Once Netflix committed to ad-supported streaming they moved fast, perhaps too fast
Netflix is now giving back money to advertisers after missing their viewership targets. I don't find it surprising for 3 reasons.
1st Netflix already had a huge market share that saw value in its current pricing proposition.
2nd the price point difference is not great enough. The Ad-Supported tier is $6.99 per mo vs $9.99 per mo. $3 bucks a month or $36 per year just is not enough to make people switch.
3rd Netflix did not promote the ad-supported tier. if I were not in the streaming business I don't know if I ever would have known Netflix started taking ads
Netflix came out of the gate with sky high CPMs and from what I understand minimal targeting and low measurement /reporting capabilities. The allure of a pristine ad environment, the promise of low clutter, and the share of mind & share of audience that Netflix has was too much for major advertisers that could afford it to pass up on.
Now here are the type of things being said “They can’t deliver. They don’t have enough inventory to deliver. So they’re literally giving the money back,” said one of the agency executives.
Here are a couple of lessons.
On the what can we learn front-
Never purchase a #streaming or a #CTV schedule without an accurate audience forecast. Advertisers will get their un used ad dollars back, but what they really wanted was to make it impact in the current quarter. Getting money back is simply opportunity lost.
On it's not so bad front.
Netflix like most streaming is sold on a pay-per-delivery basis. This means advertisers only pay for impressions that were delivered to an audience. lack of impressions delivered simply means a refund of ad dollars. Traditional TV and cable which almost always under-delivers keeps the advertising dollars. They offer make goods to satisfy any viewership guarantees. The make goods are often not nearly as good as the original impressions purchased.
Even with Netflix's blunder, there's still an upside. According to this article, Netflix still feels they are in a position of strength and is still looking for high CPM. Time will tell
Full story from DSIGIDAY here