Amazon posted $60.5 billion in Q4 revenues & ad business grew 60%

Like Google and Apple, Amazon reported earnings yesterday for the holiday quarter. Revenues were $60.5 billion, and income was roughly $1.9 billion, which was more than double the revenue in the same period last year.

For the full year, sales grew 31 percent to $178 billion (vs. $136 billion in 2016). In a prepared statement, the company said, “More new paid members joined Prime in 2017 than any previous year — both worldwide and in the US.”

CEO Jeff Bezos said that Amazon sold “tens of millions of Echo devices” in 2017. He added, “Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don’t see positive surprises of this magnitude very often — expect us to double down.”

Amazon Supplemental Financial Information and Business Metrics (in millions)

Amazon Web Services had a strong quarter ($5.1 billion), but of particular interest is Amazon’s advertising business, which it currently lumps into the category “other.” Other is mostly ad revenue; it grew 60 percent year over year to $1.7 billion.

Amazon’s CFO Brian Olsavsky and Director of Investor Relations Dave Fildes both spoke on the earnings call about Amazon’s ad business. Fildes said:

Advertising was also a key contributor [to Amazon’s results] as we’re continuing to make more value — the offering’s more valuable, both to customers and advertisers alike, and that was particularly strong in North America.

Olsavsky added:

I would say our [advertising] strategy is to make the customer experience additive by the ad process. We want customers to be able to see new brands and have [an] easier time discovering products that they’re looking for. For brands, we think the value proposition is that we can find ways for them, especially emerging brands, to reach new customers. So we’re working with advertisers of all types and sizes to help them reach our customer base and the goal of driving brand awareness, discovery and better purchase decisions by the customer.

Financial analyst Brian Novak had Amazon in mind when he asked, on the Google earnings call, about ecommerce related searches on Google:

There is often speculation and question marks around how consumer behavior is changing in ecommerce and whether Google is still capturing as many ecommerce searches. Could you just talk to what you are seeing in retail search query volumes and search user growth within ecommerce in the United States?

Google CEO Sundar Pichai reassured analysts that ecommerce search and Google Shopping were healthy. But the sense is growing that Amazon will be a material player in paid-search advertising for retailers and ecommerce companies and that its competitive challenge to Google (and Apple) in several categories is just getting started.