Building confidence: With viewership expectations being met and the ball beginning to roll, Netflix is looking to the future of its advertising business and whether it should go it alone or stick it out with Microsoft.
- To launch an ad-supported tier quickly with no experience running an ad platform itself, Netflix was forced to seek out a prominent partner to get things going.
- But now, perhaps fueled by greater confidence in its ad business, Netflix is reportedly consulting with ad tech experts about the cost of building or buying its own ad platform, which could mean severing its partnership with Microsoft when that contract ends in 2024.
- Still, a potential recession and higher interest rates make hiring engineers to develop an ad platform costlier than it would have been during Netflix’s decade of ad-abstinence, and acquisitions are made difficult by the same circumstances. Besides, Netflix already has several costly, long-runway acquisitions in its portfolio thanks to its developing video game business.
Our take: Netflix has shaken off the rough launch of its new subscription tier, but it’s still not the revenue generator the company is hoping for. If AVOD does become a hefty source of revenues and subscriptions for Netflix, it will take years for the results to materialize. In the meantime, its boost of confidence after a shaky first go is giving glimpses into how the company is planning for the longer term.