Amazon Prime Video’s Advertising Expansion: A Disruptive Force in the Streaming Market
An Overview
On January 29, 2024, Amazon Prime Video made a strategic move by introducing advertising on its streaming service, boasting over 200 million Prime subscribers worldwide. This bold decision marks a significant shift in the streaming landscape, with Amazon aiming to leverage its vast user base and unparalleled data advantages.
Market Potential and Growth Projections
Analysts at MoffettNathanson foresee Amazon’s entry into the ad-supported streaming market as a “disruptive force” due to the company’s substantial scale, unmatched first-party data advantages, and massive unduplicated reach.
– Amazon Prime Video is poised to reach 159 million global viewers each month, presenting advertisers with a vast audience.
– MoffettNathanson projects that Amazon could generate over $2 billion in incremental video ad dollars in 2025.
– Amazon’s ad-supported Prime Video platform could potentially siphon dollars from competitors as it scales its marketing efforts.
Prime Video’s Advertising Approach
– Amazon’s advertising model diverges from competitors like Netflix and Disney+, which offer lower-cost, ad-supported plans alongside their ad-free tiers.
– Amazon is automatically rolling out ads on Prime Video to all members, with users having the option to pay an additional $2.99 per month for an ad-free experience.
– The average ad load on Prime Video is expected to be between two and three-and-a-half minutes per hour, significantly lower than traditional TV and most streaming services.
Advertising Opportunities and Potential Disruption
– MoffettNathanson estimates that Amazon could have 6.4 billion “ad-eligible” hours in 2024, representing a substantial advertising inventory.
– The firm projects that Amazon could generate $1 billion in incremental U.S. ad revenues in 2024 and $2.8 billion in 2027 from its ad-supported Prime Video platform.
– Internationally, Amazon’s Prime Video ad push could total $400 million in revenue for 2024 and grow to $1.3 billion by the end of 2027.
– MoffettNathanson believes that Amazon’s advertising push will primarily impact linear TV and other AVOD players, with about half of the ad dollars flowing from each source.
Prime Video’s Active Viewership and Subscription Dynamics
– MoffettNathanson estimates that Prime Video’s active U.S. subscriber base is equivalent to Netflix’s 70 million, indicating a significant potential audience for advertisers.
– However, MoffettNathanson also believes that Prime Video’s average engagement is relatively low, with factors such as fewer breakthrough titles and the platform not being the primary reason for Prime Membership contributing to this trend.
– The firm estimates that “Core Prime” viewership is less than that of competing services, due to the inclusion of Freevee FAST, rentals, and viewing through Prime Channels.
Conclusion
Amazon’s introduction of advertising on Prime Video is a strategic move that has the potential to disrupt the streaming market. With its vast user base, unrivaled data advantages, and lower ad load compared to competitors, Amazon is well-positioned to capture a significant share of the advertising revenue in the streaming space. While the full impact of this move remains to be seen, it is clear that Amazon’s entry into the ad-supported streaming market is a major development that will reshape the competitive landscape.