Introducing Ads on Netflix: A UX Design Challenge
Earlier this year, Netflix reported its first period of subscriber loss in over a decade. Over 200,000 subscribers were lost between January and March, with an additional 1 million lost over Q2. With rising popularity for competitor services such as Crave, Hulu, and Amazon Prime, Netflix needs to think strategically about expanding its user base.
During this year’s Q1 earnings call, Netflix’s co-CEO Reed Hastings highlighted two areas of focus for the remainder of the year:
- Improve the way Netflix monetizes shared accounts, including accounts with multiple users and logins; and
- Attract net-new customers by introducing a lower-priced, ad-supported tier.
This case study is focused on the latter approach: introducing ads on Netflix.
Netflix plans to introduce advertising by as early as next year (2023)*, launching a brand-new subscription tier, (the ‘ad-supported tier’) which will be offered at a discounted monthly price.
“‘While it will take some time to grow our member base for the ad tier and the associated ad revenues, over the long run, we think advertising can enable substantial incremental membership (through lower prices) and profit growth (through ad revenues),’ the company said.” (TIME, 2022)
*Note: This case study was originally written in August, 2022. Prior to Netflix’s official ad-tier launch in the U.S. the past Thursday.
The Design Challenge
Netflix ads will only be visible to users of a new, discounted subscription tier, meaning our focus audience will consist of customers willing to pay less than $9.99 USD per month (current price of Netflix’s current subscription model).
This case study for focus on 2 distinct challenges related to introducing Netflix ads:
- User Onboarding: How might users subscribe to Netflix’s new ad-supported tier?
- Experiencing Ads (Ad-Supported Tier Only): How might we introduce ads into user experience while browsing and consuming Netflix content?
User Research & Preparation
Prior to exploring solutions, I interviewed a small group of ~5 Gen-Z / Millennial streaming service users. I also conducted a survey for a wider group of users, aged 18–50. This research allowed me to draw insights about how users consume content via digital streaming services.
To create design solutions, I used elements from my existing Netflix UI Kit for mobile (iOS) — see below:
Read more about my design process to create the UI Kit here.
Note: The following solutions are presented for mobile (iOS) only but a can be applied across all responsive screens.
Introducing the Ad-Supported Tier: User Onboarding
User Insight 1: Content is King
With a plethora of streaming services available today, users care more about content than loyalty to any particular streaming service. This means users may be swayed to purchase a subscription due to a single title offered on Netflix’s platform.
My Solution:
By allowing all users (subscriber or not) easy access to Netflix’s catalogue, the consideration period to purchase is shortened. Users can explore all of Netflix’s content, including exclusive Netflix-only titles which I found are critical in swaying user’s decision to purchase more quickly.
User Insight 2: Excessive Subscription Options can be Overwhelming
Netflix has promised to maintain their current 3 plans, meaning the ad-supported tier will exist as a brand-new, 4th tier. With more options to compare, users are faced with more information to make sense of during the onboarding process.
Given that popular content is now spread throughout different streaming services, users are also more likely to pay for multiple services at once. This means users can be more price sensitive.
Netflix’s current pricing page is static with the details of each plan under headers (see below):
My Solution:
To reduce cognitive load during the onboarding process, users are presented with a carousel of pricing “cards”: digestible summaries of each plan which are easier to digest and compare.
Through user research and testing, I found that users value comparing attributes between plans, however being able to easily digest all details of a single plan at once is more important. Through my design, users can understand details of a single plan more easily while still being able to compare adjacent plans.
Experiencing Ads
Users generally care more about not seeing ads than they do about price, however there are important exceptions to this. Aversion to ads depends more on users’ expectation and the context in which they are presented with ads. If ads are relevant, non-repetitive, and non-disruptive, users aren’t bothered by ads — and sometimes even find ad content useful.
User Insight 1: Display Ads are generally considered non-disruptive, so long as content is contextually relevant
The users I spoke to during my research phase generally feel indifferent about display ads since they don’t directly interrupt the viewing experience. So long as the style of ads aligns with Netflix’s current theme, I believe display ads could fit seamlessly into the browse experience while still provoking customer engagement.
There are a number of different display ad creatives that Netflix could explore such as static ads or product carousels (for example). Best practices for styling and ad layout would be best determined through live consumer testing — putting ads in front of different user groups to see which yield the best engagement.
Finally, I believe the key with display ads will be to focus on brand partnerships that are contextually relevant to Netflix’s experience. In my examples above, I use food brands such as UberEATs and GoPuff which could pair well with the movie watching experience.
Next Steps: Usability Testing
Netflix frequently uses A/B testing when introducing new features and I believe ads should be no different. Netflix can test engagement and user’s overall feeling towards display ads, comparing results for different ad types (static vs. carousel), placements, and styles.
User Insight 2: User’s expectations to see video ads is highly influenced by their experience on similar platforms
Users’ feelings towards video ads varies more significantly than for other ad types. Users generally don’t mind seeing video ads before watching, especially if some ads are skippable and content is relevant. Users get annoyed when ads are repetitive, too long, not skippable, or occur too frequently throughout their viewing experience.
User’s patience and frustration related to video ads is also correlated to their experiences watching content on similar platforms. For example, I found that users who subscribe to other streaming services like Hulu or Crave, are more adept to seeing ads before watching since this is what they’ve experienced on these competitor services. In contrast, seeing ads in the middle of a show or movie can be disruptive, unless they are watching cable or YouTube — in which case this is expected.
From experience working in AdTech at Perpetua over the past 2 years, I also know that video ads generally have much higher engagement than other ad types, making them an attractive option for advertisers who are looking to execute more upper funnel, awareness tactics for their brand.
My Solution: Using a combination of skippable and non-skippable ads, Netflix can test introducing video ads at the beginning of content for their starter (ad-supported plan).
Areas for Further Exploration & Testing
In order for Netflix’s ad-supported tier to be successful, there are two groups that must be satisfied:
- Netflix subscribers: Netflix must ensure user’s willingness to pay a small (“discounted”) fee per month to access Netflix content is sufficient given the UX ‘expense’ of having to view ads.
- Advertisers: Netflix must ensure user engagement with ads can be measured and that each ad type is tested extensively so that proper expectations can be set for brands.
Netflix will not be the first streaming service to advertise on their platform. In fact, there are already many competitor services that have had ads for years. Netflix should take advantage of the successes and failures from competitor companies to aid its direction and testing for the ad-supported plan.
Reflection / What I Learned
Key lessons that I learned from this project:
- Delivering a successful product requires careful balance between user needs and business objectives. This particular case is challenging because ad placements and content must both consider user pleasure and brand engagement. Netflix needs to incentivize brands to invest in ads while also ensuring that ads don’t deter users from subscribing at all.
- Scope can easily be inflated when problem statements are broad. I selected this problem because I’m genuinely interested in it, however it is complex and there are many stakeholders that must be satisfied. By setting constraints and prioritizing problem areas that users care about most, I was able to come up with distinct solutions that can be used for further testing.
- Through this project, I used ProtoPie for the first time. I am comfortable prototyping on Figma but was challenged to learn a new tool given the need to include video and audio content in my prototypes. If you missed the prototype, view it here.
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