Branding & Chill: Netflix Advertising Guide

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Corey Rice
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After months of speculation and hype, Netflix rolled out the most significant change to its business model since pivoting from DVDs to streaming: the option of a new basic ad-supported subscription. What does the new Netflix ads tier, launched November 3 at 9 PM, really offer marketers that are eager to access Netflix advertising inventory? 

Unless brands are willing to allocate substantial budget towards an OTT video buy that offers minimal measurement and targeting options, the initial Netflix advertising offering appears to be a shiny object that doesn’t offer much beneath the surface out of the gates.

Netflix with Ads: How it’s Going

As of mid-December 2022, the Netflix advertising solution was off to a slower start than the streaming giant anticipated. Digiday reported that Netflix was in the process of allowing agencies to take back the budget they’d allocated to ads that did not meet expected reach guarantees or those that have yet to run. Only around 80% of total guaranteed reach was met in some instances. Advertisers hoping to gain a specific reach over a set amount of time (particularly for the holiday season) have been able to reach their goals. Some of these advertisers have moved the budget and money to 2023 while others simply asked for the funds to be returned.

After just one month, the advertising tier does not appear to be growing at the expected clip, but the option and programming is still relatively new.

💬 What kind of ads succeed on Netflix? 💬
“Netflix’s advertising tier is a new product that needs refinement. For the current price, you can largely get more scale and features elsewhere. Due to the current reporting limitations and reach issues, it is not recommended that brands advertise on Netflix when they are hoping to reach a larger audience in a shorter amount of time. Instead, this placement should be considered for longterm awareness campaigns that can span a month or more.”
Brandon Pollard, Ad Operations, KORTX

Netflix with Ads: Potential Subscriber Numbers

The most important variable is how consumers will respond with their wallets to an ad-supported tier. Users conditioned by more than fifteen years of watching Netflix without any advertising with accounts currently may not be likely to adjust their subscription. Netflix is projecting approximately 3 million ad-tier subscribers in 2022, followed by a massive estimated increase to 40 million ad-tier subscribers by the end of 2023. As of December 2022 (one month after launch), the ad-tier is currently the least popular of all Netflix tiers.

These are lofty expectations given that Netflix has posted the slowest user growth of any OTT video provider in the past year.

Netflix Ad Tier Pricing

Source: Netflix.com

Netflix Advertising Impact on Digital Marketers

Ever since Netflix announced plans for the ad-supported tier back in July, digital marketers have been piecing together the slow trickle of details about how the platform will transact video advertising inventory through Microsoft and its recently acquired Xandr DSP. While brands are understandably eager for the shiniest, newest OTT opportunity to come along, they should also be prepared to wait for a seat at the Netflix advertising table.  

“We will have hundreds of advertisers worldwide for launch,” said Jeremi Gorman, president of worldwide advertising at Netflix, during a call with reporters on Oct. 13. She added that the service has “nearly sold out all of our inventory for launch.”

📍 Translation: Brands should be actively exploring and preparing alternate strategies to reach Netflix users while the first wave of high-rollers compete for costly and limited video ad placements.  

US Adults Netflix Ads

Advertising on Netflix – What We Currently Know

Netflix was initially short on specifics regarding its advertising products, but more details were released with the November 3rd 9 PM launch date announcement.

When did Netflix advertising options launch?

The Netflix with ads tier launched for consumers on November 3 at 9 PM CT. Inventory can currently be purchased through Xandr for the US, though it is close to selling out. Global markets went live in November 2022, according to Forbes.

What does the reach look like for Netflix ads?

Netflix is projecting approximately 3 million ad-tier subscribers in 2022, followed by a massive estimated increase to 40 million ad-tier subscribers by the end of 2023. These are lofty expectations given that Netflix has posted the slowest user growth of any OTT video provider in the past year. The number these subscribers individual ad buys will reach has yet to be determined. According to the Wall Street Journal, the ad-supported option is Netflix’s least popular tier, making up just 9% of total subscribers. Most ad-support users are either new to the platform or signing up for a second time.

How much does it cost to advertise on Netflix?

At launch, CPMs were estimated to be in the range of $65-$80 CPM. As of December 2023, the CPM dropped to around $55 CPM. While Netflix has lowered the price, the placement still remains the highest priced of all CTV placements with Disney+ following at $50 CPM.

What does targeting look like for Netflix advertising?

Targeting options will be limited to country and content-based categories at launch. Geo-targeting could be limited to large-scale DMAs in addition to nationally-targeted campaigns. There will be no Third-Party segmentation or First-Party retargeting.

How can I buy advertising on Netflix?

Advertising on Netflix can be purchased through the Xandr DSP or through an OTT partner (like KORTX). There are currently high, 7-figure purchase minimums to get started.

How long are ads on Netflix? How often are they be shown?

Netflix ads are available in :15 and :30 second increments. These are both pre-roll and shown throughout the program. At launch, Netflix planned to show around 4 to 5 minutes of ads per hour of programming.

Are Netflix ads be skippable?

Netflix ads will not be skippable.

What does measurement and reporting look like for Netflix ads?

Now: At present, Netflix is not currently offering any attribution for its ad buys, severely limiting the ability to measure the impact of your in-platform ads. With this model, Netflix ad purchases on the platform can only track one KPI – impressions.
Later: Starting sometime in 2023, advertisers will be able to use Nielsen’s Digital Ad Ratings to measure ads.

OTT Video Viewers by Provider

Pros & Cons of Netflix Ads for Your Brand

Just like any ad buy or marketing strategy, your team or brand should focus on whether or not Netflix ads work for your goals. While we’re still figuring out exactly how advertising before and during Netflix shows is going to shake out, the following pros and cons should be weighed before making a buy.

👍 Pros

  • Brand New, Captive Audiences: Being one of the first advertisers on Netflix will certainly help your brand stand out. If you’ve got the money and are simply looking to build brand awareness, this could be the play for you.
  • Placement Alongside Popular Shows: While Netflix numbers have declined, the platform is still one of the most popular ways to consume media. No one can argue that ads during the next season of Stranger Things or alongside the next sleeper hit (Squid Game) wouldn’t be great for your brand.

 👎 Cons

  • Expensive Ad Buys: Brands and businesses with lower budgets should not be investing in these ads just yet. The CPMs are incredibly expensive compared to other providers. If a Netflix placement is going to cost the majority of your marketing budget, skip it for this quarter or year.
  • Lacks Measurement:The measurement for Netflix ads is not as thorough as your other options. Marketers looking to track more complicated conversions or goals such as purchases, app downloads, store visits, brand lift, etc. will be disappointed with the only metric available (impressions).

💬 Are there alternatives to reaching Netflix users? 💬

“Marketers that are able to access a specific combination of data partners and inventory sources in their preferred DSP will be ahead of the curve when owned and operated Netflix ads quickly sell out and pricing soars. There’s no need to wait on the sidelines when a strategic data and inventory approach can reach Netflix users at scale outside the platform’s walled garden.”
Chris Rowell, Co-Founder, KORTX

Exploring Alternative Netflix Ad-Buy Strategies 

Luckily, brands and agencies that find themselves locked out (or priced out) of initial advertising opportunities can still reach Netflix viewers through a combination of savvy audience targeting and cross-screen programmatic inventory.

ACR (automatic content recognition) data partners enable digital marketers to reach users based on their previous Netflix content viewership at the genre or program level. The ability to target viewers outside of the Netflix viewing environment creates significant efficiencies for both data and inventory costs and also increases the options for layering on additional audience targeting attributes – something that the initial offering from Netflix will not provide.

The primary benefit of this targeting strategy is the ability to reach Netflix viewers across all devices and digital programmatic channels including Display, Video, OTT/CTV, Native, and audio. This allows marketers to meet Netflix subscribers on their terms, regardless of their location.

Netflix Ads: 2023 and Beyond

The platform will likely release more details as Netflix’s advertising options evolve. Following the November 3 launch and the remainder of 2022, marketing teams will learn more and more about the success of the brand-new ad platform and ad placements. For now, the industry will be watching closely. 

 📍Looking for a partner to help reach new audiences? KORTX can help!

Contact us to learn more about our digital advertising services. We’ll help you decide what advertising placements make the most sense for your brand and business goals.

Ask us about our CTV advertising options!

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Corey Rice
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