January 07, 2019
Why Netflix Is Increasing Their Marketing Budget
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As a leading direct-to-consumer service, Netflix has successfully relied on its vast user data, powerful recommendation engine, and highly targeted performance-marketing campaigns to increase viewership and acquire new users.
Going forward, this data-driven approach will remain the primary way content discovery and customer acquisition is achieved. However, as Netflix’s focus shifts to investing in additional and bigger budgeted originals, it will scale and redistribute its marketing spend to include more traditional, non-digital channels.
In a recent letter to shareholders, Netflix stated that big hits like Stranger Things and Bright are the result of “a combination of great content and great marketing,” and that it needs the budget “to make the hits we have really big.” This desire to go “really big” comes with great costs, however. Netflix has increased its marketing budget 56% to $2 billion, up from $1.3 billion.
What does Netflix have in mind with this dual marketing strategy, and what does it mean to the companies prospects for growth?
With nearly 118 million global subscribers, it is easy to understand why Netflix has relied mostly on its own recommendation engine to drive discovery for its content and user data to reach the most receptive subscribers.
A recent Netflix blog post discusses how the company accomplishes this. Having years of user data allows it to optimize the machine learning algorithms powering its recommendation engine and reach the most receptive subscribers for any given show. Netflix has taken this one-to-one marketing approach a step further by not only surfacing the most relevant titles but also by tailoring the key art shown based on a user’s viewing history. Their artwork personalization algorithm shows different images for the same title with the system determining what artwork is best suited for a given user. As an example, for the movie Good Will Hunting romance fans are shown the artwork containing Matt Damon and Minnie Driver, while comedy fans are shown artwork featuring the comedian Robin Williams.
Netflix’s approach to personalization exemplifies a major marketing trend over the last few years – the growing importance of effectively targeting the right users with the right imagery at the right time to improve relevancy and the user experience.
As Netflix’s budget for original programming continues to grow and it releases more high-profile titles, its marketing approach must evolve as well. Since it is a subscription-based service, Netflix will never market its originals the way Hollywood studios do, nor should it, but it is beginning to redistribute some of its media
With a reported budget of close to $100 million, the recently released Bright starring Will Smith is an example of the broadly appealing and expensive original content that Netflix is marketing to the masses. Bright represents its largest investment in an original film to date and, according to Netflix, it drove “a notable lift in acquisition” and “was one of their most viewed original titles ever.”
In addition, Netflix just launched another high-profile Sci-Fi & Fantasy series, Altered Carbon, on February 2, 2018. According to Esquire, these episodes comprise Netflix’smost expensive original series to date, with an expected cost between $6-7 million per episode. With this level of investment, Netflix is clearly looking to get the word out beyond their existing subscribers.
While the marketing pushes for both Bright and Altered Carbon still centered around Netflix and digital media, the company also ran broadcast television spots on CBS and Fox during the NFL playoffs. As well, it bought TV ads on ESPN, ran movie theater and outdoor advertising and had a paid social media presence on Facebook. These media expenditures are part of an ongoing shift in its marketing strategy to invest more heavily in channels beyond its platform and data-driven digital campaigns.
While conduits such as TV, in-theater advertising, and outdoor advertising do not provide the advanced targeting capabilities or efficiencies of digital, they are still very effective ways to extend reach and drive awareness. Live TV and NFL games in particular still deliver a large and engaged audience even though TV ratings are declining on an overall basis.
Netflix’s campaigns for Bright and Altered Carbon show that every medium can still play a role in one’s paid media mix. Building a brand to its full potential takes more than just performance marketing.
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