After launching a cheap subscription for $6.99 per month, Netflix began to actively develop its advertising business. However, the guarantees given to advertisers do not always meet the targets, so the streaming giant is forced to refund the companies.
According to the heads of 5 advertising agencies that Digiday spoke with, Netflix has broken the guarantees given to advertisers and is allowing them to refund their money for ads that they have not yet shown. Figures vary for companies, but in some cases, streaming managed to deliver around 80% of the expected audience.
“They can’t provide it because they don’t have enough resources. That’s why they return the money,” said one of the managers.
Netflix structured its initial ad deals on a pay-as-you-go basis — meaning advertisers ultimately paid only for viewers actually reached, with Netflix returning unspent funds at the end of the quarter. This method contrasts with traditional television advertising commitments, under which TV networks keep the invested funds on the books and provide advertisers with “compensation” in the form of future advertising.
However, not everyone took the money, say the employees of advertising agencies. Those companies that returned the money typically redeployed it to other marketing activities in the fourth quarter.
Course
EMPLOYER BRANDING
Build a high-quality and attractive employer brand in just one month.
REGISTER!
“The result was significantly lower than expected, so some advertisers immediately demanded a refund to spend in the festive period, and they deserve it,” said the head of another agency.
Other advertisers have asked to move ad spending to the first quarter of 2023 or later that year, as they hope that Netflix’s Basic audience will grow and the service will then be able to meet its guarantees.
The lack of viewership doesn’t bode well for Netflix’s fledgling ad business, but agency executives say a rushed subscription launch and a lack of a marketing push to push advertising levels and attract users have contributed.
Netflix also began pitching to advertisers and agencies before bringing in the pros: former Snap and Amazon ad sales executive Jeremy Gorman as head of advertising, and NBCUniversal, Hulu and Snap veteran Peter Naylor as senior vice president.
The streaming service is still looking for advertising deals through 2023, according to agency executives. The company initially asked advertisers to pay $65 per thousand impressions (which is higher than the $50 per thousand impressions Disney wanted for Disney+ and makes Netflix the most expensive of the major ad-supported streaming services), before dropping the price to $55. However, advertisers can take advantage of a not-so-successful start to streaming to “bargain” a bit.
Netflix previously said that starting in early 2023, customers who share their login credentials will be charged an additional monthly fee. The company does not disclose the details of the fines. Although, if they follow the scheme of the pilot program launched in Latin America – one quarter of the base rate, then the financial penalty should be about 3-4 USD.
For those who wish to avoid this fate, Netflix introduces the Profile Transfer account migration tool, which will transfer data from additional user accounts (viewing history, recommendations, etc.) to their new independent subscription. The new feature has already begun rolling out to Netflix users, with email notifications sent to specific people as it becomes available.
Also, streaming added the function of “remote exit” from the account. Starting November 15, users can see all devices associated with their account and can leave them remotely.
The description of each device indicates the type of hardware (for example, smart TV or Android phone); the profile most recently used to view on the device; the time Netflix last streamed something on it and an approximate location based on IP address.
