Netflix’s ad business is on the rise—but execs are still asking for patience from advertisers.
During its first-ever upfront pitch to advertisers Wednesday night, which took place virtually, Netflix touted early growth on the streamer’s six-month-old ad-supported tier and pitched the platform as a reliable way to reach young viewers. And like some other upfront presentations this week, the program was absent of big-name talent, many of whom are supporting the ongoing writers’ strike, leaving the pitching to the streamer’s suits.
“It’s not exactly as we originally planned it,” Netflix co-CEO Greg Peters admitted. “But we live in a dynamic world, and we have definitely found that being able to adjust to a new reality is very useful.”
Instead, the streamer’s executives pitched new programming and the value of being part of “the Netflix effect” via its ad-supported tier, and promised they’d win over advertisers with future ad innovations.
5 milli: Nearly five million of the company’s more than 232.5 million total global subscribers are watching on the streamer’s ad-supported plan, Jeremi Gorman, Netflix’s president of worldwide advertising, told advertisers, and their median age is 34. More than 25% of new subscribers are picking the ad-supported plan, according to Peters.
- “It’s gotten harder and harder to find viewers on linear TV because the 18- to 49-year-olds have all moved on,” Netflix co-CEO Ted Sarandos said later in the presentation. “Well, we’re finding them.”
Keep ’em engaged: Gorman pitched advertisers on the amount of time ad-supported viewers spend watching Netflix (and potentially watching ads.) “At a two-hour threshold, Netflix retains 80% of our total reach,” Gorman said, and viewer engagement on the ad-supported plan is “remarkably similar” to that on the ad-free plan.
- Half of those ad-supported members are watching programming for 10 or more hours every month, Gorman added.
- And 80% of ad-supported Netflix viewing is happening on TV sets.
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Popularity contest: Netflix is opening up its Top 10 lists to advertisers. Brands who partner with Netflix during the upfront will be able to buy ad inventory across the platform’s ten most-popular shows and movies, Peter Naylor, Netflix’s VP of global advertising sales, said.
Measure it up: Naylor confirmed that the platform will go live with Nielsen’s digital ad ratings, which measure ad reach and frequency, beginning in the fourth quarter of 2023. The company has also struck a more recent deal with the measurement firm EDO to measure ads’ effects on Google searches and site visits.
- In tests, “We found that viewers were more than four times as likely to respond to an ad on Netflix compared to other streaming platforms, and not surprisingly, four and a half times compared to linear TV,” Naylor said.
The big “but”: With that said, Netflix’s nascent ad platform is still missing some features—like more specific targeting options and some now-standard streaming formats like pause ads—but execs spun Netflix’s early days as a good thing. Instead of the same old ad format advertisers are used to, several execs suggested, why not build something better?
- Sarandos had at least one idea for a new ad format. “Imagine an engaging 30-minute commercial that plays out over several days, so when you leave one show to watch something else, the ad follows you and the story continues,” he said, adding the caveat that this format isn’t yet available—and might not happen at all.
- “Right now we have a blank canvas,” Sarandos said. “There’s really no limit to what we could do together.”