Google and Comcast battle for ad space on Netflix

Yahoo Finance's Allie Canal joins the Live show to discuss Google and Comcast battling for ad space on Netflix ahead of the streaming company's decision to add an ad-supported tier to the service.

Video transcript

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JULIE HYMAN: Netflix looking for help from its friends, or at least, its frenemies, I guess. The streaming giant is gearing up to launch its ad-supported streaming tier to reverse falling subscriber numbers. Both Comcast and Google are in the running for that spot. Here with more, Allie Canal of Yahoo Finance. So it's interesting that-- OK, so we know the ad-supported tier is coming.

ALEXANDRA CANAL: Right.

JULIE HYMAN: I guess I didn't think about that Netflix wouldn't just do it itself, that it would sort of outsource that ad capability.

ALEXANDRA CANAL: I thought the same thing, Julie. But now there's a new report from "The Wall Street Journal" that says, potentially, Google or NBC Universal could be those partners. And according to the report, there seems to be some pros and cons to both of those approaches.

So the NBC Universal one, that would be an exclusive partnership. Netflix would use their ad technology to make the ads. And then NBC U's ad sales team would sell those ads in both the US and Europe. Now this would also involve something called revenue sharing. So the one issue there is whether Netflix would get a guaranteed amount of revenue. So that is potentially one option.

And then if we look at Google, obviously, Google has a super high reputation when it comes to their ad technology. They also have experience with video, with both YouTube, YouTube TV. And Netflix has a pre-existing relationship with Google. They use a lot of their ad buying tools. So that's another one, too. The report said that Google will likely also seek an exclusive partnership. I did reach out to Netflix for comment on this report.

They told me this is all speculation at this point. They're still in the early days of rolling something like this out. But there's another report from the information that said they're talking to Roku, too. So who knows what's going to happen? There's a lot of decisions to be made. But clearly, Netflix needed to get something done right now in order to boost that revenue.

BRAD SMITH: OK, so I kind of nerd out on things like this, especially on the ad exchange side, because, to your point, it really does come back to how they are connecting the marketers, the campaigns that are being run, and the insertion orders with the end platform and the customers and how they're bidding for that almost in real-time for those insertion orders against, perhaps, "Stranger Things" versus a "Bridgerton" or something of the like. And so what does it come back to on the revenue basis for Netflix? Like, how much do they think they're going to make off of an ad-supported tier? And then who's also going to get the money on the ad side once they see those insertion orders come in?

ALEXANDRA CANAL: I think a lot of that is still up for debate. And it's a lot of questions. I'm really curious how much they're going to charge for the ad-supported tier, because if you look at their basic plan, that's higher than 15 bucks a month.

And that's significantly higher than some of those ad-free tiers for the competitors. Like, Disney+, for example, is only 8 bucks a month. So how much are they going to charge for that ad-supported tier? How much materially will that impact revenue? And I've spoken with some analysts that said they're not quite sure if that's going to add a significant amount of money to lift Netflix to where it needs to be.

But it's interesting to think about Netflix's fall from grace, right? During the pandemic, they were really considered this blue chip stock. They were at the top of their game. Now the stock is down 70% year to date. And a lot of analysts on Wall Street are really bearish on where the company can go next. So it's a big story here. And I think it's interesting to track. We'll see if that ad-supported tier can increase sentiment. I don't know, though. It's up for debate at this point.