Tuesday, January 2, 2018, 12:37 PM ET|Posted by Will Richmond
In 2017 Amazon continued launching into new businesses as it leveraged its massive scale and resources to disrupt the status quo. As we look ahead to 2018, online video adverting appears to be yet another juicy opportunity for Amazon to pursue, as all the pieces seem to be falling into place.
As background, Amazon is already investing heavily in ad tech and ad sales staff. Of course, ads and recommendations have long been a part of the Amazon shopping experience, with text and banner ads popping up following searches and on product pages. But video ads give the company a whole new opportunity.
One of the most important themes in the TV ad business these days is a desire by buyers to direct budgets to highly targeted and measurable environments, which is why Google and Facebook are so threatening. TV networks are responding by investing heavily in data-enabling their ad inventory for better segmentation and also to crack the nut of measurable attribution.
Amazon brings a new dimension to this battle: a vast trove of data about its users’ actual purchase habits that neither TV networks, Google nor Facebook can offer. But for Amazon to unlock the value of this data, it needs actual video inventory to sell. Until recently that’s something Amazon hasn’t had. But this is changing fast, setting the foundation for Amazon.
First, Amazon is creating a significant footprint of users of its Fire TV connected TV device. Just today, Amazon said the Fire TV Stick and Echo Dot were the best-selling products for Prime members in 2017. Roku has already shown that it’s possible to leverage a large deployed base of connected TVs into a robust advertising business to support free video apps, which Amazon can now emulate.
Amazon can also entice existing Channels SVOD services partners to introduce a lower-priced ad-supported option, powered by Amazon video ads. It can also include them as part of its Thursday Night Football stream. Finally, it can introduce video ads in its own original content (e.g. “The Grand Tour,” “Sneaky Pete,” etc.). These originals already often carry pre-roll trailers for other Amazon shows, so a relevant, targeted ad wouldn’t be terribly disruptive to the viewer.
For Prime members, Amazon can offer a reduction in the annual fee in exchange for a light ad load. Unlike Netflix, which strongly opposes ads in its service, Amazon is all about customer choice, so providing different price points and value propositions is aligned with the company’s approach.
Across all these different paths, Amazon can infuse its Prime users’ purchase data in order to drive improved targeting and ROI to ad buyers. Importantly, Amazon video ads create a new path toward measurable attribution, due in part to the deployment of millions of voice-activated devices as well. Imagine you see a video for a flash sale of an interesting product, then hit pause and call over to your Echo to instantly order (better still, with Fire TV now Alexa-enabled, it will be possible to do this without even having an Echo). With Prime Now, you might even have it at your door before the program you’re watching ends!
To date, Amazon’s investments in content have been mainly to fuel memberships in Prime. Soon video will be monetizable not only indirectly through Prime but also directly with advertising. As Amazon tests this model and proves its value, the company would be justified in spending even more on original content. And on it goes; Amazon has so many options ahead with respect to video advertising and it has the advantage of being a single entity like Google and Facebook. 2018 looks like the year it starts executing on the video ad opportunity.