Netflix Blankets Latin America with Display Ads in Quest for New Subscribers

Entertainment Service Was a Bigger Online Advertiser Than P&G

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Netflix is blanketing Latin American computer screens with display ads in an attempt to add users as broadband adoption grows in the region.

The company's video-streaming service was introduced to Latin America in September 2011, and since then Netflix has become one of the region's heaviest online advertisers. In March it published more online display ads in Brazil and Mexico -- 2.7 billion and 463 million ad impressions respectively -- than any other marketer, according to the ComScore Ad Metrix, effectively making it the biggest display advertiser in the region based on the relative size of those two markets.

Advertisers: Mexico
Advertiser Display Ad Impressions (000) Display Ad Estimated Spending (000)
Total Internet 20,164,700 483448.67
All Industries
Netflix, Inc. 501,014 19350.92
Procter & Gamble Co. 313,356 10438.35
Microsoft Corporation 211,616 6136.63
Viajes Beda S.A. de C.V. 188,546 7788.24
Telefonica Group 171,324 7163.43
American Express Company 170,428 4903.53 157,581 6067.53
WhatsApp Inc. 156,705 2370.69
Dafiti 128,858 2685.03
Otigroup Inc. 110,364 2657.02

Advertisers: Brazil
Advertiser Display Ad Impressions (000) Display Ad Estimated Spending (000)
Total Internet 135,326,966 R$849,041
All Industries
Dafiti 3,828,788 R$23,690
Netflix, Inc. 1,794,957 R$16,349
MRV Engenharia e Participacoes S.A. 1,448,111 R$10,719
Net Servicos 1,198,796 R$10,558
Netshoes Comercio Ltda. 1,129,164 R$8,720
Telefonica Group 980,936 R$8,592
955,781 R$5,875
LATAM Airlines Group S.A. 945,867 R$8,007
Microsoft Corporation 922,692 R$7,575
Unilever 912,870 R$8,417

It's since slipped from the top position in Brazil and accounted for roughly 1.8 billion impressions and $7.3 million spent on display ads in June, second to the online retailer Dafiti. However, Netflix is maintaining a high volume month over month. Taken over the course of a year, it's a substantial investment for the company, which reported this month that it now spends $450 million per year on global marketing. (In the U.S., Netflix was the 10th biggest display advertiser by volume in the second quarter, according to ComScore.)

"They're trying to position themselves very aggressively," said Alejandro Fosk, senior-VP at ComScore Latin America.

The company reported having 7.75 million international subscribers at the end of the second quarter, and Wedbush Securities analyst Michael Pachter estimates that less than 3 million are in Latin America. But Netflix clearly sees a bigger opportunity there, though it declined to comment on its regional marketing strategy.

It's also working around the fact that many potential customers don't have credit cards to pay for the service. In Brazil, for example, Netflix has added a debit payment option through several major banks.

High-speed internet connections -- or the lack thereof -- are the most significant barrier to becoming a Netflix subscriber, however. According to a December 2012 report from Cisco and IDC, only 5.6% of Brazilians had a broadband connection at or above 2 megabits per second. That's the minimum threshold for a satisfactory user experience for users of a video-streaming service like Netflix, according to IDC's telecom manager Diego Anesini.

Broadband speeds have increased, due in large part to increased competition among internet service providers in the case of Brazil. At the same time, Netflix has increased its ad spend year over year in Latin American markets since launching there two years ago, according to Ignacio Vidaguren, chief operating officer of IMS, a marketing services firm that manages Netflix's online spend across channels in the region.

While the major thrust of efforts across display, search and mobile is on user acquisition, branding has become more of a prerogative in the past year, Mr. Vidaguren said.

"Eventually as people sign up with better connections and get credit cards, they're more inclined to use Netflix," he said.

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