Amazon unveils AI tools for marketers amid rising costs

Amazon’s advertising growth and AI investments: Amazon reported a 19% year-over-year increase in advertising revenue to $14.33 billion in Q3, meeting analyst expectations but showing a slowdown compared to the previous year’s growth rate.

• The e-commerce giant has been expanding its full-funnel marketing capabilities, including the introduction of ads on Prime Video in January.
• Amazon’s first “broadcast season” for Prime Video is underway following its upfronts negotiations with advertisers in the spring.
• The company has released several generative AI-powered tools for advertisers, despite the high costs associated with AI development.

Retail media advertising remains a key driver: Amazon’s advertising segment continues to be a significant force, although growth has slowed compared to previous periods.

• Retail media advertising, including sponsored product listings on Amazon’s e-commerce platform, remains a growth driver due to a large advertiser pool.
• CEO Andy Jassy highlighted efforts to improve ad relevancy and introduce additional optimization controls in this area.
• The company’s Q3 earnings report impressed investors on overall earnings and revenue, despite a substantial 81% year-over-year increase in capital expenditures to $22.6 billion, largely driven by investments in generative AI.

New AI-powered advertising tools: Amazon has introduced several AI tools to enhance its advertising offerings and attract more advertisers.

• In September, the company launched a tool that quickly converts product images into video ads using generative AI, potentially benefiting small- and mid-sized marketers with limited budgets.
• An AI-powered image generator, released last year, allows advertisers to create a high volume of campaign assets efficiently.
• At its UnBoxed conference, Amazon unveiled an AI-powered solution for generating audio ads at no additional cost to U.S. advertisers using its demand-side platform.
• These AI ad products have been consolidated under a creative studio that supports marketing efforts across Amazon.com, Prime Video, and Twitch.

Competition in the AI advertising space: Other digital ad platforms are also focusing on AI-powered advertising solutions.

• Meta reported growing traction for its generative AI image and text generators, with over 1 million advertisers using these tools to create more than 15 million ads in the past month.
• Both Amazon and Meta executives emphasized the potential for further growth and “upside” in AI-powered advertising.

Prime Video advertising progress: Amazon continues to highlight the success of its advertising initiatives on Prime Video.

• The streaming service hosts popular live programming like NFL “Thursday Night Football” alongside original films and TV shows.
• Amazon held its first upfronts event earlier this year, securing advance commitments from advertisers.
• The company reportedly surpassed its goal of $1.8 billion in advance commitments from advertisers.

Analyzing deeper: The AI-driven advertising landscape: As Amazon and other tech giants invest heavily in AI-powered advertising tools, the digital marketing landscape is poised for significant transformation.

• The rise of AI-generated content could democratize access to high-quality advertising assets, potentially leveling the playing field for smaller businesses competing against larger brands.
• However, the high costs associated with AI development may create a new barrier to entry for ad platforms, potentially consolidating power among established tech companies with deep pockets.
• As AI-powered tools become more prevalent, advertisers will need to adapt their strategies to leverage these new capabilities effectively while maintaining brand authenticity and creativity.