Netflix has chosen Microsoft to deliver ads to its viewers, in a cheaper version of its video streaming service.
It is expected to launch later this year with a pledge to minimize the personal privacy breaches often associated with digital advertising.
This marks a significant step towards Netflix’s first foray into advertising after steadfastly refusing to include commercials in its video streaming service since its inception 15 years ago.
Netflix announced three months ago that it was giving up its resistance to ads after announcing it had lost 200,000 subscribers in the first three months of the year. expensive option.
Netflix has warned it is likely to report even bigger subscriber losses for the April-June period, increasing the urgency to roll out a cheaper version of its service, backed by advertising to curb customer erosion. That drop has contributed to a 70 percent drop in stock price this year so far, wiping out about $190 billion in shareholder equity and leading to hundreds of layoffs.
The Los Gatos, California company, is slated to release its April-June issues on July 19, but has still not specified when the ad-supported option will be available, other than that it will roll out before 2023. Netflix’s announcement about the Microsoft partnership also left out a crucial piece of information: the expected price of the ad-supported option.
“It’s very early days and we still have a lot of work to do,” Netflix chief operating officer Greg Peters said in a post that also highlighted Microsoft’s “strong privacy protections.”
Winning the advertising deal with a video streaming service with more than 220 million subscribers represents a major coup for Microsoft, which has spent the past 20 years waging a long-running and often bitter battle with Google, the dominant force in digital advertising.
“This deal gives Microsoft something it lacked in its growing ad business: high-quality streaming video inventory that is scalable,” said Insider Intelligence analyst Ross Benes.
Mikhail Parakhin, Microsoft’s president of web experiences, said the Redmond, Washington-based company is “excited” with Netflix’s choice in a message that also underscores the company’s commitment to privacy.
While Microsoft still makes software that powers most of the world’s PCs, Google has grown increasingly powerful thanks to its dominant search engine, ubiquitous Android software for smartphones, and other popular digital services that generated more than $200 billion in ad revenue last year. – much more than any other marketing network.
But Google ad sales rely heavily on the personal information its mostly free services collect about their billions of users worldwide, a form of surveillance Netflix apparently wants to avoid with the commercial interruptions to its video service to reduce the chance that subscribers of alienate oneself. Google also owns YouTube’s video site, which is already competing with Netflix for people’s attention and will soon be an advertising rival as well.
Microsoft may have had another factor in its favor as well. Netflix Inc. co-founder and co-CEO Reed Hastings served on the board of directors of Microsoft Corp from 2007 to 2012.