Netflix’s advertising plans could benefit adtech stocks

Netflix plans to launch its ad-supported tier by the end of 2022, and to get there, it’s reportedly looking for an advertising partner that could reduce the investment and time needed.

This has led to wild acquisition and partnership rumors in recent weeks.

• Insider surfaced rumors of a potential Roku (NASDAQ:ROKU) acquisition by Netflix — but many in the industry have shot down the idea.
• Netflix reportedly met with Comcast/NBCUniversal (NASDAQ:CMCSA), Google (NASDAQ:GOOG) and Roku for an ad-sales partnership.

AdAge also named Magnite (NASDAQ:MGNI) as one contender to serve ads to Netflix.

Enter advertising: Netflix’s plans to ramp up its ad business could come at a cost. Per The Information, Netflix doesn’t have the rights to insert ads in most of its content.

• New content will have to be created, or deals will have to be renegotiated — which could raise its licensing costs by as much as 20%.
• Those benefiting the most could be Netflix’s potential partners — coming at a time when the advertising industry is under pressure from falling advertising budgets.

Adtech giants have been hit hard alongside other growth stocks, with companies like Trade Desk (NASDAQ:TTD), PubMatic (NASDAQ:PUBM) and Magnite down over 40% this year.

When a recession is around the corner — companies are quick to pull back their ad budgets, especially in the crypto industry, where many crypto firms have already ditched sports sponsorship talks.