We wanted to take the time to discuss one of the most misunderstood big names out there…
While most people pay attention to the distribution side of things for Amazon, the reality is that there is so much more to this company than meets the eye!
Here are a few reasons why it may be worth looking into as a long-term opportunity:
1.) Growing Ad Revenue
Ad revenue has been one of the fastest-growing segments for Amazon over the past few years…
It went from ~$4.65 billion in 2017 to around $37.74 billion in 2022.
The crazy thing is…..ad revenue is projected (according to Statista) to grow to $70.82 billion by 2027!
While Meta has been heavily affected by Apple’s recent privacy changes, Amazon’s ad revenue has not…
This is largely because most of Amazon’s revenue is search-based, meaning that search queries reveal the intention of the users.
Contrast that with the social media platforms Facebook and Instagram, where user data is critical in displaying relevant ads for users.
This brings us to Amazon’s projected revenue growth…
2.) Prime Video Ads likely to add billions in additional revenue
Amazon recently announced that they will be rolling in video ads for their Prime Video platform.
Users will be able to opt out of it for a higher monthly fee, similar to what a Hulu does…
According to UBS Analyst Lloyd Walmsley, the roll-out of video ads could bring in as much as $6 billion in revenue and a potential $5 billion boost in operating income for next year!
It’s important to keep in mind that Amazon’s entire operating income for 2022 was around $12 billion…
3.) Amazon Web Services is a monster
Most folks don’t know this, but Amazon is the leader in cloud infrastructure…
In fact, according to Statista AWS captures nearly one-third of the global market share!
Why is this important?
The AI industry of the future will require a massive amount of cloud infrastructure to work off of.
This is likely a big part of the reason why big tech is throwing billions upon billions of dollars to make it compatible with machine learning…
Naturally, Amazon stands to benefit tremendously from this in the coming years!
Of course, it’s not all sunshine and rainbows for Amazon…
There is currently a high amount of regulatory risk for the company.
As a virtual monopoly, Bezos’s behemoth runs the risk of being broken up or controlled in a way that risks stifling growth.
With that said, I still believe there’s a lot to like about Amazon over the coming years…
That’s all for now!
Until Next Time,
-Damian