Netflix Lowers Ad Placement Fees

While Netflix plays the bad cop on password-sharing, its advertisers are getting the good cop.

Netflix has lowered prices for ad placements on its cheaper, ad-supported tier subscriptions, The Wall Street Journal reported on Thursday. Meanwhile, Twitter is taking a similar approach with a carrot-and-stick twist, lowering prices while simultaneously threatening to strip brands of their verified status if they don’t spend enough on ads.

Low, Low Ad Prices

Netflix introduced its ad-supported tier in November as a way of luring more potential binge-watchers onto its platform, and while it has grown steadily, it’s not been a growth bomb. It selected Microsoft as its partner for finding and placing ads in its content, and Microsoft was so confident it baked a revenue guarantee into the deal. Sadly, it looks like advertisers have not flocked to the plan, and one source told the WSJ that Microsoft has had to pay Netflix the maximum amount it can under the terms of the deal to make up for the less-than-guaranteed revenue.

Per the WSJ, that deal is now being re-worked, and Netflix is courting advertisers with discounted rates:

• Some advertisers are now being offered placements of $39 to $45 per 1,000 viewers, the WSJ reported, compared to a previous rate of around $45 to $55.
• Twitter (we’ll call it ‘X’ once they actually manage to change the sign on the office) has also dangled lower prices for brands, up to 50% off certain placements until July 31 according to emails seen by the WSJ. For extra motivation, it also warned that after August 7, if brands spend less than $1,000 on ads over a 30-day period, they’ll lose the gold-verified ticks on their accounts.

While Twitter is a slightly special case, the digital advertising market has been broadly soft for a while now, and the rock-solid marriage between tech platforms and advertisers is in need of some counseling. One Big Tech company that’s performing surprisingly well on ads is Meta. Its ad revenue growth for Q2 beat expectations on Wednesday. Wall Street was so pleased that it overlooked the fact the company’s metaverse-related losses (remember the metaverse?) hit $40 billion.

Zuckceptional: Mark Mahaney, senior managing director at Evercore ISI, told CNBC that Meta’s ad gains were partly down to its mad dash to rebuild its ad tools after Apple’s iOS changes last year gutted its revenue. “They had to scramble, they scrambled hard, it really hurt their business. But I think they’re coming out the other side now,” Mahaney said. He emphasized this was not a general trend in digital advertising: “I think it’s Meta-specific, internet advertising is not inflecting back up like this.”