Beyond Subscriptions: How Netflix Is Rewriting the Streaming Advertising Rulebook in their Latest Earnings Call

1 May

Netflix's Q1 2025 earnings call wasn't just another victory lap. It was a statement of intent.

The numbers dazzled—$10.54 billion in quarterly revenue, up 12.5% year-on-year, and a surge in ad-supported sign-ups now accounting for over half of new members in key markets. But the real headline? Netflix is rewriting the rules of streaming advertising, and it wants the whole industry to take notice.

For years, Netflix kept ads at arm's length, touting a pure subscription model. Now, the company is all-in on advertising—but on its own terms. The Netflix Ads Suite, their new in-house ad tech platform, is already live in the US and Canada, rolling out across Europe and beyond by year's end. This isn't just a new revenue stream; it's a strategic overhaul of how streaming ads are bought, targeted, and measured.

The streaming ad ecosystem has been a hot mess. Advertisers are frustrated by:

Fragmentation: Audiences scattered across platforms and devices, making it hard to build reach
Opaque measurement: Inconsistent standards and limited third-party verification making ROI murky
Poor ad experiences: Viewers hate repetitive, disruptive ads
Falling CPMs: As inventory expands and competition heats up, premium prices are seriously challenged

Netflix entered the advertising game with eye-popping CPMs - reportedly as high as $75 in Canada and $65 in the US - reflecting its premium positioning and limited inventory. But reality has set in. As competition intensifies and ad inventory grows, CPMs have dropped significantly, now ranging between $29 and $42 in the US. This downward pressure mirrors the broader streaming market trend, with Amazon and Disney+ offering lower CPMs and greater scale.

This is where Netflix's ad tech approach stands out:

Unified, cross-device reach: Campaigns now span TV, mobile, and tablet, with creative tailored to each screen
Granular targeting: Advertisers can reach viewers by genre, mood, life stage, and even what's trending right now
Transparent measurement: Netflix is opening its walled garden, integrating with Nielsen, DoubleVerify, Integral Ad Science, and Kantar
Better ad experiences: Interactive and episodic ads mirror binge-watching habits; addresses ad avoidance and "banner blindness" by making ads engaging and less disruptive

In many ways, Netflix is following Hulu's 15-year playbook. As the original hybrid streamer, Hulu pioneered many of the innovations Netflix is now adopting and it doesn't get enough credit for the work that it did to lay the groundwork. Over the past ten years since the launch of Hulu's Ads Manager in 2015, Hulu has pioneered:

Self-service platform: Hulu Ad Manager has allowed businesses of all sizes to create and target campaigns since 2020, including small and medium businesses
Diverse ad formats: Hulu led with binge ads, pause ads, ad selectors, and QR code integrations
Premium environment: Strictly high-quality, professionally produced content ensuring brand safety
Access to Disney data and targeting capabilities (in the US): Hulu benefits from Disney's combined data pool, which includes 218 million monthly unique visitors, 100 million household-level IDs, 160 million CTV IDs, and 190 million device IDs in the U.S, alongside access to a single set of audience segments and measurement tools. This includes leveraging behavioural data from streaming, linear TV, and even theme parks and merchandise.

But Hulu faces challenges Netflix is determined to avoid: high ad loads (sometimes exceeding 11 minutes per hour), limited global reach (US-only), and the need to continually innovate as competitors catch up. Netflix, with its global footprint across 190+ countries, has the scale that Hulu never achieved.

The Creator Play: Netflix Eyes Video Podcasts

In another significant reveal during the earnings call, co-CEO Ted Sarandos signalled Netflix's intent to expand into video podcasts. "As the popularity of video podcasts grows, I suspect you'll see some of them find their way to Netflix," Sarandos noted, acknowledging the blurring lines between podcasts and talk shows.

This move comes as YouTube - not audio-first platforms like Spotify or Apple - has become the dominant destination for podcast consumption, attracting 31% of weekly podcast listeners according to Edison Podcast Metrics. Nearly half of podcast listeners now watch their favourite shows on Smart TVs, signalling a clear shift toward visual consumption of traditionally audio content.

Netflix is already licensing content from popular creators like Ms. Rachel and comedian Tony Hinchcliffe (of Kill Tony podcast fame), but Sarandos made it clear they're looking beyond established names: "We're looking for the next generation of great creators, and we're looking everywhere, not just in film schools and certainly not just in Hollywood."

What differentiates Netflix's creator approach is its monetisation model. "We believe we have the best monetisation model on the planet for premium storytelling," Sarandos emphasised. "I think we could help those creators reach an audience. Our model can also support more ambitious efforts for them, could help de-risk them, unlike the kind of typical [user generated content] models."

This creator-focused strategy aligns perfectly with Netflix's ad tech ambitions, potentially offering advertisers new contexts and formats to reach audiences beyond traditional TV and film content.

Netflix isn't just chasing ad dollars—it's trying to set a new standard for the entire industry. Its dual-revenue model (ads plus subscriptions) is proving resilient, especially as younger and more price-sensitive viewers flock to the ad-supported tier. With an $18 billion annual content budget, Netflix has the firepower to keep global audiences hooked—and now, with its ad tech overhaul and expansion into creator-driven formats, it's making every impression count.

Co-CEO Greg Peters admitted they're still early in the ad journey, likening their position to "stepping up to the plate, starting to swing" rather than being fully in play. But the trajectory is clear: Netflix is positioning itself as the premium advertising destination in streaming, addressing long-standing industry pain points while leveraging its massive global scale and expanding content universe.

In short: Netflix isn't just building an ad tech platform. It's attempting to fix streaming advertising's biggest headaches while learning from Hulu's successes and stumbles, all while expanding its content tentacles into the booming creator economy.

As CPMs face continued pressure across the streaming landscape, Netflix's bet is that superior targeting, measurement, user experience, and content diversity - delivered at global scale—will help it maintain premium pricing in an increasingly competitive market. And that's a story everyone in media should be watching close

Hulk walked so Netflix could run:

The evolution of advertising in streaming services reveals a fascinating trajectory from Hulu's pioneering ad-supported tier to Netflix's bold new frontier.

As an early innovator, Hulu established the blueprint for balancing viewer experience with advertiser value, developing sophisticated targeting and engagement tools over a decade of refinement.

Now, Netflix's recent commitment to building proprietary ad technology marks the next chapter in this evolution—leveraging their vast global reach and data insights to reimagine what streaming advertising can be.

This comparison highlights how these two platforms represent both the established foundation and emerging future of ad-supported streaming: