Amazon’s ad business continues to soar, topped $3 billion for first time in Q4

Amazon reported $3.38 billion in advertising revenue for the fourth quarter of 2018 on Thursday, surpassing $3 billion in a quarter for the first time. With that, Amazon’s ad business topped $10 billion for the year, a 95 percent increase from 2017.

Surpassing expectations. That’s far and above the $4.6 billion eMarketer had estimated in September, when it declared Amazon had become the third-biggest ad seller in the U.S. (well) behind Google and Facebook. (Facebook reported $16.6 billion in ad revenue last quarter.) Amazon had already generated $4 billion in advertising revenues in the first two quarters of the year, according to its own earnings reports.

Soaring revenue, but slowing growth rate. Amazon’s impressive ad revenue growth (still reported on an “Other” line item in the company’s earnings reports) did slow with each quarter in 2018. The fourth quarter’s year over year growth of a still-lofty 97 percent ended a three quarter streak of triple digit growth.

A focus on SMB sellers. Amazon has been courting small and medium-sized businesses with the launch of dedicated Storefronts in September and new features to give sellers more support and visibility.

Amazon said that more than half of units sold in Amazon’s stores this holiday season came from small and medium-sized businesses, third-party sales are growing faster than first-party sales, and nearly 200,000 small and medium-sized businesses surpassed $100,000 in sales in Amazon’s stores in 2018.

With advertising becoming less of an option and more of a requirement for sellers to compete on the ecommerce platform, every one of those 200,000 SMBs is either a current or likely near-future advertiser.

Why you should care. Amazon still holds a small share of the advertising market compared to Google and Facebook, but as a share of commerce and CPG advertisers, it’s certainly a different story. Advertisers and agencies plan to increase their media spend on Amazon in 2019, according to our research. Expect to see Amazon continue to advance its advertising offerings in the coming year.