Amazon goes head-to-head with media giants in Ad Upfronts debut

Amazon has become a growing threat to digital advertising Meta and Googleattracting billions of dollars per quarter from brands trying to reach the masses of users who flock to the site daily.

But it’s not just about digital ad dollars anymore, and Amazon’s first presence at this year’s Upfronts events is the clearest indication yet that the e-commerce giant is ready to take on traditional media.

On Tuesday, Amazon made its first presentation during Upfronts, an annual ad sales event featuring media leaders such as Disney and Comcaston NBCUniversal. Amazon’s Prime Video and other streamers have historically been featured at Newfronts, which is Upfronts’ take on digital media. But internet video platforms had a bigger presence on the main stage as Netflix and Google’s YouTube have joined the party in recent years.

Amazon is taking a new step in the advertising industry as it approaches a critical turning point. Advertisers continue to spend more on digital TV than linear TV. This year, they’re projected to spend about $18.8 billion on traditional TV ads during Upfronts, up 1 percent from a year earlier, according to eMarketer. In contrast, digital advertising during Upfronts and Newfronts is projected to grow 32% to about $16.5 billion this year.

More ad-supported streaming platforms have also jumped into the ring, giving advertisers yet another alternative to traditional TV, where viewership has declined. Amazon announced it will begin showing ads on its Prime Video streaming service in January, adding to its robust ad offerings such as free TV streaming service Freevee and Twitch, its live-streaming site popular with gamers.

The company will generate up to $3 billion in U.S. ad revenue this year from about 58 million households that will see ads on Prime Video content, TD Cowen analysts wrote in a note to clients on Wednesday. The firm has a buy rating on Amazon stock.

“When I joined Amazon almost four years ago, the No. 1 question you all asked was, ‘When are you going to show ads on Prime Video?'” Alan Moss, Amazon’s vice president of global ad sales, said on stage. “Well, we at Amazon love to deliver to our customers. By introducing ads to Prime Video, we’ve created the largest ad-supported premium streaming service in the world.”

The company said that ad-supported streaming content now reaches 175 million viewers in the US each month, up from more than 120 million in 2021. It also revealed that Prime Video has 200 million global customers, 115 million of which are in the US

Amazon’s advertising business still primarily makes money by charging brands to promote their products on its properties in a variety of ways, from sponsored listings on its website to ad spots on Fire TV streaming devices. Revenue in advertising business climb 24% in the first quarter to $11.8 billion.

Amazon has also spent billions on live sports programming in an effort to attract more viewers and advertising dollars. The company recently reaffirmed its commitment to live sports by acquiring the exclusive rights to a National Football League playoff game next season.

Amazon executives on Tuesday tried to win over advertisers with a full slate of programming and a cavalcade of celebrities like Reese Witherspoon and Jake Gyllenhaal to promote new original content. The company also highlighted its “billions of customer signals” that allow brands to target ads.

Paul Kotas, who runs Amazon’s advertising business, said the company “made a big bet” 18 years ago when it first ran ads on its website. He showed how the business has evolved to include digital video ads on Prime Video.

“We’ve been working for this moment for years, and that’s why being here on stage today means so much,” Kotas said. “And of course, at Amazon, we’re never done innovating.”

— CNBC’s Lillian Rizzo and Alex Sherman contributed to this report.

Disclosure: NBCUniversal is the parent company of CNBC.

WATCHING: The volume of ads will not decrease, it will simply change