Some great reporting from Ad Age over the past couple weeks reveals how Amazon and Google are ramping up in premium video advertising. Given the size and respective positioning of both companies, their initiatives are worth paying close attention to.
First, on Google, Ad Age reported that YouTube has begun to offer feature length movies like “The Terminator,” “Rocky” and “Legally Blonde” for free and with ad support (note all are also available on The Roku Channel). They’re part of around 100 movies YouTube has collected in a bid to further boost YouTube viewership and give advertisers more access to premium, brand safe content.
Though YouTube would surely never admit it publicly, The Roku Channel’s outsized success was probably a key motivator for moving ahead with adding movies. The Roku Channel launched just over a year ago and is free and ad-supported. It has become a strong indicator of the appetite viewers have for free long-form content, even if it’s a bit older and non-exclusive. Advertisers have been drawn to The Roku Channel, with Roku’s ad business contributing meaningfully to the company’s Platform segment that broke the $100 million revenue mark for the first time in Q3 ’18.
YouTube, which is of course the 800-pound gorilla of ad-supported video, has no doubt been following The Roku Channel’s trajectory and realized adding movies to its offering was a no-brainer. With YouTube’s and Google’s vast trove of user data, selling high-CPM, well-targeted ads in movies (especially to studios targeting certain types of audiences for new releases) is a very attractive opportunity.
And speaking of tapping into user data, Ad Age also reported that Amazon has told content providers whose apps are used by Fire TV owners that Amazon will now take 30% of available ad inventory to sell itself. Note the “told,” not “requested,” aspect of this change. Amazon - recognizing its nearly 50 million strong Fire TV user base has earned its place in the pecking order for content providing scratching for revenue anywhere they can get it - is now in a position to dictate its terms.
Those terms, which will also include a mandatory requirement to use Amazon’s ad network starting next year, do not actually deviate much from how Roku has worked with content providers. Rather, the significance of Amazon’s moves is that the behemoth has clearly woken up to the video advertising potential in front of it and is making the appropriate moves to capitalize. With its own trove of users’ purchase data, Amazon is perhaps best positioned of all the tech giants to offer a breakthrough value proposition to advertisers in targeting and ROI.
Simmering somewhere in Amazon’s kitchen is its own free video service, widely reported last summer, and no doubt forthcoming at some point soon. This will be yet another competitor for The Roku Channel and YouTube’s nascent ad-supported movies offering.
Amazon has become a critical player in SVOD, accounting for 55% of all new SVOD subscriptions via Amazon Channels. And of course its own Prime Video service is a quasi-SVOD play, tied to 2-day shipping. But the big untapped opportunity for Amazon in video is in advertising.
Amazon is already the third-biggest online ad business after Google and Facebook, racking up $2.5 billion in revenue in Q3 ’18. Video likely accounted for only a tiny portion of that amount, and this will certainly change in coming quarters. VideoNuze readers will recall that back in January, I speculated whether 2018 would be the year Amazon moved aggressively into video advertising. It appears that’s what’s happened.
For everyone involved in TV and premium video who use advertising to partially or fully fund their businesses, Google’s and Amazon’s recent moves must be taken very seriously. The $80 billion U.S. TV ad business alone is a juicy target for both these companies, and it’s clear they’re coming for their share.