Shares of the tech-giant Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) were rising today after an AdAge report came out indicating that the company is talking with Netflix (NASDAQ: NFLX) about potentially working on an advertising deal with the video streaming service. The tech stock was up by 4.5% as of 1:55 p.m. ET.
The AdAge report said Alphabet’s Google is currently a “front-runner” among other competitors to forge an advertising partnership with Netflix, as the streaming service looks to boost its ad revenue.
You may recall that Netflix’s management said recently that it wants to launch an ad-supported streaming tier that would help the company attract additional users. The company hasn’t launched the idea just yet, but teaming up with Alphabet — which has nearly unmatched experience in the ad business — could help Netflix move closer to achieving its goal.
Alphabet investors were likely driving the stock higher today as they anticipate a deal with Netflix could be a significant addition to the company’s already-successful ad business. Shareholders may be especially interested in a partnership between the two companies right now because some are concerned that the economy could experience a slowdown as the Federal Reserve raises interest rates in order to tamp down inflation.
If an economic slowdown does happen, it could curb some spending on online advertising. A new ad partnership with Netflix would be a welcomed deal for both Alphabet and its investors right now.
No official deal has been announced between Netflix and Alphabet yet, so investors will want to keep a close eye on any new developments. In the meantime, Alphabet investors should prepare for more share-price swings as investors continue to digest news about the economy and inflation.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), and Netflix. The Motley Fool has a disclosure policy.