Amazon (AMZN) – 2024 – December, 15 2023
Both JP Morgan and Piper Sandler named Amazon as a top pick for 2024. They called out reasons that were identical to the investment case (LINK) that I shared earlier this year. The bullishness comes from a combination of marketplace and logistics operating leverage as well as Amazon Web Services (AWS) cloud growth bottoming. Piper Sandler shared a survey with some upbeat data. It depicted strong AWS spend intentions from CIOs in 2024. It also hinted at a growth acceleration for AWS in excess of the other public cloud providers. Finally, the survey pointed out an optimistic ad spend appetite, which should further feed marketplace margins.
Speaking of advertising tailwinds, Amazon inked a deal with Interpublic Group’s (IPG’s) IPG Mediabrands for its ad-based streaming product. IPG is the 5th largest advertising campaign manager in the USA and this is Amazon’s first large-scale ad agency contract of this nature. The deal is for 3 years and gives Amazon Prime a large base of high-quality brands to sell placements to. IPG gains preferred access to sponsorship and advertising opportunities on both Amazon’s streaming service and its marketplace. Pairing marketplace ad placements with the newer streaming service will allow Amazon to mightily bolster the reach that it can provide to advertisers and better compete with established streamers like Netflix.
Amazon has been hard at work on its programmatic advertising offering. Its investments in building out the tech stack combined with its unmatched database provide real value to advertisers in their quest to maximize returns. Per a MarketingDive article, Magna (part of IPG Mediabrands) calls Amazon’s talents in programmatic advertising “game changing.” We shall see how that translates into high margin revenue.
As a final 2024 note, Amazon is enhancing investments in China to better compete against Temu for sellers there. It will launch a new innovation center in the country to guide new sellers through onboarding and their growth journeys. While I don’t see Temu as an Amazon-killer, it is a strong competitor. Its quality lags Amazon’s, its fulfillment greatly lags Amazon’s in the Western World, its brand trust lags Amazon’s and it can’t compete with the Amazon Prime subscription here. With all of that said, it surely can steal a little share and be a formidable counterpart. While this isn’t another Amazon, it’s also not another throwaway like Wish.com.
