Netflix’s ad tech pivot pays off as revenue tops $11 billion

Netflix beat Wall Street’s Q2 expectations by leaning hard into a new strategy: building its own advertising technology to double its ad business and recasting its story for investors around profit, not just subscriber counts. The company’s latest earnings report shows the pivot is already paying off, with revenue topping $11 billion for the quarter.The ad engine revs up: The ambitious plan to double ad sales hinges on Netflix taking full control of its technology. The streamer has now moved completely off Microsoft’s ad tech, finishing the global rollout of its own platform, the Netflix Ads Suite. Netflix called the move “foundational” to its long-term strategy, saying it will give advertisers better targeting and new formats, with interactive ads set to arrive later this year.Content is still king: The quarter’s performance was fueled by a mix of established hits and new content pipelines. The final season of Squid Game was a massive driver, pulling in 122 million views, while upcoming new seasons of Wednesday and Stranger Things are expected to power the second half. At the same time, Netflix is broadening its definition of a creator, with co-CEO Ted Sarandos pointing to the success of YouTube-native talent like toddler series Ms. Rachel.Changing the channel: To support its ad business, Netflix is leaning into live programming to create the kind of appointment viewing that has long been the bedrock of traditional television. The strategy is part of a larger campaign to recast its story for Wall Street, forcing investors to concentrate on financial metrics like revenue instead of subscriber counts, which the company no longer reports quarterly.The big picture: Netflix is successfully evolving from a pure-play subscription service into a multifaceted media company, where a booming advertising business, powered by its own technology and a diverse content slate, is just as important as its next hit show. The earnings report landed amid other big moves from the streamer. The company is taking its hit shows beyond the screen, announcing plans for its first Netflix House entertainment complexes. The focus on original content comes as the battle for licensed hits intensifies, with reports suggesting Disney outbid Netflix for the rights to kids’ show CoComelon. But not all analysts are convinced by the company’s new narrative, with some criticizing its lack of transparency after it stopped reporting key subscriber metrics.‍