Netflix VP of global advertising sales Peter Naylor has left the company as the streamer told Wall Street not to expect a huge amount of revenue from advertising next year.
Netflix, which became popular in part because it was ad free, changed course and launched an ad-supported tier in 2022.
Jeremi Gorman was named president, worldwide advertising and Naylor, who helped build Hulu’s ad business, was named VP.
Gorman was replaced by Amy Reinhard in 2023. At that time company executives said its ad business was in the “crawling” phase of its rollout.
Netflix said it will be hiring a head of ad sales for the U.S. and Canada with Naylor gone.
“Peter’s enthusiasm, industry knowledge and relationships have been invaluable in getting our advertising business off the ground. I want to thank him for all he has done to build our team, grow the business and position Netflix for success,” said Reinhard.
On Netflix’s second-quarter earnings call Thursday evening, Netflix execs talked about making scaling its ad business a priority.
“We’re small in every measure,“ Netflix chief financial officer Spencer Neumann said. “We talk about it a lot. We’re small in share of TV time. We're small in terms of penetration of connected TV homes. We’re small in revenue market share. And we're going to grow in those areas across-the-board and ads are going to be a bigger piece of that puzzle. Just we won’t have it be primary in ’24, ’25, but it contributes. It's a meaningful contributor.”
With the ad business failing to scale quickly, Netflix said subscribers to its higher-priced ad-free tiers generate more revenue per unit than its ad-supported subscribers do. At most other streamers, ad revenue more than makes up for the lower price paid by subscribers willing to watch ads.
“Clearly the ads business is not scaling in line with original plans, and this was also likely a factor in opening to more ad tech partners sooner than we expected,” New Street Research analyst Dan Salmon said.
Also Read: Netflix To Launch In-House Advertising Tech Platform
“Based on our conversation with industry executives, we think the partnership with Microsoft has also been below expectations, though likely mitigated by minimum guarantees,“ Salmon said. “Opening to more demand sources like The Trade Desk and Google’s DV 360 will be augmented by a more aggressive build-out of internal ad tech capabilities, starting with a proprietary ad server.”
Despite the sluggishness of its ad business, Netflix reported a 44% increase in net income to $2.1 billion, or $4.88 a share, from $1.8 billion, or $3.29 a share year ago, at a time when legacy media companies are still hoping to turn the red ink from the streaming businesses into break-even propositions.
“This is what winning looks like,” Pivotal Research analyst Jeff Wlodarczak said.
“It is abundantly clear that Netflix is demonstrating massive scale as it continues to produce strong subscriber results and free cash flow with the ability to invest to accelerate that growth (through deals such as the ‘25 WWE agreement and the ‘24 Christmas NFL games) while its stream peers continue to generate substantial losses and generally mediocre subscriber results,” he said.
