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Netflix, the world number one in video streaming, has therefore chosen Microsoft to manage advertising on its platform.
This alliance between two giants of American technology arouses quite a few reactions, even if the arrival of advertising on Netflix not expected for 2 or 3 years. Netflix wants to offer its subscribers acheaper subscription than current formulas, but with advertising. This is surprising, because since the beginning Netflix has used the argument of the absence of advertising to seduce its customers. So why this 180° turn?
Answer: last April the management of Netflix announced that it had lost 200,000 subscribers instead of harvesting 2 million new ones. This is a first in 10 years! Whose fault is it ? But to several factors. First the competitors who are more and more solid and who are eating away at market share. But also the fact that offering exclusives is no longer enough to retain subscribers. Netflix also strongly restricts the sharing of identifiers, which no longer pleases its customers. In short, all this meant that last April Netflix tumbled on the stock market by 47%. And it’s not getting better, since Netflix stock is down 70% year on year.
Netflix: ad-supported subscription will be co-produced with Microsoft
netflix finally selected Microsoft to manage the advertisements of his new subscription. A surprising combination. The owner of Xandr, since the end of last year, an advertising marketplace linked to connected TV. Note that Microsoft’s own advertising buying solution, namely the Microsoft Audience Network, which includes its PromoteIQ solutions for retail and the Microsoft Customer Experience platform for marketers, forms the backbone of the Microsoft’s digital advertising platform.
“Marketers who turn to Microsoft for their advertising needs will have access to Netflix viewership and premium connected TV inventory. All advertisements shown on Netflix will be exclusively available on our platform. This announcement also supports our privacy vision which is built on protecting customer information.” Greg Peters, COO and Chief Product Officer at Netflix, added, “Microsoft has the capacity to support all of our advertising needs as we build this new offering. Above all, Microsoft provides great flexibility that will allow us to innovate over time, both from a technological and business point of view, and has important measures in place to protect the privacy of our subscribers. The project is in its early stages and we still have a lot of work to do. But our long-term objective is clear, we want to offer more choice to customers and offer advertisers a premium experience, more qualitative than linear television.“
Will Microsoft buy Netflix?
Ted Sarandos, co-CEO of Netflix, confirmed a few weeks ago that Netflix would soon launch a new formula with advertising, and we now know that Microsoft will be in charge of advertising. The arrival of this new cheaper formula with advertisements should allow Netflix to convince more users to subscribe to its platform, but such a rapprochement with Microsoft could also hide greater ambitions.
NETFLIX IS APPROACHING MICROSOFT TO BUYOUT
An analyst believes that Netflix would not have chosen Microsoft randomly for its advertisements, since the American company would try to get closer to the giant with a view to a takeover. Indeed, Laura Martin, senior analyst at Needham, spoke about the deal with Yahoo and suggested there might be bigger ambitions here, namely the ability for Netflix to position itself for a friendly relationship with Microsoft and possibly open the door to a real acquisition
According to her, no other company that Netflix could have partnered with would be able to complete the $100 billion acquisition that the company needed for financial or regulatory reasons. “It could be that Netflix is looking for a release,” Martin said. “Netflix is trying to approach Microsoft in hopes that after Microsoft digests its acquisition of Activision, it will turn around and then buy Netflix.”
“Microsoft has the proven ability to support all of our advertising needs,” said Greg Peters, COO and CPO of Netflix, in a statement. The publisher of the Bing Ads advertising network “offers the flexibility to innovate over time, both on the technology and sales side, as well as strong protection for the privacy of our members.
Another argument that led Netflix to choose Microsoft. The latter acquired Xandr last December, which was the division in charge of programmatic advertising of AT&T. This acquisition should allow Microsoft to offer a convincing offer in the field of online advertising, shaken by the end of third-party cookies.
NETFLIX REFINES ITS MODEL
With this new offer, the release date of which is not specified, consumers will have more options to access Netflix content. And marketers who turn to Microsoft for their advertising needs will have access to Netflix’s audience. All advertisements served on Netflix will only be served through Microsoft’s platform.
The streaming service does not give details on its future offer. He’s going to have to calibrate it to run enough publicity to make it profitable for him without his members being overwhelmed with ads while watching a movie or series. The streaming service needs to find new money as it said earlier in the year it lost 200,000 subscribers. An announcement that led to the fall of its stock market action and was followed by two waves of layoffs and 150 and 300 people.