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Netflix disappointed its advertisers with low subscriber numbers and pricey airtime

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Netflix has disappointed its big spending advertisers with low subscriber numbers and pricy airtime. There’s an easy fix

Netflix’s ad-tier is struggling (Netflix)

“THEY’VE PISSED EVERYONE off by overcharging and underdelivering.”

— Netflix’s new advertising-supported tier has disappointed its customers.

— No, not you and me…

— The ad tier’s real customers would be the world’s largest advertisers.

AS WE’VE PREVIOUSLY written, the tier has gotten off to a rocky start.

— Believe it or not, only about 1m people in the US subscribe to Netflix with ads.

— That means an astonishing 74x as many people are opting for Netflix without ads.

THAT IS OUT of whack.

— And it says that Netflix with ads, at US$6.99 per month, is way too expensive.

— What’s worse, apparently Netflix overpromised the number of eyeballs they’d deliver, meaning Netflix is having to literally refund money to their ad clients.

HOW’D NETFLIX GET here?

— The answer is two fold.

— First, Netflix priced their ad space too high, at US$65 CPM (That’s fancy mediaspeak for 65 bucks for every thousand “impressions,” which itself is fancy mediaspeak for how many times an ad is served up.)

— This CPM has since come down to US$55.

— Still high though and, for an advertiser, it’s multiples higher than the cost of buying ad space during popular YouTube videos.

ALSO, WORD HAS it that Netflix knows surprisingly little about its subscribers. 

— A large part of the whole reason to advertise online (versus tv) is the ability to focus your ad spend by narrowing your reach to certain demographics, or interests, or even lookalike audiences (that’s fancy online advertisingspeak for a group of users that share some sort of characteristics with another group of users.)

— Another big reason brands advertise online is, of course, the ability to measure the outcome of their ads.

— In other words, if you advertise on Instagram or YouTube, you will totally know if someone clicked through your ad to visit your site.

— Netflix doesn’t really allow for any of this.

— So, for advertisers, buying ad slots on Netflix is kind of the worst of all worlds: expensive, not very finely tuned, and not click through-able either.

ALL THAT SAID, ad people are optimistic Netflix will figure it all out.

— Last year, Netflix poached a couple of ad sales execs from Snap (a company that seems to have an iffy business model itself).

— And Netflix is considered a “prestige placement.”

— What that means is, as the thinking goes, having your ad interrupt Wednesday, Stranger Things, or Bridgerton is much, much better than having it show up on some random YouTube creator’s page.

— But, like, is it? Or is that kind of thinking an old school advertisers' mentality?

— An “impression” is an impression, and if it’s a quality ad, it should have the desired effect, no matter where it shows up.

THE REAL SOLUTION to all of this has been staring Netflix right in the face…

— …if Netflix has been reading this newsletter for the past year, that is.

— Lemme explain.

— I’m a huge fan of this thing I call “The Deal.”

— The Deal is my nickname for the advertising supported media business model, and it goes like this:

Show me what I want for free, and in exchange I’ll look at an ad every now and then.

— It’s worked for every gigantic media business for over a century, from radio and television to Google, Facebook, YouTube, and more.

— Even Amazon has an enormous ads business that makes the company an astonishing US$38b per year.

— (For the record, that’s more than any traditional media company makes, and it’s bigger than the entire global newspaper industry.)

— Once more, for the Netflix decision-makers in the house: Show me what I want for free, and in exchange I’ll look at an ad every now and then.

FACE IT NETFLIX, creators and consumers own the media landscape today.

— Last issue, we quoted a media expert who observed just how substitutable every thing is in the Internet age.

— Netflix has got to know that AI and amateurs are poised to create almost every bit of content we consume, and that most of that content is gonna be gratis, too.

— It’s time for Netflix join the new (old) media world, and make its ad tier free.

More:

Netflix’s CPM still under media buyers’ skin months into its disjointed push into advertising »»

Netflix ad supported tier is getting traction »»

YouTube CPM Rates By Niche (YouTube CPM Guide) »»

Retail, search and Amazon’s $40bn ‘advertising’ business »»

Written by Jon Kallus. Any feedback? Simply reply.

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