Amazon’s nascent ad business is bigger than it’s ever been — and it’s starting to make inroads with big brands

Amazon’s ad business may not be as gigantic as Facebook or Google, but it’s gaining traction.

During Amazon’s fourth-quarter earnings, the e-commerce giant reported $3.38 billion in “other revenue,” a line item mostly comprised of advertising sales during the fourth-quarter of 2018, up from $2.5 billion during the third-quarter. Year-over-year “other” revenue jumped 97% from the $1.7 billion Amazon reported in the fourth-quarter of 2017. For the total year of 2018, Amazon’s ad revenue hit $10 billion.

According to a recent note from Pivotal Research, Amazon is expected to make $38 billion in ad revenue by 2023.

Read more: Amazon’s ad business is set to more than quadruple by 2023 — and Google should be worried

Advertising represents a small fraction of Amazon’s revenue, but it’s increasingly on the lips of executives.

To compare, Facebook made $56 billion in ad revenue for 2018, and Wall Street expects Alphabet-owned Google to report $136 billion in 2018 revenue when it reports its fourth-quarter earnings next week.

Amazon reported a total of $72.4 billion in fourth-quarter revenue. For the total 2018 year, Amazon raked in $232.9 billion, marking the first time the e-commerce company passed $200 million.

Amazon has its sights on big brand budgets

Performance-driven retailers and brands traditionally represent the bulk of Amazon’s advertisers, but that’s starting to change as Amazon moves into measurement and video advertising.

The company recently rolled out a metric called “new-to-brand” to all advertisers, which tracks the number of people who saw an ad for a brand and then purchased that brand on Amazon for the first time in a year. Amazon tested the metric with ads that run during its live streams of National Football League telecasts.

Amazon also recently became accredited by the industry watchdog Media Rating Council to measure viewability — a metric that big brands use to measure how much of ads are actually viewed by humans.

Video is another growing area, according to marketers. Amazon is pushing into ad-supported OTT with Fire TV and IMDB’s streaming service Freedive.

“Facebook and Google have had video inventory at scale that’s ad-supported for some time now,” John Nitti, Verizon’s chief media officer, told Business Insider recently. Verizon tested ads on Freedive. “While Amazon’s ad business had been relegated to display and other ad formats, now they’re starting to scale into video.”

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