Netflix’s ad launch is off to a bumpy start, but it still holds significant potential

During its first six months with advertising, Netflix reportedly let advertisers reclaim their money after missing viewership targets and canceled its first in-person upfront a week prior to the event.

• It’s very early days for Netflix advertising. The company has been around longer than TiVo, but its advertising offering is young enough to fly for free on most commercial airlines for another 16 months. During Netflix’s virtual upfront in May, it reported nearly 5 million users on its ad plan worldwide.
• New subscribers are warming up to advertising. By the end of 2023, Netflix’s ad tier will have 3.1 million subscribers in North America and 9.9 million subscribers worldwide, according to SVB MoffettNathanson. Nearly one-fifth of new US sign-ups were for the ad tier in January 2023, up from about one-tenth of sign-ups in November 2022, per Antenna.
• Netflix’s large audience could become an advertising goldmine. With about 191.1 million monthly viewers in North America, by our estimates, Netflix could become a billion-dollar ad business if it can convince more viewers to watch ads. Its password-sharing crackdown could influence the most price-sensitive customers to adopt the cheapest, ad-supported option.