Netflix to Roll Out Interactive Ads Later This Year

Netflix said Thursday (July 17) that it expects advertising revenue to roughly double in 2025, as the company introduces interactive ads in the second half of the year.

“We’ve closed the large majority of deals with the major agencies, those results have generally been in line or slightly better than our targets, and consistent with our goal to roughly double the ads business this year,” said Netflix co-CEO Greg Peters, in a conference call to discuss earnings.

Executives said the ad business is ahead of internal forecasts and gaining momentum globally. Peters said Netflix did well in the upfronts, a period in which media companies sell ad inventory for the upcoming TV year.

Peters said advertisers are responding positively to Netflix’s growing global scale, high engagement rates, and the new Netflix Ad Suite launched in April.

“The most immediate benefit from this rollout is just making it easier for advertisers to buy on Netflix,” Peters said. “We’ve seen an increase in programmatic buying. … We’re going to roll out additional demand sources like Yahoo that’ll further open up the market.”

The company also plans to introduce more advanced ad features such as improved targeting, measurement tools, and personalized ad experiences. “We’re also going to be introducing interactivity in the second half of the year,” Peters said.

Netflix plans to ramp up its gaming business as well, but at a pace appropriate to demand. Peters pointed out that gaming represents a “very, very large” total addressable market, or TAM.

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New Website

In the quarter, Netflix rolled out a new website user interface. Peters said the previous look harkened back to the Netflix of 10 years ago and the new look is more able to incorporate advanced capabilities.

One of those is a conversational artificial intelligence (AI) chatbot being piloted at Netflix. The viewer will be able to talk in natural language with an AI to do things like find shows to watch according to specific preferences and genre.

Ted Sarandos, Netflix co-CEO, said the company has a “strong” lineup for the second half, with new seasons of “Stranger Things” and “Wednesday” as well as new movies like “Happy Gilmore 2” and a new “Knives Out” film. A movie from Ben Affleck and Matt Damon is also coming.

The company is also expanding its live programming strategy, with events such as an NFL Christmas Day doubleheader, WWE matches, and boxing. “Live has outsized positive impacts around conversation, around acquisition, and we suspect, around retention,” Sarandos added.

Netflix’s strategy is not just to deliver one-time hits, but provide a steady stream of content that will be well-received by viewers, Sarandos added.

The company believes in its local-for-local philosophy, where it invests in shows created by local creators for the local audience. Case in point is its partnership with French broadcaster TF1.

“The fundamental purpose for this TF1 partnership is all about that goal of expanding our entertainment offering. How do we enhance the value we deliver to members?” Peters said. “In this case, it’s specifically about highly relevant local-for-local content in a country that has strong demand for that local content.”

BofA Global Research analyst Jessica Reif Ehrlich said Netflix is “well positioned given the company’s unmatched scale in streaming, further runway for subscriber growth, significant opportunities in advertising and sports/live” events as well as continued earnings and free cash flow growth, in her July 15 report shared with PYMNTS.

Ehrlich noted that South Korea’s “Squid Game” Season 3 had the best 10-day viewership ever for a Netflix show, with 106.3 million views. Overall, in the Nielsen multiplatform ratings for the 2024-2025 TV season, Netflix claims 10 of the top 15 shows by total viewing.

The analyst said the second half of 2025 should “build on this success” with the return of hit shows, new movies and live sporting events. Netflix is also thinking of getting into video podcasting, Ehrlich said.

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Netflix House Opening

Asked if Netflix would be open to acquiring other studios or networks, CFO Spencer Neumann said the company has historically been builders, not buyers. The company does “look at a lot of things,” he added, but currently has “no interest” in owning legacy media networks.

In the second quarter, Netflix reported a net income of $3.1 billion ($7.19 per share) compared with $2.15 billion ($4.88 per share) in the like quarter a year ago. Revenue rose 16% to $11.08 billion year over year. It posted free cash flow of $2.27 billion.

Netflix’s financial performance exceeded Ehrlich’s expected earnings per share (EPS) of $7.05 per share as well as projected revenue of $11.04 billion and operating income of $3.68 billion. The Street’s consensus EPS is $7.07.

Netflix said the second quarter’s revenue increase was due to signing up more subscribers, higher prices and increased ad revenue. Every geographic region saw double-digit revenue growth.

Looking ahead, Netflix raised its projected 2025 revenue to $44.8 billion to $45.2 billion from $43.5 billion to $44.5 billion. The higher forecast would reflect the dollar’s weakening, subscriber growth and ad sales. It expects earnings of $6.87 per share for the year.

Shares of Netflix fell less than 1% to $1,263.25 in after-hours trading.

Separately, Netflix also announced on Thursday (July 17) that the first two locations of Netflix House, its food, shopping and entertainment complex based on its streaming hits, will open in late 2025 at the King of Prussia Mall in the Philadelphia area and the Galleria Dallas in Dallas. A third location is slated to open in Las Vegas in 2027.

Each complex is more than 100,000 square feet and will feature virtual reality, gaming and other experiences as well as dining, all based on Netflix’s hit shows such as “Squid Game,” “Stranger Things,” “Bridgerton,” “Money Heist,” “One Piece,” among others. For example, fans can play the terrifying “Red Light, Green Light” game from “Squid Game.” Dining is provided by Netflix Bites, where the food also takes its cue from its shows and movies.

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