With its first-ever upfront weeks away, Netflix is making programmatic strides (despite totally flubbing its “Love Is Blind” livestream this weekend).
On Tuesday, the streamer announced the launch of a private marketplace (PMP) using Microsoft’s ad sales platform.
And after nearly a year of talking about it, Netflix says it’s ready to enforce password sharing in the US.
The launch of a PMP with Microsoft contradicts recent headlines that suggest Netflix is considering building its own ad tech.
But when it comes to ad tech, “we have ambition to be innovative in this space,” Greg Peters, Netflix’s co-CEO, told investors during the company’s earnings call on Tuesday.
Let’s get technical
But building an ad tech stack doesn’t happen overnight – Netflix needs to get the advertising basics down first.
“For now, we’re very much in the mode of following a well-trodden path,” Peters said, which means working with a well-established ad tech partner to improve its current offerings before building anything of its own.
Netflix is particularly focused on making more of its content ad-supported. As of Q1, 95% of Netflix titles are available through its ad-supported plan, up from closer to 90% at launch, said CFO Spencer Neumann.
Launching a PMP is a logical move for Netflix as more of its inventory opens up for advertising.
Netflix is also working on implementing ad verification measurement with both DoubleVerify and Integral Ad Science, both of which recently released their own verification tools for Netflix advertisers on the same day.
Sharing is caring
On the monetization front, Netflix also shared more details about its password sharing plans, which appear to be having a negative impact on subscriber growth.
In Q1, Netflix saw a 4% increase in YOY revenue and increased its total paid memberships by 4% to just over 232 million subscribers.
While those results don’t sound too bad, Netflix’s subscriber growth rate is actually plateauing. The company only gained around 1.5 million subs for the quarter, compared with more than 7.5 million net new adds last quarter.
Part of the slower subscriber growth comes from Netflix’s decision to enforce password sharing, which appears to have caused subscriber churn, hence the recent price reductions.
The streamer expanded password-sharing enforcement to Canada, Spain, Portugal and New Zealand last quarter and plans to roll that initiative out to US subscribers in Q2.
“Our account sharing initiative will build a larger base of potential paying members,” Peters said. “That’s why we’ve been so focused on execution.”
Netflix executives didn’t say exactly how much password sharing affected subscriber counts this quarter, but did acknowledge that churn is a short-term result.
“Like with a price increase,” Peters said, “we expect to see an initial cancel reaction at first, followed by increased membership and revenue as borrowers sign up for their own accounts or as subscribers pay to add an extra member to their plans.”
But as for pricing, Netflix is “still figuring it out,” he said.
For now, Netflix expects more subscribers to sign up for its ad-supported plan at the lower cost thanks to recently updated video stream quality and an increase in the number of concurrent streams allowed.
Still, Netflix’s ad-supported journey is still in early days.
“We’re only a couple quarters into this,” Neumann said, noting the need for better targeting and measurement to “reinforce our premium CPMs.”
But, even in early days, Netflix is optimistic.
“2023 is off to a good start,” said Ted Sarandos, Netflix’s other co-CEO. “We’re growing – not as fast as we’d like to, but we are growing, and we are profitable.”
