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 has decided to push further to 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 number of ads and a disruptive number. 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.
