What Netflix Entering the Ad Business Means for Marketers

Netflix finally launched its commercials-supported subscription Basic with Ads, marking its entry into the advertising business. This has left many marketers wondering if they should jump on the opportunity. The answer is: It depends. Here’s what you need to know.  

• Point of entry: ~$1MM 
• CPMs: around $65 (depending on the category)
• Reach: ~500,000 subscriptions
• Limited targeting: e.g. genre, country
• Limited measurement: no IP passbacks, minimal post log type reporting.

So how should brands determine whether they should consider the media buy?

Taking advantage of a new prestige platform depends largely on marketing and business KPIs, your baseline brand awareness and of course, budget constraints. Here’s a framework to consider when evaluating Netflix as a channel:

• If you had media dollars to invest, would you be open to testing new channels that may not initially perform as effectively as proven channels? If you want to be an early adopter and test what will work or needs optimization, this may be your moment
• Is targeting critical to your advertising strategy? The initial launch may be limited in data and targeting
• Is measuring performance through ROAS and incrementality a necessity? If you do have testing dollars and are not hyper-focused on specific measurement outcomes, this may be a play for you.

What happens next? 

The opportunity to run media on Netflix will grow over the next few years. Once data becomes available, more brands will begin testing Netflix as a CTV SVOD channel. The premium nature of the content and access to quality programming will position Netflix to win audiences back and capture new customers looking to cut their TV entertainment costs through the ad supported option.

Immediately, though, the rollout will most likely follow the footsteps of the launch and rollout of Peacock back in 2020:

• Top brands in leading verticals will be the first movers to test the waters
• Initial data and case studies will guide pricing for both the advertiser as well as subscriptions
• Pricing will recalibrate several times over the next couple of years.

All in all, we’re excited to see Netflix enter into the advertising game, adding to opportunities for brands to invest in CTV campaigns – especially since they’ve waited 25 years to get here.  As the playing field continues to evolve with streaming advances, we will keep a close watch on Netfix’s subscription base and CPMs. Looking for support for your CTV and programmatic campaigns? Send us a note here.