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Netflix’s (NFLX) Ad-Based Plan Success Netflix’s Ad-Based Plan Surpasses 23 Million Monthly Active Users

Advertising-Based Growth

Netflix (NFLX) has experienced significant growth in its ad-based plan, with President of Advertising, Amy Reinhard, revealing that the service has surpassed 23 million global monthly active users at the Variety Entertainment Summit at CES 2024. This represents a substantial increase from the previously reported 15 million users a little over two months ago.

Reinhard highlighted the strong engagement levels among users on ad-supported plans, with 85% of them streaming on the platform for more than two hours per day. This suggests that the ad-supported model is resonating well with Netflix’s audience.

Netflix runs 10, 20, and 60-second ads on the ad-based plan, which was launched in various countries in 2022. The Basic With Ads plan is priced at $6.99 per month in the United States, less than half the cost of the Standard plan at $15.49 per month.

Ad-tier subscriptions reportedly account for approximately 30% of all new signups in the 12 countries where the platform has been launched.

The company’s ad-tech deal with Microsoft (MSFT) as its global advertising technology and sales partner has played a pivotal role in the success of Netflix’s advertising strategy and technology infrastructure.

Content Portfolio and Investor Outlook

Netflix’s focus on originals, both movies and TV shows, has been a major growth driver. The Zacks Consensus Estimate for NFLX’s revenues for 2023 is pegged at $33.60 billion, indicating growth of 6.29% year over year. The consensus mark for earnings has increased by a penny over the past 30 days to $2.19 per share. The company is scheduled to launch a bundle of comedy content as part of its upcoming event, Netflix Is a Joke Fest, including shows like The Hollywood Bowl and The Greek Theatre.

Netflix intends to implement strategies that curtail its costs and benefit its users. It has been planning to reward binge-watchers with ad-free episodes to boost user retention. Users who view three episodes in a row will receive one ad-free episode.

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Shares of this Zacks Rank #2 (Buy) company have returned 7.3% in the past six months compared with the Zacks Consumer Discretionary sector’s 2.8% rise, attributed to the success of its recently released content and a strong pipeline for 2024. This is expected to fend off competition from industry peers like Disney (DIS) and Amazon (AMZN). Netflix has outperformed Disney but underperformed Amazon, with DIS declining 1% and AMZN returning 17.5% over the past six months.

Amazon is set to launch several content on its streaming platform, Amazon Prime Videos, including Role Play and Kevin James: Irregardless. Disney has plans to unveil several comedy content like Deadpool 3 and Inside Out 2 among others.