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Amazon It is becoming a growing threat to digital advertising incumbents dead And Googleattracting billions of dollars a quarter from brands trying to reach the masses of consumers who flock to the site daily.
But it's not just about digital ad dollars anymore, and Amazon's inaugural presence at this year's Upfronts events is the clearest indication that the e-commerce giant is ready to take on traditional media.
Amazon on Tuesday made its first presentation during Upfronts, an annual ad sales event featuring media heavyweights such as Disney And ComcastNBCUniversal. Historically, Amazon's Prime Video and other streaming software will be featured in Newfronts, the digital media style of Upfronts. But online video platforms have had a bigger presence on the main stage Netflix Google's YouTube has joined the party in recent years.
Amazon is offering a new take on the advertising industry as it approaches a critical turning point. Advertisers continue to spend more on digital TV than on linear TV. This year, they're expected to spend nearly $18.8 billion on traditional TV ads during intros, a 1% increase from the previous year, according to eMarketer. By contrast, digital advertising during the Upfronts and Newfronts periods is expected to grow 32% to about $16.5 billion this year.
More ad-supported streaming platforms have also entered the ring, offering advertisers another alternative to traditional TV, where viewership has been shrinking. Amazon announced it will begin running ads on its Prime Video streaming service in January, adding to its established advertising offerings such as the free TV streaming service Freevee, and Twitch, the live streaming site popular among gamers.
The company will generate up to $3 billion in U.S. ad revenue this year from the estimated 58 million households that will watch commercials in Prime Video content, TD Cowen analysts wrote in a note to clients on Wednesday. The company has a buy rating on Amazon stock.
“When I joined Amazon nearly four years ago, the first question you all asked was: When are you going to run ads on Prime Video?” Alan Moss, Amazon's vice president of global ad sales, said on stage. “Well, at Amazon we love to deliver for our customers. By serving ads on Prime Video, we've created the largest ad-supported premium streaming service in the world.”
The company said its ad-supported streaming content now reaches 175 million US viewers a month, up from more than 120 million in 2021. It also revealed that Prime Video has 200 million global customers, 115 million of whom are in the US.
Amazon's advertising business still makes money primarily from charging brands to promote their products across its properties in a variety of ways, from sponsored listings on its website to ad spots on Fire TV streaming devices. Advertising business revenue rose 24% in the first quarter to $11.8 billion.
Amazon has also spent billions on live sports programming in an attempt to attract more streaming viewers and ad dollars. The company recently reaffirmed its commitment to live sports, grabbing exclusive rights to an NFL playoff game next season.
Amazon executives on Tuesday tried to attract advertisers with a crowded programming slate and a parade of celebrities like Reese Witherspoon and Jake Gyllenhaal to promote new original content. The company also emphasized “billions of customer signals” that allow brands to target ads.
Paul Kutas, who runs Amazon's advertising business, said the company “made a big bet” 18 years ago when it first introduced ads on its website. He explained how the business has evolved to include digital video advertising on Prime Video.
“We've been working for this moment for years, which is why it means so much for us to be here on stage today,” Kutas said. “And of course, at Amazon, we're never done innovating.”
— CNBC's Lillian Rizzo and Alex Sherman contributed to this report.
Disclosure: NBCUniversal is the parent company of CNBC.
Watch: Ad volume isn't going down, it's just going to change
