You can almost hear the groans as this news spreads across the Internet. One of the most appealing things about streaming video is that it comes ad-free, but this may be changing as Netflix has started to experiment with commercials.
Before you go to cancel your subscription, watching Netflix isn't about to become the hellish, ad-strewn watching experience that is U.S. terrestrial TV. Instead, Netflix will show trailers for in-house programming before and after streaming videos.
Netflix confirmed to Motherboard that it is testing the ads with certain users. "We are running a test to show some of our original programming," said a Netflix spokesperson. "As with any Netflix product test, this may never come to all our members."
For now, the company is doing a test trial of the HBO advertising model, where it shows ads for other Netflix shows, like Orange is the New Black or House of Cards between programming, but doesn't interrupt shows. The ads are also only being rolled out to specific users in specific markets and there has been no attempt to run third-party advertising.
Some users are reporting they are able to skip the ads, while others say they could not; some users are reporting 20-second ads, and others are seeing longer ads; however, all reports say the ads are for Netflix shows.
These kinds of ads are unlikely to put off too many viewers, but they could be the starting point for a potentially very lucrative income stream. Netflix has a lot more information about its customers than traditional TV channels have on their customers. The company has a record of every show or film that every user has watched, which could be used to build a profile that would be interesting to advertisers.
The problem with third-party ads, of course, is that Netflix risks losing its audience altogether. Competitors like Amazon Instant Video or the recently launched HBO Now don't run annoying ads, so Netflix users could switch en masse. Then again, some streaming services like Hulu do run successful ad platforms. It could be that Netflix is now confident enough in the loyalty of its users and now has a growing number of Netflix original shows are not available anywhere, that it is willing to risk advertisements.
However, just last year, the company's chief product officer said Netflix had no interest in advertising. "Internet TV is divorced of the need of advertising revenue because we can develop direct relationships with the consumer," Neil Hunt said. It's probably a little early for Netflix to try third-party ads yet, as this testing is likely just a move to keep users interested in upcoming programming, but as customer loyalty increases I wouldn't rule out the possibility entirely.
