Amazon Prime has successfully built a strong subscriber base of over 200 million due to the range of services it offers, including an extensive shopping range, free shipping, music, and cloud services. These services allow Amazon to remain competitive and continue to attract and retain customers.
The main difference between Amazon Prime's advertising strategy compared to other players such as Netflix is the subscription model. Amazon will place all current users into the ad-supported tier of its service, giving subscribers the option to pay extra to view without advertising. Netflix users all begin in the non-ad-supported tier and have the option to pay less for a service that incorporates advertising.
Commenting on Amazon Prime's entry into the ad-supported video market, Matthew Bailey, Omdia Principal Analyst said: "The forecasted global revenue of over $2bn for Amazon's ad-supported Prime Video tier in 2024 indicates considerable growth potential for the streaming platform and reflects Amazon's efforts to diversify its revenue streams beyond subscription fees.
"A significant factor contributing to Amazon's success will be their capability to provide closed-loop attribution and the inherent advantage of having all their users ad-addressable by default. Amazon has already experimented with directly shoppable ad formats, and this would enhance their ability to monetize their platform even more."
Omdia's research also considers the introduction of new services by Amazon's ad-supported Prime Video, including shoppable TV. This feature allows viewers to directly purchase products they see in shows or movies, creating a new avenue for e-commerce within the streaming platform.
Concluding, Bailey said "Omdia expects more partnerships between prominent retailers, broadcasters, and online video platform owners as they look to compete with Amazon. These will range from data-sharing partnerships to enable commerce-led video advertising measurement and targeting through to direct retailer integration with video services."
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SOURCE Omdia
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