After avoiding advertising for years, Netflix announced that it would introduce an ad-supported subscription tier.

This move represents new territory for the entertainment platform that has been among the most popular streaming services. However, it’s fairly easy to see why the company made this move.

There has been a surge of new streaming services in the past few years. Many of these offer subscription pricing that is much lower than Netflix’s, and many are also relying on ad revenue. In addition to this, subscriptions at Netflix have been declining. There’s also the ongoing issue of users “sharing” their subscriptions with others.

All of these things have driven Netflix to embrace advertising. This development is exciting news for advertisers who look forward to the opportunity to reach this audience. Keep reading to learn more about Netflix advertising and what all of this means for advertisers.

What Will the New Netflix Ads Look Like?

There are still quite a few missing details, but we do know that ads will only be shown on the subscription tier created for that purpose. Other subscribers will be able to continue using their ad-free streaming.

Also, Netflix plans to contract with third-party ad companies to manage the new advertising options. This setup will allow Netflix to focus on its core mission of producing and distributing entertainment content, which is important as the company needs to focus on regaining some of its lost subscription numbers.

Additionally, by outsourcing its advertising, Netflix will gain access to more data that will help ensure better ad relevance.

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Netflix does plan to make its advertising-supported option available to viewers in the United States. However, the company is mostly focused on using this option to increase its subscriber base globally.

The streaming company has begun to lose some ground in other countries where it faces competition from less expensive services. This reality has made the brand struggle to execute its plans to expand into new countries.

By adding this ad-supported option, Netflix hopes to be in a better position to compete with less expensive streaming services. If this strategy works, the company will be able to expand globally.

Although there isn’t much information available on how Netflix ads will work or what they will look like, it’s possible to gather some decent insights.

In all likelihood, Netflix will follow at least some of the practices established by other services that use ads. The customer experience will also likely align with other connected television (CTV) and over-the-top (OTT) advertising.

The Potential of OTT And CTV Ads on Netflix

If you’re a business owner interested in the potential of leveraging OTT and CTV ads on Netflix, you aren’t alone. Then again, you may be entirely new to advertising on streaming services. In that case, here are a few terms to understand:

  • AVOD: This acronym stands for “ad-supported video on demand”
  • OTT: “Over the top” is content that is streamed online — it goes “over the top” of traditional cable television
  • CTV: “Connected TV” is a general term for streaming both content and ads to televisions that are connected to the internet
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The differences between OTT vs CTV are small, but there is a distinction. Connected TV is basically over-the-top ads on smart TVs, whereas OTT includes everything such as tablets, smartphones, etc.

If you were to advertise as part of Netflix streaming on devices, that would constitute OTT advertising — if streamed directly to connected televisions, it would be CTV. The content that Netflix will show on its ad-supported tier will be AVOD.

What Can Advertisers Expect from OTT Advertising on Netflix?

Because OTT advertising is displayed on internet-connected devices, you will have access to user behavioral, demographic, and contextual data.

This access means that you can specifically target your advertising to different demographic criteria or behavior patterns. The setup is unlike traditional television, where your ads must be geared toward a more general audience.

Netflix will be working with third-party companies to manage its advertising options. This setup will likely give them access to data from these platforms that advertisers can use to understand audiences better and target their ads. Such collaboration is useful because Netflix doesn’t retain the same quantity of data as its competitors.

This third-party data will level the playing field in a way. Netflix will be able to offer you the same opportunities to reach the right audiences as other OTT platforms.

Other Data Opportunities

Once you begin showing your OTT ads to Netflix audiences, you will have access to reports-based performance data from those ads. You can use this information to improve your advertising strategy.

Interactive Ads

Some OTT platforms will allow you to publish interactive ads. These have the potential to get customers more engaged and may be more memorable.

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What About CTV with Netflix?

While CTV doesn’t have all of the interactivity and data that is possible with OTT, it is still a powerful channel for reaching customers. Brands will be able to reach a wide audience with varied demographics and interests. That’s a valuable opportunity for most companies.

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