Amazon has for the first time broken out its advertising services revenue in its fourth quarter earnings report of 2021, and the numbers are staggering. The US e-commerce giant made $31.2bn in ad revenue last year, a 32pc increase on 2020.

Advertising revenue for the last quarter was also up 33pc at $9.7bn, indicating that Amazon sells more ads than previously thought. The last major earnings break out the company made was when it separately reported its cloud sales, Amazon Web Services (AWS), for the first time in 2015.

The sheer size of Amazon’s ad business puts it ahead of many other tech companies, including Microsoft, which reported advertising revenue in 2021 of more than $10bn in its most recent earnings call. Amazon has also been creeping into the market share of Google of Facebook, the two biggest players in the ad space.

Some analysts think the Amazon’s success in advertising is because nearly three in four consumers start their online search for a product on the Amazon website, according to a study by Jungle Scout based on Q1 2021. This puts it ahead first product searches on Google, Facebook and brands’ own websites.

“Amazon has done such a great job of becoming the ‘everything store’ that they have been able to convince consumers that whatever you want will be there,” Wedbush analyst Michael Pachter told GeekWire. “Instead of searching on Google, Amazon customers commence product searches on Amazon, hence a shift of ad dollars away from Google and to Amazon.”

However, advertising on Amazon is a little different from how other companies understand it because its ad revenue comes from sellers rather than third parties in the form of ‘sponsored products’ and ‘sponsored brands’ – a bit more akin to promo material in a supermarket, but on a larger digital scale.

Prime price hike, cloud earnings and Rivian

Amazon also said in its earnings call that it is raising the price of its Prime service by $20 to $139 on 18 February for new customers and on 25 March for existing ones. This is the first price increase in four year and will not affect the monthly price of Prime Video-only subscription.

The increase in price was blamed on inflationary pressures and increasing wage costs, as Amazon reported a quarter four revenue of $137.4bn – a 9pc increase on the fourth quarter of 2020. Revenue for the full year was up 22pc to $469.8bn.

Even though the quarter marks the first single-digit growth by Amazon since 2017, investors have shown confidence in the company’s performance and shares jumped 14pc in extended trading after the earnings call yesterday (3 February).

Revenue numbers were particularly good for its cloud segment AWS, which at $17.8bn exceeded StreetAccount expectations of $17.37bn. This increase in cloud sales has been a major of recent tech earnings, with other Big Tech companies such as Microsoft and Google reported bumps in cloud sales.

Rivian, Amazon’s electric vehicle company, also reported a big profit of almost $12bn, driven by its IPO in November which priced each share at $78, valuing the company at $66.5bn. After the earnings call, shares of Rivian jumped by 3pc in extended trading.

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