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The growth rate of Amazon's ad business is plunging but revenue is still up

Business Insider | Apr 26, 2019, 02.52AM IST

jeff bezos amazon

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Amazon CEO Jeff Bezos

  • Amazon made $2.7 billion during the first quarter from advertising, representing a 36% year-over-year jump.
  • Ahead of earnings, Trip Miller, Gullane Capital Partners managing partner and Amazon shareholder, told Business Insider that advertising is one of the top two or three growth areas of the company.
  • Amazon has been ramping up its pitch to advertisers and is currently hiring 1,200 advertising roles across eight of its teams.

Amazon's ad business is steadily growing but not as quickly as it has in the past.

During the first quarter of 2019, Amazon made $2.7 billion from advertising, which is labeled as a line item called "other." The ad revenue represents 36% year-over-year growth but is a dip from the $3.4 billion Amazon reported during fourth-quarter earnings.

While Amazon's ad business is bigger year-over-year for the quarter, its growth rate is plummeting. During the first quarter of 2018, amazon's ad business grew at a 132% year-over-year. And during the fourth quarter, the growth rate was 97% year-over-year, making the first-quarter's 36% jump a drastic change.

Read more: Marketers say Amazon's advertising business is difficult to navigate. Here's why the company thinks the 'chaotic' structure actually makes sense.

Amazon wants to take on the duopoly

The slowdown comes at a critical time for Amazon, which has been steadily angling for more share of the ad dollars that go to Facebook and Google.

According to research firm eMarketer, Amazon's US ad business will grow more than 50% this year.

The company's also been staffing up its pitch to agencies, including hiring for 1,200 advertising roles across eight teams. According to agencies, Amazon's been building out specific teams to service them and has stepped up its programmatic and video offerings.

Ahead of earnings, Amazon shareholder Trip Miller, managing partner of Gullane Capital Partners, said that advertising is one of the three biggest growth areas for Amazon and that it has an edge in going into "multiple, vertical opportunities" compared to other digital advertising companies.

"Other than regulation, Amazon is the biggest risk to Alphabet on the search side," he said. "If you're not doing business with Amazon, especially on the advertising side, over the next five years, you're losing."

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