Netflix, the streaming giant that revolutionized the way we consume entertainment, is apparently considering a major shake-up in its advertising strategy. After partnering with Microsoft for its commercial-based subscription tier, Netflix is now contemplating building its own in-house adtech system for streaming advertising. Yes, you heard that right—Netflix wants to dive headfirst into the world of ads. And while it may seem like an unusual move for the platform that became famous for ad-free streaming, there might be some method to this madness.
The current partnership with Microsoft, which provides the technology behind Netflix’s commercials, is set to run for two years. But rumors suggest that Netflix might be eyeing a different path once the agreement expires. According to insiders, the streaming giant is exploring the option of building its own ad infrastructure or even acquiring Microsoft’s existing technology outright. It seems Netflix is determined to take control of its advertising destiny.
To understand Netflix’s motivation behind this potential shift, we need to look at its competition. With the rise of ad-supported streaming services like Disney+, Max, and Peacock, Netflix is feeling the pressure to keep up. It has been in talks with ad buyers to experiment with “episodic” campaigns, where ads are presented in a series of sequential spots rather than repeated ad nauseam. Such campaigns require direct relationships with consumers and advertisers, necessitating an in-house solution. Netflix wants to play in the big leagues and give its competitors a run for their money.
But why is Netflix considering parting ways with Microsoft? Well, let’s just say that Microsoft’s ad sales prowess in the connected TV (CTV) space is less than impressive. Even Xandr, the platform Microsoft acquired, is struggling to establish itself in CTV. Netflix, being the ambitious disruptor it is, wants to explore other options that align better with its vision and objectives.
So, what are the alternatives for Netflix? One possibility is to license or acquire smaller players in the adtech space, such as Magnite Streaming, Innovid, Publica, or Smartclip. These companies work with CTV publishers but might not offer the scale that Netflix requires. Another option is to acquire a smaller AVOD (ad-supported video on demand) or FAST (free ad-supported streaming TV) service with existing in-house adtech solutions. Fubo TV and Tubi are potential candidates, having built their own ad-serving capabilities over the years.
However, Netflix’s choices are somewhat limited. Most major AVOD streaming services have already acquired the necessary tools to support ads. Netflix finds itself playing catch-up in this regard. If it decides to build its own system, it can start from scratch or use existing frameworks like Kevel to expedite the process. With its substantial revenue of $30 billion per year, Netflix certainly has the resources to pursue this route.
But building an in-house tech stack is no easy feat. It requires expertise, time, and seamless integration with existing infrastructure. Netflix needs to assemble a talented team and gain enough experience to navigate the complexities of the advertising world. It’s a long journey, and it may take more time than initially expected.
While the ultimate outcome of Netflix’s adtech deliberations is uncertain, it’s clear that the company is serious about expanding into the ads business. The hiring of Jon Whitticom, a former Comcast executive, as an advertising platform advisor underscores Netflix’s commitment to exploring its options. With its massive subscriber base and unparalleled original content, Netflix has the potential to become a major player in the advertising world. And let’s face it, they could use the additional revenue to fund those extravagant production budgets.
Netflix’s foray into advertising hasn’t been without its challenges. When the commercial-based subscription tier was first introduced, media buyers were taken aback by the high CPM (cost per thousand impressions) prices quoted by Netflix. It was a rocky start, but the company has been quick to learn from its initial missteps and course-correct.
One thing is clear: Netflix is determined to disrupt the advertising landscape, just as it did with traditional television. By exploring options beyond its Microsoft partnership, the streaming giant is positioning itself to take control of its advertising destiny. Whether it chooses to build its own ad infrastructure, acquire existing technology, or form strategic partnerships, Netflix wants to be the master of its own advertising domain.
However, Netflix’s ambitions shouldn’t come as a surprise. The company has always been known for its bold moves and willingness to challenge the status quo. From revolutionizing binge-watching to producing award-winning original content, Netflix has shown time and time again that it’s not afraid to take risks.
If Netflix successfully builds its own in-house system for advertising, it could revolutionize the way ads are delivered and consumed. With its vast user base and sophisticated recommendation algorithms, Netflix has the potential to create personalized and targeted ad experiences that truly resonate with viewers. Gone would be the days of generic, repetitive ads. Instead, we could see innovative “episodic” campaigns that tell engaging stories and captivate audiences.
Of course, there will always be those who lament the introduction of ads on Netflix. After all, one of the platform’s biggest selling points has been its ad-free experience. But let’s not forget that ads have been a staple of television and other streaming services for decades. If Netflix can strike the right balance between ads and content, it has the opportunity to offer a unique and compelling advertising experience that sets it apart from the competition.
So, will Netflix succeed in building its own in-house advertising system? Only time will tell. But one thing is certain: Netflix is not content with resting on its laurels. It’s constantly pushing boundaries and exploring new avenues for growth. And whether you love them or hate them, you can’t deny that Netflix knows how to make a splash. So, brace yourself for the next chapter in the Netflix revolution—the era of Netflix ads.
