Advertising on Netflix AVOD: A new frontier for brands
We already know that Netflix is set to introduce an ad-supported version by the end of this year. So, what does such an AVOD model mean for brands and marketers? Once upon a time, Netflix disrupted the good old VHS era with its video-rental business model. Now, with its slew of unique capabilities, such as precise targeting, a treasure-trove of first-party data, and precise measurement capabilities, the streaming giant is poised to emerge as a preferred new-age medium for marketers and agencies.
Industry observers feel that an AVOD model by Netflix will open up a new marketing window for brands.
Click here to attend IMAGEXX 2022
From an advertiser’s perspective, such a move will only open avenues to reach a certain section of our audience, says Krishnarao Buddha, Senior Category Head, Parle Products. According to him, there is a high probability that with the aid of precise targeting and measurement capabilities, Netflix may become a go-to partner for most advertisers, especially to reach the niche audiences though the key determinant will be the cost.
As far as brands are concerned, says Rajiv Dubey, Senior General Manager, Head of Media at Dabur India, this will be just another medium for advertisers. “It will be another AVOD platform. It is not going to be any different than anybody else. Everything will depend on what kind of numbers Netflix is giving vis-a-vis others. That’s what will matter, in terms of pricing, targeting, etc.,” he adds.
Dubey, however, is sceptical as to whether Netflix will share the data, such as demographics, etc., with the advertisers. “Such kinds of data will be very helpful for advertisers, which I don’t think they will share,” he says.
The AVOD ad model is likely to attract a lot of advertisers since it is a new medium, and far more targeted, says Trust Research Advisory CEO N Chandramouli. He, however, feels that the question of how viewers will react to advertising will remain a question. “This will largely depend on the type of advertising displayed, and unless advertisers and agencies rethink this medium entirely, and create advertising to suit OTT, it may not work,” says Chandramouli.
As long as Netflix is able to keep consumers glued to the platform with the highest quality content, it’s likely that marketers and agencies would dive right in, says Rashid Ahmed, Head of Digital, Infectious Advertising. “Throw in exacting measurement metrics, and most brands would find the platform a suitable medium for advertising,” he says.
According to Ahmed, Netflix is a data-driven platform that hyper-customises content for users. “It’s the reason the platform is able to hit the money-pot for many of its shows. Pivoting this strength towards providing advertisers with deep segmentation at a highly granular level would make the platform a magnet for brands,” he adds.
It is clearly exciting news for marketers, says Siddhant Raizada, Head – Marketing, Kristal.AI.
“OTT is the new evolution of TV and is expected to become a primary viewing medium in the near future. According to some industry studies, majority of Indian viewers prefer OTT over DTH. While Netflix is not the leading streaming service in India, it does have a pole position with the viewers of English medium content,” Raizada adds.
According to Raizada, if Netflix is able to provide more targeted marketing options like geo-targeting, content-based, time-based ad placement, etc. it surely will become a preferred platform for marketing.
Precise targeting
Netflix’s introduction of ads will help marketers tap into a new supply of inventory, states Vested Finance Marketing Director Akash Gupta.
“Ads could be coming to Netflix by the end of the year, after the platform lost subscribers for the first time in more than a decade. While it is not still certain what the ad-supported model will look like, it is most likely to be rolled out under an ad-supported subscription tier. This means that if subscribers do not wish to see any commercials, they can choose an ad-free plan. Netflix’s introduction of ads will help marketers tap into a new supply of inventory. Instead of targeting all viewers of a certain programme, this will let marketers zero in on target demographics. Netflix will be working with third-party advertisers; hence it will be able to provide competitive targeting data so that marketers make the most of their OTT advertising strategy,” explains Gupta.
With over 220 million paid subscribers worldwide, this will certainly emerge as an important medium for advertisers. Gupta, however, warns that other ad-supported streaming networks like Hulu and HBO Max do exist and Disney+ will be introducing an ad-supported model too.
First-party data
Netflix is no ordinary medium as far as a potential advertiser is concerned. The streamer sits on a rich repository of first-party data that can provide meaningful and impactful insights into a brand’s target audience. This treasure-trove of data, a salivating prospect for any marketer, indeed is crucial, given the fact that brands are increasingly finding it difficult to use first-party data on account of privacy issues.
Chandramouli feels that brands that lack first-party data will surely benefit from advertising on Netflix.
The first-party data quality is an advantage that very few other platforms can stake claim to, asserts Chandramouli. According to him, Netflix not only knows the demographics of the audience, but it also understands their psychographics based on the content they view. “This type of viewer analysis has not been available so far, and linear TV is still struggling to get the demographics right. Every brand is likely to benefit from such sharp targeting, especially those that lack first-party data.”
Netflix is just like a special network sitting on a large amount of first-party data, says Akash Gupta. “Their ad value lies in the data and in their connection with customers. Through Netflix, marketers can design targeted campaigns based on user preferences and habits,” he adds.
One of Netflix’s top priorities, according to Gupta, will be to ensure that the user’s viewing experience is protected. Hence, it will thoroughly screen its ad partners and ensure that the ads are aligned properly with appropriate contexts, he predicts.
Netflix does have a rich depository of first-party data, but when they introduce the ad-supported model, maintains Gupta, they need to ask consumers to opt-in again to share their data with advertisers and it is to be seen how consumers will respond to that.
“It will be interesting to see how much user data Netflix will be willing to share with advertisers. While Netflix has been a first-mover in many areas, when it comes to having an ad-supported model, it is late to the party. But this could be a benefit as they would have learnings from what has worked and what has not worked for others,” explains Gupta.
Rajiv Dubey is also sceptical as to whether Netflix will share the data with the marketers. “It all depends on whether they will share the data with the marketers. As far as advertisers are concerned, things are not going to change a lot. What is going to change is for Netflix. For advertisers it is going to be another platform, which is already there,” says Dubey. According to him, Netflix has very deep data on audience preference, etc. Their AI is much evolved as compared to anybody else.
Siddhant Raizada foresees that if Netflix is able to restore trust and offer a reliable marketing data and insights, it will become a formidable competition to Facebook and YouTube, because they platforms, over time, have lost their credibility.
Data privacy, says Raizada, is certainly an issue with digital marketing. “As consumers we support, but as marketers we dislike it. Given the rich consumer base of Netflix, advertisers in the premium and luxury brands will surely advertise on Netflix and benefit from the data insights they get from the platform. The most important factors will be trust in the data. The existing social platforms have been frequently criticized for presenting misleading information; hence have lost some credibility with marketers,” he explains.
Krishnarao Buddha agrees that first-party data will be beneficial to advertisers. “Various brands do have access to the first-party data though it may be challenging to use the same on account of high cost and fast-gaining importance of privacy-related concerns. With the rich repository of first-party data of Netflix, advertisers will benefit from getting access to such an audience and help them gain consumer insights,” says Buddha.
The road ahead is not very rosy for Netflix. The streamer will have to surmount privacy-related hurdles.
Rashid Ahmed maintains that privacy regulations clubbed with personal data usage policies will undoubtedly be a hurdle that Netflix will have to surmount, if the platform were to provide granular audience targeting.
“The content and entertainment giant’s key asset is the sheer volume of data it has collected over time, pointing to users’ interests, likes and even dislikes. As brands find it increasingly difficult to reach their preferred audiences through various other media, Netflix may be able to corner a large portion of the advertising market, if it can successfully change its model to one that’s advertising-driven, within a tight consumer privacy regulatory environment,” says Ahmed.
Customisation
Netflix holds immense potential for marketers if approached correctly. Does leveraging the platform require a complete overhaul of existing approaches, as Netflix predominantly caters to Gen Z and Millennials?
Akash Gupta feels that it should not require a complete overhaul of existing approaches. He, however, maintains that marketers need to understand what is appropriate for their respective products or services. “Bite-sized video content is likely to work better with Gen Z and Millenials. The messaging has to be quick and in a language they speak. Advertising should be based on a storytelling approach that clearly explains why the product or service will help them. This segment also prefers interactive ads where one is asked to take some action like tapping, swiping, or clicking. Brands can also look at time-sensitive posts that leverage FOMO and come across as a brand that is fun and cool by incorporating an element of humour. Brands are already doing this on other OTT platforms,” says Gupta.
Siddhant Raizada also doesn’t expect an overhaul in the way brands will go about advertising on Netflix. According to him, Netflix will complement the existing marketing channels like YouTube and social media. Netflix, he asserts, is a video viewing platform.
“It’s a better version of TV and will help bring more efficiency to the money spent on TV advertising. But it will not replace DTH immediately, as the adoption is largely still with millennials and Gen Z. Recent rise in inflation has led to people cancelling their Netflix subscriptions, which proves that it is still a discretionary expense. DTH and cable TV, being very cost-effective viewing mediums, will retain their presence especially in middle and lower income groups. However, if Netflix is able to pass on the benefit of advertising revenues to consumers in the form of lower fees, it will be able to safeguard its subscriber base against inflationary pressures,” Raizada concludes.
“Once the consumer has to bear with ad content, the expectations on the quality of actual content goes up significantly. After all, consumer time is used for intrusive advertising, and this the consumer knows as valuable. Advertisers will need a range of audience demographics to be catered to, and more than just Gen Z and Millennials needs to be incorporated into the Netflix strategy. Also, as stated earlier, advertising on OTT must not be a digital advertisement replica, but must be thought about afresh in a way to engage the audiences while the content is playing,” says Chandra Mouli.
The key to success of the streaming platform lies in the way they approach the marketers, says Buddha. Ultimately, what matters is the value offered to the advertisers, he adds.
“It should be a win-win proposition. A case in point is the case of a music platform which has not been able to leverage its favorable position due to its rigidity. Netflix has a strong following by the Gen Z and Millennials and it can continue to grow the base. This TG is its strength. There is no need for a change in strategy,” he asserts.
Rashid Ahmed feels that granular targeting would become the most sought after by advertisers.
“Netflix utilises data to provide content customisation at the individual user level. The degree of customisation is based on individual preferences, content consumption history, and even avoidance of suggested content. Effectually, this means that broad segments like Millennials or Gen Z may be waylaid, if Netflix is able to offer granular audience targeting parameters to marketers, and if brands take the effort to create highly defined audience personas. Broad segment advertising would still be conducted by brands looking at establishing themselves, but it’s likely that granular targeting would become the most sought after by advertisers looking at conversions,” concludes Ahmed.
Share
Facebook
YouTube
Tweet
Twitter
LinkedIn