Netflix (NASDAQ:NFLX) recently revealed that its advertising tier has reached an impressive milestone of 15 million global monthly active users, one year after its initial launch. This represents a substantial increase from the 5 million users reported back in May.
Following this announcement, Netflix’s stock saw a gain of over 1% during morning trading. Year-to-date, the stock has surged by more than 40%, significantly outperforming the S&P 500’s 10% increase during the same period.
Amy Reinhard, the company’s new head of advertising, expressed enthusiasm for the achievement, stating in a blog post, “We have built an incredible foundation, focusing on areas advertisers told us matter most, all while delivering unmissable entertainment at an unbeatable value.”
It’s important to note that monthly active users, or MAUs, are not equivalent to paying subscribers. Netflix has not disclosed actual subscriber figures for the ad tier or the total revenue generated. MAUs can include multiple individuals using the same account.
Reinhard’s blog post highlighted new features and enhancements, such as the introduction of a “binge ad” format. This format grants viewers who watch four episodes in a row the option to view the fourth episode without ads. The rollout of this feature is scheduled for the first quarter of 2024.
Netflix has also been actively pursuing a sponsorship model for its ad product, allowing advertisers to “partner” with a new movie or TV show. This approach was initiated with Frito-Lay sponsoring the most recent season of “Love is Blind.” Further sponsors will be announced for reality series “Squid Game: The Challenge” and the upcoming final season of “The Crown.”
This news comes on the heels of Netflix’s latest earnings report, which revealed a nearly 70% increase in ad plan membership quarter over quarter.
The company acknowledged that there is still “more work to do to scale this business,” especially concerning securing higher ad revenue. The gradual growth of the ad tier has been a point of concern for analysts, who have highlighted the time it will take for advertising to significantly contribute to Netflix’s overall revenue.
Nonetheless, the $6.99 ad tier offering has become a substantial revenue initiative for the company, combined with its efforts to curtail password sharing, which aided in boosting subscribers in the latest quarter. Additionally, the company recently announced price increases for certain plans in the US, UK, and France, further emphasizing its commitment to enhancing revenue and profitability.
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Author Stephanie Bédard-Châteauneuf 
