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How Big Is Amazon’s Ad Business?

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Respectable size and growing

Amazon (AMZN) doesn’t reveal much about its advertising business. It buries its advertising sales in its Other category, under which it also reports incomes from co-branded credit card agreements. In any case, only certain advertising services sales are included in the Other category, making the picture even murkier.

So how big is Amazon’s ad business? It certainly isn’t as significant as the ad businesses of Facebook (FB) or Alphabet’s (GOOGL) Google, but it’s respectable. On top of that, it’s growing at a decent pace, according to researchers.

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More than $5 billion in revenue in 2018

Analysts at Barclays estimate that Amazon’s ad revenue was $1.4 billion in 2016. Morgan Stanley researchers expect Amazon’s ad business to bring it $5.0 billion in revenue in 2018, with that amount swelling to $7.0 billion by 2020. BMO Capital analysts expect Amazon’s ad revenue to hit $3.5 billion this year and grow to $5.7 billion in 2018.

Facebook and Google generated revenues of $7.9 billion and $21.4 billion, respectively, in 1Q17. In the quarter, Amazon’s Other category, which includes its ad sales, was $850.0 million, a rise of 56.0% annually.

Room to grow in Amazon’s ad market

Amazon’s chief financial officer, Brian Olsavsky, recently hinted that the company sees advertising becoming a significant part of its business.

In the advertising business, Amazon’s advantages include its ~300.0 million active customer base and its nearly unparalleled insight into consumers’ shopping habits, which it can tap to produce more relevant ads.

Small ad platforms such as Amazon.com, Snap (SNAP), and Verizon’s (VZ) AOL are expected to benefit from the advertiser rebellion against Facebook and Google’s duopoly.

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