The Netflix Advertising Fantasy is Probably Just a Fantasy

The Netflix Truthers are out there.

You can’t attend an ad industry event without hearing someone declare, quite confidently, that the ads are coming to Netflix. They simply have to be.

A few weeks ago, Tara Walpert Levy, YouTube’s vice president of agency and brand solutions, seemed to indicate she had some inside information when she remarked that recruiters have been telling her that Netflix is seeking advertising executives.

Mark Zagorski, CEO of the video ad tech firm Telaria, extolled the common theory as to why Netflix would go the ad route at the VideoNuze event this past week in New York. “You can’t burn that much cash or raise that much debt forever,” he said.

Zagorski cited the fact that Netflix had been testing promotional ads for its own shows as clear evidence that a secret ad plan was being hatched.

"Advertising is coming to Netflix," he said. To think otherwise, you’d “have to be on crack.”

When it comes to Netflix and advertising, we’re not sure who is or isn’t on crack here - but Netflix has never even left any wiggle room on the subject.

“No advertising coming onto Netflix. Period,” wrote CEO Reed Hastings in a Facebook post a few years ago.

Hastings firmly reiterated this no-ads position last March at Netflix's developer event. That hasn’t stopped the rampant speculation.
For starters, Netflix has close to 150 million subscribers and incredible piles of consumer data. Who wouldn’t want to advertise to that audience?

And it’s not as though big tech companies don’t have a history of starting out anti-advertising before going all-in. Remember when Google executives kept saying they’d never bring pre-roll ads to YouTube?

Still, you have to wonder how much of this speculation is driven by a heavy dose of wishful thinking. After all, the advertising business is seeing consumers run from live, linear, ad-supported TV in droves thanks in large part to ad-free streaming services like Netflix. The company is essentially training a generation or two that sitting through interruptive ads is no longer the price you have to pay for getting great content. Instead, the price is roughly 10 bucks a month that automatically comes out of your - or your parents' -  bank account.

So it’s natural that advertisers talk themselves into a Netflix ad conspiracy theory. And there’s no question that Netflix has loads and loads of debt.  $12.3 billion!! (long term, according to Variety). In math terms, that’s a lot.

But as many have pointed out, Netflix is playing a very long game - looking to control as much of earth’s leisure time as possible (they speak of their competitors as sleep and Fortnite). There have been other companies which have eschewed profitability in exchange for market share - and the long game has worked out (see Amazon).

Plus, it’s not exactly clear that turning on ads would wipe out $12 billion in debt anytime soon.

More importantly, you have to listen to Hasting’s comments, and think hard about what Netflix is. Advertising, particularly anything disruptive, is an anathema to the Netflix experience. Netflix is on-demand streaming. The experience of choice and control is the brand.

"Really having great experience -- no advertisements or chopping up all of the content -- vastly outweigh the fact that one company is gaining a lot of influence," said Hastings last year.

And think about it, how exactly would an advertising rollout on Netflix work without awkwardly chopping things up? A few ads per hour here and there? Some short pre-rolls before every show? Maybe just run ads alongside licensed content, not originals? How would that fly with Netflix's partners?

Moreover, consumers would scream - and some would cancel. As Hulu sales chief Peter Naylor put it last week at the VideoNuze show, “We all suffer from churn.” Ads would make Netflix really suffer.

Putting aside what may or may not happen in emerging markets, here’s betting that advertising never finds its way to Netflix in the US. Hey, it makes for a fun conspiracy theory (it could even make for a great Netflix documentary). My guess is that advertisers are going to have to come to grips with the fact that much of OTT is off limits.

Remember, this is a company that went through a very famous product expansion fiasco. Is Hastings going to risk blowing the company’s rep a second time?

If you know anything about the media business, there are rarely Quikster fixes.

Header photo by Thibault Penin on Unsplash