Netflix’s CPM still under media buyers’ skin months into its disjointed push into advertising

By Michael Bürgi

Countering recent reports about Netflix’s first quarter of offering an ad-supported tier being largely successful, media buyers Digiday spoke with are expressing frustration at its still-too-high $55 CPM and the still-too-slow growth for its ad-supported sub base.

It’s important to note that the four high-level investment executives at a number of media agencies all expressed optimism about the direction Netflix is heading in. And they want to see Netflix succeed, they said, if only to have more competitive options to place their clients’ dollars in the cluttered and confused CTV marketplace — but also so that those viewers aren’t lost to marketers behind ad-free paywalls.

Still, the launch has left a few major investment execs — and their clients — feeling underwhelmed with what Netflix brought to its ad-supported launch back on Nov. 3, 2022. One major holding company head of investment noted that several clients expressed a strong desire to be part of that launch, despite very few subscribers (the ad-supported tier now counts about 1 million subs), but the exec was disheartened to find the streamer had not cut back further on its $55 CPM (which was down from an initial $65) or offering some sort of added value for launch advertisers.

“Since then, I actually polled the team to see how much interest there been post launch among clients feeling like they needed to get on Netflix? [There was] Zero,” said the head of investment, who spoke on of anonymity.

“A lot of clients dropped out at that point, because they said that it’s not worth it,” continued the exec, who thinks Netflix would be more fairly priced at between a $45-50 CPM. “Those clients that dropped out because of the price obviously haven’t come back in. But then we also haven’t had clients post launch that came and said, ‘Well, I wasn’t in the launch, but now I really want to be on Netflix.’”

The head of activation at another major media agency group noted that make goods continue to be offered to advertisers. “They literally are giving money back because they can’t actually deliver what they sold in due to their low subscriber base,” said the executive who also spoke on condition of anonymity. “They’ve pissed everyone off by overcharging and underdelivering.”

The first exec also pointed out that the ad sales operation needs to get more sophisticated. “They’re still in their infancy with their ad model, meaning their targeting is not yet up to par with some of the other streaming providers.”

Even the tech side of Netflix’s ad business is being scrutinized, although Netflix isn’t being singled out per se. “Many AVOD/OTT companies are experiencing similar challenges in determining how to balance and optimize their own subscriber dynamics with the growing expectations of advertisers who demand measurable outcomes,” said Herman Yang, head of Moloco Enterprise, which is pushing AVOD providers to move to machine learning solutions with dynamic pricing.

All that said, the activation executive did acknowledge that despite the frustration, media …read more

Source:: Digiday