Despite recent forecasts indicating Amazon’s advertising revenues will reach $40 billion by 2023, it appears that the financial results of the second quarter were slightly on the downside as the e-retailer giant’s increased spending reduced its profit margins to deliver lower than expected earnings, resulting in a net income of $2.6 billion - the lowest since the second quarter of last year.
However, despite the mixed results, Amazon’s advertising business grew by 37% to $3 billion over the second quarter, boosted by a high surge of subscriptions to Amazon Prime which coincidentally also stood at 37% year-on-year to reach $4.7bn.
In addition, Amazon’s revenue also jumped 20% from last year, a rebound from 16.8% in the first quarter, which was the slowest in four years. The recovery follows Amazon’s pledge to spend $800 million in the second quarter improving warehouses and delivery infrastructure as part of a plan to make one-day shipping the standard for Prime members.
“The stagnation we’re seeing has been bubbling under the surface for some time. With such a diversified business model, Amazon has been able to lean on different parts of the business for stability. This has meant it’s been able to get by while critical challenges have arisen at the business’s very core – the marketplace,” said Sophie Light-Wilkinson, VP Marketing EMEA at Bazaarvoice.
“We’ve seen in recent months how consumer trust has been thrown by fake product and fake reviews scandals. It has clearly impacted how consumers approached this year’s Prime Day, with major competitors benefitting from an uptick in interest. While Amazon endures for now as the final point-of-sale, it’s clear consumers now look to qualify purchases elsewhere, creating a big opportunity for retailers all over the world.” she added.