Amazon’s AVOD could change TV adspend and retail media forever

Amazon’s AVOD could change TV adspend and retail media forever

The launch of ads on Prime Video could change where TV advertising investment goes while increasing the role of retail media in CTV.

It’s a curious thing that sometimes the long-term impact of some of the biggest events in media aren’t appreciated at the time. It could be argued that this was true of the launch of Amazon Prime Video’s ad-funded service in February.

Yes, there was news coverage and some discussion. But have we really appreciated the macro or long-term impact of what Amazon is doing to TV and, indeed, to digital marketing?

There are two areas where the launch of Amazon’s advertising-supported VOD (AVOD) proposition could prove a pivotal moment in marketing. It is not just the impact Amazon will have directly through its own services, but the influence on others that it could have.

The first is the effect on TV advertising investment patterns. The second is retail data becoming an increasingly essential component of streamed TV. This, in turn, could rebalance digital media investment, creating powerful, complementary alternatives to dominant performance-led tech platforms.

A point of no return for TV?

Let’s look at why Amazon’s AVOD could be the most important moment in commercial TV for years. Unlike the roll-out of AVOD services from Disney+ and Netflix, marketers are taking real notice of Amazon’s launch.

This is because of the way Amazon did it — in effect corralling its entire 200m subscriber base worldwide (9.7m in the UK) into the ad-funded model. This creates huge momentum towards a future TV advertising industry in which AVOD combined with CTV attract the biggest share of overall TV investment.

We are some years away from this, but the direction of travel is now clear and this may be a point of no return for TV’s linear dominant model.

If Amazon’s streaming audiences are happy to stick with ad-funded services and if the ads-to-programming tolerance ratio is not breached, other streaming services may look to follow that template and shift their business models from subscription to AVOD or, at the very least, balance them in favour of AVOD.

Amazon has launched with a low cost per mille, which is clearly attractive in the short term. We’ll see how this pans out, but in tandem it is also ramping up its content offering.

Its drive into sport is particularly interesting. In the US, Amazon is reported to be in negotiations to buy Diamond Sports Group, which owns Major League Baseball and National Basketball Association rights, to complement existing National Football League content rights. This is a significant move for American sports fans.

In the UK, Prime has had a stake in Premier League rights, but appears now to be switching to boxing.

While Sky has blazed a trail in terms of mixing addressable TV and premium content such as sports and film, and has a larger subscriber base than Amazon in the UK, it has to look elsewhere for retail data.

From niche to must-buy

It is the fusion of significant AVOD audience delivery, premium big-screen and mobile content plus proprietary addressable data with advanced measurement that catapults Amazon from a relatively narrow offering to “must-buy” appeal for media buyers.

At the heart of this, of course, is the shear breadth and depth of purchasing and consumer insight information that can be translated to addressable TV investment. This is hugely attractive not just to endemic advertisers (those that retail through Amazon) but for non-endemic brands too — financial services, travel, healthcare, leisure etc.

The idea of powering addressable TV with retail data has already taken root in the UK, including ITV AdLabs’ Matchmaker solution with Tesco and Boots, and Channel 4’s union with Nectar360. In the US, Walmart Connect has teamed up with Roku, Google’s Display & Video 360, The Trade Desk and TikTok to build an AVOD proposition.

Amazon has always ranked highly in Kepler’s demand-side platform benchmarking exercises, thanks to the quality of its first-party data for both activation and measurement. And that really is the game-changer for TV. Because Amazon’s data is so accurate and its tech ecosystem is so capable, brands can be confident about who they’re reaching.

Advertisers don’t have to bring first-party data into the mix; many simply don’t have enough anyway. This is important for smaller or mid-sized brands that probably won’t have had the capacity to invest strategically and efficiently in addressable TV.

The proposition is especially attractive for endemic brands operating within Amazon Web Services. Being able to tie back conversion to a large-audience TV campaign across big-ticket TV and film content that’s also brand-safe hasn’t really been possible in the past.

Retail and TV — season 10

What will be the knock-on effect? It is conceivable that we will see the creation of a platform that provides a menu of retail data options to power connected TV and streaming platform investment.

Big retail brands may be able to scale their data offering to operate alone. But if streaming audiences embrace AVOD options, and the balance between ad-free streamed TV viewing subscriptions and ad-funded options tips towards the latter, other possibilities might come into play. Could data-rich retailers make a play for broadcasters?

In the US, Walmart recently acquired TV manufacturer Vizio, which, like other smart TV brands, enables advertisers to target audiences. It’s likely Walmart will integrate this into its retail media network.

What does it mean for digital media?

I talked to more marketers about TV in February than ever before. TV is now falling inexorably into the embrace of the digital marketing sphere.

The growing investment in dynamic creative applications and the injection of AI into investment optimisation, measurement and creative make this a hugely exciting time. And all this against the backdrop of cookie deprecation and the rise of retail media as a pivotal force in marketing.

The integration of retail data into addressable TV at scale, and the gradual democratisation of this through streaming and a more holistic approach to campaign measurement, could create powerful digital advertising alternatives to Meta and Google.

The reinvention of TV is gaining speed and its combination with retail data looks like a winning formula.

Seamus Brennan is director of partnerships at Kepler

Media Jobs