Amazon reported record revenue and profit last week in a monster $72.4 billion quarter. One of the fastest-growing segments, however, is not traditional retail.

It's advertising.

Perhaps not shockingly, when you have 100+ million Prime subscribers and hundreds of millions of web and mobile customers, you can charge brands for access to them. That's why Amazon's "other" revenue category grew 95% to $3.4 billion: it's mostly  advertising.

But is this growth sustainable?

One CMO I talked to recently thinks so. Carl Tsukahara, chief marketing officer of experimentation and optimization service Optimizely, thinks Amazon's just getting started.

And his reasoning might be a bit of surprise.

Koetsier: Why is Amazon doing so well?

Tsukahara: Jeff Bezos has said that running experiments is fundamental to doing innovation. That's where Amazon has a massive advantage ... it's a strong part of their culture. Also, they're using their physical presence to have an advantage over purely digital competitors.

As Amazon goes into ad serving in different areas, they have the ability to test and learn at scale. Display, retargeting, anything ... they have this mass experimentation culture built in.
This will give them a huge advantage.

Koetsier: Do you see that mostly in consumer packaged goods?

Tsukahara: I think it will be in many new categories, not just CPG. Amazon is expanding the coverage across all categories, and this has the potential to disintermediate other players.

They have that benefit of being the actual deliverer of the goods ... seeing how consumers will consume the goods, that's a huge advantage for Amazon in my opinion.

Koetsier: How so?

Tsukahara: If you're running ads ... how much do you see of what's happening downstream? Not much. 

But Amazon can actually see what people consume, and that's a huge advantage. It's not just rearview experience but the actual consumption ... none of the marketplaces can see that.

This is a really powerful thing when you run experiments against that because you can actually see the end result. There's a closed loop from purchase to consumption. Over time by experimenting at scale but also seeing this actual consumption ... very few companies if any have this closed loop.

Koetsier: Clearly, marketing and advertising data is now about much more than marketing and advertising ... it's about the product experience.

Tsukahara: Well, I know at Optimizely we span the entire set of touchpoints that a consumer might have ... we call it "digital experience optimization."

Koetsier: Thank you for your time!