Month: May 2019

Why is there a problem with ad tech vendors making money on the data they sell to clients?
There are ad tech vendors getting big rebates on the targeted CPMs they buy on behalf of advertisers. Advertisers are too worried about their media agencies secretly profiting from their money to see the same thing happening at their demand-side platform. For data providers, the data they own is an asset they can sell time and again, so it’s relatively easy to pay a rebate on that volume. It’s similar to the situation when a media owner sits on their assets and then pays a rebate to an agency for buying.

How do ad tech vendors make money from these hidden rebates?
It’s easier now for advertisers to see how much a data provider charges them because in some instances the invoices come directly to them, and when they don’t, they know how to get that information from their DSP. That pricing information doesn’t offer the full picture, however. Advertisers can’t see whether that same data provider has given the DSP a rebate in exchange for a certain volume of impressions. These rebates tend to be paid quarterly and can account for sums that can represent a double-digit percentage of a DSP’s annual revenue.

Are the rebates worth more to ad tech vendors than their platform fees?
There are some DSPs getting giant rebates on the data they buy from providers. Those ad tech vendors make more money on the data they buy than what they make on the large customers that pay really low platform fees. If you’re an ad tech vendor that’s locked in the arms race to win market share, you have to be creative with how you broker deals in order to offset the fact some of the platform fees you charge agencies and increasingly advertisers just aren’t profitable. It’s not right, but it shows how far some companies are willing to go to keep the lights on.

Why do ad tech vendors agree to deals that aren’t profitable for the business?
Rebates are symptomatic of the race to the bottom caused by advertisers and their procurement teams insisting on the cheapest price possible. It’s created a situation where you have DSPs undercutting each other on platform fees in order to secure more bids being made through their tech. The more volume a tech vendor has, the lower the relative costs of running it. But fees are getting lower to the point where it’s tricky for a DSP to keep investing in its bidding tech and maintain data centers across the globe to listen to bid requests without looking for other ways to stretch already thin margins.

Why isn’t this a bigger issue in ad tech?
Agencies don’t have much insight into how their ad tech vendors make money, while the ad tech vendors regard data transparency as the elephant in the room. They know they’re delaying the inevitable outrage by not talking about it now, but if they kick this hornet’s nest, then they worry it will invite more downward pressure on pricing. It’s the same thing that happened when the DSPs started to disclose their take rates on bids.

What needs to happen for the rebate issue to be addressed?
The move to transparent media buying across the supply chain will ultimately create a level playing field where media owners, ad tech vendors and agencies can ensure they get paid a fair profit for the services they offer. If advertisers want to see how their ad tech vendors make money, then they need to make sure disclosure is governed in the same way it’s starting to be on the agency side. As it stands, the focus is on making fees transparent, which is a starting point, but shouldn’t be the only factor used to determine the quality of an ad tech vendor. There’s too much focus on the hidden fees made by the agencies and not enough on the rebates to ad tech vendors, which is a classic case of misdirection.

The post Confessions of an ad tech executive: ‘Rebates are symptomatic of ad tech’s race to the bottom’ appeared first on Digiday.

In short, Xandr is looking to offer advertisers a one-stop shop for targeted TV and video ads. But it’s not the only one attempting this. On the TV side, Comcast continues to try to bridge the gap between TV and digital video, as is addressable TV ad seller NCC Media (of which Comcast is a part owner). And TV networks including Fox, Comcast-owned NBCUniversal and Viacom are building their own TV-and-digital ad marketplace through industry consortium OpenAP, of which AT&T-owned Turner had been a member until last month. Then in the digital realm, companies including Google, Amazon, Roku and Samsung sell video ads across their own networks of publishers.

Xandr has the advantage of AT&T’s customer data to set it apart from others selling targeted ads on TV and online. Xandr has already used AT&T’s data to create 30 custom audience segments for advertisers to target audiences on Turner’s digital properties. Now it will use those audience segments to target viewers across Community and is in the process of building hundreds more. Additionally, AT&T is able to map all of the devices in a given household in order to target the members of that household with ads running across those various devices. “AT&T’s data is really interesting, valuable and differentiating. What you buy (Amazon) and where you go (AT&T) are some of the best signals, and we look forward to leveraging them across Xandr’s inventory,” Barry Lowenthal, CEO of The Media Kitchen, said in an email.

However, being able to target specific audience segments using AT&T’s data is only as good as the ability to reach those audiences at scale, which is why ad buyers have been waiting to hear more details regarding the inventory Xandr can offer.

Community will include inventory from WarnerMedia properties, including Turner’s and Otter Media’s portfolios of sites and apps, as well as AT&T’s streaming TV services DirecTV Now and AT&T WatchTV. Additionally, Vice, Hearst Magazines, Newsy, Philo, Tubi and Xumo will make their inventory available through Community. According to Xandr’s announcement of Community, the marketplace’s various inventory sources combine to reach more than 50 million people each month.

While Xandr has reportedly run into issues convincing some TV networks to sell their inventory through AT&T’s advertising arm, the company appears to have been able to persuade Viacom and A&E Networks to join Community, according to comments made on May 14 by AT&T CEO Randall Stephenson. In a keynote at J.P. Morgan’s Global Technology, Media and Communications Conference that was streamed online, Stephenson referred to an unnamed marketplace that AT&T is building and said that “Viacom is bringing some inventory and A&E.” A Xandr spokesperson declined to comment beyond the information included in the company’s announcement of Community, which did not mention Viacom or A&E Networks among the inventory sources.

Viacom has been expected to allow Xandr to sell some of its inventory following the company’s renewed agreement with AT&T to carry Viacom’s TV networks on AT&T’s pay-TV services, including DirecTV. According to The Wall Street Journal, AT&T had lobbied for Viacom to buy Xandr’s ad products and sales services, which likely includes the new video ad marketplace. Meanwhile, A&E Networks has prided itself on making its digital inventory widely available through programmatic marketplaces.

Whether Community has enough inventory to satisfy ad buyers’ supply demands remains an open question. One agency exec said they will need to test Community before being able to judge the sufficiency of its inventory and pointed out that they won’t need to judge Community on its own. Since Xandr is adding Community as well as DirecTV’s on-demand inventory to its addressable TV ad packages to target ads, it may be able to appease advertisers that are looking to target audiences at the household level across TV and digital.

Ad buyers generally find that there isn’t enough addressable TV inventory available, which is why they have been intrigued by efforts from companies such as YouTube and NCC Media to enable advertisers to extend their addressable TV campaigns online on a like-for-like basis.

Advertisers buying Xandr’s Community inventory will be able to use whitelists and blacklists to specify which publishers they do or do not want to carry their ads, as well as specify which device types they do or do not want their ads to run on. Xandr will provide advertisers with post-campaign reports listing the publishers that carried a brand’s ad.

These control and transparency tools will be particularly important for making traditional TV advertisers comfortable with buying Xandr’s Community inventory, said a second agency exec. These advertisers are accustomed to knowing the content they are advertising against and wary of the context in which their ads may appear online. However, in taking advantage of these controls, advertisers would limit their campaigns from running across Community’s entire inventory pool, re-raising the importance of Xandr being able to offer enough inventory for advertisers.

The post With video ad marketplace Community, AT&T’s Xandr expands inventory appeared first on Digiday.

Yaccarino was light on additional details about “The Office” and NBCU’s streaming service. For instance, when will “The Office” arrive on NBCU’s own service? The company’s licensing deal for the show with Netflix runs through 2021, so will it have to wait until that deal runs out? Will NBCU look to keep “The Office” on its service exclusively, or will it continue licensing the show on a non-exclusive basis to Netflix?

These are the key questions all of the major media companies weighing as they prep rival streaming services. Disney, for instance, has been public about its intentions to release its movies and TV shows on Disney+ and Hulu (which it now fully controls). In doing so, Disney is willing to forego billions of dollars in licensing revenue the company generates every year. WarnerMedia, meanwhile, seems to want the best of both worlds. Late last year, WarnerMedia renewed a licensing deal with Netflix that gives the streaming giant exclusive access to all 10 seasons of “Friends” through 2019. Netflix, which used to pay $30 million a year for those exclusive rights, agreed to pay up to $100 million for the renewal. But WarnerMedia’s parent company, AT&T, has also publicly said it envisions a scenario where “Friends” can live on multiple streaming platforms.

There is a distinct possibility that the big media companies will treat licenses for individual hit shows on a case by case basis. The conventional thinking is that as these vertically-integrated media companies look to battle the tech giants for people’s time and money, they are going to prioritize their own direct-to-consumer platforms. That is likely to gut Netflix’s library. More than half of the top 50 shows on Netflix are made by media companies planning to launch rival streaming services, according to Jumpshot data cited by Recode.

But how valuable is library programming to a subscription video service? Netflix clearly wanted to keep “Friends” and paid more than triple to keep it exclusively for one more year. But does “Friends” drive subscriptions? It’s more likely that these shows keep people around, versus being the reason they choose to subscribe, according to industry insiders.

“[Library shows] are a commodity — you gotta have it because it helps with churn,” said a longtime media executive. “Maybe a big show like ‘Friends’ can work for targeted customer acquisition campaigns, but not a comprehensive acquisition campaign. But if it helps with churn, pulling it from your rival and putting it on your own services could help capture some of that audience.”

Netflix likes to have “Friends” and “The Office” because those are great shows that people love to passively watch at home; but it’s the exclusive original series that typically drive someone to subscribe. The key is exclusivity.

The long-term impact these licensing decisions will have on Netflix is still unclear. There is survey data that suggests 29% of Netflix users between the ages of 18 and 29 would cancel their subscription if Netflix lost “The Office.” Some industry insiders argue that while Netflix will certainly be affected by losing some of its most popular shows, the overall impact won’t be as dramatic as it may seem. According to MediaREDEF’s Matthew Ball, Netflix’s catalog has shrunk by two-thirds since 2012, and yet the company has raised its prices by 46% and continues to add subscribers. And Netflix, which wants to replace the entire TV bundle (excluding live news and sports) instead of just one network, is concentrating more of its content spend on exclusive and original programming that can ostensibly replace some of the licensed fare that leaves its platform.

What all of this ultimately boils down to is the simple fact that it’s about to get harder and harder to get all of your favorite shows by subscribing to just one or two streaming services. More streaming services are coming, which means consumers will have more options — for better or worse. The services that succeed will be the ones that make themselves indispensable to people who don’t want to pay for more than three or four video subscriptions.

Netflix is betting that it has 148.9 million reasons — and many more by the time its big-media rivals launch their streaming services — for why it will remain vital to consumers. Its big media rivals need to figure out the role their content plays in capturing that same relationship.

Confessional

“Their office smells like venture capital.” — Video exec, about meeting with Quibi

Numbers don’t lie
$5.8 billion: The minimum amount Comcast is guaranteed to receive from Disney for its 30% Hulu stake.

29.1 million: Number of active Roku accounts.

What we’ve covered
CBSN crosses 1 million daily streams:

• CBS News’s live streaming news network, CBSN, now has 1 million daily video streams, with 80% watching content live.
• The news category in streaming video is getting more competitive, but CBS News said it’s not worried — thanks to a nearly five-year head start.

Read more about the CBSN here.

BuzzFeed is moving to a TV-like video strategy for its digital shows:

• The digital publisher plans to produce 20 longer, serialized shows for YouTube, Facebook and other platforms
• Shows such as “Worth It,” “Unsolved” and “The 100-Baby Challenge” are getting high watch times.

Read more about BuzzFeed here.

What we’re reading
WarnerMedia to put some shows on streaming service first (sub required): WarnerMedia plans to run new episodes of TV shows such as TNT’s “The Alienist” on its upcoming streaming service, before airing them on cable. The service is tentatively being called “HBO Max” and is a top priority at the company. But similar to WarnerMedia’s approach to licensing its programming externally, the company is trying to build a huge streaming businesses while maintaining its incredibly lucrative cable business.

As broadcast upfront season begins, there are signs that streaming isn’t king yet: During last year’s upfronts, ABC, CBS, Fox and NBC combined to secure more than $9 billion in primetime ad inventory; cable networks grabbed more than $11 billion. While streaming is increasingly getting consumers’ time and attention, the dollars haven’t left traditional TV as quickly. This is a good primer for why the upfronts remain relevant, especially as the industry braces for the streaming wars.

Apple has launched its Amazon Prime Video Channels clone: Apple TV Channels offers subscriptions to HBO, Showtime, Starz and other programmers. The company is banking on TV Channels and its upcoming Apple TV+ service to grow its services business, which generated $11.5 billion in revenue during the second quarter.

FX boss on Hulu as a streaming home post-Disney acquisition: The potential for FX to be a feeder into Hulu, which will serve as the “adult” complement to Disney+’s “family friendly” streaming service, makes a ton of sense. It’s likely that down the road FX’s existing streaming apps get deprioritized as Disney prioritizes Disney+, Hulu and ESPN+.

The post At the upfronts, streaming video — and a key question about Netflix — takes centerstage appeared first on Digiday.

“Everything we do starts with the data we hold,” said D’Cruz.

Pizza Hut’s marketers are sitting on more first-party data than they ever previously have. That’s thanks to the launch of the brand’s loyalty program last September. Since then, the digital ventures team has started to use that data to help inform the media buys made by its agencies. Some of that data is used to build lookalike audiences for agencies to target against, while some is used internally by Pizza Hut’s marketers to decide what creative to use for a specific format.

“The team has changed our approach to marketing helping us put our media strategy together and act on it,” said D’Cruz. “We are now more targeted, we know our customers better, we know what their media choices are and we can personalize our communication to them.”

Rather than view the digital ventures team as a way to shave costs from its media buys like other in-house teams, Pizza Hut uses it to leverage the value from the reams of data being generated from its online orders. Around 70% of the company’s orders in Europe come from either its site or app. Pizza Hut wants to cement its place in the pizza delivery market across Europe; therefore, having a team ready to pounce quickly on those orders moving online and the subsequent data they generate is key. Eventually, this could lead to more of the advertiser’s media being bought internally, particularly as more of it is won programmatic auctions.

“Given that the data sits with us, we know how consumers are behaving on our site and that means we can go and find lookalike audiences or go and market to people outside of that,” said D’Cruz.

The digital ventures team sits within the wider marketing one, but has a separate remit. That’s created a healthy friction between the two teams, said D’Cruz. For example, the customer experience team would typically want to reduce the number of steps in a customer journey to make it as seamless as possible. In contrast, the marketing team wants to collect more information to be able to tailor content to their preferences, said D’Cruz.

That said, D’Cruz said the friction is essential to driving further innovation. Both teams share many of the same KPIs: customer acquisition, conversion and retention.

Like many other advertisers, Pizza Hut had grown dissatisfied with the quality of work it paid agencies to produce. Most (77%) of the 73 client-side marketers surveyed by Digiday last month said underperforming or low-quality campaigns were a key reason why they turned their back on an agency. “We worked with a traditional media agency that didn’t necessarily think digital when it came to performance marketing and so we made changes,” said D’Cruz. “Those changes saw us not only build our own team but also partner with a specialist digital company.”

The post How Pizza Hut is building an in-house customer experience team appeared first on Digiday.