Could Amazon Win A Major Chunk of The Video Ad Market

Amazon is reportedly in talks to incorporate more advertising within its video content.

Net US Digital Ad Revenues at Amazon, 2016-2019 (billions, % change and % of total US digital ad spending)

While Amazon is first and foremost known as an ecommerce vehicle, it also generates significant digital ad revenue. eMarketer estimates that US digital ad revenues for the company are expected to reach $1.65 billion by the end of this year. At that level, it would make up 2.0% of total US digital ad spending.

But Amazon’s ad offerings are fairly unusual and video has not been a focus.

“Amazon is capable of building a video ad platform to rival the likes of YouTube, Facebook, Twitter and Hulu,” said Paul Verna, principal analyst at eMarketer.

However, Amazon will have to tread carefully to avoid upsetting its users, who are accustomed to an ad-free video experience. “It’s easy to envision Amazon selectively serving ads on part of its platform, such as Twitch, but harder to imagine a scenario in which episodic shows on the subscription tier are interrupted by ads,” he added.

According to another eMarketer analyst, Nicole Perrin, Amazon's display business is growing strongly, thanks largely to targeting capabilities that allow advertisers to reach customers based on their search, browsing and purchase histories. "But what it lacks right now is video at scale," she said. "Amazon also isn't necessarily trying to maximize its ad revenues; it has a strong focus on customer experience and loyalty, and so far has not sacrificed either to overly intrusive advertising."

According to CNBC, Amazon is discussing ways of ensuring video ads don’t appear next to inappropriate content—signaling that it may see an opportunity to woo advertisers worried about brand safety on other major video platforms.

eMarketer estimates that Amazon Prime Video will have 85.3 million users in the US this year. By comparison, YouTube will have 185.9 million users and Netflix will have 128.0 million.

—Rimma Kats

Source: eMarketer