Amazon’s Ad Business Is Booming—But Will Tariffs Derail the Momentum?

Just when we thought Amazon’s Q1 earnings would center around cloud struggles and shipping speeds, the real headline-grabber turned out to be advertising.

Yes, advertising.
Amazon’s ad business is officially the dark horse of digital marketing, and its Q1 2025 earnings prove it.

While AWS (Amazon Web Services) came in a little short of Wall Street expectations, Amazon’s advertising division surged ahead, outpacing the growth of digital titans like Google and Meta. With 275 million U.S. users engaging with Amazon’s ad-supported content, its reach is now rivaling traditional media giants—and possibly redefining the future of retail-driven performance marketing.

But just as things start to look rosy, there's a new potential disruptor lurking on the horizon: tariffs.

The Highlights from Amazon’s Q1 Earnings

Let’s break down what marketers and compliance professionals need to know:

• Ad Revenue Surge: Amazon’s ad business showed strong double-digit growth in Q1, making it one of the fastest-growing segments in the company.
  
  

• Retail Data Advantage: Amazon continues to lead in closed-loop attribution—offering marketers performance visibility from impression to purchase.
  
  

• AWS Slowdown: While cloud revenue slowed, Amazon’s pivot to advertising seems to be cushioning the blow.
  
  
  

Why Amazon's Ad Model Works So Well

What sets Amazon apart from Google and Meta? One word: purchase intent.

Amazon isn’t just a content platform—it’s a full-blown retail ecosystem. With billions of transactions and customer data at its fingertips, Amazon offers advertisers something Meta and Google can't: proof of purchase.

That’s a game-changer for performance marketing, especially in uncertain economic times. Ad budgets that once went toward clicks and eyeballs are now flowing toward platforms that can show actual sales—and Amazon sits at the top of that list.

But Here Come the Clouds: Tariffs on the Horizon

Amazon’s advertising growth could be entering stormy weather. Why? Because most of the ad spend on Amazon comes from third-party sellers—many of whom rely on overseas manufacturing and slim profit margins.

Enter tariffs.

If new or increased tariffs raise the cost of goods for these sellers, their profit margins shrink. And when margins shrink, ad budgets are often the first to get slashed.

💬 “If seller costs rise due to tariffs... that provides less margin for those sellers to spend on advertising.” — Brad Jashinsky, Director Analyst at Gartner

Amazon’s superpower—its dual role as both a retail giant and an ad platform—may also be its Achilles heel. Tariffs could force sellers to make tough trade-offs between staying competitive on price and fueling product visibility through paid ads.

What This Means for Marketers

If you're running campaigns on Amazon or advising brands that do, here’s what you need to be thinking about:

1. Watch Tariff Developments Closely

Keep an eye on international trade policy. Rising tariffs could indirectly increase your cost-per-sale by squeezing the businesses funding your ad placements.

2. Audit ROAS Regularly

In tighter economic environments, every ad dollar counts. Amazon's platform still delivers strong return on ad spend (ROAS), but fluctuating seller budgets can impact inventory, competition, and bid pricing.

3. Diversify Ad Channels

While Amazon is powerful, don’t go all in. Use a balanced media mix to reduce exposure to platform-specific risks—especially those tied to global policy changes.

4. Elevate Organic Strategy

If ad budgets shrink, ranking well organically becomes even more important. Invest in product listings, reviews, and SEO to hold your ground when paid search softens.

Final Thoughts: Amazon’s Dual Identity Is Being Tested

Amazon is no longer “just” an online retailer. It’s a dominant force in digital advertising, offering a unique blend of performance marketing and commerce integration.

But as Q1 earnings show, success in one arena doesn’t guarantee immunity in another. Tariffs could introduce real headwinds—not just for Amazon’s bottom line, but for every seller and advertiser who depends on the platform.

For marketing leaders, this isn’t just an economic footnote—it’s a strategic red flag. The future of performance marketing might depend as much on Washington D.C. as it does on Seattle.