Ads are now a big part of most streaming services as they allow them to offer cheaper or free access to the content on the site. Netflix is among the several companies that used this method to create affordable ad-tier subscriptions. In doing so successfully, it makes sense for the company to invest in ads more.
Netflix's Own Ad Servers
The streaming giant has only introduced ads to the service in 2022, and it has been a success seeing as millions of users have opted for the ad-tier plan to save on costs. With ads being a huge part of the business, Netflix is not launching its own ad tech.
The company is currently partnered with Microsoft to develop its ad business, but with its own ad servers, Netflix will have better control over the content that it shows its subscribers, which means it can create targeted and personalized ad experiences, as per Tech Crunch.
Out of the 270 million subscribers Netflix has, about 40 million of them are ad-tier plans. If they're going to watch ads, it might as well be suited for them based on their preferences, although it's still unclear how the company determines that.
"Bringing our ad tech in-house will allow us to power the ads plan with the same level of excellence that's made Netflix the leader in streaming technology today," Netflix President of Advertising Amy Reinhard said.
In addition to that, the executive also mentioned that they are being strategic about how the company presents ads because they want their members to "have a phenomenal experience." They are, therefore, conducting deep consumer research for better advertisement practices.
There have even been reports stating that Netflix will stray from the traditional format of ads. Instead of the typical repetitive commercials, it wants to create "episodic" campaigns that will be more on the narrative side as they promote a product or service.
In a way, it's on-brand for Netflix to produce such as way of advertising, given that it's a film and TV show content-based service after all. It might even encourage more subscribers to switch to the ad tier since ads will be more bearable, maybe even entertaining.
Netflix's Success With the Ad-Tier Plan
Back in 2022, Netflix experienced its first subscriber decline in all its years of business. In response, the company introduced new plans and policies such as the password crackdown and the ad-supported plan for cheaper costs.
After just six months of release, the cheaper plan already had five million users. It has since grown to 40 million monthly active subscribers with the recently released numbers, which is almost twice the amount of ad-tier consumers in January when it was just 23 million.
Even with the decline, Netflix continued to be in the lead within the streaming service industry. Prime Video has 200 million subscriptions globally, and Disney+ has 154 million. Among the mainstream streaming services, Peacock is falling behind with just 34 million subscribers to date.