US streaming ad revenue to approach $17B, but competition stiffens

Stream TV Insider

article here

The U.S streaming market will approach $17 billion dollars in advertising revenue this year, projects Ampere Analysis, but streamers like Netflix are scaling faster than their ability to monetize and ad-supported subscription services face increased competition.

Ampere finds that ad funded video on demand services such as AVOD and BVOD, as well as linear FAST channels and social video services like YouTube are becoming increasingly significant in the battle for viewers for 2025.

Growth is strong in the UK too with around GBP1.1 billion (USD$1.37bn) in online video ad revenue (specifically VOD and FAST advertising delivered to viewers on streaming services such as Netflix, Tubi, Disney+) ) predicted for 2025 rising to GBP1.6bn (USD$1.99 billion) by 2029.

The British-based analysis and research firm isn’t the only market researcher to pinpoint ads as a chief income generator for streaming video.

“Ads are the new revenue multiplier,” stated McKinsey in its October Growth industries and The Next Big Arenas of Competition report. Indeed, as subscription revenue growth levels off, global AVOD revenue will continue to grow at double-digit rates through 2028, with a five-year CAGR (compound annual growth rate) of 141%, charts PwC in its Global E&M Outlook 2024-2028. Within three years advertising will account for about 28% of global streaming revenues, up from 20% in 2023, it estimates.

Speaking to StreamTV Insider, Ampere dug deeper into its research. For example, Ampere consumer data shows that in the U.S., 40% of 18-to 64-year-olds report having watched an AVOD service in the past month prior to researching last fall, which is double that of five years ago.

For example, Ampere consumer data shows that in the U.S., 40% of 18-to 64-year-olds report having watched an AVOD service in the past month prior to researching last fall, which is double that of five years ago.

“These AVOD viewers represent a highly engaged audience,” said Annabel Yeomans, research manager at Ampere Analysis. “On average they watch an hour’s more content per day than non-AVOD viewers and within that, AVOD services are really significant, accounting for 25% of that viewing time.”

Yeomans said this puts pressure on broadcasters and SVODs “who typically see their share of that viewing time squeezed when AVOD services enter the viewing mix. Broadcasters should focus on their own VOD platforms as a way of reaching consumers as more and more services enter the market.”

Amazon doubles down on ad-tier

In November, Amazon announced it would close its free ad-supported video service Freevee, unifying the service’s AVOD titles and FAST channels onto its Prime Video platform. Ampere thinks “the upsell opportunity is clear” since Amazon might have an addressable U.S audience of 21.8 who currently access only its free content. That’s based on 44% of Freevee viewers in the US who (as of November) were not subscribers to Prime Video.

“In the context of the wider subscription market slowdown, this represents a significant opportunity for Prime Video to target and sign-up new subscribers,” concluded Ampere’s Orina Zhao.

The closure of Freevee followed the launch of Amazon’s ad-supported tier a year ago.

“Amazon’s strategy was to default all its members to ad-supported users, and in doing so they were able to operate at [the ad-supported service] scale virtually overnight,” said Ben French, Ampere research manager.

This differs from Disney+ and Netflix where paying subscribers need to actively sign up or switch to receive a cheaper subscription version with ads.

Ampere suggests Amazon launched in the U.S with “very low ad loads” of around a couple of minutes per hour or less but has since doubled this to around four minutes.

French said, “Amazon are an experienced advertiser [on the retail side] but went from zero to 100 with their ad tier. So what you're seeing in terms of low ad-loads is more of a function of how new the service is in the market, not where they will end up. In addition, they were potentially easing users into the ad supported experience [with earlier lower ad loads].”

Netflix needs to balance content offer with price hikes

In its Q4 results which ended December 31  Netflix revealed that 55% of all new sign-ups globally (the figure is 45% in the U.S according to Ampere) are to the ‘standard with ads’ membership plan.

Ampere data further shows that the percentage of US ad supported subscribers  have more than doubled over the course of last year. As of Ampere’s January, 2025 SVOD Economics data, 24% of US-based Netflix subscribers are on the Standard with Ads tier, and 14% of US-based Disney+ subscribers are on the Basic (ad-supported) Tier.

 The analyst concludes that sign-up trends are an even more “profound” indicator of forward momentum.

At last official disclosure, Netflix reported having 70 million monthly active users on its plan with ads.

“Over half of all new sign-ups to all major streamers including Disney+ and Paramount+ are to ad supported memberships,” says French. “This is a strong indicator that users are willing to view ads and that the U.S. ad supported market will grow significantly over the next couple of years.”

“While ad tiers are way to reach more spend-savvy consumers, SVODs also need to ensure that they continue to invest in content in order to justify the subscription costs that go with these ad tiers when compared to a FAST or AVOD service,” notes Yeomans. “This is going to be increasingly important as continued price increases put consumer spending under pressure.”

Netflix just announced new price increases which takes its ad-supported tier from $6.99 to $7.99 per month (the standard ad-free tier jumping $2.50 to $17.99 per month).

“The quality of content is going to be really key if consumers are to continue to pay because there will come a tipping point where the price to view content (with or without ads) won’t be justified and they will start to strip back on paid services,” said Yeomans.

Netflix has upped its original content spend for 2025 by $1 billion for a total of $18 billion.

Ads aren’t material revenue for Netflix yet

When Netflix initially launched its ad-tier its long-term goal for advertising was at least 10% of their revenue. It later told shareholders during a Q3 2024 call, “We don’t expect ads to be a primary driver of our revenue growth in 2025. The near-term challenge (and medium term opportunity) is that we’re scaling faster than our ability to monetize our growing ad inventory.”

French noted that, “Whilst already a substantial portion of Netflix business, ad revenue is not planned to be even a quarter of their total business any time soon.”

He added, “Netflix launched their ads tier at a substantial discount to customers. They promised low ad loads of around four minutes per hour but are delivering even fewer ads per hour in general. They’ve converted a portion of their user base to the ads tier and have now raised prices, which will help to increase the distance between the ad supported and the premium offer and further help to attract users.”

At the same time, Ampere’s early ad analytics data shows that a very low ad load on Netflix aligns with its “very ambitious target CPMs.” French said, “Ad loads will need to be scaled up in order to start really driving revenue. In the long term ads will have a more significant impact on Netflix’ business.”