Summary:

Amazon’s Lovefilm has bought up adverts under its rival’s business name, as Netflix (NSDQ: NFLX) prepares to launch on Lovefilm’s home turf…

Netflix Vs Lovefilm

Amazon’s Lovefilm has bought up adverts under its rival’s business name, as Netflix (NSDQ: NFLX) prepares to launch on Lovefilm’s home turf early next year.

Lovefilm has bought search keyword ads against searches for the keyword “Netflix” on Google (NSDQ: GOOG) UK and Yahoo (NSDQ: YHOO) UK.

Users who search for “Netflix” are promised “Britain’s largest range of films & games – 70,000 titles and counting” and “Free first class post for DVD, Blu-ray & Games rental”. We are not sure how long this has been going on.

Last year, the European Court of Justice ruled that Google was not culpable if companies breached trademarks by placing ads against rivals’ trademarks. But the court then advised Marks & Spencer be found liable for placing ads against Interflora’s brand name for its own florist service.

Google answered an average 110,000 monthly UK searches for “Netflix” this year, according to Google’s AdWords planner, which lists competition for the keyword as “low”. By contrast, Google served 1.22 million monthly “Lovefilm” searches.

Netflix will launch in the UK and Ireland in Q1 2012. Marketing to a populace unaware of the Netflix brand will be one of the significant costs.

Lovefilm has 1.7 million customers for its movies and games across the UK, Germany, Sweden, Denmark, and Norway but, unlike Netflix, which is forced to by being a public company, won’t break out online consumption from postal consumption.

Amazon (NSDQ: AMZN) bought the company for a combined $200 million as the connected TV opportunity promises a step-change distribution opportunity for streaming-media operators.

But Lovefilm’s online odyssey appears less fully-formed. Its online roster is poor compared with its disc-based business. It still signs customers through direct mail and shopping mall promotions for a business that is mostly DVD-centric. This week, I even received door-to-door Lovefilm salesmen.

A key differentiator between Lovefilm and Netflix in Europe may be TV. That is something Lovefilm does not offer but which Netflix is negotiating rights for.

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