Almost half of new Netflix signups opt for ad-supported option
Netflix has reported a strong Q2 2024, with 17% revenue growth, and “steady” progress on its ads business.
Its revenue growth was driven primarily by an increase in average paid memberships, up 16% from the same period last year. Average revenue per membership (ARM) was up 1% year-on-year.
Operating income for Q2 amounted to US$2.6 billion, up 42% from Q2 last year. The streaming platform had an operating margin of 27.2%, up five percentage points on last year’s 22.3%.
It now expects a full 2024 revenue growth of 14%-15%, up from 13%-15%, and an operating margin of 26%, up from 25%.
In H1, Netflix generated more view hours across film, series and licenced titles, than all other streamers combined, according to the Nielsen Top 10 report. The streaming platform believes its entertainment offering “satisfies important needs” for consumers and creators, and looking forward, believes its biggest opportunity lies in winning a larger share of linear and streaming TV time.
“If we execute well – better stories, easier discovery and more fandom – while also establishing ourselves in newer areas like live, games and advertising, we believe that we have a lot more room to grow,” Netflix said in a letter to shareholders.
“Across streaming, pay TV, film, games and branded advertising, it’s a $600B+ market, and today Netflix accounts for just ~6% of that revenue. But success starts with the consumer. Because when we delight people with our entertainment, Netflix can drive higher engagement, revenue and profit than the competition.”
As for the success of its ads tier, Q2 saw a 34% increase from Q1, 2024, allowing Netflix to expand later in 2024 and into 2025. The ads tier now accounts for over 45% of Netflix’s signups globally.
The streaming platform has announced the build of an in-house tech platform, that will be tested in Canada later this year before being launched broadly next year. It is also expanding its programmatic capabilities to include The Trade Desk, Google DV 360, and Magnite.
Despite being on track to achieve “critical” ad subscriber scale in 2025, Netflix has said it doesn’t expect advertising to be a primary driver of its total revenue.
“The near term challenge (and medium term opportunity) is that we’re scaling faster than our ability to monetize our growing ad inventory. It’s why continuing to build our ad sales, measurement and tech capabilities is so important,” the letter to shareholders read.
“Based on everything we’ve learned and our progress over the last 18 months – we’re confident that advertising will be a key component of our longer term revenue and profit growth.”
Netflix has also begun testing a simpler, more intuitive homepage, which the streaming platform has said will “significantly improve” the discovery experience.
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Lauren McNamara is the associate editor at Mumbrella, covering the creative and PR beat. She joined in November 2022 as editorial assistant, after completing a Bachelor of Communications (Journalism) at UTS.
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