Despite the challenges, Netflix says its advertising level is doing well • TechCrunch

In November, Netflix reveal A long-awaited sponsored ad layer that offers customers in select markets, including the US, the ability to offset the cost of a Netflix subscription by allowing their viewing to be interrupted by ad breaks. In the Consumer Electronics Show In Las Vegas, Netflix’s head of global advertising, Jeremy Gorman, gave some preliminary thoughts on how the product will perform as well as future plans for the streaming device.

During an interview at Variety’s Entertainment Summit on… CESThe CEO said the company was pleased with the selection and diversity of first-time advertisers.

“It’s really inclusive,” Gorman said of the variety of participating brands. “We see CPG companies, luxury companies, car companies…[and] sectional. This is also good for the consumer experience, she noted, because it means viewers won’t get bored with one car ad after another. Gorman predicted: “There’s a wide variety of ad types, and I think we’ll continue to see that.”

The interview also touched on some of the early complaints and concerns about Netflix’s ad invasion.

Among those issues, the main drawback the company received was because of its advertising price hikes, asking what one industry executive called the “Super Bowl.” CPM. However, Gorman justified the pricing but admitted that the market will ultimately determine what kind of price Netflix can get.

“From a supply-and-demand perspective, max CPM reflects two things: first, we can’t accommodate that many advertisers. We certainly don’t want to disappoint anyone. Then second, I think the premium content environment in which ads are running requires High cost per thousand impressions.

Whether Netflix constitutes a “privileged environment” is of course up for debate. But it appears that Netflix is ​​adjusting its expectations.

“I think we’re certainly humble enough to understand pretty much that we’re on top of the market, and in addition, the market will more or less dictate to us what a reasonable CPM is,” Gorman said.

Another concern with the ad-supported Netflix service has to do with content that could contain ads. Because the streaming device wasn’t set up as an ad-supported service to begin with, many of its content deals didn’t include AVOD (Video On Demand) rights. This means that Netflix has a limited ad inventory, and it can’t even run ads on some of its “Netflix Originals” if the deals don’t include the appropriate rights.

Gorman also addressed this, saying that Netflix has been actively working on licensing issues.

“This is moving forward, as we speak, day by day. We are renegotiating deals that we had a long time ago,” she said, adding that the “vast majority” of the content people watch regularly is available on the surface of the ad tier. Meanwhile, Gorman said that Netflix has about 85% to 95% of its content available at the ad level.

And then there’s the real concern that, from a commercial perspective, offering a lower-cost tier has the potential to cannibalize existing Netflix subscriptions as customers fall back to cheaper tiers at a faster rate that’s not matched by growth in the advertising category. Despite this, Gorman played down those concerns, saying that historically Netflix customers have stayed on the plan they’re currently working on.

Unfortunately, the CEO couldn’t talk about the uptake of the ad-supported product as Netflix prepares to announce its earnings, but he said “we’re pleased with the growth we’re seeing.”

Currently, the Netflix ad layer is available in the US, UK, France, Germany, Spain, Italy, Australia, Japan, Korea, Brazil, Canada and Mexico. The company has no immediate plans to expand, but in the long term it aims to target any larger advertising market. In addition to the ads, Basic with Ads subscribers have to deal with lower video quality (720p HD) and are limited to streaming from one device. They also cannot download content to their device for offline viewing.

Going forward, Netflix aims to do a little more than show typical ads, including things like dynamic insertion of ads near moments relevant to marketers, single-view sponsorships, and more. It will also later allow marketers to target ads by age and gender.

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