Amazon’s service sales are about to eclipse its product sales

Amazon still makes most of its money from selling products, but its sales of services are on pace to eclipse them.
Amazon still makes most of its money from selling products, but its sales of services are on pace to eclipse them.
Image: Reuters/Mike Segar
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Amazon is known for selling a huge range of stuff like books, TVs, diapers, and more, but a growing share of its sales fall into what the company calls “services.”

It’s a mixed bag including the commissions and fees Amazon collects from third-party sellers on its marketplace; Prime subscriptions; sales related to Amazon Web Services, its cloud-computing platform; certain subscriptions to digital content; and the fees it charges sellers for advertising. In the three months ended June 30, Amazon’s sales of these services hit $55.1 billion, just shy of the $58 billion Amazon recorded in product sales, which include its sales of stuff as well as shipping fees and sales of certain digital media.

These service sales have been growing at a faster pace for years, and in the quarter rose 42.4% compared to the same time last year, while product sales crept up a more modest 15.4%. At this rate, Amazon will soon see more revenue from services than products.

The company’s total sales for the quarter, meanwhile, rose 27% to $113.1 billion.

Advertising and AWS are boosting Amazon’s service sales

One of the fastest growing parts of Amazon’s service business is advertising, which sellers buy to make their products more visible amid all the stuff Amazon sells. While the company doesn’t break out its advertising sales separately, it does report a segment simply labeled “other” which primarily consists of advertising sales. In the recent quarter, that segment grew 87% compared to the same time last year to reach $7.9 billion. It also marks the fourth quarter in a row growth of that segment has accelerated.

Amazon Web Services, the division built by Andy Jassy, Amazon’s new CEO, also had a strong quarter, growing at its fastest pace in two years. Sales for the segment jumped to $14.8 billion, up 37% over last year. Jassy said the uptick came as more companies sought to “transform their businesses and move to the cloud” in Amazon’s release announcing its earnings. Among those Amazon said had signed deals recently included Ferrari, the National Hockey League, and Swisscom, a large telecom provider in Switzerland.

Of course, while Amazon builds up these businesses, it’s still bringing in plenty of fees from the sellers on its platform. Its sales of services to its third-party sellers—made up of commissions, but also the money it collects for storing, packing, and shipping orders for those sellers—increased 38% to $25.1 billion.