News

POV: Amazon's Video Ambitions

Mindshare Point of View: The New York Times and other media are reporting that Amazon is set to launch an online video service that will feature advertising in order to make it available for free to consumers. The reports suggest the new service would be de-coupled from the existing $99 Prime Instant Video offering, which doesn’t include advertising. It is already being dubbed a ‘Netflix killer’.
 

DETAILS AND IMPLICATIONS

Few details are available at this time. However, it’s clear to see why Amazon would be interested in disrupting the market. According to Nielsen, streaming video subscribers aged 18-to-34 watch 20% less TV after signing up to an on-demand service, while those in the 25-to-54-bracket watch 19% less.  At the same time, digital ad spend will surpass TV spend in the US by 2018, fuelled by online video networks such as YouTube and Hulu.

Amazon is appealing to two market needs. First, if the service really is free, the consumer-demand for this at a moment when Netflix has raised its subscription prices. Second, the advertising industry’s need for more premium video ad inventory but with a richer data set for targeting, particularly data correlated to actual sales.

Amazon’s unique pool of consumer data could help advertisers go beyond current targeting criteria such as demographics and behavioral data to more robust information such as quite simply who is actually buying, or most likely to buy, particular products. This instant connection to sales information is becoming more relevant to more marketers as Amazon moves into packaged goods and real-world delivery of groceries and other perishables. Amazon will be able to fully attribute from the online video ad you’ve watched on your tablet or IP-enabled TV to the end purchase, and use all of that data to reverse target to a larger pool of people who statistically would have a higher probability of buying your products, including FMCG brands who are historically big TV spenders.  

However, this data-flow would work in two-ways for Amazon. Per above the first flow is to use the Amazon sales data to improve targeting. The second is to help Amazon sell more stuff to you on its own platform, as it would know not only what you have bought and browsed, but also what you have been watching – been enjoying the latest Breaking Bad series – maybe you'd like some official merchandise?  All of that enhanced data will be brought to bear across the Amazon ecosystem.

Add into that Amazon’s ability to tie everything back into its e-commerce platform and maybe we could be watching “TV” video ads that allow you to add products to your cart with the click of a button without interrupting the viewing experience.


SUMMARY

If confirmed, Amazon's free ad-supported video service could be a game changer. Marketers will get big benefits in terms of inventory, audiences and performance. It will be worth keeping an eye on the flow of data in this new offering. The trend is for the larger platforms to use ‘signed in’ services to build greater profiles of consumers, tying the data back to an individual – think Facebook ID etc. An Amazon that knows what you buy and also what you watch will be more powerful than ever. Whether the free content will be alluring enough to kill Netflix is another question. Some consumers, particularly premium, may be willing to pay for on-demand ad-free content such as House of Cards. For others, Orange may not be the New Black anymore.