Did Netflix Get Facebook Blowback?

WASHINGTON, DC - APRIL 10:  Facebook co-founder, Chairman and CEO Mark Zuckerberg testifies before a combined Senate Judiciary and Commerce committee hearing in the Hart Senate Office Building on Capitol Hill April 10, 2018 in Washington, DC. Zuckerberg, 33, was called to testify after it was reported that 87 million Facebook users had their personal information harvested by Cambridge Analytica, a British political consulting firm linked to the Trump campaign.  (Photo by Alex Wong/Getty Images)
Alex Wong

Last week Netflix surprised investors by reporting disappointing quarterly results. Specifically they noted that subscriber “acquisition growth was lower than we projected.”

This has happened before. And Netflix didn’t provide a clear explanation of why their subscriber growth numbers were soft. But I couldn’t help remembering that Netflix is a heavy, heavy user of Facebook advertising and marketing tools to keep growing their subscriber numbers. Remember, Netflix is a classic ‘direct to consumer’ marketer, even though people sometimes don’t think of them that way.

Consider this article from trade publication Adexchanger from a bit over a year ago.

At its F8 developer’s conference in San Jose this week, Facebook rolled out the next version of its marketing API suite, which includes new tools to automate creative production and targeting parameters. Those APIs make it easier for developers to create, manage and measure campaigns on Facebook. The easier it is to use them, the more advertisers are likely to spend.

Netflix, for example, has been using Facebook’s marketing APIs to build a custom solution for its in-house programmatic marketing team.

The streaming platform added 19 million net new members last year, bringing the total to 98.8 million subscribers overall.

To sustain that level of growth, Netflix maintains a sizable marketing budget – just shy of $1 billion in 2016. But it doesn’t have all that much human capital to spare. The company has 4,000 employees globally, and only 31 people on the programmatic marketing team.

“To get the kind of leverage that we need on those folks who are executing our marketing campaigns, we need to develop a suite of automated products,” said Andrew Covato, director of product management for marketing technology at Netflix.

And a bit later this …

Over six months, four Netflix engineers were able to build a suite of custom in-house buying and measurement products on top of a combination of Facebook marketing interfaces, including the ads management, ads insights and lift APIs.

The integrations have been a particular time-saver for Netflix, which brought all of its automated media buying in-house around four years ago and continuously tests and iterates.

“Netflix is a very test-heavy culture,” Covato said.

Using a cocktail of Facebook marketing APIs, Netflix developed a tool that helps scale management for A/B and lift tests by enabling programmatic managers to quickly set up test campaigns that adhere to the many best practices the brand has developed over time.

Now, a major caveat: In my articles yesterday, I was talking about something I know about from years of experience in the digital advertising space and from my own reporting on the issues with Facebook. This is different. I know very little about Netflix, the trajectories of their growth or a lot else. I’m simply pointing out that their industry reputation is one that suggests they’ve invested heavily in Facebook marketing for programmatic subscriber acquisition. They appear to hit unexpected softness in second quarter of 2018. And, as I noted yesterday, there’s a decent amount of evidence that Facebook’s advertising efficiencies declined significantly starting in March of this year and going forward. It doesn’t sound like a big stretch to speculate that the two things might be related, at least to some degree.

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