Netflix’s ad-supported tier has reached 1 million monthly active users in the US, Bloomberg has found, suggesting its advertising business is gradually picking up steam.
The cheaper AVOD tier had a slow start in November, debuting as the least popular option of the streaming giant’s pricing plans. According to research firm Antenna, the ad tier accounted for roughly 9 percent of November sign-ups; that’s compared to 15 percent for HBO Max With Ads when that launched in 2021.
But Netflix Basic With Ads now accounts for 20 percent of new sign-ups in the US, Antenna data shows. The user base grew by more than 500 percent in its first month after launch, and another 50 percent in its second month.
Prior to the launch, the streaming company forecast its ad tier to reach 1.1 million US viewers at the end of 2022, and 13.3 million by Q3 2023. The specification of viewers rather than subscribers makes the results harder to gauge, and the figure is more likely to be affected by Netflix’s password sharing crackdown, as the streaming company hopes to convert account sharers into paying subscribers.
Picking up stream
For now though, advertisers are reportedly satisfied with the progress after a rocky launch period. In December, reports emerged that Netflix was offering marketers their money back after missing viewership guarantees on the ad tier by as much as 20 percent. Similar stories came out of Australia, where Netflix refunded advertisers when the ad tier underperformed by up to 70 percent.
Bloomberg reports that Netflix has now fulfilled its projected deliveries to advertisers, though insiders suggest that the company is less than satisfied with its advertising partnership with Microsoft. The company’s ad tech platform Xandr was notably untested in the CTV space, and Netflix is apparently exploring alternative options for when the deal wraps up next summer.
As a relative newcomer to the advertising business, Netflix is behind the likes of Roku, Amazon and Disney which have all bought their own ad tools. The company is now looking to take its ad tech in house, considering building or buying its own advertising stack.
At the same time, Netflix is planning to broaden its advertising offering over the coming months. In January, the streaming firm’s ad chief Jeremi Gorman admitted that the business launched with “minimum viable product”, only serving 15- and 30-second ads. The company plans to introduce single-show sponsorships and demographic targeting, according to Gorman.
