Brands give Amazon $1.8 billion as it challenges YouTube and Netflix for video ad budgets

At the end of 2023, Amazon announced it would enter its AVOD era by introducing ads to Prime Video, the movie and TV streaming service that comes bundled with its $14.99/month Prime membership. Ads began running Jan. 29, 2024, with Amazon setting an internal goal to sell $1.8 billion in video marketing commitments this year.

And, according to a person familiar with the matter, the ecommerce giant is now set to surpass that goal, Deadline reports. Ad sales have reportedly been helped by Amazon hosting its first-ever upfronts presentation, putting it more squarely in competition with AVOD king YouTube and Netflix.

On top of that is Prime’s “hefty programming budget,” per Deadline, where it’s snapped up rights to originals like The Lord of the Rings: The Rings of Power, the Russo brothers‘ questionable $250 million spy thriller Citadel, and, of course, MrBeast’s contentious Beast Games (for a definitely hefty $100 million). Deadline‘s source says Amazon has dropped prices on ad slots to encourage brands to buy in, too.

So, does $1.8 billion in commitments mean the company’s ad push is paying off?

Well, that figure shrinks when compared to YouTube’s ad revenue, which came in at over $31 billion in 2023, and $8.66 billion in this past quarter alone. Going AVOD puts Amazon in direct competition with YouTube, which itself has been going after advertisers hard for years now, pitching its content as a competitor for TV. For good reason, too: YouTube now accounts for 10.4% of all watchtime on TV screens, while Amazon’s Prime Video is down at around 3.5%.

There’s also Netflix as a competitor. It too introduced an AVOD tier within the last couple years–though, notably, it didn’t grandfather all subscribers into the ads-included tier the way Amazon did. It simply introduced a lower-cost tier where subscribers could choose to drop their fee a few bucks in exchange for putting up with ads. Amazon did the opposite, introducing ads into its default tier and asking people to pay $2.99 more

It’s worth noting Netflix tried to charge advertisers more upfront, which reportedly caused them to balk and led to it making just about $1 billion in ad revenue in 2023. Amazon’s discount strat—which already pays off for it on the ecommerce side—seems like a key factor in helping it push to $1.8 billion.

As for whether Amazon can build up a bigger challenge to YouTube and Netflix (primarily YouTube) moving forward, that could rest on its willingness to release data. Thanks to Nielsen, we know it gets 3.5% of TV watch time, but YouTube’s video view counts are open to the public, and Netflix has begun doing bigger data dumps to show how much viewership its content rakes in. YouTube and Netflix also have one core thing in common: if someone comes to their platform, it’s to watch content (or maybe play a mobile game). If someone subscribes, they’re paying to watch that content.

Amazon has over 200 million Prime subscribers—and they all get Prime Video included in that price. CEO Andy Jassy mentioned that number during an Amazon earnings call in April, saying 200 million was Prime Video’s “reach.” But how many of those 200 million Prime subscribers actually watch Prime Video? How many of Amazon’s big-budget original projects are getting enough eyeballs that brands want to run ads against them? Amazon is selling ads with attractive slot pricing, but if it wants to truly take a slice of ad dollars from established AVOD streamers, it might have to cough up more granular proof of viewership.