Coinciding with Upfronts, Netflix this week disclosed momentum for its streaming plan with ads, as well a move to bring ad tech in-house and partnerships with The Trade Desk, Magnite and Google.
Netflix with Ads now counts 40 million monthly active users across 12 countries. The ad tier was first introduced in late 2022 and the latest metrics are up from 5 million MAUs a year ago and the 23 million MAUs Netflix last disclosed in January. The plan with ads is driving over 40% of all Netflix signups in markets where it’s available. And viewers on ad-supported plans are watching for healthy clips. According to the company, over 70% of its ad-supported subscribers watch for more than 10 hours a month, which Netflix said is 15 percentage points higher than its nearest competitor, per Nielsen data – while more than 50% of viewers on its ad plan watch the streaming service for more than 20 hours per month.
While seeing ad tier subscriber traction, Netflix still has work to do on the advertising capability front and has decided to bring ad tech in-house. This week the company said it will launch its own advertising technology platform by the end of 2025, providing advertisers with expanded ways to buy, measure impact and utilize new insights. Initially and up until this point, Microsoft had been Netflix’s main ad tech and sales partner.
“Bringing our ad tech in-house will allow us to power the ads plan with the same level of excellence that’s made Netflix the leader in streaming technology today,” said Netflix President of Advertising Amy Reinhard in a statement.
Speaking at a MoffettNathanson investor event Wednesday, Netflix VP of Finance and Investor Relations Spencer Wang discussed advertising efforts, noting ad plan user growth but also citing early days and indicating a need for patience as building up a new business takes time. That also means patience in advertising revenue catching up to subscriber gains.
Citing several sequential quarters of strong ad tier subscriber growth Wang said, “there’s naturally a lag in the monetization of it as we grow our inventory and our supply but that’s a very fixable challenge for us.”
Two key factors in scaling the advertising business, according to Wang, include growing the ad plan base (which still pales compared to the 270 million total paid subscribers it has globally) and developing more capabilities for advertisers. Specifically, he called out measurement and verification capabilities, as well as improving Netflix’s go-to-market sales approach.
Netflix deal meaningful for The Trade Desk, Magnite – analyst
In addition to taking on more ad tech efforts itself, Netflix is expanding its DSP and SSP relationships for improved ad buying.
Microsoft is staying on as a partner, but Netflix is extending programmatic buying capabilities through DSPs The Trade Desk and Google’s Display & Video 360, as well as independent SSP Magnite on the supply side.
In a May 15 note to investors, Macquarie Research analyst Tim Nollen, said Magnite won’t touch Microsoft’s Xandr SSP that had been Netflx’s main supply-side partner up until this point, but it will integrate into all three DSP partners of The Trade Desk, DV360 and Xandr, and provide services on a global basis.
Testing with the new ad tech partners is expected over the summer. Macquarie views the announcement as benefitting both The Trade Desk and Magnite, although doesn’t expect material revenue contributions to either until next year.
Still, “the effect should be meaningful, both financially – especially for Magnite – and in terms of the statement this makes on both companies’ leading industry positions,” wrote Nollen.
And with Magnite providing services globally, over time, the firm believes the deal will deliver “a material revenue impact” to the SSP “as Netflix scales its programmatic efforts and seeks competitive auction dynamics and ad decisioning to power higher priced ad inventory.”
Eventually, the analysts expect Magnite will also be able to utilize its SpringServe ad server to deliver decisioning features for Netflix’s ad sales.
As for The Trade Desk, Macquarie noted the DSP will compete with DV360 and Xandr, along with direct sales teams at Netflix, where the firm expects it to perform.
“[A]nd as it has done successfully with CTV providers from Hulu to Peacock to now Roku, we expect TTD will win share of the transactions and eventually help guide Netflix from pre-sold ad deals to more private marketplace bidded transactions,” wrote Nollen. “These should bring higher CPMs to Netflix, greater ROI for advertisers, and a higher take rate for TTD.”
Netflix is the latest to partner with Google’s DV360 and The Trade Desk, with Disney in March announcing integrations with both partners on its own Disney Real-Time Ad Exchange (DRAX) for access to its streaming ad inventory.
Alongside expanded programmatic partners, Netflix this week touted a new lineup of vendors to help advertisers better measure and verify the impact of campaigns, including Affinity Solutions, DoubleVerify, EDO, Integral Ad Science, iSpot, Kantar, Lucid, NCSolutions, Nielsen and TVision.
And in a significant move this week that could also have implications for advertising, Netflix scored rights to live stream two Christmas Day NFL games in 2024, as well as holiday games in 2025 and 2026, under a three-year deal.