1. Amazon's Stealth Ad Business

Amazon reported another whopping quarter, which, while undoubtedly placing the antitrust target more firmly on its back, also showed how clever the Seattle-based marketer has been. Their ad business, long an afterthought to Google’s and Facebook’s is now worth well over a billion dollars—it’s the major part of the $2.03 billion worth of “other revenue” that Amazon reported this quarter, said “other revenue” growing a whopping 139%.

Why It Matters

Because no one realizes that Amazon advertising is actually advertising. That’s because people go to Amazon exclusively to buy things (and occasionally watch video, but Amazon cleverly has them do that via a separate app) and so ads on Amazon are the online equivalent of an in-store display and even there most people probably assume that Shop Rite set up the booth with free samples of Kraft cheddar cheese to keep their customers well fed and happy while they shopped.

This is a huge advantage that companies like Netflix, Spotify and Amazon have: they can run ads and consumers don’t even realize they’re seeing ads. They assume that big banner for “Jessica Jones” is there because Netflix thinks they might like it. Not because Marvel paid for it.

Amazon has that going for them, and even more options.

They could, if they wanted, offer up ads that ran in conjunction with product placement during one of their shows. So that if a character on, say, “Sneaky Pete” (check it out if you haven’t already) was eating a box of Cheerios, a viewer who was in the right target demo might see an ad for Cheerios on their home page the next time they signed on to Amazon.  Only they wouldn’t even realize that it was an ad, they’d just think that nice Mr. Bezos was putting it on their home page because he knew they liked Cheerios and this week they were 75 cents off.

Even better, Amazon could play with timing, placement and pricing of the Cheerios ad, to ensure it reached optimum performance and then charge General Mills even more for it.

This sort of tactic would prevent them from actually having to run any sort of ads during their TV programming, while still reaping the rewards of an ad-supported model and creating the coveted second revenue stream for their TV programming. (No point in calling it “video programming” as it’s TV.)

Which would send that “other revenue” up even higher.

What You Need To Do About It

If you’re an advertiser, especially an advertiser of things that can be bought on Amazon, then go for it. There’s no reason not to double down on a platform your customers are all likely using anyway. Like we said, think of it like an in-store display. (And you know how effective those are at driving sales.)

The only thing we’d caution is that while in-store displays drive retail sales, they don’t really do much for your brand image, so you’ll still want to spend some money there on actual TV spots.

If you’re a network there’s not a lot you can do beyond pointing out the aforementioned benefits of branding ads.

If you’re an MVPD or vMVPD, you can get in on the action yourself by charging for better placement on the home page of your app or set top box-based electronic program guide.

Something to think about.

 

2. Conviva's Big OTT Stats

A new report from Conviva provides a seemingly well-researched passel of statistics to confirm what many of us have noted anecdotally: OTT viewership is booming.

According to Conviva, streaming hours in North America increased 174% YOY for Q1 2018. And while there were more “starts” on mobile, far more hours of video were watched on actual television sets than on mobile devices.

Why It Matters

This makes sense in that most mobile viewing is short-form, so the total number of shows people watch on mobile will be higher than the total number of shows they watch on TV, despite the fact that even teenagers actually spend way more total hours staring mindlessly at the watching TV.

But that’s not the only factoid from the Conviva study that’s bound to be misquoted, and kudos to TechCrunch for pointing this next one out.

According to the study, viewing on Apple TV is up a super whopping 709% (not a typo) while Roku viewing is only up 87%.

But that number is self-reflective, so to speak. Since hardly anyone watched on Apple TV in Q1 2017, the fact that more people are watching in Q1 2018 creates a 709% rise in viewership. Whereas, Roku, which already has the lion’s share of OTT viewing, only increased its lead slightly, despite the fact that many more people were watching via Roku.

And by “hardly anyone” and “the lion’s share” we mean this: 256 million hours were streamed on Apple TV in Q1 2018 while over a billion hours were streamed on Roku. (Probably far more, as TechCrunch wisely points out: over 15 billion hours were streamed on Roku in 2017. 15 divided by 4 = 3.75 billion hours. So 3.75 billion hours on Roku versus 256 million on Apple TV. Fortunately Apple sells a whole lot of iPhones.)

What You Need To Do About It

If you’re an analyst or journalists, be like Sarah Perez at TechCrunch: read these reports carefully, don’t jump to unfortunate conclusions and point out stats that could trip people up.

If you’re an advertiser, you should now have even more stats to back up your “but OTT is happening now and we should get in on it right away” argument.

And if you’re a network or MVPD, you have even more reasons to double down on your various and sundry OTT efforts.

 

SIDE NOTE

We had the pleasure of hearing our favorite Wall Street analyst, Needham’s Laura Martin speak today at the Mitch Oscar Secret Society (which is neither secret nor a society.)

Martin hit on two points that you’re probably sick of hearing us make at TV[R]EV, but here they are again:

1. Consumers are turned off by the idea of subscribing to a mess of unrelated apps. They like order and convenience, which is why vMVPDs, which provide both, along with a single bill and an easy to use program guide are looking so good. So watch for lots re-bundling, including cross-platform re-bundling like Hulu-Spotify.
2. Silicon Valley companies forget that programming has to actually be good in order for people to watch it. All the pinpoint targeting in the world won’t help if the the casting is wrong or the scripts are boring. (Unless of course people think Tom Brady made out with his son, but that’s a whole other story.)