Home Latest News Amazon's Prime Video ads will generate billions, analyst says – Yahoo Finance

Amazon's Prime Video ads will generate billions, analyst says – Yahoo Finance

Amazon (AMZN) is planning to roll out ads on Prime Video, and it's likely to generate billions in extra revenue for the e-commerce giant, UBS US internet analyst Lloyd Walmsley said.
"We think conservatively it could add $3 billion [to Amazon's revenue] if they're just showing three minutes of ads every hour under the advertising community's current go-to-market," Walmsley told Yahoo Finance Live (video above).
"But if they actually increase those ads closer to six minutes an hour, then it could obviously double that," Walmsley added. "You're talking about $6 billion of potential revenue coming in through ads, and, by comparison, traditional linear TV is showing something like 16 minutes per hour of ads."
Amazon plans to roll out advertisements in its video streaming service in early 2024. The company said it aims to have "meaningfully fewer" ads than linear TV providers and other streaming services.
It also will offer an option to upgrade to an ad-free plan for $2.99. Currently, Amazon includes Prime Video as a part of its Prime membership, which costs $14.99 per month or $139 per year. A standalone Prime Video membership is $8.99 per month.
Even Walmsley's estimates may be understating the boost to Amazon's revenue.
"We think the impact of a global rollout is in the range of $6.6 billion to $8.0 billion of incremental revenue," Wedbush analyst Scott Devitt wrote on Sept. 24. "The ad-free offering ($2.99/month) represents a roughly 20% hike to the monthly Amazon Prime subscription price in the U.S. ($14.99), or a ~26% increase on the annual fee ($139)."
The company has needed to shift its approach to monetizing Prime for some time.
"We've seen, especially in markets like the US, that Prime adoption has slowed quite a bit," he told Yahoo Finance Live. "You've seen it in their subscription revenue line. I think they're now at the point where they can start to move the needle more on actually directly monetizing through ads."
Amazon is undoubtedly also eyeing the attractive margins for Prime Video advertising, according to Walmsley.
"The incremental margins on this are likely to be quite high for Amazon because, in many cases, they've already paid for the content," he said. "They either own it outright or they've licensed it to basically provide it to Prime users. So we don't think that there's a lot of incremental cost as they start to show ads and generate ad revenue."
Amazon stock is up 50% in 2023 to date.
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.
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