Netflix’s Ad-Supported Tier Is Hitting Its Stride

It took a few months and an initial slow start, but Netflix’s ad plan might be gaining steam. The advertising tier, which launched in November, has reached about 1 million monthly U.S. users, according to a report from Bloomberg.

The tier reportedly grew its user base by 500 percent in the month after launch and another 50 percent in its second month, according to internal data cited by Bloomberg. But Bloomberg also notes that the 1 million monthly active users using the ad tier include multiple people using one account, and the stat is at least a month old.

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In December, a month after the ad tier launched, subscription analytics firm Antenna reported that the plan was the least popular Netflix plan during its first month of availability, driving only 9 percent of new signups and accounting for 0.2 percent of overall subscriptions in the U.S. The majority of subscribers (57 percent) were new to the service, while 43 percent were existing users who opted to downgrade to the less expensive plan. Antenna further estimated that the ad plan accounted for 15 and 19 percent of new signups in December and January.

For comparison, Antenna estimated that ad-supported Disney streaming sign-ups — including Disney+, Hulu, and ESPN+ — accounted for 20, 27, and 36 percent of new signups in the three months after Disney+ launched its ad plan in December. HBO Max’s ad plan, launched in June 2021, got 14, 16, and 21 percent of new sign-ups during its three initial months of consumer availability.

At the time, Netflix spokespeople claimed Antenna’s figures had inaccuracies and did not account for the full picture of how the ad-supported tier is performing. Last month, Netflix told its advertising partners that it had doubled sign-ups to the new tier during January compared to November, although it did not release the actual total number of sign-ups to the tier.

Before Netflix officially launched the $6.99-a-month ad tier, called the “Basic With Ads” plan, leadership reportedly anticipated that they would reach 1.75 million domestic subscribers on the tier by the end of its first quarter of availability, or after March 31; that’s roughly 2.4 percent of Netflix’s overall North American subscriber base. Analysts currently estimate that the U.S., where Netflix has a strong existing user base, could provide roughly 15-30 million new users on the tier over the long term.

Although Netflix’s ad tier still hasn’t reached the level of prominence in the streamer’s business similar to that of other ad plans like Hulu’s, where 57 percent of its user base pays cheaper fees for commercial breaks, the news is an encouraging sign for its future. The initially reported figures prompted some concern over the overall strength of the tier, especially after many campaigns from advertisers fell short on the streamer, with some only reaching 50 percent of the viewers Netflix projected them to; Netflix has reportedly informed its advertisers that campaigns have since fulfilled their initial projected targets.

Netflix runs its ads through tech provided by Microsoft, in a deal that will reportedly run for two years. Earlier this month, it was reported that the streamer is discussing buying or building its own internal in-house advertising software once the deal expires, although no steps have been confirmed.

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