Netflix Unveils New Ad Measurement Capabilities Amid Modest Engagement Growth
Netflix reported 12% revenue growth in Q3, but its ads business is lagging, prompting the company to tweak its forecast. The company is banking on ad measurement improvements to prove its value to advertisers.
Original reporting · adexchanger.com
Original: “Netflix Touts New Measurement Capabilities As It Struggles With “Modest” Engagement Growth”
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Key points from AdExchanger’s report
- Netflix reported 12% revenue growth in Q3, but its ads business is lagging expectations.
- The company is introducing new ad measurement capabilities, including the Netflix Pixel, to prove its value to advertisers.
- Netflix is focused on expanding its content slate to boost audience engagement and drive revenue growth.
- The company's engagement growth has been modest, with viewership increasing only 2% over the first half of the year.
- Netflix's global user retention has improved year over year, despite recent subscription price hikes.
Netflix has released its Q3 earnings report, showing a 12% year-over-year revenue growth to $12.9 billion, according to AdExchanger. The company's ads business, however, is not meeting expectations, causing Netflix to adjust its forecast for the rest of the year. This adjustment comes after a recent round of layoffs and leadership shuffles on the creative side.
During the earnings call, Netflix Co-CEO Greg Peters announced that advertising revenue has grown over 80% this year, but this rate falls short of the company's goal to double its ad revenue. As a result, Netflix is under pressure to deliver a strong Q4 report. The company is focusing on improving ad measurement to demonstrate its value to advertisers.
Netflix has introduced the Netflix Pixel, a new tool to standardize the way marketers measure business outcomes such as conversions and brand lift. The company has also announced a new buy-side integration with The Trade Desk, which will enable programmatic targeting across Netflix's ad inventory. These upgrades aim to minimize the revenue gap between ad-free and ad-supported memberships.
The company's main goal is to increase advertiser demand and narrow the revenue gap between ad-free and ad-supported memberships. Netflix has seen this gap narrow throughout the year, which is evidence that its ad upgrades are working. The new pixel and integration with The Trade Desk are expected to drive competitiveness and increase ad fill rates.
However, to capitalize on these ad platform improvements, Netflix needs to boost audience engagement. The company's engagement growth has been modest, with viewership increasing only 2% over the first half of the year. Co-CEO Ted Sarandos acknowledged that engagement is not growing as fast as desired, and the company is working to improve it.
Netflix is focused on expanding its content slate, including professionally produced programming, sports, and live events. The company has signed content licensing and distribution deals with partners such as Disney and Brazil's Globo network. It is also eyeing similar deals in the future and expanding its live sports inventory with high-profile events.
Despite the modest growth in viewing hours, Netflix's global user retention has improved year over year, and the company's churn rate has beaten its forecast. However, the company's share price dipped nearly 6% during after-hours trading, indicating that investors may be uncertain about the promise of future gains from these partnerships.
Questions and answers
What is the Netflix Pixel?
The Netflix Pixel is a new tool to standardize the way marketers measure business outcomes such as conversions and brand lift.
Why is Netflix's ads business lagging expectations?
Netflix's ads business is not meeting expectations, causing the company to adjust its forecast for the rest of the year.
How is Netflix planning to boost audience engagement?
Netflix is focused on expanding its content slate, including professionally produced programming, sports, and live events, to boost audience engagement and drive revenue growth.
