As Netflix dives into the realm of ad-supported streaming, it’s clear that the video advertising landscape is about to experience a seismic shift.
With the streaming giant making its move, we sat down with Dave Morgan, CEO of Simulmedia, to discuss how Netflix’s new tier will impact the industry and what it means for advertisers, long-form video content, and the advertising world at large.
In light of the tough ad economy in 2023, Morgan believes that Netflix’s ad-supported tier is well-positioned to succeed. “It still has limited inventory as the ad tier just begins to scale.
Thus, it doesn’t need huge commitments from advertisers, just modest commitments from a number of the top brand advertisers, and it doesn’t need to trade pricing for volume like fully scaled players need to when budgets are under pressure,” he says.
Morgan also thinks that an ad-supported Netflix reinforces the power of long-form video content as an advertising media, but doesn’t undermine the short-form success of platforms like TikTok and YouTube. “Its success is not mutually exclusive to Netflix’s success,” he says.
When asked about the impact of Netflix on industry standards, go-to-market strategies, and thought leadership in the video ad industry, Morgan has high expectations. “A lot,” he says, adding that Netflix’s leaders “(Jeremi Gorman and Peter Naylor) are super smart, well respected and have done this before. We need leadership around native streaming capabilities in the ad community, and I am sure that they will step up and take the mantle.”
Morgan also has strong opinions on how the advertising industry can inspire and ennoble the commercial world and contribute to the regeneration and redemption of mankind.
“We need to make access to high-speed broadband affordable and ubiquitous for everyone… We need to rebuild community-centric local news and information platforms with the demise of the local print media and the shrinking of local TV news.
We need news content that can be anchored in news, not just opinion. That will have to be ad-supported because if news requires subscriptions and broadband fees, those who need it most won’t be able to afford it.”
As for other players in the industry, Morgan suggests that now is the time for major streaming and linear TV players to go for “leap-frogs” and find ways to improve their ad experiences. He highlights the importance of embracing new creative formats, enabling targeting without leaking user data, and solving annoying issues like ad frequency capping.
Morgan is also critical of the current state of programmatic ad-tech, especially in the face of the growing popularity of Connected TV (CTV) ads. “We need to dump the banner-born programmatic approaches for more natively-focused CTV platforms and approaches,” he says, adding that the margins taken by programmatic platforms are “outrageous” and the lack of transparency is “dragging our industry down.”
In terms of creative strategies for advertisers during the ad recession, Morgan sees this as a great time to focus on user experience and reduce the frequency of irrelevant ads. However, he admits that he’s “not hopeful that it will happen this year.”
Discussing the potential for the advertising industry to leverage the power of advertising to inspire and ennoble the commercial world, Morgan calls for more people in the industry to speak out about the parts of the business that need fixing.
He believes that the industry can do better by turning back the clock to the days when advertising helped people live healthier lives, find products they needed, and created scale in consumer goods sales that made them affordable to the masses. “We need to turn back the clock to the days when advertising helped people live healthier lives, find products that they needed and didn’t know existed, and created scale in consumer goods sales that made them affordable to the masses. We can do so much better than we are today.”
Dave Morgan’s insights provide a thoughtful analysis of the impact of Netflix’s ad-supported tier on the video ad market and the industry as a whole. As the industry navigates challenging times, his suggestions for improvement and evolution are worth considering.
By focusing on user experience, embracing innovation, and prioritizing transparency and ethics, the advertising industry can continue to thrive and contribute to the betterment of society.
