Netflix has chosen to help Microsoft offer ads in a cheaper version of its video streaming service that is expected to be released later this year with a commitment to minimize intrusions into personal privacy that often accompany digital ads.
The alliance announced Wednesday marks a major step toward Netflix’s first foray into advertising after firmly refusing to include ads on its video streaming service since its inception 15 years ago.
Netflix announced it would drop its resistance to ads three months ago after revealing it lost 200,000 subscribers during the first three months of the year amid tougher competition and rising inflation that has put pressure on family budgets. This made management realize that the time had come for a less expensive option.
Netflix has warned that it will likely report even greater subscriber losses during the April-June period, increasing the urgency of launching a cheaper version of its ad-supported service to help reverse customer erosion. This drop has contributed to a 70% drop in the price of its shares so far this year, has wiped out about $ 190 billion in shareholder wealth and resulted in hundreds of layoffs.
The Los Gatos, California-based company plans to release its numbers from April to June on July 19, but has not yet specified when its option with advertising support will be available, unless it is released before 2023. Netflix’s announcement about Microsoft’s partnership also omitted crucial information: the expected price of the option with advertising support.
“It’s very early and we have a lot to work on,” Greg Peters, chief operating officer of Netflix, said in a post that also highlighted Microsoft’s “strong privacy protections”.
Reaching the ad deal with a video streaming service with more than 220 million subscribers represents a major coup for Microsoft, which has been embroiled in a long and often fierce battle for the past 20 years. with Google, the dominant force in digital advertising. .
Mikhail Parakhin, president of Microsoft Web Experiences, said the Redmond, Washington-based company is “delighted” with the choice of Netflix in a blog post that also underscored the company’s commitment to privacy.
While Microsoft still makes software that powers most of the world’s personal computers, Google has become increasingly powerful through its dominant search engine, ubiquitous Android software for smartphones, and other popular digital services. which last year generated more than $ 200 billion in advertising revenue, far more than any other marketing network.
But Google’s ad sales rely heavily on personal information collected by its mostly free services about its billions of users worldwide, a form of surveillance that Netflix obviously wants to avoid with commercial outages. of its video service to reduce the chances of alienating subscribers.
Microsoft may also have had another factor in its favor. Netflix Inc. co-founder and co-CEO Reed Hastings served on the board of directors of Microsoft Corp. from 2007 to 2012.
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