Why Amazon's Prime Video is set to dethrone YouTube as the king of the smart TV ad market
Amazon's Prime Video is on pace to lead the advertising market on US-based smart TVs, according to a late July report from Morgan Stanley analysts.
YouTube is the market leader right now, but Morgan Stanley forecasts that Prime Video will knock it off its perch in 2027.
Advertisers are flocking to connected TVs (CTV) as consumers shift from traditional TV to streaming. Morgan Stanley expects the US CTV ad market to grow 13% a year through 2030 to $55.2 billion while the pay-TV ad market shrinks about 2% a year in that span as cord-cutting continues.
Prime Video will grow more than twice as fast as YouTube through the end of the decade as it plays catch-up with Google's video giant.
The turning point was last year, when Amazon turned on ads by default for all Prime Video users unless they paid an extra $3 a month. That supercharged its ad business with the flick of a switch.
Tim Lathrop, the VP of digital platforms at ad agency Mediassociates, said his clients tend to spend more TV dollars with Amazon than YouTube, even though Prime Video's ad rates can easily run around 50% higher. Advertisers like when their ads appear in Prime Video's TV-like environment, but some consider YouTube's user-generated fare unsuitable for their brands, he said.
"Amazon is growing in all ways. It's focused on high-impact, shoppable ads," he said. "The other part is the brand-safety part. You could say YouTube is behind on that front."
YouTube's share of TV viewership dwarfs its peers, representing more than triple Prime Video's in June, according to Nielsen. But Morgan Stanley doesn't believe YouTube will convert those eyeballs to ad dollars as efficiently — and some other ad analysts agree.
Amazon and YouTube didn't respond to requests for comment.
Prime Video and YouTube are fundamentally different businesses, and that informs the direction of their ad strategies.
In both cases, their CTV ad revenue is small compared to the rest of their ad businesses. But while TV advertising makes up around 10% of Amazon's total advertising business, it's a much smaller slice for YouTube parent Google.
Ashwin Navin, the CEO of measurement firm Samba TV, said Amazon has made CTV a major pillar of its pitch to advertisers, highlighting Prime Video and Fire TV and its purchase data.
By contrast, Navin said YouTube still sells its massive ad platform in a way that makes it hard for advertisers to isolate CTV ads.
Samba works with YouTube in several markets to measure how the platform performs alongside traditional TV. YouTube has a lot of CTV viewership, but it hasn't been packaged with CTV in mind, he said.
Amazon has simply made a greater effort to create a compelling CTV offering than YouTube has.
Amazon's success still isn't a done deal.
Prime Video still must show advertisers it has a steady stream of original shows that people want to watch. Amazon has spent a ton on shows without generating much water-cooler buzz — with a few exceptions, like "The Summer I Turned Pretty" and MrBeast's "Beast Games."
And although Amazon has added NFL and NBA rights to its content roster in the last few years, it doesn't have as much live sports programming as traditional media players.
"As they build out their content, they'll be more considered," Lathrop said of Prime Video's appeal to advertisers.
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