Amazon Video's New Ad Tier has Marketers Salivating at the Expense of Traditional TV

On Jan. 29, Prime Video will make its ad tier the default for its tens of millions of subscribers, a move that could unravel how advertisers deal with TV broadcasters and scare off rivals with its massive scale.
Amazon Video's New Ad Tier has Marketers Salivating at the Expense of Traditional TV

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On Jan. 29, Amazon will unleash what one top advertising executive calls a “tornado” that will “upend” the streaming video landscape. The company will flip a switch and turn on ads for all of its Prime Video viewers. Users will have the option to pay $3 a month to remove the ads, but as the executive quips: “Almost no one will do that, are you kidding me?”

The move will instantly turn Amazon into a streaming-ad juggernaut, and the largest ad-supported subscription streaming platform in the marketplace with tens of millions of users, leapfrogging the likes of Netflix in the process.

Kevin Krim, CEO of the ad measurement firm EDO, estimates that Amazon could see a CPM (the cost per thousand consumers who see an ad) of about $50, below what Netflix sought when it got into advertising a little over a year ago, but still “a big premium to linear TV.”

And advertising is also a zero-sum game. While ad spend has grown over time as the economy has expanded, when a marketer or agency decides to commit budget to a new player, it is usually at the expense of someone else.

This time around, a likely victim is linear TV, with S&P Global’s Naveen Sarma writing Jan. 3 that “we believe advertisers have permanently left legacy platforms, including national TV.”


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