There are a few certainties in life we can all agree on. Death, taxes — and that a large swath of Netflix’s user base will always recoil in horror at the mere mention of advertising on the video streaming service.
Nevertheless, the CEO of online advertising marketplace The Trade Desk thinks that’s exactly what Netflix is going to have to embrace sooner or later if it’s ever going to have a real shot at going head-to-head with YouTube in terms of international growth. That exec, Jeff Green, gave his take on Netflix and ads during the latest episode of Recode Media with Peter Kafka, arguing that consumers are getting closer to the limit of how many subscriptions they’ll be willing and able to pay for. And, crucially, as that ceiling approaches, services would do well to remember that many consumers are perfectly fine with the trade-off of accepting ads in order to keep their service free.
According to Recode, Green believes Netflix is going to follow the Hulu ad-supported model eventually, offering an ad-supported tier alongside its ad-free subscription, in order to compete with YouTube.
“They’ve envied YouTube’s international reach for a very long time, where even less than two years ago, 80 percent of subscribers for Netflix were in the U.S.” Green told Recode. “Our median household income’s at $50,000-ish, roughly, a year … compare that to all the places where there’s growth in the world, which is also where advertisers are willing to pay ahead. I don’t think there’s any chance that they can catch up to YouTube, whose geographical distribution is exactly inverted, which is 80 percent comes from outside the U.S., unless they go ad-funded in the same way that YouTube is.”
Green, of course, is not a disinterested observer here. His company connects advertising agencies and brands with ad opportunities via programmatic advertising. Still, we’ve made this same point in earlier posts here on a number of occasions. That there is currently a glut of content services — be they video or news media outlets and all manner of enterprises in between — racing to put up paywalls or roll out subscription offerings of some kind. The budgets of ordinary consumers aren’t unlimited, which means this is of course a game with a finite number of winners.
“I honestly think this is the model for lots of publications, which is okay, if you wanna pay a premium to avoid the ads that’s fine,” Green continues in his comments to Recode. “But the default will be to see ads, and most people would rather see, especially fewer, highly relevant ads, which is only possible through programmatic.”
Netflix, you could argue, has been tiptoeing into these waters. Here’s an earlier post we did when Netflix first began experimenting with teasers for its own programming that are effectively tantamount to ads.