Beginning Monday, Amazon.com Inc (NASDAQ:AMZN) will introduce ads on its Prime Video platform.
What Happened: This strategic decision aims to bolster Amazon’s already substantial $38 billion advertising business, signaling a significant shift in the streaming advertisement arena.
Amazon’s entry into the streaming ad wars presents a lucrative opportunity for advertisers struggling to connect with audiences scattered across various streaming services.
With its extensive data and broad advertising options, Amazon is poised to become a formidable competitor to traditional TV networks and digital platforms like YouTube.
This initiative comes as Netflix Inc (NASDAQ:NFLX) is also rapidly developing its advertising business.
Analysts from Wall Street project that Amazon’s advertising venture could generate over $5 billion in revenue. According to a report by Business Insider, this revenue stream is expected to come primarily from advertising, supplemented by a $3 monthly fee from Prime Video viewers who opt out of ads.
Setting itself apart from competitors like Netflix and Disney+, Amazon is introducing ads as the default experience for Prime Video users.
According to Morgan Stanley (NYSE:MS), this strategy could potentially reach an audience of 70 million viewers. Amazon’s dominance in the U.S. retail media market, capturing three-fourths of all retail media dollars, provides valuable data for targeted advertising.
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Amazon’s advertising rates, set between $30 to $35 CPM, are comparable to those of its streaming rivals, despite some initial resistance from advertisers.
An Amazon spokesperson told the outlet that the company had a “strong response from agencies” wanting their clients to be first on Prime Video.
“We value our ad customers and, as is common practice, occasionally thank our most engaged clients with additional opportunities,” the spokesperson said.
The company also offers a variety of video-ad products, including the ad-supported service Freevee, and has been building advertiser confidence through its successful ads on NFL’s “Thursday Night Football.”
The introduction of ads on Amazon Prime, alongside Netflix, is expected to attract smaller advertisers who typically find traditional TV buys cost-prohibitive.
Amazon actively encourages advertisers with incentives like additional ad impressions for significant investments.
However, the success of Amazon’s advertising initiative is not a foregone conclusion. Prime Video accounts for just 3.3% of U.S. TV-watching time, trailing Netflix, and faces the challenge of attracting nonendemic advertisers.
The company must compete with long-established TV ad partners such as Walt Disney Co (NYSE:DIS) and Comcast Corporation (NASDAQ:CMCSA).