Amazon’s video ad push expected to generate an extra $5 billion in revenue

Amazon.com Inc.’s push into video advertising will boost annual revenue by as much as $5 billion, according to a Bank of America analysis, mostly generated by new television-style commercials on Prime Video.

Ads on Amazon’s streaming service will start appearing in North America on Jan. 29 and internationally on Feb 5. To receive ad-free content, North American subscribers will have to pay an additional $3 per month.

Amazon will sell about $3 billion in video ads this year and generate an additional $1.8 billion from Prime subscribers who pay the extra fee to avoid commercials, BofA analyst Justin Post wrote in a note Wednesday.

The estimate assumes 70% of Prime subscribers will opt to watch ads rather than pay the fee.

Amazon’s advertising business – mostly search and display ads on its web store – generated $12.1 billion in the quarter ended September 30, about 8.5% of total revenue.

The Seattle-based company sees Prime Video as an ideal spot to boost ad sales and profit from the billions it has spent on content, including movies and National Football League games.

Advertising is Amazon’s smallest but fastest-growing revenue source.