Netflix’s experiment in advertising on its streaming entertainment platform is producing results six months after launch, gathering nearly 5 million subscribers.
At the upfronts in the US, Netflx told media buyers that more than a quarter of new subscribers opt for the cheaper advertising-supported tier.
“The signals are promising: engagement on our ads plan is similar to our comparable non-ads plans,” says co-CEO Greg Peters.
“Since early this year, our ads member base has more than doubled. On average, more than a quarter of our signups now choose the ads plan in countries where it's available. Seventy percent of our ad-supported members are between the ages of 18 and 49.”
Peter Naylor, VP, global advertising sales, announced new product and measurement solutions for Netflix’s ad-supported plan, including the ability for brands “to connect with our audiences during some of the most watched and most relevant cultural moments of the year.”
This includes two new sponsorship opportunities to give brands “the opportunity to be within the top streaming content anywhere".
The ad-supported tier is still in its infancy and is a tiny part of Netflix’s 232.5 million total subscribers.
However, the total returns (subscription plus advertising dollars) are attractive. Revenue per member is greater than Netflix’s standard plan.
Analyst Jessica Jean Reif, from Bank of America Securities, says Netflix appears to have a huge advantage in television advertising.
“Given the limited ad load, premium video content, your humongous reach and engagement with some pretty hard-to-reach demographics as well as the ongoing mass transition from linear to streaming, your position is enviable,” she told a Netflix briefing last month when the streaming platform released March quarter results.
“Having said that, you seem to be very careful in your advertising rollout. Can you give us your key learnings to date and what the growing pains have been so far?”
Gregory Peters replied that he was “significantly optimistic” about the long-term opportunity of a highly lucrative, high-margin business.
“But we've always expected and we continue to expect, frankly, this to be a gradual build,” he told the briefing.
“It follows a very similar process that we've used in so many other areas where we get in, we learn as we go, we iterate. And we found that having that approach yields basically great long-term outcomes as we sort of grow and learn.
“We've got a lot of work to do to develop -- continue to develop features that support advertisers.
“We're rolling out things like measurement and verification, but we've got a bigger, longer road map that we have to go do there.
“We're improving our go-to-market and sales capabilities in partnership with Microsoft. There's a lot of good work that we have to go do. And some of this is hard work. This is country by country.
“You've seen us add programmatic private marketplace that gives advertisers more ways to buy as we grow inventory. And then we're also trying to improve things on the consumer-facing side. So we're adding more features to the ad plan. We're making that experience better for members.”
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