Netflix ad prices could be too expensive for some companies at $65 cost per thousand, according to a Wednesday report from The Wall Street Journal.
WSJ received this information from ad buyers who met with Netflix and its ad partner Microsoft last week. The price is higher than what streaming platforms typically charge advertisers, said the buyers. Some industry experts believe that the high price could limit Netflix’s ability to attract new advertisers. Others say that the price is justified because Netflix has a large and engaged audience.
Netflix is looking to increase its revenue after posting a quarterly loss of $133 million in April. The company has been investing more in original programming, which has led to increased costs.
Advertisers may be hesitant to pay the high price for Netflix ads, especially as viewership for the platform declines. Research company Moffett Nathanson found that Netflix lost about 2 million subscribers in the United States last year.
Netflix is charging too much for its ads, and media buyers won’t be able to get verified measurement from third-party sources like Nielsen and Comscore, according to a report from AdAge. Wait, what? So you’ll be paying a premium price and no way to validate the numbers?
There are a few reasons why no third party measurement is a bad idea for Netflix ad sales. First, it makes it difficult to judge the effectiveness of Netflix’s ads. Without outside measurement, Netflix can’t compare how its ads perform against those of other streaming providers or traditional TV networks. This means that Netflix may be wasting money on ads that aren’t effective, and it can’t learn from its mistakes to improve its advertising strategy.
Second, it makes it difficult for Netflix to compete for ad dollars. Traditional TV networks and other streaming providers can point to independent measurements to show that their ads are effective. Netflix can’t do this, which makes it less attractive to potential advertisers.
Ultimately, no third party measurement is bad for Netflix because it makes it difficult to judge the effectiveness of its ads, makes it less competitive for ad dollars, and gives it an unfair advantage over its competitors.
At those prices, Netflix may not be able to convince advertisers to buy in, especially without any verification of the accuracy of their measurements. The company has been investing heavily in original programming and has been ramping up its advertising efforts, but it may be tough to sell ad space at those prices.
Because Netflix is so new to advertising, there is very little targeting capabilities in the sense that most marketers interpret the term. Also, most of the commercials will run in proximity to shows of Netflix’s choosing with buyers having no say about what program content their ads are placed next to.
This can be a major issue for brands that are looking to specifically target a certain demographic with their advertising. And, even if brands are lucky enough to get their commercials placed next to appropriate program content, they may find that the real “premium content” on Netflix – shows like House of Cards or Narcos – excludes ads altogether
Netflix has responded to these criticisms by saying that they are still in the early stages of development for their advertising platform, and that they are working hard to improve it. They have also promised more sophisticated targeting capabilities in the future. But for now, advertisers should be wary about spending money on Netflix advertising. There are simply too many unknowns and potential problems.
