Netflix slips 7% on report of advertiser refunds on viewer misses
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Netflix stock (NASDAQ:NFLX) is 6.8% lower Thursday morning, on pace for its biggest one-day drop since September, alongside a report that says it's allowing refunds to advertisers after missing some viewership guarantees on its new ad-supported service tier.
The streamer is allowing some advertisers to reclaim funds for ads yet to run after the miss, Digiday reports, citing ad agency executives.
That's part of Netflix's unique "pay on delivery" approach that lets advertiser pay only for the viewers actually reached, vs. traditional TV's approach of keeping money on the books and using future "make-goods" to catch up on viewership guarantees.
Not all advertisers have reclaimed funds, according to the report - and those who have generally had holiday-timed campaigns and want to reallocate money before the year is up. But Netflix is missing viewer guarantees by varying amounts, in some cases delivering about 80% of the viewers expected, it said.
Despite the news, agency execs see the outcome as a result of Netflix's speed in launching the ad business rather than any long-term view.
Netflix has signaled this year that it would enter the business cautiously and develop it over time. But it's also drawn criticism for "hubris" with regard to aggressive pricing and its measurement promises.