- Netflix is rolling out an ad-supported tier in November and is pitching advertisers on it.
- Advertisers say Netflix is asking for high prices but not offering measurement.
Netflix is launching a new ad-supported tier later this year and ramping up its pitch to marketers.
The streaming giant has been pitching advertisers on a November launch with aggressive pricing, according to advertisers briefed by Netflix. Netflix is competing for ad dollars with a growing number of competitors including Disney's forthcoming ad-supported version of Disney+, NBCUniversal's Peacock, Hulu, Amazon, and Warner Bros. Discovery.
AdAge reported that Netflix is expecting the ad-supported tier to generate 500,000 subscribers by the end of the year compared to its 220 million total subscribers.
"We are still in the early days of deciding how to launch a lower-priced, ad-supported tier, and no decisions have been made," a Netflix spokesperson said about the launch of an ad-supported tier. "So this is all just speculation at this point."
Here's everything we know about Netflix's advertising plans.
Netflix is leaning on Microsoft to sell ads
Netflix recently hired Snap's top former ad sales execs to build its advertising team. Jeremi Gorman will be president of worldwide advertising and Peter Naylor will serve as VP of ad sales.
But Netflix's advertising partner Microsoft's Xandr led the initial talks with advertisers, Insider previously reported.
Advertisers were told they can purchase Netflix ads through Xandr's demand-side platform, the adtech firm's tool that buys programmatic ads for marketers, said an adtech exec briefed by Microsoft. They'll be able to set up programmatic ad campaigns with guaranteed pricing and placements. For advertisers that do not use Xandr's DSP, Netflix will offer insertion orders, a more traditional way of buying TV ads. In both cases, the ads will ultimately be sold by Netflix, not Microsoft, said the exec.
Netflix is seeking top ad prices
Netflix is asking for CPMs (the cost to reach 1,000 people) between $60 and $65, according to advertisers who have heard Netflix's presentation. That would make Netflix one of the priciest streaming TV options for marketers, slightly above the rollout of HBO Max last year.
Advertisers said they expect prices to drop once Netflix's ad-supported tier launches, as has been typical with other streaming services like NBCUniversal's Peacock. Netflix is also asking ad agencies for yearlong commitments ranging from $10 million to $20 million depending on the size of the agency, similar to upfront deals, according to sources.
Netflix is also asking advertisers to commit quickly. Two advertisers said that Netflix asked for proposals by the week of Sept. 5, overlapping with Labor Day. Other sources said it was looking to approve advertisers by Sept. 30. Netflix is looking for names of potential takers and a general understanding of how advertisers spread their budgets throughout the year, suggesting that Netflix is targeting the biggest TV spenders.
Netflix will have fewer ads than its competitors
Streamers typically pitch advertisers on lighter ad loads than traditional TV for a better viewing experience, and Netflix is similarly pitching advertisers on four minutes of ads per hour of TV watched, on par with HBO Max and slightly less than Peacock's five minutes of time, said the executive who was briefed.
Netflix is also looking to differentiate itself with tools that limit the number of ads that people see to one ad every hour with a maximum of three ads per day, said the executive.
Advertisers say Netflix will be picky about ads
Netflix is only allowing a handful of big brands as launch advertisers and plans to examine each ad for high-quality messaging and creative, said the executive briefed by Netflix.
Netflix has long worked with big brands like Coke and GMC to integrate product placements into shows like "Stranger Things" and "Queer Eye." It's touting such partnerships to advertisers and its ability to make their ads, said the executive.
Advertisers want data and measurement
Netflix is pitching advertisers on the ability to target ads by genre, country, and Netflix's own daily ranking of the top 10 programs while looking to add more specific parameters like age, gender, content rating, and time of day down the road, said the executive briefed by Netflix.
One area advertisers say Netflix is lacking in is measurement. Netflix is not offering advertisers stats and data offered by third parties that vet audience size, at least not initially. Metrics like attribution that track what people do after seeing an ad are also not offered. Such data has become standard in how advertisers measure performance and vet streaming platforms.
"They're demanding versus selling," an ad buyer previously told Insider. "They're new to it all."