Netflix is making a significant move by developing its own advertising technology platform, slated for launch by 2025. This decision ends their initial partnership with Microsoft for ad solutions.
The in-house platform aims to leverage Netflix's massive user base of 270 million with personalized ads, directly competing with advertising giants like Google and Amazon. "Our goal is to deliver an ad experience that matches the excellence of our industry-leading streaming technology," stated Amy Reinhard, Netflix's president of advertising.
This shift reflects Netflix's commitment to user experience. They plan to explore innovative ad formats like "episodic campaigns" that tell a story across multiple placements, potentially replacing generic ads.
Since launching its ad-supported tier in late 2022, Netflix has seen explosive growth, reaching 40 million monthly users (up from 5 million in just six months). Notably, 40% of new subscribers in those regions choose the ad tier.
To bolster its ad offerings, Netflix is expanding its programmatic buying partners to include The Trade Desk, Google's Display & Video 360, and Magnite, alongside Microsoft. Additionally, partnerships with Nielsen and Kantar provide advertisers with robust campaign measurement tools.
Netflix highlights its audience's high engagement, with over 70% of ad-supported plan members exceeding 10 hours of monthly viewing, surpassing competitors. This, combined with the cultural impact of their shows, makes them highly attractive to advertisers.
Despite strong growth, Netflix will stop reporting quarterly membership numbers and ARPU in 2025. They'll focus on metrics like revenue, operating margin, and free cash flow, which they believe better reflects their financial health.
The ad tier's success underlines the rising popularity of ad-funded streaming, reinforcing Netflix's vision for an in-house ad tech platform. Launched in late 2022, the tier has grown rapidly (8x in a year), as viewers seek affordable access to Netflix's content library.
Netflix emphasizes the high engagement of ad-supported plan members. Nielsen data shows over 70% watch for more than 10 hours per month, offering a valuable audience for advertisers. Their upcoming ad tech platform allows greater control over ad displays, enabling personalization and innovative formats. Partnerships with industry leaders expand buying options for advertisers, increasing their ability to target Netflix's engaged audience.
Recognizing the importance of high-quality content, Bela Bajaria, Netflix's Chief Content Officer, announced a diverse slate of new series, movies, and live events. This focus on varied and engaging content aims to keep viewers hooked, further enhancing the platform's value proposition for advertisers.
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