{"id":3293,"date":"2022-08-03T01:38:38","date_gmt":"2022-08-03T05:38:38","guid":{"rendered":"https:\/\/advertisingweek.com\/aw360\/2022\/08\/03\/netflix-proves-water-cooler-moments-still-flow-can-it-do-the-same-for-advertising\/"},"modified":"2022-08-03T01:38:38","modified_gmt":"2022-08-03T05:38:38","slug":"netflix-proves-water-cooler-moments-still-flow-can-it-do-the-same-for-advertising","status":"publish","type":"post","link":"https:\/\/advertisingweek.com\/aw360\/news\/netflix-proves-water-cooler-moments-still-flow-can-it-do-the-same-for-advertising\/3293\/","title":{"rendered":"Netflix Proves Water Cooler Moments Still Flow: Can It Do the Same for Advertising?"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><em>By Adrienne Little, Co-founder,\u00a0<a title=\"https:\/\/andrising.com\/\" contenteditable=\"false\" href=\"https:\/\/andrising.com\/\" target=\"_blank\" rel=\"noopener\" aria-label=\"and rising, linked to and rising dot com site\">And Rising<\/a><\/em><\/p>\n\n\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s no coincidence that Kate Bush\u2019s 80s classic \u201cRunning Up That Hill\u201d soared to number one, breaking new records. The water-cooler moment still flows. Stranger Things is one example of how Netflix consistently delivers uplifting, iconic moments of entertainment that can still be universally enjoyed, even if we do live in our own atomised digital content bubbles. But reaching new peaks of cultural influence comes just as Netflix fights its own terrifying forces of evil. <a href=\"https:\/\/www.cnbc.com\/2022\/07\/19\/netflix-nflx-earnings-q2-2022.html\">Netflix\u2019s Q2 market update linked here<\/a> showed further subscriber loss but was met with market stoicism, and an uptick in share price (still off a savage 60% from pandemic highs). Why? In a can\u2019t-turn-back move, Netflix has partnered with Microsoft, betting on the very thing it countervailed: advertising.<\/p>\n\n\n\n\n\n\n\n<p class=\"wp-block-paragraph\">At first blush, there\u2019s cause for brands to tingle with anticipation at the chance to ride Netflix\u2019s cultural stronghold. There\u2019s no getting around it; Netflix\u2019s ascent has been asymmetric to TV advertising\u2019s <a href=\"https:\/\/www2.deloitte.com\/uk\/en\/insights\/industry\/technology\/technology-media-and-telecom-predictions\/2022\/tv-viewership-decline.html\">decline as part of traditionally scheduled, ad-filled linear TV, reported here on Deloitte.<\/a> Live event viewing from the Super Bowl to the Oscars has temporarily recovered after record 2021 lows &#8211;\u00a0 and Love Island is back &#8211; but net, <a href=\"https:\/\/www.forbes.com\/sites\/bradadgate\/2021\/10\/13\/the-fastest-growing-video-advertising-platform-is-now-ctv\/\">the wholesale shift<\/a> to connected TV is here even if some of the data lags. And beware of survivor&#8217;s bias as we approach this year&#8217;s Christmas ads. The media industry\u2019s dirty little secret is that it needs to push <a href=\"https:\/\/www.thinkbox.tv\/getting-on-tv\/useful-resources\/how-tv-is-traded\/\">pre-negotiated linear deals, the homeland of an older, lower demographic, reported here on Thinkbox.tv.<\/a> Linear TV numbers are <a href=\"https:\/\/www.hollywoodreporter.com\/business\/business-news\/streaming-linear-tv-upfronts-2022-1235138020\/\" aria-label=\"still significant, click to read on hollywood reporter\">still significant<\/a>, but in an on-in-the-background more than actually watch them kind of way.<\/p>\n\n\n\n\n\n\n\n<p class=\"wp-block-paragraph\">Netflix is the opposite. It\u2019s high attention, premium, younger, binge-watching. Going from nemesis to ally, Netflix would offer advertisers a unique combination of TV impact and digital connectivity. With the opportunity for multiple Superbowl moments around new series releases, IP partnerships, product placement, and static search ads &#8211; Netflix has Pandora\u2019s box at its disposal. Ad quality would also be up as the platform begs creativity that matches up to the programmes (ads considered good or better than the programmes are another TV metric that\u2019s been in <a href=\"https:\/\/mediacatmagazine.co.uk\/advertisings-likability-crisis\/\" aria-label=\"decline, read more on mediacat magazine here\">decline<\/a> since Kate Bush last charted). In sum, Netflix stands to give TV advertising a shot in the arm for what it traditionally did best: create talked-about moments as a way to print money for brands.<\/p>\n\n\n\n\n\n\n\n<p class=\"wp-block-paragraph\">Now let\u2019s add in Netflix\u2019s digital prowess. Brands need new places to play in a market where digital media has become expensive and saturated (Facebook also has depleted powers following Apple\u2019s decision to block ad tracking). Netflix just wrapped itself in an advertising superpower\u2019s cloak called Microsoft. Whilst Microsoft was last to market with PPC (pay-per-click) for Bing, Yahoo! and MSN, its ad revenues now surpass $10 billion, the fourth largest digital ad platform and a sleeping ad giant about to awaken. Netflix will also consider Microsoft\u2019s metamorphic acquisitions of 2021 &#8211; Activision Blizzard and Xandr. The first gets Netflix closer to the $95 billion video game market, and the second is the leading innovator at the intersection of digital and TV. Xandr is a formidable force, a data-enabled ad tech platform offering \u201c<a href=\"https:\/\/www.xandr.com\/\" aria-label=\"sophisticated campaigns on premium inventory, click here to read on xandr dot com\">sophisticated campaigns on premium inventory<\/a>\u201d. The scary bit? Brands will likely command and control all this directly with their credit card in one hand and an easy-to-use mobile-ready dashboard in the other.<\/p>\n\n\n\n\n\n\n\n<p class=\"wp-block-paragraph\">So Netflix might save TV advertising. But how does all this help Netflix? Netflix has 220 million subscribers; an ad business would add a chunk of change to Netflix\u2019s revenue overnight. But, this also contradicts the driving force behind Netflix\u2019s success. In a move deemed very risky then, Netflix\u2019s first $100m bet on original content, House of Cards, hit it out of the park. Unprecedented capital deployment into original programming ensued, followed by Apple, Amazon and ultimately Disney.\u00a0 Never before has the consumer enjoyed so much &#8211; around $1.2bn of content for each $1 spent. And all of it ad-free.<\/p>\n\n\n\n\n\n\n\n<p class=\"wp-block-paragraph\">Taking on advertisers is to take on a new head of commissioning, one we now know can prove damaging in the long run. Only recently did Netflix begin to report hours viewed of its biggest shows &#8211; a metric it\u2019s never used to justify revenue. Advertisers demand a return on ad spend, and the example of Facebook pulls content into a chase for eyeballs in ways that lead to bad things. When you write for Netflix, you\u2019re allowed to take more than a handful of milliseconds to make those eyeballs water (the season finale of Stranger Things is two and a half hours long). Just as the news becomes filled with clickbait, and our social feeds are full of outrage, so does TV&#8217;s trend toward low-quality sensational entertainment to hit its numbers. Just as Instagram depresses teenage girls, shows like Love Island bring in big audiences by exploiting our worst instincts. For premium users, paying \u00a310.99 might get rid of the ads, but can they expect Netflix to be as focussed on quality, original, inventive, innovative programming in an environment where the algorithm begins to skew towards Too Hot To Handle (or endless Stranger Things spin-offs)?<\/p>\n\n\n\n\n\n\n\n<p class=\"wp-block-paragraph\">And when it comes to stealing and addicting our attention to new content, there\u2019s new competition in town. TikTok pitted 22.6 trillion watched minutes against Netflix\u2019s 9.6 trillion minutes globally <a href=\"https:\/\/twitter.com\/profgalloway\/status\/1528096252520550406?lang=en-GB\">in 2021<\/a>. TikTok\u2019s triple punch is small-bite entertainment, the near-zero cost of commissioning, and an algorithm the US government fears as a public enemy. TikTok also dominates<a href=\"https:\/\/qz.com\/2066247\/tiktok-takes-aim-at-the-growing-social-commerce-sector\/\" aria-label=\"social commerce, read more here on quartz\"> social commerce<\/a> (valued at <a href=\"https:\/\/www.grandviewresearch.com\/industry-analysis\/social-commerce-market\" aria-label=\"$584 read more on grand view research dot com\">$584<\/a> billion in the US), and ads created by users now convert higher than those agencies can produce.<\/p>\n\n\n\n\n\n\n\n<p class=\"wp-block-paragraph\">Netflix successfully bifurcated the world into (lower quality) ad-funded content and (higher quality) paid-for subscriptions. The idea of bundling these seems reactionary and desperate. But let\u2019s get back to Netflix\u2019s fundamental objective here. Netflix doesn\u2019t need to impress the market with advertising revenue growth. It simply needs to stem the flow of subscriber loss. Gas prices shoot up, and you need to save money for a few months; you will have to cease to be a Netflix subscriber, and Netflix will have to report that as a loss. But, if you drop to the freemium version, you no longer leave the Netflix ecosystem. No failure to report.<\/p>\n\n\n\n\n\n\n\n<p class=\"wp-block-paragraph\">For advertisers, traditional brands will always want to wrap their products in the comfort of safe, low involvement mass penetration and occasional use. Those days of re-entering pop culture aren\u2019t about to return. The next generation of brands will emphasise scalable, higher-value communities, where retention is critical, and brand stretch provides the growth (clue: the world\u2019s only trillion dollar brand is Apple).<\/p>\n\n\n\n\n\n\n\n<p class=\"wp-block-paragraph\">Netflix doesn\u2019t need a big, bombastic ad service to dominate, and it has no interest in helping brands solve their existential media problems. Embedding the latest technology to place relevant ads for brands willing to pay is a finger in the dam of user loss. And let\u2019s not forget that Netflix\u2019s ad tech will know to give us just the right amount of advertising. When Netflix first entered commissioning, predictions imagined <a href=\"https:\/\/www.forbes.com\/sites\/stevenrosenbaum\/2013\/02\/05\/netflix-risky-stratedy-for-house-of-cards\/\">a total disaster, reported here on Forbes<\/a>. Netflix is hard to bet against, but as it runs up the hill of its current challenges, it needs to think carefully about the deal it makes with God.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Netflix doesn\u2019t need a big, bombastic ad service to dominate, and it has no interest in helping brands solve their existential media problems.<\/p>\n","protected":false},"author":7,"featured_media":3294,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","editor_notices":[],"footnotes":""},"categories":[1],"tags":[3],"topics":[2],"class_list":["post-3293","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-brands-marketers","topics-editorial"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Netflix Proves 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