Ads could soon be Amazon’s most profitable business

Amazon’s ad business pulled in $20B+ in 2020 and may already be the most profitable part of the company.

March 31, 2021

This is a jarring stat.

Amazon’s advertising business brought in $20B in 2020, which is more than the sales of Snap, Twitter, and Pinterest… combined.

While Amazon bundles its ad business under the category of “other,” leading tech analyst Benedict Evans teased out the number and shows it has doubled in just the past 2 years.

The ad revenue is a drop in the bucket for Amazon…

… which generated $386B total revenue last year. However, the majority of those sales are from the low-margin retail business.

Evans estimates that Amazon’s ad division could bring in operating income as high as $13.6B, which is in line with Amazon’s cash-cow cloud business.

The result isn’t too surprising if you think about it

According to CivicScience, ~50% of online shoppers start their product search on Amazon.

With all of these people to buy goods on its platform, Amazon is happily selling its digital real estate to the highest bidder.

Research firm Marketplace Pulse recently did a teardown of Amazon’s website — and the results were eye-opening. Everything shaded blue in the image below is an ad.

THAT is jarring!

Ads have taken over Amazon (right) like it did on eBay (left) (Source: Marketplace Pulse)

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