Bird's Eye View

What does Netflix’s new ad-support plan mean for brands?

By Gregor Chalmers, Head of Broadcast

There’s recently been a lot of buzz in the news about the incoming Netflix ad tier. The exciting news for brands is that Netflix has agreed to sign up to BARB – this will give the platform some much-needed transparency and is clearly an attempt to persuade advertisers that they have the numbers to justify spending. Early signs are promising, with first figures suggesting their 8.2% share of total viewing outstrips that of Amazon Prime Video (3.6%) and Disney+ (3%).

While some brands have signed up for the launch (L’Oreal and Nyx among them), the high-price point has raised eyebrows: the CPMs are believed to start at £50, pricing the platform much higher than the rates charged by the likes of ITV and C4. However, market forces will dictate whether this rate is sustainable or if Netflix will need to compromise to generate a sufficient volume of spend.

The ability to reach a potentially new audience or maximise reach against lighter viewers is obviously exciting for advertisers and agencies. The BARB integration provides independent measurement, but at such a high price point, we have to ask the same core question we would of any platform: what is it adding to our media plans?

While traditional linear viewing is in gradual decline (albeit having returned to some degree of stability after the turbulence of 2020-21), there remains plenty of flexibility and reach to be had in this space. High-spending brands seeking additional reach are most likely still best served by diversifying spending into BVOD spaces, with arguably only the biggest spending needing to consider Netflix as an immediate-reach driver.

Netflix has long been associated with “binging”, and if this trope proves accurate, it might ward off DRTV advertisers from the space. Even if the targeting is accurate, is there value in reaching someone who only wants to watch the next episode and isn’t likely to engage with the call to action? The initial targeting options appear fairly broad brushstroke (the ability to demo-target won’t arrive until next year), so once the novelty of seeing their ads appear alongside Stranger Things, there might be questions about what brands are actually getting for their money.

So while moves towards measurability and transparency are positive, the limited targeting at launch and high price point makes us cautious about rushing to invest. However, as other rivals introduce their own ad-funded tiers (Disney+ is on track to launch in early December), this will hopefully lead to the market driving better innovations in targeting and potentially lowering costs to incentivise spending.

For more information on what this means for you, please get in touch.