Amazon’s biggest ever quarter for ads
This week’s 5 stories look at quarterly financials from Amazon, Alphabet and Spotify, plus new data on UK streaming, and a very Gen Z way to learn about your finances.
Amazon issued good results both in advertising and cloud revenues. Ad revenues for the quarter were the highest ever at $17.3bn meaning a total of - $56.2 for the full year, with these revenues now making up over 9% of its total income. This was the first year of ads in Prime Video, and the 18% increase year on year is second only to Meta’s 21% out of the big players, but also the second quarter in a row under 20%. AWS - its cloud business - increased revenues by 19% to $28.8bn, also a good performance, and showing the growing importance of AI within this part of the business. The reason why cloud is a crucial area for companies like Amazon and Alphabet is because it is where lots of AI is done. If companies keep their data in the cloud then they are likely to use that company’s AI tools for analysis, and the big companies are desperately trying to grow their capacities in these areas as fast as possible, with collective capital expenditure for Alphabet, Amazon, Meta and Microsoft projected to exceed $300bn this year.
Alphabet also released very impressive results - ad revenues up over 10% y-o-y, with search at just over $54bn in Q4, and YouTube above $10bn in a quarter for the first time ever. Another big number was for its own cloud business; their revenues were just shy of $12bn, a rise of 30% year on year, but this shows a slight slowing down of growth compared to Q4. As with Amazon, greater investment in the necessary infrastructure for AI may cut the price of access to AI, but as more people use it, overall revenues should rise.
Spotify also delivered good results. It was their 4th consecutive quarter of profits, and they finished the year with 675m monthly active users, of which 263m pay. The paying subscribers account for over 85% of Spotify’s income, but ad revenues hit $537m, an increase of 7% year on year. Spotify is rapidly trying to offer as full an audio service as possible with programmes to reward both podcast audiobook creators. It also now has over 330,000 shows uploading video versions of their podcasts, and I suspect there is an attempt to make the shows more visual - for example Louis Theroux doing press-ups in this most recent episode. Spotify also revealed that it paid out over $10bn to the music industry in 2024 alone - nearly ? of the streamer’s total revenues, and nearly $60bn since they were first founded. 10 years ago 10,000 artists were making over $10,000 on the platform; last year over 10,000 artists made over $100,000.
BARB’s quarterly establishment survey also came out this week, showing their estimates of the level of subscription to different viewing services. In terms of the ad tiers, Amazon Prime is the biggest with 11.6m homes (39.4% of UK homes), with Netflix on 4.7m (16%), and Disney+ at 1.5m (5.2%). Netflix is the biggest gainer - it was only at 3.8m in Q3, and of course has the biggest total reach at 17.1m (58.2% of all homes).
Something I learned about in a partner session this week. The Gen Z-focussed finance app Cleo has a ‘roast’ mode, where it gives its users financial advice by criticising spend with catty remarks. Where other finance apps simply show you what you have spent on different items, this one chastises you within the chat function of the app by telling you how much money you are wasting in a very direct way.