Decoding Netflix's Ad Strategy: A Review by Analyst Post Upfront Presentation

Oppenheimer analyst Jason Helfstein had an Outperform rating on Netflix, Inc NFLX with a price target of $415.
Wednesday afternoon, Netflix management hosted their Upfront presentation and Q&A with analysts.
Given the lack of prior disclosure, the streaming giant has been a top pick, and the analyst is incrementally more positive on the ad tier progress.
Most notably: 1) ad tier has ~5 million MAUs, significantly more than the 1 million reported by third parties; 2) represents 25% of new subscribers in respective geographies; 3) viewed 80% on TV; and 4) average age of 34, all of which helps support the premium ad prices.
In addition, Netflix viewers are 4 times more likely to engage with an ad on Netflix vs. other streaming platforms and 4.5 times vs. linear TV.
Ad product development includes frequency caps and the ability to sponsor Netflix series launches and purchase guaranteed inventory from NFLX's Top 10 shows.
Netflix is also adding more third-party verification tools, including Nielsen ONE, which will give advertisers de-duplicated audience measurement metrics and a partnership with EDO, Inc., a TV outcomes measurement platform.
Interestingly, Netflix believes it can bypass the demand-side platforms (DSPs) for campaign optimization.
While still early, executives believe advertising revenue will grow to +$3 billion over time, and they also confirmed press reports that $300 million in opex reduction is underway.
Netflix expects to launch Paid Sharing in additional markets before quarter-end, with increased noise around higher churn from third-party data providers.
Price Action: NFLX shares traded higher by 9.49% at $372.22 on the last check Thursday.
Photo by Tumisu via Pixabay

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