Netflix has hit the rewind button on its ad partnership with Microsoft.

The move comes as the streaming giant introduced a $6.99 per month ad-supported option last year, with Microsoft winning the bid to provide tech for the service and sell ads on Netflix's behalf through a “revenue guarantee.” 

🔄 Seeking Alternatives

However, with the new ad tier slowly gaining traction, The Wall Street Journal reports that Netflix is now looking to sell ads through other partners, according to people familiar with the matter. The company is also renegotiating its agreement with Microsoft to reduce the revenue guarantee, though the exact terms are still being worked out. Sources say some company executives have been frustrated that Microsoft hasn’t sold more ad inventory.

💼 Luring Media Buyers

To attract more advertisers, the streaming giant is now offering better deals, charging some brands around $39 to $45 per 1,000 viewers compared to the previous range of $45 to $55. These lower rates, which are more in line with other subscription streaming services, have enticed new advertisers to buy ads from Netflix, ad buyers said.

💰 Challenges for Advertisers

Netflix noted, however, that the impact of ads on its overall earnings remains relatively small, and its CFO doesn't expect a substantial contribution this year. 

One of the challenges for advertisers is the limited number of subscribers to the platform's ad tier. Brands risk having viewers see their ads too often and can’t effectively target specific groups of subscribers, according to media buyers.

Despite these challenges, Netflix has asked brands to be patient, as the ad business continues to evolve. 

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