The Amazon logo is displayed on the smartphone and PC screen.
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Social media giants Meta as well as Click inform investors that the online advertising market is experiencing some turbulence due to the economic downturn. Amazon sends a completely different message.
While the bulk of its business is in e-commerce and cloud computing, Amazon has created reliable online advertising department forcing brands to pay big bucks to promote their products on the company’s website and app.
in second quarter, Amazon grew faster than any of its larger competitors in the market and also outperformed the rest of the major players. Amazon’s advertising revenue rose 18% year-over-year to $8.76 billion, beating analysts’ expectations and highlighting the division’s meteoric growth and growing importance to brands.
Against, Facebook advertising business shrink, shrink For the first time in history, there are no analyst estimates, and the company is forecasting a second consecutive decline in revenue in the current period.
Here are the growth rates in descending order for the leading online advertising platforms.
- Amazon – 18%
- Click – 13%
- Google – 12%
- Pinterest – 9%
- Twitter – 2%
- Facebook – (1.5%)
It’s not just social media companies that are criticizing the challenging advertising environment. streaming service Roku reported a disappointing second quarter results and said in a letter to shareholders that the current advertising market is reminiscent of the beginning pandemic Covid-19“when marketers prepared for macroeconomic uncertainty by rapidly cutting ad spend across all platforms.”
Meanwhile, Amazon reassured Wall Street by forecasting third-quarter revenue growth from 13% to 17%. This will be a boon for the advertising department because “the advertising business is going the same way as the commercial business,” said Andrew Lipsman, an analyst at Insider Intelligence.
“I think in the long run Amazon will create absolute advertising power,” Lipsman said. “This engine will change advertising.”
Amazon has a clear advantage over several social media platforms that have been struggling lately. In 2021 Apple iOS privacy changes have made it harder for advertising sites to track users. huge impact on Facebook and Snap. Amazon, by contrast, is a separate silo where advertisers are directly involved in creating campaigns.
Lipsman said companies worried about a potential recession are allocating more of their ad budgets to places like Amazon, where they’re more likely to get a return on their investment.
“Ad dollars are running to safety right now, and that safety is when you can show a measurable return on ad spend,” Lipsman said.
The prospect of advertising leading to direct sales is driving many pinterest current strategy. The company is investing heavily in e-commerce and recently named former Google head of commerce Bill Ready as its new CEO, replacing co-founder Ben Silbermann.
Justin Patterson, analyst at KeyBanc Capital Markets, said there are indications that Pinterest has seen some success in e-commerce and that its “algorithms to help people find contacts or find items on Pinterest to shop also continue to improve.”
Pinterest’s revenue fell slightly short of analyst estimates, and the company also posted a disappointing mid-single digit growth forecast. But stocks up 12% after activist investor Elliott Management revealed he was the company’s largest shareholder and said, “Pinterest is in a unique position in the advertising and commerce ecosystem.”
For all the doom and gloom surrounding the broader online advertising market, Keith Scott-Dawkins, global director of business intelligence at media investment firm GroupM, sees plenty of reason to be optimistic. Facebook parent company Meta is still making a lot of money, she said, and while social media platforms aren’t experiencing the same explosive growth they did during the pandemic, they’re still attracting the attention of top advertisers.
Brand awareness is important for companies in the consumer goods industry and beyond, regardless of the current economic climate, Scott-Dawkins says.
“We’ve heard from consumer product brands in the past about the importance they place on advertising and brand advertising in times of recession, simply in terms of consumers choosing their brand over a generic brand,” she said.
The big question will be whether consumers will cut back on spending throughout the year, which could have a deeper impact on companies’ advertising budgets. If so, Amazon could still increase its share, but in a market with fewer dollars.