'Ad Sold Out' Netflix Airs Ads for Volvo, Ford, Tiffany, Samsung Electronics, McDonald's
Ads Play Mid-Content, Shorter Than Terrestrial Broadcast Commercials
Supports 'Personalized Ads' Based on Gender, Age, and Content
[Asia Economy Reporter Oh Su-yeon] Following Netflix's introduction of an ad-supported subscription plan on the 4th, global brands and major corporations have rapidly flocked to advertise on Netflix, signaling a significant shift in the advertising market.
According to industry sources on the 8th, Netflix recently launched a new 'Ad-Supported Basic' plan priced at 5,500 KRW per month. This plan adds advertisements to the existing Basic plan (9,500 KRW per month), maintaining the same 720p resolution but at a 4,000 KRW discount. Ads lasting 15 to 30 seconds are shown before and during content playback, requiring viewers to watch an average of 4 to 5 minutes of ads per hour.
Depending on the content, for programs lasting between one hour and one hour and twenty minutes, there are typically one to two ad breaks before and during the content. Each ad can range from as long as 70 seconds (four ads) to as short as 15 seconds (one ad). While this may feel somewhat tedious, considering that terrestrial broadcasts include about 10 minutes of ads per hour (including pre-, mid-, and post-roll ads), Netflix's 4 to 5 minutes of ads per hour is relatively less.
To provide personalized advertising, users subscribing to the Ad-Supported Basic plan enter their date of birth and gender upon sign-up. Gender options include male, female, and prefer not to say. Advertisers can deliver targeted ads based on the user's input, viewing country, content genre, and other data. For example, a refreshing beer ad might be shown alongside sports-related content.
A Netflix representative stated, "At the launch, ads will be targeted mainly by content genre and country (such as action, drama, romance, sci-fi, top 10, etc.). Advertisers can also choose not to display ads on content that does not align with their brand (such as sexual content, nudity, or realistic violence)." They added, "In the future, ads based on members' viewing history will also be implemented."
As of this date, foreign car brands like Volvo and Ford, the world’s top three luxury jewelry brands including Tiffany, and global fast-food chain McDonald's have been confirmed to air ads on Netflix in Korea. Major domestic companies such as Samsung Electronics, Kia Motors, Handsome, OB Beer, HiteJinro, Paldo, hy (formerly Korea Yakult), and Kurly are also advertising their products through Netflix.
The enthusiastic response from prestigious global brands and large corporations to Netflix's ad-supported plan underscores the strong interest from advertisers. Netflix announced in its third-quarter earnings report that it had "almost sold out its advertising inventory," indicating positive advertiser feedback. According to the advertising industry, Netflix has fully sold its initial ad inventory in Korea as well.
Industry estimates place Netflix's CPM (Cost per Mille, cost per 1,000 impressions) at approximately 36,000 KRW, which is about 1.2 to 1.4 times higher than Internet Protocol TV (IPTV) and 2.4 times more expensive than YouTube and Naver.
Netflix offers professionally produced content, which enhances trustworthiness, and has already secured targeting technology through personalized content recommendations. Additionally, it has a strong core consumer base. According to Mobile Index, 82.6% of Netflix users are aged between 20 and 40, a higher proportion than Instagram (81%), Facebook (76.5%), and YouTube (70.4%).
The explosive popularity of Netflix advertising is expected to bring significant changes to the domestic advertising market. This is because, amid a prolonged economic downturn and weakened advertising demand, Netflix has emerged as a 'catalyst.' In particular, similar types of TV advertising are likely to be greatly affected.
Choi Yong-hyun, a researcher at KB Securities, commented, "Netflix advertising is expected to grow rapidly by securing large corporate clients with substantial advertising budgets. The domestic Netflix advertising market is projected to grow to 1.2 trillion KRW by 2025." He added, "Even as the OTT advertising market opens up, the overall advertising market will not expand. OTT advertising is expected to capture market share from existing advertising media within the total advertising market."
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