Get all your news in one place.
100’s of premium titles.
One app.
Start reading
Investors Business Daily
Investors Business Daily
Technology
BRIAN DEAGON

The Popcorn Goes Stale As Netflix Fails To Deliver The Goods For Advertisers

An ad-supported video streaming service launched by Netflix last month isn't building a big enough audience to satisfy spending from marketing executives, it was reported Thursday. Netflix stock dropped.

The company is falling short of ad-supported viewership guarantees made to advertisers, allowing them to take their money back for ads that have yet to run, according to a report from Digiday.

Netflix launched its ad-supported streaming service in early November. For $7 a month, the new subscription tier costs less than half of Netflix's most basic plan. It includes four to five minutes of ads per hour.

Netflix stock plunged 8.6%, to close at 290.41 on the stock market today, during a broad market selloff.

Netflix remains the world's largest streaming service, with 223 million subscribers but never before has included ads. The company decided to head in a new direction after a tumultuous start to 2022 that saw viewership shrink.

Digiday said Netflix has structured the deals on a so-called "pay for delivery" basis.

Netflix Stock: Falling Short About 20%

The specific shortfall amounts vary by advertiser, but in some cases, Netflix has fallen short by about 20% in terms of audience viewership promised, company executives told Digiday. A Netflix spokesperson declined to comment.

Concerns about advertisers reducing spending plans surfaced on Nov. 2 after Roku reported third-quarter results and warned of deteriorating ad spending.

"Companies are pulling back their ad budgets because they're uncertain if there will be a recession or not," Roku Chief Executive Anthony Wood said in a conference call with analysts at the time. "A lot of Q4 ad campaigns are being canceled."

Roku stock sank 4.6% when it warned of deteriorating ad spending during its third-quarter earnings report.

On Thursday, Roku stock closed down 7.8%. Other industry players hit by the ad spending downturn included AMC Networks, down 7%. Paramount Global collapsed 8.9% and Warner Bros. Discovery plunged 9%.

Netflix stock is down more than 50% so far this year.

Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.