What would happen if Netflix was free?

I’m a Netflix customer, I pay the $7.99/month for the service, it’s great. In particular I feel like I’m recreating the Discovery channel experience when I was younger, watching documentaries and then movies/tv shows as I want.

I think they are over hyped a bit, their recommendations recommend things Netflix knows I’ve watched, they could do with a social component (ala Spotify) or at least a way to recommend to friends.

But that aside I was thinking the other day, what if they opened up a free ad supported version?

1) I think most current customers would keep paying

The price is incidental really.


2) It would open up a big market

Those that don’t want to pay that extra part, would suddenly have access. Now, in reverse this is what Hulu tried to do, go ad supported first then add premium. But I think the Netflix model (partly due to their dvd revenue business) has allowed them to build their loyal customer base.

3) It would generate equivalent revenue

The video advertising market has progress a lot in the last few years, with even AOL saying last year they were selling out their inventory. So what is different now is that brands want to buy more video ads online, they love the targeting and it’s a great supplement to the rest of their mix. Lets say Netflix could sell it at $0.10 CPV, half of what you’d pay on YouTube. That means a customer would only have to watch 80 ads/month to make the revenue.

The average american watches 5 hours/day, if Netflix was getting 30% of that viewing time, that’s one 30 second ad every 20-30 minutes over the month.

Update: And it actually turns out the current subscriber averages exactly that.

4) It could even produce upside

Depending on how well the ads are targeted, they could even ask for more. In this scenario below I’ve given a ranges of CPVs to figure out the ads per hour needed to match it.

Screen Shot 2015-01-28 at 8.57.02 AM


You can download my excel here if you want to have a play: NetFlix Calculation. But it shows at the higher end you wouldn’t need an ad every hour.

5) Hang on, why isn’t TV already doing this?

Quite simply, their model is sold on reach & frequency, they make more by selling more (natural) but at an incremental discount they have lost value in the long tail. Viewer 1,000,008 is less valuable than viewer 500,000 in the tv selling model. In digital, they are as valuable. TVB have an example here of a cost of $1.98 per 1000 homes.

See this, Price vs Audience size.



For the sake of this post I haven’t gone into, TV production costs (as Netflix needs this in the eco-system to provide), change in acquisition and/or change in product. My view is Netflix has the potential to grow in the eco-system, not replace the eco-system. In that change it would also have to pick up components that broadcaster provide.

As HBO cuts the cord this coming March, Netflix sits on a goldmine really, what are they going to do?

January 28th, 2015

Instacart Advertising – How these guys will bring digital advertising to the supermarket

I’m an avid Instacart user, why? Because it means I eat out less, it’s easy to do and who doesn’t like convenience. This simple app lets you order items from your local supermarket, then select when you’d like them delivered.

Yesterday whilst preparing an order, I realized a few things. Instacart because it isn’t a supermarket but has all the data a supermarket should be able (but doesn’t really) utilise, they could do some amazing things to innovate in bringing digital thinking to food shopping.

Here’s a few thoughts:

1) They can do specials.

Discounts off food, and like the supermarket these will be paid for by the brands.

2) They can target these offers

They know my address, general profile information by zip but also what I spend and categories of shopping.

3) They can optimize against performance

Imagine as a brand, optimizing per basket add. You only serve the offer up to people in a limited area, customize your offer and optimize against basket adds. You can then roll that out national or by zip code.

4) They know (and can affect) loyalty

Or going a step further, you could incentivize or pay for loyalty. Pay more for someone that adds your product to their basket four times in a row.

5) Drop off campaigns

Target people who used to buy your product but haven’t in the last three shops.

And that’s just the start, I look forward to seeing Instacart opening this up to brands, I imagine at the right time this will be massive for them.


This is also a potential Amazon Direct play. They already have the ad engine and recommendation engine just not targeted at this area.


January 9th, 2015

Your product/service has a job, that job fits in with a habit or workflow

I’ve been absorbed in product literature of recent, one thing that stuck out to me was this Drucker quote:

“The customer rarely buys what the company thinks it sells him. One reason for this is, of course, that nobody pays for a ‘product.’ What is paid for is satisfaction.” Companies think they are selling products and services, but in reality people hire those products and services to get jobs done in their lives. via FastCodeDesign

Products and services slot into these jobs, if you can:

1) Capture people naturally as they complete the wider jobs you assist with

2) Acknowledge & inform the steps before/after

3) Ensure successful & seamless completion of that job.

You become an essential tool.

This is something early on, we realised at Y&S, in those days people didn’t know what digital marketing was/is/how it could help. So we built a strategy around capturing the person who would be researching, to figure out how to solve their digital problem and make them look good. That then got us in front of more businesses… and in turn more business.

With Nudge, we’re optimising towards this a lot, how can we make our role in the campaign seamless. How can we tick the three boxes above. Lots to do.


November 11th, 2014

Acorns – saving your spare change

If you’re like me, you like to do as much electronic transactions as possible, it means carrying less cash and also being able to study your behaviour.

Living in the US that’s not as easy as it was in NZ, the banking system is very outdated, for example when I pay my rent I log into TD Bank, hit bill pay, they then print a cheque and send it to my landlord. Nuts!

That aside, I’ve been playing with Acorns, which is a little app that pulls in your transaction data and rounds up each transaction to the nearest dollar, then once it hits $5 it will scoop that up and put it in savings.


Now it is automatically invested, in a fund of your choice. I’ve been doing it for around 6 weeks give or take and saved about $66. Not the most amazing amount but it is an automatic behaviour which happens in the background. It’s like scooping up a small amount here and there which isn’t noticed and then over a year will add up.

Very cool.



My current strategy is to build that up, then at regular intervals I’ll scoop the money out and put into my other long term investments. As whilst it’s nice you earn interest on it the options aren’t that great.

Nonetheless a great little app and a way to build more automated savings into your life.


November 6th, 2014

You play the hand you get and other lessons from Warren Buffett

In a joint Q&A with Bill Gates at Washington University in the 90s – Warren shared some of his great wisdom to the students. Here are my top takeaways:

1) Developing great habits
He says  “the chains of habit are too light to be felt till they’re too heavy to be broken”. Re-iterating that it’s vitally important to develop productive habits when you’re young, as when you’re old they’re much harder to change.

2) Focus on moving forward

You should “never look back, don’t worry about anything”, you can’t change that, focus on where you’re going. Don’t be wed to the past – it’s already the past.

3) Play the hand you get

“You play the hand you get, play it as well as you can and be thankful enough”.

4) Turning horsepower into output

He talks about converting all your horsepower into output, that is spending your time meaningfully, on the things you’re good at, Bill Gates chimes in about how he gets Ballmer to look at his calendar and critique as to whether he’s doing that.


I’ve included the full interview below.


November 4th, 2014

The Dumb Pipe Analogy, what we can learn from it

I enjoyed this article Bringing the dumb pipe metaphor to email: Why Google wants to replace Gmail, talking about how email is a blunt service. As in it is a delivery mechanism.

The term dumb pipe analogy comes from networking lingo, it’s where someone provides a connection from A to B but don’t layer any services on top. The telcos that power our iPhones make a great example, as Apple controls that device whereby the telcos are restricted to just providing the data & connectivity for it to work.

The problem is email’s over-used and misused everyday. From transactional data, to communication to collaboration, so Google is working on putting a layer on top to make it more actionable. A Facebook newsfeed for email.

It’s a good framework to think of, in any industry the first challenge is building the pipes, it’s what we’re doing with Nudge building out the measurement, the second challenge once the pipes are in and well used is layering the intelligence on top for heavy users.

The third layer? Opening up an eco-system so others can build on top of that.

October 29th, 2014

Fingerprints are usernames, not passwords

I’ve been thinking about this a lot, fingerprints as passwords.

The rise of the Apple Touch ID which uses your fingerprint to unlock your phone and now process transactions with Apple Pay. Which in the system of the phone and the user, verifies the owner is present but isn’t a password. But you would think it is.

The iPhone doesn’t store your actual fingerprint -> but you have to reasonably expect, that if you digitally store your fingerprint (and chances are if you’ve been through customs it is already sitting in multiple databases around the world) it’s going to be compromised at some point.

This post by Dustin Kirkland from 2013 digs into it a bit more, saying that yes fingerprints are great as an identifier but not as a password.

Makes a heck of a lot of sense.

October 25th, 2014

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