TV or not TV, that is the question? Why Netflix is using a surprisingly familiar playbook to launch its ad offering…
It was supposed to be earth shattering for advertising and mind blowing for media buyers - a totally different ad experience.?
All that beautiful data and personalisation.?
A juicy adtech and sales partnership with Microsoft.
An excited and sizeable group of brands ready to trial some highly targeted video advertising on one of the world’s most culturally impactful media platforms.?
But when Netflix’ big announcement of their new advertising proposition finally came things seemed a bit flat and…well…familiar.?
------
After years of publicly stating that they would never run ads, this November Netflix will officially launch their ad offering.
The’ll kick off with uber high CPMs ($65) for mid and pre-roll 30 second formats, offering just genre and country level targeting.
There’ll be a minimum $10 million spend commitment per brand and the service will use third party ratings verification from Nielsen to track audiences.?
Big advertisers will be able to buy against Netflix’s top 10 most-viewed TV series and against some content genres. But for the first phase of the ad tier’s rollout, Netflix will not serve ads based on city or area level data, age, gender, viewing behaviour or time of day.
Here’s a sneak preview of what the ads might look like:
Look familiar?
With the high prices, 30 second pre and mid roll ads, limited targeting and Nielsen verification you'd be forgiven for thinking that Netflix have just inadvertently 'invented' TV advertising in 2022!
Most media buyers were expecting a beta ads product with addressable CTV style personalised targeting, shorter 10-15 second formats, the ability to integrate off platform data and maybe even with a shiny new self-serve ad buying platform open to all.
The response to Netflix' announcement was bemusement and disappointment.
So why have they dusted down an old TV ad sales playbook?
Why has a company with all that brain power, investment, contextual data and engineering talent not created something a little more exciting??
I think the answer is simple - it's a smart, strategic choice to position their ad offering at the altitude of 'big TV buy for large advertisers' rather than 'programmatic free for all'.
It gives Netflix a chance to launch quickly and in tandem start to build a real game changing ad platform.
This makes sense for a number of reasons.
| Netflix are tapping into brand & media buyer inertia
Netflix understands one of the most powerful behavioural bias in the world. It's launching an ad offering that very closely resembles how TV is currently spoken about, bought and targeted.
It’s tapping into the incredible inertia of big brands and media buyers in big agencies.
Having worked in multiple such agencies, it’s hard to explain how important a factor inertia, ease and friction is in media selection.
Netflix are going after the Unilever, P&G, Mars, Mondelez, Walmart and Vodafones of the world, because these brands have the budgets to immediately sink > $10 million in.
High CPMs, limited targeting and Nielsen verification is the currency and language of these types of brands.?
New platforms and channels have to work doubly hard to get onto media plans for big brands, especially if they’re noticeably different or bought in a new way. Why take any risk when what’s gone before has worked well. New platforms and channels have to work doubly hard to get onto media plans for big brands, especially if they’re noticeably different or bought in a new way. Why take any risk when what’s gone before has worked well?
| Netflix are pegging their ad offer to a particular line of the media plan
This is another subtle but absolutely vital point based on media buying mental models and behavioural biases.
Yearly media plans are both figuratively and literally broken up into a myriad of different lines, encompassing different channels and formats.
领英推荐
Netflix have chosen to pitch their offering at a very specific altitude of that media plan and have purposefully chosen to stay away from other levels.
They’re trying to take money from the part of the plan that encompasses TV, BVOD and higher quality video formats. These are high CPM, high spend broadly targeted, often with limited formats (and high creative production budgets to boot).
One of the dangers of Netflix opening up an auction based, programmatic style ad platform is that they would automatically pitch yourself against another line of the plan - closer to programmatic display, social video or other more targeted media options which are far more fragmented, less focused on quality and with a lot more tech middlemen taking their cut.
There's no way Netflix should peg themselves at that lower, ‘performance’ level if they can get away with charging more and positioning in the rarified air of the TV/brand video line for now.
When you’ve got a luxury sought after good, you do all you can to stimulate demand from buyers with deep pockets and maintain a sense of scarcity, quality and signalling value.
True scale will come later.
| Netflix are guaranteeing creative quality
An unintended consequence of the growth of CTV and new targeted video advertising channels is the decline in creative quality.
Simply, big brands have big polished ads made by big agencies with big production budgets. Scale up or medium sized brands have limited budgets and are often less creative or story driven in their video advertising.?
Have you watched YouTube pre-roll or connected TV advertising lately? Every second ad is a crappy DTC brand or a low production local car dealership ad with a bit of copy clipped to reflect the target audience.??
The types of brands that Netflix launch with will themselves signal a lot to the market and set the scene for other brands to follow.
Big brand TV spend is more prestigious, more lucrative and the creative is better looking.
A company that has won two of the top three Emmys and received 27 Oscar nominations clearly doesn’t want to diminish its value by launching with crappy targeted ads that don’t fit with the incredibly high production values of its own content.?
| Netflix are employing a speedy 'beta' approach with plenty of room for evolution?
It isn’t easy to build a world class advertising offering in 6-8 months. It’s also not easy to launch and sell a new, different product tier in that time period. Netflix is trying to do both and keep its core business humming along at the same time.?
Netflix projects it will have between 400,000 to 1 million targetable viewers in the US at launch, which is a relatively small figure. This easy to understand and easy to buy initial ad proposition will allow them to go live bang smack in the middle of the most lucrative time of the year for big brand advertising. It's also a period which this year includes a World Cup that both England and USA have qualified for, meaning brands have lots of budget stored up.
It will also allow for a huge amount of testing and learning, evolution of formats, targeting and measurement along with lots of innovation in 2023. Every new bell or whistle will of course be communicated with a new press release, creating a drumbeat of positive stories for Netflix in the new years.?
Instead of trying to snap off more than they can chew, the Netflix decision makers have chosen to eat the elephant one bite at a time.?
------
In summary, I think Netflix’ restraint and clarity in launching a basic offering and pitching it to Superbowl production level brands for a huge CPM is an excellent short term decision.
For now the copycat strategy will do the job.
According to Netflix ad chief Jenni Gorman, inventory for the new "Basic with Ads" tier is almost sold out, with "hundreds of advertisers signed up worldwide for launch, from major automakers to CPG companies, leading travel, retail, and luxury brands."
Netflix know that large advertisers with big budgets will be lured like magpies to the shiny new object, thus providing Netflix with a very welcome source of high margin revenue from advertising, which will be pumped straight back into expenses as Netflix get ready to launch a far more beefed up offering in 2023.?
As the saying goes, TV isn’t dead, it’s just having digital babies.?