Cost-Per-Click (CPC): What Is It & How to Calculate
by Frankie Karrer
Min Read
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Netflix is stirring the streaming pot with strong numbers and a serious pivot in how they define success. Will others follow suit? The MNTN team weighs in.
8 Min Read
The Netflix Q1 2024 performance report is out. Not only did it cover the streamer’s recent results, it also came with news that might determine the future state of streaming measurement. Our team had some thoughts…
Cat Hausler (Content Marketing Manager): Hi all! Netflix recently released its Q1 2024 results. Overall, performance seems to be on the up and up — revenue, earnings per share, and net subscriber additions exceeded expectations. But not everything is sunshine and rainbows for the streamer… Despite a strong Q1, Netflix reported that growth could start to slow. They also said that beginning in 2025, they won’t be releasing quarterly subscriber numbers. As a result, shares took a dip. Would love to hear your thoughts!
Tim Edmundson (Sr. Director, Content): Their earnings show why they’re winning the streaming wars and the fact that they’re still managing to beat expectations on performance is pretty wild after all these years. What’s not too surprising however is the fact that they’re projecting subscriber growth to slow, since everyone and their mom have a subscription at this point.
Frankie Karrer (Associate Content Manager): Yeah — that might be more of a symptom of the streaming industry at large. As eMarketer recently reported, the high saturation in the number of Connected TV users has meant that we may soon see more slowing in new user adoption (there’s just not that many more folks who aren’t on CTV already!). So as one of the first streaming trailblazers, it makes sense that Netflix might be also slowing in subscriber growth right now, and want to focus more on other indicators of success.
Jacob Trussell (Content Marketing Lead): I also think what these numbers do is reinforce how growth is cyclical, and we shouldn’t always expect performance to go up and to the right forever. A boom in subscribers when a new experience is unveiled will always result in a slowdown the following year as the true baseline for future growth becomes more clear. Which means, likely, we’ll see that slowdown incrementally reverse the following year. Kinda like how CTV boomed, and now we’re in an incremental growth phase. It’s classic capitalism to expect every year to be a boom year.
Devon Maloney (Content Editor): Agreed, @Frankie. The combination of “good news for shareholders” and “strategic pivot in how we tell our success story” also seems very deliberate, like they’re underscoring their leadership in the CTV space and expecting everyone else in the industry to eventually follow suit. What do we think Netflix will be using as The Key Shareholder Metric going forward, if not subscriber count?
Jacob Trussell: I wouldn’t be surprised if they invented their own new metric for success! They’ve positioned not sharing subscriber growth numbers as semi-routine, that they hit a certain threshold that makes those numbers relatively irrelevant to shareholders and advertisers alike. But I don’t think that reason is strong enough yet to save themselves from the, frankly, slightly bad optics of this decision. I even think it opens them up to suspicion, questions on why they feel like they need to keep those numbers close to their chests. Personally, when a major enterprise company says “you don’t need to see those numbers” all it makes me think is “Oh, we should probably see those numbers.”
Devon Maloney: ✨Pay no attention to those numbers behind the curtain✨
Tim Edmundson: For the industry leader, I see it as a bit of a power move — the other streaming networks are very interested in showing subscriber growth because they need to grow subscribers. Netflix, on the other hand, already won that war (or at least the very big battles thus far) and can now go on to say, “We don’t need to play that game anymore, so let’s define success with something else.”
Devon Maloney: Yeah, I was also thinking about how the numbers are outrageously high as they are, and if the password crackdown is any indication, subscribers aren’t exiting en masse any time soon.
Jacob Trussell: I think the fact there wasn’t a mass exodus of subscribers after the password crackdown just helps Netflix remain firm about their thought that price increases have no ceiling. But, and I don’t want to precariously throw around the word “greedflation”, what other non-essential consumer service has increased 43% in five years? Netflix will eventually hit a ceiling, and I frankly think they are going to find it sooner than later. Execs at Netflix don’t feel price increases in their wallets like the average consumer does, and I think that means the ceiling may sneak up on them. So while they may see this sort of infinite price growth, it very easily could come back to bite them.
Part of their reasoning for increases is that they are increasing the value of their service with new shows. But ask yourself: how many new shows have they released in the past five years that made a cultural impact that keeps folks on the platform that justifies this fastly growing cost? All I can come up with is Bridgerton, Squid Game, Wednesday, The Queen’s Gambit, and maybe The Witcher, if I’m being generous. That’s five shows in five years, with the latter two already losing a lot of their cultural cachet. Does five major shows in five years feel like accurate justification for a 43% hike? For some, yes, and for others, no. We’ll see how many of those yes’s start to turn to no’s if they increase their price yet again this year.
Matt Collins: To play devil’s advocate a bit here, Netflix has the resources to offer a portfolio approach to their programming. They can invest in the culturally relevant programming that gets people talking — if we were still working in-office, I’d want to talk about the “3 Body Problem.” But that portfolio is expanding to include live programming, sports, and familiar shows in re-run. It’s their breadth and their depth that makes them so formidable.
Jacob Trussell: Great point! Branching out into other styles of programming will certainly add that perceived value they’re hoping for.
Matt Collins: Returning to Tim’s comment on Netflix’s positioning — I agree. Netflix has become indispensable for many users. That’s a far cry from how newer entries are perceived. So now, I expect Wall Street and Netflix to focus on average revenue per user, or ARPU, and making every ad impression as valuable as possible.
Mel Yap (Content Marketing Lead): I think the fact that they’re prioritizing other metrics like engagement — how long people spend on the platform — indicates how important the viewing (and in turn, ad experience) is going to be for both networks and the brands that advertise on them. Since they were the pioneers of the streaming space, it’s only a matter of time that the industry as a whole will eventually follow suit on how they report on their numbers. Greg Peters, one of Netflix’s CEOs, said here that the “number of members x monthly price” calculation is becoming less accurate with multiple ad tiers/price points.
Stephen Graveman (Content Marketing Manager): Having been in the game for so long, and with the largest subscriber base, Netflix surely has a wealth of longtail user data that no one else can claim. I’m sure there’s a million ways they can slice and dice it to appeal to advertisers and investors outside of “X number of subscribers.”
Like Amazon, another trailblazer in the space who eventually hit critical mass, I can see Netflix occasionally updating with a press release when they hit a big round benchmark subscriber stat. But with so many streaming services competing for ad dollars and attention, maybe they’ll kick off a new wave of thinking for how these services define “success.”
Matt Collins: Netflix mentions ads and advertising eight times in its most recent shareholder letter, which clocks in at about five and a half pages, not including tables. It’s all about the ad tier these days at Netflix. Their audience, plus the data Stephen mentions, and the partnerships they are striking with the likes of Kantar, Lucid, and Nielsen Catalina Solutions increasingly will make them a must-have on media plans, especially for the biggest brand advertisers.
Tim Edmundson: I wonder if this earnings will be what the industry looks back on and cites as the moment Netflix really went all-in on advertising as their primary business.
Matt Collins: I think that’s right, Tim. I wonder how Hulu and Roku are taking the news.
Isabel Greenfield (Content Marketing Manager): I think it’s become clear over the past few years that great content alone isn’t going to be what carries these streaming channels to success and that advertising is an essential part of staying afloat. However, I feel that Netflix has the advantage of having great content that makes it worth riding out the price hikes or signing up for your own plan if you were password sharing. It will be interesting to see how they strike a balance between providing great content (including the new verticals like sports and live events) and increasing the ARPU numbers that Matt mentioned.
Matt Collins: What a great time to be an advertiser. The shift to streaming is happening across consumers, networks, and advertisers. More ad options subsidizes costs for consumers, opens up more ad impressions for marketers, and creates new revenue streams for networks. It won’t be a straight up-and-to-the-right journey, as Jacob points out, but overall, the state of the union is strong, my friends.
Cat Hausler: Well, it looks like Netflix and Amazon will be making their first Upfronts appearances, so maybe we’ll get more info soon. To be continued…
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