Netflix says ‘making good progress’ in advertising business

Netflix (NFLX) said: “We’re now approaching the second anniversary of the launch of our advertising business and we’re making good progress. Our ads plan allows us to offer a lower price point for consumers, which is proving to be popular: in Q3, it accounted for over 50% of sign-ups in our ads countries and membership on our ads plan grew 35% quarter over quarter. We’re on track to reach what we believe to be critical ad subscriber scale for advertisers in all of our ads countries in 2025, creating a strong base from which we can further increase our ad membership in 2026 and beyond… However, we have much more work to do improving our offering for advertisers, which will be a priority over the next few years. Our in-house first party ad tech platform is on track to roll out in Canada next month, with a broader launch to all ads countries in 2025. We’ve also expanded our programmatic capabilities with The Trade Desk and Google DV 360, which is going well. It’s still very early for our advertising initiative. As we said last quarter, it takes time to build a new revenue stream and we don’t expect ads to be a primary driver of our revenue growth in 2025. The near term challenge (and medium term opportunity) is that we’re scaling faster than our ability to monetize our growing ad inventory. While this creates a short term drag on ARM, we are balancing building ads scale (for more meaningful ads revenue and ARM contribution over time) while still delivering healthy overall revenue growth in the near term (as noted, we expect our total company revenue to grow 15% year over year in 2024). And we’re making progress with ads monetization, as we saw in this year’s US Upfront – closing deals with all major holding companies as well as independent agencies, with a 150% plus increase in upfront ad sales commitments over 2023, in-line with our expectations.”