Julia Faria
Research lead covering advertising and marketing
Netflix advertising - statistics & facts
Netflix, a long-time denier of advertising as a revenue source, caved in. In November 2022, the company kicked off its ad-supported tier in 12 markets, including the U.S., the UK, France, Germany, Brazil, Australia, and Japan. Adopting Netflix's Basic With Ads plan, users allow their viewing to be interrupted by 15-30 seconds ads while paying lower prices for a subscription. The company started hinting at this development earlier in 2022, hoping to attract more subscribers and increase revenue. However, as Netflix enters the ad business, the streaming giant will have to balance new subscribers without losing premium-tier customers. Simultaneously, the company will have to provide an attractive environment with an extensive enough reach for advertisers to be willing to spend their money.
While the streaming icon takes its first steps in the advertising business, analysts already predict the future of Netflix ad revenues. Preliminary figures estimate the company's gain with advertising at around half a billion U.S. dollars in 2023 – a value expected to increase to nearly four billion dollars by 2027. Currently, the company's challenge lies in bringing in subscribers to the ad-supported plan. For instance, one-third of consumers in the United States preferred paid, ad-free streaming content in 2021. Among already Netflix subscribers in the country, only 14 percent were likely to switch to a less expensive, ad-supported subscription option, according to a survey conducted in 2022.
Netflix wrestling for subscribers and revenues
At the beginning of 2022, Netflix remained adamant about not using advertising. Nevertheless, the company's position changed after subsequent losses in the number of subscribers. For the first time in over a decade, Netflix saw its customer base decrease in the first two quarters of that year. In comparison, its competitor Disney+ gained millions of new customers in the same period. Despite the bumpy start into 2022, Netflix managed to reverse the downward trend in the subscriber count and ended the year by counting a net subscriber addition of more than seven million. By this time, the move toward advertising accelerated, and the company announced its new Basic With Ads plan.While the streaming icon takes its first steps in the advertising business, analysts already predict the future of Netflix ad revenues. Preliminary figures estimate the company's gain with advertising at around half a billion U.S. dollars in 2023 – a value expected to increase to nearly four billion dollars by 2027. Currently, the company's challenge lies in bringing in subscribers to the ad-supported plan. For instance, one-third of consumers in the United States preferred paid, ad-free streaming content in 2021. Among already Netflix subscribers in the country, only 14 percent were likely to switch to a less expensive, ad-supported subscription option, according to a survey conducted in 2022.
Competition on the AVOD revenue front
Netflix was not the only platform to announce the pivot to an ad-supported model in 2022. Disney was also on the quest to grow its customer base by entering Disney+ in the AVOD arena. But why is everybody jumping on the advertising bandwagon? The reasons behind the popularity of ad-supported video-on-demand are twofold. Consumers choose it because it is an affordable alternative to accessing popular content otherwise locked behind premium plans. Platforms go the AVOD route because it helps ramp up the subscriber count while adding another layer to their revenue sources. Globally, ad-supported VOD revenue was estimated at nearly 38 billion U.S. dollars in 2022, with the United States as the largest market. All in all, advertisers can look forward to growing opportunities in the VOD market. As more and more platforms discover the benefits of ad-supported business solutions, they open doors to untapped audiences.
