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Content, Advertising and Commerce: The Future of Advertising on Netflix

On TV & Video‘ is a column exploring opportunities and challenges in the field of advanced television and video.

Today’s column is by Chris Keune, cargo VP of Data Science and Product.

Netflix has suffered from flat subscriber growth in recent quarters, hurting its stock price and internal morale. Now, without a diversified revenue model, the company has announced that it will open up its content to non-paying subscribers in an ad-supported model.

But trying to sell ads doesn’t have to be a sin. If done right, Netflix can set the standard for modern media companies. It can offer a model that combines content, commerce and advertising into a single, seamless experience.

There are a number of huge opportunities that no streaming content provider has tapped into, from live streaming retail to immersive content as advertising. Netflix may be the company that makes this possible.

Gamification of Commercial Experiences

Advertisers like CTV for its targeting and measurement capabilities. But the viewing experience is bad. Anyone familiar with advertising in streaming content knows that most of them are simply recut versions of TV ads. Capital One, Nike and other big spenders on CTV also suffer from radio frequency problems. I’ve seen the same Charles Barkley ad for Capital One at least a hundred times on YouTube, Hulu, and other apps.

Netflix would be wise to explore more creative advertising options. It already has its own studio services, so why not allow brands to create engaging CTV experiences unique to the Netflix platform?

For example, to increase viewer retention, Netflix has developed interactive series like You vs. Wild and Trivia Quest. Translating interactivity to CTV would set Netflix apart from its competitors. A “choose your own adventure” for ads, if you will, where viewers can choose their ad, resulting in a more relevant brand experience. The resulting data can then inform more personalized ads to the viewer.

Taking commerce to the extreme

Netflix has an excellent opportunity to offer shopping to its customers. In June 2021, the company started a retail store to sell show-related merchandise, including “Stranger Things”, Ozark and even Emily in Paris inspired luxury apparel. By integrating the links to its store with its content, Netflix could offer a richer viewing experience.

Furthermore, with the payment methods on file, Netflix could easily capitalize on opportunities like one-click shopping for the target audience, allowing brands to benefit from a seamless and closed loop to increase conversions. In addition to revenue, it could be a way to collect more data on non-paying subscribers.

And then there are live shopping events – already a $500 billion dollar market in China. These events are primed for explosive growth in the US, but early attempts by channels like QVC prove these outlets lack the creativity to capture mainstream attention.

Imagine real trade shows like those on the Home Shopping Network (HSN) or QVC, but special offers are available on-demand and updated daily. Similar to Amazon’s Lightning Deals, Treasure Truck, or limited-edition sneaker deals, these commercial connection points can keep fans entertained and committed to the Netflix platform by offering services beyond content.

Plugging in programmatically

Netflix needs to get smart fast if it wants to be a force in programmatic CTV. With extremely attractive first-party data, it could be building and selling its own audience in no time. Netflix has a state-of-the-art contextual recommendation platform that can be easily reconfigured to handle ad optimizations and results, like a walled garden.

Because email is its deterministic ID, Netflix can integrate with other holistic ID solutions like The Trade Desk’s Unified ID 2.0 platform, extending the brand’s reach beyond its own walls. Ultimately, Netflix could build its own DSP to provide this cross-screen capability within its platform.

Most CTV players are just getting to grips with programmatic content and haven’t offered much innovation for brands yet. When Netflix plays its cards right, it can be a formidable force in the CTV ecosystem — not to mention commerce and content.

follow cargo (@Cargo) and AdExchanger (@Adexchanger) on twitter.

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