Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Netflix has won the streaming war. Now it needs to win the advertising one. That will be easier said than done.The company remains the undisputed leader in video streaming. Last week, it threw up another big quarter of subscriber and revenue growth, adding more than 8mn net new subscribers from April to June. Revenue rose 17 per cent to $9.6bn while net income jumped by nearly a third.Fuelling the growth was last year’s decision to crack down on password sharing and introduce a lower-priced subscriber plan with advertising. Hit shows such as Bridgerton and Baby Reindeer also helped attract viewers.At a time when rival streaming services are struggling to gain customers and make a profit, Netflix, with its 27 per cent operating margin and robust free cash flows, is the envy of the sector. Its shares have traded accordingly. The stock, up 35 per cent over the past 12 months, hit a new high this month. At about 30 times forward earnings, it commands a premium over rival streaming operators.But the subscriber surge from the password crackdown cannot last. User growth will slow. This could come as soon as the next quarter, with tougher comparatives from last year. Netflix plans to stop reporting quarterly subscriber numbers starting next year.It’s a questionable move that may backfire. Without insight into subscriber growth, investors will be forced to focus on other metrics. Netflix will need to start making more money from advertising to maintain its share price gains.The problem is Netflix is still a minnow in advertising. While YouTube and Amazon have well-oiled ad machines, Netflix is only starting to build its own ad-tech platform. Analysts at Emarketer forecast Netflix will generate $760mn in advertising revenue this year. That would translate into just a 2.7 per cent market share of the so-called connected TV ad business. Hulu and YouTube each have 12 per cent, while Amazon has 11 per cent.Netflix’s cheaper, ad-supported tier has over 40mn global monthly active users. It needs to work harder to monetise these customers. That means showing more ads, or even introducing ads to its other ad-free tiers. At Amazon’s Prime Video, showing ads is the default mode. Customers have to pay more to avoid ads.But people pay for Amazon Prime for free delivery. Video is just gravy. Netflix customers will have less tolerance for ads, and for being asked to pay more to stay ad-free. After years of pitching itself as an ad-free alternative to traditional TV, Netflix faces its toughest battle yet.pan.yuk@ft.com
