Why is Everyone Afraid of Amazon?

Compared to some of the other tech giants, Amazon is still a relatively small player in the advertising world. Google’s total ad revenues in their most recent quarterly financial results were ten times larger than Amazon’s ($2.5 billion). While Amazon is included in pretty much every acronym used to group the multinational tech companies; FAANG, GAFA, FATBANG and the like, it is still not afforded the same status as the ‘duopoly’ of Google and Facebook.

But for many, Amazon is the ‘sleeping giant’ of the advertising industry, and represents Silicon Valley’s biggest challenge to the media industry. Ex-WPP CEO Martin Sorrell has said that of all the threats facing ad agencies, Amazon is the one that keeps him up at night. Scott Galloway, who explored the growth of Amazon, Google, Facebook and Apple in his book ‘The Four’, last week said at the Brandemonium conference that Amazon should be feared by the rest of the four.

With each of these companies continuing to grow revenues at an extraordinary rate, it’s easy to forget why some consider Amazon in particular to be the most threatening. Below, we’ve broken down the key areas Amazon is operating in, and why it may be poised to knock the duopoly off their advertising pedestal.

Amazon Advertising

Amazon’s advertising business is far from best-in-class today. As a recent Digiday report claimed, some advertisers are frustrated with what they describe as clunky dashboards and limited functionality.

But the company has been taking steps to simplify its ad offering, bringing its four separate marketing divisions together earlier this year under the ‘Amazon Advertising’ banner.

Amazon runs sponsored ads, which promote an advertisers’ product within search listings, as well as display and video ads. While sponsored ads only appear on Amazon, display and video ads are run across Amazon’s properties (which include the likes of IMDb and Twitch), as well as other sites partnered with Amazon. These ads can only be bought through Amazon’s owned and operated DSP.

Obviously the key appeal here is Amazon’s user data, and its ability to serve ads to users who are primed to buy – in the case of ads served on Amazon.com, the user is actively looking to make a purchase. Amazon’s DSP allows marketers to target audience segments based on buying behaviour – for example, an advertiser can target users currently in market for their product, or who are habitual buyers of their product, and can retarget on third party sites those who’ve previously searched for the product.

“Advertisers know the Amazon audience is huge and primed to buy, and that Amazon’s platform will allow them to target based on real shopping and buying data—not just demographics and interests,” said an eMarketer report released earlier this year.

These benefits seem to be overriding concerns about clunky interfaces. A report released by Advertising Perceptions last week claimed that Amazon’s DSP is now the most-used by advertisers (in terms of the percentage of marketers using it), jumping ahead of Google Marketing Platform (formerly Doubleclick Bid Manager or DBM).

And ad revenue is soaring as Amazon ramps up the ad business. The company’s ad revenues sat at around $600 million in 2013, while at their current pace Amazon are pulling in $10 billion per year and rising.

Eroding the Agency Model

Amazon’s increased focus on advertising at a glance looks like good news for agencies, offering them an attractive new avenue to funnel their clients’ ad spend into.

But many fear that increased advertising on Amazon could reduce the need for agencies. as marketers look to cut out the middleman and plan their campaigns directly with Amazon. Reports surfaced earlier this year that Amazon has begun working with brands including Lego and HP directly.

“Amazon are creating products, similar to Facebook and Google, which are exceptionally easy to operate plus they already have direct to brand conversations as they have major brands selling through the platform,” said Wayne Blodwell, CEO of the Programmatic Advisory.

Blodwell says it’s unlikely that Amazon will cut out agencies completely. “If you bring those two together it’s clear that agencies could easily be disintermediated, but much like Facebook and Google I think advertisers need specialisms to help navigate wider marketing options and to best understand where to deploy budget, as well as the operational excellence in operating the platforms themselves. It’s like anyone can learn to drive, but very few become Lewis Hamilton.”

We have also seen specialist Amazon agencies emerge designed to provide an end-to-end for all of Amazon’s ad products. But while not all brands will work with Amazon directly, any loss of business during what is already a precarious time for agencies is bad news.

Voice Search

One of the notable themes at this year’s CES was the battle between Google and Amazon connected home devices, an important component of which is these devices’ voice search capabilities.

Opinion is split on if and when voice search will overtake typing – CSS Insight analyst Ben Wood believes voice will be the primary search input by 2021, though this prediction is seen as wildly optimistic by some.

If voice search does take off though, Amazon could be well placed to soften Google’s iron grip over search ad revenues. Amazon’s smart speakers currently make up 75 percent of the UK market, compared to 16 percent for Google. Google’s shareholders have begun to question how Google will fare as voice search grows.

Amazon is continuing to invest at a frightening pace too. Scott Galloway claims that “Amazon has more job openings in their voice group than Google has in the entire company right now.”

Voice search at the moment remains much harder to monetise than typed search, since audio ads are more intrusive than ads on a screen. This means fewer can be delivered in any given search without destroying the user experience.

But this is a much bigger problem for Google than it is for Amazon. Google has much more search ad revenue to lose, and Amazon leads users straight from voice searches into purchases via its ecommerce platform.

If Amazon establishes a firm lead in voice search, this data would act as an invaluable enhancement to Amazon’s DSP. Amazon’s shopping data already makes its DSP very attractive to advertisers – adding a bank of wider search data to rival Google’s would make it even more formidable.

Premium Video and UGC

At the moment Amazon’s primary video platform, Amazon Prime Video, is built to hook customers into Prime membership and onto the ecommerce platform, rather than generate money itself.

While this means it isn’t currently competing for TV ad dollars, it is competing for eyeballs, and has the sheer spending power necessary to fund a huge library of premium content.

One of the clearest examples of this is Amazon’s move into sports broadcasting. Live sports has been viewed as something of a crutch for linear television, and if Amazon snatches away expensive broadcasting rights it would be very bad news for the likes of Sky and BT.

When it comes to spending power, there’s no competition – Amazon’s market cap currently sits at $803 billion, while BT’s is $32 billion. In the most recent auction for Premier League broadcasting rights Amazon dipped its toes in the water for the first time, seen by many as a precursor to a bid for a much larger package later down the line.

The growth of subscription video services like Amazon Prime Video is already squeezing revenues for traditional broadcasters, with Ofcom finding earlier this year that subscriptions to Netflix, Amazon and NOW TV in the UK have overtaken subscriptions to pay TV services.

This pressure could ramp up further if Amazon makes a long anticipated move into ad-funded premium video. The Information reported earlier this year that the company is working on an ad-supported video service for Fire TV device owners, which would have a reach of around 48 million.

While Amazon is using Prime to target the premium video market, its simultaneously hoping its live-streaming platform Twitch can knock YouTube off its perch in the user-generated content market.

read more here: videoadnews.com

Major OTT Companies Securing Foothold in Sports Streaming

In their attempt to entice and engage more customers, leading over-the-top (OTT) companies like Facebook and Amazon have tapped into the sports streaming market.

At the Sport Business Summit held recently in London, executives from Facebook and Amazon have discussed about the engagement of these Internet-based companies in sports matches streaming.

In the words of Peter Hutton, Facebook’s Director of Global Live Sports Partnerships and Programming, Facebook believes it can help congregate sports fans.

In addition, he said that the social media giant thinks it can facilitate streaming enthusiasts to experience sports “in a better way.”

The Facebook executive admitted that shifting from watching on traditional TV to availing the services of OTT companies is certainly challenging.

However, Hutton contended that smooth transition is facilitated by Facebook through its partnerships with broadcasters.

Social media platforms can also help rake in new sports fans like what happened during Facebook Watch’s coverage of the Major League Baseball.

It enabled the real-time interactions among the audiences, the coaches, and the athletes during the live presentations of the baseball games.

Amazon Prime Video, the subscription video-on-demand (SVoD) division of the e-Commerce juggernaut, presents a wide array of sports programming as well.

These include the National Football League’s matches, the US Open Tennis Championships, and the soccer games of Germany’s Bundesliga.

By 2019, Amazon Prime Video will present 20 English Premier League matches across two particular dates in December. This schedule also consists of Boxing Day programming.

Alex Green, European Managing Director of Amazon Prime Video, also spoke at the Leaders’ Week of the London sports business conference.

He cited that the SVoD service of the online retail giant is certainly committed to sports broadcasting for the long haul.

Green elaborated on the fact that plenty of today’s consumers are anticipated to register for a 30-day trial free of charge to view the Boxing Day matches.

In addition, this trend will propel an increased surge in new members during the busiest shopping period of the year.

read more here: digitaltvlife.com

Amazon has built its own advertising technology for OTT TV

Amazon’s mission to conquer advertising may have a new front — video ad tech.

And in this case, instead of challenging the Google/Facebook digital ad duopoly, Amazon would be looking to insert itself into a battle between Comcast and Google.

Specifically, Amazon has discussed building a proprietary video ad serving product for its own streaming business —and eventually licensing it, according to media executives familiar with the matter. Such a product would be similar to Comcast’s Freewheel or Google’s DoubleClick tools, the people said.

It’s unclear how far along Amazon is in the process of developing this ad serving product. The company is not directly taking meetings to pitch its own ad server, one person said. Instead, the potential product has come up during discussions Amazon is having with media companies about its emerging programmatic ad business via Fire TV devices.

Video ad serving software helps big media companies make sure that the right ads run at the right time and keeps competitor’s ads away from each other,so Coke ads don’t run right next to Pepsi, for instance.

Freewheel, which Comcast acquired in 2014, has been the category leader for a while. But more recently, Google has made an aggressive play with its own alternative.

The stakes are high. While getting big media companies to use their ad tech over a competitors doesn’t necessarily provide Comcast or Google’s a lock on ad budgets, it does enable these companies to get their hooks deeper into media partners.

Playing such a central role in delivering a media companies’ advertising infrastructure provides a Google or Comcast with loads of data on viewership and ad patterns. Plus, the more successful a company like Google is at helping a giant like CBS manage its video ads business, the more opportunities to deepen such a partnership. Or so the thinking goes.

In Amazon’s case, the company is now a solid number 3 when it comes to pure digital advertising. And with the growth in popularity of its Amazon Fire TV device, it’s rapidly growing its footprint in OTT advertising.

Amazon has historically built its own ad tech, first to serve its own ad business before eventually licensing it to partners. But when it comes to video ad serving, Amazon currently employs third parties when streaming events such as The Laver Cup or select Premier League Soccer events.

While media companies may view working Amazon warily (as they already do Comcast and Google), Amazon could have two clear advantages in this sector, if it were to go ahead and build and license an ad serving product.

read more here: www.businessinsider.com

The Big Story: The A To Z On Amazon

As Google and Facebook built their castles and moats, Amazon lurked beneath surface. But in recent years, it’s breached. Its walled garden is still significantly smaller than Google’s and Facebook’s – around $2 billion, as of its recent Q2 – but maybe that doesn’t matter.

First, as Amazon continues to mature as an ad buyer’s destination, more dollars will inevitably pour in. Second, Amazon – unlike Facebook and Google – isn’t an ad-supported business. For the longest time, ad revenue was simply a nice-to-have.

In this week’s “The Big Story,” the AdExchanger team scrutinizes the history and future of Amazon as an ad platform – from one decade ago, when it struggled to convince media planners to buy a banner ad, to today, as the owner of some of the most coveted and exclusive data sets.

How does Amazon work with ad buyers today? Where does its platform most need to be improved, and how do advertisers work around its current limitations? And what products will Amazon develop as its ads move beyond performance into areas such as branding and awareness?

Finally, what does the future hold as Amazon penetrates consumer households more deeply with popular automated home assistants like Alexa?

Listen in as AdExchanger editors unpack Amazon’s ad stack like a Prime Day package.

read more here: adexchanger.com

Amazon Job Posting Hints at Ad-Supported TV Ambitions

Amazon has dropped a huge hint that it’s working on an ad-supported TV service, releasing a job posting looking for a ‘head of Prime Video channels, free to air TV and advertising TV partner channels’. The job description, spotted by Facebook’s director of gaming Damian Burns, gives us some initial clues of how an ad-supported TV service on Amazon might look.

The post describes one of the main responsibilities of the roles as developing Prime Video’s European strategy for free-to-air and advertising funded channels. It says whoever us hired will be required to work with broadcasters across Europe, translating their requirements into Amazon capabilities, and to act as an “internal champion” for free-to-air and ad funded content.

There are two possibilities for what exactly this could be referring to, but both would be a significant step into the video ad world for the e-commerce giant.

Amazon may be looking to develop an ad-supported, free-to-air version of Amazon Prime Video, with subscribers able to avoid the monthly subscription fee by watching ads instead. Currently, Prime Video only runs ads for other Amazon shows as pre-rolls or post-rolls, but the company runs targeted video ads elsewhere, meaning opening up ads on Prime Video to other brands shouldn’t be too difficult tech-wise.

Ad Age reported rumours that Amazon was developing this kind of service last November, though a company spokesman denied that this was the case.

Such a move would mark an acceleration of Amazon’s TV strategy, where premium content isn’t used primarily to make an Amazon Prime subscription (which includes free delivery and a variety of other benefits) more attractive to consumers.

Currently the vast majority of VOD services available through Amazon Prime Channels only offer ad-free, paid subscriptions, even when that service has a cheaper or free ad-supported subscription tier on its native platform. A few broadcasters have made live streams of their linear channels available through Prime Video in Europe, but these still come as part of paid memberships.

The introduction of free to air channels would suggest that at the very least some of these channels would be made available without paying an extra fee, and possibly without a Prime Video subscription too.

Regardless of the end product, it will be another big step into ad land for Amazon and in the UK market it will provide additional competition for the likes of Freeview, YouView and FreeSat, as well as to paid services like Sky and Virgin Media.

read more here: videoadnews.com

Cordless TV streamers prefer Amazon Prime Video to Netflix

New comScore data shows one-third of TV streamers are cordless. It also shows that cordless Amazon Video users watch 13% more than Netflix users. The difference is all in their content strategies.

Cord-cutter and cord-never differences

According to comScore, one-third of households streaming to the television are cordless. The other two-thirds have either cable, satellite, or telco pay TV services. The cordless group is broken into two broad categories: those that had pay TV and got rid of it (18%) and those that have never had pay TV (14%.)

The cord-cutter group primarily skews older than the cord-never group. The largest group of cord-cutters comes from the 35-44-year-olds, with 23%. 21% of cord-cutters are millennials (18-34-year-olds). Millennials dominate the cord-nevers. 24% of 18-34-year-old TV streamers have never had pay TV, versus 15% of 35-44-year-olds.

Cordless favor Hulu, YouTube

Hulu has the highest percentage of cordless subscribers of the top four online video services. Hulu subscribers make up almost half of those without pay TV. 41% of YouTube users are cordless, and 37% of Netflix and Amazon Prime Video are cordless.

Cordless Hulu users also watch a lot more online video on their televisions. They watch, on average, 86 hours per month and stream to the TV 21.6 days per month. Cordless YouTube users watch 78 hours per month and stream to the TV 19.8 days a month. Surprisingly, Amazon Prime Video users best Netflix in engagement among the cordless users. Amazon users watch 70 hours and 19.8 days per month, Netflix users watch 62 hours and 18.6 days per month.

The comScore data could suggest that, though the cordless group rejects pay TV, they are not rejecting traditional television. They will continue to hear about great TV shows through the social and traditional media and around the water cooler. Moreover, when they hear about a great show, the place they are most likely to find it online is Hulu.

Why cordless Amazon users watch more than Netflix
Another interesting question is why those cordless TV streamers using Amazon watch significantly more (12%) than those using Netflix. This fact is particularly interesting given there is a large overlap between the two groups.

The viewing difference stems from the different content business models used by both companies. Amazon provides a far greater variety of content than Netflix because it resells other SVOD services through its Channels program. It also rents and sells movies through the Prime Video app. According to Ampere Analysis, consumers could access 26,000 distinct movie and TV show titles through Amazon Prime Video as of February 2017.*

read more here: nscreenmedia.com

New Amazon Channels Data Shows Why Apple Wants to Copy It

Amazon has quietly become a major player in the subscription video sales business: Amazon Channels, the company’s platform for reselling subscription services like HBO and Showtime, now accounts for 55 percent of all a la carte direct-to-consumer video subscriptions, according to new data from The Diffusion Group (TDG).

53 percent of all consumers who don’t get HBO through their pay TV provider are purchasing it via Amazon channels, TDG estimated in a new report titled The Future of Direct-to-Consumer Video Services. Those numbers are apparently even higher for some of the other TV networks: 72 percent of Showtime subscribers get the network’s direct-to-consumer offering via Amazon Channels, and 70 percent of Starz a la carte subscribers receive it from Amazon.

The Diffusion Group arrived at these estimates by surveying a nationally representative sample of 2,000 adult broadband users. “We used an online panel comprised of several million double opt-in respondents, one of the largest in the country, and added multiple quality checks to best ensure accurate outcomes,” explained the company’s president and director of research Michael Greeson.

However, it’s worth noting that the relative size of these subscription services inevitably leads to small sample sizes, which can result in significant variation. HBO’s online service surpassed 5 million subscribers this year, while Showtime has more 5 million subscribers together with CBS ALL Access.

A Showtime spokesperson told Variety after the initial publication of this story that the percentage reflected in this survey for Showtime was significantly off, but declined to comment on Amazon’s actual share.

Amazon launched Channels as an add-on program for Prime Video subscribers at the end of 2015, and has since continuously grown the number of video services available through channels. The company also briefly experimented with selling its own niche video services through Channels, but gave up on that strategy earlier this year.

Sources at participating video providers have long told Variety that Amazon has become a massive reseller, easily outpacing Google’s and Apple’s app stores. The success of Amazon’s program also hasn’t been lost on Apple, which is reportedly looking to resell standalone video subscription services via its TV app on Apple TV and mobile devices. However, those plans may not materialize until next year, according to a recent Bloomberg report.

read more here: variety.com

How an Hit TV Program Contributes to Amazon’s Profitability

Last week Reuters reported data from internal Amazon documents that for the first time provided insights into viewership of the company’s original TV programs and their contribution to creating new Prime subscriptions. Below I’ve done some additonal math using separately reported information to calculate how profitable at least one of Amazon’s original programs could be.

Last October, Fortune reported research from Consumer Intelligence Research Partners indicating that Amazon Prime subscribers spend an average of $1,300 per year compared to an average of $700 per year that non-Prime subscribers spend. (Note, back in Fall, 2016, Morgan Stanley said that according to its survey, Prime subscribers spend nearly $2,500 per year, vs. $544 for non-subscribers). For the purpose of my calculations, I just used the CIRP estimate of $600 incremental spending per year by subscribers.

The Reuters article notes that the Amazon program “The Man in the High Castle” delivered 1.15 million new Prime subscribers worldwide. So, multiplying this by the incremental annual spend of $600 yields $690 million in incremental revenue from these new subscribers. Amazon’s North American e-commerce operating margin in 2017 was approximately 2.7%, so the operating profit on the incremental revenue would have been around $18.6 million (this is rough, because some of the incremental subscriber spend came from international where it is undoubtedly lower and also where Amazon actually still loses money on an operating basis).

In addition to the annual incremental spending benefit, those 1.15 million new subscribers also spent $99 to belong to Prime, which would be another $114 million in annual revenue. The operating profitability of the membership fee is hard to calculate given all the different benefits and their costs, but assume it’s 50%, so the profit would be around $57 million. In total that would mean “The Man in the High Castle” delivered year one profits of $75.6 million vs. its cost of $72 million, or $3.6 million net profit, a 5% margin. But keep in mind this is only year one; as long as Amazon retains these 1.15 million subscribers, the profitability multiplies. In addition, there are further revenue streams derived from Prime members such as add-on subscriptions to video services through Amazon Channels.

Admittedly, the above math is a little rough, and it should also be noted that Reuters’s own reporting hasn’t been independently verified. Still, Amazon CEO Jeff Bezos has been extremely candid about the benefits of video to Prime. In an interview with Recode in mid-2016 (see 37:32 cue point), Bezos said that “When we win a Golden Globe, it helps us sell more shoes,” adding that both Prime’s free trial conversion and annual renewal rates increase when subscribers watch video. He actually cited “The Man in the High Castle” as an example of programming that works really well, no surprise.

read more here: www.videonuze.com

Amazon Prime Video By The Numbers

Prime Numbers

Reuters obtained audience numbers for Amazon’s Prime Video subscription service. According to the internals, by early 2017 Amazon Video had drawn more than 5 million people into the Prime loyalty program, and about 26 million people overall were watching content on the platform. Amazon now spends $5 billion per year on original content, as entertainment has proven a powerful on-boarding ramp to Prime membership and a virtuous cycle of consumer spending. Those video numbers also point to why Amazon keeps its most valuable content ad-free behind a subscription paywall, since it isn’t about recouping ad revenue for the studio investments. It’s about the lifetime value of a Prime subscriber compared to a mere logged-in Amazon shopper.

Fickle Friend

Facebook is offering to fund news publishers’ shows for its Watch video hub. But publishers, fed up with Facebook’s tendency to flip-flop on such offers, are proceeding with caution, WSJ reports. Facebook pulled a similar stunt with its Live section, spending $50 million to fund year-long projects for news pubs, and then failing to renew those deals the following season. Still, publishers are willing to take the risk if it means access to Facebook’s huge audience. “I think anytime Facebook is willing to pay, we’re more willing to play,” said a publishing exec. “The problem is that when these pilot programs expire, there is still no clear revenue channel. Then you’re stuck.” More. Related: The chairman of NBC News slammed Facebook, AdAge reports. “You can’t have a relationship with them.”

Asleep At The Wheel

Snapchat’s shares sank almost 5% Thursday after pop singer Rihanna called out the app for running a tasteless ad that asked users to decide whether they wanted to “slap Rihanna” or “punch Chris Brown.” Snapchat removed the ad, which ran inside a mobile game on the platform, and chalked it up to an error by its review team, which is supposed to block any content that violates its policy banning“shocking, sensational or disrespectful” content. “We are so sorry we made the terrible mistake of allowing it through our review process,” Snap said in a statement. “We are investigating how that happened so that we can make sure it never happens again.”

read more here: www.bloomberg.com

Amazon will soon distribute ad-supported streaming channels

Amazon’s Channels program has been a big hit for TV networks and digital publishers with subscription video streaming products. Soon, Amazon wants to open up advertising as another form of revenue for media partners that have ad-supported streaming apps.

Speaking at Digiday’s Future of TV Hot Topic last week, Rich Au, head of Amazon Channels in the U.S., said Amazon will start offering ad-supported streaming channels later this year. While he did not provide a specific timetable, Au pointed to how Amazon already supports ad-supported channels in Europe, including a partnership with Discovery that includes access to the company’s linear TV feeds in European markets. Amazon will open up similar possibilities in the U.S., he said. (Amazon stressed that this is a distinct offering from the existing Amazon Channels program, which focuses on subscription streaming channels.)

In the U.S., the Amazon Channels program offers subscriptions to top networks, including HBO, Showtime and CBS. Advertising could substantially benefit streaming networks such as CBS All Access that already offer ad-supported tiers on their own. Right now, anyone subscribing to CBS All Access through Amazon can only access the app’s $10 monthly ad-free tier. When Amazon opens up access to the app’s $6 ad-supported tier, CBS has a chance to create a second revenue stream from its Amazon partnership.

It’s hard to understate the impact the Amazon Channels program has had on the growth of subscription streaming services in the U.S. When NBCUniversal launched its now-defunct comedy streaming service Seeso in January 2016, Amazon accounted for upward of 60 to 70 percent of total subscribers, said Evan Shapiro, the former NBCU exec who launched Seeso. By the time Shapiro left NBCU in May 2017, Amazon Channels accounted for 40 percent of total subscribers, Shapiro said.

“That was because over time, we found organic [search] traffic migrating to the native platform,” Shapiro said. “But Amazon’s growth didn’t slow — and the best part of the Amazon Channels product was that the churn is substantially lower than others.”

Two other Amazon Channels partners at TV networks corroborated the program’s impact on their subscription apps, privately telling me that Amazon Channels contributes anywhere from 25 to 45 percent of total subscribers.

read more here: digiday.com