A different kind of Netflix ad: a billboard for ’Beverly Hills Cop: Axel F' (Beata Zawrzel/NurPhoto via Getty Images)

Adding Down?

Netflix's ads tier is growing but it's not the savior the company hoped for — yet

Last year they were telling a different story about ads profitability.

7/19/24 9:24AM

A year ago, Netflix said it was making more money from ads subscriptions than the more expensive ad-free options. During 2023’s Q2 earnings call, Chief Financial Officer Spence Neumann said, “Our overall ads ARM continues to be higher than basic ad free globally,” referring to average revenue per membership, which is a combination of the subscription fee and ads revenue.

That seems to have changed. “Currently our ads ARM is lower than our non-ads ARM,” Co-CEO Greg Peters said on the earnings call yesterday.

What happened?

“Currently because we've been scaling so rapidly, we're racing behind essentially to fulfill all of that increasing inventory. And we're lagging in that regard,” Peters said.

In other words, it seems people are signing up for the ads tier so quickly, Netflix has more room to show ads than it has deals with advertisers or the ad tech is not good enough to meet this increased demand, meaning they are not able to effectively monetize all these new views with ads.

“We're on track to achieve our critical scale goals for all of our ads countries in 2025,” he said.

“We're adding more sales folks. We're adding more ads operation folks, building our capabilities to meet advertisers. A big component of that is giving advertisers more effective ways to buy Netflix.”

Netflix already appears to be shaking up its ad team. Yesterday, media industry vet Peter Naylor became the second of two senior executives to leave the ad team.

Netflix introduced its lower cost ads tier in limited markets a year and half ago. In May the company said its ad-supported tier had 40 million global subscribers, or almost double what it was in January. That meant ads subscribers represented about 15% of all subscriptions.

Netflix reported that this quarter its ads tier grew 34% from last quarter, but didn’t say how many subscribers that was. It did say a full 45% of new signups in ads markets was for the ad tier last quarter, growing from 40% in Q1.

For now, Neumann called ads a “meaningful contributor” to the streaming company’s revenue.

“When you get into 2026 and beyond, it can be even more meaningful, and hopefully it becomes the point where it is a primary contributor given all that engagement and reach that we're building,” he said.

Jon Keegan14h

OpenAI races to release updated ChatGPT in response to Gemini, the WSJ reports

OpenAI could release an updated GPT-5.2 as soon as this week as it races to respond to Google’s Gemini 3 chatbot. Last week, OpenAI CEO Sam Altman declared a “code red” in response to the threat, as Google appeared to leap to the front of the pack with its high-scoring AI model.

Altman has directed OpenAI teams to pause work on its quest for AGI and the Sora 2 video generation app, and double down on its core flagship product, ChatGPT, as it faces new pressure from competitors, The Wall Street Journal reports.

Altman seems to be panicking that if the company’s core product falls out of favor, it may not be able to generate the cash needed to pay for the $1.4 trillion worth of deals it has signed, according to the report.

Sam Altman’s Sprint to Correct OpenAI’s Direction and Fend Off Google

900M

Rani Molla14h

OpenAI’s ChatGPT is nearing 900 million weekly active users, according to a new report from The Information, up from 800 million in October. The Microsoft-backed chatbot has notably higher usership than Google’s Gemini, which as of its last earnings call had 650 million monthly active users. (ChatGPT’s monthly number is likely much higher than its weekly stats.)

Still, The Information notes that thanks to the success of Google’s latest AI model, app downloads have jumped and visits to its website are growing much more swiftly than those to ChatGPT’s — stats that have contributed to a “code red” situation at OpenAI.

Jon Keegan15h

Falling behind its rivals and facing internal tension, Meta reportedly preps new “Avocado” AI model

2025 turned out to be quite a chaotic year for Meta’s big AI dreams.

This year was supposed to be all about Llama 4, Meta’s open-source AI model that never fully launched.

In a frenzied pivot to get back in the race, Mark Zuckerberg undertook an AI all-star hiring spree for his new Meta Superintelligence Labs, spending oodles of cash on NBA-sized pay packages to lure recruits.

So how’s it all going within the company? Things aren’t exactly humming along, according to CNBC.

It reports that the new team has encountered friction within Meta’s corporate structure. The cloistered team is apparently working on a new frontier AI model code-named “Avocado,” which, despite Mark Zuckerberg’s passionate open-source AI manifesto, might turn out to be a proprietary, closed-source model.

Per the report, the many in the company were expecting Avocado to be released before the end of this year, but it’s now planned for Q1 2026.

A Meta spokesperson said, “Our model training efforts are going according to plan and have had no meaningful timing changes.”

Updated to include comments from Meta

From Llamas to Avocados: Meta's shifting AI strategy is causing internal confusion

So how’s it all going within the company? Things aren’t exactly humming along, according to CNBC.

Per the report, the many in the company were expecting Avocado to be released before the end of this year, but it’s now planned for Q1 2026.

A Meta spokesperson said, “Our model training efforts are going according to plan and have had no meaningful timing changes.”

Updated to include comments from Meta

Rani Molla

15h

Tesla is making even fewer Cybertrucks now than when it first started

At an annualized production rate of less than 11,000, it’s a “commercial failure.”

Rani Molla16h

Microsoft invests tens of billions for AI infrastructure in India and Canada

In two separate announcements this morning, Microsoft committed to investing tens of billions on AI infrastructure in India and Canada. In India, the company said it will invest $17.5 billion — its largest-ever investment in Asia — from 2026 to 2029, “to advance the country’s cloud and artificial intelligence (AI) infrastructure, skilling, and ongoing operations.”

Microsoft also said it’s adding to its investments in Canada for a total of CA$19 billion (roughly $13.73 billion) between 2023 and 2027 to “build new digital and AI infrastructure needed for the nation’s growth and prosperity.” This includes more than CA$7.5 billion in outlays over the next two years.