For the longest time, Amazon Web Services, or AWS, was the secret weapon in Amazon India’s treasure chest. The cloud services arm of the e-commerce giant is the runaway leader in India’s cloud services space—it was estimated to have earned around $700-800 million in 2019. That spot is now being taken over by Amazon’s advertising business, which, for all practical purposes, is likely to go one better. 

Because unlike AWS, the six-year-old ad business has lower capital expenditure and no data centres to add year after year. In fact, the Indian ad unit is expected to cross $500 million in annual sales for the year ending March 2022, according to a source from the company. A spokesperson from Amazon India, in response to a questionnaire from The Ken, declined to confirm the estimate.

Amazon uses the same pay-per-click playbook as Google, too. Sponsored ads, sponsored brands, and display ads display ads Display ads Amazon Sponsored Display ads allow brands to reach customers via auto-generated placements on places including the app's home page and other pages across Amazon.  make up the core products of Amazon’s ad business in India. These are all the products and brands you see with the ‘sponsored’ tag while surfing Amazon’s home page or when searching for a particular product. Sellers bid for a keyword that’s relevant to their product, committing to pay a fixed amount to Amazon each time a user clicks on the sponsored ad. The higher the seller is willing to pay for each click, the higher their place in the search results. 

Tilting things in Amazon’s favour are key behavioural changes from customers. More users are now keying in product searches directly on the homepage instead of Google when looking to buy something, be it offline or online. In India, over half of urban internet users do this, notes a 2020 study by consulting firm Kantar. 

Not surprisingly, Amazon is on a hiring spree for the unit, if job listings on professional social network LinkedIn are anything to go by. The emerging success of the Indian unit mirrors its global success, where Amazon Advertising clocked nearly $7 billion in revenue $7 billion in revenue CNBC Amazon’s ads business is generating nearly $7 billion a quarter Read more during the quarter ended in March 2021. In India, the unit may very well be Amazon’s white knight in a market where core e-commerce operations are still reported reported The Times of India Amazon India's e-commerce unit loss widens to Rs 5,849.2 crore in FY20 Read more to be running at a loss

AUTHOR

Munsif Vengattil

Munsif keeps a tab on what Big Tech has been up to in India and all things OTT. He was with Reuters previously, where he wrote investigative pieces on Facebook’s content moderation operations and WhatsApp’s troubles in the run-up to India’s national elections. If you want to talk to Munsif about journalism, tech policy or his love for seekh kebabs, write to him at his first name @the-ken.com.

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