Amazon Q4 report: A Booming Ad Business & Prime Membership Fee Hike
Amazon has published its much-anticipated Q4 earnings report in which it disclosed for the first time revenue from its Advertising line of business. The report also disclosed updates to Prime, Black Friday performance, and its Q4 and full year earnings, which showed the e-commerce giant had successfully retained the momentum from the e-commerce boom in 2020.
Below, we pick out the highlights from Amazon’s Q4 Report.
In 2021, Amazon’s revenue for its advertising LOB was recorded at $31.2 billion with quarterly sales growing 32% year-over-year to $9.7 billion, placing the tech giant ahead of several other behemoths including Microsoft, Snap Inc. and Pinterest.
In fact, these figures now place Amazon as the third largest advertiser in the US directly behind Google and Facebook. Google reported fourth-quarter ad revenue of $61.2 billion, while Facebook notched ad sales of $32.6 billion in the period.
Another standout nugget of information was regarding Amazon’s net YoY earnings; Net sales increased 9% to $137.4 billion in Q4, compared with $125.6 billion in Q4 2020, resulting in shares soaring 14% in after-hours trading on Thursday to $3,175. Excluding the $1.3 billion unfavorable impact from YoY changes in foreign exchange rates throughout the quarter, net sales increased 10% compared with Q4 2020.
Additionally, Net income increased to $14.3 billion in Q4, or $27.75 per share, compared with $7.2 billion, or $14.09 per share compared to the same period in 2020.
Full year 2021
Regarding the full year, Amazon reported that Net sales increased 22% to $469.8 billion, compared with $386.1 billion in 2020. Excluding the $3.8 billion favorable impact from year-on-year changes in foreign exchange rates throughout the year, net sales increased 21% on 2020.
Operating income increased to $24.9 billion, compared with operating income of $22.9 billion in 2020.
Net income increased $33.4 billion, or $64.81 per diluted share, compared with net income of $21.3 billion, or $41.83 per diluted share, in 2020.
Amazon also made an announcement regarding Prime membership fees, announcing a rise in the price of monthly membership, citing heavy investments in the service from an increase in product selection, an expansion in delivery infrastructure, growth in service areas like Prime Music and a rise in wages and transportation costs. In a statement they said,
“Amazon also continues to invest heavily in Prime. In the last few years, Amazon has added more product selection available with fast, free, unlimited Prime shipping; more exclusive deals and discounts; and more high-quality digital entertainment, including TV, movies, music, and books… Since 2018 in the U.S., availability of Free Same-Day Delivery has expanded from 48 metropolitan areas to more than 90, items available for Prime free shipping have increased over 50%, and members have saved billions of dollars shopping Prime Day. This is all on top of new program benefits like prescription savings and fast, free delivery from Amazon Pharmacy and the continually growing Amazon Music for Prime members, Prime Reading, and Prime Gaming. With the continued expansion of Prime member benefits as well as the rise in wages and transportation costs, Amazon will increase the price of a Prime membership in the U.S., with the monthly fee going from $12.99 to $14.99, and the annual membership from $119 to $139. This is the first time Amazon has raised the price of Prime since 2018. For new Prime members, the price change will go into effect on February 18, 2022, and for current Prime members, the new price will apply after March 25, 2022, on the date of their next renewal”.
Amazon recorded their biggest-ever Black Friday to Cyber Monday holiday shopping weekend, with apparel, beauty, home, and toys among the top-selling categories.
During this key retail period, third-party sellers—most of which are small and medium-sized businesses—achieved record worldwide sales on Amazon. More than 130,000 third-party sellers worldwide surpassed $100,000 in sales on Amazon, and between Black Friday and Christmas, U.S.-based third-party sellers sold an average of 11,500 products per minute. What’s more, Amazon India’s month-long Great Indian Festival sales event was the biggest shopping celebration ever for sellers and brand partners on Amazon.in, with nearly 30,000 sellers surpassing $100,000 in sales
All in all, Amazon has had a stellar year. Its booming ad business resulted in a 14% increase in shares after-hours trading on Thursday to $3,175, is a sign that investors believe the company will continue to grow, and that Amazon’s advertising offering is something investors are more eager to rally behind. We always believed that Amazon would continue to grow, and that it wasn’t simply a quick lockdown fix that people would bounce back from.
The value and convenience factor of Prime, its price-competitiveness as well as the first party data for advertisers renders Amazon a powerful force for both brands and consumers alike.