Amazon has launched Ads on Prime Video: Here's what you need to know

Amazon has started showing ads on Prime Video, a move it announced in late 2022 has now come to reality.

The feature will be launched in stages – starting from Prime video subscribers in US, UK, Germany followed by other Europe region and then the rest of the world.

The cost of prime membership has not changed. But for US customers who want to disable ads on Prime Video, they will have to pay and extra $2.99/month on their existing Prime Video Subscription. The launch plan and pricing for other countries except US is not clear yet.

Why is Amazon launching ads on Prime Video?

Amazon works hard to keep Prime a “no-brainer” subscription. Prime Video is one of the multiple offerings that Prime subscription provides. Ex. 300 Million products available on fast, free delivery, seamless checkout experience, 24/7 chat support, exclusive pass to all sale events and Prime day events to name a few.

Amazon invests heavily on content – from exclusive rights to even producing original series and films. However, increasing content production and acquisition costs, as well as Amazon’s focus on profitability make Prime Video a huge loss maker in this category.

One way out is to increase prices for Prime Video.

Keeping up with being a customer centric offering, Amazon decided against it. Instead, it is introducing 2 tiers of pricing: 1 for people who can tolerate ads and another of people who absolutely do not want to watch ads.

This is not a new concept: most video streaming services like Netflix, Disney+, HBO have ad supported plans. Using these plans, customers can watch content on these channels for a lower price in exchange for watching commercials.

The global AVOD market (i.e. ad supported video on demand) is valued at $38 Billion, and is growing at a CAGR of 17.5%. Can you imagine? This number may increase to $90 Billion in the near future.

This shows that showing ads on Prime Video might be a brilliant move by Amazon. Especially among cord- cutters and the Gen Z audiences who have no issues with watching a few ads on streaming TV.

With additional ads revenue, Amazon will generate more revenue from existing user base itself and also add a revenue stream from existing sellers. It will also be able to attract more revenue from customers who do not want to watch ads.

Will this cause a customer churn? This is all conjecture at this time, but we believe that Prime Video is still a very attractive offering for customers to churn citing ads on the video platform.

In terms of Prime Video audience, since the concept of ads within video is not new to customers, we are not expecting watch hours to go down.

How will Prime video differentiate itself from Linear TV ads

Linear TV ads include around 4 minutes of ads per hour. Amazon will offer much less ads than this, however it did not specify how much less.

Also, Amazon is going to use tech to ensure that ads are as less intrusive to the customers as it possibly can. As per our research, there are a few ways of showing ads to video customers:

(a)    Display ads on the video page: These are the most intrusive ad types. It may not disrupt the video watching experience, but video ads appear elsewhere while the video is playing. These ads take the customer straight to the product detail page of the product advertised.

 (b)    Video ads within a video: The points at which ads are introduced within a video are called Cue Points. You can identify cue points with a red pointer on the video scrubber. It tells you that a video is coming up. In free video services, these scrubbers are automatically incorporated, which disrupts watching experience. With a high quality service on Prime Video, these cue points will most likely be incorporated to cause minimum disruption to video viewing, i.e timed according to scene changes.

(c)     Placement ads: These are the least disruptive ad types. They are placed on within the video on walls, objects used in the video ex. Cups, standees etc..

 See here for ex. imagine if this Game of Throne still actually had a cup. Now cup is a dead space. Amazon will use this space to place an ad. Not just that, it can place a different ad for different demographic of customers.

How will Prime Video ads impact sellers?

Ads may or may not be frustrating for the video viewers, but they are great news for sellers and brands. It is the opportunity to show their brand to 200 million Prime customers world-wide. These are the most engaged customers on Amazon spending 17.2 hours a month on shows and movies.

Amazon has not talked about how ads will be incorporated within video, but it already has a AVOD service called Freevee, which means that the technology of Video ads already exists and now it is a matter of scaling the tech to Prime Video and poof! They are ready. 

Challenges for sellers to launch Prime video ads

Ads on Prime Video might be great for Amazon on the revenue front, but it comes with challenges both for sellers and for Amazon. Here are a few of those:

• Compliance: The biggest challenge is compliance. For those who set up sponsored brand ads on Amazon PPC, know this first hand. Amazon has strict policies of what can be shown to the customers, the language used in ads and products that can be advertised. These policies lead to high rejection rate of ads and hence cause frustration among sellers.

• Cost of ads: Sponsored Brands are expensive to run, not only because of higher cost of placements, but also because it includes a creative aspect. Prime Video ads will demand highest level of quality (4K) and this will increase the cost of advertising on Amazon.

Conclusion

Amazon has so far not disclosed any guidelines for Prime Video ads. We will learn as we go. However, the potential in terms of reach and impact is immense. It will help brands reach targeted and engaged audience.

We will talk more about Prime Video ads in future, as we get more clarity from Amazon. At this time, if you are looking to learn more about Amazon ads and how to automate them, you can get in touch with us here.

FAQs

Q1: Why has Amazon decided to introduce ads on Prime Video?

Amazon has introduced ads on Prime Video to offer a more diversified business model, allowing for additional revenue streams. This move can support the creation of more high-quality content and potentially keep subscription costs competitive.

Q2: Will all Prime Video content have ads?

Not necessarily. The introduction of ads may vary by content type, with some shows or movies remaining ad-free, especially those under the Prime exclusive or original categories. Details on which content will have ads should be outlined in Amazon's official communication.

Q3: Can I skip ads while watching Prime Video?

The ability to skip ads may depend on the specific ad format and policy Amazon implements. Some ads might be skippable after a few seconds, while others may require full viewing before continuing with the video content.

Q4: How will this change affect Prime Video subscription prices?

Amazon has not explicitly mentioned how the introduction of ads will impact subscription prices. The addition of ads could potentially help in keeping subscription costs down by offsetting content production and acquisition costs through ad revenue.

Q5: Can I opt out of ads on Prime Video?

Amazon may offer different subscription tiers, with higher-priced options potentially allowing users to opt out of ads. Keep an eye on official announcements for updates on subscription options.