Netflix Announces Plans to Take AdTech In-House at 2024 Upfronts
Netflix is joining a long list of other companies to build out their own adtech. While the Upfronts and Newfronts are all about securing ad slots at the market rate for the upcoming year, there’s still a vig (interest payment) when you are dependent on others for pieces of your ad business. Paramount decided to work with vendors for some parts of their workflow as well as build other pieces, but Netflix will be joining a growing list of companies including Amazon, Disney, Comcast, Roku, Warner Bros. Discovery, and YouTube who went the DIY route.
It seems Netflix customers will watch ads and what better way to reap the bounty but by running their own tech? The ad account costs $6.99 a month, compared with $15.49 for ad-free. At their Upfront presentation on Wednesday, Amy Reinhard, Netflix’s President of Advertising, spoke about the growth of ad-supported accounts. They now serve ads to 40 million global monthly active users—up from 5 million a year ago. Over 40% of all signups in the 12 countries which have ad-supported plans.
Since we’re looking at worldwide numbers here, this seems like a leap to invest in creating all the infrastructure. In fact, there’s a job posted on their site for anyone who matches the description for Sr Manager, Advertising Business Operations (Live Operations), for a salary range for this role of $280,000-$600,000.
The financial press reported for first-quarter results that Netflix will plan to stop providing quarterly membership data and average revenue generated per member. The company sees second-quarter revenue of $9.49 billion, up 16%. One estimate from J.P. Morgan is Netflix should have around 19 million subscribers to the ad-supported service right now.
In-House Adtech by End of 2025
Their in-house adtech platform is targeting to be developed by the end of 2025. They are pitching this as giving advertisers new ways to buy, target, and measure impact. “Bringing our ad tech in-house will allow us to power the ads plan with the same level of excellence that’s made Netflix the leader in streaming technology today,” she said.
This summer, Netflix will expand its buying capabilities to include The Trade Desk, Google's Display & Video 360, and Magnite, who will join Microsoft as the main programmatic partners for advertisers. Another key part of the formula is having content which will work well with advertising. Celsius will be the first presenting sponsor for the upcoming live Jake Paul vs. Mike Tyson event this July. Brand partners for the fight will have featured placements throughout the broadcast and customized branding inside the ring.
"We’re being incredibly strategic about how we present ads because we want our members to have a phenomenal experience. We conduct deep consumer research to make sure we stay ahead of the competition, bringing opportunities that are better for members and better for brands,” said Reinhard.
Binge Ad Format
Netflix reports over 70% of their ad-supported viewers watch more than 10 hours a month—which is 15 percentage points higher than the nearest competitor, according to Nielsen. They also mention in the recent press release, “Netflix members also pay even more attention three hours into watching than they do when they first start. And because they do, they’re around twice as likely to respond to an ad compared to other streaming services and linear TV.” This really begs the question of how they are measuring this.
Starting in Q1 2024, there is supposed to be a new binge ad format for consumers watching multiple episodes in a row. After watching three consecutive episodes, the fourth episode is to run ad-free. In early 2024, the plan is to integrate QR codes in U.S. advertising.
Sponsorships is another area of focus, this will expand to global services in 2024, with title, moment, and live sponsorships. Frito Lay’s Smartfood did title sponsorship on Love is Blind and coming up, we will partner with additional sponsors for new reality series Squid Game: The Challenge, and final season of The Crown. Moment Sponsorships will feature cultural moments for advertisers to tap into like local holidays. Last November 14, T-Mobile, Nespresso, and others were Live Sponsors for Netflix’s newest live sports event, The Netflix Cup.
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