Amazon is in a new crisis! Advertising business is frozen

In the two years after the epidemic, Amazon has reaped the benefits of the epidemic, with both traffic and stock prices booming, and it has indeed had two good years. However, this year, signs of fatigue have emerged, with two consecutive quarters of deficits. Coupled with the fact that the Q4 forecast released some time ago was too pessimistic, Amazon's stock price plummeted in a short period of time and fell back to its total market value in April 2020.

Amazon's stock price has fallen by 42% this year, nearly half of its value. This is the second worst drop in Amazon's history. The first was during the bursting of the US Internet bubble in 2000, when Amazon's stock price fell by 80% in one year and it took almost a decade to slowly recover.

Moreover, negative news has been coming out from Amazon in the past two days. An internal email from Amazon's senior management was intercepted by foreign media. The content mentioned that the advertising business, one of Amazon's two major cash cows, has stopped expanding and will be frozen according to the current staffing configuration, and no new positions will be added.

It is quite strange for a company of Amazon's size to stop hiring in a core business, considering that advertising business is currently an important source of revenue for Amazon.

In the second quarter, the advertising business supported Amazon's growth. While the revenue of competitors such as Facebook and Google fell or slowed down, Amazon's advertising business revenue soared. In the second quarter, advertising revenue increased by 18% to US$8.76 billion; in Q3, it increased by 25% year-on-year to US$9.55 billion. Amazon's advertising business has become a giant among Internet advertisers and the second cash cow of Amazon besides AWS. Now is the peak season at the end of the year, everyone is burning advertising fees. It is the most critical node of the advertising business. It should be the time when the advertising business should be most expanded and aggressive. Amazon's move is really puzzling.

According to internal executives, this is Amazon's continued action to tighten its belt, including suspending recruitment for certain businesses and gradually reducing products and services. The advertising business provides jobs that require intellectual labor, which is typical of high output with few people. Such businesses have to suspend recruitment. Amazon's current situation is definitely the most difficult time since 2000.

The freezing of advertising staff also means that Amazon may not have enough staff to handle emergencies during the peak season at the end of the year. Every peak season, Amazon always has some pressure on servers and websites, which leads to inexplicable crashes or bugs. Advertising has had budget overflow and super-high bidding bugs. During this peak season, everyone must keep a close eye on their advertising situation and take screenshots as evidence in time if any unexpected situation occurs.