Amazon’s Latest Move: Introducing Ads on Prime Video
Beginning Monday, Amazon.com Inc (AMZN) will introduce ads on its Prime Video platform, a strategic decision aimed at bolstering the company’s already substantial $38 billion advertising business. This move signifies 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 (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 (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.
Amazon’s advertising rates, set between $30 to $35 CPM, are comparable to those of its streaming rivals, despite some initial resistance from advertisers. The company has received a “strong response from agencies” wanting their clients to be first on Prime Video, according to an Amazon spokesperson.
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 (DIS) and Comcast Corporation (CMCSA).
While Amazon’s move to introduce ads on Prime Video is a significant development, it remains to be seen how advertisers and viewers will respond. As the streaming ad wars continue to heat up, it is clear that Amazon is determined to carve out its share of the advertising market and reshape the streaming advertisement landscape.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
