Netflix‘s ad-supported streaming tier now boasts an impressive 40 million global monthly active users, marking a significant leap from the 5 million reported just a year ago. This milestone, announced at Netflix’s recent Upfront advertising presentation, underscores the rapid growth and popularity of this more affordable option in Netflix’s diverse subscription offerings.

With a total subscriber base of 270 million worldwide, the majority of Netflix users still prefer the ad-free experience. However, the surge in ad-supported tier subscriptions highlights a notable shift in viewer preferences, influenced by the increasing cost of ad-free plans.

Netflix’s journey towards an ad-supported model has been a cautious one. For years, the streaming giant resisted the inclusion of advertisements, sticking firmly to its premium, ad-free roots. However, facing intense competition and the need for new revenue streams, Netflix confirmed in 2022 its plans to roll out a cheaper, ad-supported tier. By the end of that year, the Standard with ads plan was officially launched.

In the United States, this ad-supported plan is priced at $6.99 per month. It offers HD streaming on up to two devices simultaneously, although some movies and TV shows remain unavailable under this plan. In contrast, the basic ad-free plan costs $15.49 per month, and the premium plan, which includes additional features like spatial audio and offline downloads, is priced at $22.99 per month.

The reception of the ad-supported tier has been overwhelmingly positive. Netflix reports that in countries where the option is available, more than 40 percent of all new signups are for the ad-supported plan. Moreover, over 70 percent of these subscribers engage with Netflix content for more than 10 hours each month. Advertisers, too, are seeing benefits: Netflix notes that users on the ad-supported plan are twice as likely to engage with advertisements compared to those on other streaming services.

The introduction of the ad-supported tier is not just about offering a budget-friendly option; it’s also a strategic move to enhance revenue. Since its launch, Netflix has partnered with Microsoft to manage its ad placements. However, looking ahead to 2025, Netflix plans to launch its own in-house ad platform, aiming for greater control and potentially higher ad revenues.

Beyond diversifying its subscription models, Netflix has taken steps to curb password sharing, a practice that has long impacted its revenue. By ending multi-household account usage, Netflix has successfully driven both subscriber growth and an increase in revenue, solidifying its position as a leader in the streaming industry.