Amazon is considering a more serious bid against YouTube, ad industry sources say

Key Points
  • Amazon is taking meetings about getting serious on including more advertising opportunities on its video content.
  • One potential program would pair vetted video creators and companies to create sponsored content, and Amazon would take some of the deal revenue.
  • It has also met with technology companies to discuss preventing inappropriate content from appearing next to ads.
Sources: Amazon to compete with YouTube ad opportunities
Sources: Amazon to compete with YouTube ad opportunities

Amazon is taking meetings about launching programs to bring more advertisers to its video platforms and make it a stronger competitor against YouTube.

The company has had multiple meetings where it suggested it would be launching more advertiser-friendly initiatives. Several people said Amazon suggested it would be more open to giving advertisers more data on what viewers were watching and what they were doing online. Another potential program would pair companies with vetted video producers to create sponsored content, one buyer said. Since the production is technically an advertisement, Amazon would get some of the deal money.

Amazon has also met with several technology companies regarding how to prevent inappropriate content from appearing next to ads, an issue called content adjacency, several people with knowledge of the meetings told CNBC. The industrywide issue was put in the spotlight when several ads on YouTube and on other Google-owned platforms were seen running next to neo-Nazi and jihadist content in March.

CNBC spoke to five sources with knowledge of the talks, including people from major advertising companies and media companies. These sources requested anonymity because these were private meetings with Amazon about potential projects, and they were not authorized to discuss them publicly.

Digital video advertising is booming, with U.S. video ad spending reaching $13.23 billion this year according to eMarketer. One of the largest recipients of revenue is YouTube, which will garner 21.7 percent of U.S. video ad revenue this year, according to eMarketer's estimates. However advertisers have been hungry for more places to put video in order to increase competition, especially with a company that could have the scale and reach of YouTube.

Amazon had 310 million monthly active customers when it last reported numbers during Q1 of 2016. Though it pales in comparison to YouTube's 1.5 billion monthly active users, if Amazon could tell advertisers what its customers like to watch online and pair that with their shopping habits, one source noted this could be a "game changer; the big thing to watch for disrupting the overall ecosystem."

Currently Amazon allows anyone to upload videos through a program called Amazon Video Direct (AVD), The videos are then available to buy or rent, stream through Amazon Prime or to watch for free with ads. It also owns Twitch, a video platform where users can livestream content and save previous sessions to be watched on-demand.

Although AVD's current ad-supported program is comparable to YouTube's offering, advertisers aren't bullish on it yet. Media buyers said it doesn't give out as much information about ad performance (including return on investment) compared to YouTube and doesn't allow third parties to audit how well the ads are doing, with one media buyer calling it a "black box." It's also pricier than YouTube. For these reasons, many companies still think of YouTube as the de facto video platform to advertise on. But if Amazon could give advertisers more data about consumers and allow its information to paired with analytics from outside sources, it could make it a gigantic force.

Amazon declined comment.

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