Netflix Going Commercial Free an Opportunity Lost For Advertisers

The most valuable advertising venue on the Web won't ever be up for sale. The chance to run even five words of text, let alone a banner ad, on the page won't be available.

Lacking that, what kind of price could be attached to various opportunities throughout The number of marketers lining up ready to spend might resemble the 2 a.m. rush at Target on Black Friday.

To start with, the Netflix audience is vast, about 23 million paying subscribers. And a coveted one. The group is tech-savvy, particularly the cord-cutters with the Roku boxes. Many are voracious consumers of media.

More importantly for an advertiser, however, would be the opportunity for prime targeting and addressability. One of Netflix's strengths, a reason it should be able to fend off challengers for some time, is its superb recommendation engine.

You watched "Lost in Translation," we suggest you'll like "Pulp Fiction"? Or, here are seven TV shows somehow related to the film that you may enjoy. You live in San Francisco, here are a bunch of local favorites.



Fine-tuning the algorithm that offers suggestions for subscribers based on previous behavior is as critical to Netflix as Google's efforts to update its search capability. So, the focus is relentless and it's tough to imagine how many engineers tinker with the process each day.

Financials at Netflix are soaring. Operating income in the first quarter was nearly double the same period a year ago. The share price has had a phenomenal 52 weeks.

Driving it all is subscriber growth seems to be inexorable. The company and Wall Street seem to believe it just might get some 90 million U.S. homes to pay $8 a month.

Yet, in the meantime, why not diversify to boost the bucks? Raise the remarkably affordable price.

Or, open the vault to advertisers?

A banner ad at the top of the entry page would sully the image? Ok, why not at the bottom? How about pre-roll ads?

Endemic advertisers such as movie companies and networks couldn't stay away. Neither could microwave popcorn.

But even though Netflix has experimented in the space, partly through ads on its DVD mailers, it ain't happening for a long time.

"We're not going to win because we've added adjacency bets that may or may not add profit that we could subsidize other parts of our business," Netflix CFO David Wells said at an investor event last week. "So, until the time comes when we feel like we've grown that out, and then we're looking for adjacencies, I'd say expect from us continued focus ... on that one consumer vertical."

That lack of greed should serve Netflix well. After all, Facebook lasered in on the consumer experience before opening up the advertising stream and it's been careful while doing it.

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