Amazon’s video ad push expected to generate an extra US$5 billion in revenue

AMAZON.COM’s push into video advertising will boost annual revenue by as much as US$5 billion, according to a Bank of America (BOA) analysis, mostly generated by new television-style commercials on Prime Video.

Ads on Amazon’s streaming service will start appearing in North America on Jan 29 and internationally on Feb 5. To receive ad-free content, North American subscribers will have to pay an additional US$3 per month.

Amazon will sell about US$3 billion in video ads this year and generate an additional US$1.8 billion from Prime subscribers who pay the extra fee to avoid commercials, BOA analyst Justin Post wrote in a note on Wednesday (Jan 3). The estimate assumes that 70 per cent of Prime subscribers will opt to watch ads rather than pay the fee.

Amazon’s advertising business – mostly search and display ads on its web store – generated US$12.1 billion in the quarter ended Sep 30, about 8.5 per cent of total revenue. The Seattle-based company sees Prime Video as an ideal spot to boost ad sales and profit from the billions it has spent on content, including movies and National Football League games. Advertising is Amazon’s smallest but fastest-growing revenue source. BLOOMBERG