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Netflix was all about not having ads for a long time. But then they decided to change their mind and finally adopted advertising. This has become a great success for Netflix.

From their earnings conference: 

First and foremost, we love our ads plan because it allows us to offer a lower price point for consumers. That's more choice, good accessibility. That is proving to be popular. It means that we obviously have more people that can sign up and enjoy a growing range of entertainment that we've got to offer. It's also the reason that we've been successful in driving that first ads priority we had in our ads goals, our most primary ads goals, which were to get to sufficient scale.

So Q4, ads plan represented over 55% of sign-ups across our ads countries. We've seen membership on those ads plan increase about 30% quarter-over-quarter this last quarter. That was on top of 35% the quarter before, on top of significant growth the quarters before that.

So as you point out, we've seen significant growth since launch, which we're excited about. Maybe even more excited about the fact that the engagement of those ads members remains healthy. So view hours per member on the ads plan is similar to engagement on our standard non-ads plan in our ads country, which is a really good marker that we're excited about.

This is very important. This means that the engagement of customers between both ad supported and premium plans was the same. However, Netflix stands to benefit a lot more from those users on the ad supported plan as they generate revenue from advertisers.

So we've done the work, I would say, to meet our scale goals for advertisers in '25. And that means that increasingly, we've been able to shift more of our focus, more of our attention on making the offering better for advertisers to increase monetization of that growing inventory. This is going to remain a priority and part of our road map for at least the next several years, likely years to come after that.

But we're making solid progress already. For example, we exceeded our ads revenue target in Q4, which was an exciting milestone to get. We've doubled our ads revenue year-over-year last year. We expect to double it again this year so that should give vou a sense of the slobe of monetization growth that we're on. 

In the fourth quarter, the advertising plans accounted for over 55% of signups across their ad supported countries. That means whenever Netflix got a new subscriber, more than half of them chose the ad-supported plan. This approach for Netflix has been super effective - this has been already proven by YouTube that offers a Premium option.

The global advertising spend is poised to reach a $1 trillion this year, presenting a massive opportunity for the advertising industry. Netflix made a significant splash by unveiling these figures. It wouldn’t be surprising if Netflix ascends to become one of the top five companies in ad revenue within the next decade, alongside Google, Meta, and Amazon. 

Spencer Wang (Vice President of Finance, Corporate Development & Investor Relations):

And then over time, the first-party ad tech platform allows us to deliver more critical capabilities to advertisers that we hear from them that they really need. So more programmatic availability. We're talking enhanced targeting, we're leveraging more data sources, more measurement, more reporting, more incrementality studies. So being on our own tech stack enables all those advertising features, advertiser-facing features.

But the other big benefit is it just creates a higher quality experience for our members. So it increases relevance. That's good for them It's good for advertisers. It's good for us. It's good for everybody in the ecosystem essentially. Just so to reiterate, we've got many years of building ahead of us. The road map is clear. We're committed to iterative innovation and advertising just as you've seen us de in many other places.

And as I mentioned before, while we've got tons of work, we feel the path for the next several years at least is fairly straightforward, and we're confident we can continue to grow revenue at a solid pace and earn a growing piece of that over $25 billion in CTV ad spend.

Advertising on META is highly effective because you can target your ads to a specific group of people or community within a small area or even an entire city. Similarly, Netflix aims to enhance its learning capabilities by analyzing user viewing habits to improve its ads. It’s incredibly frustrating to endure ads that hold no interest for you. Netflix recognizes this issue and is actively working to address it.  This is beneficial not just for the customer but also the advertiser. 

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