15th July 2022
The battle for streaming services ads is heating up. After hinting that it would consider introducing ads due to dwindling subscriber numbers, Netflix has now named Microsoft as its exclusive technology and sales support partner for its new ad-supported service. Also this week, Disney has inked a deal with The Trade Desk to support greater audience activation at scale programmatically.
In April, Netflix reported that for the first-time its subscriber numbers were going down and in response the streaming giant suggested that it might reverse its anti-ad stance and consider an ad-supported tier to the service. At the time Netflix co-CEO Reed Hastings said: “Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription, but as much as I’m a fan of that, I’m a bigger fan of consumer choice.”
This week in advance of its latest earnings release and warnings that it expects to lose further subscribers, Netflix has announced that Microsoft will be its partner of choice to deliver a new ad-supported offering which it hopes to launch before the end of this year.
Greg Peters, Netflix COO said in a statement: “Microsoft has the proven ability to support all our advertising needs as we work together to build a new ad-supported offering. More importantly, Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.”
Netflix had been reported to have been having discussions with several partners over the last couple of months, including Google, Comcast, The Trade Desk and Magnite.
Microsoft is a surprise choice for many as it has a perceived lack of video-selling capabilities compared to some other services. However, Microsoft doesn’t operate a competing streaming service, unlike Google which owns YouTube and Comcast which owns NBCUniversal’s Peacock and this could be part of the appeal for Netflix. In addition, Microsoft’s global footprint, more general advertising expertise, Xandr offering (ad exchange, ad server and DSP), plus its gaming position with Xbox one and Game Pass service, does mean that Netflix has chosen a heavyweight partner to help it bring a new ad funded service to life.
Also this week, Disney announced that it is teaming up with The Trade Desk to enable brands to target automated ads across Disney’s linear and streaming properties — Hulu, ESPN+, ABC, Freeform, ESPN, National Geographic and FX. The news comes in advance of the launch of an ad-supported tier for its flagship service, Disney+, which whilst not yet confirmed, it would make sense for this to be included in the future.
The Trade Desk’s advertising automation tools and ad network is designed to allow Disney to sell more ads at scale and accelerate its goal to target more of its overall pool of first-party data. A focus of the deal is driving interoperability between Disney’s Audience Graph and The Trade Desk through the open-source framework Unified ID 2.0, using Disney’s secure clean-room technology, enabling more addressable, biddable inventory across the Disney ecosystem.
Netflix has revealed very limited details of its ad funded service, nothing really beyond the fact that it will launch one and Microsoft will be its ad partner. All eyes are now on what that will look like as the company looks to stem subscriber losses by converting those subscribers into valuable eyeballs on an ad supported service. It’s certain that many consumers would use a service, but exactly how many is unknown and advertisers will be waiting in anticipation to see what opportunities it will bring.
Disney’s agreement with The Trade Desk is another sign that the premium ad-supported streamed video market is growing, with consumers reassessing their paid subscriptions in light of changing economic conditions globally. Competition to capture this shift will only increase, with a battle for the best content to attract users to platforms and also the best technology and ad offering to monetise the audience.