Shareholder letter: Netflix says its ad tier has 15M+ MAUs globally, accounting for ~30% of new sign-ups where it's available, and plans new ad formats for 2024
Netflix is ready to use “The Crown,” “Squid Game” and other signature series to take ad dollars from rival streamers.
Context & Ripple Effects
This is an early adoption milestone for Netflix's lower-priced, ad-supported offering: it had become a meaningful source of new customers in the markets where it was offered, while Netflix was preparing formats that could package its signature programming for advertisers.
The subsequent trajectory makes the milestone more consequential. The tier rose to more than 23M monthly active users by January 2024, then Netflix said it would build its own ad platform after reaching 40M MAUs, indicating that ad sales was becoming a more central operating capability rather than a peripheral plan option.
First-order effects
- Netflix can use the ad tier as both an acquisition product and a new inventory source, with new 2024 formats intended to make its major series more marketable to advertisers.
- Advertisers gain another route to reach Netflix viewers around recognizable programming, while Netflix can pursue spending that might otherwise go to rival streaming services.
Second-order effects
- A growing share of sign-ups on the ad plan increases pressure on other streamers to demonstrate comparable audience reach, programming adjacency, and ad-format capabilities to protect advertiser budgets.
- More ad-tier activity gives Netflix a stronger incentive to control the technology and sales stack behind the product—a direction reflected in its later move toward an in-house ad platform.
Third-order effects
- If ad-supported plans continue to supply an increasing share of streaming acquisition, the competitive benchmark shifts from subscriber totals alone toward the ability to monetize viewers through both subscriptions and advertising.
- Streaming services with distinctive programming and scalable ad infrastructure could gain leverage in advertiser negotiations, while services lacking either may face a tougher path to fund premium content.
The trend: Streaming is moving toward hybrid monetization, where ad-supported tiers are becoming a core growth and advertising-product strategy rather than a discount option.