Netflix Pondering Ways to Move on From Microsoft on Ad Tech (Report)

Netflix ad-supported tier
(Image credit: Netflix)

Just months after signing a two-year deal to have Microsoft supply it with advertising technology needed to launch its commercial-supported tier, Netflix is said to be looking to build or buy its own ad tech. 

As was first reported by Digiday (opens in new tab), Netflix has hired Jon Whitticom, formerly a product manager for Comcast's ad tech unit, FreeWheel, as an advisor to help it examine its options in terms of building or buying its own technology when the Microsoft deal expires in 2024. 

Microsoft officially became a player in ad tech when it completed its purchase of Xandr from AT&T in June of last year. A month later, Microsoft emerged as the surprise winner in the bid for Netflix’s technology services contract, with the leading subscription streaming company trying to quickly launch a discounted service tier that was partially subsidized by advertising, 

The $6.99-a-month “Netflix with Ads” tier launched in November. 

Microsoft beat out Comcast and Google to get the business. Those familiar with the dealings told Digiday that Microsoft’s advantage centered on not having a streaming platform that directly competed with Netflix, as Comcast’s Peacock and Google’s YouTube do. 

Netflix with Ads had a slow first month in the marketplace, with only 9% of Netflix signups being for that tier. Netflix reported increased traction for the new service to its advertising partners in January, but public comments from top-level Netflix executives indicate some of the blame for the sluggish start relate to the technology.

For example, during Netflix’s Q4 earnings call in January, newly promoted Co-CEO Greg Peters seemed to deliver a back-handed compliment to his company's ad-tech partner. (Seeking Alpha transcript available here (opens in new tab).)

On one hand, he noted: “We were able to launch this very, very quickly. And the tech is all working. The product experience is good. And that’s really a testament to lots of hard work for both Microsoft and Netflix teams who worked very hard to make that happen, and it’s really rewarding to that to see.”

But Peters also noted that Netflix's ad delivery acumen was still “crawling” and needs to enter the “walking” phase soon.

“We’ve got a lot to do to get there,” he added. “So there is a bunch of technical improvements in terms of ad delivery validation, measurement. We’ve got progress already on that, more to do in the next quarter or two.” ▪️

Daniel Frankel

Daniel Frankel is the managing editor of Next TV, an internet publishing vertical focused on the business of video streaming. A Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, Daniel has worked on staff for publications including E! Online, Electronic Media, Mediaweek, Variety, paidContent and GigaOm. You can start living a healthier life with greater wealth and prosperity by following Daniel on Twitter today!