Amazon advertising bucks Q1 digital slowdown with help from automation

Dive Brief:

Amazon grew its advertising revenue by 23% year-over-year in the first quarter for a total of $9.5 billion, beating expectations, according to an earnings statement.

In prepared comments, CEO Andy Jassy attributed momentum for the segment to investments in machine learning technology that can serve more relevant ads to users and deliver “unusually strong” results for brands.

Not everything is sunny in Amazon advertising. The unit recently experienced cuts amid a broader round of layoffs at the e-commerce giant, while ad-supported platform Twitch is weathering leadership struggles.

Dive Insight:

Amazon’s ad sales remained resilient in Q1 despite an uncertain economic environment that has led marketers to tap the brakes on spending. Like many in the tech world, the company took care to highlight the benefits of automation in improving advertising relevance and efficiency amid renewed interest in sectors like artificial intelligence. Total revenue hit $127.4 billion, above Wall Street’s estimates, but investors were spooked about a quarter-over-quarter slowdown in its Amazon Web Services cloud-computing unit.

On a call discussing the Q1 results with analysts, Amazon executives stated that sponsored product and brand placements were some of the biggest growth drivers for advertising. Those are among the most popular ad formats in the retail media space, and ones where Amazon wields particular strength due to its sprawling e-commerce marketplace. About 61% of consumers begin their hunt for products online on Amazon, according to Insider Intelligence.

Amazon’s rate of growth for advertising was well above Google search, which grew only about 2% over the Q1 period. Meta Platforms, which has started to compete more directly with Amazon on the performance marketing front, similarly saw gains in the single-digit range following several quarters of declines.

“[We’re] continuing to buck wider advertising trends and deliver robust growth,” said Amazon CEO Jassy on the call with investors. Jassy noted that, even in tough times, people need to shop, a benefit of convenience-oriented e-commerce sites like Amazon. That factor combined with a “substantial investment in machine learning” led to impressive brand outcomes, Jassy added.

But Amazon has been subject to the same tech headwinds shaking up Google and Meta. The company has laid off thousands of employees, with some of the most recent job cuts directly impacting its advertising division, CNBC previously reported. Twitch, Amazon’s live streaming platform, has also been rocked by executive departures and policy changes that have frustrated users and creators.

Still, Amazon continues to enshrine itself as a juggernaut in advertising and media. The company will again present at the Interactive Advertising Bureau’s NewFronts next week, a content showcase intended to win over brands and agencies. Amazon on Thursday unveiled a multi-year agreement with Pinterest to bring third-party ads to the inspiration-focused platform. Pinterest said the decision was motivated by user interest in shoppable content.