The Burning Issues That Ad-Supported Netflix Must Address

Dave Morgan
Dave Morgan  |  Chief Executive Officer
Updated: Sep. 23, 2022
Published: Sep. 21, 2022

I’ve been having fun playing our industry’s longest-running parlor game – “The Netflix & Advertising Guessing Game” -- where we pretend to be either Reed Hastings or Ted Sarandos, Netflix’s co-CEOs, and pontificate on how everything in the world of advertising would be great if Netflix would just follow our counsel and run its recently announced ad-supported tierin exactly the ways we recommend.

Yes, we are probably all frustrated TV sports color commentators.

I took the show on the road in mid-September to do it on stage in Toronto at Canada’s largest TV ad event, The Future of TV Advertising Canada, with long-time friend Robert Tas, a partner at McKinsey and one of the smartest marketers and digital strategists I know. He ran digital marketing and growth at both JPMorgan Chase and 1-800-FLOWERS, and has had a long, successful career as a tech executive and entrepreneur.

Our session at FTVAC, titled “What an Ad-supported Netflix Tier Would Mean for TV Marketers,” began with a lot of clapping and excitement among hundreds of TV and video ad buyers about the prospect of Netflix with ads. Tas’ opening line: “Let’s all calm down. We’ve got a lot to figure out first before we get too excited.”

He noted that there are four big issues Netflix needs to address before we can determine whether or not an ad-supported Netflix will dramatically change TV video ad marketing, measurement and culture. His thinking ran along these lines:

Market. Who will be the viewers of ads on Netflix? Will they be incremental to TV? Will they be incremental to other ad-supported streamers? If so, Netflix will have lots of premium-pricing opportunities for its ads.

Marketing. Can Netflix convert binge-watchers on the weekends into predictable, daily viewers who tune in every day, every week and every month, just as advertisers need them to do? Can Netflix build a program promotion machine and program release schedules like TV networks do to ensure audiences are available when and where advertisers need them to be?

Measurement. The table stakes for targeting and measurement in CTV ads are well-established. The Interactive Advertising Bureau has had them standardized for years, and all the players in the market comply -- even walled gardens like Google’s YouTube and Amazon. Netflix must quickly join that crowd as well, certainly if it wants premium pricing -- and wants to have its numbers trusted and accepted by advertisers and agencies.

Culture. Movie companies are led by studio executives, ad-supported TV companies by sales executives. Netflix has been all about the former. Is the company ready to build a future thinking and acting like the latter?

It might not be as easy as you think, since promising talent ad-free environments for their shows has been a big part of Netflix’s attractiveness to Hollywood. Fortunately for Netflix, it recently announced super-strong hires, with Jeremi Gorman as President of Worldwide Advertising and Peter Naylor as Vice President of Sales. Both have been rock stars at companies like Google, NBCU, Hulu and Snap.

What’s your take on the Netflix and advertising guessing game?

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An earlier version of this blog was originally published by MediaPost.