Amazon becomes ‘biggest advertiser in history’ with record $16.9bn spend
Ecommerce giant’s ad sales operation is also growing rapidly
Feb 08, 2022 04:15:00 AM | Article | Gideon Spanier
Amazon is likely to be “the biggest advertiser in history” after the company’s annual report showed it increased advertising spend to $16.9 billion in 2021.
The ecommerce giant said “advertising and other promotional costs to market our products and services” leapt $6 billion, or 55%.
The company cut its outlay by $100million to $10.9 billion in 2020—its first reduction in 17 years—because marketing costs were “constrained” at the start of the pandemic.
Amazon’s net sales have risen consistently during the pandemic from $280.5 billion in 2019 to $386 billion in 2020 and $470 billion in 2021.
The annual report said: “We direct customers to our stores primarily through a number of marketing channels, such as our sponsored search, social and online advertising, third-party customer referrals, television advertising, and other initiatives.”
The company’s investment in advertising far exceeds consumer goods giants, such as Procter & Gamble and Unilever, which used to be the world’s top advertisers, and other big-spending technology rivals such as Alphabet, the owner of Google. Those three companies each spend in the region of $8 billion on advertising expense—half of Amazon’s outlay.
Brian Wieser, global president of business intelligence at Group M, said: “Amazon is likely the biggest advertiser in history based on the 10-K [annual report] data.”
Wieser cautioned that it is difficult to make an exact comparison between companies because most of them make “limited disclosures” and will often use “an expansive definition of advertising” that can go beyond paid media costs.
Amazon uses many creative agencies, including Droga5, Joint and Lucky Generals. Initiative, part of Interpublic, handles media globally through a bespoke agency, Rufus. Amazon also has a large in-house operation.
Amazon’s total marketing costs, which include wages and sales commission for cloud platform Amazon Web Services, rose 48% to $32.6 billion in 2021.
Amazon the media owner
The company’s annual report also revealed for the first time the scale of its own advertising sales operation.
The media owner said “sales of advertising services to sellers, vendors, publishers, authors, and others, through programmes such as sponsored ads, display, and video advertising” were $31.2 billion in 2021.
That was a 58% increase on $19.8 billion in 2020 and two and half times its ad sales of $12.6 billion in 2019.
Amazon now ranks roughly fifth by global ad sales behind Alphabet, Facebook parent Meta, Alibaba and TikTok owner Bytedance.
Asked whether there is any link between Amazon’s increased advertising spend and its fast-growing ad sales, Wieser said: “There likely isn’t any direct link between the two figures, such as advertising to drive more ad revenue or spending money on its own platforms and recording one figure as a cost and the other as revenue.”
Rather, advertising on shopping and other retail sites has “simply become a critical environment to drive sales for companies of all sizes who have ecommerce operations”, Wieser said, adding Chinese firms advertising internationally on Amazon was a significant driver of growth.
The US is Amazon’s biggest market, with $314 billion of sales, Germany is next biggest on $37 billion, the UK generates $32 billion, Japan $23 billion and the rest of the world $64 billion.
(This article first appeared on CampaignLive.co.uk)