Amazon is taking a bigger piece of ad sales on Fire TV, its connected TV devices, by requiring TV networks and digital publishers to hand over 30 percent of their commercial space for it to sell, according to new terms from the e-commerce giant.
Until last month, Amazon let the publishers sell their own ads and take all the money, but in September it quietly updated its terms of service, demanding a 30 percent cut of the ad inventory. Amazon keeps all that money from the inventory it gets, and that has some TV network executives starting to bridle at the new overlords they see rising to replace the old traditional cable companies.
"This is going to get complicated," says one major network executive, who spoke on condition of anonymity. "Ad revenue was never part of the discussion, and now all of a sudden it is."
The media companies that own the apps, many of them the biggest names in TV like Fox, NBC, CBS, ABC, Turner and Viacom, have kept all the ad revenue from Fire TV, until Amazon started expanding its ability to control the platform. Amazon has been developing its advertising technology to manage ads on Fire TV and to beef up its capacity to serve ads across the internet through its network of publishers. Apps and publishers use Amazon ad services as a source of advertising like they do Google and other third-party suppliers of ads.
Roku offers similar terms to apps on its devices, taking the same 30 percent. "It's a common thing," says one digital streaming executive, who spoke on condition of anonymity, because of close partnerships with Amazon and Roku. "That's the fee to be on the platform, giving up a percentage of the ad revenue."
Amazon also told media companies that starting next year they would have to use its ad network to serve all the commercials that appear on Fire TV. To understand the impact there, the apps could have used other ad networks to fill commercial breaks on Fire TV, and now can't. Just last week, Facebook said it was shutting its connected TV ad network, in part because of how difficult companies like Amazon and Roku were making it to deliver ads.
The over-the-top TV market, so-called because it sidesteps traditional cable, has become a hotly contested space among the major digital ad players like Google, Facebook, Amazon, Roku, TV networks and telecom companies. There are 48.6 million people in the U.S. with a Fire TV device, according to eMarketer, up 21 percent from 2017 and representing 27 percent of the connected TV audience.
In the past year, Amazon has been streamlining and upgrading its entire ad offering, and is growing ad sales on its own sites and beyond. Last quarter, Amazon hit $2.5 billion in ad sales, an increase of more than 120 percent year over year, propelling the company to third place among digital advertisers in the U.S., behind only Google and Facebook.
Amazon declined to comment for this story, but a spokeswoman shared the new terms of service that the company quietly updated on Sept. 30. "Effective as of September 30, 2018 Fire TV Ad-Enabled Apps must integrate with Amazon Publisher Services (APS)," the terms say. "Fire TV Ad-Enabled Apps must provide 30% of total advertising impressions in the app to Amazon."
Amazon is telling its publishing and media partners that it can get them higher prices for their ads because of its shopper marketing data. If Amazon has a better picture of the viewer on the other end, whether on Fire TV or anywhere else online, it can hit them with the same precision it would have on its own e-commerce site. This data and targeting has always been considered Amazon's biggest advantage in digital advertising, an advantage it only recently started to really press.
The video advertising infrastructure through Fire TV and beyond is a key part of its strategy to keep that advertising humming. It recently began striking dales with major media holding companies like Omnicom Media Group to buy Fire TV inventory, supported by the fine-tuned shopper data to target the commercials.
"They found a way to marry data from Amazon and this premium video environment," says a digital ad agency executive, who spoke on condition of anonymity. "It's a comparable experience to TV."