Don’t Buy Amazon.com, Inc. (AMZN) Stock Because of the NFL, But …

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Earlier this week, e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN) did something that wasn’t terribly surprising, yet exciting all the same. That is, it won the rights to stream ten of this year’s Thursday night NFL games via the internet, supplanting Twitter Inc (NYSE:TWTR), which secured those rights for the league’s prior season.

Don't Buy Amazon.com, Inc. (AMZN) Stock Because of the NFL, But ...

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Granted, the word ‘won’ is a subjective one. It won those rights in the sense that it paid $50 million for those rights … five times what Twitter paid last year.

On the other hand, considering Amazon can do so much more with live sports that Twitter could have ever even dreamed of doing, AMZN stock holders may want to worry less about the relative cost — a pittance for Amazon, by the way — and get stoked about what the partnership could do for the company’s top and bottom line.

Just for the record, the ten NFL games Amazon intends to live stream to its Prime members won’t be the company’s first live events delivered via the web. They won’t even be the company’s first sports events delivered online.

They will be, however, the highest-profile event Amazon has ever streamed, and should decidedly further blur the line between television network broadcasts and online television … perhaps a prelude to making streaming television advertising look and work a lot like that of traditional cable ads. It will also attract more users into the Prime fold, where they become infinitely more likely to purchase something from the company’s website (because, hey — shipping would be free).

And that’s what owners of Amazon stock have to be most excited about.

AMZN Stock and Advertising

Just a few years ago, Amazon was just an online retailer that happened to advertise. Today, an investment in AMZN stock is also an investment on an online advertising agency. It now serves as the middleman for a variety of advertisers because it got very good at figuring out how to deliver ads effectively.

The most recent twist from Amazon on this front: It’s now in bed with Facebook Inc (NASDAQ:FB) to make header bidding the new norm.

What’s largely underappreciated about Amazon’s potential in this arena, however, is how well it knows each and every audience member knows the shopping and browsing habits of its members.

See, whereas the network broadcast of a NFL game most likely identifies you as a male between the ages of 18 and 55 who probably likes beer, logging into the same game via Amazon Prime tells Amazon that you’re a 41 year-old male living in St. Louis Missouri that bought a new backpack a month ago and has browsed (but not bought) laptops at Amazon.com several times within the past week. You could very well see different — and better targeted — advertisements during the game than your next-door neighbor.

That stratification is powerful.

Prime Membership = More Sales

If nothing else, the addition of ten NFL games to the Prime menu makes it more likely anyone on the fence will get off that fence and become a full-blown member. Those ten games will also be broadcast by a major network, but via Prime, fans can watch it on any device they want.

It’s a big deal, in that 99% of Prime members have no intention of shopping at any other online venue.

They’re also bigger spenders. Morgan Stanley estimates the average Prime member spends $2,500 per year at Amazon.com, versus only $544 per year for non-Prime customers. Early last year, Millward Brown concluded Prime members were “almost five times more likely to make a purchase” during a visit to the website than non-members were.

Point being, sweetening the Prime pot is a clear and direct investment in more revenue. That was where Twitter — which admittedly found success with its NFL broadcasts — missed the mark. It drew a nice crowd, but never really knew what to do with that crowd.

Bottom Line for AMZN Stock

Don’t read too much into it. While it’s certainly a high-profile coup, it won’t noticeably accelerate the growth of Amazon’s top and bottom line above and beyond the company’s current growth rate. Rather, think of it as another step in the journey.

All the same, current and would-be Amazon stock holders can interpret the news as a microcosm of a bigger and increasingly important idea, which is the notion that Amazon isn’t an e-commerce company … it’s a lifestyle company, opening the door to all sorts of monetization possibilities. The plan continues to progress.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/04/amazon-com-inc-amzn-stock-nfl-buy/.

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