Netflix may not have traditional advertising on its streaming service, but it has embraced one type of advertising: its own.
The company, which has made being commercial-free a key selling point (“It is a core differentiator,” CEO Reed Hastingssaid of being commercial-free on the company’s earnings call last week) has quietly become a massive advertiser of its own, trying to reach consumers who will want to subscribe to its service.
According to the company’s 10-K filing, which was sent to the Securities and Exchange Commission this week, Netflix spent $1.1 billion on advertising in 2017, up from $842 million in 2016.
In the SEC filing, Netflix suggested that it only planned to increase its advertising spend in 2018, warning investors: “In 2018, we expect marketing spending growth to outpace revenue growth.”
In other words, its revenues will take a back seat to spending cash to lure new subscribers.
For comparison, digital advertising firm Pathmatics estimated that Hulu spent around $65 million on digital advertising in the first half of 2017, which would equate to a yearly total of $130 million if the company’s ad-spend levels remained steady. That figure would not include advertising on other sources like TV, but it it's still clear that Netflix’s ad spend far outpaces Hulu’s.
Netflix’s advertising is a mix of targeted digital buys, as well as traditional TV buys. Indeed, in its last letter to shareholder, the company was bullish on free, ad-supported streaming video services, in part because they could serve as a vehicle for finding new subscribers.
“With their multi-billion global audiences, free ad-supported internet video is a big force in the market for entertainment time, as well as a great advertising vehicle for Netflix,” the letter said.