For years, Amazon's (AMZN +3.50%) story has centered on e-commerce and cloud computing. But another engine is gaining speed -- one that's high-margin, fast-growing, and still underappreciated. That's Amazon Ads.
What makes this business so powerful is its strategic position at the intersection of intent, data, and transaction. With Prime Video turning on ads, Amazon is unlocking a powerful new layer of monetization.
This new business isn't just an additional revenue stream. It's a strategic opportunity, and it could significantly reshape Amazon's long-term outlook.
Image source: Getty Images.
Why advertising makes perfect sense for Amazon
Founded as an online bookstore, Amazon has evolved into a massive conglomerate with multiple business engines. One of the most promising of these businesses is Amazon Ads.
Advertising makes strategic sense for Amazon because it leverages what the company already does best: capturing intent and converting it into action. That creates rare, high-intent digital real estate that brands are eager to pay for. Amazon doesn't need to build new traffic sources or create new content -- it simply monetizes what's already happening on its platform.
Besides, what sets Amazon apart is closed-loop attribution, marketing speak for tracking every part of the customer's experience with an ad. It doesn't just show ads; it sees what converts -- down to the product, basket size, and reorder frequency. That makes its ad platform one of the most efficient in the world.
So, at the core of Amazon's ad model is the ability to monetize consumer intent using vast amounts of shopping, search, and behavioral data. It's part of the broader retail media trend in which retailers use first-party data to help brands target customers more effectively than traditional platforms can. Amazon's scale and data make it one of the most powerful players in this space.
NASDAQ: AMZN
Key Data Points
Amazon Ads by the numbers
Amazon's advertising arm isn't just a side hustle; it's becoming a significant driver of revenue growth.
In 2024, Amazon generated $56 billion in advertising revenue, an 18% increase from the prior year. That makes it the third-largest digital advertising company in the world, behind only Alphabet's Google and Meta Platforms. The momentum continued in the first quarter of 2025, when Amazon Ads generated $13.9 billion, an increase of nearly 18% year over year, while total company revenue rose by just 9%. That gap highlights how advertising is scaling up faster than Amazon's traditional business.
While Amazon doesn't break out ad profitability, this business carries an operating margin higher than its e-commerce or logistics operations. In other words, advertising will gradually raise the company's operating margin over time.
Looking ahead, marketing consultancy WARC projects that Amazon's retail media ad revenue could exceed $67 billion this year and reach $79 billion by 2026. If Amazon Ads can sustain this momentum, it won't be long before advertising becomes a $100 billion business.
Where Amazon Ads goes from here
Amazon's advertising business may already be substantial, but it's still in the early stages of development.
The bedrock of Amazon Ads consists of sponsored ads tied to high-intent shopping behavior. As long as the e-commerce business continues to grow, the advertising business will also expand. However, Amazon is expanding well beyond its e-commerce product pages to other parts of its ecosystem.
One key growth driver is streaming. In 2024, Amazon introduced ads into Prime Video, instantly gaining access to more than 200 million viewers worldwide. Bank of America projects that Prime Video could generate $3.5 billion to $5 billion in ad revenue in 2025. Combine that with Twitch, Fire TV, and live sports, and Amazon could build one of the most valuable connected TV ad platforms in the market.
But Amazon isn't stopping there. Its new Retail Ad Service initiative opens up its ad technology to other retailers, turning internal tools into a software-as-a-service (SaaS) business. This is similar to how it extended its internal cloud computing expertise to external users, building the massive Amazon Web Services (AWS).
In other words, as more ad formats roll out and more advertisers join in, Amazon's ad flywheel will continue to spin, building a comprehensive advertising ecosystem that encompasses every part of the consumer journey.
What this means for investors
Amazon may be best known for its e-commerce and cloud computing businesses, but its advertising business is quickly becoming a significant force. If the momentum continues, ads could become one of Amazon's most valuable profit engines: high-margin, fast-growing, and deeply strategic.
If you're a long-term investor, this is a business segment worth watching closely, as it will affect your decisions about Amazon.
