Netflix’s (NFLX) ad-supported tier is beginning to show some signs of life — six months after its debut.
At the company’s virtual upfronts presentation on Wednesday, the streamer revealed its ad-based plan, dubbed “Basic with Ads,” has 5 million global monthly active users, or MUAs, a metric that Netflix Worldwide Advertising President Jeremi Gorman said “actually matter[s] to advertisers.”
The company has yet to reveal actual subscriber figures for the ad tier, or how much revenue it’s generated so far. MUAs can include multiple people using the same account.
“We would interpret that 5MM MAUs as implying 2-3MM subscription accounts,” Evercore ISI analyst Mark Mahaney wrote in a new note to clients on Thursday, adding management has reiterated its long-term goal of generating $3 billion or 10% of its revenue from advertising.
Mahaney estimated ad revenue likely won’t achieve 10% of total revenue until “perhaps 2025.”
“The more important question for us is how incremental the ad-supported subs are likely to be to Netflix’s subscriber growth, and we continue to believe – based on our extensive survey work into NFLX user price sensitivity – that these subs are likely to be mostly incremental,” he said.
Netflix is still battling an ongoing writers’ strike, which could impact content spending and upcoming releases, although the company has said it has enough content banked to weather the shutdown. The platform is also facing continued backlash surrounding its password sharing crackdown. It previously said the crackdown will hit the US some time this quarter.
Netflix shares opened higher on Thursday following the presentation, up more than 5% in early morning trading.
‘The signals are promising’
Netflix currently boasts 232.5 million global subscriber base, but the company said ad-based users have more than doubled since early 2023, with more than a quarter of Netflix sign-ups now choosing the ads plan in countries where it’s available.
The ad tier complements Netflix’s existing ad-free offerings, and is currently available in 12 countries, including the US, the UK, Australia, Brazil, Canada, France, Germany, Italy, Japan, Korea, Mexico, and Spain. It costs $6.99 a month in the US.
“The signals are promising: engagement on our ads plan is similar to our comparable non-ads plans. That’s critical because it all starts and ends with consumers,” Netflix Co-CEO Greg Peters said during Wednesday’s presentation.
Peters added Netflix and ad buyers “share a common goal, which is building connection,” explaining, “You want to connect consumers with your amazing brands. And we want to connect them with amazing entertainment they’ll love.”
The company revealed more than 70% of Netflix ads plan members were between the ages of 18 and 49 with a global median age of 34.
Netflix co-CEO Ted Sarandos touted the company’s content slate with upcoming seasons of “The Crown,” “Sex Education,” and “Virgin River” on deck, coupled with new programming like Sofia Vergara’s “Griselda” and Shawn Levy’s “All the Light We Cannot See.”
“Netflix shows and movies are generating global audiences that are many times bigger than our closest competitors,” he said.