Amazon's fastest new growing business segment…

0:00All right, so we're going to talk about Amazon's fastest new growing business segment. So Neil, you can start off first because you watch CNBC. Amazon's fastest new growing ad segment is advertising revenue. You said Amazon's ads segment is the newest segment. Amazon's fastest growing revenue sector is advertising. Yep. Well, let's talk about this. So here, let me share the numbers real quick on screen so you all can see this. So now this is broken out, right? So online stores, the growth rate is 6%. Okay. And then third-party sellers, 18%. And then advertising services, 25%. I believe this is quarter and quarter change, Neil, if I'm reading this correctly.

0:46So I'm going to CNBC, which is where I originally learned about this. Advertising,$12.1 billion versus the street expected$11.6 billion in revenue. That's for the quarter. So assuming if they're doing roughly$12 billion, this isn't during holiday season, just times it by four, they're on track to generate roughly$48 billion a year in ad revenue. Which is crazy. So we want to talk about what's the so what behind this, right? I mean it's crazy because we've done an episode in the past about how everything eventually becomes an ad platform if you have distribution. And it's just a nice – like Netflix doesn't know.

1:23DoorDash does this. Uber doesn't know. You're in the app. They show ads for like, did you know you can eat at X, Y, and Z? Like, dude, everyone's pushing everything. Yep. So look, this guy, Sean Frank, he runs like a$100 million Yeti competitor. It's called Ridge.com. And super smart guy. But he says, look, Amazon isn't a retailer. Amazon isn't AWS. Amazon is an ad platform. It's a 3PL and an affiliate platform taking commission of every sale. These are the fastest growing segments. These are the biggest profit drivers, and it doesn't look like it's going to change. I do disagree with him. I say Amazon's a holding company.

1:58They do a little of everything. I mean, that's fair. I mean, you can say that, and then it can still be this. Yeah, that's what I'm saying because AWS isn't really – AWS, I don't look at it as an ad platform or affiliate, but I agree. They're an ad platform. They're a 3PL. They're an affiliate platform. They are AWS. They're a grocery store. They literally are a holding company that does everything. Yeah. The thing with AWS, though, I mean, we don't need to go too deep into this, but I see how he calls it a commodity business because the costs are just continuing to come down a lot, right? And then this cost of data, I mean, it's been something that's been decelerating or deflating in the last, like, 37 years or something like that.

2:40but he ends it with this so future of amazon is more ads more fees future for sellers is less margin so the question is what are you going to do about it so okay so check this out this is where people get things wrong on amazon and advertising most people look at amazon advertising as you promote your product when someone does a search on amazon that does generate a ton of revenue i've met up with amazon over this they've showcased their product we've seen that we've played around with it. Dude, did you know like when they're making their own movies, all right, let's say they have a movie with Will Smith, I'm making this up.

3:14And let's say this movie, Will Smith's sitting at a desk and there's a water bottle, right? No joke, you can pay him and they can switch out the water bottle for X amount of impressions to have Fiji on there, Aquapana or whatever it may be. Or in a movie, if there's this massive billboard, it can be Geico for a million impressions it can be Allstate for another two million impressions and then it can be Nike for 500 ,000 impressions they'll be able to swap out the cars too in the future yes they can literally swap out so many things and you won't notice it as a consumer but it's ridiculous on what they can do with ads within the movies that they're creating now they can't do this like let's say if they put Top Gun 2 on Amazon they can't do that because they didn't end up creating Top Gun too.

4:01But for the movies they're creating and the shows they're creating, they have this flexibility and they're generating a lot of revenue from this. It's not a big portion of their ad revenue yet, but I believe in the future it will be as Amazon Web Services becomes more and more popular. I mean, not Web Services, Amazon Prime becomes more and more popular, the TV version. And here's a kicker about Amazon Prime, the TV version that most people don't think about compared to like Netflix or Max or Disney. In Amazon, you can purchase, you know, HBO in there, Showtime, Paramount, etc. So then you can get content from all these different providers within your Amazon Prime account, which just makes it more usable.

4:44Look, I think this is fascinating. This just shows where the world is going. And there's a lot of AI stuff that goes, like a lot of this stuff is deflationary, right? Like data costs are coming down. AI is going to make things a lot pretty deflationary as well. And so I think get ready for the future. And I think this is something that's really, really exciting. Any other takeaways from this? Nope. All right. That is it for today. Please don't forget to rate, rate, rate, and subscribe. And we'll see you tomorrow.