Amazon.Com Inc’s introduction of ads on Prime Video will likely impact the crowded U.S. streaming market significantly.
As the third-largest digital ad seller globally, Amazon’s $12 billion ad revenue in the third quarter marks a 26% increase from the previous year.
Their vast customer data offers a unique edge in targeted advertising.
Analysts see $6.6 billion – $8.0 billion of incremental revenue on the worldwide rollout of the plan.
However, the transition into streaming ads faces challenges, as traditional media giants like Walt Disney Co and WarnerBros. Discovery Inc has established relationships with advertisers focused on broadcast TV, the Wall Street Journal reports.
Morgan Stanley predicts that Amazon could generate about $5.2 billion annually from Prime Video ads and the additional surcharge for ad-free viewing, the WSJ writes.
Despite this, Amazon must attract significant brands and their agencies to invest in Prime Video amidst competition and return on investment uncertainties.
Amazon’s strategy includes “shoppable ads,” leading viewers to its e-commerce platform.
In the face of these challenges, Amazon continues to invest in content quality and live sports, which is crucial for attracting advertisers. It recently gained streaming control over MLB, NBA, and NHL content via the Diamond Sports deal.
Despite its substantial investment in original content and sports rights, Amazon still lags in perceived premium content quality compared to rivals like Disney+ and Netflix Inc.
Earlier in 2024, Amazon roped in Jeremy Helfand, a former Disney and Hulu executive, to direct its ad efforts for Prime Video.
Helfand, known for his ad innovation at Disney, will join Amazon as the Vice President and Head of Advertising. Helfand will likely be critical to its ambitious ad-supported subscription plan.
