— The e-commerce giant must provide more high-quality content and court advertisers that don’t sell products on its platform, experts say
Patrick Coffee / Wall Street Journal:
The e-commerce giant is now the world’s third-largest digital ad seller, behind tech companies
Amazon will generate roughly $5.2 billion in additional annual revenue through Prime Video ad sales and the $2.99 monthly surcharge that subscribers can pay to avoid the ads, according to a recent Morgan Stanley research note. Roughly a third of Prime subscribers are expected to opt for the ad-free version, Bank of America analysts say.
Still, the company faces significant challenges as it enters a market where streaming rivals with large footprints in traditional media, such as Walt Disney and WarnerBros. Discovery, and even Netflix, a late arrival to ad sales, enjoy more established relationships with the advertisers that still spend the bulk of their money on broadcast TV. Amazon must convince the world’s largest brands, and the agencies that manage their budgets, to spend big on Prime Video despite a plethora of alternative ways to reach consumers and uncertainty regarding returns on their investments and threats to their market share.
“The dollars that are migrating into this opportunity are still tethered, in many ways, to traditional TV buying as opposed to digital ad buying,” said Andrew Lipsman, founder of consulting firm Media, Ads + Commerce. “Right now, Amazon is stronger on the digital advertiser front, but this is all new territory for them. They have plenty of speed bumps along the way.”
— Techmeme