Amazon ad business could become bigger than AWS, analyst says

Amazon Web Services (AWS) generated $19.7 billion in revenue during the company’s second quarter, the online tech giant said as part of its earnings report on Tuesday.

And while AWS made up a sizable share of Amazon’s (AMZN) overall revenue at 16.24%, one Wall Street analyst predicts another area of ​​the business could top those contributions.

“When you see some of the deals, some of the NFL, some of the other ad-based connected TV content that they’re looking for, there’s a long streak to grow their ad business,” Nick Jones, research analyst at shares at JMP Securities, told Yahoo Finance Live (video above). “It could be very, very profitable, potentially more than AWS’ business in the longer term.”

Amazon generated $8.76 billion in advertising revenue in the second quarter. That revenue, which included things like ads on the e-commerce website, contributed to an overall overrun of Wall Street estimates.

Jones’ projection for future ad growth hinges on Amazon Prime Video’s successful transition to live sports. Amazon is set to air NFL Thursday Night Football for the first time this season. The company’s $1 billion bet on professional football will begin Sept. 15 and feature 14 more regular-season games.

“We’re obviously excited about the streaming TV ads from Thursday Night Football and Amazon, the capabilities that we’re going to continue to work with those partners and work with our own type of technology capabilities to continue to develop,” Dave Fildes, Director from Amazon. Investor Relations, said during Thursday’s earnings call.

“We see advertising as a real opportunity”

Analysts are generally optimistic about tech companies’ foray into sports streaming.

For Jones, while he acknowledges that AWS is still Amazon’s “profit engine,” there’s more than enough room for advertising to take some of that profit share.

“We see advertising as a real long-term business opportunity,” Jones said. “It doesn’t get a lot of attention when you see some of the deals around some of the NFL nights, some of the other ad-based free-to-air and connected TV content that they’re looking for.”

The story continues

Amazon’s deal with the NFL is set for 11 years, but appears to be part of a larger sports streaming plan. The company recently locked up Champions League football streaming rights in the UK and has shown interest in football streaming rights.

It also competes with fellow tech giants Apple (AAPL) and Google (GOOG) for NFL Sunday Ticket streaming rights starting in 2023. Those rights are expected to bring in $2.5 billion a year.

Apple, which already broadcasts Friday Night Baseball, recently spent $2.5 billion on 10 years of Major League Soccer media rights.

Josh is a producer for Yahoo Finance.

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