I came for the packages, stayed for AWS, and nearly missed the machine quietly monetizing purchase intent across the entire company
When I think about Amazon, advertising is not the first thing that enters my mind. Boxes enter my mind. Delivery vans enter my mind. A smiling arrow enters my mind, followed by the uneasy realization that I once ordered batteries at 11:42 p.m. and received them before I had emotionally committed to needing batteries.
If I am thinking as an investor, AWS usually barges into the conversation next. That makes sense. Cloud computing turned Amazon from a famously low-margin retailer into something far more powerful, and AWS has earned its reputation as the company’s profit engine. It is difficult to overlook a division that reported $42.2 billion in second-quarter 2026 sales and $16.6 billion in operating income.
But while everyone watches the cloud, Amazon has been building an advertising business large enough to qualify as an empire and quiet enough to be mistaken for a line item.
In the second quarter of 2026, Amazon reported $19.8 billion in advertising-services revenue, up 26% from the prior year. Multiply one quarter by four—not a forecast, merely a way to understand the scale—and the business is operating near an $80 billion annualized pace. That is not a charming side hustle attached to a shopping website. It is a major global advertising platform hiding inside a company so enormous that nearly $20 billion in quarterly revenue can stand off to the side while AWS receives the dramatic lighting.
I think that is why Amazon advertising remains underappreciated. Investors recognize that it exists. They can see the growth rate in the earnings release. Sellers certainly recognize it every time they bid for placement. Yet the business is still mentally filed beneath retail, Prime, logistics, and AWS, as though it were an accessory rather than connective tissue.
To me, advertising is becoming one of the clearest explanations for how Amazon’s many expensive assets can reinforce one another. The marketplace creates commercial intent. Prime creates loyalty and attention. Fulfillment increases conversion. Devices and streaming properties create inventory. AWS supplies infrastructure and data tools. Advertising monetizes the moments connecting all of them.
The packages are visible. The ad machine is what increasingly gets paid for knowing why the package might be ordered in the first place.
The Most Valuable Search Bar in Retail
Google became an advertising giant by organizing questions. Meta became one by organizing attention and identity. Amazon’s advantage begins with something advertisers may value even more: shopping intent.
When I search the web for “best running shoes,” I may be researching, daydreaming, writing an article, comparing colors, or attempting to understand why respectable sneakers now cost as much as minor plumbing work. When I type “men’s size 11 trail running shoes” into Amazon, the distance between curiosity and transaction is much shorter.
That distinction matters. Amazon often meets customers near the bottom of the purchasing funnel, where the user has moved beyond general awareness and toward selection. A sponsored listing can appear beside organic results, lead directly to a product page, and culminate in a purchase without the customer leaving the platform. Amazon can then connect ad exposure with shopping behavior using its own signals.
Advertisers do not merely want impressions. They want evidence that impressions produced something besides a presentation full of optimistic arrows. Amazon sits unusually close to the cash register.
The marketplace also creates a self-reinforcing auction. Millions of products compete for visibility. Third-party sellers want access to Amazon’s enormous customer base. Popular categories become crowded. Crowding makes prominent placement more valuable. Sellers bid for sponsored positions, and Amazon collects advertising revenue whether the advertised product is sold by Amazon or by an independent merchant.
This is where the business model becomes almost indecently elegant. Amazon built the digital mall, charges many merchants for space and services, fulfills a large portion of their orders, and now operates the billboard network inside the mall. The merchant pays to participate, pays to move the product, and may pay again to ensure the product is visible among thousands of alternatives.
Calling this “advertising services” is technically accurate in the same way that calling a casino “a room with carpet” is technically accurate.
Nearly $20 Billion in a Quarter Is Not Background Noise
Amazon’s financial scale can distort perception. Second-quarter 2026 net sales reached $200.6 billion. Against that number, $19.8 billion in advertising can look like roughly one-tenth of the company and therefore somehow secondary.
I see it differently.
Advertising grew 26% year over year in the quarter, faster than Amazon’s North America and International segment sales. The reported category includes sponsored ads, display advertising, and video advertising sold to sellers, vendors, publishers, authors, and others. It is already broader than the sponsored products scattered across search results, and it is still expanding across Amazon’s entertainment and advertising technology portfolio.
The company does not separately disclose advertising operating income, so I cannot responsibly declare an exact margin. Still, digital advertising does not require Amazon to purchase inventory, pick an item in a warehouse, place it in a box, and drive it to a house. The platform is expensive, but an additional advertising dollar should carry very different costs from an additional retail dollar.
That makes advertising potentially important to the profitability of the broader stores business. Retail attracts customers and sellers; advertising monetizes that traffic. The relationship resembles a shopping center discovering that its foot traffic can generate a second revenue stream without constructing a second building.
AWS taught investors this lesson already. Not all Amazon revenue is economically equal. A dollar from a low-margin retail transaction and a dollar from a high-value service do not arrive at operating income wearing the same shoes.
Advertising may be the next part of Amazon that forces the market to revisit how it values the company’s mix.
Amazon Owns the Funnel—or at Least a Disturbing Amount of It
The phrase “full-funnel advertising” is widely used because the advertising industry enjoys turning ordinary concepts into language that sounds as though it requires safety goggles. In Amazon’s case, however, the phrase describes a genuine strategic advantage.
At the top of the funnel, Amazon can sell reach through Prime Video, live sports, Twitch, Fire TV, Amazon Music, and third-party streaming inventory available through its technology. At the middle, it can help brands build awareness and consideration using video, display, and demand-side platform tools. Near the bottom, sponsored product ads can meet a customer inside the shopping process. Afterward, measurement tools can help advertisers analyze whether campaigns were associated with product searches, detail-page visits, new customers, or purchases.
Amazon said at its 2026 Upfront that its entertainment universe connects with more than 300 million ad-supported consumers in the United States. That figure is Amazon’s own marketing claim and should be understood as such, but it illustrates the direction of travel. The company does not want to remain the place where a detergent brand buys a sponsored search result. It wants to compete for the brand’s television budget, streaming budget, programmatic budget, retail-media budget, and performance-marketing budget.
Prime Video is central to that expansion. Amazon introduced ads into the standard Prime Video experience in major markets beginning in 2024 and has continued expanding advertising into additional countries. This created premium video inventory at enormous scale without requiring Amazon to launch a separate free service and slowly convince people to use it. The audience was already there, paying for Prime and watching content. Amazon effectively turned an existing attention pool into an advertising surface, while offering an ad-free option for an additional fee in eligible markets.
That is a remarkable piece of monetization. The same household can pay for a Prime membership, watch ad-supported video, encounter an advertisement, search for the product on Amazon, purchase it, and have it delivered by Amazon. Each stage can reinforce the others.
Most advertising platforms can influence a purchase. Amazon can influence it, observe signals around it, process it, fulfill it, and potentially place the reorder button in front of the customer later. The funnel does not end at a retailer’s website because Amazon is the retailer, marketplace, media owner, ad platform, payment environment, and delivery network.
If that sounds a little circular, that is because the flywheel has stopped pretending to be subtle.
The Quiet Power of First-Party Signals
The advertising industry has spent years adapting to tighter privacy rules, browser changes, mobile-platform restrictions, and the decline of easy cross-site tracking. Third-party identifiers became less reliable just as advertisers demanded more precise measurement.
Amazon’s response is not to recreate the old internet with a different cookie jar. Its advantage comes from direct relationships across shopping, subscriptions, media, and devices. The company describes its advertising technology as informed by shopping, browsing, and streaming signals. Those signals can help a brand find relevant audiences and evaluate campaign outcomes without relying entirely on the open web’s aging surveillance machinery.
Amazon Marketing Cloud shows where the strategy is heading. AMC is a privacy-focused clean-room environment built on AWS Clean Rooms. It allows advertisers to analyze pseudonymized Amazon Ads signals alongside their own inputs, create audiences, and study campaign performance. The phrase “clean room” does not make data questions disappear, but it reflects the industry’s move toward controlled environments where information can be analyzed without freely exchanging raw user-level data.
This is one of the places where Amazon’s collection of businesses becomes difficult to copy. A retailer can build a sponsored-products program. A streaming company can sell commercials. An ad-tech firm can offer campaign tools. A cloud provider can offer clean-room infrastructure. Amazon can connect versions of all four.
The integration is the asset.
I do not believe data automatically creates an unbeatable moat. Poor tools, weak measurement, advertiser distrust, or privacy failures can erode an advantage quickly. Signals also need scale, quality, and permissioned use. Regulators and consumers are increasingly alert to how platforms combine commercial power with behavioral information.
Still, Amazon possesses something many advertisers desperately want: an ability to connect media exposure with commercial activity inside a large closed-loop ecosystem. Even when a purchase happens elsewhere, Amazon’s demand-side platform and clean-room products aim to extend the company’s relevance beyond its own store.
That is how a retail ad business begins behaving like advertising infrastructure.
Sellers Are Both the Fuel and the Warning Light
The most reliable demand for Amazon advertising comes from the merchants already dependent on the marketplace. That is also where the greatest strategic tension lives.
For a seller, advertising can be rational. Sponsored placement can introduce a product, defend a branded search, support a launch, or capture demand in a crowded category. If a campaign produces profitable sales, the seller may happily increase spending. Amazon benefits, the merchant grows, and the customer discovers a useful product.
But the auction can become less charming when advertising feels mandatory rather than incremental. As sponsored placements multiply, organic visibility may become harder to obtain. Sellers can feel compelled to pay simply to preserve traffic they once reached without an ad budget. Advertising then begins to resemble a private tax on discoverability.
The Federal Trade Commission’s antitrust case against Amazon has explicitly alleged that the company degrades the shopping experience by increasing paid placements and makes advertising increasingly necessary for sellers. Those are allegations in ongoing litigation, not established conclusions, and Amazon disputes the government’s broader characterization of its conduct. Nevertheless, the complaint identifies the central risk in plain terms: a marketplace can extract more ad revenue by selling more visibility, but customers visit because they expect relevant results rather than a catalog arranged by whoever bid most aggressively.
This is not a minor design issue. Trust is the scarce resource underneath Amazon’s entire ad machine. If search results become cluttered, confusing, or less useful, shoppers may begin their product searches elsewhere. If merchants cannot earn acceptable returns after fulfillment fees, commissions, discounts, and advertising costs, the marketplace becomes less attractive. Amazon can monetize its ecosystem aggressively only if it preserves the ecosystem worth monetizing.
There is a point at which adding another sponsored result is not optimization. It is eating the seed corn and charging the farmer for promoted placement.
Prime Video Changes the Competitive Map
Amazon advertising was once easy to classify as retail media: merchants paying to reach shoppers near the point of sale. Prime Video makes that description incomplete.
Television advertising brings Amazon into competition with Google’s YouTube, traditional broadcasters, connected-TV platforms, streaming services, and Meta’s enormous digital-ad machine. It also allows Amazon to serve brands that may not sell directly on its marketplace. An automaker, insurance company, restaurant chain, or entertainment studio can value Amazon’s video reach even when there is no product arriving in a cardboard box tomorrow.
Live sports add another layer. Sports audiences watch in real time, tolerate advertising more readily than many on-demand viewers, and remain valuable to brand advertisers seeking mass reach. Amazon’s sports rights are expensive, but advertising gives the company another way to justify those costs alongside subscriptions, engagement, and Prime retention.
This is why I do not view content spending solely as a Prime membership expense. Entertainment can support several economics at once. It attracts and retains members, increases time inside Amazon’s environment, creates premium ad inventory, promotes other Amazon properties, and generates data that can improve media planning. A show does not need to carry the entire burden on subscription revenue alone.
The risk, naturally, is that Amazon pays champagne prices for content and receives store-brand audience engagement. Media rights inflate. Hits are unpredictable. Viewers dislike repetitive or excessive ads. Measurement across streaming remains contested. Competitors are not asleep; they are merely buffering.
Yet Amazon does not need to defeat every television platform. It needs to make its inventory distinctive by combining reach with commercial signals and measurement. If a brand can run a Prime Video campaign, observe increased branded searches, retarget interested audiences appropriately, and measure downstream purchases, Amazon can offer something closer to a continuous system than an isolated commercial break.
That system may be more important than any single show.
Why Wall Street May Still Undervalue It
I think investors underappreciate Amazon Ads for four reasons.
First, Amazon is analyzed through separate stories. Retail analysts focus on delivery speed, gross merchandise volume, fulfillment costs, and consumer spending. Technology analysts focus on AWS and AI infrastructure. Media analysts focus on Prime Video. Advertising falls between categories even though it benefits from all of them.
Second, Amazon does not report advertising as an operating segment. Revenue is visible, but profit is not. Without a clean margin figure, investors must avoid false precision and infer the economic contribution from business characteristics and consolidated results. Markets prefer a labeled box. Amazon provides a very large machine with several wires disappearing behind the wall.
Third, AWS is so extraordinary that it makes other good businesses appear ordinary. In Q2 2026, AWS produced more than 60% of Amazon’s consolidated operating income before corporate-level and other considerations are mentally debated by analysts. Advertising must share the stage with one of the most profitable technology franchises ever built.
I would not value Amazon by taking an imagined ad margin, assigning a fashionable multiple, and declaring the stock obviously mispriced. The business is intertwined with marketplace traffic, Prime investment, devices, and media content. A sum-of-the-parts exercise can illuminate value, but it can also pretend shared costs and strategic dependencies do not exist.
What I would do is give advertising more weight when assessing Amazon’s long-term earnings power. The business can improve retail monetization, subsidize content, widen the company’s addressable advertising market, and deepen the value of first-party commercial signals. It also provides diversification from cloud spending without returning Amazon to the brutal economics of moving physical objects one address at a time.
Underappreciated does not mean invisible. It means the asset may be understood individually but insufficiently reflected in how the whole company is framed.
What Could Break the Thesis
No empire receives permanent diplomatic immunity from reality.
The first risk is ad saturation. Amazon can damage product discovery if paid placement overwhelms relevance. Short-term revenue gains may reduce long-term customer trust.
The second is seller economics. If merchants conclude that advertising is an unavoidable fee rather than a productive growth tool, resentment and regulatory attention will intensify. A healthy auction needs participants who believe they can earn acceptable returns.
The third is competition. Google, Meta, Walmart, streaming platforms, retailers, and independent ad-tech firms all want portions of the same budgets. Amazon’s shopping signals are powerful, but advertisers resist dependence on any single closed ecosystem.
The fourth is regulation. Antitrust litigation, privacy rules, and data-use restrictions could alter how Amazon combines marketplace power, consumer signals, and advertising tools. Advertisers will also demand independent verification that ads generated incremental sales rather than claiming purchases that would have occurred anyway.
Finally, there is the possibility that growth slows as the base becomes enormous. Twenty-six percent cannot continue forever. An annualized pace near $80 billion makes every future percentage point harder to earn.
These risks do not invalidate the thesis. They define the conditions under which it succeeds.
The Asset Hiding in Plain Sight
After looking closely at Amazon’s advertising business, I no longer see it as a profitable attachment to the marketplace. I see it as a layer spanning the company.
It sits inside search results, but it reaches into streaming television. It serves third-party sellers, but it is courting major brand budgets. It uses retail intent, but it increasingly operates through ad technology beyond the retail storefront. It benefits from Prime, content, devices, logistics, and AWS while helping justify investment in each of them.
Most companies would reorganize their identity around a business approaching an $80 billion annualized revenue pace. Amazon mentions its 26% growth after discussing delivery speeds, AI chips, and cloud expansion, because Amazon has apparently decided that one corporate profile should contain the economic output of several respectable nations.
That abundance is precisely why the asset is easy to miss.
I still believe AWS deserves the attention it receives. I still think retail execution, capital spending, AI competition, and regulation will determine much of Amazon’s future. But advertising deserves promotion from footnote to pillar. Its value is not only the revenue it reports. Its value is the way it converts Amazon’s accumulated traffic, intent, media, and infrastructure into a higher-value stream.
The company once used commerce to build scale and AWS to turn infrastructure into a service. Now it is using the behavior around commerce to build an advertising platform.
The box on the doorstep may be the end of a transaction. For Amazon’s advertising empire, it is also the receipt proving the machine worked.
Sources
Amazon Investor Relations, “Amazon.com Announces Second Quarter Results,” July 30, 2026. https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Second-Quarter-Results/
Amazon Ads, “The 2026 Amazon Upfront Delivers a Blockbuster Entertainment Universe Built on Precision Advertising,” May 12, 2026. https://advertising.amazon.com/library/news/amazon-upfront-2026-recap-announcements
Amazon Ads, “Amazon Marketing Cloud.” https://advertising.amazon.com/solutions/products/amazon-marketing-cloud
Amazon Ads, “Advertising on Prime Video to Be Introduced in Belgium, Denmark, Norway, and Turkey in 2026,” March 17, 2026. https://advertising.amazon.com/library/news/prime-video-advertising-2026
Federal Trade Commission, “FTC Sues Amazon for Illegally Maintaining Monopoly Power,” September 26, 2023. https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-sues-amazon-illegally-maintaining-monopoly-power
This article reflects my analysis and opinion for informational purposes. It is not individualized investment advice, a recommendation to buy or sell any security, or a guarantee of future performance. Financial figures should be checked against the company’s latest filings before making an investment decision.
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