Despite Challenges, Netflix Says Its Advertising Level Is Doing Well – TechCrunch

In November, Netflix unveiled its long-awaited ad-supported tier, which offers customers in select markets, including the United States, the ability to offset the cost of a Netflix subscription by allowing their viewing to be paused. with commercial breaks. At the Consumer Electronics Show in Las Vegas, Netflix’s Global Advertising President Jeremi Gorman gave a first look at the product’s performance as well as the streamer’s future plans.

During an interview at Variety’s Entertainment Summit at CES, the executive said the company was happy with the early selection of advertisers and their diversity.

“It’s really across the board,” Gorman said of the variety of participating brands. “We see CPG companies, luxury companies, automotive companies…[and] retail. We see a wide range. It’s also good for the consumer experience, she noted, as it means viewers won’t be annoyed by one car ad after another. “There’s a wide variety of types of advertising, and I think we’ll continue to see that,” Gorman predicted.

The interview also touched on some of the early complaints and concerns about Netflix’s foray into commercials.

Among them is the major pushback the company has received over its high ad prices, asking for what one industry executive has dubbed “Super Bowl CPMs.” Gorman, however, justified the price, but admitted that the market will ultimately dictate what kind of price Netflix can get.

“From a supply and demand perspective, premium CPMs reflect two things: One is that we just couldn’t take that many advertisers. We certainly didn’t want to disappoint anyone. Then, secondarily, the premium content environment in which the ads are served, I think, justifies a high CPM. »

Whether Netflix constitutes a “premium environment” is of course up for debate. But Netflix seems to be adjusting its expectations.

“I think we’re certainly humble enough to understand that we’re leading the market, and on top of that, the market will more or less dictate to us what reasonable CPMs are,” Gorman said.

Another concern with Netflix’s ad-supported service is content that may include advertisements. Since the streamer was not initially set up as an ad-supported service, many of its content offerings did not include AVOD (video-on-demand) rights. This means that Netflix has limited advertising inventory and could not even serve ads against some of its own “Netflix Originals” if the offers did not include the appropriate rights.

Gorman also addressed this issue, saying that Netflix was actively working on licensing issues.

“It is progressing, as we speak, day by day. We’re renegotiating deals we made a long time ago,” she said, adding that the “vast majority” of the content people watch on a regular basis is available in the ad tier surface. In the meantime, Netflix has about 85% to 95% of its content available on the ad tier, Gorman said.

Then there’s the real concern that, from a business perspective, offering a lower-cost tier has the potential to cannibalize Netflix’s existing subscriptions as customers move to cheaper tiers at a faster rate that is not compensated by the growth in the level of advertisements. Gorman, however, played down those concerns, saying Netflix customers have historically stayed on the plan they are on now.

The exec, unfortunately, couldn’t speak to the adoption of the ad-supported product as Netflix is ​​set to report earnings, but said “we’re pleased with the growth we’re seeing.”

At present, Netflix ad level is available in US, UK, France, Germany, Spain, Italy, Australia, Japan, Korea, Brazil, Canada and in Mexico. The company has no immediate expansion plans, but in the longer term it would aim to target any larger advertising market. In addition to ads, Basic with Ads plan subscribers face lower video quality (HD 720p) and are limited to streaming from a single device. They also cannot download content to their devices for offline viewing.

Going forward, Netflix aims to do a little more than just run typical ads, including things like dynamically inserting ads near relevant times for marketers, single-show endorsements, and more. . This will also later allow marketers to target ads by age and gender.