Netflix’s ad tech will hit the US just in time for Upfronts

The news: Netflix will launch its in-house ad tech stack in the US in April, bringing it out of testing just ahead of Upfronts. During the company’s Q4 earnings call, co-CEO Greg Peters touted the company’s progress and said it expects to double ad growth again in 2025.

• Netflix launched its ad-supported tier with Microsoft as its technology partner but has gradually moved away from the tech company. It launched its own ad system in Canada last year, where Peters noted revenue gains.
• “Using our own ads server [enables] us to offer more flexibility, more ways of buying for advertisers, fewer hurdles, just improving the overall buyer experience,” Peters said in the company’s earnings call.

Netflix’s ad path: After a rocky start and fierce competition, Netflix is hitting a stride with its advertising business. Over 55% of new subscriptions in its ad-supported markets came from its Netflix with Ads plan, and we expect the company’s US ad revenues to pass $2 billion this year.

• With its ad tech fully under its control, Netflix won’t have to worry about ceding any ad revenues to Microsoft or other tech partners.
• Despite a crowded streaming field rife with advertising competition, Netflix’s record Q4 for subscriber growth and strong holiday performance solidified its place as a leader for premium streaming inventory.
• Its two Christmas Day NFL games were the most-streamed in the league’s history, and “Squid Game” season 2 quickly became one of its biggest hits. Its WWE deal will bring another high-viewership, recurring, live streamed event to the service, and is likely to draw advertisers.

Our take: The US launch of Netflix’s ad tech represents the streaming service’s ad business reaching maturity. Several years of experience under its belt with a noteworthy tech partner will help set the company up for ad dominance, and a strong consumer appetite for ad-supported subscriptions continues to increase its viewer count.