If Netflix must have ads -it may as well fix the CTV user-experience disaster

Don't outsource what could be the most important move in company history

Don’t do it!

That’s my advice, not that I have any legitimate claim to understand Netflix’s financial pressures. I don’t have shareholders! But the news that Netflix is considering introducing ads feels like such an overreaction. You can tell by the way executives spoke about the potential move that they didn’t have much real conviction (I’m surprised that during earnings co-CEO Reed Hastings didn’t wear a sweatshirt that just read ‘Fine. You win’).

This thing is, Netflix has long been defined by its amazing user experience. Its clean interface, its algorithm, its ability to suck you in even if you’re watching crap - it’s revolutionary. And having no advertising isn’t just nice, it’s part of Netflix’s essence -which is inherently built around viewer control.

So I say, don’t do it. Don’t throw that away.

But if you must…well, why not build the best ad experience in the history of the medium? And maybe save CTV along the way.

Of course, as soon as the news broke, the speculation began. Who might Netflix hire to help the company dip its toes into advertising? The Trade Desk? A serving company like FreeWheel? An SSP? Or maybe Google?

Dave Clark @daveclark

“Who do we know at Netflix?” - Every Adtech executive today.

I can’t imaging the unsolicited bids Reed and co-CEO Ted Sarandos got this week from ‘solutions providers.’ This is a dream account for the right ad ops genius.

But if it were up to me - I wouldn’t partner with anybody. Because when it comes to delivering ads into streaming content - nobody seems very good at it. Some streamers in fact -are very, very bad at it. Whether that is their product team’s fault, or their ad tech partners’ - it’s hard to tell. I wouldn’t chance it.

Timhanlon @Timhanlon

Lost in all the Netflix-finally-admits-ads-might-work digital tongue-wagging today is the reality that NO ONE in ad-supported streaming knows how to intelligently/logically insert ads into content yet - especially in long-form shows & movies. HUGE opp to solve.

Remember, you’re Netflix. How many engineers and data scientists do you have that are masters of UI and personalization and keeping people delighted and hanging around? Can’t that power be channelled toward great advertising products? Here’s the money quote from this Wall Street Journal post on advertisers’ hunger to work with Reed and friends.

“Netflix also has an extremely sophisticated recommendation algorithm, making the possibilities extremely appealing to advertisers.”

Yes! In a streaming world that is typified by:

• jarring interruptions

• targeting that is miles from living up to its promise

• creative that is ported over from a 70-year old medium (linear TV)

• and the same ad again and again and again despite every ad tech company promising some magic cross-platform device graph that can fix this

I propose that Netflix alone can fix this. The streaming giant is well positioned to foster ad experiences and products that are built for this medium. Netflix could make CTV ads actually compelling, let alone responsive and welcome an all the stuff that it supposed to be.

I know - the category is booming. That doesn’t mean that the ad viewing experience isn’t a garbage dump right now. Maybe it doesn’t matter - but I wonder if consumers eventually rebel or start tuning these ads out entirely.

Instead, Netflix could reinvent the entire television advertising business.

Ah - but here’s what has me worried. Check out this quote from Hastings where he hints that Netflix is leaning toward outsourcing ad tech:

“We can be a straight publisher and have other people do all of the fancy ad matching and integrate all the data about people. So, we can stay out of that and really be focused on our members, creating that great experience, getting monetized in a first-class way by a range of companies who offer that service.”

Reed, you have to realize, once you run ads on your service, they are your ads, being delivered to your members. You don’t get to divorce the two. You viewers surely won’t make a distinction between the great Netflix viewing experience and the rocky ad breaks (‘oh, that’s just the SSPs’ fault). Why spend decades building up all this equity to throw it all away?

So where do you start? Business Insider has a really smart list of which executives Netflix could hire to help build out its ad operations from the ground. There are some terrific ideas on here, including the ex Hulu team, or former Facebook ad chief Carolyn Everson.

Of course, Netflix could also maybe just buy back Roku or maybe snatch up Hulu and in either case it would instantly have a fully backed ad sales and product team. However, you seem to be running out of cash - fast.

My suggestion would be to do what Amazon did. When the eCommerce giant started to edge into advertising back in say 2015, there was plenty of speculation on which ad tech company or companies they would be - since money surely was no object.

Instead, the company realized it had reams of experts in its walls who were super incredibly skilled at using data to anticipate what shoppers wanted to see and would respond to, and they built an incredibly effective ad product in house. Then as it took off, they started hiring all sorts of veterans from the ad industry.

Now, Amazon has a $31 billion ad business.

One things for sure, if you’re Netflix, don’t do what Amazon did in video. If you’ve spent any time watching shows on IMDB.TV (now Freevee), the ad delivery and targeting are abysmal. Whether this is the result of outsourcing these functions to a partner that isn’t delivering, or Amazon not realizing what it’s not good at (namely video UI) - it’s practically unforgivable.

Netflix is amazing at video delivery, and even better at presentation. So maybe the streamer can lead the industry to never before unseen heights. There are billions of TV ad dollars up for grabs. You can be remembered as the greatest ad company in the world. You could even outsource your new home grown ad tech/ad products to the whole industry. New recurring revenue!

Still, I wouldn’t do it.