Brands Shouldn’t Sleep on Amazon Prime’s Ad Push
Over the past year or so, much of the conversation surrounding connected TV advertising has been focused on many of the giant, one-time ad-free players — HBO, Netflix, and Disney+ — gradually (perhaps grudgingly) opening the door, just a crack, to advertising.
Amazon just leapfrogged all three and may have quietly become one of the most important sellers of TV advertising overnight. In fact, Amazon may suddenly be positioned to reinvent TV advertising altogether. Amazon isn’t adding an ad-supported tier as one of many subscription products, e.g., an offering that might appeal to a smaller group of cost-conscious consumers. Rather, the shopping giant has elected to make ad-supported Prime the core video product, creating what I estimate to be a 100 million-user advertising machine out of the gate. That’s because Prime Video subscribers will now automatically default into a new ad tier unless they choose to pay an additional $2.99 monthly to maintain their ad-free experience. I expect most won’t. Because of that switch, Amazon is set to define CTV advertising in ways I think many in the industry still haven't fully wrapped their heads around.
For starters, let’s do some back-of-the-envelope math:
According to Nielsen’s December 2023 Gauge report, Amazon Prime accounts for 3.3% of the total TV and streaming viewing time, compared to 8.5% for YouTube, 7.7% Netflix, and 2.6% for Hulu. If we look at the sheer number of subscribers, YouTube has roughly 125 million CTV viewers (and a billion more outside of CTV), Netflix has 240 million, and Hulu has 50 million.
We know that Amazon has 200+ million Prime subscribers. However, many of these people are there not for Prime Video viewing but simply for the Prime ecommerce benefits (e.g., free shipping). So, if you look at the typical relationship between subscribers and viewers, I estimate Prime has about 75-100 million active streaming viewers — all of whom, by default, will be watching ads unless they pay extra.
If you don’t want to take my word for it, Bank of America predicts that about 30% of Prime subscribers will pay an additional $2.99 monthly to be without ads. That means that about 70% of those 75-100 million viewers will see ads, so 50-70 million viewers on the ad tier at a minimum.
According to Amazon internal data, ad-supported Amazon Prime Video will reach approximately 115 million monthly viewers in the U.S. alone. While that estimate appears rather optimistic (perhaps inflated), anyway you slice it, Amazon will shortly have a sizable number of viewers regularly viewing ads on Prime, which should make marketers take notice.
Roaring Past the Competition
Let’s try to put this into some TV market context.
For example, I predict that Amazon Prime will soon be bigger than Hulu regarding revenue.
Think about that. While Netflix and others have stolen much of recent hype, Hulu has long been the gold standard in CTV advertising. The service, which is majority-owned by Disney, has been in the market since 2008! Its mix of high-quality premium TV shows and movies and an excellent user experience has made Hulu a no-brainer for most TV advertisers.
For Amazon Prime to top Hulu in one fell swoop would be no small feat. It would make the rest of the TV world sit up straight.
At the same time, if there’s one CTV player that would seem to be able to top any competitor in sheer reach and inventory, it’s YouTube. While the Alphabet-owned video property has had to fight a long battle to be considered as “premium” as legacy TV, there’s been little doubt that YouTube is unmatched in its ability to produce ad avails, given that its audience and usage hours are counted in the billions.
That’s why Amazon Prime’s near-instantaneous ability to gain up to 70 million ad tier viewers — allowing it to compete with YouTube for view time — would be stunning and not to be underestimated.
Consider that Insider Intelligence predicts that Prime will end 2024 in the third spot in terms of ad spend by a streaming service with $3.13 billion, behind Hulu and YouTube ($3.84 and $3.29 billion, respectively).
That’s a game-changer.
Rethinking What TV Advertising is All About
Let’s not forget, unlike those other top CTV services, Amazon Prime already has a piece of the most valuable content in all of media, i.e., the NFL, with its Thursday Night Football football package. Plus, as the company looks to rescue Bally Sports from bankruptcy potentially, Prime may have consistent viewership and ad avails coming from football, Major League Baseball, the NBA, and more.
See why the TV industry should be leaning in here?
That’s before we get to Amazon’s incredible shopping potential. I mentioned earlier that this Prime move could reshape TV advertising overall. That may sound dramatic. Yet, think about how Amazon has already revolutionized how we shop and the fact that it boasts of the richest pool of shopping data on earth. On TV, the company has already been testing different variations of video ads that drive people to take action, such as scan QR codes, add items to their shopping cart using voice, or to simply check out current items via their phones while watching NFL games. But it has a long way to go to make T-commerce a mainstream habit. If anyone can do so, I’d bet on Amazon.
Bloomberg reported that Amazon is testing a tool that zaps “inaudible tones from a product promotion to a viewer’s smartphone.” Expect lots more experimentation and innovation on this front. Plus, as Bloomberg noted, more TV commerce ads could bring more mid-tail and direct-to-consumer advertising to Prime, which could further drive up revenue. While Amazon can and should be a major player in the TV upfront market, it has smartly kept its pricing reasonable, hoping to create a broad market.
Some marketers might complain as Amazon is requiring Prime ads to be bought directly in the Amazon DSP, but this is a smart move for the company. By forcing marketers to use the Amazon ad stack, it has the potential to shift ad budgets to Amazon on all devices and formats, not just streaming, due to the draw of omnichannel campaign execution.
In fact, to help hit the ground running, Amazon and IPG have entered into a three-year deal to run advertising through Prime for IPG clients. IPG manages over $47 billion in global media spend yearly. As such, Amazon should have very little effort filling the sudden influx of ad slots on their newly minted ad-supported viewers.
Streaming Needs Streamers
To be sure, there are some caveats to pay attention to.
Amazon Prime Video is not the nightly default for many viewers like Netflix, YouTube, or even TikTok have become. While it has some hit shows such as The Boys, its roster isn’t deep. It needs more buzzy and frequent hits. Simply put, to generate all the ad inventory we expect - Amazon needs people not just to check in on Prime, but to watch a lot. Plus, Amazon has promised “meaningfully fewer” ads than what traditional TV and other ad-supported streaming services are currently forcing consumers to watch. Other streaming services show upwards of four minutes of ads per hour, so Netflix should theoretically show somewhat less than that. So Amazon needs a lot of view time to make up for its light ad load. At the same time, it boasts of an enviable movie library of nearly 12,000 films compared to Netflix's 4,000, thanks to its MGM acquisition a few years ago. Prime should find ways to promote that depth prominently. That’s where the NFL, and potentially more local sports, should help
Overall, my belief is that by the end of 2024, Amazon will generate more ad revenue than any other streaming service. Prime Video is a lodestone for marketers, and for the 60-years old TV ad business at large.
Stay tuned.
[Editor's note: This is a contributed article from Lotame. Streaming Media accepts vendor bylines based solely on their value to our readers.]
Related Articles
Raman Abrol of Vubiquity and Amdocs discusses the next stages for streaming: the union of content, advertising, and interactive experiences.
07 Feb 2024
Gijsbert Pols, Director of Connected TV & New Channels for Adjust, outlines three key CTV trends to watch for in 2024.
26 Jan 2024
YouTube may be too big to ignore. The question for advertisers might be - is it so big that it doesn't have to play by the rules? Hunter Terry of Lotame discusses many of the unusual and unexpected advertising advantages that YouTube currently possesses and what that means for the overall CTV advertising industry.
29 Sep 2023