Netflix is returning some of the money to advertisers for not fulfilling the audiences promised in the advertising contracts of the basic plan with ads, reaching in some cases approximately 80 percent of the expected audience.
The content platform launched the basic plan with ads in several countries at a reduced price. In exchange, it includes advertising, decreases playback quality and removes some of the most viewed titles from the catalog.
This new subscription plan is not reaching the number of views per ad that it had agreed with the advertising companies, remaining around 80 percent of the estimate. A slow debut in the growth of users that has forced him to return the money for the ads not shown, according to the statements of five agency executives collected by the American magazine Digiday.
However, not all advertisers have applied to get their money back. Those who have it back have been companies that were carrying out marketing campaigns specifically scheduled for these dates and have wanted to reallocate this expense. However, other companies have opted to move that investment to the first months of 2023, trusting that the audience will continue to grow until the guarantees agreed by then are met.
Netflix’s advertising deal system is based on an on-demand payment where advertisers pay for the estimated amount of reach for their ads. and, if that amount was not reached, Netflix would release the unspent ad dollars at the end of the quarter.
In addition, Netflix is the most expensive platform in this sector to invest in ads. The platform initially charged $65 for every thousand ad views, while Disney+, which also launched its ad-supported subscription plan on November 7, is priced at $50. Now, even though Netflix has lowered the price to $55, it’s still more expensive than its rival.
Returning to advertisers leaves Netflix in a bad spot. However, agency executives say it may be “a symptom of the speed with which the company launched that business,” rather than a sign of Netflix’s long-term prospects.
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Likewise, the platform continues to seek advertising agreements for 2023, as detailed by the executives, who also do not rule out that, in order to achieve them, Netflix will have to further reduce the price per advertisement.