While the streaming giant lost about 1 million users in the second quarter, Netflix added 2.4 million subscribers in the third quarter, boosting its revenue by 6% year-over-year.
The question is, what would happen to Netflix’s subscriber base if Netflix switched to advertising within his two weeks?
The streaming platform expects to add 4.5 million new subscribers in the fourth quarter, according to CFO Spencer Neumann.
It doesn’t seem worried about cannibalizing its existing subscriber base.
COO Greg Peters stressed that signing up for ad-supported Netflix Basic is mostly new subscribers, rather than existing subscribers moving to a cheaper plan.
“We don’t see a lot of members switching plans,” he said, adding that membership plans are typically a “pretty sticky choice.”
That means it has an uphill battle when it comes to poaching subscribers from the competition.
The competition is a serious “short-term constraint” for Netflix, Neumann said. A subscriber switches to another streaming service his provider instead of switching because he stopped streaming.
The streaming platform is just starting to advertise, but it’s not because there isn’t enough buyer demand.
It sold out at launch and actually had to turn down some buyers, Peters said. That speaks to the interest, but it also mentions the ad load reduction Netflix plans for its ad-supported tier.
But every ad buyer looking for sophisticated targeting won’t find it. It admits that ad targeting is also a lot easier with the Basic with Ads plan.
“We have relatively basic targeting capabilities [at launch], including contextual and genre-based,” Peters said.
One of the reasons It is launching with limited targeting options is to accelerate the release of its ad tier.
It will collect gender and date of birth upon login, but this information is not (yet) used to support age and gender-based targeting.
Netflix has reiterated that Microsoft fits this equation.
The industry was surprised that it chose Microsoft as its ad serving partner over others with deep roots in connected TV advertising.
However, It says its focus on privacy was factored into its decision.
“We’re very cognizant of privacy,” Peters said, “and all the data we [collect] will only be used to deliver more relevant ads on Netflix. We’re not using that data in any way, shape or form for profile-building off of Netflix.”
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