Netflix's ad-supported tier may be over a year away from launching, but the streaming service just selected Microsoft to be its "global advertising technology and sales partner" for the new plan.
Netflix says it picked Microsoft because of its “proven ability” to support all of Netflix’s advertising needs. “More importantly, Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members,” Netflix says, though it didn't elaborate.
The company is preparing the ad-based tier to try and attract more paying customers amid concerns that growth at Netflix is stagnating and possibly shrinking. In April, the company estimated over 100 million households are freeloading off Netflix through password-sharing.
The ad-tier plan promises to cost significantly less than Netflix’s basic plan, which goes for $9.99 per month. But offering the service also means the company needs to develop an entire backend system capable of injecting relevant ads and recruiting major brands to advertise on the platform. In addition, the ad-targeting systems will need to avoid violating people's privacy by snooping on the content they watch on Netflix.
Netflix was reportedly in talks with Google and NBCUniversal to help supply the ad technologies. But it seems Microsoft managed to sway the company in the end.
In a statement, Microsoft noted it’ll be the exclusive provider of ads on Netflix’s ad-based plan. “Marketers looking to Microsoft for their advertising needs will have access to the Netflix audience and premium connected TV inventory,” Redmond added. “Today’s announcement also endorses Microsoft’s approach to privacy, which is built on protecting customers’ information.”
Still, Microsoft isn’t known for advertising. But the company’s ad technologies are currently powering targeted advertisements that appear on the Bing search engine and on Yahoo, MSN, and DuckDuckGo. Microsoft CEO Satya Nadella is also signaling the ad partnership will help rake in plenty of revenue for Netflix.
“We want publishers to have more long-term viable ad monetization platforms, so more people can access the content they love wherever they are,” he said in a tweet.