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Measuring Netflix's Advertising Puzzle

Confronting Walled Garden Limits – Possible or Pipedream?

Image of Beatgrid measuring Netflix Advertising by Confronting Walled Garden Limits with its passive mobile ACR technology panel apps

Netflix's Programmatic Evolution: Navigating Challenges with Innovative Solutions

Starting its second year as a key player in the advertising landscape, Netflix is advancing with strategic developments, particularly in the realm of programmatic buying. This shift is a response to broader challenges faced by advertisers in understanding consumer behavior and accurately measuring campaign impact, prompting a demand for innovative cross-media solutions with precision and practical applicability.

Netflix's Exclusive Deal with Xandr and Potential Shift

Let’s back up a bit and remember how it all started… Netflix initiated its advertising journey in July 2022 through an exclusive two-year deal with Microsoft-owned Xandr’s DSP (demand-side platform). However, recent reports from July 2023 suggest a potential strategic shift as Netflix actively explores collaborations with alternative DSPs beyond the current exclusive partnership with Xandr.

Challenges and Resistance in Programmatic Evolution

Ongoing discussions reveal Netflix’s exploration of collaborations, aiming to provide advertisers with flexibility in engaging with its audience through programmatic private marketplace deals, extending beyond the limitations of the Xandr platform. Despite efforts to incentivize the use of Xandr’s DSP, resistance has surfaced, particularly from advertisers accustomed to non-Xandr DSPs for their non-Netflix ad buys. This resistance highlights concerns about data sharing limitations and the inability to connect the (cross-screen) dots across the entire ad buy within the current exclusive partnership.

Industry Perception and Potential Pivot

Industry leaders suggest that Netflix’s exploration of alternative ad tech options signifies a potential pivot in the streaming service’s programmatic strategy. While no official statement has been released, ongoing discussions with ad buyers underscore a willingness to adapt and cater to the preferences of advertisers.

Netflix's Programmatic Approach

Critics argue that Netflix’s current programmatic approach lacks the essence of true programmatic buying, with advertisers using Xandr’s DSP missing crucial data, such as cookieless person-level attribution or even IP addresses for households exposed to their ads. This limitation hinders the effective management of ad frequency across different mediums.

Addressing concerns raised by advertisers and agencies, Netflix’s potential move to open up its inventory to non-Xandr DSPs is a strategic response. This shift demonstrates Netflix’s willingness to be more flexible in its programmatic practices, representing a strategic evolution influenced by industry feedback. It may serve as an olive branch to attract a broader pool of ad dollars.

The potential pivot away from the exclusive partnership with Xandr signals Netflix’s adaptability and openness to cater to the diverse needs of advertisers. This sets the stage for potential shifts in programmatic practices and partnerships in the coming years, not only buying and planning-wise but also on the measurement side of things.

This strategic evolution aligns with broader industry challenges like the current obvious situation where traditional TV & AV measurement approaches need to catch up in grasping consumer behavior across screens, necessitating innovative methodologies. Achieving a balanced ad frequency strategy, harmonizing screens, and elevating audience engagement has become even more critical components in successful advertising campaigns.

The Importance of Accurate Measurement and Evolving Media Landscape

Today’s necessity for precise measurement becomes crucial. Shifting patterns in media consumption, along with the emergence of various channels such as video-on-demand (VOD) platforms, introduce greater complexities into the strategic considerations of advertisers. This pursuit of efficient and effective advertising practices aligns with the issues tackled by unified measurement solutions for TV, CTV, and OLV.

Novel holistic methodologies, emphasizing privacy-first approaches, are already being embraced by major advertisers on a global scale. Across regions, the industry witnesses the emergence and success of single-source passive mobile-based panels utilizing Automatic Content Recognition (ACR) technology, integrating it with geofencing technology for Out-of-Home (OOH) measurement as well. These solutions facilitate accurate (deterministic) analysis of media content across diverse screens, encompassing TV, digital video, audio, and even out-of-home audiences.

Such innovative approaches effectively confront the challenges posed by the current fragmented measurement methods. Moreover, as the industry moves away from cookies and IP-based solutions, panel measurement alternatives are experiencing a notable resurgence.

Novel holistic methodologies, emphasizing privacy-first approaches, are already being embraced by major advertisers on a global scale. Across regions, the industry witnesses the emergence and success of single-source passive mobile-based panels utilizing Automatic Content Recognition (ACR) technology, integrating it with geofencing technology for Out-of-Home (OOH) measurement as well. These solutions facilitate accurate (deterministic) analysis of media content across diverse screens, encompassing TV, digital video, audio, and even out-of-home audiences.

Such innovative approaches effectively confront the challenges posed by the current fragmented measurement methods. Moreover, as the industry moves away from cookies and IP-based solutions, panel measurement alternatives are experiencing a notable resurgence.

Connection Between Programmatic Expansion and Industry Challenges

The connection between Netflix’s exploration of programmatic expansion and the industry’s broader challenges lies in the quest for efficient and effective advertising practices – tethered to the use of unified and advanced precision measurement solutions. As a result of a stormy (fragmented) 2023, advertisers addressing the crossroads of tradition and innovation, have started to recognize the imperative for unified, holistic cross-media measurement solutions. These solutions need to transcend fragmented ecosystems, harmoniously addressing the diverse audio-visual content consumed by audiences across multiple platforms.

As the lines between linear, digital, and streaming blur at a lightning-speed pace, advertisers and measurement companies must stay ahead of the curve. Success will be defined by those who can seamlessly integrate data-driven insights, harmonize cross-media strategies, and deliver content in a captivating way that engages audiences across diverse platforms. 

Advertisers' Role & the Importance of Holistic Unified Measurement Solutions in the Era of Rapid Evolution

With the forthcoming phase-out of Google’s third-party cookies, the importance of all-encompassing unified measurement solutions is emphasised, especially for advertisers seeking to manage the intricacies of user and cross-media tracking across above-the-line and digital channels. Simultaneously, marketers must now also navigate new privacy regulations that align with contemporary consumer demands and concerns. One certainty remains: those who adapt and ride the wave of change will distinguish themselves from their competition. The steps are evident—utilizing time effectively (understanding which channels are on the rise), embracing innovative measurement solutions, and aligning with the evolving dynamics of consumer behavior and technology.

New Ad-Tier Streaming Platforms and the Role of Beatgrid

As the advertising industry solidifies its reliance on platforms like Netflix and embraces newcomers such as Amazon Prime, set to debut in late January 2024, the importance of solutions like Beatgrid cannot be overstated. Differentiating itself by not relying on IP addresses or cookies that tag households exposed to ads, Beatgrid emerges as a crucial alternative in the landscape. It sets the standards for audience measurement and ad effectiveness solutions, utilizing a true single source and, crucially, capable of accurately measuring cross-media content independently, even within walled gardens. Its capability to operate at an individual/person’s level rather than restricting measurement to households will be pivotal in the disruptive entry of new ad-tier streaming platforms. The transformative era ushered in by platforms like Netflix, Amazon Prime, Disney+, and others is poised to reshape the advertising landscape, and, innovative solutions like Beatgrid’s are positioned to play a central role in guiding brands through this dynamic shift.

By Ian Alastair Hobkirk
By Ian Alastair Hobkirk

Digital Marketing Manager

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