It was really only a matter of time before Netflix
This week, the company is launching banner-sized ads throughout its site. Sony
Not really. The ad links to the Sony Pictures' interactive site for the edgy computer-animated summertime flick. It's more about building up expectations than loading up Netflix queues.
Sony's ads feel out of place against the rich red Netflix page layout, but that's probably because Netflix has guarded its pristine user experience for too long. But this isn't the company's first foray into playing carnival barker for the motion picture industry. There were gradual inroads into marketing new releases. It went with green mailers for Shrek 2, and Garfield invaded the signature mailers before the perpetually hungry cat made his film debut.
Netflix can be a master marketer
Netflix has also taken advantage of subscriber ratings as a prelude to a pimp. The day before DreamWorks Animation's
Wow. Talk about the perfect shoehorn. The same user ratings tool that has delivered timely recommendations in the past is now being used as a source for targeted sponsorship. Netflix has the luxury of 4.9 million subscribers disclosing their celluloid likes and dislikes, and now Netflix is gearing up to cash in on that relationship. It's pitched ideal rental picks in the past. Now it's likely to get paid to pitch ideal theatrical films and products, too.
Yes, products. Hollywood isn't the only one hungry for the attention of film buffs. By this time next year, don't be surprised if you see a Harley-Davidson
This takes us back to last summer's hire of Peggy Fry, who came over from America Online to head up the company's new online ad sales division. It was a brilliant move, even if it had CEO Reed Hastings eating a little crow.
Two years earlier, we asked him about the possibility of further monetizing his growing user base by selling ads, and he seemed adamantly against it. He compared the decision to keep its red mailers pure to that of Starbucks
"We have got a very clean brand," he said at the time. "We have got a brand that really represents something special and we don't intend to expand into advertising, no matter what the associated revenues, and it is really focused on, again, creating this pureness and this great brand. We think that is the right strategy to build the most valuable company."
Let's not be too quick to hit Skip over the head with his own words. First of all, Starbucks has also backed down on that front. Just check out the java king's role in promoting Akeelah and the Bee. Then we have the inescapable truth that it makes too much sense for Netflix to do exactly what it's doing right now. Do you really think that churn will spike as a result of timely banner ads showing up throughout the site?
Reeling in the profits
I would take this one step further and really turn up the ad-generating revenue by plugging in contextual ads by Google
That's the key. Advertising is a model based on traffic, and a more aggressive push in this direction would help turn the company's largest liability -- those users going through more than 6-8 titles a month -- into a captive audience that can help offset the fulfillment costs.
Can it backfire? Of course. Maybe ad-wary members may give up providing ratings based on the company's five-star grid. Maybe the competition will catch on and cash in by marketing itself as an "ad-free" service. The risks seem mostly negligible at this time, though.
Netflix has always known how to command an audience. Now it's a matter of learning to shake those moneymakers.
Longtime Fool contributor Rick Munarriz is a Netflix shareholder and plans to stay that way. He has been a subscriber and investor since 2002. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.