Netflix Exploring Possibility of Building its Own Advertising Tech After Deal With Microsoft Expires
Ever since the furor that arose regarding the initial details of Netflix’s plans to curb password sharing, there’s been far less news about its ad-supported tier. Netflix first launched an ad-supported price plan in November 2022, partnering with Microsoft to help build its advertising platform.
A new report from Digiday suggests that the Netflix-Microsoft partnership may not be long for this world. The report indicates that Netflix is potentially exploring whether or not it will continue to buy advertising technology from outlets like Microsoft, or whether it will bring its advertising in-house and build its infrastructure from scratch.
When Netflix first began exploring the launch of an ad-supported tier, it had no experience in advertising whatsoever. Company executives had been staunchly opposed to ads on the service in the past, but two straight quarters of subscriber losses to start 2022 helped open their minds to the possibility.
Still, the company needed help to get an advertising platform up and running quickly. Microsoft stepped in to be the streamer’s exclusive sales channel and ad server for its commercial inventory. The two companies signed a deal that continues through 2024, but indications are that Netflix won’t renew when the time comes.
That’s because the streamer apparently feels that it can carry on by itself after that introductory ramp-up period. The company has hired Jon Whitticom, once the chief product officer for Comcast’s ad tech group, to act as an “advertising platform advisor.” Whitticom will be tasked with guiding the company in future decisions as to whether to buy ad technology from another company or just build it in-house.
There are advantages to both routes, according to strategic insight firm employee Brian Wieser.
“Building takes a while, but on the other hand… if you buy some other entity [with a full ad tech suite], then you’d have to abandon other revenue streams which means you’re paying for something you’re not going to get,” Wieser told Digiday.
What does all this mean for the consumer? Initially, not much will change. Netflix likely won’t back out of its deal with Microsoft before 2024, so users of Netflix’s Basic with Ads plan likely won’t notice any major overhauls in the advertisements they see. After that, however, there could be shifts in the ways ads target users by demographics, or in the way the streamer uses customer data to build more relevant advertising partnerships.
The willingness to shift away from Microsoft could be another indication that Netflix’s ad-supported tier is not performing up to expectations initially. A survey from January showed that only 12% of Netflix users were on the Basic with Ads plan, which was likely below internal targets. Basic with Ads reportedly saw double the number of sign-ups for that tier in February over the previous month’s figures, but the possibility of the service leaving its deal with Microsoft could mean that Netflix is still unsatisfied with the results.
The world’s largest streamer has shown a willingness to innovate time and again since the long-gone days when it was primarily a disc-rental-by-mail service. Those innovations could soon include new methods of advertising, if the company decides to leave its deal with Microsoft behind in 2024.
Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.
Netflix offers four plans — on 2 device in HD with their “Standard with Ads” ($6.99) plan, on 1 device in SD with their “Basic” ($9.99) plan, on 2 devices in HD with their “Standard” ($15.49) plan, and 4 devices in up to 4K on their “Premium” ($19.99) plan.
Netflix spends more money on content than any other streaming service meaning that you get more value for the monthly fee.