Ads are coming to Netflix. But whether they’ll be a boon or bust for fashion brands is the big question.
Fashion brands have been increasingly advertising on streaming platforms and Netflix has finally announced its intent to enter the space. At the Cannes Lions advertising festival in June, Netflix chief executive Ted Sarandos confirmed rumours that the streaming platform would add an ad-supported tier with a lower monthly fee.
Netflix’s new tier could present fashion brands with exciting opportunities to engage consumers. Though what that will look like in practice is still being determined, a Netflix spokesperson told BoF, as well as what value Netflix will be able to offer its advertising partners. It remains to be seen, for example, if fashion and beauty brands will be able to plug the commercials they’re already running on platforms like Hulu into Netflix. What’s more, the news of Netflix’s ad offering comes at a time of greater competition in advertising around premium streaming content, with prices having risen in turn. As well, subscriber numbers at Netflix have fallen as other platforms pump out high-wattage content.
To make advertising on Netflix worthwhile to fashion brands, experts say Netflix’s offering will need to be an improvement on existing advertising formats and the company will need to share data and audience insights, which it has historically guarded closely. How Netflix handles both will determine if this is the biggest advertising opportunity in streaming — or far from it.
“Netflix has been an ad-free sacred space for consumers since their inception,” said Aaron Edwards, CEO of The Charles NYC, a digital marketing firm. “This has been the platform where consumers are not inundated with advertising … Brands who are daring to dabble in this space should be bold and thoughtful with their execution; it feels like a great opportunity to win hearts by being respectful.”
Giving Up the Data
Since 2020, brands have poured more marketing dollars into streaming on platforms like Hulu, Disney+, Amazon Prime and Peacock. In May, streaming viewership accounted for 31.9 percent of total television consumption, according to Nielsen, marking a third consecutive monthly record-high and making it the only viewing category to exhibit month-over-month growth. (Cable accounts for 36.5 percent of viewership and broadcast for 24 percent.)
Advertising on CTV (which stands for connected television, meaning devices like Roku, connected to a television, that allow viewers to toggle between streaming platforms, the internet and even gaming) is more expensive than doing so on YouTube or traditional television. But the types of ads that typically run on CTV prioritise brand building, which has become particularly important as the effectiveness of paid social media advertising decreases, consumers are less loyal and warnings of a looming recession encourage brands to continuously remind consumers of their value.
But to justify a higher price tag, Netflix will need to offer advertising partners a look at audience data and viewership figures. In the past, the company has been reluctant to do so, sharing limited information, such as its top 10 programs in a region — which it only began doing last fall.
Brands have already found ways to measure the return on their streaming investment, however. Sleepwear brand Lunya, for instance, uses the connected advertising platform MNTN Digital to place advertisements across streaming platforms rather than with a platform directly. MNTN then reports the estimated revenue and conversion that each platform drives as well as how many customers the brand has acquired based on who they reached, said Lunya founder Ashley Merrill.
“The more granular we can get, the better,” said Merrill, referring to Netflix viewership data. “Creatively, it’s more fun to watch an ad that relates to the content that you’re about to consume. We could create a much better customer experience … because we could really try to make something that people would enjoy watching.”
The brand has ramped up its streaming investment as it’s “faced headwinds on the paid social front,” said Blair Lawson, Lunya’s CEO. Its tests of streaming advertisements have seen early success in driving new customer acquisition.
“In some ways, Netflix is the perfect setting for Lunya as a brand that’s focused on elevating rest,” Lawson said. “Our customers or potential customers should be wearing Lunya while they’re watching.”
Relevance Is Key
CTV advertisements can be clunky and even off-putting. They’re often recut from ads that appear on cable, instead of unique to the platform, repeat multiple times within the same program and even air at a louder volume than the content itself. Creating an offering that addresses these issues offers Netflix a chance to be distinct from the rest of the streaming market.
But the platform must also create more opportunities for integration between content and brand, experts say.
“If brands can pick and choose the films that they’re making ads for, or even make specific ads for a specific film … that’s pretty interesting,” said Brett Kincaid, founding partner at Matte Projects, a creative agency and production company which has produced documentary films for streaming platforms including Netflix. “Especially if the brand had a role in the film itself. Those are pretty complex deals, but I think they’ll happen.”
So far, product placement in television shows and movies has been the clearest example of this kind of integration. In fashion, brands often appear in hit series or films only after spending years cultivating relationships with costume designers, as was the case with Brazilian shoemaker Schutz in HBO Max’s “Gossip Girl” revival.
Depending on what Netflix offers brands, fashion and beauty brands could sponsor content not only in the traditional sense but helping shape storylines altogether, argued former Black Frame agency founder and brand consultant Brian Phillips. For example, a fashion brand could sponsor a show or movie where one of their brand ambassadors appears wearing their clothes, with advertisements for the brand appearing during the stream, said Lawson. The brand ambassador in question would also promote the show or film on their social media channels when it’s released.
“The more integrated you can get and touch the customer in a few different ways, the better it feels,” she added. “That’s another place of opportunity for Netflix.”
Ultimately, any advertising format on Netflix risks intruding on the viewing experience, creating more distance between brand and consumer in the long run. Getting creative will be essential to avoiding this separation. Edwards of The Charles NYC points to Hulu’s “anti-ads,” which see a brand sponsor a block of ad-free content. He also suggests integrating QR codes into CTV ads to drive higher engagement across devices, given that people tend to watch CTV with their phones nearby.
“I’d love to see brands treat this space nearly as they treat the Super Bowl,” Edwards said. “Let’s see some amazing content in a space where consumers have come to expect next-level entertainment.”