What Netflix advertisers want during the TV upfront

Netflix will make its TV upfront week debut next month, pitching advertisers from New York's Paris Theater on May 17. After a rocky start with Madison Avenue, the streamer has media buyers questioning what innovations it will bring to market that might make its six-month-old ad tier more appealing.

On buyers’ wishlists for Netflix’s upfront is making its ad capabilities on par with competitors, lower pricing and a larger audience—none of which are small asks. As one agency buyer put it, all are necessary changes in order to evaluate Netflix as an equal player in any client’s media mix—or risk getting the axe as clients watch budgets closely due to the economic turmoil haunting this year’s upfront.

While the marketplace was not surprised by Netflix’s slow start, the buzz surrounding its ad tier launch may have impacted industry expectations.

“After launching just a few months ago, we continue to be excited about the growth and performance of Netflix's ad-supported plan for our advertisers and our members,” a Netflix spokesperson told Ad Age.

Read more: Streaming TV advertising in 2023

Relationship building

A recurring qualm about the first round of dealmaking with Netflix was its rush to sell before installing an internal advertising team. The company now boasts well-regarded leadership in Jeremi Gorman, president of worldwide advertising, and Peter Naylor, VP of advertising sales. But multiple agency buyers told Ad Age they are still in talks with Microsoft, Netflix’s ad tech partner, and have yet to interact with Netflix’s in-house team.

“We need to see a Netflix sales team selling it—that was a huge part of the [early] disconnect,” said a second agency buyer.

Xandr, Microsoft’s ad tech platform tasked with building Netflix’s ad tier, led the initial round of sales. The buyer attributed discord in early dealings to Xandr’s inexperience in TV sales, as well as a seeming disconnect between the company and Netflix.

“Netflix wanted to keep it in house, but they partnered with Microsoft and didn't realize, ‘Oh, they're not just our tech platform. We have to tell them things,’” said the buyer.

The first buyer also confirmed their Netflix negotiations have been done through Microsoft, putting the duty of “actually trying to really nurture that relationship and build the trust” with the streamer on the agency’s shoulders.

“In partnership with Microsoft, we will continue to build a forever global advertising business to deliver impactful results to meet our clients' objectives,” said a Netflix spokesperson.

While Microsoft has acted as Netflix’s global sales force, Netflix has been building out its internal team. Starting in January, it brought in sales executives from the likes of Twitter, Disney, TikTok and YouTube.

Better tech

“I don’t think [Netflix’s] product was bad,” said the second agency buyer of Netflix’s entrance into the ad market last year. “The tech wasn’t ready.”

In negotiations ahead of Netflix’s ad tier launch last November, the streamer pitched its product with limited targeting, measurement and brand safety capabilities, Ad Age previously reported. While Disney+ launched its ad offering a month later with a similarly scaled-back model, confidence in the streamer held high with promises it would soon match the offerings of Disney’s existing digital products.

Netflix continues to build out its baseline capabilities, such as measurement and targeting. At the time of launch, the streamer revealed it would be partnering with Nielsen to implement the measurement company’s Digital Ad Ratings product to report viewership beyond Netflix’s internal metrics. Netflix claimed the partnership would take effect “sometime in 2023,” back in October, but the buyer said they’d still not received any word as to when.

However, some of its announced partnerships have already taken hold, such as ad verification partnerships with DoubleVerify and Integral Ad Science, which Netflix announced last October.

More subscribers

While Netflix has long been mum on its numbers, preferring to share its internally generated Top 10 report, advertisers have been eager for greater reporting of its viewership. The streamer’s ad tier reached 1 million U.S. subscribers as of March, Bloomberg recently reported; one source told Ad Age this was the first they’d seen of its ad tier count.

A third buyer said that they would be more enthusiastic to work with Netflix if it “were to gain scale—not where they’re at now, but millions and millions of people—and get their price in line.”

Lower pricing

“Some clients still believe there’s an advantage to doing a vanity buy because it’s a sexy buy. I'm not a proponent of that,” said the third buyer. 

Netflix first went to market with industry-high rates, pushing $60 CPMs (although per multiple buyers deals went through for $5-$10 less). Comparatively, Disney initially pitched Disney+ at $50 CPMs.

In the months since, reports that Netflix has underdelivered on guarantees and pulled back on committed dollars from advertisers have dominated headlines, although agency buyers have told Ad Age that was to be expected from any new market entrant.

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“[Netflix’s ad product] was brand new; we expected it to be tiny and it was,” said a fourth buyer. “There was no real way to predict how tiny, so no one is upset at Netflix for overestimating … It was a test-and-learn and no one banks huge expectations on a test-and-learn.”

The buyer said that the difference between Netflix’s under-delivery and others was more a difference in optics. If Disney+, for example, were to perform similarly, the budget could be reallocated to Hulu or ESPN+, but Netflix didn’t have other assets to move commitments to. 

Multiple buyers independently applauded Netflix for giving advertisers the option to withdraw unused commitments, with one buyer citing the news cycle around the underdelivery as being the primary reason for clients getting skittish.

Moving into the spring ad haggle, the first buyer said they are looking for Netflix to “come down [on price] a little bit, get the trust, get the impressions and move forward accordingly.”