Amazon racked up $12.06 billion in advertising-services revenue in the summer quarter — and that’s before the company’s premium streaming-video subscription service Prime Video rolls out an ad-supported tier. The ad-sales haul is up a whopping 26 percent from the same quarter in 2022 ($9.548 billion) and +13 percent from the April-June 2023 quarter ($10.683 billion).
In a quick-response note to clients (obtained by IndieWire), analyst Mark Mahaney of New York investment-banking firm Evercore ISI said one of “the big surprises” from Amazon’s Q3 results was the “material acceleration” in advertising-revenue growth. The huge uptick keeps Amazon consistent with industry leaders Meta (fka Facebook) and Google, he said.
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Amazon’s CEO Andy Jassy said his advertising sales grew “robustly.” A brag — but not spin.
Ads have been a big part of Amazon’s overall growth story, so extending them to Prime Video — a late-to-the-party announcement the company made last month — is only natural. Eight percent of Amazon’s overall net sales in the summer quarter came from ads. That’s a sizable sum when talking about the website where everybody buys everything.
But Jassy in the company’s earnings call said “we have barely scraped the surface” in figuring out how to integrate ads into Amazon’s video, audio, or even its grocery stores, so there’s “a lot” he’s excited about in the future. Jassy also flexed that Amazon’s advertising growth came at a time when the economy has most ad-heavy companies struggling.
The ads mainly exist on Amazon’s e-commerce side (Amazon’s advertising services segment sells sponsored ads, display ads, and video advertising to sellers, vendors, publishers, authors, and others), but there is already a streaming-video piece. Amazon’s FAST service Freevee and its “Thursday Night Football” NFL games both have ads.
Amazon’s rich e-commerce history gives Prime Video a big head start over the other streamers entering advertising. It already has the infrastructure in place from both a technological and talent standpoint, something Netflix needed (and still needs) Microsoft for.
Ads are the next great way to goose ARPU (average revenue per user) as new-ish streamers make a final surge toward profitability. (Netflix is already there, Hulu is generally considered profitable, and Max had one profitable quarter.)
When Amazon launches ads on Prime Video in 2024, Apple TV+ will be the last holdout of the major streamers. Given its recent price hike, Apple — the only company larger than Amazon by market cap — may not hold out for much longer.
Beyond “early 2024,” it’s unclear exactly when ads will launch on Prime Video in the U.S. When it happens, existing Prime Video members will be notified and automatically opted-in to the ad-supported tier. Their monthly subscription price will not change; those who want to remain ad-free must pay an extra $2.99 per month to remain ad free.
Monthly membership to Amazon Prime, which includes free shipping on retail products, is currently $14.99 per month. One can currently get Prime Video as a standalone service for $8.99/month; Freevee is free TV, hence the name.
Amazon also disclosed as part of the third-quarter earnings announcement that “Thursday Night Football” games averaged 12.9 million viewers this season through the first six games, including 15.1 million for the season opener. According to Nielsen, the average age for the games is 47, seven years younger than those who watch the NFL on broadcast.
Beyond its infrequent live events — “Thursday Night Football” and the Academy of Country Music Awards — Prime Video airs promotional spots for original series ahead of its series and films.
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