Netflix finds that building an ads business from scratch isn’t easy

Chris Pash
By Chris Pash | 20 July 2023

Netflix’s experiment into advertising supported subscriptions hasn’t yet made a material difference to its revenue, the streaming platform said when announcing June quarter results.

Overall, paid net subscriptions were up by 5.9 million in the three months, well ahead of expectations and compared to a drop of 1 million the previous quarter.

Revenue was up 2.7% to $US8.19 billion for an operating profit of $1.83 billion, inline with forecasts.

The streaming company says it successfully rolled out paid sharing to more than 100 countries.

”Now that we’ve launched paid sharing broadly, we have increased confidence in our financial outlook,” the company said in a letter to shareholders.

“We expect revenue growth will accelerate in the second half of 2023 as monetisation grows from our most recent paid sharing launch and we expand our initiative across nearly all remaining countries plus the continued steady growth in our ad-supported plan.”

Advertising-supported subscribers hit 5 million, according to an update in May.  

Analysts believe total returns (subscription plus advertising dollars) from the ad-supported subscription tier are attractive. Revenue per member is expected to become greater than Netflix’s standard plan.

The advertising-supported version of Netflix started at $6.99 a month in Australia from November.

Netflix, in its latest report to market, says it's working hard to scale its advertising business, eight months post launch.

“Our key focus is improving the ads experience for both members and advertisers," the company said.

“In addition to now offering 95% content parity globally (by viewing), more streams plus improved video quality on our ads plan, we’re partnering with Nielsen and EDO to improve measurement and innovating for advertisers.

“Brands can also now target media buys on our top 10, which is updated daily and enables them to connect with audiences during our biggest viewing moments.

“While we continue to grow our reach -- ads plan membership has nearly doubled since Q1 -- it’s still off a small membership base, so current ad revenue isn’t material for Netflix.

“Building an ads business from scratch isn’t easy and we have lots of hard work ahead, but we’re confident that over time we can develop advertising into a multi-billion dollar incremental revenue stream.”

June quarter numbers:

netflix june q 2023


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