Month: June 2019

Facebook also announced it was testing a new product called News Funding, which allows publishers to convert Facebook users into paying subscribers directly inside Facebook. To date, publishers using Facebook’s subscription tool have converted Facebook users on their own mobile sites, thereby being able to control the customer relationship.

The News Funding tool announced Tuesday is essentially identical to the Fan Subscriptions product rolled out to creators late last year. There is a key difference: Facebook will not take a cut of the revenues that publishers generate using News Funding, compared to the 30% cut it takes of Fan Subscription revenue. However, Facebook would still own the customer relationship. Publishers focused on consumer revenue have cited customer ownership as a key problem in their relationship with platforms including Google and Amazon. Facebook would not disclose a full list of publishers using the tool, which is still in test phase with a small group of invited publishers, including the Mexican investigative news publisher Animal Politico. After an initial test, 10 additional publishers are testing it now.

Some publishers have found Facebook’s features to be useful for acquiring and retaining subscribers — for instance, using Facebook ads to drive newsletter signups or Facebook groups to cultivate subscribers. Publishers that participated in Facebook’s accelerator programs, which have focused on topics including membership and retention, have also given those programs high marks. The Denver Post, for example, grew its digital subscribers more than 170% using strategies devised at a Facebook accelerator.

But so far, Facebook’s home-grown subscription-driving tool, which allows publishers to convert Facebook users into subscribers using Instant Articles, has not made a big impact on publishers’ hunt for subscribers. Publishers that participated in the tests of Facebook’s tools gave the tools a so-so grade after a year of use, saying that neither Facebook’s nor Google’s tools were driving meaningful subscriber growth. Facebook declined to share top-line statistics about how many subscribers its tools had helped publishers acquire.

“To date the number of conversions is so low that it makes no difference to me,” said a source at one publication that’s used Facebook’s tool, who declined to share a specific number of subscribers to avoid being identified.

Facebook said it remains committed to expanding the tools it provides to media companies, and that the product announcements made Tuesday represent an early contribution. Moving forward, the platform said it hopes that its products will help publishers drive consumer revenue, even off its platform.

“What we believe is that we need to build a flexible portfolio of products,” said Sameera Salari, the product manager in charge of news subscription monetization at Facebook. “We know this is just the beginning.”

Over the past year, Facebook has worked with more than 40 publishers to optimize its subscription tools, which first rolled out 18 months ago in an alpha test. Publisher feedback led to several changes, such as a welcome screen that greets people who subscribe to a publication using Facebook’s tools. Adding the welcome screen helped participating publishers grow their Facebook followings, and increased the amount of publisher content their subscribers read on Facebook by 40%, Facebook said.

Facebook has partnered with paywall providers such as Piano, and by cutting implementation time down; Facebook now claims that the average implementation time for its subscription tools has gone from an average of more than 12 weeks to around four weeks.

Many of the improvements Facebook made have been tied to its tools, rather than baked into Facebook’s platform as a whole. For example, the welcome screen only works on users that subscribe through Facebook, rather than any digital subscriber who happens to open publisher content on Facebook.

Salari said that Facebook intends to begin testing a version of the welcome screen that activates whenever a subscriber logs in to access content. “We want to make sure we’re methodical,” Salari said, citing the sensitivity of user data as one of the reasons why Facebook has tread lightly.

Facebook’s experiments also make it unclear whether Facebook wants to own the customer relationship, a major sticking point for publishers hunting for direct connections to consumers.

Even if the tools do not drive a ton of action right now, many publishers still see a lot of upside in tools that Facebook could develop.

“If Facebook can develop something like a propensity to subscribe model, that will likely change the game,” said Mark Campbell, CMO at Tribune Publishing. “We could identify users who have a greater propensity to subscribe and vary the meter accordingly, and even create custom audiences of likely subscribers that I’d pay to reach.”

Ultimately, the biggest factor in the uptake of Facebook’s subscription tools may be how far along most publishers are in their hunt for subscribers.

“It’s not that we aren’t interested. There’s just so many other development priorities and we have so much else to work on,” said Dan Petty, the digital director of audience development at Digital First Media, which owns newspapers including the Denver Post.

The post ‘We know this is just the beginning’: Facebook has new tools for publishers to get paying subscribers appeared first on Digiday.

Though, another agency executive who has chatted with TikTok said they had low expectations for the functionality — at least in its infancy. TikTok’s current capabilities won’t be as good as Facebook’s due to the newness of TikTok, the executive said.

“Interest-based targeting can be very effective, depending on how built out the platform’s targeting abilities are. Newer platforms sometimes offer interest-based targeting but have a tough time actually fulfilling on it because their data is still new,” the executive said.

TikTok representatives did not elaborate on what specific categories are offered in their meetings with new partners, sources said. One buyer said they expected the options to be similar to Snapchat’s lifestyle categories. Snapchat’s lifestyle categories, which were released in September 2016 alongside lookalike audiences and audience match, include 117 segments such as “American Football Fans,” “Movie Theater Goers” and “Online Shoppers.” These categories are based on a Snapchat user’s activity within the app, namely what types of content they spend the most time on.

TikTok’s content algorithm is currently powered by a similar recommendation system, per sources. The app is able to recognize what content is in a video, like a dog or a coffee cup, which is useful not only for recommendations in the feed but also could power the advertising system. Unlike on Snapchat, users on TikTok can like and comment on videos, which also provides signals for content recommendations similar to Facebook, Twitter and YouTube.

Even with the limited targeting options, some brands are currently buying ads on TikTok. A spokesperson from GrubHub, which was one of the early advertisers on TikTok, told Digiday last month that ad performance has continued to “meet or exceed our expectations.” Other marketers like Red Bull and Sony are testing the app with their own accounts. Publishers like ESPN and NBC News also have created their own accounts.

The post TikTok is testing interest-based ad targeting appeared first on Digiday.

Symbolism aside, Cannes is also fun for those lucky enough to get to go, and we’ve also got a load of lighter fare about the confab, including a guide to remaining sober while everyone around you is guzzling rosé, and an oral history of the ad tech marina. We even surveyed media and marketing executives to get their thoughts on what role Cannes plays in the industry.

Summer is also a time for change, and we’re spotlighting a whole host of change-makers in this issue as well. In marketing, I profile Mark Penn, the new CEO at beleaguered agency holding company MDC Partners. Penn, best known as the political adviser for the Clintons (both of them!) has a big job ahead of him as he grapples with some very real — and some existential — issues at the company. In retail, Hilary Milnes went deep inside Blue Apron, one of the biggest flameouts of the meal-in-a-box craze, which is attempting a last-ditch pivot. From Berlin, Steven Perlberg has an in-depth look at Germany’s obsession with privacy, and how the rest of the world may finally be catching up. Plus, there’s a bunch of Q&As with the people at the forefront of major change in the industry, from David Droga, fresh off an acquisition by Accenture, to Foot Locker’s Jed Berger, who has helped the retailer stay head even as the industry undergoes tremendous change.

This is the 14th issue of Digiday Magazine, part of our Digiday+ membership program. In our own nod to change, we’ve transformed the membership itself, expanding Digiday+ to become a core part of Digiday’s content. We hope you enjoy the issue and your membership.

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There are several valid reasons for why Quibi can pull it off, but there are also plenty of reasons why insiders are skeptical. Here are a few key reasons why Quibi could succeed, and also why it might fail.

For: “Don’t bet against Jeffrey Katzenberg.”
Ask anyone who is doing business with Quibi — even some of its biggest skeptics — and they’ll likely point to Katzenberg as one big reason why Quibi has a shot at success. Katzenberg has the relationships and the status to pull together projects with some of the biggest names in entertainment. So far, Quibi has announced shows with talent ranging from Oscar-winning director Guillermo del Toro (“The Shape of Water”) to horror producer Jason Blum (“Get Out”). In fact, Blum is producing a horror series that will star Naomi Watts.

One longtime digital and TV entertainment executive had a meeting with Katzenberg earlier this year. This executive said he went into the meeting skeptical of Quibi’s chances, thinking that this would be just “another Go90.” During the meeting, Katzenberg mentioned how he had just gotten off the phone with Justin Timberlake, trying to figure out what kind of show they would make together for Quibi. (Timberlake is hosting a show called “Inspired By,” in which he will interview other musicians and ask them about a song that inspired them to get into the industry — which will be followed by a duet.)

“Oh right, you can just call anybody you want and they will do a show with you,” this executive recalled thinking. “That was a big epiphany for me in terms of the barriers to talent and showrunners that most people have that Quibi doesn’t. If tomorrow, Samsung said they were going to create a new video platform and had some nobody as a head of the platform and this guy doesn’t know the talent, nothing interesting is gonna happen. That’s the thing tech companies underestimate pretty much at every turn. … The biggest thing Quibi has going for it is Katzenberg.”

Beyond Katzenberg and CEO Meg Whitman, Quibi’s executive team is also considered top notch: Quibi surprised many by luring top CAA agent Jim Toth, whose client list included Matthew McConaughey, Robert Downey, Jr. and Scarlett Johansson, as head of content acquisition and talent for the startup; Quibi’s content team also includes entertainment industry veterans such as Janice Min, Becky Brooks and Ryan Kadro; Quibi has also been aggressive in poaching execs from Hulu, Instagram and Snapchat for its product, advertising and distribution teams; the company has also been recruiting Netflix executives to build out its marketing team, said a source familiar with the matter.

“They’ve raised a lot of capital; they have a great team behind them; they are going to have, I’m assuming, a fantastic product — and they are commissioning really high-quality stuff,” said a digital publishing executive that’s pitched Quibi.

Against: Other big spenders have tried this before, only to fail
It’s impossible to talk about Quibi without mentioning Go90, or Vessel, or Samsung’s Milk Video or countless other video platforms that have tried and failed to find an audience for short-form video programming.

Quibi has raised $1 billion so far — with reports suggesting that the company is already looking to raise more — to fund its ambitions. But so did Verizon, which ended up losing more than $1 billion across several years of trying to make Go90 work.

Katzenberg and the Quibi team reject the comparisons to Go90, according to a source with direct knowledge. Yes, Go90 spent a ton of money in bulk on programming, but Go90 was also spending money on digital publishers and studios and other programmers that were making quality content, but not remotely close to the quality and prestige level of what Quibi is attempting with its high-profile scripted and unscripted projects. For its top scripted shows, Quibi is willing to spend $125,000 per minute, according to a deck the company shared with investors last year. That’s in line with what Katzenberg has said publicly and closer to the costs of scripted shows on cable networks than what Go90 was paying for. (That said, Quibi also plans to commission daily programming that will cost significantly less than its high-profile projects.)

Quibi is also focused on developing content that actually works in a mobile environment; this means everything from shooting series that can work in both horizontal and vertical video formats, as well as a product experience that is in line with how people actually use — and watch videos — on their phone, according to a source with direct knowledge of Quibi’s plans.

Quibi has pretty lofty ambitions in terms of customer acquisition and believes it can get 11 million paid subscribers in its first five years — and that’s its worst-case scenario, according to the investor deck. That won’t come easy as customer acquisition costs rise and more subscription streaming video services enter the market. This will only drive up marketing costs for Quibi, for which the company has been looking to poach executives from Netflix, sources said.

“People always think that as soon as you flip on a switch, people are going to notice,” said the digital and TV entertainment exec. “Unfortunately, it’s not that simple. User acquisition is so incredibly complex, it often takes years for a brand to be even recognizable.”

For: Quibi’s backers include all the major studios
Disney’s investor list includes major studios and media companies such as Disney, WarnerMedia, NBCUniversal, Liberty Global and Sony. (The startup has also other big-name backers including Google and Alibaba.)

Backing from major entertainment companies will be helpful for Quibi as it looks to secure deals with big-name showrunners and on-camera talent, sources said. “It’s hard to gain access to anyone if they are under contract with a studio,” said the digital and TV entertainment exec. “If Disney were to step in and say, there’s no way we’re letting you do something with J.J. Abrams, do you think he’s going to do it? But if you have Disney as an investor, suddenly it’s easier to access their talent pool.”

Against: Quibi’s deals are great for studios, but not necessarily for Quibi
The major Hollywood studios that have invested in Quibi also have guaranteed commercial deals with the streaming service, which means they will basically be able to recoup some of their investment by selling projects to Quibi.

Quibi’s deal terms are also generous, sources said. At a time when Netflix is looking to fully own its original programming or secure long-term exclusive worldwide rights, Quibi is showing more flexibility. For instance, Quibi is requesting a seven-year exclusive license to its movies and TV shows, sources said, but that’s only for the short-format version of those projects. If a studio wants to recut a Quibi series into half-hour or hourlong installments, or say a two-hour movie, it can sell that license after two years, sources said.

“The downside is lower,” said an executive at a Hollywood studio that is both an investor and has a commercial deal with Quibi. “I want it to work because it opens doors to a new market.”

That said, if Quibi’s most high-profile projects are found in a different format on another streaming service or TV network, that could make the service less essential for price-conscious subscribers.

“[Subscription video] is hard enough on its own,” said the studio executive. “I just don’t know how they’re going to get people to pay money for it — unless they have ‘Game of Thrones’-level stuff coming out non-stop.”

For: Mobile video consumption continues to rise
Quibi’s bet is that with mobile video consumption continuing to skyrocket, it has the ability to grab a percentage of viewers who would be willing to pay for programming that’s far superior to YouTube and other social platforms. And with the general trend of consumers increasingly willing to pay for streaming content, Quibi executives feel like they have a great shot of capturing on-the-go viewers.

Quibi’s thinking is that if there are people who are watching more than an hour of video on their mobile devices every day, it’s not that crazy to believe that Quibi can get 2-4% of those consumers to a paid experience, according to a source familiar with Katzenberg’s thinking.

“Five or six years ago, all music was free and you could listen to anybody you wanted to listen to — and you still can,” said this source. “So, then, why are there more than 100 million people paying $10 per month to listen to their favorite artists today?”

Against: Quibi is not solving a consumer need
The major question that Quibi needs to answer is whether there is actual consumer demand for a subscription video service that focuses on mobile devices and short-form content.

Katzenberg’s argument is that just because no one has done it before does not mean that there is no consumer appetite for a premium mobile video streaming service. On top of that, no one has invested in mobile video at the quality level Quibi is aiming for.

Other industry sources, including those that have deals with Quibi, are not so sure. “From a consumer perspective, given how much content is already consumed on mobile, both premium and otherwise, do you really need programming that is that expensive and made for that device? I don’t know,” said a TV studio executive.

“One, I would love for Quibi to work,” said the Hollywood studio executive. “Two, I don’t know how the fuck it’s going to work.”

The post Quibi: The next Go90, or streaming unicorn? appeared first on Digiday.

Off the back of S4 Capital’s annual gathering for shareholders last week, Sorrell expanded on his vision for the business in an interview with Digiday. Below are excerpts from the discussion, which has been edited and condensed for clarity.

You’ve spoken in the past about the need for S4 Capital to acquire a first-party data company. What does that kind of business look like?
There are a fair amount of first-party data companies around. And they’re usually pretty expensive. I don’t regard either Epsilon or Acxiom as good examples of what we’re talking about when it comes to first-party data. Liveramp, which is yet to be acquired, is more of an interesting one albeit at a high price. Merkle, which was acquired by Dentsu, is a good example of what we’re aiming for. There are conflicting views in the market around first-party data as evidenced by moves made by Publicis and IPG to acquire Denstu and Acxiom, respectively, in recent years versus WPP’s efforts to get out of the data business, albeit not completely. If I was going to rank those assets in terms of what’s attractive to us, I would say Merkle first, Acxiom second and Epsilon third. Those last two businesses are not the sort of first-party data assets we’re interested in.

If data is king, should advertisers look beyond the walled gardens?
The walled gardens have gotten taller because of privacy issues and the General Data Protection Regulation alongside concerns around brand safety and political advertising. Clients feel that direct-to-consumer is becoming more important and so are looking at ways they can have that direct relationship with as evidenced by the deals between Coca-Cola and Costa, Nestlé and Starbucks and Unilever and Dollar Shave Club. All of those deals are influenced in some way by the advertiser’s need to control first-party data or at least use it in a coordinated way.

Can increased regulation of the walled gardens help introduce more alternative platforms to advertisers?
There’s more concern over how the walled gardens are regulated to the point where even Tencent and Alibaba are being scrutinized. That’s not a bad thing for us because it raises the number of alternatives, and means less friction in the marketplace. Regardless, Google, Facebook and Amazon dominate the $200 billion ad market with $125 billion, a $52 billion and $12 billion, respectively, last year. We’ll have to see what happens when it comes to how those companies are regulated but either way, we’re anxious to operate with those big five plus Apple and Microsoft as well as Oracle, Adobe Salesforce, IBM and SAP. If you include Baidu in that group then there are 13 companies which are a key part of the ecosystem for us.

What’s changed in the market since 2016 when mentioned that the trend to in-house programmatic would be short-lived?
Speed is a competitive advantage now, and there’s increasing frustration in the market, particularly among legacy companies that can’t move fast enough and have digital businesses that are capable of driving significant growth. CMOs, CIOs, CTOs, CEOs and procurement officers are all trying to move their businesses as rapidly as they can toward digital, which is unfair in a way because often the legacy parts of those businesses are also their cash cows. Consequently, the pace of experimentation has gotten faster.

Given S4 Capital’s pitch around content, media planning and buying and first-party data, has the group found itself increasingly up against consulting firms in pitches?
The consulting firms are there or thereabouts. There was an example last week where we won a significant piece of business and one of the big consulting firms was involved in that pitch and they won a piece of it. If we continue to grow at the rate we are — we’re growing at 40% plus so far this year — then we’ll inevitably come up against those businesses more. But the consulting firms are effective at the higher reaches of companies, particularly amongst the senior management teams.

S4 Capital hasn’t ruled out acquiring more businesses this year. Are you on the lookout for a traditional media agency?
No. There’s no growth there because of the procurement pressure. It’s a space where brawn rather than brains is going to win.

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During working groups and publisher-only town hall sessions, which operate under Chatham House Rule, delegates debated their core concerns. Here are some of the comments that got our attention.

Figuring out platform hurdles
“The ever-changing algorithms of the platforms remains an issue we’re constantly fighting.”

“Navigating a world in which social platforms want to act like broadcasters is really tough.”

“We’re fighting this weird ecosystem with platforms because they’re pushing us to create a certain kind of content that actually jars with the audiences that are used to the more raw, authentic feel of video on platforms.”

“We try to push clients away from measuring views. We prefer a smaller pool of meaningfully engaged viewers than a massive pool of totally meaningless views on the platforms.”

“Facebook is trying to be a video intent platform but no one uses it like that. YouTube doesn’t have that problem.”

“We end up creating more cheap video [which performs well on platforms ] but it looks cheap, and that’s damaging for the brand.”

“Facebook’s team is not focused on publishers at all, they’re just there to sell their own inventory. So we’re not investing anything in publishing on Facebook, especially now that it’s not growing that much.”

“There’s a bigger gap between the partner manager relationship and the engineers at Facebook than there is at YouTube. The new Facebook algorithm change, that happened on our pages in the last two weeks, has grown significantly and dropped off this week, and they [Facebook] don’t know why. Engineers make massive changes at the platform level and they don’t feed through. It’s incumbent for publishers to understand their own data.”

Video content worth paying for
“It’s hard to create that value proposition with AVOD to then level up to SVOD. You can’t give away content for free and then say you have to pay for it, that changes the perception of value.”

“YouGov research showed that an individual would pay for between three and five subscription services, so that’s two mass market and a couple of smaller more niche services.”

“Ninety-nine percent of people will want something for free with ads. You have to juggle free-to-air and paid. People are prepared to pay for passions or niche verticals. We’re in the attention business.”

“From a generation perspective, AVOD is more ingrained. It’s gamified. Kids watch three ads to then get a free life.”

“YouTube Red has not worked. Kids are adept at finding it for free. They don’t feel the need to pay. Cord cutting is happening faster than anyone thought it would, 15% a year.”

“YouTube claims it’s too big to manage all the [brand unsafe] content. When you have an SVOD platform that’s not really a good enough excuse.”

“All kids know is YouTube. We need to be worried about the three to 10-year-olds. Nine out of 10 times they want to watch the phone rather than the TV.”

Vendor gripes
“I have an issue with viewability and viewability companies. The vendors tell [agency and advertiser] clients they can solve all their problems and that they’re integrated [with publishers] but they don’t even talk to the publishers. They say they’re integrated when they’re not and it’s causing us real issues in lost revenue.”

“More brands and agencies want to do programmatic VOd, the challenge is they’re hosting on their site and between the ad calls the ads are being lost. The agency is sending the wrong ad file or uploading the wrong specs. With programmatic, there’s this acceptance on the brand side that these things are all going to work. We’re all losing revenue.”

“One of the major providers said ‘80% of the video that you send is in-app’. We said we don’t have an in-app player. It turns out they can’t read it when it’s inside the Facebook browser, they think it’s in-app and they can’t measure it. They said if we integrated with them they might be able to fix it. It’s a bit strong but it feels like a protection racket because if you’re not part of it then the results are less favorable.”

“On the buy side, the frustration is people not knowing what the error codes are. You have to educate them on what a 901 is, a 401, a 303. People are so used to having a tick box in the DSP to having tick boxes, on the operations side they haven’t had to put a click tag in. With video specifically, it’s more complicated and pipes break down when it’s relatively simple, like hosting a video off-site.”

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