Netflix Ads: A Business Guide

Updated October 13, 2022

Netflix and chill might see a pause in the next few years.

The original streaming giant has plans to launch tiered ad services, which means that as consumers are binging the latest season of Nailed It!, they will receive a quick ad break right before the holiday-inspired cake hits the oven.

As more consumers are cutting the cord within the debate of cable vs streaming, it is not shocking that streaming services like Netflix are looking for more ways to monetize.

Advertisers, until recently, have relied on traditional advertising methods, but with promising news in the video ad space, more businesses are able to find opportunities to reach their target audience on social media, mobile apps, and now while they’re binging their favorite show.

This article walks through the basics of Netflix ads to help companies plan their over-the-top (OTT) advertising campaigns.

A Guide to Netflix Advertising

• History of Netflix
• What is Netflix Advertising?
• When will Netflix Ads Launch?
• What is Netflix’s ad-supported plan?
• What’s streaming on Netflix?
• How to advertise on Netflix

Interested in advertising on Netflix? Connect with an OTT advertising company to discuss your campaign goals. 

History of Netflix

Remember Blockbuster or other video rental stores?

In 1997, Reed Hastings and Marc Randolph thought how convenient it would be to rent DVDs by mail, and with that the idea for Netflix was born. When launched, the company promised personalized recommendations and unlimited DVD rentals without due dates and late fees.

The idea of streaming was introduced in 2007, and as the platform grew and grew globally, original content like ‘House of Cards,” and “Orange is the New Black’ hit the service in 2013.

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As original content hit the streamer, it became a staple during award season, with shows and films being nominated for Emmy and Academy Awards.

In August 2022, under co-CEOs Hastings and Ted Sarandos, Netflix has been in the media business for 25 years, with over 220 million subscribers around the globe.

Throughout the company’s journey, Netflix has evolved – it now has plans to enter a space that impacts subscribers and stakeholders alike.

What is Netflix Advertising?

In early July 2022, Netflix reported its Q2 earnings in a letter to stakeholders with an announcement that Netflix ads would soon become part of the platform.

The letter read, “our lower priced advertising-supported offering will complement our existing plans, which will remain ad-free.”

This came as a shock to many – including Netflix co-CEO Reed Hastings who had been long against introducing ads on the platform. But Hastings has changed his tune after announcing in Netflix’s Q1 report that the company lost subscribers (nearly 200,000) for the first time in a decade.

With the introduction of new streamers like HBO Max, Disney+, and Peacock, consumers are migrating from Netflix to find their favorite shows (Peacock now includes all episodes of the Office that left Netflix in 2021). The heads of Netflix had no choice but to go full speed ahead with their advertising plans.

The streamer also announced that Microsoft would be their choice to power its ad technology, meaning that companies that want to advertise on Netflix can through Microsoft’s platform.

Netflix advertising falls under the umbrella of over-the-top (OTT) advertising.

OTT content is media that is delivered through the internet, which includes podcasts, music, video games, and content found on streaming services.

Netflix has big plans for its launch into the OTT ads space.

When will Netflix Ads Launch?

Netflix will launch "Basic With Ads" on November 3, 2022. 

When their initially announced their second quarter earnings, Netflix mentioned their target for launching their ad-supported plan “around early next year.” However, they've moved up the launch date so it will be live well before the holidays and the Emily in Paris season 3 premiere date. 

In their statement, Netflix said they will initially debut the service in Canada and Mexico on November 1st. Then they will launch in The U.K., Australia, Brazil, France, Germany, Italy, Japan, Korea, and the U.S. on November 3rd. Finally, the ad-tier will be available in Spain on November 10th. 

When the ad-supported service does launch, there will be different options for subscribers.

What is Netflix’s ad-supported plan?

At this time, Netflix hasn’t announced pricing for their ad-supported tiers, but it’s promised to have lower prices than the current plans provided by the streamer.
As previously mentioned, Netflix will continue to provide their existing plans that will remain ad-free.

This is how streaming plans at Netflix break down: 

Over time and with the launch of ad-supported tiers, all prices will likely change depending on viewership and ad revenue.

Top Netflix Shows of All Time 

During their talks, Netflix co-CEO Ted Sarandos mentioned that Netflix was currently in discussions with a few content providers about rights issues that might occur with ad-supported subscription plans.

A move to ad-supported versions will lead the way for extra payments from Netflix to studios and other creative talents. If the agreement isn’t seen as beneficial to the studios, a vast majority of what people view might not be on the streamer and might move to new services.

This likely won’t impact original content or new movies paid for by Netflix, but if the cost increases, the amount of content might decrease.

According to Netflix, here are the top most-viewed TV shows of all time on the streamer:

Note: Numbers pulled in August 2022

Netflix is known for letting users know what’s trending for the top shows, along with recommendations on what to watch.

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Will this personalization be included in an ad-subscription tier? More than likely, considering that Netflix ad content should cater to viewers.

How to Advertise on Netflix

Having recently announced a partnership with Microsoft, Netflix will likely require advertisers to go through a custom programmatic advertising platform. 

In 2021,  Microsoft acquired Xander from AT&T and partnered with Taboola to design a programmatic ad platform that would allow users to bid for ad inventory. 

How Much Do Netflix Ads Cost? 

However, it appears that advertising on Netflix will be costly — Ad Age reported that Netflix is asking $60 CPM from their buyers. 

This doesn't seem to be deterring big-name and luxury brands, though. Jeremi Gorman, Netflix's president of worldwide advertising has claimed they've sold out of nearly all of their inventory for the launch. As expected, automakers, travel companies, retail and luxury brands are able to shoulder the cost. 

Audience Targeting on Netflix Advertising

While targeting remains limited, advertisers can target based on country as well as genre, such as action, drama, or romance. They can also choose not to run ads against certain content, such as shows or movies that contain sex, nudity, or violence. 

Despite these limitations, some brands are still able to make the most out of their campaigns. In a recent example, NYX Cosmetics and L'Oreal Paris are served on an episode of Emily in Paris, a show focused on luxury and fashion. 

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However, Netflix plans to roll out more targeting options in the future, such as subscriber age and gender, to improve performance. 

For businesses looking into advertising on Netflix, they can follow these tips for advertising on streaming services:

1. Keep your brand in focus while crafting ads
2. Know your target audience
3. Consider mobile audiences watching your content
4. Follow any ad guidelines
5. Pitch the right streaming service

Learn more: ‘OTT Advertising: How to Advertise on Streaming Services’
 

The Future of Netflix Streaming

The future of Netflix streaming is uncertain for current users of the platform, but the company is thinking positively.

With the inclusion of Netflix ads, the streamer hopes that it will be an easy adjustment for subscribers.

“Like most of our new initiatives, our intention is to roll out, listen and learn, and iterate quickly to improve the offering. So, [Netflix advertising] in a few years will likely look quite different than what it looks like on day one.”

Netflix is looking to remedy any potential losses by thinking proactively about how to achieve their revenue goals.

Advertising on Netflix will also impact viewers - negatively and positively. Viewers will have an additional step to get through while streaming their favorite show, but advertisers will show specific ads to catch their attention. 

While the idea of ads might seem frustrating for customers, it could potentially be the saving grace for their favorite Netflix programs.