Imagine Amazon’s Prime Video adopting Roku’s new buy-now ads: 1-click buying on connected TV ads?

Roku just announced something extremely interesting: Shopify Checkout that lets Roku users buy products from streaming ads with basically two taps. It’s a global first in connected TV ads and monetization, at least for Shopify merchants, and it’s also a big leap forward for direct-to-consumer. 

Perhaps more importantly, it’s yet another evolution in ad formats, and it has huge potential for many other players in the industry. One that comes to mind instantly: Amazon.

More on Amazon in a moment …

Growing FAST: free ad-supported (streaming) TV

Ad-supported streaming is huge and growing.

Throughout the golden years of streaming video growth during Covid, subscribers were where the action was and Netflix, Disney+, Crave, HBO Max, Paramount, Amazon Prime, and all the other players focused on acquiring paying customers. Now that we’re seeing tougher economic times with high inflation and that the early adopter take-my-money-now subscriber pool is drying up, the locus of growth is moving elsewhere. 

Queue ad-supported streaming, which is red hot right now:

• 25% of all streaming is now done on free ad-supported services, a new Horowitz report says
• Ad-supported services are bringing in net new customers: in one survey from March of this year, 85% of new Netflix and Disney+ subscribers joined AFTER the introduction of the ad-supported tier. (Note: they didn’t all choose the with-ads version, however: some subscribed.)
• Ad-supported streaming is growing faster than subscription-based services, according to ComScore: up 29% versus 21% last year
• 61% of respondents to an LG Ad Solutions survey say they’d rather stream free and watch ads than pay for a subscription

Free ad-supported connected TV offerings from players like Pluto, Tubi, Roku, Crackle, Redbox are growing faster than the ad-free side of the industry. So previously subscriber-focused giants like Netflix and Disney have joined them, and pretty much every big player is examining all their options for hybrid monetization: subscription plus ads, plus perhaps more creative ways of monetizing …

Roku: playing offense and defense with connected TV ads

Add to all this hotness a new ad format and monetization methodology and you have something interesting.

“We’re collapsing the funnel for Shopify’s merchants,” says Peter Hamilton, Roku’s head of ad innovation. (If the name sounds familiar, he’s the former CEO of TUNE, an early mobile measurement partner.)

From a consumer perspective, the connected TV ads process is simple:

• Watch a Roku Action Ad
• Press OK on the Roku remote to learn more about the product or service
• Check out with Roku Pay 

Roku, still the top streaming platform in North America by hours watched, says this makes purchases on your TV much simpler and quicker, reducing drop-off. Men’s apparel brand True Classic VP Paige Decker says it’s a “frictionless purchase.”

This move, of course, is both offense and defense. It’s offense because Roku is adding a simple but powerful way for brands to sell to consumers, making Roku’s ad platform more interesting to advertisers. A huge benefit for them: immediate measurability of performance, and a path to very quick ROAS. It’s also defense because there just might be another major streaming provider that’s competitive to Roku which also boasts a massive Walmart-sized e-commerce presence that is almost 100% digital.

Who could it be …

Amazon, Prime Video, and ads: a marriage made in capitalistic heaven

Amazon offers Prime Video for free to Prime members, of course, or for $9/month as a standalone subscription. But as we’ve seen with the rise in ad-supported streaming and concurrent subscriber growth that players like Netflix and Disney achieve when they add an ad-supported layer, Prime Video is missing out on audiences that don’t want to pay, don’t have Prime for 1-day shipping, or just aren’t Amazon customers yet.

(There must be a few of them. Somewhere.)

Unsurprising for a company that has a $31 billion ad business growing at 33% in recent quarters (and a incandescent 88% in a not-to-distant Q2 2022 quarter), an ad-supported tier for Prime Video is probably pretty interesting. Especially when high-margin ad revenue is almost certainly the largest single contributor to Amazon profit. So it’s not shocking at all that Amazon is in talks to launch an ad-supported tier of Prime Video. Plus, Amazon already owns Freevee, a free ad-supported streaming video service built on its purchase of IMDB. Ads on Freevee already sell Amazon products, but it’s clunky

• See QR code
• Pull out phone, open camera, scan code
• Buy in Amazon app

Imagine Amazon ads that allow the 1.9 million global merchants on Amazon to access inventory in Prime Video and Freevee via 1 click on a remote control: no extra steps, no finding the phone, no need to open the app. Amazon could go one step further: Imagine a generative AI solution that auto-creates ads for your product listing and runs them, optimizing as you go.

The potential is literally mind-blowing. (Well, almost literally.)

Plus, by the way, if you’re an Amazon customer, your purchase history and your watching history is all first-party data to Amazon. The targeting potential is obvious. (Which makes you wonder how Shopify Audiences might integrate with the new Shopify Checkout on Roku.)

The rest of the industry: Disney, HBO Max, Paramount, Apple TV+

What we’re seeing here is an evolution of the role of TV ads. 

In a sense it was inevitable based on the fact that TV is becoming an app or service on the internet. As TV continues its journey to completely and utterly digital, the advertising experiences you can deliver and experience on it are converging to those available elsewhere on the internet: on the web and in apps.

Each platform, of course, privileges slightly different experiences and flows, and that will remain. A TV remote is not a keyboard or a screen, generally.

But streaming video players who are not Roku or Amazon will have to contend with a future in which the revenue that funds the development and growth of their competitors are increasingly “free” to consumers. We’ve seen what good targeting and measurement has done to the growth of an industry like the mobile games space.

Now that’s coming for streaming TV.

Expect some mergers and acquisitions, or at minimum strategic partnerships, as these connected TV ads revenue streams grow and provide the ability for winning platforms to further invest in content and growth.