Netflix announced its Microsoft partnership in July as part of a pact that was expected to generate billions in advertising revenue for the online streaming service.\u00a0<\/p>\n
Although, after a tricky start on Madison Avenue, it appears as if Netflix is now considering alternative options on how to run its operations with potential outcomes including the streaming giant in-housing its ad tech.\u00a0<\/p>\n
Digiday has learned that Netflix has begun exploring potential options over its suite of advertising technology in a recent series of moves that includes retaining the services of high-profile expert advisors.\u00a0<\/p>\n
The final outcome of such measures is still undetermined. According to separate sources, Netflix and Microsoft\u2019s current advertising pact is set to run for two years with the potential results of its current course of action including Netflix building or buying its own tech.<\/p>\n
Spokespeople for both Microsoft and Netflix declined to comment when asked directly about the duration of the pairing\u2019s ad tech partnership. Albeit, it is understood the current arrangements mean there is an option for both parties to renew the partnership in 2024. <\/p>\n
In the interim, Digiday has learned that Netflix has procured the services of Jon Whitticom, formerly chief product officer at Comcast\u2019s ad tech unit FreeWheel, as its \u201cadvertising platform advisor\u201d with this appointment understood to be in direct relation to its \u2018build or buy\u2019 deliberations.\u00a0<\/p>\n
During the opening weeks of 2023, Netflix representatives began seeking advice on how it decides to serve subscribers with the most appropriate ad spot \u2013\u00a0technology Microsoft can offer via way of its Xandr assets<\/a>.\u00a0<\/p>\n Sources familiar with the conversations, who declined to be named given the ongoing nature of the discussions, interpret such queries as an indication that Netflix is exploring the possibility of building its own ad server, thus reducing its reliance on Microsoft\u2019s ad wares.\u00a0<\/p>\n Another potential option is for Netflix to purchase ad tech assets, albeit no sources consulted by Digiday report direct knowledge of any such active conversations as yet. Although, most believed that early-stage explorations of any potential acquisition targets were a likely outcome \u2013\u00a0\u201dhighly logical\u201d according to one corporate development source \u2013\u00a0even if nothing comes of them.\u00a0 \u00a0 \u00a0\u00a0<\/p>\n \u201cAny kind of a build they want to go for would involve a lot of customization, I think this shows they\u2019re serious about the ads business,\u201d added one source familiar with the technical nature of the discussions. \u201cIf you\u2019re serious about it, you\u2019ll want to in-house, particularly if you\u2019re that size.\u201d\u00a0<\/p>\n A Netflix spokesperson declined to comment on the record when approached by Digiday for comment on the nature of such discussions. <\/p>\n When Microsoft was named Netflix\u2019s \u201cglobal advertising technology and sales partner\u201d it was something of a surprise with\u00a0media reports tipping both <\/strong>Comcast and Google\u2019s respective ad tech suites as frontrunners ahead of the eventual July announcement.<\/p>\n Additionally, the fact that audience figures fell short of initial guarantees meant Netflix had to issue early-stage advertisers with refunds<\/a> can be interpreted as a tacit admission that future improvements are necessary.\u00a0\u00a0<\/p>\n According to separate sources, the video ad tech wares contained within Microsoft\u2019s ad tech unit Xandr fell short of initial expectations with separate public comments from Netflix execs, indicating some of the areas it seeks to focus on.\u00a0<\/p>\n Following the announcement of its headline-making pact with Microsoft, Netflix followed up with the appointment of Jeremi Gorman and Peter Naylor (both joined from Snap) to head up its advertising division with Insider Intelligence<\/a> estimating its advertising revenue could top $1 billion in 2024.\u00a0<\/p>\n However, in the early days following the announcement, media buyers were taken aback<\/a> by the $65 CPM prices they were quoted in the run-up to the debut of the commercial-backed service in November.\u00a0\u00a0<\/p>\n Sources have since told Digiday that Microsoft\u2019s perceived lack of channel conflict \u2013\u00a0Comcast\u2019s NBCU-owned Peacock and Google\u2019s YouTube are direct competitors to Netflix \u2013\u00a0was the critical aspect of its pitch.\u00a0<\/p>\n If you buy some other entity, then you\u2019d have to abandon other revenue streams<\/p>\n Brian Wieser, Madison & Wall<\/p>\n<\/p><\/div>\n During Netflix\u2019s January earnings call, chief operating, and product officer Greg Peters lauded the efforts of his company and Microsoft\u2019s initial efforts but added there is still some way to go.\u00a0<\/p>\n \u201cThere\u2019s a bunch of technical improvements in terms of ad delivery validation, measurement,\u201d he added, according to a SeekingAlpha<\/a> transcript of its Jan. 19 earnings call.\u00a0<\/p>\n Speaking separately, Madison & Wall\u2019s Brian Wieser told Digiday that most players of Netflix\u2019s profile will have to consider the \u2018build or buy?\u2019 conundrum when choosing to run an ad-supported offering and that both options have drawbacks.\u00a0<\/p>\n \u201cBuilding takes a while, but on the other hand\u2026 if you buy some other entity [with a full ad tech suite], then you\u2019d have to abandon other revenue streams which means you\u2019re paying for something you\u2019re not going to get,\u201d he added.<\/p>\n<\/div>\nSurprise candidate<\/h2>\n
Slow start<\/h2>\n