etFlix Advertising revenue – an unofficial gray paper

If anything the current quarter results and subsequent free fall of stock price tell, etFlix may no longer increase either subscription price or subscription base, it is time for other revenue sources. Otherwise its future is doomed. Moreover the content it is creating originally is super mediocre. Reason?: creativity is not something which can be produced by centralized managements.  It is altogether a different ball game, all the money etFlix could dump may not be enough for a competitive rich content.

O! and before I forget to mention, couple of side-tracks.

  1. In spite of all the head start and overwhelmingly superior engineering team presence its user’s home page plus suggestions is flawed. Even after browsing for 10 minutes couldn’t find a decent flick to watch. They only show either already watched or not interested to watch videos. They should at least have an option to hide something. Which should hide from every recommendation except hidden pieces.
  2. Prime is eating away its eye-time. It might be time to have a partnership with Costco (similar to T-Mobile) ; but Costco doesn’t get monthly 100$ average like T-Mobile. Once advertising based subscription is available etFlix may go to Costco for a partnership. It might be win-win for both of them.

Back to advertising based etFlix brain storming.

There are Six players in this

  1. Subscribers.
  2. Advertisers.
  3. Intermediaries.
  4. Sales
  5. Engineers.
  6. Advertisements

Subscribers:

You have existing subscribers and new subscribers who might come if it is advertisement supported model.

Once new advertisement based subscription comes – is it going to be completely free? Or 50% less than current price? For anybody else it might be easier but for etFlix with all its current user base this is difficult choice. If given free, current users might feel alienated, might even become vocal anti-advocates, a dangerous outcome. 💡 Instead etFlix should start with six months free for all the users who newly joined in advertising-based-subscription model, including those who got converted from any of current subscription models. This should keep current users happy and bring in new users in flocks as six months is a good trial period. After six months the subscription could be 50% less than current basic subscription. Of course this six months free can not be for-ever. It should be only for one or two quarters. Then it can be brought down to half-a-month free. Otherwise users will simply go on creating logins with different credit cards 😉

💡 In the initial days – we might be bombarded with new conversion requests. The service may not be ready for all those users trying to convert. Like Gmail initial invitation only method – we needed a way to tackle this problem. Robinhood’s add-to-queue is better approach. In this way we could completely control geography vs number of subscribers in new model. We could balance advertisement revenue vs loss in new subscription. So that the balance sheet at the end of quarter doesn’t look that bad in short term. This also means before we open up to users need to be ready with good advertisers.

Advertisers, Sales & Intermediaries

These are bunch of important folks. One of my MBA friends mentioned sales & marketing is a solved problem. Hopefully she is correct 🙂

In-house sales team can do everything in their capacity to get more advertisers. But this is equally technical problem too. In exact words this is digital enablement problem. Same problem Google adverbs solved. Anybody can be either advertiser or anybody can be a middle-man advocating other small to medium scale players. The big players can always be handled by in-house teams. Small and medium players may not get much attention. 💡 Here is where tech comes into picture. Anybody should be able to place an advertisement. All you need is a credit card.

Engineers

Without these folks, we couldn’t build! This team needs to be top-notch, highly responsive, iterative, experienced, creative with motivated leadership team.

Advertisements

This is the most important piece of puzzle. If this can be done correctly we will have success otherwise it will be another failed project. Except Youtube nobody is adopting latest technical advantages to video advertisement.

Unlike Google, etFlix may not have much personalized data about a particular user. But it has good enough data about viewers to depend upon and customize advertisements.

Example :

  1. Region,
  2. Favorite categories.
  3. Presence of kids – number of kids, their age group.
  4. Favorite color, favorite music etc…
  5. Income range?
  6. Education range?
  7. People with similar taste.
  8. Active time, free time,
  9. Data from other third parties (legal of course)

But the advertisements itself is a big challenge. We don’t want them to be highly intrusive. Do we support skip? What is the impact of CDN caching?

Do we support text only? image only? video only? (all three is what I recommend)

How does pay works? Any extra charge if user “saves” an advertisement to view later? 💡 Obviously we don’t want users to click on it and leave our video watching. We want users to continue watching video and enjoy the same. So we need a better idea to make advertisement win-win-win for etFlix-advertisers-subscibers. Instead of click and open in new tab we could have two buttons “Save” which will save it under a tab and also sends an email to user. “Contact Me” this will enable advertisers contact user with special coupons, offers etc..

The other fact is where to keep these advertisments?

  1. Banners (either text or image of GIF (sans-audio) )
  2. Full screen video advertisements with skip option.
  3. For high width screens – like those sports advertisements we could have vertical banners come and go on the right side.
  4. 💡 Dynamic placement advertisements. We all know there are several placement advertisements inside all those original videos. But they are static (for example actors will still be eating same pizza in same pizza-shop even after 10 years, that pizza shop may now be defunct!) we could make these dynamic! So Somebody watching in USA might see coffee boards, somebody in UK/India may see Tea bill boards! This will be completely dynamic! This is a great challenge for engineering team and content creators.

That’s all for now.