Doors open as Netflix considers advertising

The news that streaming giant Netflix is considering adding advertising to the service is being met with optimism from marketing stakeholders.

Paul Sinkinson, Managing Director ANZ at marketing analytics company Analytic Partners, says the move will see an “influx of advertisers” wanting to get their brands seen on the platform due to the increase in reach that will become accessible.

“There is no advertiser that isn’t going to be happy with finding a spot on Netflix, from FMCG to automotive. We’re going to see a lot of experimentation – there’s no limits,” he says.

“One of the first steps for Netflix on this path is ensuring they price their inventory correctly. If we look at some existing platforms, the ad inventory is priced quite high with a low return on investment compared to alternatives. But Netflix has a strong content offering – it’s high quality, original, and exclusive. It’s content that will continue to make people choose Netflix, and it will continue to drive subscriptions even with this recent fall. I don’t believe we’ll see a huge increase in unsubscriptions even if Netflix begins rolling out ads.”

Andrew Gilbert, Head of Platforms Strategy at media owner/martech company Yahoo ANZ, agrees that this change will be positive for advertisers. 

“For a long time the market has been consolidated to a number of major players within the Connected TV sector from an advertising point of view. In this particular case, Netflix making a decision like this, alongside Disney Plus who recently has also entered this space, will benefit advertisers by delivering additional supply, and new environments for which they can get their marketing message across.

“It will also enable new growth to Netflix’s subscriber base by lowering the barrier to entry for consumers who didn’t want to pay subscription fees previously. It’s only a positive for all involved including Yahoo DSP when this supply becomes available.”

Gilbert says moves like this typically place priority on premium brand alignment to “maintain a high quality consumer experience”.

“I’d expect that in this environment you would see large household consumer brand names prioritised first, and then well-known brands within emerging product categories after in order to create a value exchange that Netflix is proud of.”

In terms of the local TV market, he says that SVOD platforms have largely been the area of Total TV that brands have not been able to access until this supply is released in the future.

“TV investment flows towards shows that drive eyeballs and attention. In its current state, this is seen as sponsorships and competition within peak TV viewing hours for shows like 7 Days and Country Calendar, and usually competition for supply is high.

“With Netflix and also Disney Plus entering the market, you may see a shift in share slightly, but overall you will probably see new brand entrants into the TV category which will stabilise this overall.”

So with data about to become a premium what does this mean for advertisers?

 “This development brings another level of fragmentation to consumer behaviour and the media consumption aligned with it,” Gilbert says.

“For advertisers coming out of a pandemic, it’s increasingly hard to know exactly where or how your target demographic is engaging with your brand and because of this the data you use to plan, target and measure across a consumer journey is of the utmost importance. If it tells you that new opportunities like this within Netflix or Disney Plus in the future makes sense then you’re in a great place.”