Amazon’s advertising sales fell 36% for a total of $2.72 billion in the first quarter. On an adjusted basis, the y-o-y growth of this ‘Other’ segment in Q4 2018 stood at 38%, while the same ranged between 51% and 73% in previous quarters last year.
Amazon initially saw good success in its advertising segment and became a major contender to Google and Facebook. But that has faded this year and advertisers are saying that they are now focussing on building strategies and weighing how well Amazon fits into them.
On the other hand, Google (GOOGL) has been dominating the digital advertising ecosystem and has optimized its features, providing high returns for investors. Analysts also believe that the reason for the slash in Amazon’s digital advertising sales could be due to the fact that sellers on the platform may have decided to keep their spend steady, instead of increasing it.
Analysts also believe that opening their eyes to other e-commerce players like Walmart, Target or Kroger could be a part of the advertisers’ strategy of limiting their spend on Amazon.
However, some analysts view 36% drop as not too alarming as Amazon is ramping up its digital advertising capabilities, and future numbers are likely to exceed the Q1 number.