Amazon will “ramp up” Prime Video ads in 2025

[Karlston]

Subscribers tolerated the current ad load, so Amazon is adding more commercials.

 

Subscribers to Prime Video's ad tier will start seeing more commercials next year, further testing how much advertising streamers will tolerate.

 

Speaking to the Financial Times today, Kelly Day, VP of Prime Video International, said that Amazon will offer more Prime Video ad slots to advertisers next year. She didn't get into specifics but confirmed that Prime Video's ad load would "ramp up a little bit more into 2025."

 

In January, when Amazon launched Prime Video's ad tier, The Wall Street Journal reported that subscribers would see an average of between two and three-and-a-half minutes of ads per hour. Day told FT today that upon launch, Prime Video with ads was given a "very light ad load," providing subscribers “gentle entry into advertising that has exceeded customers expectations in terms of what the ad experience would be like." The executive pointed out that Prime Video with ads doesn't show commercials in the middle of content. That could change next year.

 

Amazon is also adding shoppable ads to Prime Video in 2025, FT confirmed. The new ad format, which includes carousel ads, pause ads, and brand trivia ads—is being sold to advertisers as a new way to attract TV and movie viewing audiences that have become more elusive in the streaming age.

Ads haven't hurt Prime Video business so far

According to Day, subscriber churn in response to the ads has "been much, much less than we anticipated."

 

Amazon says Prime Video has 200 million monthly viewers and that subscriber count hasn't dropped dramatically since it got ads. Similarly, market research firm Antenna told FT in July that a substantial amount of Prime Video subscribers opted out of ads initially, but that number soon "trailed off." By May, fewer than a 10th of subscribers were paying for an ad-free subscription, Antenna said.

Prime Video not a big part of Amazon's ad business yet

For a while, streaming was viewed as the ad-free alternative to cable. However, with streaming services more focused on turning subscriber counts into profits, the companies are increasingly relying on ads. Streaming services say they make more revenue per user on average if the subscriber uses an ad tier. Meanwhile, increasing costs for streaming subscriptions are pushing viewers to look for ways to save money.

 

Despite forcing all of Prime Video subscribers to the ad tier in January unless they paid an extra $3 per month, Amazon has seemingly yet to tap Prime Video's full ad potential. Amazon's ad business still mostly relies on ads shown on the Amazon website, Amazon CFO Brian Olsavsky told investors in August. In the first full quarter when Prime Video with ads was available, Amazon's ad business grew more slowly than expected than in recent quarters, with ad sales missing analyst estimates ($12.77 billion compared to $13 billion).

 

That said, ads remain one of Amazon's fastest-growing and highest-margin businesses, and the conglomerate is keen to cultivate it. Amazon has reportedly already surpassed its ad-spending commitment goal for Prime Video for 2025.

 

Amazon has also been competitive in ad pricing, reportedly offering lower prices than Netflix, while creating an early advantage by forcing all of its subscribers onto ad tiers and by already appealing to advertisers with its e-commerce business.

A fine line

With Amazon's ad business growing and the company seeing minimal blowback since launching Prime Video with ads, it's decided to push further and see how much more subscribers are willing to bear.

 

On one hand, those who have already viewed ads on Prime Video may be open to accepting whatever Amazon's ad department is willing to throw at them.

 

Others, however, may think they were already paying their dues with the current ad setup. For subscribers who are fed up with streaming tactics like rising prices, changing libraries, and password crackdowns, there's a fine line between an acceptable and disruptive amount of ads. Ad fatigue could also make commercials less effective.

 

At least for now, ad tiers make business sense for streaming providers, most of which are striving to hit or maintain profitability. Ad subscriptions make up 38 percent of the streaming market and represented more than half of new subscriptions in Q4 2023 and Q1 2024, per Antenna.

 

As long as people keep paying for ad subscriptions, streaming providers will seek more ways to use viewers to generate ad dollars. With Amazon increasing ad loads next year, we can anticipate more streaming services to test how much advertising customers will accept.

 

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