In line with Netflix’s new strategy to drive revenue after significant subscriber loss.
Netflix announced the move after reporting its first subscriber loss in more than a decade and the cutback of hundreds of jobs earlier this year.
It’s been public knowledge for a while now that Netflix has been experiencing difficulties. The streaming service has lost about 200,000 subscribers between January and March this year and after its shares have cratered by about 70%.
In a bid to drive revenue the new partnership with Microsoft will let subscribers choose a cheaper subscription plan, where they will be shown adverts, in an attempt to appeal to consumers who are seeking to cut back on costs.
There had been talks with several different partners to deliver advertising sales, including Google, and Sky owner Comcast’s NBCUniversal, before teaming up with Microsoft.
Microsoft acquired Xandr, AT&T Inc.’s advertising division, in December after recording $10 billion in advertising sales the previous year. According to Ari Paparo, who sold his advertising technology company to Comcast and later spent a few years working there, Xandr is a distant second in the field of video advertising.
“I think it’s a smart move,” According to Dave Morgan, founder and chief executive officer at Simulmedia, a TV and streaming ad-buying platform. “It’s become pretty clear since they bought LinkedIn and Xandr that Microsoft has recommitted to the digital ad business.”
At this moment, there isn’t much information on the partnership yet, or when we will be able to advertise on the new ad-supported option.
“It’s very early days and we have much to work through,” Netflix’s Chief Operating Officer Greg Peters said in a statement.
According to Kantar, Hulu, owned by Walt Disney Co., produced $2 billion in advertising revenue over a year that concluded in September. Hulu only operates in the US. According to Bloomberg Intelligence, Netflix could increase its revenue in the US and Canada by $1 billion to $3 billion with adverts.
How does this affect marketers? “This deal gives Microsoft something its growing ad business has lacked–quality streaming video inventory that has potential to scale. Microsoft, the fourth largest ad seller in the US, offers fewer conflicts of interest for Netflix than some other companies and it has strong relationships with a wide swath of advertisers.” Insider Intelligence Principal Analyst Ross Benes said.
More ad placement possibilities would be advantageous to us, especially on a network as huge as Netflix. Those who have been neglecting Microsoft or CTV advertising, in general, ought to take advantage of this opportunity.
This move from Netflix and Microsoft certainly leaves us with a few questions. Will there be a cross-pollination of audiences into Linkedin and Bing?
Will we be dropping the old ‘default browser’ stereotype we hear all the time?
Will there finally be a broader reach on Bing’s audience network?
The ongoing cost of living crisis, increased competition and the difficult global economic situation means that surely Netflix faces more subscriber losses in the future. This begs the question, how expensive will the ads be for advertisers to fill the void of subscriber loss?
Thoughts from Luke, Paid Media Director at Bind Media:
This is an excellent opportunity for advertisers who want to expand their footprint on Microsoft ads with richer ad experiences, beyond what is currently available through the audience network.
Some marketers will be cautious about the announcement after Bing had previously failed in its partnerships with Apple (Siri) and Yahoo! Gemini. We have yet to see Microsoft truly harmonize the relationship between Bing and its acquisition of LinkedIn, beyond subtle audience integrations.
That being said, there will be a huge first-mover advantage for advertisers that are would prepare to utilise the ad network and grab the attention of millions of Netflix subscribers worldwide.
One thing is certain, If Bill Gates was still on the board, we’re sure he’d be jumping for joy.