Netflix is serious about ads

Video streaming could have been the end of TV commercials, but now even Netflix (NFLX-2.00%), an industry pioneer, is making its advertising business a “priority.” This comes as the streaming giant shifts its focus from subscriber growth to profit.

Netflix said on Thursday that it added more than five million paid subscribers in the third quarter of 2024, outperforming Wall Street expectations of 3.5 million, according to a consensus from FactSet (FDS+0.43%).

However, that figure is down 40% from the same period last year, as a spike from its password-sharing crackdown is starting to wane. The company also said its average revenue per member remained flat year over year.

Still, Netflix delivered strong results this quarter with its revenue rising 15% year over year to $9.8 billion. Its net income rose 40% in the quarter to $2.4 billion, from $1.7 billion in the third quarter of 2023. The company expects its full-year revenue to grow 15% — the high end of its previously projected range.

Netflix stock rose nearly 4% in after-market trading on Thursday.

The streaming pioneer’s success comes as other media companies struggle to keep up and are still trying to figure out how to make their services consistently profitable. It also continues to prove that Netflix’s password crackdown and bet on advertising, which debuted on its platform in 2022, were not missteps.

The company’s ad-supported memberships rose 35% quarter over quarter and accounted for 50% of new signups during the three month period.

“It’s still very early for our advertising initiative,” Netflix said in a press release. “As we said last quarter, it takes time to build a new revenue stream and we don’t expect ads to be a primary driver of our revenue growth in 2025.”

In August, Netflix was able to increase its upfront sales commitments by 150% from 2023. This was the media giant’s second year participating in upfront negotiations — advertising deals made ahead of the upcoming broadcast year, which typically starts in fall, through which media companies try to sell the bulk of their inventory.

As part of its advertising efforts, Netflix reiterated that plans to start testing an in-house ad tech platform in Canada this year before launching it more widely in 2025.