Content, Commercials And Commerce: The Future Of Ads On Netflix

On TV & Video” is a column exploring opportunities and challenges in advanced TV and video. 

Today’s column is by Chris Keune, Kargo VP of data science and product. 

Netflix has suffered from flat subscriber growth in recent quarters, tanking the stock price and internal morale. Now, without a diversified revenue model, the company has announced that it will open up its content to nonpaying subscribers in an ad-supported model. 

But a move to sell ads doesn’t have to be a fall from grace. If done right, Netflix can set the standard for modern media companies. It can offer a model where content, commerce and commercials combine into a single, seamless experience. 

There are a number of huge opportunities that no streaming content provider has captured yet, from livestreaming retail to immersive content-as-advertising. Netflix can be the company to make it happen.

Gamifying commercial experiences    

Advertisers like CTV for its targeting and measurement capabilities. But the viewing experience is poor. Anyone familiar with ads on streaming content knows that most of them are simply recut versions of TV ads. Capital One, Nike and other big spenders on CTV also suffer from high-frequency issues. I’ve seen the same Charles Barkley ad for Capital One at least a hundred times across YouTube, Hulu and other apps. 

Netflix would be smart to explore more creative advertising opportunities. It already has its own studio services, so why not allow brands to build engaging CTV experiences that are unique to the Netflix platform? 

For example, to increase viewer engagement, Netflix has developed interactive series such as “You vs. Wild” and “Trivia Quest.” Translating interactivity onto CTV would set Netflix apart from its competitors. A “choose your own adventure” for ads, if you will, where viewers are able to select their ad, yielding a more relevant branded experience. Resulting data can then inform more personalized ads for the viewer. 

Upping the ante with commerce

Netflix has a prime opportunity to offer shopping to its customers. In June 2021, the company launched a retail shop to sell merchandise related to shows, including “Stranger Things,” “Ozark” and even luxury apparel items inspired by “Emily in Paris.” By integrating the links to its store with its content, Netflix could deliver a richer viewing experience. 

Additionally, having audience payment methods on file, Netflix could easily lean into opportunities like one-click shopping, enabling brands to capitalize on a seamless and closed loop to drive conversions. In addition to revenue, it could be a way to collect more data on nonpaying subscribers. 

And then there are live shopping events – already a $500 billion market in China. These events are primed for explosive growth stateside, but early attempts by channels like QVC prove these outlets don’t have enough creativity to capture mainstream attention.  

Imagine actual commerce shows, like the ones on the Home Shopping Network (HSN) or QVC, but specials are available on-demand and refreshed daily. Similar to Amazon’s lightning deals, Treasure Truck or limited-edition sneaker deals, these commerce connection points can keep fans entertained and glued to the Netflix platform, providing services that extend beyond content. 

Plugging into programmatic

Netflix needs to get smart fast if it wants to be a force in programmatic CTV. With extremely attractive first-party data, it could build and sell its own audiences at the drop of a hat. Netflix has a state-of-the-art contextual recommendation platform that can be easily reconfigured to handle ad optimizations and outcomes, like a walled garden.

With email being its deterministic ID, Netflix can integrate into other holistic ID solutions like The Trade Desk’s Unified ID 2.0 platform, extending the brand’s reach outside its own walls. Eventually, Netflix may build its own DSP in order to deliver this cross-screen capability within its platform. 

Most CTV players are just getting up to speed on programmatic and haven’t offered a ton of innovation for brands. If Netflix plays its cards right, it can be a formidable force in the CTV ecosystem – not to mention in commerce and content.

Follow Kargo (@kargo) and AdExchanger (@adexchanger) on Twitter.

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