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Kevin Krim November 6, 2022 3 min read

POV: Netflix’s Hotly Anticipated Streaming Debut

Netflix’s ad launch has been hotly anticipated for months. It’s one of the biggest new premium opportunities to become available in a generation – and they’ve assembled a dream team of respected advertising veterans – from Jeremi Gorman and Peter Naylor to Julie DeTraglia and Adam Gerber – to lead the new business.

It’s a “prove it or lose it” moment for streamers as Netflix and others launch ad-supported tiers to their subscription models. I was able to catch up with reporters at Yahoo! Finance, Marketing Dive, Insider, and Broadcasting & Cable last week to share my thoughts.

Yahoo! Finance: Netflix ad tier debuts at ‘a pivotal moment for the industry,’ ad exec explains

We may start to sense tension between Netflix’s premium niche programming that’s sourced from around the world and what is typically effective for ad-supported content. As a programmer, you tend to play it safe in order to attract the largest audience that will still be palatable to advertisers. That’s going to push Netflix into uncharted territory from a content strategy perspective.

Innovation will be fascinating to watch with a culture like Netflix, which wants to be different and wants to have a good user experience. Over time, I think we’ll see brand sponsorship integrations into the content itself. Netflix already does that quite a bit. It’s very low key, but they’re really one of the best in the industry.

Insider: Netflix is entering a new era with ads. Here’s how marketers and brands could influence the programming you see on the streamer

It’ll be hard for Netflix to maintain its long-tail, differentiated programming in an ad-driven model. If you’re pricing on impression and genres, you’re going to feel pressure over time to produce very popular content.

Digital advertising is increasingly being measured based on actions people take after seeing an ad, like searching for the product, which could incentivize certain kinds of content being made. EDO found that along with broadly popular shows, the kind of programming people like to watch in groups — like sports and reality shows — score the best in ad engagement.

Marketing Dive: High stakes: Netflix’s ad-supported tier arrives as marketers face uncertainty

Advertisers will be paying a high premium to advertise on Netflix — with uncertain results. The platform reportedly won’t have third-party measurement until at least early 2023. The stakes are high. Netflix knows that to create a sustainable ad-supported tier, those ads have to perform based on the outcomes marketers need to generate.

 As American families juggle inflation and rising gas costs, ad-supported tiers give them more affordable access to highly popular and premium TV content. This will be huge as the proliferation of streaming — including expansion of current platforms and newly introduced streaming services from major networks — continues. But will Netflix bring in new price-sensitive subscribers or will current subscribers trade down? That’s the only real risk.

Broadcasting & Cable: Madison Avenue Tunes In as Netflix Launches Ad Tier

As the measurement debate rages on, brands working with Netflix will need to leverage multiple premium video currencies — with signals such as reach, frequency, and sentiment ultimately delivering too little value, too late. In fact, brands are increasingly measuring their streaming ad performance by the actions consumers take after seeing an ad, like searching for a featured brand or product.

The right measurement innovations could, in turn, support investment in more compelling and varied programming. Netflix has pioneered mass-niche foreign-language programming like Squid Games and Extraordinary Attorney Woo. Those are very different programs than what reach-based pricing on broadcast or cable incentivizes. In this environment, the ability for advertisers to rapidly optimize their campaigns based upon insights on audience, program and even creative will matter more than ever.

Agree? Disagree? Drop me a line on LinkedIn to let me know, and check back on our blog weekly for fresh data, commentary, and insights on the latest industry news and trends.