Despite pulling back advertising by 23 per cent in 2020, Netflix still managed to add 37 million subscribers and increase revenue by 24 per cent.
According to the company’s annual report, ad expenses fell by $US432 million to $US1.45 billion in 2020. This included digital and television advertising.
The company’s total marketing costs also dropped to nine per cent of total revenue. In 2019 this figure was 13 per cent.
“We utilize a broad mix of marketing and public relations programs, including social media sites, to promote our service and content to existing and potential new members,” Netflix said.
“We may limit or discontinue use or support of certain marketing sources or activities if advertising rates increase or if we become concerned that members or potential members deem certain marketing platforms or practices intrusive or damaging to our brand.”
And while the reduction in advertising spend has coincided with Netflix’s massive revenue and subscriber growth, the streaming service was aided by the COVID-19 pandemic last year, as users adopted SVOD at rapid pace amid global lockdowns.
The streaming service’s continued investment in new content has also led to a rise in ‘word-of-mouth’ advertising for Netflix.
Throughout the years, Netflix has been able to attract new subscribers to the platform on the back of the hype around certain shows and series. The platform also uses data to show users what they should be watching.
Data from Parrot Analytics shows The Queen’s Gambit – which was one of the most viewed shows on Netflix in 2020 – was 20 times more in demand than the average series in the US show during the month of November.
In a further sign of confidence, Netflix increased its subscription price by $1 for most of its US users last October.