Netflix’s anti-advertising days are long behind it.
The streamer, which reported Q1 earnings on Thursday, grew its overall revenue by 15% year over year, largely driven by account growth, thanks to anti-password sharing tactics. The point of banning account sharing, of course, is to push more people into Netflix’s ad-supported tier.
The number of ad-supported accounts on Netflix grew 65% since Q4 last year.
Generating more subs for its ad tier is Netflix’s way of “building a much more durable and healthy foundation for revenue growth across a larger base of paid members” via advertising, CFO Spencer Neumann told investors.
Scale is the “No. 1 request” advertisers have for Netflix, Neumann said. But Netflix is well aware that it needs more than just scale to woo advertisers – it also needs to provide measurement.
On Thursday, Netflix also announced new partnerships with three measurement providers: Kantar, Cint and NCSolutions. They join Netflix’s existing measurement partner slate, which already includes Nielsen ONE, outcomes-based measurement provider EDO, and verification vendors Integral Ad Science and DoubleVerify.
What’s the outcome?
Its measurement offering began with the basics: reach, frequency and verification.
But Netflix sees “an opportunity to reengage with advertisers” by demonstrating progress on measurement for its ad products, said co-CEO Greg Peters.
The addition of more measurement partners will help Netflix appeal to as many advertisers as possible by addressing both ends of the purchase funnel.
Lucid Impact by Cint will allow Netflix to measure lift in brand awareness, ad recall, brand favorability and consideration. Its advertisers can also get similar metrics from Kantar through Microsoft, Netflix’s designated ad sales partner (for now).
For business outcomes, NCSolutions has shopper data from grocery chains and drug stores that can help marketers measure incremental sales lift among viewers who saw products advertised on Netflix.
Netflix has been working with EDO for nearly a year, so outcomes measurement isn’t net new for the streamer. However, its ongoing investment in measuring performance and ad effectiveness is a sign advertisers are keen to track outcomes, not just count viewers.
A solid measurement infrastructure is what “advertising partners require to continue investing,” according to an email Netflix sent to press ahead of earnings.
The path ahead
But is better measurement helping Netflix attract more ad budgets?
Although Netflix’s user base with ads is clearly increasing, “it takes a while to grow [ad revenue] to the point where it’s material,” Peters said. Ad revenue still isn’t a strong contributor to the company’s bottom line. Its average revenue per user growth remained flat on Q1 at just 1% year over year.
To change that dynamic and entice more advertisers, Netflix needs more subscribers to sign up for ads. Currently, 40% of new subscribers choose the ad plan.
“We’re just getting started with advertising,” Neumann said. And over time, he said, Netflix expects even more moochers to sign up for the wallet-friendly (aka ad-supported) plan once they get kicked off shared accounts.
And, in the meantime, the company will focus on fleshing out the ad products that marketers expect, Peters said.
“There’s plenty of work ahead of us” when it comes to ad monetization, he said.
And hey – it is only Netflix’s second upfront season, after all. The company’s upfronts presentation will take place on May 15 – and AdExchanger will be there.
