Netflix relies on Microsoft to manage advertising on its platform

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Netflix relies on Microsoft to manage advertising on its platform

Online streaming service Netflix lost a lot of members in the first quarter of 2022.

Microsoft was chosen as head of space sales technology ads from the Netflix platform. The streaming giant wants to offer cheaper subscriptions, but with advertising.

Netflix announced the move in April, after a disappointing first quarter where the platform lost subscriptions for the first time in 10 years. The announcement came as a surprise to its users, as the company had been speaking out against the very idea of ​​running ads for years.

Clearly it works for Hulu, Netflix boss Reed Hastings remarked, referring to a competing service, during a conference call with analysts.

“If you want the ad-free option, that will always be possible. If you prefer to pay less and tolerate ads, there will be an offer for you too.

—Netflix boss Reed Hastings

This subscription will be in addition to the three options already offered (Essential, Standard and Premium), the cheapest being at 9 $.99 per month in Canada.

Microsoft will be responsible for designing and managing the platform for advertisers wishing to serve ads to Netflix users.

Microsoft has a proven ability to respond to all our advertising needs by building with us a new subscription offer with advertisements, said Greg Peters, Netflix's COO, quoted in Wednesday's statement.

Unlike many of its competitors, Microsoft does not have a streaming service for TV series or movies.

According to the American specialized press, Netflix had considered other partners, such as Google, the world leader in advertising, and Comcast, an Internet provider which owns Peacock, the NBCUniversal platform.

Microsoft has the advantage of not having a competing streaming service, unlike the three companies that garner roughly two-thirds of digital ad budgets in the US: Google, Meta, and Amazon.

< p class="e-p">The Redmond group ranks fourth in this market in the United States, notes analyst Ross Benes, of eMarketer, for AFP. He represents fewer conflicts of interest for Netflix than other companies and has established relationships with a range of advertisers.

“This deal gives him something missing from Microsoft's advertising business – a quality offering in video streaming, with strong growth potential.

—Ross Benes, eMarketer Analysis

Netflix believes that Microsoft will allow it to innovate flexibly, both in technology and in sales techniques, and provide strong protections for the privacy of subscribers, said Greg Peters.

Introducing advertising means exposing yourself to the questions that have been debated for years around the personal data of Internet users, harvested on a large scale to target them with personalized ads, which are more lucrative .

We are at the very beginning of the process, but our long-term objective is clear: more choice for consumers, and a premium tool for brands better than in traditional television, detailed the director.

Analyst Ross Benes expressed his doubts on this point, finding it curious that Netflix preferred not to design and manage its advertising platform itself.

One of their biggest strengths is their user experience. Given the ad formats found on Microsoft products, such as Bing and LinkedIn, this partnership indicates that ads on Netflix will not set a new standard in the burgeoning streaming industry, but will instead emulate the usual formats, for better or for worse.

After years of conquering Internet users at high speed, Netflix lost 200,000 subscriptions worldwide in the first quarter compared to the end of 2021, news that had caused its share price to drop by 25% instantly.

The Californian group reacted by announcing the arrival of advertising in its offer , which must help finance the investments necessary to maintain its leading position in the streaming industry, of which it is a pioneer.

He had also indicated that he was going to tighten the screw on the side of the sharing of identifiers and passwords, which allow many people not to pay to access the content of the platform.

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