Dive Brief:

• Amazon is now taking a 30% cut of the ads shown to viewers on Fire TV, the company’s connected TV devices, Ad Age reported, citing anonymous industry sources. Previously, Amazon let publishers sell their own ads and take all the money, but the company updated its terms of service in September. 
• The change in terms comes as Amazon has been developing its ad technology to manage ads on Fire TV and expand its ability to serve ads across the internet through its publisher network, with apps and publishers using Amazon ad services. 
• Amazon has also alerted media companies that they will have to use its ad network to serve the commercials appearing on Fire TV starting next year. Apps have been able to use other ad networks to place spots during commercial breaks on Fire TV. 

Dive Insight:

Amazon taking a share of Fire TV ad sales shows how the over-the-top (OTT) TV market is heating up while underscoring the growing role of ad sales for Amazon. The news comes as the connected TV ad space is growing increasingly fragmented and other platforms like YouTube are ramping up their ad offerings for brands. Amazon continues to expand into TV-related hardware, having introduced the Fire TV Cube — which brings Echo capabilities to the connected TV viewing experience — this summer. 

In the U.S., 48.6 million people own a Fire TV device, a 21% increase from 2017 and accounting for 27% of the connected TV audience, according to eMarketer data cited by Ad Age. As the rate of cord cutting continues to rise, more consumers are adopting smart TVs and set-top boxes, and 80% of U.S. households are projected to be reachable thorough OTT this year according to Magna forecasts. Ad spending on OTT TV is expected to jump 40% to $2 billion in 2018.  

Amazon has been working on growing its ad business and become a stronger competitor for the digital duopoly of Facebook and Google. For Q3 2018, Amazon reported that its “other” category, which is mostly comprised of its ad business, grew 123% to $2.5 billion. The company now ranks as the No. 3 digital ad platform, behind Google and Facebook. 

Fire TV is a key part of Amazon’s ad strategy. The company has been working on deals with major media holding companies, like Omnicom Media Group to buy Fire TV inventory, which will be supported by shopper data and allow for targeting of commercials, according to Ad Age. The company has been informing publishers and media partners that it can get higher prices for ads because of its consumer data. Amazon has been courting advertising by promoting its data and ability to target audiences. 

In August, Amazon said it planned to launch an ad-supported video service for Fire TV device users. The service would be separate from Amazon Prime, and is reportedly being developed by IMDB, Amazon’s movie and TV information site. Amazon is working with major studios to license older TV shows for the service.