How Netflix’s Ads Announcement Could Change the CTV Landscape
Netflix has been in the news a lot over the past few days, but not for the same reasons in recent memory when subscriptions and viewing hours soared during the pandemic. Instead, on April 20, 2022, the streaming service announced a loss in subscribers that sent the stocks plummeting 35% during a year when they were already down 40%. This is a trend that is echoed throughout the industry, as CNN+ announced it was shuttering it’s doors mere weeks after launching their service. This news has been a wakeup call to the industry, as they begin to understand they’ll need a better monetization model in order to survive in such a competitive environment—and Netflix didn’t take long to address this. Recently, CEO Reed Hastings announced he’d be considering a lower-cost, ad-supported service for the platform. Let’s discuss how this could affect the CTV landscape.
The Best of Linear TV with the Power of Programmatic
The whole reason for Netflix’s popularity is that it offered the ability for consumers to choose the content they wanted to watch and, in the manner of shows, how much they wanted to watch at once. Even still, at the end of 2020, the company announced the launch of a linear (think traditional) TV channel called Direct, which eventually evolved into their feature allowing users to let Netflix what to stream. The move allowed Netflix to avoid complicated linear television advertising models, something that many current companies must juggle with their newer, digital-streaming services. But they were still missing an advertising-based option.
So, for Netflix, the announcement really couldn’t have come at a better time. The CTV Market is growing quickly and across multiple different streamers, giving marketers all of the best attributes of linear TV with the power of programmatic targeting, actionability, and attribution. Netflix will be able to harness this, without the clumsiness of simultaneously managing Linear streams. However, they’ll need to develop machinery to help them do this, as the market for streaming is hot, and their competitors are certainly taking notice.
Benefits Not Only Abound for Marketers, but Consumers too
One of the best things about Netflix’s announcement is that it doesn’t just benefits marketers, it also benefits consumers looking for more options and a better viewing experience. For marketers, it gives them a hefty boost of extra scale. Netflix is still the largest streaming service in the United States in terms of their total number of subscribers, allowing marketers to reach consumers, while in their homes, that they otherwise wouldn’t have been able to get in front of.
For consumers, Netflix’ streaming options have long outpaced many of their current competitors in terms of how high they price. With inflation at higher levels than we’ve seen in decades, this ad-based option gives consumers a cheaper way to subscribe, or re-subscribe, to the service. Importantly, it also means that as these new consumers join, they won’t be inundated with batch and blast ads but rather with personalized experiences from the brands they love the most. Finally, the lower price stands to see Netflix begin adding in net new subscribers at a healthier rate. This increase in revenue will allow Netflix to re-invest in content deals and original content, further supporting their subscription goals.
Offering Greater Reach with the Right CTV Partner
We know that Netflix CTV will enable the platform to grow, giving marketers an extended audience reach and a way into the TV business that doesn’t rely on the production of costly, primetime commercials. But, it’s important for marketers who want to break into the space to choose the right partner who can help them reach audiences across Netflix and all other streaming services that offer an ads-based option. When RFPing for a CTV partner, ensure that they have the ability to transcend the walled gardens of the fragmented streaming landscape and enable you to serve ads at the app level. This gives you the ability to reach customers whether they’re watching on Roku, Hulu, AppleTV, or any one of the other many options that exist.
Additionally, that fragmentation in the streaming industry has ensured that many users are dropping and joining new and old services at a faster rate than ever before. With an app-based CTV partner, you won’t have to guess which apps your customers are using the most—the work will be done for you.
The Bottom Line
Netflix has over 200M subscribers already at it’s disposal. By offering a lower cost solution, they’ll be able to drive even more subscriptions at a quicker rate. Combine that with the addition of new ad revenue and they should have even more resources to fuel their content machine, driving those subscriptions even higher. With such a large, reachable, and engaged audience, we expect them to be a major player in the ads space.
Still, Netflix is likely a year or two away from rolling anything like this out. To ensure you aren’t getting left behind, reach out to a CTV partner who can help craft an individualized plan that meets your business needs today. Until then, we’ll keep our eyes out for more announcements surrounding an ad-supported service. After all, each one proves to have reverberating effects not just for Netflix but across the industry.