The following quote is taken from a deep-dive analysis on Netflix’s two-decade rebirth as a media company to become one of the top five best-performing tech stocks. Hear the original recording on the Acquired.fm podcast.
Over the last three years, Netflix has grown its subscriber base by 30%, year over year, give or take ~1%.
The company is extremely data-driven about when to [deploy] marketing spend, and when they feel it’s a good idea to spend on [acquiring] customers.
A lot of this stuff [we’ve discussed in this two-part podcast] is true in the abstract, like the product getting more valuable over time, and new big hits drawing people in, but Netflix, based on their earnings reports, appears to care about growing 30% year over the year, and then flexing different levers to get there.
Sometimes they spend more money on content (which for other companies, you can think about as product investment) and sometimes they spend more money on marketing.
And I would imagine the way it works is when they feel like they have an opportunity to create a superstar show, they go hard into it. If it works and they’re going to hit their 30% growth, they don’t need to do an enormous amount of marketing spend. If it doesn’t, then they need to do more marketing spend to bring people onto the platform.
It’s just kind of an interesting way to think about driving the business, and since that’s been so constant, it’s sort of clear what levers they’re moving to accomplish what end.Ben Gilbert, Co-Founder at Pioneer Square Labs