January 25, 2023
Analyst Boosts Netflix '24 Ad Forecast To $2.1B, Cites Faster Ad-Option Growth
- by Joe Mandese @mp_joemandese, January 18, 2024
Citing stronger-than-expected ad-option subscriber growth, the equity research team at New Street Research this morning revised their 2024 ad revenue projection for Netflix up by $700 million to $2.1 billion.
Most of that ad spending ($1.231 billion) will come from the U.S. and Canada, with other markets increasingly accounting for a greater share of Netflix advertising revenues through New Street's 2030 projections.
"Our estimates continue to only assume the 12 launch countries (U.S., Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico, South Korea, Spain, and the U.K.) and no price changes to the ad tiers," New Street's Dan Salmon writes in the update, adding: "More country launches and ad formats/tools would be incremental to our estimates and could be key catalysts for the stock."
The revised forecast projects Netflix will add 13 million net new ad-option subscribers in 2024 and 8 million in 2025.
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So let's say that the analyst is substantially correct and the ad-supported Netflix service obtains about $1 billion in U.S. ad revenue this year. That's must be assuming that it can maintain its high CPM demands of around $45-50. But is that likely considering how small the service's overall coverage is?
When Netflix announced its decision to enter the ad-suppored field some of us---myself included---speculated that this move----if well executed----might develop into a much larger entity than it has become and U.S. ad revenue expectations were as high as $4 billion annually by this time. So while I and, I hope, others still wish Netflix success in the AVOD business, what we have seen so far is a huge disappointment. The launch was far too tentative and the initial offerings were hardly advertiser-friendly. Perhaps better is to come.---We shall see.