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- Let's talk about advertising.

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- Yeah, I know it's the
quietest little $40 billion

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business you've never heard of.

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- What's next for Amazon
to find out, we're talking

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to Brad Erickson at RBC Capital.

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Brad, welcome. Is AI an
important part of Amazon's

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future business

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or is this just something

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where they're in the tech business?

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You have to say you're working on AI right

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now because that's the thing.

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- Well, obviously if you're
in the tech business, you have

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to say you're working with ai,

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but no, AI is, is central to
the company's work, has been

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for, for a number of years.

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AWS is all about sort of customizing the,

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whatever a company needs in
terms of their cloud services,

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their generative AI approach
is gonna be exactly the same.

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You're a company, you need
access to generative AI tools,

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you're gonna come to Amazon,
they're gonna hand you a menu

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of models and solutions,

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and then they're gonna
say, Hey, we're gonna sort

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of custom build this for your enterprise

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and exactly what you need.

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That's an enormous, I think,

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competitive advantage versus
some others that are gonna come

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with a more limited set of offerings,

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much more off the shelf,
less customized tools.

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I do think they'll participate,

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if not over participate
in the, you know, the,

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the compute capacity necessary
to run generative ai,

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generative AI applications in the future.

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- One thing that got a lot of
attention over the past year

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was Amazon's pharmacy service
that they just started up

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where you can buy your
drugs directly from Amazon,

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they're selling 'em at a cut rate.

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Is that gonna be a big part

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of the consumer pharmaceutical
sector going forward?

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- I don't think it is going

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to be impactful hardly
at all to the stock.

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Frankly, stepping back from it, like one

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of the reasons healthcare
is obviously a huge piece

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of the economy, and,

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and when you think about, you
know, Jeff Bezos, bill Gates,

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everybody, all the major
players have talked about

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how it's kind of the last
vertical that tech is yet

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to really address.

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All of these businesses at
some level are built upon the

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foundation of network effects

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and you just don't get those benefits

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and that ability to, to proliferate,

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see services proliferate in the same way.

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And so it's, it's just
not a scalable business.

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It's a good development.

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They bought one medical,
which is another one in the,

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in the healthcare space obviously.

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We'll see. But I think
building a brand and,

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and how, you know, insurance
companies operate state

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to state commissioners

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and that sort of thing, it's
just a much more like iterative

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process versus like one day we all wake up

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and realize everyone uses
Instagram as an example.

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- And it seems like
Amazon is weirdly starting

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to rival on a smaller scale, Google

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and Meta in terms of
capturing advertising dollars.

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Is that gonna continue to grow?

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Like have we seen them, you
know, kind of hit a wall here?

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How big is that gonna be?

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- Yeah, I know it's the
quietest little $40 billion

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business you've never heard of.

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They have million third party
sellers who are always, who,

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who in many cases build businesses
from scratch based solely

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on the ability to sell through Amazon.

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Amazon has a lot of leverage
in that, in that situation.

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And so by helping advertisers
get in front of folks

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at some point, when we speak

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with third party sellers
on Amazon, frequently

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what we hear is that the
discoverability on Amazon has

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become quite challenging.

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And that's just the nature
of the beast, right?

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Amazon has leverage over
over them in that situation.

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There is a limit to how much
you can charge for the right

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to be discovered on Amazon,

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but there's more runway to go there.

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And so we think there's a, there is a lot

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of growth left in the
advertising business.

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The other piece of advertising for Amazon

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that's becoming more prevalent

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and even less well known, they're always,

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they're in the game of,
of bringing more traffic

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and selling more products, right?

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And so inevitably there are a lot

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of other places on the internet

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that previously they
were not tapping into.

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What we're finding is Amazon's
establishing these third

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party partnerships where their ads

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for products from these third
party sellers I mentioned are

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going onto other websites that
can then route traffic back.

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They can sell those things
and, and make money.

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Pinterest would be a great example.

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Pinterest and Amazon now have a deal

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where you're gonna start seeing
Amazon products on Pinterest

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as ads that would bring
you back to Amazon.

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It's a huge benefit to Pinterest in terms

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of product relevance, and
it's a huge benefit to Amazon

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because a lot of folks
on Pinterest wanna shop

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and spend money and, and
brings more business there.

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So those are kind of,
there's, there's sort

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of multiple vectors to the ad business.