Amazon, AI, and ads on Prime Video

The trillion dollar ecommerce giant is adding ads to its Prime Video streaming service because everybody else is, but the secret story is about Amazon’s growing AI capabilities. 

By Brad Berens

On September 22, Amazon announced that it would follow Netflix, Max, and Disney+ and start running ads on Amazon Prime Video. Ad averse Prime subscribers can cough up another $36 per year to protect their tender eyes.

Here’s a snippet from the announcement:

To continue investing in compelling content and keep increasing that investment over a long period of time, starting in early 2024, Prime Video shows and movies will include limited advertisements. We aim to have meaningfully fewer ads than linear TV and other streaming TV providers.

The first sentence fails to persuade. Amazon can afford Prime Video without adding ads. At the time I’m writing this, Amazon has a $1.3 trillion dollar market cap. Amazon spent $16.6 billion on entertainment content in 2022, but even if it more than tripled that to $50 billion it would still be a rounding error in Amazon’s total business.

As I’ve written elsewhere, Amazon and Apple inhabit different business realities than other entertainment companies: if you add up the market caps for Disney, Netflix, WBD, Sony, Comcast, and Paramount they equal less than half an Amazon or a quarter of an Apple.

Amazon is adding ads to Prime because it can: since all the other big streamers have done so, there’s no downside. Back when I worked at EarthLink, the old dial-up ISP, we watched dominant AOL like hungry coyotes lurking outside a butcher’s shop, because when AOL raised its prices we could raise ours. A similar logic applies here.

Amazon has quietly built a huge digital online ad business, turning the former duopoly of Google (Alphabet) and Facebook (Meta) into a triopoly, soon to be a quadropoly with Apple. The new ads on Prime Video combine two different kinds of value for advertisers: all the data that Amazon has about its customers’ preferences and buying histories (a.k.a. retail media) along with the immersive quality of 30 second commercials—enough time to tell a short story.

For most people, Prime Video is part of the overall bundle that includes two-day shipping and many other things. Prime members spend more on Amazon (almost 300% more each month according to one recent survey about which I am skeptical, although the general trend is well established). The few subscribers who are offended by ads will grumble but cough up the $36 because the rest of Prime is too valuable to lose. A vast supermajority of the more than 115 million people who watch Prime each month will sit through the ads.

Adding ads to Prime Video makes Amazon’s ad business bigger, but I think there’s still more going on. Amazon tends to have what I call a “two-strategy strategy” where it buries a long-term goal inside a short-term move. In this case, the long-term move is about AI.

All about the algorithms

On September 28, Amazon added a new suite of tools to Amazon Bedrock, the “Generative AI as a Service” division is launched back in April as part of Amazon Web Services (AWS).

In plain English, this means that just like how individuals can use ChatGPT to write emails or summarize articles and use DALL-E to create images, now businesses can use Amazon’s large collection of AI technologies to build intelligent tools on Amazon’s platform without having to invest in expensive equipment.

Bedrock’s original use cases were text generation, virtual assistants, search, text summarization, and image generation.

Click on “image generation,” for example, and the text expands to “quickly create realistic and visually appealing images and animations for ad campaigns, websites, presentations, and more.” Instead of scouring the web or a stock photography site for an image, Bedrock will create one for you.

Full 30 second ads generated in real time by AI and personalized to the individual Prime Video profile level can’t be far behind.

What would AI generated, 30 second commercials look like?

Let’s imagine that Amazon deduces that a couple is pregnant based on recent purchases of books about babies, maternity wear, and neonatal vitamins. (This is akin to Charles Duhigg’s famous piece about how Target knew a teen girl was pregnant before her father did.) Amazon also knows the couple’s race, neighborhood, friends (based on gifts they’ve sent and received), and entertainment tastes on Prime Video.

Adding ads to Prime Video makes Amazon’s ad business bigger, but I think there’s still more going on. Amazon tends to have what I call a “two-strategy strategy” where it buries a long-term goal inside a short-term move. In this case, the long-term move is about AI.

For Procter and Gamble, which sells Pampers, this is actionable information.

Much of a 30 second spot about Pampers will be the same for everybody: the product shots, the demonstration, the logo. Amazon Bedrock will dynamically assemble and generate the rest. If the couple is black and lives in the suburbs, then Bedrock will show an establishing shot in a similar neighborhood and have black hands pour blue fluid onto the diaper. Likewise for different couples in different neighborhoods.

A digital spokesperson might address the camera directly—not saying something creepy like, “Bob, Teresa, your baby is coming in just a few weeks,” but instead talking about a use case calibrated to match Bob and Teresa’s situation.

Since Amazon will know on what device the couple is watching Prime Video, how close their home is to a distribution center, and how long it would take to deliver an order, the digital spokesperson might say, “just click the OK button on your Roku remote, and we’ll get these diapers to you tomorrow morning.” If Amazon knows that couple has and uses an Echo device, the digital spokesperson might say, “Just ask Alexa and we’ll send the diapers right away.” This takes shoppable video to a whole new level.

If this sounds either like far future science fiction or the 1981 movie Looker, think again. Today, in China, convincing digital clones (or “deep fakes”) of real spokespeople sell products in live streaming sessions: the clones cost the company around $1,000 per year.

Short term, Amazon is exploiting a revenue opportunity by adding ads to Prime Video.

Long term, Amazon is creating a uniquely powerful and incomparable ad product that combines the broad media reach of Prime Video, data about Amazon customers, ecommerce dominance, and an immense AI toolbox so that companies can advertise, customize, and sell on one platform.

What other company can compete with this? Google has AI and YouTube, but it doesn’t do ecommerce. Even if Walmart, which is investing in AI, follows my advice and buys Paramount, it doesn’t have Amazon’s “create a platform for other businesses” approach.

Soon, the ad inventory on Prime Video might become the most valuable ad inventory in existence.


Brad Berens is the Center’s strategic advisor and a senior research fellow. He is principal at Big Digital Idea Consulting. You can learn more about Brad at, follow him on Post and/or LinkedIn, and subscribe to his weekly newsletter (only some of his columns are syndicated here).


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October 4, 2023