Amazon’s advertising engine sputtered a bit in Q2 2024. While it still saw a healthy 20% year-over-year growth to $12.77 billion, this fell short of analyst expectations. The slowdown can be attributed to two key factors: increased competition in the retail media space, where sponsored product formats dominate, and a maturing ad market overall.
However, instead of panicking, Amazon seems to be making a strategic shift. They’re turning their focus towards Prime Video, their streaming service. This is evident in two ways:
- Prime Video with Ads: First, Amazon recently introduced ads on the platform, expanding their advertising revenue stream beyond just product placements.
- Upfronts Debut: Second, they hosted their first-ever upfront event, where they directly pitched bigger ad budgets to marketers.
Why Prime Video? CEO Andy Jassy sees a unique opportunity here. He believes advertisers can leverage Prime Video’s programming to directly influence buying decisions on Amazon, a powerful one-two punch. Imagine watching a captivating show about cooking and then seamlessly transitioning to see the same ingredients offered with a discount on your Prime membership screen. That’s the potential Amazon is chasing.
There are challenges, of course. Building a robust video advertising model takes time, and Amazon still heavily relies on its traditional ad formats. However, the company has some exciting advantages in this new arena. Its exclusive rights to NFL “Thursday Night Football” and a recent deal with the NBA provide them with premium content to attract advertisers. Additionally, Amazon’s treasure trove of consumer data allows them to offer highly targeted campaigns, connecting brands with the right audience at the right time.
Ultimately, while Q2 may not have been a record-breaker for Amazon advertising, their strategic pivot towards Prime Video suggests they’re playing the long game. By integrating advertising into their streaming service and leveraging their unique market position, Amazon is aiming to unlock a new wave of advertising growth in the years to come.