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Some potential challenges that Netflix might face in implementing an ad-supported version could include backlash from current subscribers who are used to an ad-free experience, potential decrease in the quality of user experience due to ads, and the need to balance ad revenue with subscription revenue. Additionally, Netflix would need to ensure that the ads are relevant and not intrusive, which could be a complex task given the diverse range of content and audience on the platform.
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Why did Netflix choose Microsoft as its ad partner? On Netflix's Q2 earnings call, the company announced it lost 970,000 subscribers. This was Netflix's second straight quarter of subscription losses, after it lost 200,00 in Q1. To make up for this lost market share, Netflix needed a plan: and that plan became the launch of an ad-supported version. A few months later, Netflix had a partner to run these ads: Microsoft.
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