Amazon Lines Marketing Spend 1
There is not enough information in the public domain to reliably identify Amazon's top three brand lines in terms of marketing spend. The financials that Amazon discloses are not granular enough for brand-level marketing expenses to be determined or triangulated. As several sources suggest that Amazon.com, Amazon Prime, and Amazon Web Services (AWS) are Amazon's biggest brands, it is likely that these are also the brands with the biggest marketing expenses.
- On its corporate website, Amazon identifies its eight product and service categories as Amazon.com, AWS, Prime Video, Amazon Music, Fire Tablets, Fire TV, Echo and Alexa, and Kindle E-Readers and Books.
- The company, however, owns around 128 companies, the most prominent of which include Whole Foods Market, Ring, Zappos, Twitch Interactive, Kiva Systems, and Audible. Amazon has several brands in the following categories: books, cloud, delivery process, entertainment, payments, physical stores, smart home/devices, and shopping.
- In its regulatory filings, Amazon discloses only the marketing expense of the whole company. In 2018, Amazon spent $13.814 million on marketing, around 5.93% of the company's net sales of $232,887 million. That year, AWS accounted for $25,655 million of Amazon's net sales.
- Amazon has only three reportable business segments (North America, International, and AWS) and only six reportable product and service categories (online stores, physical stores, third-party seller services, subscription services, AWS, and other).
- Amazon's net sales of $232,887 million in 2018 breaks down into the following product and service categories: online stores ($122,987 million), third-party seller services ($42,745 million), AWS ($25,655 million), physical stores ($17,224 million), subscription services ($14,168 million), and other ($10,108 million).
- Notable online stores include Amazon.com and Zappos, notable physical store brands include Whole Foods Market, Amazon Books, Amazon Go, Amazon 4-Star, and Amazon Pop-Up, and subscription services include Amazon Prime and other non-AWS subscription services,
- If it is assumed that each of the aforementioned reportable product and service categories spent 5.93% of net sales on marketing, the marketing expense of each category can be estimated as follows: online stores ($7,293 million), third-party seller services ($2,535 million), AWS ($1,521 million), physical stores ($1,021 million), subscription services ($840 million), and other ($599 million).
- The retail, digital advertising service, and cloud service businesses of Amazon play an important role in how the company makes money. The majority of Amazon's revenue comes from product sales, while the majority of the company's profits come from AWS, Amazon Prime, Amazon Advertising, and seller services.
- Amazon Prime is a paid subscription service offering users shipping, streaming, shopping, and reading benefits. AWS, on the other hand, is a subsidiary offering cloud computing services that are scalable, reliable, and inexpensive.
- Amazon is an extensive user of cross-platform marketing promotions.
Our initial strategy focused on scouring Amazon's corporate website, regulatory filings, and presentations, as companies typically list their brand lines or business segments on their websites and in their annual reports. On its corporate website, Amazon categorizes its products and services into Amazon.com, AWS, Prime Video, Amazon Music, Fire Tablets, Fire TV, Echo and Alexa, and Kindle E-Readers and Books. Unfortunately, in its regulatory filings, Amazon has only three business segments, namely, North America, International, and AWS.
The company does not disclose the marketing spend of the aforementioned eight product and service categories, and instead, provides only the marketing spend of the whole company. Using the marketing expense and net sales provided in the company's most recent annual report, we were able to compute that in 2018, Amazon's marketing expense was 5.93% of net sales, and AWS's marketing expense was around $1,521 million. Since AWS is an operating segment by itself, it is likely that it is one of Amazon's largest businesses.
Marketing expense: $13,814 million
AWS net sales: $25,655 million
Estimated marketing expense of AWS: $25,655 million x 5.93% = $1,521.3415 million
In its latest annual report, Amazon provides the following breakdown of net sales: online stores ($122,987 million), third-party seller services ($42,745 million), AWS ($25,655 million), physical stores ($17,224 million), subscription services ($14,168 million), and other ($10,108 million). If we assume that each category spent around 5.93% of net sales on marketing, the following category marketing expenses can be estimated:
Online stores: $122,987 million x 5.93% = $7,293.1291 million
Third-party seller services: $42,745 million x 5.93% = $2,534.7785 million
AWS: $25,655 million x 5.93% = $1,521.3415 million
Physical stores: $17,224 million x 5.93% = $1,021.3832 million
Subscription services: $14,168 million x 5.93% = $840.1624 million
Other: $10,108 million x 5.93% = $599.4044 million
Having ascertained that Amazon does not share the marketing spend of its brand lines in its disclosures and publications, we proceeded to check if any third party has identified Amazon's top brands or businesses in terms of marketing spend or sales. While Amazon itself has not disclosed the information, it is possible that a third party such as a media outlet or analyst firm has studied the subject and has published an article or report about it. This second strategy, however, led us to just a number of articles listing the brands, subsidiaries, or top acquisitions of Amazon. Investopedia lists the top seven acquisitions of Amazon, while both BuzzFeed News and NPR list all the businesses owned by Amazon. Since the top seven acquisitions of Amazon are not necessarily the same as the top seven businesses of Amazon, we decided not to use Investopedia's list.
Since the top Amazon brands by marketing spend or sales are not publicly available, and Amazon itself identifies its product and service categories as Amazon.com, Amazon Web Services (AWS), Prime Video, Amazon Music, Fire Tablets, Fire TV, Echo and Alexa, and Kindle E-Readers and Books, we changed tactics and searched for the marketing spend or sales of each of these eight brand lines. If the marketing spend of the brand line were not publicly available, we figured it could be triangulated with the assumption that the marketing expense is more or less 5.93% of net sales regardless of brand line or product/service category, and that the brands with the biggest net sales are the brands with the biggest marketing expenses. This strategy proved ineffective, however, as we were unable to find the marketing spend or sales of any of the brands, apart from AWS.
Finally, we turned our attention to how Amazon makes money, and looked for sources covering the biggest revenue streams of the company, as these sources may contain clues as to the company's largest businesses. We examined Amazon's marketing strategy as well with the hope that the strategy will uncover the brands with the biggest marketing expenses. This final approach led us to several helpful articles, including those published by Business Insider, Investopedia, and Talkwalker. These articles offer insights into Amazon's largest sources of revenue and profit, but unfortunately, they do not provide any quantitative data on brand sales or marketing expense.
All in all, while the sources we were able to gather suggest that Amazon.com, Amazon Prime, and AWS are Amazon's biggest brands, there is not enough quantitative data in the public domain for us to determine the marketing spend of each major brand. The lack of information can be attributed to Amazon's non-disclosure of brand-level financials.