Companies

Amazon's Ad Expansion: A Catalyst for 2024 Profit Margins

Published January 4, 2024

Amazon.com Inc AMZN, a pioneer in e-commerce and cloud computing, is projected to see significant margin improvement by 2024, following a successful advertising strategy. According to insights from Bank of America (BofA) analyst Justin Post, ad spend data suggests a robust outlook for the tech giant. With a promising surge of 48% year-over-year growth in marketplace ad spending through November, as reported by Skai for the fourth quarter, the company's plans to introduce more ads in Prime Video and to continue developing new advertising initiatives are well on course.

The Path to Enhanced Margins

Amazon has long been transforming its vast online platform, incorporating revenue streams that expand beyond their traditional retail services. This evolution has carried them into the realm of digital advertising, where they now compete with other tech behemoths. While the main part of the business has been centered on their marketplace, introducing advertisements within their streaming service, Prime Video, marks the next phase of growth for AMZN. This move by Amazon not only diversifies their ad offerings but also taps into the larger trend of ad-supported video-on-demand, a space where companies like Netflix Inc NFLX, have started to explore as a new revenue channel.

Streaming Services and Expanded Advertising

The growth of streaming services such as NFLX, known for its vast library of films and in-house television series, has considerably altered the advertising landscape. Amazon, taking a leaf out of the similar business models, could leverage Prime Video's substantial subscriber base to boost its ad revenues, a strategy which seems to be part of Amazon's broader plans to enhance its profitability. In light of these industry shifts, the analyst's expectations for 2024 reflect confidence in the company's ability to capitalize on its ad initiatives and improve margins significantly.

Amazon, Advertising, Earnings