If you’ve been on Netflix in the last month, chances are you’ve seen The Social Dilemma documentary trending on the ten most popular TV shows and movies section. The controversial movie has pulled back the curtain behind some of the largest social platforms and the problems they created. Former experts and creators of popular apps like Facebook, Twitter, tech, and medical experts warn about the dangers that have arisen from a select few controlling the way we receive information and how they are ‘reprogramming society’ through social media. Sounds kind of scary, right? However, the whole storyline behind the social dilemma being pushed by Netflix is a self-serving story – and you are about to learn why.
Enlightened Experts or Convenient Storytelling?
Netflix sharing a story about the dangers of social media is almost comical if it were not for the fact that they are talking about heavy and important topics. The Social Dilemma delves into the problems that have resulted from the rise of social media such as mental health, political advertising, and discrimination. Many of the experts featured throughout the movie were individuals who worked at the social media giants like Facebook or Twitter. Isn’t it interesting that these individuals are only now suddenly enlightened and anti-advertising? Their supposed enlightenment is not real, rather convenient storytelling. It did not seem to bother them enough while working there -they became millionaires off the advertising they helped to create! It was all fine up until the documentary because they built a very successful business on that model.
Netflix is Also Making Money Off You
Netflix wants you to think social media platforms are the enemy. The average Joe may not realize that those companies are a direct threat to their business model. But how does Netflix intertwine with Facebook or Twitter? It is in the way they are monetizing their online platforms. There are three main ways to monetize online platforms:
- Ads
- Selling products
- Charge the user
The first is the most familiar. The platform is free to the user and revenue comes from advertisers. The most well-known are Google and Facebook, which allow you, the user, to search for anything and stay in touch with “friends” for free. The second are platforms that are making money from selling products, like Amazon and eBay. Lastly, we have the least commonly used approach, which is to charge the user for the service, like Netflix.
Even though Netflix may have the upper hand in the argument against social platforms, Netflix is still making money off their subscribers. They operate on a non-ad model and they are going on the attack. But what would someone be willing to pay in a monthly fee to not have your data shared? You can find the average time users click on Facebook ads and how much their average cost-per-click (CPC) actually costs. The question becomes: are you willing to spend a monthly fee for your social platforms, such as Facebook, or are you still comfortable continuing to see the ads that are most relevant to you?
Publicly Traded = Prices Grow
The other aspect where Netflix’s argument falls short lies in that they are a publicly traded company. The reason that the advertising model is more attractive is because once you hit critical mass of users, your growth rate slows and can even plateau. The only way Netflix can grow their revenue is by raising their prices. As of right now, Netflix’s user base is not growing at the rate that it was while people were adopting.
Their growth now comes from raising their prices. Last week, Netflix announced they were increasing the premium tier from $14 per/month to $18 per/month. In a recent note to his clients, analyst Alex Giaimo of Jefferies said, “In the Q1 call, Netflix said that they were ‘not even thinking about price increases,’ while the Q2 language was more open-ended.” He also went on to explain that a potential $1 to $2 rate hike in North America and Europe could generate the business an additional $1 to $2 billion in fiscal ad revenue.
Food for thought: When I started subscribing to Netflix in 2010, I paid $8/month and now they will charge me $18, more than double!
Final Thoughts
Each online company is making money off you, but in different ways. For one of the three to call out the other two is not a fair argument. The entire online platform business model monetizes its customers from selling products, giving a free service with ads, or charging you directly for the service. This self-serving movie put forth an almost-convincing argument, but perhaps you, as a reader, will begin to look at this differently now.
Do you still feel the same way?
