Happy anniversary, Netflix! The traditional first anniversary gift is paper, which Netflix has accumulated through new revenue streams. The latest change to one of these, the emerging ad-supported experience, will arrive in early 2024.
A year ago, Netflix launched ads, something industry watchers and Netflix executives thought would never happen. However, since the streamer is still relatively new to the world of advertising, it is still experimenting with how users experience advertising on the service. Today, Netflix has 15 million monthly active users on its ad-supported tier — and the company just announced a major shift for 2024.
In the first quarter of next year, Netflix will introduce the “Binge Ad”. According to the streamer, viewers who stream three episodes of a series in a row will receive a fourth episode without commercials. The advertising load will not change for the ad-supported episodes, a person with knowledge of the plan told IndieWire.
It’s a win for users who have already binged four seasons of Never Have I Ever, for example, and it could be a reason to attract new subscribers to the ad tier. If you’re an advertiser, incentivizing longer engagement periods is a carrot. Netflix would like that too.
There are a few other new ways your viewing experience will change when you have Netflix with ads. Also in early 2024, Netflix advertising in the US will be able to display QR codes. And certain shows are directly sponsored. We already have “Love is Blind” presented by Frito Lay’s Smartfood. Coming soon, both “The Crown” and “Squid Game: The Challenge” will have presenting sponsors. And Netflix’s first live sporting event, the “Netflix Cup” on November 14th, will be presented by T-Mobile, Nespresso and other companies.
“Our goal is not just to offer the same products and tools that the industry expects – although we have made great progress in this area over the last year. “It’s about building something bigger and better than what exists today,” Netflix advertising president Amy Reinhard wrote in the blog post. “We want to shape the future of advertising on Netflix and help marketers tap into the amazing fan base of our must-watch shows and movies.”
Other features that have popped up on Netflix for advertisers include ads of varying lengths and targeted ads based on the streamer’s global or regional top 10 lists. There’s even the ability to run ads while users download shows and movies to watch offline – other streamers don’t offer this.
Netflix recently announced price increases for its ad-free Standard and Premium plans, but maintained the price of the ad-supported plan, which is $6.99/month. Pushing more users onto the ad-supported plan is great for ARPU (average revenue per user – or “ARM,” as Netflix calls it). Users of the cheap tariff ultimately value Netflix more than those who watch ad-free.
Streaming competitors have begun to understand that ads are a great way to increase revenue — and perhaps even make these streaming services profitable. Disney+, Max and Paramount+ have already launched ad-supported plans, and Amazon has said it will soon do the same. (Apple TV+ may not be far behind.) Amazon already has a big lead in this area compared to Netflix, thanks to the handful of advertising dollars it gets from Freevee and the live “Thursday Night Football” games.
Netflix does not disclose how many subscribers have the ad-supported plan compared to the ad-free plans. The company recently announced that it added 9 million subscribers in the summer quarter and now has 247 million. Of new signups in countries where Netflix offers advertising, 30 percent chose to save money and watch commercials.