Here’s How Netflix Makes Monster Money with Secret Ads

Netflix, Inc. isn’t engaged in the traditional advertising business but the online streaming giant seems to be generating some money by promoting different brands and products in its TV shows, according to a new report.

More than 70% of Netflix shows have at least one product placement, Greg Isaacs, chief product and marketing officer at product integration firm Branded Entertainment Network, told CNBC. He said that Amazon, Netflix’s chief rival, is placing product advertisements in almost all of its shows.

Branded Entertainment Network is engaged in placing products in TV shows, streaming content and in digital influencer videos. Branded Entertainment Network was started in 1989 as an image licensing service by Microsoft co-founder Bill Gates, who still owns the company. The company reported more than 6,000 placements last year in shows, including Dunkin’ Donuts and GM in House of Cards, Tincup Whiskey in Jessica Jones and Jose Cuervo in Fuller House.

According to Isaacs, brands pay $50,000 to $500,000 per episode for getting into a Netflix or Amazon show. The price is calculated based on the popularity of the show and how long the product will be showed in the episode. There are two options for product placement in the shows: a logo in the background or a real plot point in the story.

Netflix’s House of Cards is a popular political drama television series. According to the report, the show is attracting top dollar through product placement.

Product integration is becoming a popular way of attracting advertisement dollars as no commercial opportunities are available on the streaming platforms.

According to the report, Netflix or Amazon don’t put all of money into their pockets but it’s the production company that usually makes a product integration deal and collects the fees. It’s unclear how much money Netflix and Amazon earn from product integrations.

In the past, integrating a branded product into a TV program was largely manual and required a negotiated deal between an advertiser and a studio or producer, according to Branded Entertainment Network. The company has been working to automate that process.

Top Wall Street Analyst Calls Netflix a “Monster”

Netflix has more fans on Wall Street and one of them is BTIG Research analyst Richard Greenfield, which believes that the streaming giant is a “monster.”

Greenfield raised his price target on Netflix to $225, becoming the most bullish analyst on the Street, Business Insider reported.

Netflix, Inc. reported impressive results for the second quarter, adding 5.2 million new subscribers versus 3.2 million expected by Wall Street analysts.

Netflix’s stock is up more than 48% so far this year. During the last 12 months, the company’s share price has surged over 114%. On Friday, the stock was closed up 0.74% at $184.04.

In a note to investors, Greenfield wrote that the video streaming service is “hitting escape velocity”.

“It appears increasingly apparent that legacy media companies have indeed created a ‘monster’ that is threatening their financial future,” he wrote in the note.

Greenfield attributed Netflix’s impressive new subscribers’ growth to “its aggressive content production/licensing strategy, combined with its best-in-class technology.”

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