Amazon Leveraging AI for Big Advertising Push

Amazon.com released its third-quarter earnings and the news was upbeat. Now, the company is equally upbeat on how much firepower AI is bringing to the digital retail giant’s bottom line.

Overall, Amazon’s revenues soared by 13% to $143.1 billion for the quarter with net income rising from $2.9 billion to $9.9 billion. At 94 cents per share, earnings significantly bested the 58 cents per share estimate from Wall Street analysts.

Amazon has been in deep cost-cutting mode in 2023, slashing 27,00 jobs with more layoffs to come, even in the executive suite, company officials say.

Yet Amazon should be in growth mode going forward in areas where AI is leaving an indelible imprint.

In the company’s quarterly conference call on October 26, company chief executive officer Andy Jassy was bullish on the technology and how the company was using it.

“All of our significant businesses are working on generative AI applications to transform their customer experiences,” Jassy says. “In our stores business, we’re using generative AI to help people better discover products they want and more easily access the information needed to make decisions.”

Amazon is also using generative AI models to forecast inventory the company requires across the board such as optimizing last-mile transportation routes for Amazon package delivery drivers. “We’re also making it much easier for our third-party sellers to create new product pages by entering much less information and letting the models do the rest,” Jassy says.

An AI Push Into Digital Advertising

Advertising is another area where the company is leaning into AI and machine learning to generate revenue.

Jassy told analysts that Amazon has recently rolled out a generative AI image generation tool that enables brands to simply upload a product photo and description to quickly create unique lifestyle images when marketing their products and services.

“With Alexa, we built a much more expansive and previewed the early version of our Large Language Model (LLM),” Jassy said. “Apart from being a more intelligent version of herself, Alexa’s new conversational AI capabilities include the ability to make multiple requests at once, as well as more natural and conversational requests without having to use specific phrases.”

Company CFO Brian Olsavsky told analysts the company’s advertising revenues have risen substantially, thanks to its massive investments in AI and learning language models.

“We continue to see durable growth in advertising, which grew 25% year over year, excluding foreign exchange, primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers,” Olsavsky said. “We have seen a strong improvement in our profitability.”

Investments in AI have especially paid off in other major areas, including the company’s lucrative Amazon Web Services.

“On a quarter-over-quarter basis, we added more than $900 million of revenue in AWS as customers are continuing to shift their focus toward driving innovation and bringing new workloads to the cloud,” Olsavsky said. “While optimization still remains a headwind, we’ve seen the rate of new cost optimization slowdown in AWS, and we are encouraged by the strength of our customer pipeline.”

Customers are “excited” about Amazon’s approach to generative AI, with several new announcements made during the quarter. Those include a strategic collaboration with Anthropic, opening Amazon Bedrock up to general availability, adding Meta’s Llama 2 model to Bedrock in the near future, and new customization capabilities of CodeWhisperer.

“AWS remains a clear cloud infrastructure leader with a significant leadership position in the number of customers, the size of our partner ecosystem, our breadth of functionality, and the strongest operational performance in the industry,” Olsavsky said.


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