– Netflix’s ad-supported tier saw a 34% increase in membership quarter on quarter in Q2, as revealed in an earnings statement. The company did not disclose specific subscriber numbers for this tier, which had approximately 40 million global monthly active users as of May.
– The streaming giant is implementing significant changes to its advertising unit, including the development of an in-house ad-tech platform expected to be widely available by the end of 2025. Netflix is also expanding into the programmatic advertising space through partnerships with The Trade Desk, Google Display & Video 360, and Magnite.
– As Netflix refines its strategy, it is parting ways with Vice President of Ad Sales Peter Naylor, who joined the company in 2022 as the ad-supported tier was launching.
– Netflix executives have often described their vision for creating an advertising powerhouse as a “crawl, walk, run” process. The company appears to be approaching the “walk” stage, though not without undergoing some transitions.
– Naylor is the second major ad executive to leave the company, which is nearing its second year of operation. Jeremi Gorman, who joined Netflix at the same time as Naylor from Snapchat to serve as global ad president, departed in October. Amy Reinhard, formerly vice president of Netflix’s studio operations, replaced Gorman. Netflix is now seeking an executive to lead U.S. and Canada ad sales, as opposed to Naylor’s more global role.
– Netflix launched its ad business in 2022 with the support of Microsoft’s ad-tech and sales expertise, but is now focusing on developing an internal platform. The in-house ad tech is expected to be tested in Canada later this year before a global rollout in 2025. Concurrently, Netflix is forming new programmatic partnerships, adding The Trade Desk, Google Display & Video 360, and Magnite to its lineup.
– These efforts aim to help Netflix achieve “critical ad subscriber scale” by 2025. While the ad-supported segment is becoming a more significant revenue contributor, it will not be a primary growth driver this year or next, the company noted in a shareholder letter.
– Netflix faces increased competition in ad-supported streaming following Amazon’s introduction of commercials to Prime Video in January. Netflix is also moving further into live programming, such as sports, which are attractive to advertisers.
– User engagement appears to be strong as consumers deal with subscription fatigue and seek more affordable streaming options. Netflix’s ad-supported tier, priced at $6.99 per month in the U.S., now accounts for over 45% of sign-ups in all markets offering this option. Ad formats like pause ads, which appear when viewers take a break, have been tested by brands including Coca-Cola, Ford, and McDonald’s.