Latest / Retail Media Breakfast Club / Here’s where Amazon is spending its own advertising budget
Transcript
- Where Amazon Spends its own ad budget === [00:00:00] Kiri Masters: According to the law of large numbers, Amazon should be finding it hard to keep growing. It already takes roughly forty percent of every dollar spent online in the US, and yet the hits just [00:00:15] keep coming. North American net sales were up sixteen percent in the second quarter of this year, and advertising, now almost a twenty billion dollar a quarter business, grew twenty-six percent. [00:00:29] [00:00:30] Now, I usually write about Amazon as an ad platform, where it is a dominant retail media force. But what gets less airtime is how Amazon spends its own advertising budget. Where is it [00:00:45] spending in order to grow its retail business? Now, Amazon hands out advertising recommendations to brands every day, but the best advertising advice that Amazon gives isn't in a slide deck.[00:01:00] [00:01:00] It's in where it puts its own money. So to find out where exactly that is, I turned to research firm Sensor Tower, which tracks ads shown on digital services and linear TV. [00:01:15] And a quick note on this data set before we get into it. Out of home print, radio, cinema, and sponsorship aren't covered in this data set. [00:01:26] This data set also includes co-op and vendor-funded [00:01:30] marketing. Those are ad slots that Amazon has purchased on behalf of its advertisers and on sold to them either directly as off-site inventory or at an aggregate level. So this is Amazon's media plan, not strictly Amazon's [00:01:45] own checkbook, and there are a few limitations. [00:01:48] But I think that this probably encompasses a big percentage of what Amazon is spending on its own advertising today [00:01:56] And this article was originally published to my column at The Drum [00:02:00] on the 18th of August as The Best Advertising Advice Amazon Gives Isn't in a Slide Deck. Let's jump in [00:02:08] [00:02:09] Kiri Masters: So Sensor Tower estimates that over the last three years, Amazon has put [00:02:15] seven point four billion dollars of tracked media spend into the US market. [00:02:21] And I'm gonna keep coming back to the year 2025, which is the most recent full year, obviously, and look at where the ad spending was in [00:02:30] 2025. So in 2025, Amazon spent $2.7 billion on ads. Now, in my article on The Drum, which you can find in the show notes of this episode, I have a table [00:02:45] that breaks down the 2025 spend by channel. [00:02:50] Now, reading a whole bunch of numbers out to you on a podcast is probably not- going to be super easy to track, so I'll just give [00:03:00] some big number breakdowns. Remember that $2.7 billion ad number. [00:03:07] Nearly 600 million of that was spent on Facebook. The next biggest line item was linear [00:03:15] TV with 435 million. After that, Instagram at 381 million, and then going down the list, we have OTT [00:03:25] AKA connected TV, YouTube, [00:03:30] Pinterest, desktop display, desktop video, TikTok, and then the line items that fall under $100 million in ad spend a year, Snapchat, LinkedIn, mobile apps, Reddit, X, [00:03:45] and mobile display. So again, I don't wanna read out every single number in that table, a little bit boring in a podcast, but I just wanted to give you a sense of where they're spending their money. [00:03:54] And as I say in the article , the striking thing about that breakdown is [00:04:00] how kind of unremarkable it is. There's nothing really groundbreaking here. It probably looks like a lot of retail companies' media plans. And of course, the [00:04:15] single largest advertising line item is Meta. So I broke out Facebook versus Instagram, but if you add them together- [00:04:25] That's over a billion dollars in ad spend out of its $2.69 [00:04:30] billion advertising plan. The top three line items, Facebook, Instagram, and linear TV, that's over half of everything that Amazon bought last year [00:04:39] Now, to be fair, Amazon can't really buy retail media. [00:04:45] no retailer really sits above it, so Amazon can't eat its own dog food. Although, of course, you will notice when you're watching Prime Video, you will see ads for other Prime Video TV shows [00:05:00] and sort of Amazon's own products, just like on the Amazon app and website you will see ads for Amazon's own private label brands. [00:05:10] That's known as house advertising, and Sensor Tower actually [00:05:15] excludes that [00:05:16] in these breakdowns [00:05:18] and what Sensor Tower says, and this is a comment from Julia La Rosa, who is the vice president of innovation and strategy at Sensor Tower, that Amazon established this retail, [00:05:30] the one of the first retail media networks long before that term was even coined. So there's no surprise that they're very savvy and well-funded in traditional digital advertising too. [00:05:41] Amazon has actually been the number one or number [00:05:45] two advertiser annually, the biggest spender or the second biggest spender going back to at least twenty twenty according to Sensor Tower, and there's no sign that that's changing as they're continuing to grow [00:06:00] poor audience targeting is frustrating, but for retail media teams it can be costly too. With Growth Loop's composable commerce media [00:06:15] solution, you can turn your first-party data into hundreds of high-value audience segments and launch campaigns faster. After partnering with Growth Loop, instant commerce pioneer Gopuff [00:06:30] scaled from a hundred syndicated audience segments to more than six hundred, and now it takes less than forty-eight hours to turn around a custom segment for one of their brand partners. [00:06:43] Learn more [00:06:45] about how Growth Loop is powering Gopuff's best-in-class retail media operations at go.growthloop.com/breakfast. That is [00:07:00] go.growthloop.com/breakfast [00:07:04] Now coming back to what, what I said about Amazon can't spend money on retail media [00:07:09] I guess it could. I actually have seen retailers like JCPenney advertising on Amazon Prime [00:07:15] and Thursday Night Football and the like. So it's technically possible, but [00:07:19] doesn't seem like Amazon is doing that right now. [00:07:23] ~And by, and just because they're not doing that, that doesn't mean that they're ~and just because they're not doing that, that doesn't mean that they're choosing between closed loop and reach. Amazon [00:07:30] is the closed loop. It has better purchase data than any other network can sell to it. And so Amazon can measure a meta impression to an amazon.com order with more certainty than any other retail media [00:07:45] network can measure on its own. [00:07:47] So Meta isn't where Amazon settles just because it can't measure elsewhere, it's because Me- Meta actually passes Amazon's own measurement bar [00:07:58] Now, as for what products [00:08:00] and services Amazon is advertising here, this is interesting because Amazon isn't just the store, as they call it. They also have other products that they're selling. AWS, for example, to a B2B [00:08:15] audience [00:08:15] A surprising amount of its ad spend goes towards marketing its subscriptions, advertising its own content, Amazon Prime [00:08:25] advertising its own devices like the Ring [00:08:30] camera [00:08:30] But of course, a big part of the ad spend is the store [00:08:34] Retargeting ads for products that you viewed, ads for categories that you might be interested in, advertising tent pole events, things like that [00:08:43] So that's [00:08:45] the array of products and services that Amazon is actually advertising when they're spending these dollars [00:08:53] So that's all a little bit pedestrian, a little expected perhaps. But what is interesting is the [00:09:00] formats of the ads that Amazon is spending on, and this is the part that might be instructive to other advertisers [00:09:10] And here's where I'm gonna be calling out some more numbers, uh, again. [00:09:15] So tracked spend from Sensor Tower for Amazon rose 17.3% over three years. So spending overall has gone up. Tracked impressions [00:09:30] rose only 2.1%. So that's quite a delta between the tracked spend and the tracked impressions [00:09:37] Meaning that Amazon bought a fairly consistent amount of advertising [00:09:45] over three years, uh, but they paid more for it. And the difference when we look into the type of advertising that they're running is the difference between display and video [00:09:59] So [00:10:00] when we dive into display ad types like banners versus video, this is where the delta starts to really show up. When we just look at US desktop advertising impressions [00:10:14] [00:10:15] Between 2023 and 2025, we saw desktop [00:10:20] Impressions drop by just over 12%, and we saw video, impressions jump over that [00:10:28] three-year period, [00:10:30] 151%. So they are meaningfully jumping into a video format [00:10:35] essentially swapping it out for desktop display. Now, I spoke with my former colleague at the [00:10:45] agency Acadia, Ross Walker, who is the director of retail media there, and he says that he's been running the same play on the brand side. [00:10:53] And so when I showed this data to Ross, he found it really interesting because he's seeing the same thing play [00:11:00] out on the buy side. Here's what he told me: "Banner ads are a trap. Low engagement, low incrementality. but video has real impact to traffic and sales long term. [00:11:12] We've moved a ton of budget out of banners and [00:11:15] into video [00:11:16] And speaking to this question of volume loss in impressions, he says that that's not really so much of a problem in his view because impressions that he and his team buys with video are much more engaging He says that the cost [00:11:30] and loss of reach are worth it because the effective reach is better and the costs pay for themselves And so the takeaway for any advertiser here is the same reach might cost more, and your impression counts might go backwards before they justify [00:11:45] themselves. [00:11:45] But Amazon's media plan and Acadia's experience both point to this as being a trade possibly worth making [00:11:54] As long as you're aware of those trade-offs [00:11:56] In the article, I also have a little side [00:12:00] quest into looking at what Amazon has been doing with ChatGPT ads, which is interesting. I don't have time to cover that on today's episode, but you can check the article out for that analysis. What this all comes back to is three... [00:12:15] Looking at three years of Amazon's own media buying shows us a few core habits: go where the reach is, pay more for the format that works harder, and keep a small bet running on whatever is [00:12:30] next. [00:12:30] That's the ChatGPT story. Now, none of this is particularly exotic, and that might be the finding at the end of the day. A company with the best purchase data in retail, free to spend its money anywhere it [00:12:45] likes, puts half of that into Meta and television [00:12:49] Played around with formats and moved it into video formats that are working better for it, and set aside a very small budget for emerging [00:13:00] channels like ChatGPT ads. Amazon hands out advertising recommendations every day. Its own media plan is the one that's really worth reading. [00:13:10] Watch what Amazon does, not just what it recommends you [00:13:15] do. Thanks for listening. I'll link up to the original article in the show notes, and I'll catch ya next week. [00:13:21]