Netflix: A Rushed Move Into Advertising With $65 CPMs, No Third-Party Measurement?

When you are the perceived leader in business -- especially media -- even if you don’t know much about video advertising, just act like you know what you're doing.

Netflix is reportedly telling media buyers it will start its new advertising service at a sky-high $65 cost-per-thousand (CPM) viewers.

At that high price, media buyers won’t be able to get “third-party measurement" by Nielsen, Comscore, or others.

Just trust that Netflix is giving you accurate media post information, right?

What might seem strange is that Netflix only just hired two veteran advertising sales executives from the troubled Snap -- Jeremi Gorman and Peter Naylor to lead the company’s ad efforts. So who is making that $65 CPM call?

Negotiation, of course, is a delicate art.



At the same time, media buyers’ understanding is that Netflix will launch its highly anticipated advertising-supported service in just two months with a very modest expectation of 500,000 subscribers buying into the ad option.

Other reports suggest Netflix's ad-supported option will be priced for consumers at between $7 and $9 a month -- somewhat in line with other services.

This feels rushed -- especially for a media company with zero experience in video advertising sales. It has only been a few months of Netflix's dramatic reversal from its long time reluctance to offer advertising placement.

Add to this questions about Netflix’s partnership in hiring Microsoft's Xandr operation to be the technology backbone of the effort. While Xandr does have a growing track record of digital media advertising, Microsoft itself has limited experience in video advertising operations.

All this comes amid a possible recessionary marketplace for TV-video advertising with the near-term scatter marketplace continuing to drift lower -- down double-digit percentages from a year ago.

In addition, there is strong speculation that upfront commitments for the new TV season made in June will see cutbacks when it comes time to place actual orders with TV networks at the end of the month.

For its part, Netflix looks to offer conservative expectations for the seemingly quick startup -- the 500,000-subscriber figure also comes with plans to sell four minutes an hour of advertising time, more or less, in lockstep with other premium streaming platforms from veteran TV-network selling media companies.

Perhaps the lack of ‘third party measurement”, however, should be somewhat alarming for veteran media buyers who not only require third party measure as a baseline to do any business, but nowadays expects much more when it comes to return on investment metrics for their media schedules.

Again -- trust Netflix?

When you are the anointed leader in a marketplace -- with veteran media-agency video buyers scrambling to find additional media reach due to the continued and dramatic decline of linear TV viewership, taking a measured leap of faith may feel like a modest gamble.

Your big media-selling company partner -- one that you always wanted to sell start video advertising -- wants to help.

7 comments about "Netflix: A Rushed Move Into Advertising With $65 CPMs, No Third-Party Measurement?".
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  1. Ed Papazian from Media Dynamics Inc, September 2, 2022 at 8:59 a.m.

    Wayne, it's much worse than what you are reporting if the information coming from various sources about what Netflix is damanding are correct. For, example, there will be virtually no targeting capabilities in the sense that most marketers interpret the term. Also, most of the commercials will run in proximity to shows of Netflix's choosing with buyers having no say about what program content their ads are placed next to.And the real premium content may exclude ads entirely. Adding to the growing list of issues,  it appears that most of the commercials will not be in in-show breks---which gives them a better chance to be seen--- but in pre- and post roll spots. Finally, Netflix has been insisting that it will take only firm 12-month buys, limited to $20 million per buyer ( brand? ). As for the "audience" data that Netflix will supply, all it can be is set usage info as there is no way to determine who, if anybody, is watching any of the commercials. Needless to say the time buyers at the big "Madison Avenue" media shops are less than thrilled with what they are hearing from Netflix so far. 

  2. Douglas Ferguson from College of Charleston, September 2, 2022 at 10:17 a.m.

    When you're in the catbird seat, you charge whatever you please.  Otherwise you might race to the bottom. 

  3. Ed Papazian from Media Dynamics Inc, September 2, 2022 at 10:52 a.m.

    Douglas, if Netflix was still sitting in the proverbial catbird seat---as was the case three or four years ago---it wouldn't be offering an ad-supported service at all.

  4. David Scardino from TV & Film Content Development replied, September 2, 2022 at 10:59 a.m.

    As one who used to run ABC-TV Daytime Sales Proposals, I can testify that you can charge anything you want... and buyers can decide to go elsewhere. And after the market moves and you are stuck with unsaleable merchandise and no one to buy it, you will be fired. In the end, it is, if you'll pardon the expression, a market.

  5. John Grono from GAP Research, September 2, 2022 at 7 p.m.

    Hubris of the highest degree.

  6. Ed Papazian from Media Dynamics Inc, September 2, 2022 at 7:37 p.m.

    Hubris is a good word for it, John, but I would go for arrogance, myself, coupled with a vast ignorance about how TV ad time is planned, sold and bought.

  7. Jef Gorsky from Zenith, September 5, 2022 at 4:16 p.m.

    Am I really that surprised about the CPM?  No.  This is their baseline they want to charge for the time being.  I do expect CPMs to be more compettitve once we see subscriber bumps.  Until then, there will be a watchful eye on the platform's continued development.

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