Think You Know Amazon? Here's 1 Little-Known Fact You Can't Overlook.

Amazon (NASDAQ: AMZN) is one of the most successful stories in the history of the American economy. Three decades ago, founder and former CEO Jeff Bezos set up an online site that sold books.

Since those early days, the company has evolved into one of the most dominant enterprises the world has ever seen. Amazon is valued at a whopping $2.4 trillion and raked in $670 billion in trailing-12-month sales.

As a result of that meteoric rise, the stock has been a huge winner. In the past two decades, shares have skyrocketed 227,000% (as of Oct. 3). This is one of the most closely watched businesses around, so it makes sense if most investors think they're very familiar with its operations.

But there are still some aspects of the company that might fly under the radar. Here's one little-known fact you shouldn't overlook.

Image source: Getty Images.

Leveraging data to monetize attention

Investors know Amazon as the leading e-commerce player. Or perhaps they're familiar with Amazon Web Services (AWS), the preeminent cloud computing platform that gets all the attention from Wall Street. There are also other areas, like Whole Foods Market and autonomous-vehicle subsidiary Zoox. I haven't even mentioned Amazon's foray into the healthcare market with the One Medical membership-based primary-care service.

This business seems like it has its hands in all the cookie jars of the economy. However, most investors might not realize that Amazon has become a digital-advertising juggernaut. For context, consider that in Q2 (ended June 30), the company collected $15.7 billion in ad revenue, an increase of 22% year over year. This is more than double the total sales figure from the same period four years ago in 2021.

Amazon's annualized ad revenue in Q2 was nearly $63 billion. When you think about it, though, it might not be that surprising that the company has become a force in this market.

Amazon started showing ads on search results in 2012, and in January 2024, it introduced an ad-supported Prime Video membership option. Its online marketplace had 2.7 billion visitors in August, and that same month, Prime Video commanded 3.9% of all daily TV viewing time in the U.S. It also plays NFL games on Thursday nights.

The business has been able to monetize all the attention on its digital properties, leveraging data in the process. And that data is extremely valuable.

This was clear when Amazon inked deals with Roku and Netflix, allowing advertisers to use the tech titan's demand-side platform to buy ad slots on these streaming platforms. Given Roku's and Netflix's broad reach, it makes sense that both companies wanted to partner with a business in Amazon that has deep consumer insights.

Advertising efforts should be raking in profits

Alphabet, the leader in the industry, raked in $71.3 billion of ad revenue in the second quarter. Meta Platforms, another powerhouse, registered $46.6 billion of ad sales during Q2. Both predominant internet companies are extremely profitable, putting up strong operating margins.

This implies that Amazon's advertising division is raking in sizable profits. Needham and Company analyst Laura Martin estimates Amazon's ad business puts up an unbelievable 70% operating margin.

Amazon's ad segment is growing at a brisk pace, and there's no reason to believe this momentum will abate meaningfully anytime soon. According to estimates from Grand View Research, the global digital-advertising market is expected to reach $1.2 trillion in yearly revenue by 2030. Should Amazon continue its success, with ad sales rising noticeably in the years ahead, it's easy to believe that the company's earnings power will get a substantial boost.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Netflix, and Roku. The Motley Fool has a disclosure policy.