Inside Netflix’s hunt for its next ads leader and what it signals about the company’s future

Insiders say Netflix ads clashed with product

Netflix is by far the dominant streamer, with 278 million subscribers worldwide, but it’s looking to new areas like advertising and gaming (both under co-CEO Greg Peters) to keep growing.

Leaders have said they expect advertising to eventually account for 10% of Netflix’s revenue, but growth has been slow to materialize. Peters addressed the issue on the company’s second-quarter earnings call, saying advertising revenue hadn’t kept up with the growth of the ad-supported tier, and that the company had a lot of hard work ahead to build all the features advertisers demanded.

That task falls to Reinhard, a Netflix veteran and advertising outsider who was named ads president in October 2023.

Insiders have said Netflix’s adoption of ads faced friction with the product side early on. They also said Naylor clashed with Jon Whitticom, the VP of product for advertising at Netflix under Reinhard, over which products to deliver for advertisers. Under Whitticom, Netflix enabled advertisers to buy its ads through tech companies like Google, The Trade Desk, and Magnite. It also plans to build its own in-house ad server to help advertisers leverage their buys.

Insiders said Whitticom was more focused on prioritizing programmatic tools that would help the company scale with advertisers of all sizes over features particularly important to Naylor’s big advertiser clients, like certain geographic targeting abilities and the ability to keep their ads from appearing on content they deem unsuitable.

Multiple insiders said Netflix also pushed back on giving advertisers access to certain information they rely on to validate the delivery of their ad campaigns, citing a desire to protect user privacy. It’s possible the company plans to build those abilities itself and in a privacy-safe way, which would take more time. Big Tech companies have been under scrutiny for how they treat user data.

A Netflix insider said these issues hampered the sales team in this year’s TV upfronts, where entertainment companies make their pitches for the nearly $70 billion in annual TV ad spending.

“The sales team says, ‘You want to bring in these big numbers, you got to give us the tools advertisers demand,'” said a second person who’d had conversations with Netflix. To this person, Reinhard’s keeping Whitticom was a sign that she valued product over salespeople.

Insiders said the sales team also butted heads with the product side over how much of Netflix’s highly coveted inventory, such as NFL games, should be sold programmatically rather than directly, where it could be sold as a centerpiece of larger ad packages.

A Netflix spokesperson denied that Naylor and Whitticom clashed over product and said the company wasn’t prioritizing certain advertisers over others with its programmatic rollout. The spokesperson added that the company has allowed targeting by geography since the ad-supported plan launched.

The spokesperson also said the company was “very proud” of its upfront results and pointed to an earlier announcement stating that it met its expectations and that sales were 150% higher than last year, without giving dollar figures.

Netflix had a slow start with advertisers

Netflix’s embrace of ads after long eschewing the business has been one of the most closely followed stories in advertising of late. It generated excitement among advertisers when it launched its ads tier, Basic with Ads, in late 2022. Advertisers were eager to appear near its prestige shows, and streaming ad inventory was scarce at the time.

But the effort got off to a rocky start. Some advertisers considered Netflix’s initial prices too high for its small ad-supported audience and basic offering. Netflix missed viewership targets for some advertisers.

Then, Amazon flooded the market with ads on Prime Video, promising it would reach 115 million US viewers out of the gate. Netflix, by comparison, says it has 40 million global monthly users of its cheaper ads tier, which ad experts have estimated amounts to around 20 million US subscribers.

There were other hiccups along the way. Some advertisers criticized Netflix for relying too much on Microsoft, its initial partner, to kick off its sales effort. Netflix also shook up its ad sales leadership twice, with its first ads leader Jeremi Gorman being replaced after a year, and then with Naylor’s recent exit.

Netflix lowered its prices to as much as $29 per 1,000 impressions, The Wall Street Journal reported, roughly matching Amazon, but some advertisers still considered it too expensive at this year’s upfronts.

Ad buyers particularly felt Netflix’s initial ask for about $800,000 for each of two NFL games that it recently won the rights to, plus ads that would run across its ads tier, was out of touch with the market.

Some people who’d talked to Netflix said drama over the ad leadership shake-ups and lingering questions about the strategy aside, they still thought Netflix could build a robust ads business and would have no problem recruiting a new sales leader, even if it doubled down on automation.

“The stock’s at an all-time high,” a third person who’d had conversations with the company said. “It’s the preeminent brand in streaming. Even if they’re not the preeminent brand in advertising, they could be.”