Amazon's ad business is surging - and it's starting to get a crack at bigger brand budgets

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Jeff Bezos, chief executive officer of Amazon, arrives for the third day of the annual Allen & Company Sun Valley Conference, July 13, 2017 in Sun Valley, Idaho.

• Amazon made $2.2 billion in "other" revenue during the second-quarter of 2018, up from $2 billion from the previous quarter. "Other" is primarily made up of Amazon's ad business.
• The e-commerce giant continues to make inroads in advertising. And agencies say they're getting access to more sophisticated ad-buying tools.
• Interestingly, Eric Heller, CEO of Amazon-focused and WPP-owned Marketplace Ignition, said that the agency is seeing a boom in branding dollars shifting to the platform.

Amazon's ad business continues to surge, raking in $2.2 billion during the second quarter, the company revealed during second-quarter earnings. Amazon buckets the revenue into a line item called "other" that primarily comes from advertising.

Amazon reported $52.9 billion in revenue during the quarter, down slightly from analysts' expectations. "Other" income jumped 129 percent year-over-year. The company reported $2 billion in "other" revenue during the first quarter.

Amazon is clearly cozying up to advertisers - and not just ones that sell stuff

Amazon continues to intrigue advertisers, but the platform is already nabbing bigger budgets, according to Eric Heller, CEO of Amazon-focused and WPP-owned Marketplace Ignition.

The e-commerce juggernaut is well-known for focusing on retailers and consumer-packaged-goods brands that are fixated on direct-response advertising.

But that's changing, according to Heller. He said marketers are increasingly shifting brand marketing dollars over to Amazon, indicating that brands are eyeing Amazon for more than experimentation advertising budgets.

Specifically, Heller cited billboards and out-of-home advertising as examples of where brands are cutting their spend and moving it to Amazon.

"We're seeing dollars move to Amazon and I think the reason why is because they're closer to a shopping cart," he said.

"Even a year ago, Amazon was this direct media platform and I would tell you over the last three to six months, we got access to brand dollars because everyone realized, 'Why are we trying to win billboards on highways when we're losing when someone searches for our brand name on Amazon?'"

In terms of where marketers are spending those brand dollars, advertisers are specifically savvy at buying headline search ads, which is a valuable placement that appears at the top of search results on pages.

According to the agency's research, 68% of online shopping searches in the US start on Amazon. When looking at both the US and the UK, 80% of shoppers use Amazon's ratings and reviews when deciding to make a purchase.

It's getting easier to buy Amazon ads at scale

Additionally, Amazon's ad-buying tools have improved over the past year, he said. For example, six months ago, Heller's team managed campaign budgets through Excel spreadsheets. Now he's able to bill clients through purchase orders that don't require tying a credit card to individual campaigns.

Rolling out more sophisticated tools mimics how other platforms including Facebook, Google and Twitter built their advertising fortunes. Amazon's ad-buying platform is likely not nearly as slick as Facebook, Google or Twitter's software, but it's clear that Amazon is gaining steam and marketers are starting to see results, Heller said.

"We're starting to get API access and Amazon is focused on making it easier to spend the money that you should be spending," he said.