After a highly turbulent year, Netflix (NASDAQ:NFLX) is now moving into the world of ads. Originally, the company had kept its spot at the top of the streaming sector by not implementing ads, setting it apart from rival platforms like Amazon (NASDAQ:AMZN) and Hulu. Since NFLX stock crashed, however, Netflix has badly needed a turnaround. Now, the company is betting on a new ad-based subscription plan. To launch it, Netflix just hired two leaders who helped grow Snap (NYSE:SNAP).
Yesterday, Netflix confirmed the hiring of Jeremi Gorman and Peter Naylor. Previously, these executives were Snap’s Chief Business Officer and Vice President of Ad Sales, respectively. Gorman will now move to the role of President of Worldwide Advertising at Netflix. Meanwhile, Naylor will retain his previous title.
Both of these hires bring a wide range of ad sales experience to a company just breaking into the space. Prior to Snap, Gorman spent six years at Amazon. Naylor also spent six years in ad sales at Hulu.
NFLX stock is up more than 3% today as momentum for the company’s new chapter builds. Let’s dive into what investors can expect as it prepares to turn a corner.
NFLX Stock in an Ad Sales World
This isn’t just a story about a company poaching two executives from another. It’s a story about Netflix recognizing a need for change and setting itself up to accomplish that in the most effective way. NFLX stock is rising today because Netflix has made a highly strategic play to launch itself into the digital advertising sphere. It intends to ride this wave back to the top, making the recent hiring news worth a closer look.
It’s easy to dismiss Snap as a social media company used mostly by teenagers. But InvestorPlace’s Luke Lango believes the company is much more. When macroeconomic headwinds pushed markets down in June 2022, Lango called SNAP stock a “canary in the coal mine for the economy as a whole.” As Lango notes, Snap is “one of the most successful digital advertising companies out there with one of the highest ROIs for advertising.”
Lango isn’t the only one to have taken a bullish stance on SNAP due to the company’s advertising strength. Back in April, InvestorPlace contributor Muslim Farooque called Snap a top pick among advertising plays.
Snap clearly understands the advertising game and has done an excellent job staying on top of it. Now, two of its ad leaders will be responsible for Netflix’s success in the space. Investors should take the hires as an indicator that NFLX stock will likely rise in the coming year.
What Comes Next
Netlfix’s decision to expand its advertising sales team should signal one thing to investors; the company is fully committed to taking the ad-based subscription market by storm. According to The Verge, Netflix’s new plan is expected to cost between $7 and $9 per month and will launch broadly in 2023.
Netflix will not likely see any serious growth until then. However, the company is clearly poised for a turnaround. That has some investors viewing the second half of 2022 as an opportune time to buy the dip in NFLX stock. Ray Dalio is already betting big on NFLX becoming a value play in 2023.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
