Amazon is ahead of Netflix in the battle for TV advertising.
The two companies made a lot of noise during this year’s upfront presentations, where streamers are pitching the roughly $70 billion in annual TV ad spending and advertisers are trying to secure the majority of annual TV ad deals.
But among the new streamers, it’s Amazon that’s winning advertisers’ wallets, multiple ad buyers told Business Insider. It has a larger ad-supported audience than Netflix, a bigger sports footprint and cheaper prices. Amazon also has a broader portfolio of platforms, including Twitch and Wondery, that advertisers can use to expand their ad buys, as well as the ability to tie ads to sales results.
Amazon has already had a major impact on the TV ad market by making all Prime Video viewers see ads by default in January, allowing advertisers to target an additional 115 million U.S. viewers. Netflix says its ad demographic has 40 million monthly users worldwide. It’s not an exact apples-to-apples comparison, but suffice it to say that Netflix has a much smaller ad-supported audience than Amazon.
Amazon has significantly increased its ad inventory and lowered its ad prices — roughly half of the $30 per 1,000 impressions Netflix was asking when it launched its ad inventory in 2022 — putting pressure on other TV ad sellers to lower their prices.
One ad executive said Amazon’s introduction of Prime Video Ads this year has driven down streaming ad prices by 20%, especially for Netflix and Disney+, which buyers say were especially expensive at the start. The person, like other ad executives interviewed for this story, spoke on condition of anonymity to speak freely about sensitive negotiations.
A second advertising holding company executive said he expects Amazon to become the third or fourth largest TV ad seller upfront, behind traditional TV giants NBCUniversal and Disney and perhaps YouTube.
The executive noted that Warner Bros. Discovery has not caved to advertiser demands for lower ad rates, Paramount’s future as an independent company is uncertain and Netflix is not on the list. Upfront negotiations are ongoing and the final outcome remains unclear.
“You can’t ignore what Amazon is doing in the market,” the executive said. “They’ve singlehandedly forced big changes.”
Four advertising industry sources who spoke to Business Insider said Amazon is set to beat Netflix in this year’s big advertising battle.
Amazon is targeting sports ad dollars
Sports has emerged as a major differentiator that gives Amazon an edge. Live sports have become essential to retaining viewership despite rising costs, as evidenced by the current bid by multiple companies for NBA broadcasting rights. The live nature of sports also makes it a must-have for advertisers who need to promote time-sensitive products and events. Advertisers are also aware that while viewers prefer ad-free TV shows and movies, they may tolerate ads during live sports.
Amazon has been aggressive in broadcasting live sports, and is in the third year of an 11-year deal to broadcast Thursday Night Football games with the NFL, the most popular sports league.
Ad buyers said Amazon’s “TNF” service is mature, and while it initially charged high prices, it’s now priced right. A third ad-holding company executive described them as charging $300,000 to $400,000 per game, in line with other sellers of NFL games. Prices vary by opponent. Amazon has also introduced other novel features, such as ads tailored to specific games, and advertisers have grown pleased with the viewership that games have attracted on Amazon over time.
Amazon also broadcasts NASCAR, National Women’s Soccer League games and select Women’s National Basketball Association games.
Netflix is trying to catch up with Amazon when it comes to sports, having inked a $5 billion deal to air WWE’s flagship weekly wrestling show, “Raw,” alongside other WWE programming, as well as a three-season deal to air select NFL games, including two this Christmas.
It also plans to have a series of other live entertainment events, including live tennis and golf events, around which it plans to sell advertising.
Two ad buyers said they were surprised that Netflix initially asked for about $800,000 per NFL game, which includes ads that run on the company’s ad-supported tier. A third buyer said that’s close to what Fox charges for America’s Game of the Week, a highly-rated matchup with a locked-in audience. By comparison, Netflix’s first game will come on Christmas Day and after a big holiday promotion. Netflix will have to hope people will find the game on its platform, and if it falls short on viewers, it won’t have many other games to compensate advertisers.
“These demands are completely off the mark given that we’re still building our advertising base,” the second executive said.
It’s common for ad sellers to aim high for new services and then drop prices over time. After launching its ad tier last year with a high rate of $65 per 1,000 impressions, Netflix has cut its costs to reach non-sports entertainment viewers by about 30%. Some advertisers are still clamoring for another 10% cut. They might get their wish: Netflix is offering some advertisers rates as low as $29 per 1,000 impressions, according to the Wall Street Journal, roughly the same as what Amazon is asking.
Netflix and Amazon declined to comment.
Still, advertisers want more ads on Amazon
But Amazon still has a long way to go before it can sell TV ads in the way advertisers have been accustomed to for decades.
One of the complaints ad buyers have with Amazon is that the company gave advertisers no return on the money they spent on “Thursday Night Football” ads when negotiating Prime Video ads, in line with standard practice for TV ad sellers such as NBC and Disney.
Advertisers also want more data about who is watching Amazon’s entertainment programming, and why. Some shoppers are wondering how much Prime Video, a service included with Prime membership whose main draw is free shipping, and others are skeptical or confused about what the numbers Amazon has released actually mean.
Data reveals that while Prime Video viewing is on the rise, people still spend three times as much time watching Netflix as they do Prime Video.
Still, buyers have been far more enthusiastic about Amazon than other streaming services like Netflix and WBD’s Max. Buyers have been aggressive in negotiating to bring streaming ad rates on par with broadcast TV, which they believe are too expensive given that the majority of TV viewing still happens on linear channels, where advertising is cheaper.
Amazon is also working on developing packages that would allow large advertisers to advertise across its streaming inventory, including Prime Video, sports, Freevee and Amazon Fire, according to an executive at the first ad holding company.
Ed Papazian, founder of advertising consultancy Media Dynamics, said he expects the average price for a streaming ad to fall to $27 this year from about $34 last year. Most TV advertisers want mass reach for a guaranteed price, not costly granular targeting.
“Typical CMOs want tons of cheap impressions,” he said. “Their thinking is that targeting is great, but it doesn’t work.”
