Six months after the launch of its $6.99 per month ad-supported tier, Netflix revealed that the offering has grown to nearly 5 million monthly active users globally with a median age of 34.
“Of course, it’s early days for our ad-supported plan, but our signals are all promising,” Netflix co-CEO Greg Peters told advertisers during the company’s virtual-only upfront presentation on Wednesday. “Engagement on our ads plan is similar to our non-ads plan and that’s critical because it all starts and ends with consumers.”
Peters noted that the ad-supported tier’s membership base has “more than doubled” since early this year, with more than 70% between the ages of 18 and 49. Over a quarter of the streamer’s sign-ups choose the ads plan in the 12 markets where it’s available.
“So we’re making some very good progress and, in terms of growth, there’s plenty of runway ahead of us,” Peters added.
The update on the ad-supported tier comes amid a growing push for streamers to be more transparent about their data to advertisers, investors and the public. As of the first quarter of 2023, Netflix boasts a total of 232.5 million subscribers globally.
The company’s average revenue per user came in at $16.18 in the United States and Canada, $10.89 in the Europe, Middle East and Africa region, $8.60 in Latin America and $8.03 in the Asia-Pacific region. Revenue in the U.S. and Canada grew 8% year over year to $3.6 billion, while revenue in Latin America grew 3% year over year to $1.07 billion, EMEA revenue fell 6% year over year to $2.5 billion and APAC revenue fell 13% year over year to $934 million.
According to Netflix, the ad tier’s average revenue per paid membership in the U.S. is greater than its standard plan. As a result, the ads tier will offer 1080p versus 720p video quality and two concurrent streams in all markets where it’s available to make the offering more attractive to a broader group of consumers and strengthen engagement of existing and new subscribers to the ads plan.
Netflix’s change of heart on advertising comes after executive chairman Reed Hastings – who once promised that the platform would offer no ads – conceded he was wrong and that it was a mistake to not jump into the space several years ago.
Co-CEO Ted Sarandos emphasized during Wednesday’s presentation that Netflix revolutionized the television viewing experience after introducing “House of Cards” a decade ago and that it is working on “similar breakthroughs in advertising” that “can be just as impactful.” For example, a 30-minute commercial could one day tell a story over the course of several days across multiple pieces of content, Sarandos said.
“You’ve heard a lot from us today, and I think it all boils down to one thing: Netflix is a little bit different,” Sarandos concluded. “In the past – when consumers had very little choice of where to watch – it didn’t matter so much which network a show or film landed on. They were all very similar. Today, we believe that having a title land on Netflix makes all the difference in the world.”