Netflix (NFLX) stock is trading higher after the company’s third quarter earnings beat showed momentum in its ad-supported offerings. MNTN CEO Mark Douglas joins Seana Smith and Madison Mills

“The move towards ad-supported customers is doing something very interesting [for] Netflix. It's essentially making it a growth stock and a value stock at the same time. The reason I say that is they're adding ad-supported customers at a significantly faster rate than they're monetizing them. So that's creating a big revenue backlog that they'll tap into in maybe two to three years,” Douglas says.

He explains that Netflix’s shift into ad-supported subscriptions is similar to its password-sharing crackdown, which boosted subscriber growth. “A few years ago, it was so easy to get into a Netflix account using your friend's or family member's account. Then they just kind of slightly locked down on that and had an explosion of subscribers and an explosion of revenue. This is essentially similar. You know, it's basically creating this revenue backlog that they'll tap into.”

“Another way to think about it is you could predict that Netflix will do a, let's say, a two times price increase in two years, except the subscriber is not going to pay for it. The advertiser is,” he says, explaining that with the ad-supported tier, Netflix is driving significant revenue from advertisers rather than directly from users.

Douglas notes, “A little secret in media is that the advertiser media companies want you to like ads… They love when you're in the ad-supported tier, not in the ad-free tier. It makes them a lot more money” as it’s “kind of double dipping” with advertisers and users driving revenue.

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This post was written by Naomi Buchanan.