Friday, January 30, 2009

Amazon Marketing Costs Take a Look

Amazon (AMZN) came out with some pretty good numbers. Amazon should be established as the internet success marketing story. So instead of looking at the financial numbers lets take a look at the way the marketer markets itself. Perhaps there may be a few conclusions.

Total 2008 marketing spend was $484 million vs. $344 million representing a 40% increase. Q4 marketing spend was $169 million vs. $133 million representing a 27% increase for the quarter. 35% of 2008 marketing costs were spent in Q4.

Read this quote from their press release

Our marketing expenses are largely variable, based on growth in sales and changes in rates. To the extent there is increased or decreased competition for these traffic sources, or to the extent our mix of these channels shifts, we would expect to see a corresponding change in our marketing expense or its effect.”

OK so they are claiming adherence to the B School Text Book marketing concept of turning all marketing costs into variable costs. But Y/Y revenues are up 29% and marketing costs are up 40%. Impressive as the increase is, the variable correlation of marketing spend to revenue generation is not quite what they are making it out to be.

The marketing challenge remains at Amazon.