Netflix (NASDAQ:NFLX) has reported that its advertising tier now boasts 15 million global monthly active users, marking a significant increase from the 5 million users the company announced in May. Following this announcement, Netflix’s stock rose by more than 1% during morning trading. For the year-to-date, Netflix’s stock has gained over 40%, significantly outpacing the S&P 500’s 10% increase during the same period.
Amy Reinhard, the company’s new head of advertising, expressed her satisfaction with the growth, emphasizing the company’s focus on building a strong foundation while delivering compelling entertainment at a great value. However, it’s important to note that monthly active users (MAUs) are not equivalent to paying subscribers. Netflix has yet to disclose specific subscriber figures for the ad tier or the revenue it has generated. MAUs can include multiple individuals using the same account.
In the blog post, Reinhard highlighted new features and enhancements, such as the “binge ad” format, which allows viewers who watch four episodes in a row the opportunity to watch the fourth episode without ads. This feature is set to be introduced in the first quarter of 2024.
Netflix has also been pursuing a sponsorship model for its ad product, enabling advertisers to “partner” with new movies or TV shows. Frito-Lay initiated this approach with the latest season of “Love is Blind,” and additional sponsors will be revealed for the reality series “Squid Game: The Challenge” and the upcoming final season of “The Crown.”
This news follows Netflix’s recent earnings report, which indicated that ad plan membership had increased by almost 70% quarter over quarter. Nevertheless, the company acknowledges that there is still “more work to do to scale this business,” particularly in terms of securing higher ad revenue. Slow growth in the ad tier has raised concerns among analysts, who have pointed out the extended timeframe required for advertising to significantly contribute to the company’s top line.
Despite these challenges, the $6.99 offering has been a major revenue initiative for Netflix, coupled with its efforts to address password sharing, which helped boost subscribers in the latest quarter. Additionally, the company announced price increases for certain plans in the U.S., UK, and France as part of its strategy to enhance revenue and margins.
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