Amazon Eyes Traditional Media, Ad Business Hits $11.8B

Amazon Targets Traditional Media, Aiming to Become "Largest Ad-Supported Premium Streaming Service" with $11.8 Billion Q1 Ad Revenue

By Athena Xu

5/15, 08:42 EDT
Amazon.com, Inc.

Key Takeaway

  • Amazon's participation in the Upfronts, traditionally for traditional media giants, marks its strategic expansion into traditional advertising to complement its digital ad dominance.
  • With digital advertising set to surge by 32% to $16.5 billion this year, Amazon leverages its Prime Video ads and platforms like Freevee and Twitch against declining traditional TV viewership.
  • Amazon's ad business grew 24% to $11.8 billion in Q1, driven by diverse content offerings and investments in live sports programming to attract more advertisers.

Amazon's Strategic Expansion

Amazon's foray into the digital advertising realm has positioned it as a formidable competitor against established giants like Meta and Google. The e-commerce behemoth's decision to participate in this year's Upfronts, traditionally a domain for media titans such as Disney and Comcast’s NBCUniversal, underscores its ambition to broaden its advertising reach beyond digital to traditional media platforms. Amazon's presence at the Upfronts, a pivot from the digital-focused Newfronts, signals a strategic shift as it aims to capture a larger share of the advertising market amidst a landscape where digital spending outpaces traditional TV.

Alan Moss, Amazon’s vice president of global ad sales, emphasized the company's customer-centric approach, stating, “When I joined Amazon nearly four years ago, the No. 1 question all of you asked was, ‘When are you going to show ads on Prime Video?’” He highlighted the introduction of ads on Prime Video as a milestone in creating the "largest ad-supported premium streaming service in the world." This move is part of Amazon's broader strategy to leverage its extensive user base and diverse content offerings to attract advertising dollars.

Digital vs. Traditional Advertising Dynamics

The advertising industry is witnessing a significant shift with digital advertising gaining momentum over traditional TV. Projections by eMarketer suggest that while traditional TV ad spending is expected to see a modest increase of 1% to $18.8 billion during the Upfronts, digital advertising is forecasted to surge by 32% to approximately $16.5 billion this year. This trend is further amplified by the entry of more ad-supported streaming platforms, challenging the conventional TV advertising model and offering advertisers new avenues to reach audiences as traditional TV viewership declines.

Amazon's announcement in January to introduce ads into its Prime Video streaming service, alongside its existing ad-supported offerings like Freevee and Twitch, is a testament to the growing appeal of digital platforms for advertisers. TD Cowen analysts project that Amazon could generate up to $3 billion in U.S. ad revenue this year from Prime Video alone, catering to an estimated 58 million households.

Amazon's Ad Business Growth

Amazon's advertising business has seen robust growth, with a 24% increase in revenue to $11.8 billion in the first quarter. The company has successfully monetized its vast ecosystem, from sponsored listings on its e-commerce site to ad spots on Fire TV streaming devices. Amazon's strategic investments in live sports programming, including securing exclusive rights to a National Football League playoff game next season, underscore its commitment to enhancing its streaming content and attracting more viewers and advertisers.

During the Upfronts presentation, Amazon showcased a rich programming slate and enlisted celebrities like Reese Witherspoon and Jake Gyllenhaal to promote new original content. Paul Kotas, head of Amazon’s ad business, reflected on the company's journey from introducing ads on its website 18 years ago to incorporating digital video ads on Prime Video. He emphasized Amazon's continuous innovation in the advertising space.

Street Views

  • TD Cowen Analysts (Bullish on Amazon):

    "The company stands to generate up to $3 billion in U.S. ad revenue this year from an estimated 58 million households who will see commercials in Prime Video content."

Management Quotes

  • Alan Moss, Vice President of Global Ad Sales at Amazon:

    "When I joined Amazon nearly four years ago, the No. 1 question all of you asked was, ‘When are you going to show ads on Prime Video?’ Well, at Amazon we like to deliver for our customers. By introducing ads on Prime Video, we’ve created the largest ad-supported premium streaming service in the world."

  • Paul Kotas, Senior Vice President of Amazon Ads:

    "We’ve been working towards this moment for years, and that’s why being here on stage today means so much... And of course, at Amazon, we’re never done innovating."