News and Insights
Netflix Ads—what do we know so far?
April 7, 2023
The introduction of Netflix Ads
Netflix has become the go-to platform for streaming entertainment and has changed the way we consume content. During the COVID-19 pandemic, the platform experienced a record high number of subscriptions, but more recently in 2022 Netflix saw a decline in subscriptions. This has led to Netflix’s decision to introduce ads, starting with the low cost “Basic with Ads” subscription package in over a dozen countries.
While Netflix may be new to the ad-supported model, Connected TV (CTV) ads have been around for a while, with many platforms offering similar subscriptions from Hulu, HBO Max, and Disney+. From a marketing perspective, Connected TV advertising has been an efficient form of advertising, as it allows advertisers to access a highly engaged audience, more precisely target their ads and gain granular data in real-time compared to traditional TV media buying.
What should you consider if you want to set up ads on Netflix?
The launch of Netflix ads presents a huge opportunity for advertisers to reach a new Connected TV audience, given the platform’s massive user base of over 200 million subscribers worldwide. It also provides a chance to reach a vast number of users who may not use other streaming services besides Netflix. However, there are key considerations to keep in mind before shifting budgets from other Connected TV channels in favour of Netflix.
Targeting capabilities
One of the main limitations of Netflix ads is the current targeting capabilities. Advertisers are only able to target based on programming genres, featured movies, and shows on Netflix’s current Top 10 list, and by country.
The limited targeting capabilities of Netflix ads are a significant consideration for advertisers looking to reach a specific audience. Without the ability to target specific demographics, advertisers will not be able to reach their target audience effectively. However, Netflix has acknowledged this shortfall and has plans to expand its targeting capabilities in the future.
No tracking
Another limitation of Netflix ads is that there is no third-party attribution. Currently, within the current model, Netflix ads are only tracking impressions as a KPI. However, Netflix has plans to introduce measurement and additional metrics this year to help advertisers better understand the impact of their advertising on the platform.
While the current limitations of Netflix’s ad tracking capabilities may make it difficult for advertisers to measure the impact of their advertising spend on the platform. As these capabilities continue to evolve, advertisers may be able to gain a better understanding of the impact of their advertising on the platform and make more informed decisions about their advertising spend.
CPMs
Additionally, with a premium CPM of around $65, Netflix ads are significantly more expensive than other connected TV services such as Hulu, Amazon, and Disney+. In comparison, Hulu’s CPM ranges from $20-$45, and Amazon’s CPM ranges from $10-$25. The cost of advertising on Netflix is closer to the cost of traditional 30-second ad breaks on established broadcast TV channels. This makes Netflix ads an expensive investment for advertisers, particularly for smaller brands with limited budgets.
In the long term, it is likely that Netflix will allow advertisers to buy ad space programmatically, which will reduce the cost of entry for brands with smaller budgets. As the Netflix Ads develops, it may also become more affordable for advertisers to use. However, in the short term, the high cost of entry means that only larger brands with substantial budgets can benefit from Netflix ads.
While there are limitations to the current model, Netflix’s massive user base makes it an attractive option for advertisers. It remains too early to understand the consumer’s viewing experience and how audiences will engage with ads on Netflix, but for now, it presents a promising opportunity for marketers to connect with new customers and increase their brand exposure.
Conclusion
In conclusion, Netflix’s decision to introduce ads marks a significant change for the streaming platform and presents a new opportunity for businesses to reach a large audience. However, it is still early days for Netflix advertising, there are considerable challenges regarding targeting and measurement capabilities that need to be resolved before advertisers can create a reliable strategy. With upcoming developments in the pipeline, Netflix ads could become a more significant player in the advertising industry.
Meanwhile, if you have a paid media project you want to discuss, do get in touch! Our team is experienced in running successful cross-channel campaigns that deliver results.