📺 Netflix Ads can bring $4B additional revenue for the streaming giant!
For the first time since 2009, Netflix has lost users — 200K in Q1, 2022. But, “ads” can SAVE this streaming giant. Here’s how!
The word "disrupted" gets thrown around a lot when talking about startups — more often with comical optimism than real substance.
But, if there is one company that has truly disrupted a market, it's Netflix.
From selling DVDs online to pioneering this weirdly esoteric, new-age concept of streaming, Netflix has surely "disrupted" the entertainment industry.
And, over a 24-year long run, they have reaped the benefits of their innovations. But, alas, good times always see an end.
Over the past year, Netflix's share price has dropped by a crazy 68%. And, since 2009, for the first time, they reported a 200K decrease in their subscriber numbers. The predicted user trends also don't look very good.
In short, Netflix's boat is sinking. And, it's high time Netflix looks for life-support.
In Netflix's case, that life-support is advertisements. So, here's how ads can SAVE Netflix!
But first, tell me more about Netflix. How did they disrupt the entertainment industry?
It all started when Reed Hastings, Netflix Founder & CEO, was six weeks late to return his "Apollo 13" VHS cassette. He was charged a hefty $40 fee. But, from an awful experience came a brilliant idea.
At that time, the video rental services sector was a $16B industry. And, given that these rental shops would act like tough librarians, there was a huge place for improvement.
Hastings along with Marc Randolph decided to start Netflix in 1997 as an online DVD rental service. Their advantage was simple — people could order any DVD online to directly reach their doorsteps. So, they no longer have to worry about the limited choices in the local shop.
But, they didn't stop there. In early 2000, Netflix introduced its famous monthly subscription model and dropped the due dates, and late fees structure. Now, users could simply pay a flat subscription fee to receive DVDs of their choice.
Since then, it has very religiously stuck to its subscription model. That's even after its pivot to becoming a streaming platform in 2007.
The new model, introduced a combination of licensed television, plus original content on the streaming platform.
And, fortunately, unlike Apollo 13, Netflix successfully pulled off its very own moon landing, ie. acquiring 222M paying subscribers to date!
The phenomenal rise of Netflix ... and then the fall
Since its launch back in 2007, Netflix has enjoyed a steady increase in both subscribers and revenue. But, it was during the pandemic when they saw exponential growth!
While you and I were busy binging Money Heist and Squid Game, Netflix was minting cash! In 2021, Netflix made ~$30B in revenue while its net income increased by 85% to $5.12B. Additionally, in the last quarter of 2021, it also added 8.3M paying users.
But, the pandemic spurt came crashing as 2022 drove in. In the first quarter of 2022, Netflix lost a record 200K subscribers. This was totally unexpected as Netflix had never reported negative growth since 2009!
Consequently, its Q1 2022 revenue also fell to $7.87B from a forecasted $7.93B. That's still an increase of $1.58B from the previous quarter.
But, the trend is still concerning. Netflix is not growing as quickly as it used to and that is hinting at very grim times in the future.
In fact, it is expected to lose 2M more subscribers in the next quarter!
But, after such a phenomenal growth spurt, why exactly is Netflix’s growth slowing down? And, how can ads help here? Well, continue reading to find out!
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Hrishikesh
The ad-free content is there Moat IMO and introducng ad-tier can be a bit harmful coz Netflix isn't like Google's or Facebook's Advertising platform.
well, who knows hope everything works out for the best.