Thursday, February 6, 2014, 10:52 AM ET|Posted by Will Richmond
Yesterday, FreeWheel quietly announced that it's powering video ads for Amazon. Though the announcement was light on details, anytime Amazon moves into a new space, as it's doing with video ads, it's noteworthy. I spoke to Doug Knopper, co-CEO of FreeWheel, who noted this is the company's first customer that isn't a pure media company, underscoring for him how ubiquitous video and video advertising are becoming.
Though under tight constraints from Amazon about what he could say, Doug emphasized that, as with all Amazon initiatives, the focus is on creating a better customer experience. In FreeWheel's release, Lisa Utzschneider, Amazon's VP of Global Ad Sales positioned video ads as a discovery vehicle, helping customers learn about related products.
In this context, Amazon would be aligning video ads with its vaunted recommendations system. It's easy to imagine, for example, buying or renting "Captain Phillips" on Amazon and being served a pre-roll trailer for a Tom Hanks' movie currently playing in the theater, with a "buy now" button. The connection doesn't even need to be that tight; with purchase data for tens of millions of its customers, Amazon could correlate which ads for which products would work best and then serve these. If Amazon could leverage its internal data to drive higher purchase conversion for advertisers that would be very impactful.
Video ads could also open up additional business model flexibility. For example, Amazon has long sold Kindles with Special Offers that selectively show display ads to defray the upfront cost of the device. Now Amazon could extend Special Offers to video ads as well. Notwithstanding the potential for annoyance(!), video ads' higher value could enable even deeper discounts on the Kindle purchase, making them more competitive with iPad and Android tablets.
Then of course there's the option of offering a straight up ad-supported model for TV shows and originals from Amazon. Whereas Netflix has long said it won't pursue an ad-supported model, Amazon could possibly offer one, or a hybrid with a lower subscription cost for Prime, and/or a lower one-time rental fee. Utzschneider mentioned how Amazon has already begun to offer video ads in certain TV shows viewed on Kindle Fire.
In short, by working with FreeWheel, Amazon has created many potential options for how to integrate video advertising. One of Amazon's historical strengths is that it rejects the idea of "one size fits all" - rather, it has always tried to offer multiple options depending on a customer's preferences. No doubt the smart folks at Amazon will treat video advertising the same way - integrating it one way for certain customers and other ways for other customers. It should be interesting to watch unfol