Netflix ad push takes it back to the future – The Hollywood Reporter

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Netflix’s plan to get into advertising was unorthodox. She was looking for unusually high CPMs (the cost to reach 1,000 consumers), and targeting and tracking was almost non-existent.

That was 2005. And Netflix decided the time was right to get into the advertising business via slips placed in its signature red DVD envelopes.

“My entertainment clients loved it because of the halo effect of being associated with Netflix,” recalls Michael Miraflor, former media buyer and now chief brand officer at venture capital firm Hannah Grey. “And it offered a creative canvas large enough to hold the appropriate key art.”

Netflix finally folded its DVD ad sales team as it got into streaming, but 17 years later it’s trying to enter the space again – with unusually high CPMs and targeting and following minimal. He always relies on this halo effect. “In a way, it’s like history repeating itself once again,” says Miraflor. “Everyone was disappointed when they ended the ad product and the ad sales team because of the pivot to streaming.”

Netflix’s renewed advertising plans are just starting to take shape. The company has a tech and business partner in Microsoft, new leadership in ex-Snap execs Jeremi Gorman and Peter Naylor, and a rough idea of ​​what it’s looking for (sources confirm the company is looking for CPMs above $60, more than double that of most competitors, and offering very limited targeting capability at launch).

“Advertisers have been knocking on this door for years,” says Anthony Katsur, CEO of the IAB Tech Lab. “They’re kind of a dream media company to work with.”

But, in the world of advertising, the big question is not whether Netflix’s advertising campaign will succeed – virtually everyone agrees – but whether getting into advertising changes Netflix, which has long prided itself on navigating the cutthroat world entertainment.

“The culture change is going to be significant. It’s one of the most unique cultures I’ve ever encountered – and with pride,” says Kevin Krim, CEO of data and measurement company EDO. “Change will have to permeate that culture first, and then it will have to trickle down to the business model, the content, the technology.”

Oppenheimer’s Jason Helfstein writes in a September 19 research note that Netflix “is in a unique position to aggregate large audiences and control the timing of series launches for prominent advertisers, imposing high CPMs.”

As such, Helfstein expects the streaming company to exceed its expectations as consumers flock to the cheaper tier and the company gains efficiencies by monetizing them.

“The Street is not pricing in the advertising opportunity yet, and we think sentiment should improve as more analysts update the models,” he adds.

The biggest unknown, according to multiple stakeholders on the buyer, agency and brand side, is Netflix’s desire to adhere to the “three Ts”: transparency, targeting and tracking.

Although Netflix has been loath to release viewership data, it has mellowed. He now has public Top 10 lists and participates in Nielsen’s The Gauge, a product that examines time spent on linear television and streaming. While no one expects Netflix to provide a more specific audience for individual shows (unlike linear TV, streaming is generally sold by the audience advertisers want to reach, not the show on which they want their ad to appear), it is expected that some things will need to be clarified. “We’re about to enter CTV’s awkward teenage phase [connected TV, with digital video ads delivered via TV sets], and Netflix is ​​no different,” says Katsur. “The dollars will go to the most transparent partners.”

Andrew Rosen, founder of Parquor, adds: “Transparency is still a game, and they still have pieces to play.”

But Netflix is ​​starting to take action in the targeting space. At launch, it will only allow marketers to target by genre or by viewers of its most popular shows. There will also be limited geo-targeting. But, in the advertising space, this is not enough. Linear TV is sold based on demographics such as age and gender – and CTV options can overlap with purchase intent (Looking for a car? Recently bought a house ?) Instagram-like. For Netflix to reach its full advertising potential, it will need to find a way to target these consumers.

Such maneuvers are “almost necessary to justify the price premium, unless the plan is to reduce CPMs over time as the platform evolves,” says Miraflor.

Then there is tracking, the third rail of advertising. Marketers like to have as much data as possible about who sees their ads. Netflix, which has zealously protected its customers’ privacy and data, is unlikely to accept the status quo. But he will probably have to provide third-party proof that the ads are seen and resonated.

Beyond adapting to the needs of the advertising world, Netflix also risks transforming its business and its content. If advertising really takes off and becomes a core business for Netflix, it will have to adapt to the give and take nature of the business that companies such as Disney and Warner Bros. Discovery know only too well.

“[As] advertising becomes a more critical part of their growth story, advertisers will have more clout and have more of a seat at the table,” says Katsur.

And, perhaps most importantly for Netflix: the temptation to change where the content budget is spent could also shift, in favor of building time spent on the service.

“If you focus on audience size, you’re not going to make some of the interesting, diverse programming that Netflix has done well with,” Krim says, noting that the company has built “a niche product for the masses”.

“Advertising is changing that model in an interesting way,” he adds, noting that “it will take years to get to the full Netflix ad experience, but it will become something quite distinct, I I’m sure of it”.

A version of this story appeared in the September 16 issue of The Hollywood Reporter magazine. Click here to subscribe.

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