Prime Video ads isn't quite the cash cow yet for Amazon

If you’ve been streaming the latest shows or movies on Prime, you’ve likely noticed that ads are now part of your streaming experience. This change, introduced earlier in the year, is part of a broader strategy to boost Amazon’s advertising revenue. However, the retailer’s effort has yet to pay off, with the actual gains from its ad segment falling short of analysts’ expectations.

In the second quarter of the fiscal year, Amazon’s ad business grew by only 20% — this has been the slowest growth rate for the company’s ad segment in years (via The Information). As expected from such an announcement, the company’s share price dropped at market open. But what’s surprising is that the second quarter — April to June — was the first complete period to include revenue from video ads.

For a few months now, users have been seeing ads by default when streaming on Prime — that is, unless they agree to pay more for the ad-free plan. During a recent call with reporters, Brian Olsavsky, the Chief Financial Officer of Amazon, emphasized that, as of now, sponsored product ads, which refer to merchant-sponsored ads that appear on the top of your Amazon search page, will continue to be the core focus of Amazon’s ad businesses.

Amazon has taken a more gradual approach to introducing ads in its video platform, which we can only assume is to avoid alienating customers who had gotten used to an ad-free experience on Prime Video. That said, the company now has plenty of new streaming content in the works, which might just help in the success of its ad-supported model, as well as attracting new customers.

Although Amazon’s video ads business has made some pretty significant strides and is coming up strong against competitors like YouTube, its overall ad business is still fairly reliant on traditional merchant-sponsored ads on the Amazon app.