Month: January 2019

Naturally, the movement to replace agencies is spawning … more agencies.

As the in-housing movement progresses, there’s a rush to acquire and invest in companies offering in-house capabilities. This is driven by the reality that a marketer making creative or media buying part of its internal operations is a complex undertaking, requiring new roles, technology and more.

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A time of reckoning in digital media is upon us, and it’s time to take a closer look at the numbers.

That’s been the general feeling at publishing trade group DCN’s Next summit, held this week in Orlando, Florida. General chit chat around the conference, which has attendees from companies as diverse as giant broadcasters to print magazines to small digital media operations, focused on the growing number of challenges facing the industry.

The post The Rundown: Wave of layoffs has publishers concerned appeared first on Digiday.

Amazon’s responding to a wake-up call: The retail company makes more money letting other people sell to customers on its marketplace than it does selling to customers itself.

Strategy has shifted accordingly: The company has been opening up more e-commerce features and capabilities to third-party sellers that were once reserved for wholesale vendors, and shifting resources to be more hands-on with third-party sellers.

Third-party marketplace traction is picking up on Amazon thanks to more awareness and education on the selling model: There are networks of resources for small-business owners, big brands and resellers alike that explain how to get started selling on Amazon, and how to turn a profit doing so, by updated logistical changes to the marketplace and sharing tips and tricks. It also reflects a broader industry shift in retail toward direct sales, as more brands become less reliant on wholesale relationships, reworking supply chains and e-commerce teams to sell straight to customers.

When retail middlemen fall out of fashion, even Amazon has to switch gears.

“We’re seeing brands migrating from the [wholesale] side to the seller side ultimately because of control,” said Kiri Masters, the founder of the Amazon agency Bobsled Marketing. “If you have the time and ability to man a third-party seller account, you’ll get more control over inventory, you can send new product launches directly onto Amazon, and then determine pricing. It starts to make more sense, unless you’re only set up to be a wholesale vendor, and a shrinking number of companies are set up that way.”

According to eMarketer data, Amazon’s marketplace accounts for more overall sales than direct, and the gap is widening. In 2017, direct sales grew 21 percent to $70.4 billion, while marketplace sales grew 41 percent to $129.5 billion. This year, eMarketer forecasts that marketplace sales will increase by 31 percent, to $230 billion. And, due to higher margins, Amazon makes more revenue from the marketplace although inventory sold there isn’t the majority: The company reports that the marketplace accounts for more than 40 percent of all units sold.

Internally, Amazon is reacting to that shift. According to current and former Amazon business managers, in the past 18 months, it’s opened up more features to sellers, including Subscribe and Save (which sets automatic repeat purchases for items like shampoo and packaged foods), its Early Reviewer Program (which prompts reviews from a seller’s first buyers), automated couponing, more nuanced reporting tools like lost buy box percentage (which helps sellers set more competitive prices), as well as all of Amazon’s advertising products.

Other special programs are floated by Amazon’s team to help boost sellers, while getting sellers to act as guinea pigs for tests, like a pilot for a box of free trial-size products that would be sent to customers based on past purchasing behavior, said Elaine Kwon, a former Amazon vendor manager who currently consults brands selling on the platform.

“Almost all of what I call Amazon’s ‘innovation dollars’ are being reallocated to the marketplace side to help expand it in every category possible,” she said. “Any brand that is trying now to truly grow their Amazon business, there is no reason to do it anywhere but the marketplace.”

Reallocating resources
For Amazon, a marketplace business has better economics than its core, low-margin retail business. Marketplace businesses are pay-to-play, high growth and high margin. Amazon’s wholesale growth is limited by how many vendor managers it can hire to assign to its vendors, and how much inventory it can buy. In contrast, marketplace growth is essentially infinite, said Masters.

So, changes have been made to how Amazon aligns resources. According to Fred Killingsworth, CEO of Amazon consultant Hinge, the company last year pulled vendor managers off of all wholesale accounts that were doing less than $10 million a year in sales. And in Feb. 2018, it launched its Marketplace Growth program, which assigns a strategic account manager on Amazon’s team to help sellers navigate changes to the marketplace and act as a resource in solving problems and answering questions. Previously, Amazon’s Seller Central was a fully self-service marketplace, where sellers only get access to a dashboard and a generic “help” email for when problems arise.

Marketplace Growth addressed the often-cited complaint from sellers that Amazon’s largely faceless organization makes it impossible to navigate glitches and changing rules. Assistance doesn’t come cheap: To participate in the program, sellers doing under $1 million in revenue on Amazon are charged $2,500 a month for the service, and on the high end, those doing $10 million a year or more are charged $5,000 a month.

That monthly charge is on top of a pile of other fees Amazon charges sellers (and which don’t exist on the wholesale side): Fulfilled By Amazon, Amazon’s inventory management program that charges for Prime shipping privileges, storage and fulfillment, takes up around 30 percent of a seller’s overall revenue. Plus, Amazon gets a 15 percent commission for purchases made on the marketplace. Add-ons like search ads and enhanced brand content eat up more of the bottom line.

“Amazon used to focus on wholesale so they could control more of how brands appear on the site, but what they’re realizing is there’s more than one way to do things. And seller-side is pay-to-play. They can essentially make more money while doing less work,” said Rina Yashayeva, the vp of marketplaces at the integrated agency Stella Rising, and a former business development manager at Amazon.

Marketplace perks
Yashayeva said that, while her job was to recruit new brands as sellers on Amazon, she had to make clear to brands that once they were onboarded as sellers on the marketplace, they were essentially on their own. Amazon pushes a “hands-off-the-wheel” approach to seller management, and while that’s still the norm for most sellers, exceptions are made as business development managers spend more of an effort courting brands to the site.

Mike Grillo, the CEO of Gravity Products, which primarily sells weighted blankets, said Amazon reps from its “strategic accounts” team approached him with insight that Amazon customers were searching his brand name and then buying knockoffs on the platform when they couldn’t find them. Grillo was also pitched to be part of Amazon’s Brand Incubator program, which gave the brand access to more exposure on high-profile areas of the site, like the homepage, as well as a dedicated team member to help navigate merchandising and advertising.

Grillo said that the deal included a Cyber Monday offer: In exchange for an exclusive discount on the Gravity blanket, the product would be heavily promoted in Amazon’s Cyber Monday outreach. Grillo said that on that day, the brand pulled seven-figures in sales, and Amazon accounted for 15 percent of the company’s $16.5 million in sales in 2018.

He said that there was more that the Amazon reps put on the table that he ultimately didn’t take them up on, including a “soup-to-nuts” fulfillment arrangement in which Amazon would take care of shipping and logistics from sellers’ manufacturing sources in Asia.

“When you have brand equity, Amazon will come find you and then they’ll make you a deal. We discounted our product because the volume and promotion made up for it, but prior to that, we had no plans to sell on Amazon,” said Grillo.

In talks with new brands to get them to sell on the platform, Amazon’s teams now push all options — third-party marketplace, wholesale selling, third-party selling through an outside partner — in a pivot away from prioritizing wholesale, according to Kwan. In general, there’s more parity between the tools and features that each side of the business have access to, rather than two distinct selling experiences. And, according to rumors, it could all be laddering up to a One Vendor selling system, in which brands will have no choice in how they sell on Amazon.

But for now, a rising Amazon marketplace lifts the e-commerce giant’s overall business.

“A lot of dollars that used to be allocated for investment and growth in wholesale have been reallocated to the marketplace side. That money moving there is an indicator for what they’re looking for,” said Kwan. “It signifies a bigger direction for the overall company that they expect will pay off.”

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TikTok, the short-form video app from Chinese tech company Bytedance, began testing ads in the U.S. and the U.K. this month. This move comes less than six months after the app combined with Musical.ly. TikTok claims to have 800 million daily active users on its “fast-growing global creation and interaction video platform” overall, according to a source.

Digiday received a pitch deck that TikTok sent to a large advertising agency in Europe. The deck includes the app’s monthly active users and other audience insights broken out by country. The numbers are dated as of November 2018. The deck also describes the four ad products TikTok is offering and how they are measured.

A media buyer told Digiday TikTok is charging $10 CPMs for fixed buys. A media executive who learned of TikTok’s ad strategy at the Consumer Electronics Show this year said he heard higher prices for the brand takeover ad unit and said that there are three tiers of pricing at a fixed rate. The buyer said agencies are getting different rates.

TikTok did not respond to a request for comment by press time.

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Last week, The Financial Times appointed its first head of diversity and inclusion, Priscilla Baffour, tasked with improving the gender pay gap and help attract and nurture a diverse workforce. Last November, The Telegraph hired its first head of diversity, inclusion and belonging, Asif Sadiq, formerly from consulting firm E&Y.

Championing diversity isn’t new in media, broadcasters have adapted quicker than news or print publishers, hiring those that reflect their audiences. Sky is third in the list of top-50 U.K. employers for diversity and inclusion. BBC, Channel 4, ITN and ITV have run various initiatives to improve diversity.

“Broadcasters have been under pressure for longer, their audience bases are more diverse, and so bigger steps have been taken,” said Dr. Karen de Silva, associate director social science at behavioral analysis firm Canvas8. “In print, with more niche audiences, there’s definitely more work to be done.”

Most publishers have stated their commitment to improving diversity in the workplace, particularly after legal requirements meant they had to publish the difference in what organizations were paying men and women in April 2018. Elements of this role and diversity initiatives are often bundled into human resources departments, not appointing a specific role doesn’t mean publishers aren’t trying to make changes. But diversity roles specifically are evolving.

“The inclusiveness is key,” said Rachel Gascoigne, leadership consultant at Wickland Westcott. Gascoigne added in previous years the role was more often called diversity and equality. “There’s only so much you can do to increase diversity in the short term, but there’s much more to increase the sense belonging in daily decision-making.” She points to decisions like not scheduling meetings at 5.30 p.m., for instance, to not alienate staff childcare commitments. “Diversity is being invited to the party; inclusiveness is being asked to dance.”

Gascoigne, who runs diversity and inclusion workshops, points to three elements companies look at to drive a more diverse workforce: the people who are recruited, the people who are promoted and inclusive decision-making. “The key interest [from organizations] is in hearing what other companies have done. Organizations think there is a silver bullet; they think they’re missing something,” she added.

A lot of initiatives in driving diversity are often unsung. There’s a nervousness among companies about getting this wrong, and some are wary of coming across as tokenistic, which makes growing awareness more difficult. Widening contact pools and diverse interview panels are becoming more common, internal council groups can be effective if they don’t segregate those they’re trying to include. Equally, products are more often marketed to specific groups: The Economist and The Financial Times have aimed at women in recent marketing campaigns and editorial products. Lip balm brand Burt’s Bees released rainbow-colored products to celebrate Pride.

Gascoigne has run four workshops with six organizations attending each since last summer. They’re oversubscribed because it’s a topic that’s moving up the agenda for organizations, but also because diversity and inclusion get deprioritized when client deadlines loom, so attendees drop out.

But the amount of research into how diversity impacts the bottom line is stacking up. Research from McKinsey, which looked at over 1,000 global companies, their revenues and the makeup of the workforce, found that companies in the top quartile for gender diversity on their executive teams were 21 percent more likely to experience above-average profitability. For ethnic and cultural diversity, more diverse companies had a 33 percent likelihood of outperformance. Companies in the bottom quartile for gender and ethnicity diversity weren’t just not leading; they were lagging behind.

In the U.K., McKinsey found that greater gender diversity on the senior-executive team corresponded to the highest performance uplift: For every 10 percent increase in gender diversity, earnings before interest and taxes rose by 3.5 percent. Often there’s a causal correlation between diversity and profitability rather than direct results, and factors like attracting and retaining top talent as well as better understanding customers are two ways diversity helps to fuel return.

Having senior leadership buy-in is the ingredient for successful diversity initiatives, a long-term view is needed to make a cultural shift. “These decisions need to come from the top,” said Daren Rubins, founder of media recruitment company Conker. “In every brief, we discuss with clients, there’s a conversation about diversity and inclusion. I would like to see diversity and inclusion roles disappear; it’s everyone’s responsibility. But we’re not there yet.”

Specifically, the FT’s move to increase diversity means it will be able to boast more internationally relevant and innovative voices, though it shouldn’t stop there, said de Silva. “Diversity on the FT’s board would be the next hurdle. People want to see authentic diversity from businesses, not just surface-level engagement with the issue.”

The post ‘They think there is a silver bullet’: UK publishers are hiring diversity execs appeared first on Digiday.

Qualcomm’s revenue is expected to decline for the third consecutive quarter as Apple and others continue to withhold royalty payments amid legal challenges.

Tesla chief Elon Musk committed the Silicon Valley auto maker to an ambitious goal this year: a profit in every quarter. If it does deliver, it will be with a new chief financial officer.

Taiwan’s Foxconn says it may not build a Wisconsin factory for which it was promised $4 billion in incentives, while Amazon fields tough questions in New York.

Facebook posted record profit in the fourth quarter, showing the resilience of the social-media giant’s business even as it battled through a string of challenges.