Quick Take: Big Tech’s Q3 Earnings Have Big Implications for Media

With US listed public companies’ quarterly earnings currently being drip-fed to Wall Street, here are two of the implications for Media and Advertising entities from Tech’s Big Four Q3 earnings:

Amazon’s Media Presence is Continuing to Grow: While Amazon did not break out its specific numbers around the nascent advertising and media group aspects of its business, its revenue defined as other, is alongside its emerging subscription revenue (Prime, Amazon Video etc), is the fastest growing element of the Amazon ecosystem. At USD 1,123million in Q3 revenue and 58% YoY growth, this was 36% higher growth than Amazon’s online store and 16% higher than its web services business. Whilst, this still only accounts for 2.6% of total revenue, it is a pertinent reminder of how successfully Amazon are diversifying their revenue streams. As warned by WPP CEO Martin Sorrell, Amazon are fast becoming a force to be recognised in the digital ad space currently defined by the duopoly of Facebook and Google. The Seattle Tech giant may continue to benefit from an agency landscape that may welcome a third player at the table to lessen their dependence on Facebook and Google.Google are not moving away from ad dependency as quickly as they would like: AI, Augmented Reality, Self-driving cars - if there is a trend in technology you can be sure Google are working on some iteration of it. However, this is yet to materialise into a meaningful revenue stream for the business outside of advertising on its search and its video assets (YouTube). Q3 2016 Ad revenue was 89% of Google’s total revenue, a year later and this dependence on advertising has only fallen to 87.6%. Whilst Google and Facebook control 57% of the total digital advertising market (and presently swallow up 99% of growth), they will soon be challenged by Amazon on this area. Yes, Google remains incredibly profitable (earnings outperformed Wall Street analyst expectations), but like Facebook it remains vulnerable unless it can find its next growth story. Apple was able to do this by moving from computers into electronics and smartphones, as have Amazon with the success of Amazon Web Services. Facebook and Google, rounding off Tech’s ‘Big Four’, are still far from achieving this security in revenue and safety from disruption of their core business.