Netflix’s ad-based tier reached 23 million active users this month, the company said at the CES 2024 event in Los Angeles on January 10. The streamer will also launch new ad formats in the upcoming months.
The ad-supported plan surpassed 15 million active monthly users in November, which is quite a leap for Netflix. Growing the ad plan is a top priority for the streamer, which has made strides to drive new subscriber numbers since the plan launched in 2022. The streamer reported close to 70% quarter-over-quarter growth in October.
“We’re very fortunate to be able to take a long-term perspective on this,” said Netflix’s President of Advertising Amy Reinhard, according to Variety. “Scaling our business is absolutely our biggest priority right now, but we want to make sure we’re doing that in a meaningful way for the members.”
Netflix said members have gravitated towards the ad-supported tier. About 30% of new subscribers chose this plan, which costs $6.99 a month, over the ad-free plans that start at $15.49. The streamer’s ads range from 10, 20, and 60 seconds long.
“Of Netflix’s customers on ad-supported plans, 85% are streaming on the platform for more than two hours per day,” Reinhard said, according to Variety.
A growing number of subscribers across streaming platforms have switched to cheaper ad-supported plans, and streaming platforms have encouraged this trend. Ad-supported plans drive subscriber growth by offering a less expensive or sometimes free way to watch content than ad-free tiers. The ad-supported plans help offset content licensing and operational costs.
Last month, Insider Intelligence predicted Netflix would outperform Disney+ in terms of advertising revenue growth. The streamer launched ads on its platform in 2022 and began cracking down on password sharing in 2023, which prompted outrage from account sharers. Still, Netflix gained millions of subscribers, 8 million of which signed up since October.
Cord cutters moved to streaming to avoid costly cable TV and advertisements. However, streamers have come full circle by leaning hard into incentivizing ad-supported streaming. Peacock used to offer a free ad-supported plan, but in 2023 began charging for this tier. Prime Video will launch an ad-supported plan on January 29, with an option to remove ads for an extra $2.99 a month on top of the yearly subscription plan.
Price hikes across streaming platforms also encourage ad-supported subscriptions. Late last year, Netflix, Disney+, and Max raised the price of their ad-free plans yet didn’t touch the ad-supported cost.
Netflix will roll out some new ad formats to the plan this year. Users will be able to pause ads, which Netflix hopes will create a less disruptive streaming experience. The new format will include QR codes on the platform and “Binge Ads,” which gives a user one ad-free episode for every three episodes watched back to back.