Amazon.com Inc’s (NASDAQ: AMZN) advertising business grew the most in over two years to outpace the growth of its other tech rivals Alphabet Inc (NASDAQ: GOOGL) and Facebook Inc (NASDAQ: FB) in the first quarter.
What Happened: The e-commerce giant’s advertising revenue grew 77% year-over-year to more than $6.9 billion in the quarter ended March 31.
Amazon attributed the ad revenue growth to higher traffic and the improvement in its advertising placements leading to more relevant ads for the customers.
“Certainly, traffic has been a large driver of what we’re seeing in the advertising space but it discounts the kind of improvement that we’re also seeing in relevancy and new products that the team is rolling out that the customers also enjoy,” Amazon CFO Brian Olsavsky told analysts in a post-earnings call.
Amazon and rivals such as Google and Facebook have seen their advertising business benefiting from stay-at-home consumption and the reopening of the economy in the last three quarters.
In Photo: Amazon, Google, Facebook Ad Revenue Over The Previous 5 Quarters. Google noticeably remains the dominant player in the space.
Why It Matters: While Amazon’s ad revenue is still smaller than the rivals, it has been growing at a much faster pace.
In Photo: Amazon’s Advertising Revenue Growth Far Outpacing That Of Rivals
Amazon, which currently draws most of its revenue from the U.S., grabbed 10.3% of the region’s digital ad market share in 2020, compared to 7.8% in 2019, as it chips away at market leader Google, according to a recent Wall Street Journal report that cited research firm eMarketer.
Amazon is expected to account for 10.7% of the U.S. digital ad market in 2021, as per eMarketer’s estimates, and the share could grow to 12.8% by 2023.
Google-parent Alphabet’s ad revenue grew at 32.3% to $44.68 billion in the quarter ending March, its fastest annual growth rate in at least four years. The growth got a boost from the lower base last year as the onset of the coronavirus pandemic resulted in an 8% drop in advertising spend.
Facebook’s ad revenue grew 46% to $25.44 billion in the first quarter which the company attributed to higher-priced ads and a 12% increase in the number of ads delivered.
Price Action: Amazon shares closed 0.37% higher at $3,471.31 on Thursday and were up 2.35% in after-hours trading. Facebook shares closed 7.30% higher at $329.51 and Google-parent Alphabet’s shares closed 1.43% higher at $2,392.76 on Thursday.
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.