More Than Half Of Netflix Subscribers Now Sign Up For Ads

Netflix is ​​entering the ad monetization phase.

Its total revenue rose 16% to $10.2 billion last year thanks to growth in subscriber and advertising revenue, while operating margins rose 27%. Netflix added 19 million subscribers in the fourth quarter alone beating Wall Street’s expectations 9.8 million, bringing the global total to 302 million.

Signups rise as more people subscribe to Netflix’s ad tier to save money — and as Netflix kicks slackers shared accounts more than a year.

“2025 is the year we go from ‘browsing’ to ‘walking,'” Netflix CEO Greg Peters told investors, referring to ad monetization, during the company’s Q4 earnings call on Tuesday.

Netflix doubled its annual advertising revenue last year, and “we expect it to double again this year,” Peters said.

Making money is moving

For Netflix, the “crawl” phase involved expanding the ad-supported membership base enough to satisfy advertisers.

But since ads first launched in November 2022, “we’ve done the work to meet our goals for advertisers,” Peters said, noting that more than 55% of new subscribers signed up for an ad-supported tier last quarter. FYI, that number was 50% in October and 40% in April.

With Netflix now comfortable with its scale in terms of ad inventory and reach, “we’ve been able to shift more of our focus to improving our offering for advertisers,” Peters said.

Serving advertisers “will remain a priority and part of our plan for years to come,” Peters said.

Netflix ad stack

For Netflix, a big part of moving its ad business from “browse” to “walk” is “building your own ad lineup,” Peters said.

Netflix first announced plans to build its own advertising technology stack in May and initially tested the platform in Canada. Now, all of the streamer’s ad serving in Canada is done in-house.

The new in-house advertising platform will launch in the US over the next few months.

According to Peters, Netflix’s advertising platform should improve the experience of media buyers by increasing flexibility while reducing the number of programmatic jumps. For example, agencies and brands can buy Netflix inventory directly through their choice of The Trade Desk, Google DV360, Magnite or Microsoft, Netflix original advertising sales partner.

Control over its own ad serving technology also allows Netflix to provide advertisers with “more data sources, more measurement and more incremental reporting,” Peters said, in addition to broader programmatic availability. Better data should also improve the user experience with more relevant ads while boosting ad sales for Netflix, he added.

Meantime, Netflix is ​​raising prices. Its ad-free standard and premium plans now cost $2.50 and $2 more per month, respectively, while the ad-supported plan is up $1 per month to $7.99. This is the first time that Netflix has increased the cost of its advertising layer.

Peters acknowledged that Netflix has “significant work to do” when it comes to maximizing ad monetization. “But we think our path is straight,” he said, “and we have a significant runway that will continue to grow.” [ad] income.”