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Amazon's advertising sales growth slowed dramatically in Q1

Megan Graham
  • Amazon's "other" net sales, which primarily includes advertising services sales, grew 36 percent year-over-year in the first quarter. 
  • But that slower growth comes after growth in the segment was triple-digit or near-triple digit for four consecutive quarters. 
  • Amazon reported better-than-expected first-quarter profits Thursday but is experiencing slower revenue growth. 

One of Amazon's most promising new business areas, advertising sales, appears to be slowing down.

The growth of Amazon AMZN 's "Other" segment, which consists primarily of advertising sales, slowed dramatically to 36% in the first quarter from the previous year, at $2.72 billion. That's a big slowdown from 97% year-over-year growth last quarter, and over 100% growth for three consecutive quarters before that.

Amazon's fast-growing advertising business has been a bright spot for the company amid slowing growth in its core e-commerce business. 

According to figures from eMarketer, Amazon has become the number three digital advertiser in the U.S, behind only Alphabet's Google and Facebook. CNBC previously reported that some consumer packaged goods advertisers were moving as much as half of their search ad budget from Google to Amazon, where an advertisement can be converted into an immediate sale on the site.

As of February, Amazon was expected to take over 8.8% of net digital ad revenue share in the U.S. It still trails behind Google GOOGL , which is expected to have 37.2% share this year, and Facebook FB , with an expected 22.1%, according to eMarketer.

Amazon's steady expansion beyond e-commerce has drawn fire from some politicians.

Most prominently, Democratic candidate Sen. Elizabeth Warren in March unveiled a plan to break up Amazon  and other tech giants, saying they have "too much power over our economy, our society, and our democracy." In particular, Warren has said Amazon plays a dual role of running a marketplace and selling its own products in it, creating a "conflict of interest." Amazon removed some promotional spots for its own products earlier this year, possibly in response.

The company revealed the numbers as it  reported better-than-expected earnings Thursday. The stock barely moved after hours, as revenue was mostly in line with expectations and operating profit guidance for the second quarter was light. 




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