While there are plenty of so-called "hard-to-reach" demos that media buyers grapple with, it's time for a new segment to enter the industry lexicon: the "Netflix demo." For marketers, this is a brewing storm and to say the group is an elusive target is an exceeding understatement.
Among the hard to reach may be young gamers, but at least there's the chance to have an avatar maneuver around a Mountain Dew machine. For wealthy DVR fiends, there are some -- as dubious as it may be -- who still argue there is ad exposure during fast-forwarding.
But then move to the group that is increasingly relying on Netflix as a principal entertainment venue. They may be cord-cutters. They may be those who say who cares if I miss the full season of "Grey's Anatomy," I'll watch all the episodes on a winter Saturday. They may come home from a hard day at work and after staring at a computer screen with banner ads for hours and then driving home and passing billboard after billboard, decide I just don't want any commercials of any kind tonight.
So, the problem for marketers is Netflix simply offers no opportunity for advertising. None. And, executives have no plans to offer it, choosing to focus on building up the $8-a-month streaming audience.
"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 recently at an investor event. "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."
As usual, CBS researcher David Poltrack is way ahead of the curve on a would-be Netflix demo. This week, he offered up that CBS new technology focus groups (December 2010-January 2011) showed 43% have a Netflix subscription.
New technologists or early adopters - 10% of that group already have iPads, the data showed -- are the people many advertisers want to reach. (Netflix wasn't even on the selection list in the CBS focus groups a year ago because its footprint was so much lower.)
While releasing the data at an MPG Collaborative Alliance gathering in New York, Poltrack referred to the penetration of Netflix as a "phenomenon" and suggested the amount of people streaming videos in prime time is akin to a mid-size cable network. There are about 23 million Netflix subscribers.
Netflix has issues with acquiring content, but that looks to be one that could always wax and wane. Showtime may offer it shows to stream, then pull back when a contract expires.
Netflix may find it tough to acquire TV comedies since they do well in syndication sales. Yet, serial dramas could become easier for it since they don't work so well in a syndication market or on cable. (Netflix is increasingly having a seat at the table in all syndication bidding wars.)
The serials are in the Netflix wheelhouse, which is that "rainy day" concept of allowing a person to sit back and watch dozens of episodes of "Lost" at once. Netflix recently won the rights to stream "Mad Men," for example.
It is also making a bet on producing its own content, but it has no aspirations to resemble a studio in any manner.
Advertisers, in the meantime, haven't given up hope about finding some way to use Netflix to their advantage -- including helping provide content.
Before that, new Carat USA President Doug Ray suggested allowing advertisers to sponsor channels.
That could be activated overnight. Netflix's recommendation engine offers viewers suggestions about programming they would enjoy divided by segments, such as "Comedy," "Documentary" and "Children & Family." Placing a not-too-obtrusive logo with tagline there - with no link to a Web site to avoid navigating away -- would be attractive. P&G or Wal-Mart would be a natural for the family segment.
But Ray seemed to indicate that marketers' best chance of a strong presence on Netflix would be to do what many do in partnerships with networks: underwrite appealing content with some respectful brand integrations. Then, perhaps give it to Netflix for little or no cost.
Noting that in every arena marketers "have to completely rethink the advertising model and the paid media model," Ray said Netflix has particular value in that it lies at the vortex of four ingredients driving convergence in the marketplace: content, mobility, social and commerce.