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The streaming service that changed the course of entertainment by, in part, famously swearing off commercials, now has 70 million users watching ads each month. These days, more than 50 percent of new signups in Netflix‘s 12 ad-supported countries are for its ads plan; Netflix’s ad tier launched two years ago. (Disney+, which followed Netflix into ads, is also celebrating an anniversary this week; read about that one here.)
Netflix’s own ad tech will roll out globally next year; Canada is already solely running on the in-house platform. Netflix had initially partnered with Microsoft’s ad tech to get up and running.
It was a slow start for Netflix with Ads, but things have since picked up. Along the way, Netflix learned a lesson about asking advertisers for huge rates before establishing a user base that would actually see said advertising.
But advertising is beginning to make more and more sense, for both Netflix itself and its members. For Netflix, ads bring in another reliable revenue stream. As a matter of fact, Netflix executives have said that the average revenue per member (or ARM) is higher on the ad-supported tier than on its pricier subscription plans. Plus, the very global streamer cannot command the rates in emerging markets like India and Africa that it does in matured areas like the U.S. and Canada. And for members, why not save (more than) a few bucks per month? Especially when some of Netflix’s primo upcoming programming, like its Christmas Day NFL games and WWE’s weekly flagship series “Raw,” have built-in commercial pods.
Netflix’s Standard with Ads plan runs U.S. users just $6.99 per month; it is undoubtedly among the best values in streaming. Its Standard plan, the cheapest ad-free option and Netflix’s most popular plan, runs $15.49/month. Premium Netflix, the 4K and spatial audio option (as well as some other things like the ability to watch and download on the most devices), is $22.99.
The analysts at Evercore ISI believe Netflix’s current rate of growth on its ad tier “should at least support” the streamer’s forecast to double its advertising revenue in 2025. Evercore’s own math predicts Netflix’s ad revenue next year has the potential to be “well above $3 billion,” according to research shared with IndieWire, and should become 10 percent of the company’s overall revenue in 2026.
Netflix ended September with nearly 283 million global paid subscribers. Within its third quarter shareholder letter, Netflix announced it is “on track to reach what we believe to be critical ad subscriber scale for advertisers in all of our ads countries in 2025, creating a strong base from which we can further increase our ad membership in 2026 and beyond.”
“The near term challenge (and medium term opportunity) is that we’re scaling faster than our ability to monetize our growing ad inventory,” the letter continued.
In the long term, that will be a good problem to have had.
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