min read
· Posted on
May 17, 2024

Netflix breaks up with Microsoft's ad tech platform because it wants to own The Crown jewels

Netflix will be ditching its partnership with Microsoft as part of this new plan to build its own ad-tech platform.

What's the key learning?

  • Outsourcing a project also means you don’t need to make an initial investment like if you’d built those capabilities in-house.
  • You can also learn from someone who already knows what they’re doing and then build it yourself later… with all those insights.
  • Netflix can also have more control on how ads are presented such as experimenting on "episodic" campaigns, allowing advertisers to run series of ads to tell a story versus generic, repetitive ads.

👉 Background: Last month, Netflix announced its profit had gone gangbusters - partly from its password crackdown, partly from its new content (hello Baby Reindeer) and of course largely thanks to its ad-supported tier.

👉 What happened: Now, Netflix has announced that 40 million users have jump onto the ad-supported plans. That’s up from just 5 million ad-supported users just 12 months ago. And it will be building its own ad-tech platform to compete with Meta and Google.

👉 What else: As part of this new plan, Netflix will be ditching its partnership with Microsoft, who previously helped the 'Flix get up to speed with ads.

What's the key learning?

💡When a business is building out a new feature or project, there’s one key question: do we build or do we buy? Do we keep things in-house, or outsource it to the professionals?

💡 For Netflix, outsourcing to Microsoft when it first announced its ad-supported plan meant it didn’t need to invest billions of dollars (and time) into custom-building its own system. It could get live quickly and see whether there was demand.

💡Now, Netflix has confidence in its ad-supported future. In fact, it reckons its ad revenue could grow to $5 billion USD per year in the near future…so it can’t be relying on external parties anymore for such a core part of its business.

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