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Netflix Plans 54% Increase in Marketing Spend

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What: Netflix has announced its quarterly results, and they plan to increase their ad spend from US $1.3 billion to $2 billion.
Why it matters: Netflix shares have increased 10% in Q1 2018, placing it at a worth of US $110 billion. As they continue to increase their ad spend and global subscriber base, Netflix could be the most successful in-house advertiser ever.

After a successful 2017, or as Netflix itself announced in its latest earnings release, after a "beautiful Q4", they have decided to boost their ad spend in 2018 to hit US $2 billion. "We believe our big investments in content are paying off," Netflix informed to its stakeholders. "Big hits result from a combination of great content and great marketing. We’re taking marketing spend up a little faster than revenue for this year (from about $1.3B to approximately $2B) because our testing results indicate this is wise." Approximately US $8 million will be spent on original content alone this year.

House of Cards (2013) was the first-ever Netflix original

Once upon a time, Netflix was virtually the only video streaming provider. Now that new competitors seem to appear every day and formerly partner firms such as Disney and Televisa have decided to move their content to their own platforms, Netflix has decided to stay on top no matter what. With about new 80 original films and 30 anime series, Netflix originals could amount to 50% of their content this year. Even though they have not disclosed their marketing strategy, Netflix is expected to devote most of its budget to digital and especially programmatic. Netflix's recommends content to users based on what they watch, a functionality that it sees as built-in marketing for shows.

For the case of slightly older demographic segments, or people who still prefer traditional TV, Netflix has not taken its sight away from them. Most TVs today are "Smart", meaning they have built-in access to Netflix. "[We are] making it super easy for them to sign up by just actually adding Netflix to their bill," said Chief Product Officer Greg Peters, "or even more what we're looking at now is packaging Netflix into one of those operator offerings so they just get it as part of a bundle that they're purchasing for the operator." However, Netflix knows those Smart TVs often also include access to their competitors' platforms (like Hulu, HBOgo, and Amazon), another reason to do their best to stay on top.

Netflix is an Acquired Taste for Latin Americans

In terms of what this means for Latin America, Netflix does not disclose regional numbers. However, we know that they have delivered international content from Mexico, such as Club de Cuervos and The Day I Met El Chapo, or even stand-up comedy shows like the one of successful comedian Sofía Niño de Rivera. They have also produced an Argentinian thriller, Edha, and a Brazilian sci-fi series titled 3%. For 2018, they plan to add more Latin American subscribers than ever with 50 original productions from this region. "A good story told well is a global product", said Ted Sarandos, Chief Content Officer at Netflix.

A good story told well is a global product.

But Netflix was not always well received. When they introduced the website in Latin America in 2011, online streaming was pretty new and they had to compete heavily with traditional pay TV. In 2013, Netflix was the biggest digital advertiser in Latin America. In March that year, they surpassed even Procter & Gamble in Mexico with over 463 million ad impressions, and they had about double the amount in Brazil. This number went way up by 2016. According to Portada's 2017 video marketing guide, there were 322 billion Youtube ad impressions in Mexico, against Brazil's 642 billion.

Maria Mercedes was one of the telenovelas formerly available on Netflix

Now, Mexico and Brazil are among Netflix's biggest markets, right behind UK and Canada. Though we don't know how many subscribers out of the 6.8 billion international users they acquired last year are Latin Americans, analysts believe there are around 5 million subscribers in Brazil alone. And this number might soar if Netflix keeps its promise to include telenovelas in its original content, filling a hole left by Televisa when they moved all their soap operas to Blim (Televisa's OTT platform) in 2016.

Janet Grynberg

Janet has worked as a translator and editor for magazines and publishing houses including Expansion and Grupo Planeta since 2014. She is part of the Portada editorial team, and her main interests include literature, traveling, and exploring new cultures. Follow me on Twitter!

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