A global ad supported Netflix is inevitable

I’ve been watching Netflix and how they tackle the challenges in front of them for a while, my earlier post explored what would happen if Netflix was free.

There are a few driving forces here:

1) Netflix itself says it thinks going global will drop piracy. Read.

Their argument is that people are using VPNs and torrents to download anyway, as someone from New Zealand, people simply just download shows when they’re not available. However like Spotify I imagine a monthly model would have an impact on piracy.

2) There is brand demand for more digital video content.

Everyone I talk to is screaming for more video inventory, they want more people to watch more ads. Netflix in some respects has potential attention to monetize. If you’ve read my earlier post, I do think they will retain the paid model but they are positioned to earn more revenue from offering a free option.

3) If you think Netflix is more like YouTube than it is like HBO.

YouTube is a global platform of content, that is open and shared but not the best experience for lean back viewing. People go to YouTube for a purpose, as such ads seem more of a barrier. Netflix in essence has the same platform, just with more control on getting the content in. This is almost a Apple vs Microsoft dichotomy.

I think these will position Netflix in that way, with a global database, powered by digital video ads.

And under that view I think their growth potential is seemingly infinite.

April 1st, 2015

The Apple Watch

You knew it was coming.

1) Is it a sustainable form factor?

If watch behaviour is any example yes.

2) Imagine how good it’ll be in five years

A real robocop kind of future.

3) The real question is, when will you buy into it, today or tomorrow.

I’ve been wrong before but the app marketplace is what will make it sticky. Like swapping tv subscriptions, 2 or 3 compelling apps will make you switch. They might be at launch, or they might be next year.


March 11th, 2015

Medium is now more like Tumblr, Tumblr is more like medium

I’m a fan of Medium, I’m also a fan of Tumblr.

A few weeks back Tumblr made some changes to be more like Medium, and now Medium has done the same.

It’s a dangerous game once you start looking sideways rather than looking ahead.

March 2nd, 2015

Options Trading & Directionality

One of my personal goals each year the last few years has been to upskill in how I invest, in particular my personal long term investments. I’ve always had the philosophy that it is something that keeps me sharp, but allows me to explore other businesses and through that better understand my own.

This year on the list is to better understand Options Trading, having been a skeptic, I’m beginning to scrape the surface. The best explanation I’ve heard is, it’s options are about directionality, you’re buying an option on a direction of a company.

So, I’ve started with a few hypothesis, I believe this company is going in this direction, then found information to stack up and against that hypothesis. Then you buy an option on that.

I like that ethos, when you’re building a business you have to make lots of decisions on directionality, it’s not that you know precisely (although you probably have a gut feel, it’s that you think things are heading that way, and you need to adjust. Of course as the future becomes nearer you can get more predictable.

Then you can band your team around that, we’re going this way.

February 11th, 2015

Average Attention Minutes

I was in a meeting yesterday, sharing the story of how a client of ours was frothing over Average Attention Minutes. I think even I have been surprised at how instructive it has been.

This one metric allowed them to understand, where across their campaigns, their content was best at changing the view of their target market. Now it’s not telling all of the story of each component but provided a filter whereby they could begin to understand.

Funnily enough, this morning, I was browsing my old delicious account and found an old post of mine, on Time Marketing, back in 2008.

Time is even more scarce than it was then,  in the last 6 years media options have only proliferated. What I’m seeing is (finally) a trend towards higher quality story telling, whereby it’s not designed for everyone, it’s for you. I’m even more curious to see how the likes of Netflix, Amazon Prime and Apple play in this.

I still think it’s a long way off, true benchmarking of time between mediums, but in a digital eating all communications world it’s not as far away as you think.

February 10th, 2015

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

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