Amazon’s entry into the streaming ad market has significantly disrupted Netflix’s advertising plans. Earlier this year, Amazon converted its entire Prime Video subscriber base to an ad-supported version, which has had a profound impact on the streaming ad market. This move has led to a significant amount of ad inventory, affecting negotiations that Netflix, YouTube, and other streamers are having with advertisers.
The e-commerce giant is driving down ad prices for everyone, with Netflix now asking brands to pay roughly 29𝑡𝑜35 for reaching 1,000 viewers, a significant decrease from the 39𝑡𝑜45 that it charged some advertisers last summer. These reduced ad rates are closer to what Prime Video is looking to charge, according to ad buyers.
In response to this disruption, Netflix is offering larger premium-price ad packages that include allowing advertisers to integrate their products and services into certain programs. This includes a coming drama series about the world of bull riding featuring Tim McGraw. Netflix is also offering larger sponsorships of live events and in-person events tied to some of its programming.
While Amazon doesn’t disclose subscriber numbers, it has said the ad-supported tier of Prime Video has an average reach of 115 million monthly viewers in the U.S. By contrast, Netflix told advertisers that its ad tier reaches 40 million global monthly active users.
Despite Amazon’s reach, ad buyers said Netflix programming is attractive because it tends to be more popular and often generates more buzz in the marketplace. Netflix consistently ranks as the second most watched streaming option behind Alphabet’s YouTube, according to Nielsen.
However, Netflix’s pitch for upfront ad dollars comes at an inopportune time. Several ad-holding companies are currently competing to win Amazon’s lucrative ad-buying account. As part of that contest, many of the agencies might promise to commit to buying a significant amount of ad time from Amazon on behalf of their clients to curry favor during the pitch.
In conclusion, Amazon’s entry into the streaming ad market has upended the status quo, forcing Netflix to adapt its advertising strategy. The outcome of this disruption remains to be seen, but it’s clear that the streaming ad market is undergoing significant changes.
