Amazon's ad revenue grows to $7.9 billion while e-commerce sales slow

Amazon’s e-commerce growth spurt is starting to slow down as the pandemic wanes, and ad sales grew last quarter, but not as fast as many predicted. On Thursday, Amazon released its first-quarter financials, showing total sales of $116.4 billion, meeting Wall Street expectations. But its revenue forecast for this quarter was lower than estimates. Amazon projected total sales will be between $116 billion and $121 billion in the second quarter. Amazon’s ad revenue in the first quarter grew 23% year over year to $7.9 billion, and Wall Street expected ad revenue would top $8 billion, according to CNBC. Amazon has been grappling with rising energy and labor costs, as well as changing shopping habits as people return to pre-pandemic activities. The company Thursday began rolling out a 5% fee charged to independent sellers on its website who use its shipping services, a move designed to blunt the impact of inflation and rising fuel costs. Earlier this year Amazon raised the price of its Prime speedy-shipping program by $20 to $139 a year in the U.S. Meanwhile, Amazon’s ad business is becoming an increasingly important component of its ecosystem. Amazon is becoming a force in the digital ad market, serving search, display and video ads on its own platform, and fulfilling ad services for third-party websites through its demand-side platform. Earlier this month, Amazon launched a new “Buy With Prime” service, which allows online stores, outside of Amazon, to extend Prime member benefits to shoppers, including free shipping and seamless checkout. Upcoming Ad Age events Ad Age Next: Multicultural Marketing on May 9 Ad Age In-Depth: TV Pivot on May 24 and 25 Adam Epstein, co-president of ad software firm Perpetua, said Buy With Prime could bolster Amazon’s shopping data, and inform its ad platform. “The Buy With Prime button is an entry-point in every DTC website for Amazon to collect first-party conversion data,” Epstein said. “That’s how their ad business gets from $40 billion to $100 billion a year.” On Monday, Amazon will host a NewFronts presentation as part of the Interactive Advertising Bureau’s ad sales convention that runs through Thursday. Amazon will show off its ad platform, and look to win advertising budgets for its newly rebranded Freevee service, which had been IMDb TV. TV Upfronts and Newfronts 2022 calendar Amazon also continues to release new lines of products. Last quarter, the company launched a new in-house brand called Amazon Aware, which is a line of apparel, home and beauty products marketed as eco-friendly. Amazon also is looking ahead to its popular Prime Day, which is the annual online sales event set for July this year. Amazon is going through a rocky consumer environment, CEO Andy Jassy said in the earnings statement. Sales only rose 7.3% year over year, which represented the slowest pace of growth since 2001, and marked the first time Amazon has ever recorded back-to-back quarters of less than 10% revenue growth. “The pandemic and subsequent war in Ukraine have brought unusual growth and challenges,” Jassy said. “As we’re no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network. We know how to do this and have done it before. This may take some time, particularly as we work through ongoing inflationary and supply chain pressures.” Amazon’s stock slid in after-hours trading close to 12%. —With Bloomberg News

Amazon's ad revenue grows to $7.9 billion while e-commerce sales slow

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