How Netflix could up the ante for advertisers as it explores solutions to its ad tech conundrum

By Ronan Shields

Earlier this year, it emerged that Netflix was exploring potentially adjusting its ad strategy after what can be considered a tricky start to the advertising business.

Sources said outcomes could include the streaming service overhauling its relationship with Microsoft, which has powered Netflix’s ad tech. Sources familiar with Netflix’s early conversations suggested they were a precursor to the streaming giant eventually building or buying its own ad tech.

Such developments can be seen as a tacit admission that things did not go as planned in the early phases of the Netflix-Microsoft partnership. After all, the streaming giant had to issue rebates to advertisers after its initial campaigns failed to live up to earlier expectations.

However, as one source recently told Digiday, Netflix’s recent series of moves demonstrate “they’re serious about the ads business,” and with that in mind just what does the streaming giant have to do to realize its earlier predicted $1 billion-plus advertising business?

Separate buy-side sources reported a “bumpiness” at the beginning of Netflix’s offering with one going as far as to say the launch was “shrouded in mystery” with confusion over the availability of inventory.

Separately, some commented that the utility of the Xandr ad server (one of Microsoft’s ad tech assets) did not live up to expectations — some of Netflix’s earliest in-housing conversations centered around a potential new ad server.

Meanwhile, others cited limitations around ad targeting and measurement, along with accompanying high CPMs, were also contributors to a disappointing start.

Mark Giblin, CEO of CTV campaign management platform LightBox, told Digiday the Netflix team demonstrated positive signs, such as a willingness to sign up to BARB, a panel-based measurement system used by TV buyers in the U.K.

“BARB measures overnight ratings, and when you think how you watch on-demand viewing in a different way, it can look as if shows are not as big as they really are,” he explained. “So, they took that risk on as that’s the [TV] currency [in the U.K.].”

Sources told Digiday that in the early phases of ads running on Netflix, campaign delivery was comparatively manual and third-party measurement wasn’t available.

Although, separate sources indicate its gradual opening up to third-party measurement is a sign that it intends to increase bidding volume. “This may have been Xandr-driven and a sign of intentions to trade programmatically,” added Giblin.

John Goulding, CSO at MiQ, an ad tech firm that worked on some of the early campaigns, told Digiday that Netflix’s original set-up to shy away from third-party ad tech, may have been a signal of its intentions to maintain its service as a premium media environment.

“It was about having a light payload of ads, a high frequency-capping experience and they were somewhat selective over what brands could run,” he explained. “The stuff that’s being rolled out incrementally that we’re really excited for is enhanced measurement, that will be a really big addition.”

Additionally, both Giblin and Goulding said that show-level targeting would prove an attractive proposition for advertisers, especially in a hyper-competitive marketplace where …read more

Source:: Digiday