eMarketer: Netflix Ad Revenue Expected to Reach $1 Billion in 2024

With Netflix’s lower-priced $6.99 monthly ad-supported “Basic with Ads” tier approaching its one-year anniversary (on Nov. 16), the subscriber option accounted for 30% of all of the streamer’s sign-ups in September, according to new data from eMarketer. Netflix recently disclosed that the ad-supported plan has 15 million global monthly active users.

eMarketer projects the ad-supported option will generate more than $1 billion in ad revenue in 2024, ahead of rival Disney+, with an ad-supported option that is projected to reach $910 million in ad revenue next year.

The research group bases the projections on Netflix growing viewer time spent on the platform in relation to an estimated $30 billion-plus U.S. ad spending market in 2024.

“There’s potential for growth as advertisers move to where users spend their time,” Sara Lebow, analyst with eMarketer, wrote in a post.

For Netflix to achieve the ad-revenue milestone, it has to deliver on a few key metrics, including expanding beyond 15- and 30-second ads to 10-, 20-, and 60-second spots; launching a binge format, which rewards viewers who watch three consecutive episodes with an ad-free fourth one; QR codes on programing; brands touted as title sponsor on content; and Netflix’s first live sports event, The Netflix Cup golf tournament in Las Vegas on Nov. 14.

The live event presents Netflix with a major opportunity to move past its last live event, the ill-fated “Love Is Blind” season four reunion episode, which failed to live-stream due to technical issues.

“To win over advertisers’ trust, the platform can’t afford another debacle,” Lebow wrote.

 

Data: Netflix’s Ad-Supported Plan Off to Slow Start

When Netflix launched its lower-priced ad-supported subscription plan Nov. 3, co-CEO Reed Hastings cautioned the impact would be minor from the get-go with little impact through the fourth quarter, which ends Dec. 31.

Indeed, data from Antenna suggests a modest start for the $6.99 monthly plan. The research finds that 9% of Netflix’s domestic subscription sign-ups in November were to the “Basic With Ads” plan, making it the least-popular of their plan options. In addition, just 0.1% of Netflix’s existing U.S. subscribers switched to the ad-supported option.

The results mimic consumer response to HBO Max, which saw a mild pickup when it first launched its ad-supported option in June 2021. As Antenna previously reported, 15% of HBO’s U.S. sign-ups were for HBO Max with ads in its launch month.

In addition, Antenna found that 0.2% of existing U.S. Max subs switched to the ad-supported plan in its launch month, about double the Netflix switching rate.

The popularity of the Max With Ads plan did increase over time, accounting for as many as nearly 33% of new subs over the course of its first year in the market. Currently, Antenna estimates that 21% of Max subs use the ad-supported plan.

“Consumers have demonstrated that, with the right pricing and packaging, they will opt-in to ad-supported video services,” Antenna wrote. “In fact, services that launched from day one with an ad-supported tier (or, in Hulu’s case, launched ad-free, but introduced an ad-supported option thereafter) have much higher share of subs selecting the ad-supported option.”

Jason Helfstein, analyst with Oppenheimer, said the early data suggests that Netflix, which refused to stream ads until a rocky Q1 fiscal quarter changed its mindset overnight, is easing in ads to content slowly.

“Not surprising that the ad launch has some hiccups and Netflix does not want to flood ads to  meet commitments at expense of engagement,” Helfstein wrote in a note. “Advertisers are also shifting non-holiday specific unspent funds to Q1. Microsoft is likely paying minimum guarantees; therefore, we don’t see an impact to revenue in the short term.”