The first details about Netflix’s advertising model have circulated. While the advertising-supported subscription could start as early as autumn 2022, advertisers have to invest large sums – and in return they hardly get any targeting options.
Disney+ will launch its ad-supported subscription model on December 8, 2022. The competitor platform Netflix had planned to launch its own counterpart in spring 2023, but could now bring it forward to November 2022. As Parker Herren reports at Ad Age, the streaming service wants to forestall Disney and at the same time win numerous subscribers and advertisers. However, there are some problems from the perspective of media buyers: According to the first information about Netflix’s advertising model, advertisers can neither choose the program in whose context they advertise nor set granular targeting. In addition, the price for the advertising inventory is significantly higher than that of the competition.
Netflix: advertising model still immature?
The streaming service has already offered advertising inventory through the cooperation company Microsoft, which will be responsible for advertising on Netflix. However, this initial offering lacks the option to choose the ad environment. According to Herren, it is also not yet entirely clear in which content contexts advertising can ultimately take place; here it still depends on various license agreements.
Netflix wants to offer ad packages based on the 20 genres on the platform. In addition, there are said to be offers aimed at Netflix’s top ten lists. However, so far there has only been a very limited targeting function, as the first buyers explain. Advertisers will also not be able to receive any analytics from Netflix itself for the time being. Impressions may initially be accessible via Microsoft’s Xandr platform, while Netflix does not yet offer comprehensive data. However, these are extremely important for advertisers.
According to the first offers, you can choose 30- and 60-second spots, but they can only run once an hour. These spots should not be played out to children, as was already indicated in advance – that’s how Disney + keeps it. According to the Ad Age report, platforms such as Disney+, Apple TV+ and Co. are not allowed to place ads on Netflix.
The offer is still too expensive for many
A particularly serious problem for many advertisers, given these immature advertising options, is the price that Netflix charges for the ads. This is rumored to be 60 US dollars to reach 1,000 viewers. Disney+, in turn, is said to call a CPM of $50. In addition, the streaming service would like to receive a minimum investment of 20 million US dollars if media agencies want to place advertising. But whether this demand will be accepted is questionable. In this way, Netflix could deter a number of potential advertisers.
However, the streaming service wants to sell various ad inventories in September 2022. Starting this month, the company will be supported by Peter Naylor and Jeremi Gorman. Joining from Snapchat, the Top Ad Executives will lead Netflix’s advertising model as head of ad sales organization and president of worldwide advertising. It is possible that the sale of ad inventory will continue beyond September.
By the end of 2022, Netflix wants to generate at least 500,000 subscribers with the advertising-supported model, who could act as potential advertising recipients. That would only be a fraction of the more than 220 million customers that the company already has. Nevertheless, it remains to be seen whether so many people will decide to subscribe to the discounted Netflix version in a few months. According to reports, this should already cost between seven and nine US dollars per month. And according to Bloomberg, this model shouldn’t offer a download option for offline viewing either.
Whether Netflix will actually offer the ad-supported model as early as November 2022 has not yet been confirmed. The company is covered with statements. However, it does indicate that some things are likely to change in the advertising model.
“It’s all just speculation at this point”
A Netflix spokeswoman told Ad Age in a statement that various aspects of the ad-supported subscription model and associated advertising options for advertisers are still evolving:
We are still in the early days of deciding how to launch a lower priced, ad-supported tier and no decisions have been made. So, this is all just speculation at this point.
However, as soon as Netflix and Disney+ launch their discounted subscription models, new areas of interaction will open up again for the advertising industry. And for the streaming services, there is an opportunity to diversify their own revenue model. However, companies should listen to the customers – whether subscribers or advertisers – and not be too bold. Because there is by no means a lack of competition, especially in the advertising and streaming markets.
Tags: Netflix advertising model CPM targeting
