💸 Amazon’s $30B+ ad biz


September 23, 2021

The Hustle

In an effort to make its supply chain more circular, Ikea launched a new furniture buyback program. Unfortunately, the program requires customers to visit a store in person… and risk getting lost in the Ikea maze forever.

Today’s rundown:

  • Prime placement: Inside Amazon’s $30B+ ad empire.
  • Hollywood holdup: A historic strike may be looming.
  • Disposable clothes: Fast fashion’s environmental disaster.

Let’s do it.

The big idea
Amazon Ad

Amazon’s $30B+ ad business, explained

Have you noticed more and more “sponsored content” on Amazon?

It’s not your imagination: the company’s advertising business is huge — and growing.

The ecommerce giant long passed Microsoft to become America’s 3rd largest ad platform, trailing only some random internet companies called Google and Facebook, per CNBC.

Amazon’s ad revenue hit ~$8B…

… in Q2 2021 (+87% YoY) which computes to an annual run rate of ~$30B+.

Here’s a fairly mind-blowing stat: Amazon’s ad business alone is worth nearly 2.5x the combined revenue of Snap, Twitter, Roku, and Pinterest.

Sponsored content has replaced product recommendations

And retailers are happy to pay up to get onto Amazon’s precious digital real estate. By one estimate, 74% of American consumers begin their product search on Amazon.

Other ad inventory includes:

  • Sponsored search (up to 6 ads can populate the top of product search results)
  • Sponsored brand posts (several products from one brand listed in a banner)
  • Video ads

The price to place ads is also going up

A number of companies (e.g., Elevate Brands, Thrasio Holdings) are raising billions to roll up Amazon stores and optimize them to squeeze out every penny.

Competition from these well-funded startups has pushed the average cost per click on an Amazon search ad to $1.27, vs. 86 cents last year.

Amazon says ads are “optional” for brands but — just like Google — you don’t want to get buried on page 4 of search results.

Juozas Kaziukenas of Marketplace Pulse tells CNBC that “it’s not uncommon now for brands to be spending 50% or more of their product price on various fees to be selling on Amazon.” 😬

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SNIPPETS

PetSmart launched a new online pharmacy where customers can fill prescriptions from vets and have them shipped to their door. #ecommerce-retail

The world’s biggest floating wind farm, located off the coast of Scotland, gets ready to power 50k+ homes. #clean-energy

Your new best friend: A little Italian robot is designed to carry up to 20 pounds and follow its owner around at 6 mph. #emerging-tech

The government would like you to tell it if you’ve been hacked, not pay off hackers — which it says could violate US sanctions. #privacy

Some Robinhood users will get crypto wallets next month, allowing them to send and move crypto in and out of the app. #fintech-cryptocurrency

Uber’s up: The rideshare giant’s announcement that it could see a profit this quarter caused its stock to bump up 11.5%. #big-tech

New Media
Netflix screensaver

Hollywood unions vs. streaming services

Netflix used to send DVDs in the mail. Now, it’s all about streaming, and a major Hollywood union wants those platforms to pay up.

The International Alliance of Theatrical Stage Employees (IATSE) is a union with 150k+ members, including editors, costumers, cinematographers, script coordinators, and more.

Back in 2009, IATSE and TV/film studios saw the future of streaming services — AKA “New Media” — as uncertain. Both agreed for “greater flexibility” when it came to employment terms and conditions.

Cut to 2021:

  • Netflix has ~209m subscribers and just crushed the Emmys with 44 wins
  • Amazon Prime has ~200m subscribers; ~175m use it to stream TV/film
  • Disney+ has ~116m subscribers
  • HBO and HBO Max have ~67.5m subscribers

IATSE argues New Media has become regular media now, and should offer the same benefits and pay as other studios.

A big strike is brewing

IATSE has been negotiating a new contract with the Alliance of Motion Picture and Television Producers to no avail, per The Hollywood Reporter. In addition to increased pay for streaming projects, it wants:

  • Shorter hours — many workers cite 12+ hour days
  • Harsher penalties for skipped meals and weekend work
  • Higher base pay for lower-paying jobs

If enough local unions vote to authorize a strike, it could open the door for the biggest strike in Hollywood since 1945.

Meanwhile, industry employees are sharing some brutal work stories to drum up support.

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Cost of Doing Business
landfill

The environmental cost of fast fashion

They say there’s no such thing as a biological free lunch, and the same principle seems to apply to fashion.

Fast fashion — the overproduction of trendy clothes at low cost by mass-market retailers — has created big problems in Ghana, where many of the clothes end up.

Americans are buying 5x the clothes they did 30 years ago…

… and getting a fraction of the usage. The average item is only worn 7x before being disposed of.

Leftover clothes from donations and thrift stores get shipped to salvage markets abroad, where market traders purchase them in bulk, fix them, and resell them.

But fast fashion has stunted that cycle for 2 reasons:

  • There are way too many clothes now
  • Fast fashion materials are poor quality and difficult to reuse

Accra, Ghana’s capital, receives ~15m items of used clothing per week, and sends ~40% of it to landfills. When the landfills get full, the clothes end up spilling onto beaches, creating mountains of trash.

Consumer behavior could be the answer…

… and seems to be moving in the right direction. In a recent study from GlobeScan, 74% of respondents acknowledged that they need to consume less to protect the environment.

Whether it’s as simple as purchasing less, or adopting trends like circular fashion, it’s clear that fast fashion could use a speed bump.

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TRENDS

The Shark Tank robot and $275k/mo. selling skirts

Have you read this week’s Trends report?

If you haven’t, you’re missing out on:

  • Tips on how to pitch your startup from the Yale School of Management (and the AI they built to think like a judge on “Shark Tank”)
  • How Amazon sellers specializing in cosplay costumes are raking in an extra $275k/mo. from one product alone
  • Ideas for getting in on the $88B anti-aging industry
  • And much more

To get access to the full report, try 1 week of Trends for just $1.

You’ll also get access to the entire archive of Trends research, the Trends private community, and one week of member-only events so that you can see what all the hype’s about.

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AROUND THE WEB

🎮 On this day: In 1889, Fusajiro Yamauchi founded Nintendo Koppai — now known as just Nintendo — to make Hanafuda, a type of Japanese playing cards.

🐶 Haha: Villa Park, Illinois, will soon attempt to break the Guinness World Record for the largest canine wedding. To do so, more than 178 dog couples will have to show up to get faux-married.

🏎️ That’s cool: This weekend, several cars from “Mad Max: Fury Road” are up for auction, including the “War Rig” and “Doof Wagon.” Guitar-playing, flamethrower guy not included.

🌱 That’s interesting: Finnish researchers found that planting lawns and forest undergrowth in daycares can change young children’s immune systems.

🤢 Wait, what: Networking is touted as a key part of career growth, but plenty of people avoid it. Why? Researchers say it makes them feel “physically dirty.”

💙 Huh: Roses are red, hyperlinks are usually blue. Here’s why.

Meme of the day
shipping speed meme

Seriously, though. (Source: The Funny Beaver)

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