Co-founder Reed Hoffman to step back after 29 years
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Netflix posts quarterly net profits of $5.3 billion, its highest ever. Investors, however, punish the share price with a sharp drop because of the bleak outlook. Even advertising will contribute little in the coming period. Perhaps the bigger news is the announcements by co-founder and chairman Reed Hastings that he was stepping away from the company after 29 years.
“Netflix changed my life in so many ways, and my all‑time favourite memory was January 2016, when we enabled nearly the entire planet to enjoy our service,” Hastings said.
At first glance, Netflix reported solid figures last night: revenue up 16%, a near doubling of net profit and tidy control over costs. Even so, the market was unimpressed.
The problem lies in the outlook. Investors believe Netflix has now put its strongest growth phase behind it. For the second quarter, for instance, the streamer does not expect to sell much more than it did in the first quarter. And the revenue growth achieved over the past year largely comes from higher subscription prices, which averaged just over 10%.
To appeal to new or returning customers, Netflix is expanding its line-up with new series, live events, games and, these days, video podcasts as well. The long-term impact of that remains to be seen. The streaming market is a crowded one.
There is still growth potential, however, in the field of online advertising.
Netflix is betting heavily on advertising and expects to reach around $3 billion in ad revenue this year, double the level of 2025. To this end, the streaming platform is building an ecosystem that now includes more than 4,000 advertising clients, up 70%.
Through partnerships with DSPs, advertisers can reach Netflix viewers more precisely, based on their shopping behaviour, interests and lifestyle. Netflix has also recently launched its own Conversion API, enabling advertisers to measure the effectiveness of their campaigns using real-time insights and first-party data.
For now, Netflix is still mainly targeting large advertisers and media agencies, but it wants to stimulate growth by using GenAI to design creative formats and more contextually relevant ads.
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