In July 2022, Netflix announced a partnership with Microsoft that was expected to generate billions in advertising revenue for the streaming giant. However, sources report that Netflix is now considering alternative options for its advertising technology, including the possibility of in-housing its ad tech. Netflix has hired high-profile expert advisors to explore its options, with one potential outcome being Netflix building or buying its own technology.
The current partnership with Microsoft is set to run for two years, with an option for both parties to renew in 2024. In the meantime, Netflix has retained the services of Jon Whitticom, formerly of Comcast’s ad tech unit FreeWheel, as its “advertising platform advisor” to help with its “build or buy” deliberations.
Sources familiar with the conversations suggest that Netflix is exploring the possibility of building its own ad server to reduce its reliance on Microsoft’s ad technology. Another option could be for Netflix to purchase ad tech assets, although no sources have reported direct knowledge of such conversations. Early-stage explorations of any potential acquisition targets were deemed a “highly logical” outcome.
“If you’re serious about it, you’ll want to in-house, particularly if you’re that size,” said one source familiar with the technical nature of the discussions. When Microsoft was named Netflix’s “global advertising technology and sales partner,” it was something of a surprise, with Comcast and Google’s ad tech suites tipped as frontrunners ahead of the eventual announcement.
Sources say that the video ad tech tools within Microsoft’s ad tech unit Xandr fell short of initial expectations. Although Netflix executives have publicly highlighted some areas it seeks to focus on, media buyers were taken aback by the $65 CPM prices they were quoted in the run-up to the debut of the commercial-backed service in November.
Madison & Wall’s Brian Wieser said that most players of Netflix’s profile will have to consider the “build or buy?” conundrum when choosing to run an ad-supported offering and that both options have drawbacks. Building takes a while, but buying another entity with a full ad tech suite could mean paying for something you’re not going to get.