Introducing ads could potentially increase Netflix's revenue by providing an additional source of income. Advertisers would pay Netflix to display their ads to its large user base. However, this could also risk alienating some subscribers who prefer an ad-free viewing experience, potentially leading to a loss of subscribers.
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Let's jump back to April: Not only did Netflix miss analysts' expectations for subscriber growth by 2.5 million, it lost subscribers for the first quarter ever and announced it would lose more. Netflix's stock lost a third of its value the following day, leaving its share price down $500 dollars from its previous peak. So why did Netflix decide ads would fix this?