After months of speculation and hype, Netflix is poised to roll 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, launching November 3 at 9 PM, really offer marketers that are eager to access Netflix advertising inventory?
Unless brands are willing to allocate a 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.
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 subscriptions. 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.
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.
Netflix was initially short on specifics regarding its advertising products, but more details were released with the November 3rd 9 PM launch date announcement.
The Netflix with ads tier will officially launch for consumers on November 3 at 9 PM CT. This is when all ads will officially launch within the content. Inventory can currently be purchased through Xandr for the US, though it is close to selling out. Global markets will go live in November 2022, according to Forbes.
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.
Currently, CPMs are estimated to be in the range of $65-$80 CPM.
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.
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 will ads be on Netflix? How often will they be shown?
Netflix ads will be available in 15 and 30-second increments. These will be both pre-roll and shown throughout the program. At launch, Netflix plans to show around 4 to 5 minutes of ads per hour of programming.
Netflix ads will not be skippable.
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.
“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
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.
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.
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.
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