Netflix’s ad ambitions meet a hungry market

The Future. Netflix’s ad tier is debuting just as brands are desperate to get their advertising on the limited space available on current streaming platforms, giving Netflix plenty of supply and the upper hand in negotiations. With Netflix set to cut off non-paying password sharers from the platform next year, a low-priced and well-funded ad tier may be the key to turning them into paid subscribers.

I want to be where the people are
Netflix may be late to the ad game, but it may be getting in at the right time.

• Per The Information, with network and cable TV declining, advertisers want to put more ads onto streamers… but the streamers only accept a limited number of ads to keep the experience enjoyable.
• That means lots of brands are itching to find a way into the streaming ecosystem, but there isn’t enough space to appease everyone.
• With Netflix entering the fray, advertisers are not only getting a huge new buyer, but the most successful platform when it comes to viewership – precisely what brands want.
  • Viewers spent nearly double the time on Netflix than they did the most-watched network, CBS.

Several top ad agencies are already saying their clients want to be on the platform as soon as it becomes available — so Netflix’s first upfront (where platforms lock down ad commitments) is expected to be a huge event.

Ad IQ
To understand how seismic the ad-dollar shift is to streaming, you don’t have to look much further than Warner Bros. Discovery. According to data from the Standard Media Index, linear ad revenue for the conglomerate fell 39% over the last year… but streaming ad revenue was up 32%. The money just changed formats.

The TV ad market is still four times bigger than the market on streaming, but expect that ratio to flip over the next decade, especially as advertising on streaming provides brands with more data targeting and insights. And considering that, on average, an ad on a streamer costs 56% more than on linear TV, Netflix hopes that it’s tapping into a well of new revenue that will subsidize the lower price of the coming ad tier.