Amazon generated $12.06 billion from its advertising services in the third quarter of 2023.

The figure marks a 26.3% increase from the same period in 2022 – a result significantly better than forecasts predicted by Wall Street.

Why we care. Amazon’s exceptional performance serves as a powerful signal that the digital advertising industry is experiencing a robust resurgence following on from the economic downturn. This promising trend should instill confidence among cautious marketers, ultimately rekindling their trust in the sector. As trust is rebuilt, experts anticipate a surge in ad spend during the all important holiday season in Q4.

Exceeding expectations. Financial analysts had predicted that ad revenue would generate $11.6 billion in Q3 – which would have marked a 21% year-on-year increase. However, Amazon’s ad sales surpassed this by $460 million. The segment includes:

• Sales of advertising services to sellers
• Vendors
• Publishers
• Authors
• Third parties through programs like sponsored ads, display ads and video advertising.

Ad partners. In the third quarter of this year, Amazon teamed up with a number of publishers and brands to serve ads on their apps and websites for products that are sold via Amazon in the US, including:

• BuzzFeed
• Hearst Newspapers
• Pinterest, Raptive
• Ziff Davis’ Lifehacker
• Mashable

The retail giant suggested these collaborations played an important role in its success in Q3.

Leveraging AI. Amazon also attributed its successful third quarter to rolling out new AI capabilities for brands and advertisers. In India, Amazon introduced a generative AI digital assistant to assist small businesses in setting up an online store, offering support with registration, listing, and advertising.

Other AI announcements included Amazon’s Supply Chain, a fully automated service for sellers to efficiently transport products from manufacturers to customers.

What has Amazon said? Andy Jassy, Amazon CEO, described Q3 as another “strong quarter”. He said:

• “We had a strong third quarter as our cost to serve and speed of delivery in our Stores business took another step forward, our AWS growth continued to stabilize, our Advertising revenue grew robustly, and overall operating income and free cash flow rose significantly.”
• “The benefits of moving from a single national fulfillment network in the U.S. to eight distinct regions are exceeding our optimistic expectations, and perhaps most importantly, putting us on pace to deliver the fastest delivery speeds for Prime customers in our 29-year history.”
• “The AWS team continues to innovate and deliver at a rapid clip, particularly in generative AI, where the combination of our custom AI chips, Amazon Bedrock being the easiest and most flexible way to build and deploy generative AI applications, and our coding companion (CodeWhisperer) allowing enterprises to have the equivalent of an experienced engineer who understands all of their proprietary code is driving momentum with customers, including:
  • Adidas
  • Booking.com
  • GoDaddy
  • LexisNexis, Merck
  • Royal Philips
  • United Airlines.”

Earnings report. You can read Amazon’s full third quarter 2023 results report for more information