Netflix’s ad-supported tier has not met expectations, according to five ad agency execs who spoke to Digiday. Apparently, Netflix made guarantees to advertisers and so far the platform is failing to live up to these. In the existing arrangement with Netflix, ad agencies can take their money back for ads that have not yet run if they choose to.
The report states that Netflix has a pay-on-delivery arrangement with advertisers where it only gets paid for the ads shown to customers. For the ads that don’t get shown, it releases the ad dollars back to the agencies. This arrangement is different to how traditional TV stations do ads. In those arrangements, advertisers spend the full amount of money and any money not spent is spent on future ads.
One of the ad agency executives that spoke to Digiday was quoted as saying “They can’t deliver. They don’t make enough inventory to deliver. So they’re literally giving the money back.” Agencies that are taking their money back are those who have Christmas-related ads which will be no good soon. Some agencies have left their money with Netflix for future ads.
While this news suggests that the cheaper ad-supported tier is getting off to a slow start, we must keep in mind that it’s new, only launching in early November.
Over time, people who don’t mind ads, and want to save a bit of money, may opt for this ad-supported tier and resolve the issue. It’s also important to note that the tier only launched in 12 countries so as it expands to more places this could also increase ad views.
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