (which it continues to classify as “Other” revenue line) is now up to $3.4 billion, up from $2.5 billion the prior quarter. That means a 95 percent year-over-year growth.
But an interesting point is a deceleration of growth: In Q3, Amazon ads were up 123 percent year over year, and prior to that, it was 129 percent year over year.
The company has made serious strides in improving the advertising offering for agencies. Most recently, it beefed up its brand metrics by offering a “new to brand” metric which will attempt to convince marketers that not only can the retailer sell products, but also attract new customers. Brands continue to be gung-ho on Amazon as a viable advertising alternative to the power of Facebook and Google. New data from Feedvisor this week showed that 57 percent of brands that currently sell on Amazon also now advertise on it — with 82 percent saying that advertising and branding is one of the most “compelling” reasons to sell on Amazon.
The big takeaway: Just hold your horses a bit. While ad sales are staggeringly good, it’s also coming off the back of a holiday season where sellers ramped up spending to drive sales during the holiday period. At the same time, Omega Replica Watches the growth is decelerating.
2. Amazon’s global ambitions may have suffered an India-sized setback
India has long been considered an Achilles heel for Amazon. The world’s second-most populous country has been a tough nut to crack — local rivals like FlipKart (now owned by Walmart) have gotten ahead because they were there first, and Amazon has had to pour a lot of money in localizing operations in a country that is still heavy on cash use and higher in mobile penetration over email addresses. Now, a new hit: New foreign direct investment rules set to go into effect Feb. 1 mean that it is now blocked from selling products via vendors in which they have an interest, and they also can’t make deals with sellers to sell on their platforms. Already, Echo speakers and Amazon-branded products, as well as Basics products, are off the site. The impact this could potentially have on Amazon’s private label could be huge.
Elsewhere in Asia, Amazon also this week launched a Middle East marketplace. This is confusing because it also two years ago purchased existing Middle East marketplace Souq.com for $580 million. But now, reports say it is asking sellers in the U.S. to go through Amazon, not Souq. The interesting thing is that Amazon is a very mature business in the U.S., with the U.K., Japan and Germany accounting for most of its international sales. But if it needs to grow, it needs to capture large swathes of the market in Asia.
3. Amazon loves to laud “small- and medium-sized businesses,” which may not be that small or medium
Once again, Amazon propped up the success of small- and medium-sized businesses on the marketplace. These businesses drove more than 50 percent inventory sold over the holiday shopping season, and according to Amazon, more than 200,000 small- and medium-sized businesses made over $100,000 in sales in 2018. That sounds great — Amazon is always trying to demonstrate that it’s boosting, not squashing, the little guys, and it’s introduced features to showcase that support. Amazon Storefronts, for instance, launched in September as a place to discover new small- and medium-sized businesses, using language on the homepage like “Support artisans” and “Discover women-owned businesses.”
But, on Amazon, even small and medium is pretty big: According to the company, small businesses have fewer than 100 employees and less than $50 million in yearly revenue, medium-sized businesses have fewer than 1,000 employees and less than $1 billion in yearly revenue. In Storefronts, Dyson and Kenmore are featured brands.
4. The third-party marketplace is (still) growing faster than wholesale retail
Highlighted in the earnings was easier and cheaper shipping solutions for third-party sellers, Omega Replica who are now driving faster-growing sales for Amazon than Amazon’s wholesale retail business (as we reported). Amazon’s marketplace sellers now get more affordable shipping rates for some USPS and FedEx options, and in the U.S., Europe and Japan, Fulfilled By Amazon storage fees went down. Amazon’s getting more competitive when it comes to shipping and fulfillment rates as other platforms get in the game: BigCommerce launched BigCommerce Shipping this week, which is free for subscribers, and Shopify has integrations for cheap at-volume shipping rates.
Meanwhile, third-party seller services brought in $13.4 billion for Amazon this quarter, an increase of 27 percent over the last, demonstrating just how much money Amazon stands to make by shifting the marketplace into a high-growth, pay-to-play arm of the business.
5. Physical stores grow slow
Physical store sales were at $4.4 billion, an increase over last quarter’s $4.2 billion, but a 3 percent decrease year-over-year. That says a lot about how much of a resource suck physical retail is, considering all of Amazon’s other categories saw double-digit growth. Right now, physical stores under Amazon include Whole Foods, Amazon Go, Amazon Books and Amazon 4-Star, and the retailer also opened six pop-up stores over the holiday season.
CFO Brian Olsavsky attributed the decline in sales to Whole Foods, and a period of adjustment in its financial calendar that took five days out of this year’s quarter. Also, he noted, Prime Now orders for delivery from Whole Foods are counted as online sales, showing that even Amazon has trouble delineating retail channels.
Still, Amazon’s betting a lot on technology in stores like cashierless checkout and free one-hour and same-day delivery and pickup for grocery orders from Whole Foods. It plans to expand the Prime Now grocery delivery program to more cities. Here’s hoping it pays off — overhauling physical retail isn’t cheap. — Shareen Pathak and Hilary Milnes
Reading the tea leaves — or, job postings
To find out where Amazon’s headed, look to its careers page. Right now, there are more than 1,100 job positions open on Amazon lumped under “Marketplace,” divided into teams like Amazon Global Fulfillment Services and Seller Support. Under its “Third-Party Seller Recruitment and Development” division, Amazon is looking for people to manage seller relationships in an assortment of titles and specific assignments — 65 people, as of Friday, a 20-person increase since Wednesday of this week. There are openings for several strategic account managers, who are tasked with driving more sales revenue from third-party Amazon sellers. The job descriptions also get specific about the product categories that Amazon is drilling into: multiple account manager roles are being tasked to focus on “consumables,” which covers health and beauty, grocery and baby — a “high growth area,” according to Amazon.
They also provide insight into programs Amazon is getting off the ground. For example, a “growing and entrepreneurial team” under Seller Recruitment and Development is working on coming up with new tools for sellers, like education, planning and supply chain optimization.
“Money [is being] allocated to where growth is happening,” said former Amazon vendor manager Elaine Kwon.
3 questions with Michael Dubin, CEO, Dollar Shave Club
Has Dollar Shave Club’s identity shifted under Unilever ownership?
The Dollar Shave Club is run as an independent company — that was the design of the working relationship when we closed the deal. That was important for me for a number of reasons. A lot of times you hear about companies being acquired and management throughout the organization of the acquiring company is very keen on learning from the acquired company. That can be a distraction, and I really wanted to make sure we were insulated from that as much as possible, so having structural separation helps that. Preserving cultural independence is important, and that’s benefited us as well.
What do you think is going to be the biggest force shaping retail this year?
I think that you’re starting to see a lot of companies take swings at alternative retail concepts. Cheap Omega Replica People are always going to go out into the real world; anyone that wants to thrive in this era needs to figure out a game plan to be there. You’re starting to see companies like Neighborhood Goods create more of these discovery centers that are not fully inventoried locations; they’re placed among other retailers. It’s a new era of department stores, so to speak, but the emphasis is more on discovery than spending hours in one location.
Is there pressure to turn Dollar Shave Club into more of a lifestyle brand as you launch new products?
The problems that we observed in the razor category — which is that prices are too high and shopping experiences are frustrating and cumbersome — [exist]in the grooming and personal care space for men. Our premise is we want to give you a best-in-class product for less than a best-in-class price. Ultimately, we are trying to solve problems for guys as it relates to taking care of themselves. That’s the justification for launching these products; we believe there’s a hole in the marketplace, and we believe that it’s essential that you use a variety of products to take care of yourself. — Suman Bhattacharyya
Poshmark, a selling app that lets users sell clothes to each other right from their closets (as well as build mini wholesale businesses), released its first Year in Social Commerce report, giving insight into what goes on when shoppers scroll through the other people’s wardrobes. Here’s what to know.
- 78 percent of purchases on Poshmark involved a social interaction of some kind: Poshmark’s users can like, share and comment on postings.
- Every day, Poshmark’s self-reported 40 million users send out 1.2 million likes, Omega Replica Watches 18 million shares and 350,000 comments.
- Cardi B is boosting Fashion Nova: Her partnership contributed to a 210 percent increase in purchases of Fashion Nova apparel on Poshmark.
- Meghan Markle wearing Aquazzura heels, meanwhile, led to 151 percent increase in purchases on Poshmark.
- Highest-valued brands on Poshmark include Allbirds, Reformation, Carhartt, Eloquii and of course, Gucci.
- Poshmark’s most purchased items last year included men’s Off-White sneakers, teddy coats, fanny packs and Gucci Marmont belts.
What we’ve covered
Third-party play: Amazon is following the money, and shifting internal resources and attention to its third-party marketplace, as it outpaces the growth of its wholesale business. Retail middlemen are falling out of favor, and not even Amazon is immune.
Blue Apron blues: Blue Apron CEO Bradley Dickerson has a strategy in place to get top customers spending more while targeting new customers similar to those Omega Replica loyal subscribers through outside partnerships. Here’s hoping it works: Blue Apron lost 89,000 customers in the fourth quarter of 2018, and 189,000 customers in the full year.
Thanks, I got it on Facebook: Instagram is a well-known shopping and discovery engine, and Facebook wants to be one, too. Who wouldn’t trust Zuckerberg with their credit card information? кредитная карта онлайн решение
Why HelloFresh struck an ad deal with StreamElements to reach the gaming community
StreamElements’ plug-and-play interface creates a lighter lift for brands looking to reach the gaming community, eschewing the protracted negotiations and production time that can come along with brand partnerships with prominent individual streamers.
What these latest consumer affinity trends tell us about marketing in 2023
Video views could guide marketers on where consumers will shop after watching content on social networks.
Sam’s Club wants to ‘broaden awareness’ in cinemas with a faux-movie trailer starring Kevin Hart
For the holiday season, Sam's Club has teamed up with Kevin Hart to help launch its ad featuring a movie trailer style and is hoping to connect with moviegoers by boosting brand awareness for the holiday season.
SponsoredPublishers are adapting advertising strategies for a privacy-first world
Tina Iannacchino, senior publisher director, Seedtag So much of the attention around the death of third-party cookies and its impact on the digital advertising industry is focused on the implications for brands and consumers, which is far from the complete picture. The digital publishing industry in the U.S. is massive and set to be shaken […]
Why YouTube’s focus on competing with streamers may have hurt the platform as brands focus on TikTok
As competition continues to heat up in the digital video and content creation space with TikTok, Instagram and the recent addition of social app BeReal, YouTube may be feeling that heat more and more.
Dentsu’s new global gaming lead reflects on gaming strategy ‘void’ in advertising, media
Despite the rapid rise of gaming in recent years — or perhaps because of it — many brands and marketers are still confused about how to best reach the gaming community. Dentsu's new global gaming lead Brent Koning is equipped to navigate these uncertain waters.