Amazon is now setting its sights on expanding its advertising business. According to a report by The Wall Street Journal, the company is planning to launch an ad-supported tier for its popular Prime Video streaming service. This move is part of Amazon’s strategy to diversify its revenue streams and tap into the growing digital advertising market.

Currently, Amazon operates Freevee, an ad-supported streaming service. However, the introduction of ads to Prime Video would mark a significant expansion of its advertising efforts. The company is exploring different options for implementing ads, including serving them to existing Prime subscribers and offering an upgraded ad-supported tier at a higher price point. By introducing ads, Amazon aims to generate additional revenue that can be used to secure lucrative streaming rights, such as those for National Basketball Association (NBA) games.

The potential acquisition of NBA rights is a strategic move for Amazon, which has been actively competing with other tech giants like Google for exclusive content. The Information previously reported that both Amazon and Google are interested in bidding for NBA rights when they become available for renewal in 2025. By launching an ad-supported tier, Amazon would have a compelling case to negotiate favorable streaming deals, ensuring that Prime Video remains a top destination for sports enthusiasts.

In addition to its plans for an ad-supported Prime Video tier, Amazon is reportedly in discussions with major media companies Warner Bros. Discovery and Paramount Global. The company aims to incorporate ad-based versions of its services into its streaming platform. Currently, Warner Bros. Discovery and Paramount Global offer ad-free tiers of their streaming services through Prime Video’s Channels service. This partnership could result in increased revenue for both Amazon and the media companies, as Amazon typically takes a 50% cut of subscription fees when users sign up for third-party Channels.

The introduction of ads to Prime Video raises questions about user experience and potential backlash from subscribers accustomed to an ad-free viewing environment. However, Amazon will likely tread carefully to strike a balance between ad monetization and user satisfaction. The company has a history of leveraging data and advanced algorithms to deliver personalized recommendations and advertisements on its platform, ensuring relevance and minimizing disruption to the user experience.

From an advertising perspective, the addition of an ad-supported tier on Prime Video presents a unique opportunity for brands and marketers. Amazon’s vast customer base and wealth of consumer data provide advertisers with highly targeted and effective advertising options. With Prime Video’s expanding reach, advertisers can leverage the platform to engage with a large and diverse audience, optimizing their campaigns and driving conversions.

Moreover, this move aligns with Amazon’s overarching strategy of integrating various services into its ecosystem. By bringing ad-based versions of external streaming services to Prime Video, Amazon enhances the value proposition for its subscribers. This integration allows users to access a wider range of content while streamlining their entertainment experience within a single platform.