On Wednesday, Netflix announced that it had chosen Microsoft as a partner to assist it in developing a lower-cost subscription tier that would rely on advertisements to help generate money. In a statement, Netflix stated that "Microsoft has the demonstrated capacity to handle all our advertising demands as we work together to establish a new ad-supported product." More importantly, Microsoft provided our members with robust privacy protections while allowing for future technological and commercial innovation.
The decision is unexpected in many ways. Netflix will probably have to give up some of the ad money it makes by joining together with a partner. However, creating an ad-sales unit from scratch is a difficult task, and Netflix might have needed assistance to get going as its competitors use their hard-earned expertise to an advantage. These rivals are already skilled at selling millions of dollars' worth of commercial inventory to Madison Avenue. In an effort to increase the advertising inventory it sells via connected-TV, Disney, for instance, earlier this week disclosed a new arrangement between itself and the ad-tech business the Trade Desk. Earlier this year, Disney began selling an ad-supported version of its subscription service, Disney+.
Microsoft's selection shows that Netflix is willing to experiment with some of the newest methods for video advertising, such as targeted ads and programmatic ad sales, which rely on data to match advertisements to exact types of audiences. Microsoft completed the acquisition of AT&T's Xandr ad-tech division, which had been engaged in programmatic advertising, in June. "It's still extremely early, and there are many issues to resolve. But our long-term objective is obvious. More options for customers and superior, non-linear TV brand experiences for sponsors. Added in the statement was Netflix. We're eager to collaborate with Microsoft as we launch this new service.
