Netflix is admitting that it still has ways to go in order to scale the necessary advertising reach and subscriber size with its ad-supported model. It claims that by taking a customer-focused approach and providing advanced features to advertisers, they may ultimately surpass competitor streaming services in the advertising market. Netflix suggests that its ad-supported tier serves as a backup plan for users who express dissatisfaction with price increases. It seems that the streaming behemoth believes its competitors are doing advertising incorrectly. Some of its streaming competitors haven’t yet done as well in creating an advertisement-friendly environment.
Netflix wants to educate consumers about the ad-supported tier
According to Netflix, part of its mission is to inform customers about what to expect from their Netflix advertisements. This allows people to consider what, given their unique tastes, would be the best decision for them. The secret is to use the data collected as more people use the ad-supported tier to build models and capabilities that minimize repetition and intrusiveness while delivering relevant ads and a tailored experience.
Insights on new subscribers to ad-supported plans
Some reports state that new customers to the ad-supported plans see four minutes or less of advertising every hour, whilst those who cancel and re-up only view 60 seconds or less. This is before the amount of ad time is progressively increased once more. Resulting in rumors that a sophisticated method of desensitizing ad-verse consumers is part of Netflix’s educational process. However, since last May, six months after the plan’s introduction, when the business claimed to have drawn close to 5 million sign-ups worldwide, Netflix has not made available the precise number of with-ad members. According to reports from July, out of over 75 million Netflix members in the United States, 1.5 million of them were using the advertising plan.
Netflix’s Ad Formats Expansion
Netflix announced the start of title sponsorships for seasons, series, and new domestic live sports events in addition to the growth of its ad formats. It includes the addition of a binge format, as part of its effort to realize that potential. Apart from introducing ad buys for its top 10 content selection, Netflix is collaborating with Microsoft, an ad tech partner, to provide other programmatic ways to access its ad inventory. Future expanded targeting capabilities should be available soon, as improving ad relevance is the first stage.
Challenges Netflix Might Face
Customers who use streaming services aren’t used to any kind of advertisement environment. In the past, cord-cutters sought to save money by forgoing the pricey cable bundle. In the process, they improved their viewing experience by being able to watch content whenever they wanted, without interruptions. Priorities are ranked highest for measurement. Therefore, Netflix is working to give comparable measurement capabilities to service a large list of partners across other nations in addition to launching a measurement relationship with Nielsen in the U.S.
A chance for Netflix
Just one year into their agreement, Netflix started a restructuring of its advertising partnership with Microsoft in July. In order to revitalize the developing area of its business, the streaming juggernaut decided to lower its ad pricing. Netflix leaders within the firm voiced their displeasure with Microsoft’s ad inventory and sales performance. Microsoft was forced to make the maximum amount stipulated in the agreement reached more than a year ago. This was a result of weak sales and a smaller-than-expected ad market. Microsoft had been chosen by Netflix as a partner at the beginning of its advertising business.
Transactional technology that enables transactional customer relationship is the base of the digital publishing ecosystem for the past two decades. This is how it works- attracting a reader, showing them a headline or a few words or an article, then coming up with a paywall to buy a short subscription package and moving on.
Every potential subscriber is treated as any other e-commerce customer with the same conversion funnel. We have built complex tech- stacks to support this approach and the ad-focused tools and subscription products remain unchanged and operational at certain levels in the digital customer journey. Till now, the flexibility in the customer experience was never a question. The journey was straight, simple, and direct with a single focus -deliver content, monetize on it, and maintain engagement. However, this transactional approach no longer caters to commercial or customer needs.
Lately, people are accustomed to making their own choices- which product is suitable for them, opt for premium or family packages depending on their needs and likes. The growing subscription economy has altered the way a customer perceives their product and services.
A successful recurring relationship is built on personalization when a customer can choose the product or package right for them and leave the rest. Jim Barksdale rightly said, “There are only two ways to make money in business. One is to bundle, the other is to unbundle.”
Businesses should be able to answer important questions like which one to pick, where, and how.
Presently, to answer the questions, publishers are enforced to hack the existing transactional tools and development teams are still investing their efforts on the complex system instead of building new products to grow revenue. Marketing teams want to explore with fine-tune new customers but are hindered by the same old inflexible technology.
Ultimately, publishers suffer badly due to lack of innovation, low ad -yields, complex technology, high costs, and no personalization for consumers. In simple words, the industry’s technology is unfit and outdated and it is worrisome considering the future is about dynamic products and personalization and automation. By relying on transactional technology with all limitations, publishers are at risk, and growth is restricted in this new economy.
Coronavirus led digital publishing growth
With COVID-19, the subscription economy has changed in six weeks which could have taken longer otherwise. The UK’s largest subscription site, iSubscribe witnessed its digital magazine subscription jump 400 % jump in volume. The traffic to the Financial Times website saw a jump of 250% Y-o-Y in the past month. There is an all-time high in the industry conversion rate.
But the question now is, will this continue post coronavirus crisis when the audiences find themselves with subscriptions that are not required?
So what next to sustain this?
Commercial teams need to set up a highly personalized customer journey without reaching to their technical team for help each time. They should independently learn, test, and change a range of products, packages, and revenue models.
This implies publishers should not rely on years of coding experience to handle but need integration of tools across the customer journey- offering personalized outcomes to every potential subscriber. Publishers need tools that don’t require coding to ensure that every client, prospect, and visitor is handled by the organization and the power to build change is in the hands of the specialists who know the market.
The world’s largest publications are using this platform to get ahead of the curve and be ready to steal the thunder once the markets settle -which might not take too long.