From DVDs to Ad Fees, Netflix Continues to Evolve

4 Min Read

When Netflix announced that they were launching an advertising-supported tier, speculation over the details of their future offerings spread like wildfire. From who they were going to partner with for the backend technology (Microsoft’s Xandr) to what exactly they were going to be offering advertisers (still unclear), the industry has been keeping a close eye on the streaming giant. This past week, industry chatter has been centered around the price tag of the upcoming advertising offering…and it’s not small. 

Netflix’s rumored CPMs are sky high

The streaming rumor mill may be even more active than that of an average high school. The latest on the former streaming prom king, Netflix? Rumor has it that they will be asking a cool $65 CPM for ads on their platform. 

Seem like a high number? It certainly is. The average streaming CPMs range based on several factors, from inventory to targeting, but often can price out to less than half of what Netflix is rumored to be charging. This pricing is more in-line with the premiere of a primetime show back in linear TV’s heyday. Even then, that price would have been limited to a special event and not the industry standard. 

Netflix has since released a statement addressing the rumors, saying “We are still in the early days of deciding how to launch a lower-priced, ad-supported tier, and no decisions have been made. So this is all just speculation at this point.”

It remains unclear exactly what Netflix is offering advertisers

The price is concerning not just because Netflix is potentially asking for more compared to their competitors, but also for the potentially limited package it supplies to its customers. Netflix is a newcomer to advertising; many others have been evolving their offerings based on advertiser needs over the span of many years. 

At launch, subscribers will likely need to opt-in to the advertising-supported tier. While surveys have suggested that many current subscribers would be willing to watch advertising if it means keeping their costs down, right now Netflix is only predicting 500,000 ad-tier subscribers at the outset. This small audience means advertisers would be spending a lot only to reach a limited amount of people. Plus, the high CPMs mean limited frequency across any single campaign. 

In terms of measurement, Netflix has yet to release what results advertisers will be given access to. Will Netflix provide reporting beyond the delivery of impressions? 

Performance-focused reporting would unlock valuable insights for Netflix’s future advertisers

Netflix was the original streaming superstar. With high-performing originals and quarter-after-quarter increases in subscribers, advertisers coveted placement within Netflix’s ad-free walled garden. Many large advertisers opted for the next best thing, buying product placement within these originals as a chance to get in front of this valuable audience.

Still, Netflix is a major player in the Connected TV space, and you can’t count them out yet. An ad-supported tier could help with their subscriber issues–but they need to handle it the right way not only for viewers but advertisers as well.

As Netflix builds out their ad offering, they’d do well to look at how CTV advertising has been used by marketers for more goal-oriented advertising versus just upper-funnel awareness and reach.

They have an opportunity to unlock their premium audience for advertisers and provide the reporting that would help advance business goals, rather than treating it as linear TV 2.0 that’s limited solely to reach. Netflix can (and should) build technology that helps advertisers tie actual outcomes to their campaigns (which has proven to be very successful for advertisers, case in point: MNTN’s Performance TV platform).

If they do end up having high CPMs, then the ability to offer advertisers measurable results will likely soften the blow because brands will have the reporting to prove it was worth the price of admission. While Netflix may be joining the advertising offering late, they have an opportunity to learn from others in the industry and create real results for their future advertising clients.