Mar 12, 2023 · 31m · another-podcast
Amazon's $40B advertising business
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Tech analyst Benedict Evans and host Tony Cameron analyze the rapid rise of Amazon's $40 billion advertising business, exploring how retail media networks, algorithmic discovery, and digitized trade marketing are reshaping global commerce.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The hosts hold 82.7% of the talking time here. How this is scored →
The hosts as informed peer 8.1 Guest teaching 0.0 Guest disagreement 0.1 The hosts pushing back 0.8
speaking balance: gold is the hosts, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 8:38 Pushing back on public outrage over merchandising
In a very low-conflict conversation, Benedict offers mild exasperation at the public backlash against MrBeast, pointing out that Procter & Gamble and Coca-Cola have sent merchandising teams into stores for decades.
Hardest push from the hosts ▶ 7:11 Benedict rejects the monopoly ad clutter narrativeWhen Tony notes critics accusing Amazon of being monopolistic by filling search pages with ads, Benedict dismisses the novelty of the complaint, comparing it to supermarkets intentionally putting milk in the back.
Biggest teaching moment ▶ 8:20 Tony brings up MrBeast merchandising tweetTony informs Benedict about MrBeast asking fans to tidy up chocolate bars at Walmart, providing a contemporary creator-economy parallel that Benedict hadn't initially highlighted.
The host holds their own ▶ 3:07 Benedict calculates Amazon ad margin parity with AWSBenedict demonstrates his analytical expertise by calculating Google's 60% operating margins minus TAC/R&D to prove Amazon's $38B ad business generates over $20B in operating profit with negligible capex.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The hosts as informed peer | Guest teaching | Guest disagreement | The hosts pushing back | Why |
|---|---|---|---|---|---|---|
| Taking a Break from AI to Discuss Amazon's Ad Empire | 8 | 0 | 0 | 1 | Benedict establishes the premise of the episode using his annual tech presentation data, breaking down Amazon's $38 billion ad revenue and financial reporting mechanics. Tony acts strictly as an inquisitive co-host feeding setup prompts. Benedict demonstrates deep familiarity with tech financial statements and operating margins across AWS, Google, and Amazon. | |
| Search Ads as Trade Marketing and Algorithmic Price Discrimination | 8 | 0 | 0 | 0 | Benedict draws nuanced comparisons between digital search ads, traditional retail slotting fees (end caps), and algorithmic price discrimination across hundreds of millions of SKUs. Tony validates these points and asks clarifying questions. The discussion is analytical and completely collaborative. | |
| Supermarket Layout Psychology and Physical Merchandising Realities | 8 | 0 | 1 | 2 | Benedict reframes public complaints about Amazon ad clutter by citing 75 years of physical supermarket layout psychology (putting milk in the back) and detailing the shift toward first-party merchant media data. Tony introduces the MrBeast Feastables merchandising anecdote, which Benedict seamlessly incorporates into corporate brand history. The dynamic remains conversational with Benedict driving the analysis. | |
| The New Gatekeepers and Paid Auctions as Quality Filters | 9 | 0 | 0 | 1 | Benedict presents his thesis on 'the new gatekeepers' versus historical media and retail bottlenecks, referencing Bill Joy and the market dynamics of paid auction ranking as a quality filter. Tony chimes in with supportive analogies regarding legacy book publishers. Benedict commands the discussion with comprehensive historical tech context. | |
| Social Selling Trends and Price as an Information Signaling System | 7 | 0 | 0 | 1 | Benedict unpacks social commerce trends across China and TikTok, tying modern digital pricing to Hayekian free-market information systems. Tony shares a relatable consumer pricing psychology anecdote, which Benedict immediately contextualizes with probability distribution theory. The dialogue is friendly, mutual, and intellectually aligned. | |
| Unbundling Google Search and Modernizing the 1970s Retail Playbook | 9 | 0 | 0 | 0 | Benedict outlines the unbundling of Google search via Google Trends data ('cheap' vs 'best') and uses his witty analogy of Jeff Bezos working through a 1970s retail encyclopedia. Tony enthusiastically agrees and recalls previous presentations. Benedict demonstrates mastery over retail business model evolution and search intent shifts. | |
| The Future of Suburban Malls and US Retail Space Oversupply | 8 | 0 | 0 | 1 | Tony shifts the conversation to the survival of suburban shopping malls, allowing Benedict to cite data on US retail square footage per capita exceeding global averages by 5 to 10 times. Benedict explains how physical retail bifurcates between basic logistics and experiential curation. The dynamic is structured as a thoughtful host analysis responding to an open question. | |
| Unbundling Retail Cost Structures and Episode Conclusion | 8 | 0 | 0 | 0 | Benedict summarizes the modern unbundling of retail cost structures below the gross margin line, explaining how digital channels replace physical store leases. Tony summarizes the broader themes before wrapping up the episode. The segment ends on a cohesive, harmonious note. |
Statements from this episode (18)
Evans: Amazon's $38B Ad Revenue Surpasses Global Newspapers and Prime
“And thirty eight billion dollars is bigger than the global newspaper industry, which of course is now much reduced. It's also bigger than Amazon Prime.”
Evans: Amazon Ads Yield Operating Profit Equal to AWS Without Massive Capex
“So if you apply that to 40, forty billion dollars, you get whatever it is, 20, over twenty billion dollars which is roughly the same as AWS, so roughly equivalent operating profit as AWS, And without AWS's 10 or twenty billion dollars of capex attached to it.”
Evans: The App Store's purpose is selling iPhones, not standalone profit
“The purpose of the app store is to sell iPhones. I mean, it has revenue, and it has a cost base, but it also sells iPhones.”
Evans: Global trade marketing spend totals hundreds of billions of dollars
“If you pay a retailer for end caps, if you pay a retailer to put your product On the shelf. If you pay a product retailer to give your product more shelf space, if you pay a retailer to put it like by the checkout, then that's called marketing, not advertising…”
Evans: Amazon ads function as price discrimination to squeeze supplier margins
“This is effectively a way for Amazon to squeeze more margin. Out of its suppliers as much as it is advertising”
Evans: Walmart generated $2.7B in advertising revenue last year
“Walmart did, I think, 2.7 billion dollars of advertising last year.”
Evans: Uber Reaches a $500M Advertising Revenue Run Rate
“Uber is now at a five hundred million dollar run rate, and everyone, obviously eBay and Pinterest and Etsy want to do this, but also people like Target want to do it.”
Evans: High-margin advertising disproportionately boosts retailers' bottom lines
“And so a relatively small, so an advertising business that is a small percentage of your top line is going to produce a very disproportionate amount of bottom line, which makes it very, very tempting.”
Evans: Legacy Gatekeepers Held More Power Than Google or Amazon Do Today
“They were old gatekeepers, and they were generally much bigger and much more powerful than Google or Amazon which is kind of a counterintuitive thing to say, but, you know, we came from a world in which there were three TV stations, and mostly Most cities in A…”
Evans: Amazon has 350M to 450M SKUs, many made-to-order
“Amazon has 354 hundred and fifty million scoops. It has sufficiently many scoops that it's actually not a very meaningful number because an awful lot of that is just stuff that doesn't exist until someone orders it.”
Evans: Paid search placement acts as a natural quality and relevance filter
“And if you're going to pay to be there, then the odds are that there's an ROI on that, and the reason there's an ROI is that If you pay to be there, people buy it. And, you know, that is actually a kind of a quality filter.”
Cameron: TikTok Generated Roughly $11 Billion in Ad Revenue in 2022
“And it looks like, I think it was last year that TikTok TikTok's ad revenue was eleven billion, I think, which is pretty high.”
Evans: TikTok ad monetization and e-commerce underperform relative to user time
“TikTok advertising is doing okay, not, not doing, not where it could be relative to the time it has. TikTok selling, TikTok e-commerce, you know, one here is pretty kind of ambivalent things about it. You know, they create, they, I don't think they got to wher…”
Evans: Product search moved almost entirely from Google to Amazon
“What's happened in the last decade or so is product search has moved almost entirely from Google to Amazon.”
Evans: Google search intent shifted from price comparison to product discovery
“It used to be that, that, that cheap was high. Cheap has gone from high to low. Best has gone from low to high. And the story, the hypothesis here is that people used to use the internet for a price comparison. You already knew what you wanted. You went to Goo…”
Evans: Most Amazon practices replicate retail playbooks used since 1850
“The invention is how to scale, but most of what it actually does is stuff that retailers were doing in 1950 or 1900, or even like 1860, 18, 70. Like, private label goods was always a hilarious thing. I mean, that, the freak out around private label goods has n…”
Evans: US Has 5 to 10 Times More Retail Space Per Capita
“Well, so there's a chart in my presentation of retail square, square foot per capita in, in which the U S has like five to 10 times more retail square foot per capita than anywhere else. And half of that is is, is malls in which the U S has basically massively…”
Evans: Digital advertising enables brands to replace physical store rollouts
“And then everything else, like everything that you pay below the gross margin line is how is it that you get the product to the consumer? All of that is now sort of up for grabs. You know, in the past you couldn't say, should we open a city? Should we open sho…”