Month: April 2019

A weekly comic strip from AdExchanger that highlights the digital advertising ecosystem…

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Here’s today’s AdExchanger.com news round-up… Want it by email? Sign up here. Unsnapped Snap is launching an ad network that will allow it to distribute its ads on other apps and reach non-Snapchat users. The Snapchat Audience Network will allow app developers like Tinder and Houseparty to integrate an SDK that lets buyers advertising on Snap… Continue reading »

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Stitch Fix, now a $1.2 billion dollar company, is rethinking how it markets itself to users and potential customers.

The post Retail Briefing: How Stitch Fix markets itself appeared first on Digiday.

Where five-year-old mattress brand Casper ends up won’t just affect the future of the company, it will send signals about the health of the digitally native vertical brand or direct-to-consumer industry as well.

The company, which recently attained unicorn status thanks to a fresh round of Series D funding led by existing investors Target, NEA, IVP and Norwest, is reportedly out shopping for underwriters to explore a potential initial public offering. Going public, and the pricing Casper attracts, will go a long ways to giving an early verdict on the long-term value being created by the crop of direct-to-consumer brands.

“For the past six months, no matter who I talk to, the common refrain in the industry has been that this is some kind of make-or-break year,” said one DTC brand founder. “A lot of that has to do with Casper. If Casper makes it, we’ll all breathe a sigh of relief.”

“In short, it will all signal a whole lot. Whether Casper IPOs, is successful at it, or bombs, or even exits,” said another.

Why is Casper special? For one, the current wave and explosion of DTC brands is recent enough that there simply aren’t enough companies that have been around long enough and have kept growing. So it’s an age factor.

Barring Dollar Shave Club, there hasn’t been a major acquisition in the space in the past few years. As Kevin Lavelle, founder and CEO of menswear brand Mizzen + Main said, “Its a meaningful data point in an industry where there aren’t a lot of data points.” Many venture capitalists have stoked this idea, saying that 2019 is the year a high-profile exit or IPO will happen. (The other big contender for this is Warby Parker.)

Thirdly, Casper embodies what you could call the 1.0 model of the DNVB industry, which saw the playbook of launching a brand online, selling primarily through e-commerce, then going fast, and quick into a physical retail expansion. (While this isn’t a popular, or even a very clean-cut theory, the 2.0 model, embodied by Glossier or Away, is more socially native, where Instagram figures big, and relies much more heavily on a community aspect.)

“Casper really is a bellwether for the 1.0 model, which lots of brands are launching with even today,” said another DTC brand founder.

“Look, I have a Casper mattress. And I think they can be a success story,” said Lavelle. “In fact it’s better for all of us if they are.” But the issue is that if the IPO doesn’t go well, or simply doesn’t happen, and if Casper does not exit, Lavelle, like other founders, worries that people will unfairly anchor onto that.

“There will be an effect on other DNVBs because it will change investor sentiment,” said Lavelle. “Some investors aren;’t that savvy. But a lot of them are. Somewhere subconsciously it’ll be in the back of their mind. The idea will be, if Casper couldn’t do it, why will this company?”

It’s not exactly fair to call Casper the canary in the coal mine. It’s even simplistic: One brand cannot determine the trajectory of an industry, let alone the complicated one that is the “born-online” consumer brands industry, which runs the gamut from everything from product to category to marketing prowess to strategy to longevity. “But, people will run with the signal they see,” said a fourth brand founder.

“They’re one of the best in the business,” said a fifth founder of a company which also plays in the “sleep” space.. “We’re very different from them, though. We’re younger, smaller. But we still look at them as the ‘what could be’.”

“Net-net I believe this is less of a strategic move and more the only move that Casper has left given how much money they’ve raised,” said the first founder. It’s true that it’s increasingly tough for Casper to find a buyer the more expensive they get — although it’s not out of the question — so for many, even that is turning into some kind of cautionary tale to exit before you get too big to do so.

Casper is also still predominantly a mattress company although it likes to tout itself as being about all things sleep. The company’s next move is to own the bedroom, creating everything from sheets to night lights, a far cry from when it launched. But those haven’t really taken off, and other entrants in the “home goods” space like Brooklinen and Parachute have a head start. Successful IPOs in consumer goods almost always demand a breadth of product to minimize risk; Casper does not at least for now have that.

The other area Casper’s fortunes will affect is how DTC brands think of physical retail, said Huge’s global head of retail, Robin Copland. Casper, like other formerly online-only brands, made a big push into stores — with relationships with Costco and Target. E-commerce still represents the majority of its revenue, say sources, but it’s still a favored playbook. Copland said that if Casper’s IPO doesn’t do well, or there isn’t a successful exit, that will also come into question. “One of the biggest Cap-X expenses is in physical retail,” said Copland. “It’s upping the game for the industry in general. Where does that play out?”

Notable competitors in the mattress category have mostly found some kind of detente: Tuft & Needle recently partnered with Amazon to design an exclusive mattress. Purple is now public after it was acquired by a shell company in 2017 (a reverse Casper, in a way.) Allswell is owned by Walmart.

“There are a couple of very simple criteria that influences the perspective of a VC. To us, it starts with a disruptive consumer value proposition. Are they offering something different? The second is defensibility, do they have an unfair advantage in offering a solution or project that will allow them to be the only game in town?” Scott Friend, principal at Bain Capital Ventures, told Digiday in December. “The counterexample of that is Casper. They’re a great mattress brand but there are lots of them now, and that makes their job incredibly hard.”

The post ‘Bellwether’: Direct-to-consumer brands are watching Casper’s fate closely appeared first on Digiday.

Following a year in which Vimeo did $160 million in revenue, the IAC-owned video company is courting more advertisers and media companies to join the list of video creators and various businesses that use its video player and technology services.

Today, Vimeo is nearing 1 million paying subscribers for its video software services business, according to Vimeo CTO Mark Kornfilt. That software services business has become a huge growth area for the company, accounting for a “vast majority” of Vimeo’s revenue, according to a letter to shareholders from IAC CEO Joey Levin earlier this year. Ninety-nine percent of Vimeo’s subscribers are on the self-serve software, the company said.

“The reality is that many people still see us or think of us as a YouTube competitor — or for some people who have followed our progress, perhaps a place where filmmakers come to put their content,” said Kornflit. “We are now entirely focused on providing tools across the various areas of the video workflow for creators.”

In 2017, Vimeo made a major strategic shift from being a destination where people came to watch high-end videos, to a software provider for video makers of all sizes and types. Vimeo’s focus is capturing a larger share of a $20 billion market for video hosting, distribution and monetization. And this means being useful for a customer base that can include every type of video producer, from a social media star or media company publishing to various social platforms, to a yoga teacher streaming live video, Kornfilt said.

Vimeo offers four subscription tiers, ranging from the Plus package at $7 per month to the Premium tier for $75 per month. The company declined to break out, in terms of percentages, how many of its customers subscribe to the different tiers. But at nearly $160 million in overall annual revenue and close to 1 million paying subscribers, Vimeo would be making roughly $13.33 per month per subscriber if all of its revenues came from its software subscriptions.

Looking ahead, Vimeo sees growth opportunities with video makers interested in launching subscription services. Beyond its core software product for video makers, Vimeo also offers an OTT product that allows customers to spin up subscription streaming channels. That product is being used by more than 1,000 OTT subscription services, the company said.

“It’s across the board; we are seeing content owners of all sizes coming online through us and going direct to consumer,” Kornfilt said. “It’s a trend that we are going to see continue over the next couple of years as these media properties and publishers get a grasp on their ability to spin up these services, frankly, quite easily.”

While small businesses are the fastest-growing customer segment, according to Kornfilt, top marketers such as Red Bull, Unilever and the NBA are also using Vimeo products, the company said.

Vimeo’s efforts to get in front of more publishers, marketers and other business owners have included an ad campaign featuring cheeky out-of-home placements promoting what Vimeo can and can’t do for video creators. The $10-million campaign has included pre-roll ads on YouTube promoting Vimeo’s ad-free video player.

One of the newer feature sets, introduced in early 2018, is the ability for Vimeo subscribers to publish natively to social platforms including Facebook, YouTube and Twitter, “with one click,” said Kornfilt.

This creator-centric approach, which also included offering tools such as live streaming and support for HDR video, helped Vimeo grow its bookings by 30 percent in the second quarter of 2018, the company said. And with 90 percent of Vimeo subscribers on annual plans, according to Vimeo, the company hopes to create enough stickiness where it can routinely grow revenue by 20 to 30 percent, said Levin in his shareholder letter.

The post How Vimeo shifted from being a YouTube alternative to a $160m B2B player appeared first on Digiday.

When Roger Lynch walks in the door as the CEO of Condé Nast later this month, he will face a long, daunting to-do list. The 55-year-old executive, who has previously served as chief executive at Pandora and Sling TV, is new to the magazine world but used to tough challenges.

On Thursday, the magazine publisher named Lynch, the former CEO of Pandora Media, as its next chief executive, replacing Bob Sauerberg. Lynch will take the helm of a once-tribal, print-focused media company trying to become a global one, with a business centered on video, creative services, consumer revenue and — crucially — profitability by 2020.

Lynch enters the legacy publishing industry as a relatively unknown quantity to publishing veterans. Current and former Condé Nast executives admitted to Digiday that they had never heard of Lynch prior to Thursday’s announcement — though they agreed that his experience made him a smart choice.

Sources that have worked with Lynch in the past say the same. The former physicist, who spent years designing infrared missile systems before pivoting to business school at Dartmouth, is described as methodical and level-headed, equally adept at digging into the weeds and using big-picture thinking to see years into the future. That competence, observers say — and Condé hopes — will trump the fact that Lynch has never worked in publishing.

“He’s kind of the cleaner,” said one source that’s worked with him at Pandora. “He comes in, reorganizes, figures out where to focus and execute.”

When Steve and Jonathan Newhouse informed Condé staffers last winter that they had begun searching for a new CEO, observers mused that there were few executives in the media world suited to the task. In addition to reining in costs, Condé’s new boss would have to guide dramatic expansions into new, competitive areas including video, creative services and consumer revenue. Those moves would require new thinking about distribution, organization and strategy — plus managing a large-scale shift in priorities.

Lynch, at various junctures, has tackled all of those. Back in the late ’90s, when he was trying to build Chello, a European broadband internet service provider that eventually expanded to serve 15 different markets, Lynch oversaw a “political,” “mind-numbing” process of taking many companies’ technology and content assets and centralizing them into a single product, said Sudhir Ispahani, Chello’s former CTO.

“He came into a very complex environment,” Ispahani said. “He had to deal with the CEOs of all of these different, loosely-knitted companies.”

Lynch also has experience in managing turnarounds and growing new businesses while keeping an eye on the bottom line. At Dish Network, Lynch oversaw the development of Sling TV, a streaming skinny bundle designed to help the satellite distributor offset the growing wave of cord-cutting. By the time Lynch left in the spring of 2017, Sling TV had grown to an estimated 1.45 million subscribers; today it has 2.4 million subscribers.

At Sling, he also showed patience, waiting until blue-chip networks, including ESPN, agreed to join before launching the product.

“He’s one of the smarter people I know when it comes to where things are headed with [TV] distribution,” a second Pandora source said.

Lynch also has experience making cuts at large organizations without denting employee morale. He led the charge of figuring out where to relocate Pandora’s engineering team while also trimming its workforce by 5 percent, part of a broader effort at cutting costs while investing in newer areas. “He did a masterful job of not alienating anybody,” that second source said.

Lynch also has several years’ worth of experience growing multiple revenue streams simultaneously. At Pandora, he fortified positions the streaming radio pioneer had staked out, acquiring the programmatic audio ads company AdsWizz for $145 million to recast Pandora as a platform, rather than a media company.

But advertising was not Lynch’s chief priority, sources said. Instead, he was more focused on growing consumer engagement with Pandora’s products. He saw a major priority in re-deploying Pandora’s marketing infrastructure so that it could be used to boost the amount of time people spent using Pandora.

During Lynch’s tenure, Pandora’s subscription product, Pandora Premium, grew into a nine-figure source of revenue that accounted for nearly a third of the company’s revenues, according to the company’s final quarterly earnings before Pandora was acquired by SiriusXM.

Those efforts shrank Pandora’s losses and helped nudge its stock price upward. But they were not enough to drive a return to profits.

“He did the best he could do in a difficult situation,” said Michael Pachter, managing director in equities at Wedbush Securities, who noted that Pandora had to compete with bigger, better-capitalized opponents both in digital radio and for subscribers.

Lynch’s new employer faces similarly unfavorable conditions. The legacy publisher reportedly lost $120 million in 2017. And while a mix of cost-cutting and video revenue growth narrowed the gap in 2018, Sauerberg’s strategic plan does not predict a return to profits until 2020. And as Lynch charts that course, the publisher will face intense competition for the attention of both consumers and advertisers. Navigating it will require dispassionate discipline. Luckily for Condé Nast, that is what Lynch is known for.

“What he’s demonstrated at both [Dish and Pandora] is that he’s able to grow a digital business while at the same time be very financially disciplined,” said Amy Yong, an analyst at Macquarie. “I’d say that’s how investors know him.”

The post ‘The Cleaner’: Conde Nast’s new level-headed leader is a publishing newcomer appeared first on Digiday.

The hundreds of direct-to-consumer brands that have sprung up in recent years are often painted as renegades, playing a nimble David to established brands’ sluggish Goliath. Now, these brands are starting to see the merits of scale.

That’s given rise to DTC holding companies that can wring cost savings from shared services around customer support and fulfillment, while providing a more efficient means of customer acquisition that has been the lifeblood of upstart brands. There are distinct benefits at scale within holding companies: A power-in-numbers approach leads to a bigger voice that commands more attention when dealing with larger entities like Shopify, Google and Facebook; technology like machine learning and e-commerce capabilities can also be shared across brand backends. As expensive utilities like free returns and fast shipping become table stakes, brands need all the support they can get.

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BBC-ITV joint venture Freesat is putting a twist on media buying in a bid to gain a rare edge over larger, richer rivals like Sky and Virgin by ending its 10-year deal with Havas in favor of a hybrid one with two independent agencies, Roast and Electric Glue.

Roast will buy Freesat’s online ads, while Electric TV will do the same for TV, having first purchased for the advertiser last September. As effective as the holding group model can be for some brands, it no longer gives others the control and flexibility they need, particularly when it comes to online ads, which is why Freesat changed gears.

At its heart, the switch is about giving Freesat control over a media plan that will eventually move from mainly brand building to driving business objectives. Whether that’s growing brand awareness or driving sales and customer loyalty, plans are underway to assess future campaigns with custom metrics beyond simply proxy metrics such as click-through rates. That was harder to do at a network agency that has pre-defined ways of planning, buying and measuring ads in order to offer larger advertisers propositions that can stretch and flex in different markets. Prior to the changes, most of Freesat’s spend had gone into TV and so it was easier to accept the old way of working.

For this to happen, Freesat has had to become more open to sharing data such as customer data and website data with its agency in a privacy-compliant way.

“There was a time when clients would be quite guarded about things like data sharing, but we have to be a lot more transparent with our partners,” said Andre Santos, director of marketing at Freesat. “We’ve hired agencies to do their best for us and that only comes from having the data needed to make the right decisions.”

Freesat’s willingness to share data comes ahead of its transformation into an online retailer next year when it will start to manufacture and distribute the set-top boxes for its TV service.

“One of the metrics we’ll eventually be able to benchmark against is conversions because once we have the e-commerce part of the business sorted we’ll be able to start investigating the attribution value of each media on our plan,” said Santos.

Unlike Sky, which has both ads and subscriptions funding its own media budget, Freesat is funded by stakeholders including the BBC and ITV as well from money made from broadcasters that pay for slot on the service’s electronic program guide. Freesat has previously spent £5 million ($6.5 million) annually on ads, whereas Sky spent £124 million ($163 million) last year, per Nielsen. As the battle to profit from TV’s fragmentation intensifies, smaller players are at risk in the absence of robust business models. It heaps pressure on media investments to do more of the heavy lifting when it comes to driving customer acquisition.

“We’re competing with some of the largest companies in the world but don’t have the budgets they have, so it’s incumbent on our marketers to think about media differently in order to give us an edge,” said Santos.

Freesat hasn’t ruled out taking some of its media buying and planning in-house eventually. It was discussed during the pitch with the agencies potentially evolving into media consultants to Freesat’s marketers.

The post Freesat shakes up media buying model to compete with bigger TV rivals appeared first on Digiday.

Retailers are increasingly giving their wedding and baby registries a digital upgrade, in response to changing consumer tastes and competition from digitally native startups. That means adding new digital tools like chatbots, providing alternatives to  traditional gifts, and integrating mobile in-store shopping options and

Walmart announced yesterday that it is rolling out a new baby registry section within the Walmart app. As part of the redesign, Walmart’s adding a chatbot that will ask soon-to-be parents questions about their due date, their baby’s gender, and what type of nursery theme they prefer (including if they want a gender-neutral theme). The bot will then use that information to pre-populate their registry with suggested items.

“Long gone are the days when creating a baby registry meant walking around the store with a scanner in hand,” Ashlee Neuman, deputy editor for the Bump, said in an email. Today, they’re likely to be registered at multiple sites. And, they might want gifts that can’t be found on big-box retailers’ shelves.

Then there’s the Amazon effect: the e-commerce site has also become an increasingly popular place for registries, with some surveys reporting nearly a third of respondents are turning to Amazon to create wedding registries or buy baby products. So, big-box retailers also have to figure out how to differentiate themselves against Amazon’s endless aisles — as well as newer startups that allow shoppers to create registries by pulling items from multiple e-commerce sites.

In response, retailers are investing in slicker digital shopping capabilities to make the registration process as easy as possible, and in some cases are partnering up with startups that threaten to take away some of their market share.

Weddings and baby showers are two of the most popular occasions that shoppers have traditionally created registries for. According to an analysis from baby registry startup Babylist, the average order value of a baby registry created on its site last year totaled $2,100 and contained 121 items. And in a survey released by wedding website the Knot last year, respondents reported a total average order for their wedding registries of $4,853, and containing 125 items.

Big-box retailers like Target, Walmart, and Bed Bath & Beyond (as well as its children’s store, Buy Buy Baby) have been traditional stops along the path to registering for both wedding and baby showers. So, conversations about how to cater to both occasions have to go alongside one another. For both wedding and baby showers, the demand for cash, charitable gifts, gift cards and services in lieu of gifts has risen, but more so for wedding registries, according to Neuman.

“Many soon-to-be-weds find they don’t absolutely have to have a new set of dishes or a high-end kitchen appliance and prefer to put the money toward shared experiences — but when you’re expecting a baby, there’s no getting around the fact that you’re going to need a whole bunch of stuff,” Neuman said.

Target gave the registration process for its registries a refresh a couple of years ago, by integrating Pinterest Lens into its registry experience, so that customers could point their apps at an item they liked, and automatically add it to their registry. And last year, it partnered with Honeyfund — a startup that allows couples to request contributions towards their honeymoon and other experiences in lieu of gifts — to allow couples to add a honeymoon fund on their Target registry. Crate and Barrel also announced a partnership with wedding registry startup Zola last year to sell Crate and Barrel products directly on the Zola site.

Zola opened its first brick-and-mortar store in New York City this year, a pop-up that will run through April.  Here, CEO and founder Shan-Lyn Ma said the company is focused on how to use technology to help customers easily add items to an online registry in a brick-and-mortar environment. Its app utilizes near-field communication, which allows customers to wave their phone over an item to add it to a registry, instead of scanning a barcode.

Zola, which started solely as a wedding registry site in 2013, also now offers wedding planning services as well, like an online directory of vendors and invitation designs. That’s where Ma believes they can forge ahead of big-box retailers.

“I think we’ve seen many department store retailers try to copy some of the features we have within Zola,” Ma said. “But it’s been tough and we haven’t seen anyone really offer the same end-to-end experience we have.”

The post How retailers are rethinking wedding and baby registries in the Amazon age appeared first on Digiday.

At a distance, McDonald’s 19,000 square-foot flagship location in Chicago could be mistaken for an Apple store. Its boxy, glass-paneled design, and its airy, minimalistic look and feel, combined with modern-looking furniture, offer some clues as to what might have inspired the design. The company is calling it an “Experience of the Future” store, a format that inspired 4,500 store renovations last year, and it plans to grow the concept.

Other retailers are drawing inspiration from Apple’s store model. Apple has built a retail template other stores can borrow from: neat minimal stores with personalized service and experiences, including events and classes. It’s become the default setting for store design makeovers. In November 2010, Tesla hired Apple’s former vp of real estate George Blankenship, who worked at Microsoft for a year prior (he left Tesla in 2013).

“When the Tesla showroom first opened, I interviewed the head of retail for Tesla, a former Apple retail guy,” said Carmine Gallo, an author who has been studying Apple’s retail model for more than a decade. “I said, ‘This does remind me of an Apple store.’ He leaned over and said, ‘This is an Apple Store — we just sell cars.’”

It’s not only Silicon Valley brands borrowing from Apple. The list of retailers adding elements of Apple’s model keeps expanding and now includes brands like Samsung, AT&T and Verizon, as well as big-box retailers like Kohl’s and Walmart, which rolled out Apple-style associate-assisted checkout around last year’s holiday season. Digital-first beauty brand Glossier, which has stores in New York, Los Angeles and Miami, models its stores as experiential product showrooms, with products neatly laid out in uncluttered open spaces designed for discovery, with careful consideration to lighting and presentation.

“We think a lot about Apple as we think about our design and experience,” founder and CEO Emily Weiss said in a recent interview.

Apple’s 506 stores have been lauded as a retail success story, yielding approximately $5,546 per square foot, according to a 2017 CoStar study. For retailers squeezed by Amazon, the growth of online commerce and outdated stores that face declining traffic, appropriating elements of Apple’s model is a way to breathe life back into physical stores. A clean, carefully presented selection of products, a help center that resembles a hotel concierge, a space for events and classes, and a cashierless checkout system are some elements retailers are trying to copy. The common denominator is that they’re all aiming to nail an approach to retail that’s predicated on a glitch-free, easy customer experience.

“Everything is well thought out,” said Gallo. “What does a store that enriches lives look like? It’s going to be clean, uncluttered and appealing. They’re going to welcome you within a few feet or a few seconds of entering the store.”

Though the departure of Apple’s svp of retail Angela Ahrendts in February drew concerns the model was looking tired, one industry source who has worked with Apple noted that it’s more a sign that the Apple store template is on firm footing, a formula that can be exported easily to other contexts.

“[Ahrendts] basically provided a framework already,” the source said. “The stores aren’t designed to be distributed model for revenue — they don’t need the stores. There’s a deeper manifestation of the educational mission [now]. It’s not just a place to tell you how to fix or use your phone.”

With more retailers looking to its model for inspiration, Apple has started to consider what the next move is to improve upon its stores. It launched a “next generation” store model in 2016, which builds on its initial proposition, and it’s in the process of updating more store locations. The renovated stores feature interactive windows showcasing products, an expanded Genius Bar (“The Genius Grove”) with trees, an event space next to a video wall, public space with free wifi and boardrooms for training sessions.

But despite moves to incorporate elements of Apple’s model in a traditional retail context, other industry observers say traditional retailers have failed to do so beyond some of the aesthetic elements, and Apple Store retail elements aren’t necessarily applicable to all traditional, big-box retail situations.

“A lot of people think that the success is because of the look,” said retail store designer Sergio Mannino, owner of a New York-based creative design firm. “It’s successful for Apple but not translatable, because that store is the perfect representation of what the brand stands for.”

What many retailers miss, he said, is capturing the intangible elements of the experience that are behind the aesthetic. Similar to what many online-first retailers are doing today, Apple was one of the first brands to develop the store that doesn’t necessarily need to sell.

“This is what people don’t copy, or if they do, there’s a smaller percentage of [retailers] that understand that,” Mannino said. “A store today is a place where you activate your brand, where you show what the brand stands for.”

The post ‘Everything is well thought out’: How the Apple store has become a template for retailers appeared first on Digiday.