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Netflix Tells Advertisers That Ad-Tier Subscriptions Doubled in January – Report

The news comes after a weak start to the ad-based plan upon its November launch.

A man with dark hair and beard wearing an unmarked baseball cap; still from "You."


Courtesy of Netflix

When Netflix launched its ad-supported subscription tier in November, the initial sign-ups numbers could charitably be described as “soft.” In its first month of availability, the ad-tier reportedly accounted for only 9 percent of new signups, with only 0.2 percent of total U.S. Netflix subscribers on the “Basic with Ads” plan.

Now, however, it looks like Netflix’s dive into advertising may be starting to pay off. According to The Information, Netflix has been informing its advertising partners that sign-ups to the new tier have doubled over the course of January compared to November.

Netflix did not immediately respond to IndieWire’s request for comment on the increase in sign-ups.

As with many Netflix metrics, there’s a caveat here: the streamer reportedly did not inform advertisers the actual number of sign-ups in January and the total number of subscribers on the tier. Last fall, when Netflix began making deals with marketers to support the tier, leadership reportedly estimated that the tier would draw 1.75 million subscribers by the end of its first quarter of availability, roughly 2.4% of Netflix’s overall North American subscriber base.

By comparison, when HBO Max’s ad tier launched for $9.99 a month in June last year, subscription analytics firm Antenna reported it drove 15 percent of new signups in the United States during its first month, with 14 percent of new customers downgrading from the premium tier.

Hulu, which has offered an ad-tier since 2007, has roughly 57 percent of its userbase on its ad-tier. Hulu, which is owned by Disney, has reportedly become Netflix’s main inspiration for how it will build its ad tier, with Netflix Chief Financial Officer Spencer Neumann comparing their tier to Hulu’s during the quarterly earnings call. In addition, Netflix has hired several former Hulu members to build out its nascent ad sales team, including Peter Naylor, who leads the team.

According to The Information’s reporting, advertisers have had issues with Netflix’s advertising offering, with the service apparently being expensive in terms of ad spots and offering limited ad targeting tools. In addition, November saw many campaigns fall short of targeted viewers reached on Netflix, with some falling short by as much as 50 percent.

That said, ad performance has reportedly improved since the service launched, with January seeing ads approach 100% in terms of targets. In addition, Netflix plans to improve upon its ad targeting — which currently only targets users by broad age category, as opposed to other demographic categories like gender — in the coming months. According to The Information, ad executives have been willing to give Netflix the benefit of the doubt, given the newness of the ad tier.

“It has been horribly overblown how much they are underdelivering by,” Horizon Media Chief Investment Officer David Campanelli told The Information. “It’s a brand-new product that was launched from zero homes at the start. Our expectations were not underdelivered on.”

Netflix’s ad tier came as a concentrated push to increase the streamer’s subscription base and strengthen its revenue stream following a messy year filled with stalling subscriber growth and falling stock. In its earliest days, before it began producing original shows, Netflix sold itself on its lack of ads.

Even as the company grew, its leadership remained resistant to the idea of an ad tier. In a Q4 2019 earnings call, former CEO Reed Hastings said “We want to be the safe respite where you can explore, get stimulated, have fun, enjoy, relax — and have none of the controversy around exploiting users with advertising.” Evidently, the switch-up in Wall Street’s views of streaming — now valuing profits over subscription numbers — made those fears of exploitation go away.

In addition to the ad-tier, Netflix has also responded to their 2022 losses through measures to curb password sharing, or the usage of another person’s Netflix account from an non-subscriber. On Tuesday, Netflix announced a new method to curb profile sharing, mandating that users log into a specific WiFi address every 31 days in order to avoid being kicked out of their account.

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