Netflix is about to become the shiny new toy in advertising when it launches an ad-supported tier in 2023.
While this news presents endless opportunities with this news, today, we know very little about Netflix’s advertising capabilities. So we can only start to explore what advertising on the platform will look like.
Here are a few items to consider to better prepare for what’s to come.
Targeting may be limited
Spotify targets ads against playlists, followed artists and music genres, among other personal listening preferences. Compared to Google and Facebook, these are pretty limited targeting capabilities. If Netflix also limits targeting to content consumption patterns, only brands with general use products (i.e. CPG brands) will be a sure fit.
However, through its partnership with Microsoft, Netflix could broaden its targeting options down the line. Microsoft owns LinkedIn, which allows for occupation targeting. It also has access to search history through Bing and browser history with Edge. This may eventually allow Netflix to offer more robust targeting options for advertisers.
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Large upfront buys are likely to be required
If Netflix’s ad-supported tier evolves like other platforms, brands will be required to make large, upfront ad buys at the beginning stages. Snapchat, for example, in the early days required a $500 thousand budget to buy-in.
As Netflix’s ad-supported tier takes shape, similar budget expectations could knock out advertisers aiming to be first-to-market. Minimums will eventually come down and Netflix will likely develop a self-serve platform, making later in the game the right time to strike and enter the mix.
Effective performance tracking is not yet available
How will advertisers know if their marketing efforts on Netflix are effective? As anyone could tell you, it’s a bit difficult to click an ad on a TV, and performance marketers in particular need to know that someone viewed an ad and then purchased a product. Without these metrics, performance advertisers can't make data backed informed decisions.
Ad format and placements are to-be-determined
It seems Netflix might place video ads before and throughout content, similar to commercial breaks on TV. But there's no reason they should stop there. Netflix is an innovative company with the potential to reshape the ad formats we’re used to.
Standard pre-roll ads just won’t make the cut. There are opportunities for ads on Netflix’s content menu screen, through sponsorships or even on digital billboards within a show. Advertisers may want to wait for these opportunities to come along before jumping in.
We don’t know enough about the ad-supported audience
Who is going to sign up for Netflix’s ad-supported tier? It's hard to buy into a platform without knowing its reach and general audience. Netflix is continuously losing subscribers. It has also stated that some content will be locked behind its ad-free paywall. It's hard to make a recommendation about Netflix until we know more about the audience.
One day, Netflix will be a great option for advertising. But for now, it has a long road ahead to develop a strong platform in the best interest for brands and advertisers.
Patrick Lane leads media and analytics at MCD Partners.