Dive Brief:

• Amazon’s strong advertising revenues during the third quarter can be attributed in large part to the company’s decision to invest heavily in artificial intelligence, according to CFO Brian Olsavsky.

• The technology giant’s ad business generated $12.06 billion in revenue during the third quarter, marking a 26% increase year over year, according to a recent quarterly earnings report.

• The spike was “primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers,” Olsavsky said during an earnings call last week.

Dive Insight:

Amazon is among a number of big tech companies that have ramped up their AI investments over the past year.

In April, Amazon announced in a blog post that its demand-side platform was using more advanced machine learning models to help advertisers “reach highly relevant audience segments with optimal cost-efficiency.” With the enhancements, advertisers can see a 12.6% increase in click-through rate, a 34.1% increase in return on ad spend, and a 24.7% decrease in cost per impression, the post said.

More recently, Amazon’s ad business began testing AI-powered technology to enhance image generation.

Amazon's ad business has been its fastest-growing division for the past two quarters, according to Investor’s Business Daily. By 2025, the company’s global ad revenues will reach $67.59 billion, compared with $31.16 billion in 2021, an increase of 116.9%, according to data provided to CFO Dive by market research firm Insider Intelligence.

While Google and Meta Platforms continue to be major players in digital advertising, Amazon is growing to become a formidable competitor, according to a report published by Seeking Alpha in September. As the industry continues to evolve, Amazon’s ability to seamlessly combine shopping and advertising “may give it a significant edge in the competition for advertising dollars,” the report said.