What Ads on Streaming Services Can Tell Us About the New Battleground for Loyalty

A person using a tablet to decide which streaming TV app to use

By Kris Tait, Managing Director, US Croud

Back in January 2020—aka, the era before the world had experienced the global havoc of a coronavirus variant and before “social distancing” was ingrained in the vernacular—Netflix CEO Reed Hastings said, unequivocally, that his platform would not have ads. Fast forward to now and Netflix is gearing up to launch its ad-supported tier as early as November, which begs the question: why the change of heart?

During the first few months of the pandemic, streaming services were given a second chance to boost their bottom lines. At the time, Netflix reported it had gained 15.7 million new subscribers in the first three months of 2020—not too shabby, by any means.

But between April and July 2022, it lost roughly a million subscribers as well as $54 million in capital when announcing the loss of 700,000 subscribers the previous quarter. Drastic times called for drastic measures, or so it now seems, and several platforms are clueing into the fact that subscriptions alone can’t sustain them.

The streaming giant recently gave advertisers a first look at its new ad-based environment as well as how much they’ll cost. Netflix also moved up the start date to beat Disney+ to the punch, meaning that the race is on to get new customers—not to mention retain existing ones.

This is to say that the proliferation of ads across all of the leading subscription video on demand (SVOD) platforms provides what may well be the best opportunity in recent years to reach cord-cutting viewers. Roku and the National Research Group announced that one in four consumers is a “stream-only viewer,” stating that customers prefer having options and ad-supported tiers lend that.

With over 440 million worldwide paid subscribers combined, Netflix and Disney+ are still the two most popular streaming services. Introducing ads to both will definitely cause a shift in the streaming industry, and likely open the floodgates for advertisers.

That said, knowing that advertisers will be looking at the subscriber numbers as an attractive part of spending money with Netflix, Hulu, Disney and others – how do they sustain subscriber growth and avoid shifting their strategy completely to ad sales?

Putting More Focus on Lifetime Value

For streaming services, having a comprehensive understanding of their consumers’ preferences is key. Each service has a wealth of information at their disposal: What shows are being watched? Are they finishing the shows? What are they watching next?

The primary focus of this discussion, however, is not the quantity of data services, but rather how that data is utilized to create smarter selections inside their client acquisition methods. This should make brands more inquisitive and receptive to a marketing approach focused on lifetime value (LTV).

With LTV, brands can target high-value customers who are more likely to sign up for their service. As customers’ buying habits continue to change, lifetime value-based models have become more and more useful for fighting against rising CACs and falling ROIs. Switching from a short-term growth strategy to a long-term, advanced one can help streaming services gain and retain subscribers.

Optimization of Landing Pages and Sign-up Flows

Leveraging data to drive engagement is one way for marketers to avoid incurring significant expenses associated with the acquisition of new subscribers. Streaming platform personalization is an excellent strategy to reduce churn, and it should be implemented from the very beginning of the customer experience.

Landing pages must be prioritized, tailored and customized to represent the unique path of each individual. For example, if a user arrives on a landing page after clicking on an ad for a certain show, then that show should serve as the page’s thematic template, defining the copy and hero images, with other personalized content ideas orbiting around it in a dynamic fashion.

Recommendations That Are Routinely Personalized

The option for customers to view series and movies on their own time, whenever it was convenient for them, was one of Netflix’s main differentiators and most attractive features. That is a fantastic component of personalization that still makes the streaming service highly appealing.

In 2019, Netflix tried an artificial intelligence tool for the first time that would change trailers based on data collected from viewers. As a result, different users would see different trailers according to the kind of content that appealed to them. Whether it’s Netflix, Disney+ or Amazon, people expect to be given smart suggestions based on what they like.

While tailored ads and landing pages can bring consumers into your platform, offering accurate suggestions is a powerful approach to develop trust and, subsequently, user loyalty. Services that can determine when and what material to present to each user will be more successful at retaining customers. This is particularly valuable given that the average monthly rate of customer defections among premium streaming services in the United States was 5.46% in July, up from 4.46% a year earlier, according to recent data from Antenna.

Streaming platforms are now in warfare on multiple levels, advertising dollars and subscribers, which will continue to rumble on. The way to cut through and continue driving sustainable growth is finding innovative ways to acquire subscribers and improve customer retention—and the best way to do so is to create experiences that rely on data-driven personalization.