Netflix (NASDAQ:NFLX) has become a household name in the U.S., but the company still believes there are untapped pockets in its home country -- up to 31.5 million untapped households, to be exact.
For the third quarter, Netflix hit a total of 58.5 million U.S. subscribers. The company has stated that it aims to eventually reach 60 million to 90 million U.S. subscribers. At the high end of that estimate, Netflix would need to add 31.5 million more domestic accounts.
But with domestic subscriber additions slowing, investors might be wondering: how exactly is Netflix going to hit that high end?
Netflix's growth rate in the U.S.
Netflix announced global subscriber additions of 7 million for the latest period, which was a new record for the third quarter. This also represented 31% year-over-year growth from the 5.3 million subscribers it added in the same period last year.
But more importantly, Netflix added just 1.1 million subscribers domestically, compared to the 5.9 million it added internationally. Netflix is obviously having a harder time growing subscriber numbers in the saturated U.S. market versus international markets. However, investors should be encouraged to see that the 1.1 million U.S. additions represent a slight jump from the 0.9 million U.S. additions in the same quarter of 2017.
Here's a look at Netflix's recent growth in the U.S.
|Netflix U.S. Streaming||Q3 2017||Q4 2017||Q12018||Q2 2018||Q3 2018|
|Net additions||0.9 million||2 million||2 million||0.7 million||1.1 million|
|Total memberships||52.8 million||54.8 million||56.7 million||57.4 million||58.5 million|
For the fourth quarter, Netflix is predicting it will add 9.4 million global subscribers, which represents a 13% growth over the 8.3 million subscribers it added in the same period in 2017.
It's worth noting that Netflix was extra cautious on its guidance for the third quarter after being criticized for adding fewer-than-expected subscribers for the second quarter. For the third quarter, it predicted it would add 5 million global subscribers but ended up reporting 7 million global additions. So Netflix may be exercising the same caution for the fourth quarter.
Netflix focuses on "low-awareness" markets in U.S.
Here's a quick illustration to give you an idea of just how saturated the U.S. market is for Netflix. The company has a total of 58.5 million U.S. subscribers. That means that nearly half of all the current 126 million U.S. households are currently using Netflix.
Netflix's brand awareness is obviously high in the U.S. The company's challenge is finding the leftover pockets of the U.S. that haven't signed up and giving them that last push to commit to the monthly subscription.
One of the ways Netflix is hoping to scoop up these consumers who aren't their core audience of tech-savvy early adopters is by bundling its service with more traditional companies like Comcast (NASDAQ: CMCSA). In March, Netflix announced a deal with Comcast that lets customers conveniently pay for both services on one bill.
Another subscriber acquisition strategy that has proved fruitful is allowing people to sign up with a quick click through their pay-TV or mobile offering. This takes out the step of having to navigate to Netflix's website to sign up for the service. The goal is always to remove as much friction as possible when it comes to signing up for the streaming platform.
Regional cable and Internet provider RCN Telecom Services is one of the partners that features Netflix in its on-screen guide. This means that people can easily sign up for the service through RCN. In fact, last year, RCN said that more than 80% of its customers who test-drive Netflix become paying subscribers. That's a stunningly high conversion rate.
But, of course, Netflix will always maintain that its No. 1 strategy for gaining new subscribers is making bigger and better TV and film titles. Just for 2018, it plans to spend $8 billion on content. If the hits keep coming, so will the subscribers, thanks to the company's creative onboarding methods.