What you need to know:

• Amazon’s Australian ad business down under is booming. Advertising revenue grew 58.1 per cent year-on-year, reaching $242 million, making it Amazon’s fastest-growing local revenue segment, and an acceleration on the 51 per cent growth rate booked in the prior year.
• Ecom also powering. Online store revenue increased 23.5 per cent to $1.94 billion, while third-party seller services surged 47.6 per cent to $839 million.
• Amazon Prime subscription revenue jumped 38.8 per cent to $480m and strengthening Amazon’s foothold in the connected TV (CTV) advertising market.
• Retail media is reshaping ad spend: Advertisers are shifting budgets to Amazon’s ecosystem and notably, its demand-side platform (DSP) to drive conversions.
• Agencies say Amazon’s ability to link Prime Video ads directly to sales is attracting retail and brand advertisers, potentially disrupting local TV networks and BVOD ad supply chains.
• Flywheel partnership to expand.
• Marketplace dominance accelerates: Amazon added 1.1 million new Australian users in 2024.
• Long runway for growth – Amazon currently holds just 3.2 per cent of Australia’s total online retail spend, far behind its circa 40 per cent share of U.S. e-commerce, signalling 12x potential headroom if it aims for similar dominance.

Amazon Australia's latest ASIC filings reveal the company’s ad business is growing at a blistering pace – soaring 58.1 per cent year-on-year to $242m. It's also accelerating despite a highly pressured ad market: Last year's filing for calendar 23 showed a 51 per cent growth rate.

Meanwhile its online store and third-party marketplace continue their ascent – up 23.5 per cent and 47.6 per cent, respectively. Prime subscriptions were also up 38.8 per cent. All of which is feeding the ad-ecom machine and Amazon's bid to take a bigger slice of trade and marketing budgets from end-to-end.

The results do not include its cloud services business AWS – a key part of the overall story as it's where the AI magic for the next generation of applications is being cooked up.

Full funnel tilt

Comments by CEO Andrew Jassy during a recent earnings call wrap underline where Amazon is aiming its ad business:

"We've made it easier to do full-funnel advertising with us," he told analysts. "Full-funnel is from the top of the funnel with broad-reach advertising that drives brand awareness to mid-funnel – where sponsored brands let companies specify certain keywords and audiences to attract people to their detail pages or brand store on Amazon – to the bottom of the funnel, where sponsored products help advertisers service relevant product ads to customers at the point of purchase."

Per Jassy, "We made this easy for brands to sign up for and deploy across our growing advertising offering. We also have differentiated audience features that leverage billions of customer signals across our stores and media destinations. From Amazon Marketing Cloud's secure clean rooms, providing advertisers with the ability to analyse data, produce core marketing metrics, and understand how their marketing performs across various channels to our new multi-touch attribution model that helps advertisers understand how their marketing is working."

He told investors that when an advertiser uses streaming TV, display, sponsored products, and other ad types in their campaign, multi-touch attribution will be able to show the relative contribution of each to their sales.

In the US those ad-to-sales linkages are boosted by Flywheel, a digital commerce platform that plugs into the world's major digital marketplaces and is designed to give brands access to near real-time performance measurement to boost sales, share, and profit. It gets access to the platform through its relationship with Omnicom, which bought Flywheel in 2023 for $835 million. Amazon's use of Flywheel locally is expected to grow in the year ahead with the business now bedded-in within OMG's Australia operation, working with circa 10 local and global brand clients across CPG, pharmacy and consumer electronics, and actively pitching for new business alongside agency units.

According to Kristiaan Kroon OMG's Chief Operating Officer (COO), "I would say Amazon's interest in Flywheel here is what has really elevated our thinking about it."

The flipside is that OMG gets early insight and access to things like five-year lookback windows within Amazon Marketing Cloud – which means brands with longer purchase cycles, or those that sell across multiple categories, get a much more granular view. “That is coming to Australia,” per Flywheel Australia MD, Mohammad Heidari-Far.

'Trojan horse'

While there are questions around how many streaming ads are being consumed on Prime Video per user in Australia, agencies have suggested the ability to link those ads directly to sales on Amazon.com is leading retail and brand advertisers to funnel broader BVOD and CTV buys through the Amazon demand-side platform (ADSP).

For some, that means Amazon is becoming the de facto entry point for broader BVOD and CTV buying. Such a shift could carry further impacts for local TV networks and the ad supply chain – particularly independent DSPs like The Trade Desk if Amazon starts to erode their share and margin as it has with BVOD's pricing.

“For some of our endemic clients’ activity [i.e. retailers and brands that already sell via Amazon.com] where their Amazon business is large enough, we're actually seeing Amazon’s demand-side platform becoming a really attractive DSP for them to use for all their BVOD activity – because of how the buying measurement now helps them,” Heidari-Far told Mi3 last month.

“They're bringing all of their BVOD activity over to Amazon DSP so that they can frequency cap and everything else – but also see the impact and measurement on Amazon sales,” he said.

“That goes beyond the current ecosystem and can impact the overall BVOD market. So that is the Trojan horse, I would say, for a lot of endemic clients.”

Heidari-Far was also broadly on the money when last month calling out Amazon's ad revenue number, suggesting it would post revenues of "$250m or more”.

“Amazon's pace of advancing their adtech and capability to be more upper funnel with Prime Video and the integration of their DSP with more of the Amazon Marketing Cloud has overshadowed the pace of everything else that we've seen locally," he suggested.

"Now they've got Prime Video, the spend in that area is growing exponentially."

Ecom dom

According to a February report by Pattern, Amazon attracted 1.1 million new Australian users to its marketplace in 2024, bringing its total to 7.9 million shoppers.

Per the report, the outlook for Amazon remains bullish with 63 per cent of Australians planning to shop on the platform in 2025. Its appeal is particularly strong among younger shoppers (71 per cent of those aged 18-24) and high-income households earning over $200,000 annually (78 per cent).

The report also notes Amazon's march into discovery, where it has lagged some of the social platforms, with a 27 per cent year-on-year increase in users accessing the platform to discover new products. Meanwhile, the report authors suggested Google has in tandem seen a 7 per cent decline in this space over the past two years, while "direct-to-retailer websites have experienced a 13 per cent drop in discoverability".

Amazon still has a huge ecommerce opportunity to capture. According to NAB, in the 12 months to December, Australians spent $59.9 billion on online retail, representing about 13.8 per cent of the bank's total retail trade estimate.

With ecom revenues nudging $1.49bn, that means Amazon currently currently captures about 3.2 per cent of Australia's nearly $60bn online retail spend (per NAB) and not yet even 0.5 per cent of total retail spending in Australia (circa $440bn). By comparison, in the US Amazon's share of total ecommerce sales is circa 40 per cent, and its share of total retail is around 4 per cent.

Amazon has 37.8 per cent of total ecommerce sales.

Amazon results

• Revenues in Amazon's Australian online stores grew to $1.936bn in calendar 2024, up 23 per cent from $1.567bn
• The advertising business grew 58.1 per cent from $153m to $242m.
• Third-party seller services – basically commissions and fulfilment services from third parties selling on the Amazon site – are closing on a billion dollars, clocking up $839m up from $568m last year, a 47.6 per cent improvement.
• Subscription (Prime) revenues notched $480m, up 38.8 per cent.
• Revenues from related parties – where Amazon provides marketing-related support services – went into reverse, down sharply by 34.2 per cent to $309m from $471m. (Asked to clarify the reason, Amazon issued a generic statement.)
• Amazon also invested significantly more in local sales and marketing, up 33 per cent to $447m, marking it as Amazon's largest local cost line for the second year running.