Month: December 2019

You focus on direct-to-consumer brands. What’s changed recently in buying paid media for those brands?
Over the last few years, the focus was on first-time cost-per-acquisition, so acquiring customers for the first time. What’s been talked about a lot lately and what’s going to start to become a huge thing is talking about the true profits needed for a business to truly scale. We’ve had brands who’ve said, “As long as you get me a 2X ROAS on Facebook and Instagram, we can scale up.” After running ads and learning more about their business, we learned that wasn’t enough for them to scale because as they did so, costs would go up across the board. With e-commerce, everything is inventory-based, so they need the cash flow to afford the inventory to go and sell it. Then they need the margin to acquire these customers. Once all of that gets factored in, all these brands are realizing a 2X ROAS isn’t enough to scale. That alone can create a lot of problems.

How so?
A lot of brands will scale up and go from $1 million annual revenue to this $5 million to $10 million range and realize they were more profitable when they were doing $3 million to $5 million range compared to now. As you scale up, cost-per-acquisition goes up, there’s fewer buyers in the space. There are so many variables that affect the end result. A lot of the clients we bring on now, we spend a lot of time auditing their financials before we dig into the paid social financials. They think they truly understand what they need to see in returns but actually they need way better returns than that. It makes it tougher for media buyers to get wins for them.

Because the expectations are off?
When they come in expecting a 2X would be great, but they actually need a 3X or something to be profitable. The biggest thing that impacts that is that the cost of Facebook and Instagram advertising just continues to go up and up. So then cost-per-acquisitions go up, which means that brands that were OK just focusing on first-time acquisition are having to refocus their business to really push for second purchase and higher lifetime value and all of that. As costs increase, they are having to shift that focus.

How do you manage client expectations in that situation?
We’re putting more and more emphasis on repeat-purchases. We’re helping brands create bundles and types of products that will increase average order value so that when they are still focused on first-time acquisition that the margins are there. DTC brands now, if you hit any landing page from an ad, it’s bundles or high average order value products. They’re doing that because the cost of the acquisitions is continuing to go up. It’s just going to continue to get more expensive and more competitive, so if they’re not thinking about that now, it’s only going to get even tougher.

Seems like DTC companies may be too focused on that first acquisition.
Yeah, 100%. There’s been a lot of DTC companies that haven’t focused on brands. These brands have focused so much on scaling and not enough on building brand loyalty and brand equity. When you’re at scale, that’s what’s going to help those brands grow and [not enough have focused on that.]

How does it affect what you do when they’re too focused on that?
It does make it tough. The only thing we can push beyond our normal media buying tasks and skills is emphasizing them giving us more creative and testing more creative. The biggest indicator of if something will work or not is the creative and, when I say that, I primarily mean photos and videos. Brands that are investing in their own brand have a ton of creative, they’re doing a ton of organic social, they’re doing a ton of content, they’re collaborating with other brands, they’re doing all the things that will allow them to scale the creative or media buying side of things.

As the cost-per-acquisition goes up on Facebook, Instagram and Google, are DTC brands looking for that cheaper CPA elsewhere? If so, where?
Snap is the biggest one. It’s huge for the direct response DTC space and a lot of brands are having talks for the first quarter of 2020. It’s like $1 to $2 CPC. It’s a different audience. Snap did an audit, and there’s a pretty big difference between who’s on their platform versus the other one. It’s different people, and that’s what DTC brands are interested in. Pinterest is another that a few brands are starting to dabble with and leaning back toward. YouTube is also getting bigger and bigger, even as far as just driving traffic. Even driving traffic on Facebook alone, the results haven’t been as good.

With costs going up, does that change the attitude around DTC brands and their potential success?
For sure. A lot of brands are going to start failing in the next year or two because these costs have gone up so much. A lot of brands have started and relied solely on paid social acquisition, and now that those costs have gone up, they’re scrambling. I talk to other media buyers, and they’re also seeing that a lot of these brands that have been so focused on acquisition are going to be hurting. The narrative has been that this is easy and this works. But the brands that have started in the last year are facing a lot tougher times than the ones that started four, five, six years ago when CPA was super affordable.

Are DTC companies nervous that the costs have gone up?
They’re just more aware of the costs now so they’re trying to be more intentional about the spend. Before, it was if you hired a media buyer, if returns were good, like 4X or 5X ROAS, they were like, “Just spend more.” Now, if things get below a certain threshold, they’re definitely more on top of it.

So there’s a realization that paid social isn’t as easy — or as cheap — as it once was?
Costs have gone up across the board. CPMs have gone up. CPCs have gone up. Everything has gone up. Competition is higher. That cost-per-acquisition for a brand that sells a product that’s $100, it might have been $15 to $20 to acquire that customer three or four years ago and now it’s $40 to $50 to acquire that customer. That affects the margins to the point where they are not making money off the first acquisition to the point where they don’t want to pay $50 to acquire that customer again, so they are pushing ads to previous purchasers more and more. The biggest thing DTC brands need to understand is that there has to be a thought process around [marketing to] reacquire these customers again because it might not be profitable the first time through.

Has it been difficult to get DTC brands to shift focus from that first acquisition?
If you see a brand jump from agency to agency to agency, we know that it’s the brand and probably not the agency. They’re still living in the space where CPAs on Facebook should be super cheap, so they’re just trying to find someone with the fairy dust to make it work again. But even at scale it’s not there as much as it was. Those are the clients that agencies don’t want to work with and say no.

The partnership between AT&T Business and the Post is set to extend through the 2020 presidential campaign, with one goal being a VR experience that places viewers on the ground at the upcoming inauguration. AT&T also established an innovation lab that allows the Post’s product team to innovate new uses for the technology, and then the Brand Studio documents the successful uses through story-based case studies.

As it tests and learns, the WP BrandStudio will then turn those case studies into a behind-the-scenes series documenting the partnership and distribute it like a branded content campaign. The hope, according to Joy Robins, chief revenue officer of the Washington Post, is that readers, particularly decision makers at businesses that AT&T is aiming to reach, will better understand how the technology can work within their own businesses. Robins said that the partnership with AT&T aligned with the Post’s goal of creating more in-depth partnerships with advertisers.

Other technology companies have also devoted chunks of their budgets to marketing the technologies that they’ve invested lots of resources into developing, and publishers see this as an opportunity to benefit. During the onset of virtual reality, technology companies partnered with publishers help launch VR labs and studios as a way to get their readers comfortable with the new technology. The New York Times, for instance, distributed 1.3 million Google Cardboard VR glasses to its print subscribers in 2015.

More recently, Verizon built its RYOT 5G Studio in Los Angeles that’s also aimed at using media partners, including its in-house brands HuffPost, Yahoo and TechCrunch, to create new formats and storytelling capabilities. The studio also partnered with USA Today, Reuters, The Associated Press, Time and NowThis to use the technology, such as producing extended reality news programming, within their own journalism as well.

Mo Katibeh, chief marketing officer of AT&T Business, said the partnership should not only allow The Post to create new uses and tools with the 5G technology but also market these innovations to business-to-business audiences. By reaching business decision makers that try to implement those technologies within their businesses, he said that it then trickles down to consumers, who will at that point be more comfortable and interested in what those technologies are. 

“We can use test cases around 5G and AI to improve defect rates and user safety,” said Katibeh. “We’re interested in testing new formats, primarily,” continuing that the additional innovations will appeal to other publishers and companies.

This is not a new tactic for AT&T either. Fifteen years ago, he said the company’s subsidiary Cingular Wireless sent student journalists out to cover breaking news using only cell phones in order to show how these devices could change the future of journalism.

Tom Needham, executive director of The Business Journal’s content studio, said that while the Washington Post/AT&T partnership is unique in that the Post is serving as the test subjects within the case studies that the BrandLab produces, the essence of using a case study to take a storytelling approach within branded content can be very successful.

“When there is direct interaction with the brand in that story, that’s when you have a home run,” he said.

To do that, Pinterest is positioning itself as a more conscientious, caring and kinder platform that’s not about amassing social capital in the form of likes or follows. Earlier this year, it even launched a “compassionate search” so that if you search for things like “stress quotes” or “work anxiety,” you’re then prompted to explore resources or coping exercises meant to help you feel better.

Given our collective social anxieties about so much, from the threat of climate change to tremendous political upheaval, having a platform like Pinterest that makes us feel better makes a ton of sense. Pinterest has built the foundation for a utopian platform for “inspiration,” but now it’s going to have to figure out how to make sure more and more people visit more and more often, especially when #inspiration is found in spades on Instagram too.

Pinterest’s view of inspiration isn’t just about aspiration. Instead, it sees itself as a true “productivity tool” that can help you decorate your home, find the next best recipe for your office potluck, figure out what trip to book next, or maybe even indulge in some self-care. At the same time, to keep the lights on, Pinterest also knows it needs to sell you things.

At a press event in New York City looking at some of Pinterest’s top 100 emerging trends on the platform, Vikram Bhaskaran, Pinterest’s global head of vertical strategy and marketing, told me that working with advertisers is very much top of mind for the company, too. Pinterest is investing in “visual discovery optimization” that helps brands better understand how to be discovered, not just via keywords, but by visuals and it’s investing in creators, too.

While Pinterest’s third-quarter results missed estimates and shares are now trading at an all-time low — even lower than its $19 IPO price –there are signs that Pinterest is gaining some market share: Its ads sales growth grew 47% in the third quarter from the same period last year. Facebook saw 28% ad sales growth in Q3 and Google saw 17%.

So far, Pinterest’s kindness campaign seems to be working. At that same event, one attendee likened Pinterest to “the Disney World of platforms. It’s a place that just makes you happy.”

This is the latest iteration of supply-path optimization whereby agencies have gone beyond simply finding the best way to obtain the impressions they want. Agencies are now starting to limit the number of resold, pricey impressions they buy in favor of finding lower-fee, direct routes to those same impressions.

For that degree of curation to work, media buyers realized they had cut the number of SSPs they buy impressions from. That’s led to a paring down of the number of SSPs. Omnicom Media Group buys display and video impressions from 10 SSPs in the U.S. (The total is 15 when other formats like native, audio and outdoor advertising are included.)

Meanwhile, Havas has gone from buying impressions from 42 SSPs in the U.S. last year to just seven now; the agency plans to set up contractual relationships with four of them in the coming months. In the same market, Engine buys most of its impressions through four SSPs, including its own. Similarly, GroupM has switched off 55% of the SSPs it bought impressions from globally over the last three years to focus on fewer partnerships. And this year Dentsu cut the number SSPs on its list to the “single digits,” said David Newman, managing partner for programmatic at Dentsu Aegis U.K. and Ireland.

“We have seen that reducing the number of exchange partners hasn’t had an impact on scale or performance and has allowed us greater control over where and how we are buying,” Newman said.

Today agency groups like Omnicom and Havas are increasingly instructing certain SSPs to sell them specific impressions. Without direct relationships with SSPs, agencies can’t make those demands since DSPs traditionally have not offered that degree of curation. In some cases, the agencies are bypassing their DSPs to go straight to SSPs so as to understand how to find the best impressions at the fairest price. In turn, SSPs are being asked to let the agencies use their platforms to operate customized marketplaces and curated ad exchanges.

“We’re seeing a lot more RFPs from the holding companies asking us to map out how we would build a custom marketplace, a custom header tag or their own curated exchange and then outline how much would it cost, how long would it take to develop and how we would run them,” said Kyle Dozeman, vp of advertiser solutions at SSP Pubmatic.

These partnerships allow agencies to make smarter spending decisions and subsequently make more money, said Dozeman. By arranging for SSPs to share data on their auctions, traders can find cheaper impressions that aren’t being contested by rivals, for example, he said.

Omnicom Media Group trading desk Accuen has been building these relationships since publishers first started running multiple auctions for the same impression four years ago. Back then, working directly with those ad tech vendors was a long and arduous process that involved crude tactics like shutting down or opening up entire SSPs to understand how the inventory was sourced. Making such decisions is a lot easier now that SSPs and publishers are more open to sharing all the sensitive data relevant to a single impression such as cookie IDs and viewability levels. Furthermore, the widespread adoption of standards like sellers.jsons has granted traders unprecedented insight into all the ways an impression travels from the publisher to the advertiser.

“We’re working with SSPs to change the actual inventory they send us in the bid request to our buying platforms,” said Ryan Eusanio, director of programmatic operations at Accuen.

The agency’s traders are now passing to the SSPs whitelists of sites that they will exclusively buy impressions from, effectively having direct access to the ad tech vendor’s platform, Eusanio said.

GroupM has made similar moves. The agency network is working with a handful of SSPs in places like the U.K. and the Netherlands to curate and manage marketplaces of premium publishers. Those marketplaces allow GroupM to find and then manage quality impressions, whether by allowing traders to switch in or switch out SSPs or letting them sell all their deals in one place.

“We want to understand how the SSPs are measuring the quality of impressions coming into their platform,” said Jack Smith, chief product officer at GroupM. Armed with that information, the group’s traders can articulate to publishers why it makes more sense to sell more of their impressions via the agency’s approved set of SSPs. “We’re not telling publishers that they shouldn’t work with an SSP; we’re just talking through the economics of working with specific ones,” he said.

Sometimes the agencies are financially compensated for their relationships with SSPs. Pubmatic lowers its fees the more money Goodway Group spends through its platform, for example.

Publishers remain unconvinced, however, by the commercial rewards of facilitating such deals. Their fear: If they start to trim the number of SSPs that sell their impressions, they won’t look as big to the DSPs and could subsequently miss out on programmatic dollars.

“Supply-path optimization isn’t doing anything for us,” said the digital chief of a European publisher who requested to remain unnamed. “It feels like it’s all theory and isn’t really operational yet. I’d rather have direct DSP integrations so that we can skip out of most of the supply chain altogether.”