1.   Plans with and Without Advertising

This was the first model adopted by companies like Netflix when it began introducing advertising into its platform. Historically, Netflix was known for being an ad-free subscription model, with features like shared accounts. Over time, the company began to phase out some of these features in an effort to maximize the total number of subscriptions.

Once Netflix decided to bridge the gap and embrace advertising, it chose to launch a more affordable (initially) plan that included ads for customers who signed up for it.

The key challenge with this model was starting from scratch in building a customer base for the ad-supported plan to create "value" for advertisers. Advertisers, beyond premium content and device environments (like Netflix), are primarily interested in reaching large, mass-market audiences. Starting from scratch to build such a base can be a significant hurdle.

Until recently, Netflix had not provided detailed information about the total number of households / customers using its ad-supported plan. In its January 2025 earnings call, Netflix revealed that it had surpassed 300 million global customers but did not provide specific numbers for the ad-supported plan. However, in recent days, Netflix disclosed that the total number of customers using the ad-supported plan had exceeded 70 million households, accounting for nearly 25% of its total customer base. Additionally, Netflix announced that the number of ad-supported plan customers had grown by 35% quarter-over-quarter, which the company highlighted as a milestone. However, it’s important to note that the ad-supported plan still requires substantial audience growth.

For perspective, TikTok has globally 1.5 billion monthly active users (MAUs), YouTube’s 2.5 billion MAUs, and Meta’s more than 3 billion MAUs.

While these models are not directly comparable, they do illustrate the value of large-scale audiences for advertisers. This is something well understood by the big streaming platforms, which is why Netflix has not remained static in simply celebrating its ad-supported plan’s growth. Rather, they are making strategic moves with several goals in mind:

2.   Integrating Advertising Across the Entire Customer Base

A different approach has been taken by companies like Amazon with its Prime Video service, which integrated advertising into its TV offering. Unlike the previous model, Amazon opted to implement advertising across its entire customer base, offering an ad-free plan as an option. However, unlike Netflix, existing subscribers to the ad-free TV service will now see ads by default. To avoid these ads, they must subscribe to a higher-cost plan.

This strategy has allowed Amazon to enter the advertiser market in 2024 with a more appealing and larger audience base than Netflix’s when it first began offering advertising. By the end of 2024, Amazon Prime Video had over 200 million customers on the ad-supported plan globally.

It’s important to note that Amazon’s move came after Netflix entered the streaming advertising space. Additionally, Amazon had a key advantage over Netflix: a well-established advertising ecosystem, which included not only professional teams but also highly valuable assets, such as:

In the advertising Industry, audience size plays an important role: the larger the available audience, the more attractive the platform is to advertisers.

Amazon gained an initial advantage by integrating advertising into its entire customer base, giving it immediate and significant reach. In contrast, Netflix has focused on gradually building its advertising audience, seeking to create a more positive user perception of ads by linking them to lower subscription costs. However, Netflix has recognized the need to accelerate the growth of its ad-supported customer base and is pursuing strategies like the inclusion of live sports content.

The challenge for both platforms lies not only in being more appealing to advertisers but also in striking a balance between profitability and user experience. Advertising saturation can be a critical factor in subscriber decision-making. If advertising is perceived as excessive or intrusive, churn is likely to rise, forcing platforms to rethink their strategies. The key will be to offer less intrusive ad formats and segmented experiences that enhance the relevance and value of ads for users.