Netflix Seeks Premium Advertising Rates from Brands for Its Service

David Smith
Read Time3 Minute, 18 Second
Netflix

Netflix has been rushing to launch a lower-cost, ad-supported tier as it seeks new methods to earn income and attract more budget-conscious viewers. Since announcing its openness to advertising in April — a significant change for a company that has long marketed itself as a commercial-free haven — Netflix has taken several steps, including partnering with Microsoft to launch the service and hiring two Snap Inc. executives to lead its advertising push.

Buyer’s interest in Netflix

Some ad purchasers reported that Netflix informed them that an ad-supported version would be released on November 1. In July, Netflix stated that the next tier would begin in early 2023.

Netflix wants to regulate the amount any brand can spend annually on its platform at $20 million so that no business excessively promotes the service and viewers are not exposed to the same ad too frequently, according to several purchasers.

Netflix

Netflix stated in a statement, “We are still in the early stages of determining how to introduce a lower-priced, ad-supported tier.” “No choices have been taken.”

The ad buyers expressed amazement that Netflix would charge such a high premium for advertisements on an unproven platform. However, they noted that it is not uncommon for new players in the streaming industry to initially request high pricing before negotiating them down.

Since last week’s discussions with ad buyers, Netflix has chosen two new individuals to manage its advertising initiative: Jeremi Gorman and Peter Naylor, both formerly worked for Snap Inc. and whose jobs were revealed on Tuesday. Both are highly regarded on Madison Avenue and will likely bring other ideas to the continuing negotiations.

The Wall Street Journal recently stated that Netflix aims to be someday able to charge marketers approximately $80 for every 1,000 ad views by letting them target specific audience segments.

Brands had grumbled for years that they could not appear on the most extensive streaming services, such as Netflix, where customers — especially younger ones — were increasingly migrating as interest in traditional television declined. Warner Bros. Discovery Inc.’s HBO Max offers a commercial-supported package, while Walt Disney Co.’s Disney+ will debut an ad-supported version of its service this year.

Ad Campaign Details

Netflix

Initially, Netflix intends to sell 15- and 30-second advertisements that will show before and during some episodes, according to ad buyers. According to ad buyers, the business wants to limit the number of promotions to four minutes per hour of content, less than several other streaming services and significantly less than traditional television. Kantar, a research agency, reports that conventional television ad loads are typically between 18 and 23 minutes per hour.

Bloomberg News previously published specifics about Netflix’s ad business, including the company’s intended placement and frequency of advertisements. It was also reported that Netflix planned to launch its ad-supported platform in select markets during the fourth quarter.

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The buyers said Netflix wants businesses to commit to a year-long upfront ad buy by late September, similar to how traditional TV networks have worked for decades.

Ad buyers reported that Netflix allows advertisers to target specific groups of consumers but that the targeting is less precise than what they are accustomed to with web ads. Targeting people who are watching Netflix’s top 10 series in the U.S., allowing companies to target those who are watching a specific type of show such as comedy or drama, or targeting advertisements to a particular country are among the possibilities Netflix is providing, according to the spokespersons.

Advertisers and ad buyers had also hoped to expect an altogether new ad experience, as opposed to the standard internet ad model that has existed for decades. The Journal reported that some wanted Netflix to seek non-traditional possibilities, such as product placement and advertisements featuring the same performers as in the show.

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