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Doubt Netflix at your own peril 

A crowd of all-red people stand in the shape of an "N".

Illustration by Robyn Phelps / Getty / The Current

Netflix announced earnings on April 18, building upon last quarter’s astonishing growth and smashing analyst estimates for subscriber growth, revenue and earnings. Yet since then, the stock experienced a post-earnings slide — at one point it was down almost 15%. Why? Turns out it’s not payback for making six (now going on seven) seasons of Love is Blind. 

Rather, it’s because the company that first revolutionized movie rental and then original-content production — and catalyzed the entire cord-cutting movement — announced it has decided to stop reporting subscriber numbers in 2025. But immediate knee-jerk reactions questioning Netflix’s business fundamentals are actually missing the forest for the trees.

Netflix wants us to look beyond a singular metric to judge its performance. As connected TV (CTV) content production and user adoption has matured, so, too, have monetization models. While subscriber growth was an important data point when CTV was nascent — and subscriptions were the only material revenue stream — it doesn’t tell the whole story in today’s more complex and fragmented CTV ecosystem. 

Today’s streaming platforms — now dominated by tech companies whose ability to invest unfathomable resources into original scripted content and develop world-class streaming apps to present it — have diverse methods of monetizing their audiences. And it’s far from just subscription-driven. Now almost every streaming app offers an ad-supported model (sometimes the only model, in the case of the free ad-supported television apps). And with that, there needs to be a much greater focus on engagement within the app itself. While subscription revenue is a one-size-fits-all, regardless of how much or how little one streams, ad-supported models reward apps that keep their users around, with commensurate revenue and average revenue per user (ARPU) the longer a viewer stays engaged. I published an article stating exactly this two years ago, and Netflix Co-CEO and Director Ted Sarandos says it even better: “Happy members watch more, they stick around longer […] which all grows engagement, revenue and profit — our North Stars. And so, we believe that those are the measurements of success in streaming.” 

Instead of laser-focusing on subscriber numbers, investors would be well served to pay more attention to metrics that track user engagement. For example, understanding the volume of time users spend in the app; how many (and which) devices users access the app from; what content is being consumed most; usage patterns around days of week and times of day; and social engagement with Netflix content are all metrics almost certainly already tracked by Netflix and are all key inputs to ARPU. These metrics tell the story of viewer engagement. And that engagement is what can help ultimately drive ad revenue, both directly and indirectly. 

Netflix’s other recent forward-looking strategies — including its gradual crackdown on password sharing and its investment in international content production, which helped shield the company from the worst impacts of the Hollywood writers’ and actors’ strikes — could well-position the company going forward.

"Instead of laser-focusing on subscriber numbers, investors would be well served to pay more attention to metrics that track user engagement."

With such incredible financials, Netflix is in a very favorable position to continue to invest handsomely in new content — including in unconventional live sports (who’s going to watch the Mike Tyson/Jake Paul fight?) and WWE Raw — and to continue to fuel innovation in the industry. Competitors will have no choice but to try to keep up, and those with the most engaging content will win.

So let’s give credit where it’s due. Time and again, Netflix has been able to see around the corner and change the game. It literally changed the way we watch TV, and now it’s changing monetization, too — looking around the corner at the next metrics that matter and aligning their strategy accordingly. While I believe that Netflix will always offer a high-cost ad-free option, it seems clear that they’ve set their focus on growing and improving the ad-supported option and making it more engaging. That’s what matters now and I’m here for it.

This op-ed represents the views and opinions of the author and not of The Current, a division of The Trade Desk, or The Trade Desk. The appearance of the op-ed on The Current does not constitute an endorsement by The Current or The Trade Desk.