Amazon might be best known as a threat to Wal-Mart Stores Inc., department stores and nearly every other retailer, but it is also getting a growing piece of the advertising pie.
According to estimates from Morgan Stanley, Amazon doubled its sponsored products ad revenues to $1.4 billion in 2016. With an additional $1.25 billion in display ad revenues, the company booked an overall ad business of $2.6 billion or more.
Total advertising and credit card revenue for the year was $3 billion in 2016, up from $1.3 billion 2014 and $1.7 billion in 2015.
Analysts were able to estimate the ad revenue for the first time because of new financial disclosure forms that revealed revenue from “other” sources, including display ads and sponsored products, in addition to annual first-party revenue, third-party revenue and revenue from Prime membership.
Amazon’s advertising dollars come from a couple sources: Amazon lets merchants pay for promoted product listings, which can help a product appear on the first page of Amazon search results. The ads may appear on product detail pages and by search results, and shoppers who click on the ad are taken to the product detail page. The advertiser is not charged unless a shopper clicks the ad.
Amazon also sells ads through its Amazon Advertising Platform, which includes e-commerce offerings such as desktop and mobile web display ads and in-stream video ads.
While ad revenues over $1 billion are impressive for a company known more for efficient shipping and cut-rate prices than advertising, it is still a far cry from leading tech-world advertisers. Facebook, which relies almost primarily on advertising, reported total revenues for the last year at almost $27 billion, while Google, the clear leader, reported almost $80 billion in ad revenue for the year.
It’s also still shy of 2 percent of Amazon’s total revenue for the year. Amazon reported sales for 2016 at $136 billion, up from $107 billion in 2015, and $2.37 billion in profits.