Netflix Is Showing Its FaNgs

By TechNext Archives
Cover image for  article: Netflix Is Showing Its FaNgs

I bet my career (quite literally) on stage at an event when I worked for The Trade Desk many years back, that Netflix would have to go ad supported. The long-anticipated launch of ads on Netflix is nearly upon us. So now the "N" in FANG is about to show its teeth. The launch could and should represent a shift in TV and CTV. Since Netflix does not face the legacy issues that broadcasters and cable networks do, it could re-write what and how we think about TV and CTV.

While writing the future is exciting, they face some of their own challenges related to their content. The content was not designed for ads and likely their production and carriage agreements did not contemplate ads since Reed was so dead set against it. In addition to content, their subscribers expect/expected an ad-free model, and many have gone there because of this.

A few questions I have been pondering as I think about this launch:

  1. What should the future of TV be if you could write it?
  2. What is the most ideal ad experience for the user to not impact churn and help with user experience?
  3. Should there be pods or a completely new ad experience that is more relevant and useful for the consumer and should that include some version of interactivity and shop ability?
    • Should all ads be made custom for Netflix and the content vs the standard 15s or 30s we have come to know? Meaning, are there more snackable style spots like TikTok has had success with?
    • Should they require audience targeting and associated creative to ensure everything a consumer interacts with is relevant?
  4. Should pricing be based on attention or some other metric than CPM or a hybrid model?

Several of the questions above do entirely break the mold of how we think about TVtoday. The question is whether Netflix is chasing revenue to make up for their losses or if they want to deliver a truly differentiated model and write the future of TV advertising as we know it -- as they could and should have before the launches of Peacock, discovery+, Paramount+ and others who have taken share. After all, Netflix should have been the ten-million-pound gorilla and honestly could have owned the market if they acted years earlier.

So, what will the future hold? Will the company show their teeth and take a bite out of Facebook, Amazon and Google?

The jury is certainly out, but the early indication (based on presentation to agencies and feedback from them -- not yet directly from Netflix) is that at launch they are making a few changes.

  1. Only one ad from any advertiser per hour
  2. A very high CPM
  3. A sizeable Upfront commitment based on a launch of 500k MAUs

All the above is based on early presentations so this may and likely will (hopefully) change. What will work in this model and what could bite them back?

Netflix viewers have been coveted as the Holy Grail. This has been an elusive audience and agencies and brands alike cannot wait to be on this platform. Candidly, I too am looking forward to having our clients buy inventory. However, most Netflix consumers prefer an ad-free model. Thus, the ad-supported Netflix consumer will be the consumer that already has many other subscriptions. While there should be a desire to use this platform from advertisers and agencies alike as it will be greatly beneficial, one must wonder how long it may take for rates to settle like other platforms had to do. With a lower reach and frequency, similar viewers from other platforms like it and a high CPM, does the value of "Netflix" match these factors? CMOs and agency leaders should be asking how they value this consumer and the Netflix platform. If Netflix sticks to the above early model, the CPM and reach frequency numbers coupled with the possibility of no innovation or change to the model, we must carefully measure the value here.

The way ads appear to be rolling out though seem to be following the model that all other streamers have. Let a bunch of large brands on board at high buy-in rates. There are agency leaders and CMOs likely lining up to be the first on the platform for their own personal brand benefit. Hopefully some of them will create some unique ads (ones that are award-worthy to add an award to their resume along with a first or launch partner). I am not suggesting there is not value here.

I am sure everyone can remember the launch of other platforms (Peacock, discovery+, Paramount+, etc.). The user experience was not great because the ads were from the same advertisers over and over and most with no targeting. On one of these streamers I could recite the Lowes and Charmin ads.

Netflix has an opportunity to bring in targeted ads so at least you do not have ad fatigue. One may argue that it will not exist since the frequency of any advertiser is one per hour, but time will tell. The devil's advocate in me wonders -- with a frequency of one per hour, how can you get the needed reach and frequency for the ad to deliver against brand or performance metrics? Time will tell.

Consumers now have an answer on what they should expect, starting with a $6.99 basic tier.

I am very excited to finally see ads from Netflix. If they innovate, they will give FANG a huge challenge and will likely take a bite out of the others. If they follow the path they seem to be going down, I also expect great things, but not as great as if they bring in some of the innovation suggested above.

Click the social buttons to share this content with your friends and colleagues.

The opinions and points of view expressed in this content are exclusively the views of the author and/or subject(s) and do not necessarily represent the views of MediaVillage.com/MyersBizNet, Inc. management or associated writers.

Copyright ©2023 MediaVillage, Inc. All rights reserved. By using this site you agree to the Terms of Use and Privacy Policy.