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Amazon Prime Video is introducing an ad-supported subscription tier in the US starting in early 2024. These subscribers will pay an additional $2.99 per month to continue enjoying content like The Marvelous Mrs. Maisel or The Boys without ads.
Amazon needs to up revenues to sustain its hefty content spending, which reached $16.6 billion in 2022, up 28%.
Notably, Amazon's ad business generated nearly $10.7 billion in the most recent quarter, making it one of the world's largest advertising ventures, surpassing platforms like YouTube, Snapchat, and Twitter combined, which had $9.3 billion in ad revenue for their recent quarters.
Despite this, the ad business contributed only about 8% of Amazon's total net sales during the same period. Some industry experts suggest that the ad division could boast margins exceeding 50%, potentially equating to operating profit levels comparable to Amazon Web Services (AWS).
However, Prime Video ads may not be as lucrative as other Amazon ads, as they won't be shown to individuals with "high intent" like with search results, where ad visibility often leads to immediate purchases.
