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There’s an adage dating back to TV advertising in the 1970s: “If you’re not paying for the product, you are the product.” And while Netflix and Disney+ advertising tiers will not quite be free, viewers will be able to subscribe to the services at discounted price points as long as they can tolerate a few ads.
The launches arrive as the digital ad industry is mid-evolution. Europe and California have passed data privacy laws. Apple has cracked down on the harvesting of user data on their products. Browsers, including Safari and Firefox, have barred the installation of third-party trackers that follow a user’s every move, with Google Chrome in 2024 following suit. Advertisers are searching for new options.
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Third-party data, the information users indirectly give to companies by granting permission to track what they’re viewing across the internet (i.e., “Do you accept these website cookies?”), has been the backbone of the online ad ecosystem since the turn of the millennium, but it’s under fire as big tech responds to regulatory scrutiny around data privacy.
Amid the shifting tides, one thing has become clear: Hollywood giants, including Netflix and Disney+, will look to profit off the more reliable troves of personal information that they can directly collect from subscribers, also known as first-party data, with their new streaming tiers (services without ads still collect data, but are far less likely to share that data outside their own platforms without a clear need to do so). “Across all media companies, the value of their first party audience data increases exponentially with the changes we’re seeing in the industry,” said Grace Briscoe, SVP of client development at Basis Technologies, an ad software company. “There’s going to be a lot of value if they can do it right.”
NBCUniversal is already looking to capitalize on the move away from third-party data. In January, it launched a first-party identity platform called NBCUnified that enables targeted advertising without the need for cookies. The service leverages data, including streaming viewership, theme park visits and ecommerce purchases, on an expansive network of consumers across its properties.
“In the world of advanced TV, video entertainment, we didn’t see a leader, so we had calls to activate first-party data,” says John Lee, chief data officer for NBCUniversal Advertising & Partnerships. He adds that the company is “extremely conscious and careful about managing consumer data privacy and security purposes,” while acknowledging the need for agency and brand partners “to be able to work across the ecosystem beyond NBCU for things like crossplatform agency and crossplatform measurement.”
Disney will launch its ad tier ($7.99 a month) Dec. 8 and initially plans to sell ads based on viewer age. For viewers 16 and up, advertisers have been told there will be restrictions on ads related to politics, alcohol and Disney competitors. Ads shown to those 15 and under will be subject to federal and state laws governing behavioral and location-based ad targeting.
But advertising adds serious complexity to any streaming service. Not only does it require an entire stack of technology to host, target and deliver ads, but it also calls for working with a wide range of third parties to help do so, regardless of any first-party data collecting going on — erecting another layer of risk in the sensitive operation of safely collecting and handling piles of personal information on millions of consumers.
The Disney+ advertising disclosure page lists 46 companies that will be involved in supporting the data tier. They include service providers like Amazon Web Services, Google and Microsoft; ad platforms like Yahoo and TVSquared; and data management firms like Oracle, Adobe and Qualtrics.
Every single one of those partners could become a source of a data leak.
Netflix, which enlisted Snap execs Jeremi Gorman and vp sales Peter Naylor to run its ad foray, is hoping to minimize any potential advertising disruptions or tech issues by leaning on Microsoft to manage its entire ad business. At least to start, Microsoft is building all the technical infrastructure, developing the ad formats, collecting and managing the data and selling the ads. But even with Microsoft handling its end of the bargain in house, Netflix too will inevitably need to give third parties some access to data. Advertisers will likely expect to know at some point how their spots perform.
At launch, Netflix is telling marketers that it will only offer extremely limited targeting abilities (based on geographic location, or its most popular shows), but multiple high-level ad world sources expect that to change over time as advertising becomes a more important part of Netflix’s business model. (A Netflix rep says, “We are still in the early days of deciding how to launch a lower-priced, ad-supported tier, and no decisions have been made.”)
Kevin Krim, CEO of the advertising data and analytics firm EDO, says Netflix does not “have to cross over that Rubicon about giving full transparency over their audience numbers yet,” but adds that “they are going to have to get more comfortable with being more transparent and collaborative with advertisers.”
“You need some mix of ad impressions and demographics or other info,” Krim notes. “People want to say did that ad have an effect? Did it do something?”
Most consumers are likely unaware of what kinds of data are collected on them and how it’s used. In addition to harvesting information on watch history and ratings, services look at viewing day, time, location and device, search queries, abandonment rates, scrolling behavior and whether content was paused, rewound or fast-forwarded. Streaming companies like to toe the line between being just transparent enough for legal purposes and maintaining plausible deniability on certain practices. Privacy policies are arcane and indecipherable. Consumers may be giving away access to personal information to unknown third-party companies while platforms continue to leverage the data to shape production decisions and personalize content recommendations for better subscriber retention.
“A lot of these streaming companies that people think only sell content, what they’re actually doing, too, is profiting off of data in advertising,” says Jill Bronfman, an attorney at Common Sense Media. “Every one of these companies is a data company now.”
This story appeared in the Oct. 5 issue of The Hollywood Reporter magazine. Click here to subscribe.
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