The Reason Behind Netflix’s No Ad Marketing Strategy
While other major streaming services prefer to use ads, Netflix keeps dismissing the idea of advertising. Netflix executives have repeatedly stated that the streaming service won’t allow advertisements to interfere with their users enjoying the Netflix platform.
However, according to a recent investors’ note, this could change in the nearest future…
In this article, I’ll discuss the main reasons behind the absence of ads on Netflix, as well as the possibilities of change.
Why Does Netflix Refuse to Use Ads?
The CEO of Netflix, Reed Hastings, explained his belief that Netflix can build a more valuable business without advertising.
“There’s much more growth in the consumer market than there is in advertising.”Reed Hastings, CEO of Netflix
Hastings also added he believes advertising isn’t as profitable as it seems:
“Advertising looks easy until you get in it. Then you realize you have to rip that revenue away from other places because the total ad market isn’t growing, and in fact, right now, it’s shrinking. It’s hand-to-hand combat to get people to spend less on, you know, ABC and to spend more on Netflix.”Reed Hastings, CEO of Netflix
Therefore, Netflix focuses on subscriber growth and generates its revenue from monthly subscription fees.
Apart from what Reed Hastings said, the most obvious reason is that users usually find ads annoying. Of course, you wouldn’t want to sit through boring ads when you just wanted to enjoy your favorite Netflix series. This is one of the biggest reasons Netflix is praised for, and it remains ad-free.
Other streaming services such as Hulu and Apple TV+ provide a cheaper ad-supported tier and a premium option that offers an ad-free experience. Netflix also has different plans to pick from, including Netflix Basic for $8.99, Netflix Standard for $13.99, and Netflix Premium for $17.99. Additionally, none of these plans contain ads, making Netflix the only streaming service to provide a completely commercial-free environment.
Another reason could be that Netflix doesn’t want to spend tremendous amounts of money to track their users’ data in order to provide personalized ads.
Netflix told New York Times that it is a “deep part of our brand proposition” to keep the environment ads-free. It prefers to stick with creating value for its subscribers.
Netflix only allows showing trailers and previews for trending material, for example, Stranger Things or Money Heist.
The previews are usually shown during the credits, whenever you finish watching something. Even for this feature, there’s a turn-off button. All you have to do is access your account, scroll down to the settings, find “test participation,” and turn the “include me in tests and previews” off.
Not every company can be as successful as Netflix without an advertising strategy, but many advertising agencies have the capability of turning businesses into giants by offering a hand.
Netflix Ads and Marketing Strategies
Netflix is in constant competition with other streaming giants like Amazon Prime, Hulu, Apple, and many more. They all have great content, that’s for sure. So, what makes Netflix content stand out? Let’s find out below.
It isn’t all about the content but also delivering more information. When it comes to advertising, Netflix invests a big amount from their profits. The company spent a whopping $2.23 billion on marketing during 2020.
The marketing strategy of Netflix includes social media accounts that often post memes and ask questions related to fan-favorite Netflix series and movies. For example, in a 2017 tweet, Netflix asked its subscribers if they should have made another season of Stranger Things. The poll blew up in responses, with 87% responding “yes.” Considering the fact that the vast majority of Netflix subscribers are Millenials and Gen Z’s, that kind of approach is sure to create engagement.
Did you know Netflix often sends emails too? They are not the classic, boring newsletters you’re used to seeing. If you think email marketing is no longer relevant in the modern world, you should see Netflix’s emails! They always find a way to make their emails memorable and, at the same time, deliver valuable news for you. Those ways include sending GIFs, memes, and sometimes a bit risky, spam-like texts too. After all, Netflix was never afraid of taking risks.
Moreover, Netflix puts its customers’ data to good use, creating unique suggestions for each individual. Meaning every single Netflix account will have completely different homepages. When every account is personalized, the average user experience is significantly higher.
Possible Threat for the Streaming Service
Using its current subscriber growth strategy, Netflix remains one of the most successful streamers around the globe. The streamer has more than 180 million active users worldwide. However, a note sent by analyst Michael Nathanson from MoffettNathanson Research implies that Netflix may need to change their no ad marketing strategy.
Nathanson raised an important point. Although Netflix generates a revenue of more than $25 billion annually, the company should always keep an eye on its growth. Nonetheless, at some point, everyone who wants to have a Netflix account will have one. Meaning the number of Netflix users will stop increasing rapidly.
Whenever this happens, the subscribers will no longer be the revenue driver for the company, forcing them to seek another source of revenue. In short, the Moffett Nathanson analyst suggests the company may have to embrace advertisements sooner or later.
Is It Already Too Late?
According to Michael Nathanson, at least one bad sign is already in sight. The number of subscriptions has been increasing at a slower rate recently. Yet, the analyst said embracing ads could bring more trouble.
If Netflix decides to implement ads on their platform, it means a new premium plan will be created for those who don’t want to experience the ads, and it will obviously be offered at a higher cost. Considering Netflix remains relatively cheap, it won’t be a piece of good news for the subscribers.
How Do Streaming Services Gain Revenue?
On the bright side, Netflix has much room for growth before it necessarily needs to include ads. The streaming service can still achieve a lot outside the U.S. Including a wider range of content is also a possibility.
Reed Hastings confirmed that Netflix is aiming to expand its borders in the future:
“Sports, video gaming, user-generated content – if you think of the other big categories, someday it could make sense.”Reed Hastings, CEO of Netflix
Netflix may start broadcasting news, but the CEO of the platform stated the Netflix news category is less likely to happen. Netflix could go for live sports streaming like some other streaming service providers. For example, Amazon Prime Video already owns rights to some Premier League fixtures, the top-tier soccer league in England.
However, Netflix’s Vice President of business development spoke against the idea back in 2018. “In terms of live sports, there’s nothing we can do differently from a television broadcaster, so it doesn’t add additional value,” said Maria Ferreras, confirming there were no current plans to go into sports.
Nevertheless, Netflix has numerous options, and it doesn’t necessarily need to change its decades-long tradition. Thus, it’s unclear if Netflix will discuss the topic in the nearest future or not, especially after what they’ve told the New York Times.
Final Thoughts About Netflix’s No Ads Strategy
Advertising can help streaming become a more stable and fast-growing business. It can create another source of revenue – something that may become crucial for Netflix in the coming years. Yet, the streaming giant seems insistent on avoiding it.
Netflix is one of the rarest streaming platforms that disallows advertising. This is one of the primary reasons it hooked the attention of millions of people worldwide. It is a “deep part” of the “brand proposition” to focus on creating value for the subscribers and completely dismissing advertisements. So, if Netflix decides to stay with the brand niche of keeping away from ads, it won’t be surprising at all.