The investors demanded for it and rumors created even more pressure on the company, but in the end, Netflix has been brave enough to avoid the tide of adopting advertisement based business model for more revenues.
The CEO of Netflix Reed Hastings confirmed the news himself on Tuesday during the Q4 earnings call and stated that it won’t be easy for Netflix to make money with advertisements, especially when the decision would also make them stand head to head with Google, Amazon and Facebook. Moreover, by doing so, Netflix would only ruin the viewing experience for its customers, which the company cannot afford - considering the competition that is about to come.
According to Hastings, Google, Facebook and Amazon have always been more successful with advertisements only because they are collecting important user data from many sources. Besides that, their model requires business cost as well which result into more targeted ads, while ensuring that they will dominate the game for a very long time.
So, if Netflix has any plans of growing $5 billion to $10 billion through advertisements, then they would have to earn it from the existing providers and one can surely imagine how challenging it would be to steal advertisement business from Google, Amazon or Facebook.
However, that is also not all of the trouble. The CEO is also well aware of the fact that ad business comes with controversies of collecting users personal data without their consent. To make things possible, Netflix will also have to keep a keen eye on the subscribers, including their location, so making the strategic decision of not exploiting the users was backed with a strong reason, obviously.
Netflix has always been about streaming and customer pleasure, which together might make the business model look simple, but their trick has certainly worked for them in all these years.
Going beyond the decision, although the CEO of Netflix sounds nice and fair, do you know the claim is not entirely true? Netflix does track our data but only to an extent that helps their help in determining which shows to continue with or the ones that need to be dropped. The analysts also keep an eye on trends to inform producers about the programs that can really work on the platform.
Once this all sounds too much, you should also thank Netflix again for the way they also track the interactions of users to help them set up their Netflix Home Screen with the kind of shows they like.
In the similar fourth Quarter, Netflix also came out with a new viewership metric and gave it a title of “Chose to Watch”. It was aimed at making users know how many people watched the show for more than two minutes.
But all in all, Hastings still believes their viewership tracking efforts to improve the experience for their viewers is nothing when compared to Facebook, Google and Amazon’s data collection practices.
May be Hastings is right with his point because if we look at the bigger picture, then Netflix will remain to be the only platform where users would be able to enjoy whatever they want to watch without facing the fear of getting tracked. Hence, this can indeed get them to bigger revenue, larger profits and market capital as well.
Unfortunately for the CEO, this isn’t the first time that he had to clarify the company’s stance on ad business. The debate goes way back to the Q2 of 2019 where he wrote a letter to Netflix’s shareholders mentioning how not allowing ads will actually add more value to the overall brand proposition. So, this time Hastings blatantly told that any speculations regarding Netflix coming to the ad-business would only be a rumor and not initiated by them, of course.
When we go deep down into the dynamics of competition, that is going to be severe very soon with Disney+ and Apple+ coming into the game, this increased push by the shareholders seemed reasonable on their behalf. Numerous analysts are still making predictions regarding how Netflix can earn a billion more per year with the ads and therefore the investors want to make more before the market gets saturated.
Besides that, we have also seen how other TV streaming services are already relying on ads for a part of their revenue and the list does include big names like Hulu and CBS All Access. There are also a number of ad-supported emerging services like Roku’s The Roku Channel, Amazon’s IMDb TV, TUBI, Viacom’s Pluto TV, and others.
Will Netflix’s call to skip ads really help the platform in retaining and gaining more subscribers? And does it really matter for the viewer that they want ad-free streaming platforms? We will have to wait and see until the competition grows with mobile streaming services as well like Quibi, WarnerMedia’s HBO Max, and NBCU’s Peacock.
Photo: Juan Naharro Gimenez | Getty Images
Read next: Consumers Are Not Ready to Spend Too Much for Steaming TV
The CEO of Netflix Reed Hastings confirmed the news himself on Tuesday during the Q4 earnings call and stated that it won’t be easy for Netflix to make money with advertisements, especially when the decision would also make them stand head to head with Google, Amazon and Facebook. Moreover, by doing so, Netflix would only ruin the viewing experience for its customers, which the company cannot afford - considering the competition that is about to come.
According to Hastings, Google, Facebook and Amazon have always been more successful with advertisements only because they are collecting important user data from many sources. Besides that, their model requires business cost as well which result into more targeted ads, while ensuring that they will dominate the game for a very long time.
So, if Netflix has any plans of growing $5 billion to $10 billion through advertisements, then they would have to earn it from the existing providers and one can surely imagine how challenging it would be to steal advertisement business from Google, Amazon or Facebook.
However, that is also not all of the trouble. The CEO is also well aware of the fact that ad business comes with controversies of collecting users personal data without their consent. To make things possible, Netflix will also have to keep a keen eye on the subscribers, including their location, so making the strategic decision of not exploiting the users was backed with a strong reason, obviously.
Netflix has always been about streaming and customer pleasure, which together might make the business model look simple, but their trick has certainly worked for them in all these years.
Going beyond the decision, although the CEO of Netflix sounds nice and fair, do you know the claim is not entirely true? Netflix does track our data but only to an extent that helps their help in determining which shows to continue with or the ones that need to be dropped. The analysts also keep an eye on trends to inform producers about the programs that can really work on the platform.
Once this all sounds too much, you should also thank Netflix again for the way they also track the interactions of users to help them set up their Netflix Home Screen with the kind of shows they like.
In the similar fourth Quarter, Netflix also came out with a new viewership metric and gave it a title of “Chose to Watch”. It was aimed at making users know how many people watched the show for more than two minutes.
But all in all, Hastings still believes their viewership tracking efforts to improve the experience for their viewers is nothing when compared to Facebook, Google and Amazon’s data collection practices.
May be Hastings is right with his point because if we look at the bigger picture, then Netflix will remain to be the only platform where users would be able to enjoy whatever they want to watch without facing the fear of getting tracked. Hence, this can indeed get them to bigger revenue, larger profits and market capital as well.
Unfortunately for the CEO, this isn’t the first time that he had to clarify the company’s stance on ad business. The debate goes way back to the Q2 of 2019 where he wrote a letter to Netflix’s shareholders mentioning how not allowing ads will actually add more value to the overall brand proposition. So, this time Hastings blatantly told that any speculations regarding Netflix coming to the ad-business would only be a rumor and not initiated by them, of course.
When we go deep down into the dynamics of competition, that is going to be severe very soon with Disney+ and Apple+ coming into the game, this increased push by the shareholders seemed reasonable on their behalf. Numerous analysts are still making predictions regarding how Netflix can earn a billion more per year with the ads and therefore the investors want to make more before the market gets saturated.
Besides that, we have also seen how other TV streaming services are already relying on ads for a part of their revenue and the list does include big names like Hulu and CBS All Access. There are also a number of ad-supported emerging services like Roku’s The Roku Channel, Amazon’s IMDb TV, TUBI, Viacom’s Pluto TV, and others.
Will Netflix’s call to skip ads really help the platform in retaining and gaining more subscribers? And does it really matter for the viewer that they want ad-free streaming platforms? We will have to wait and see until the competition grows with mobile streaming services as well like Quibi, WarnerMedia’s HBO Max, and NBCU’s Peacock.
Photo: Juan Naharro Gimenez | Getty Images
Read next: Consumers Are Not Ready to Spend Too Much for Steaming TV
