Month: April 2020

The situation has gotten so fluid that some publishers have begun talking with one another about collaborating on programs, offering to combine forces on branded content and pooling their available ad inventory, in a bid to keep advertisers interested.

And with so many brands pausing their ad spending, some revenue leaders have instructed their sales teams to shift their focus away from big, elaborate partnerships in favor of small, turnkey deals with brands that are visibly spending right now. The $10,000 insertion order is the new $1 million deal.

“For some people that might’ve been doing large,
seven-figure partnership discussions, I want those to be there when we get
back.” said Deirdre Lester, the chief revenue officer of Barstool Sports. “But
right now I need people to focus on singles and doubles.”

Though not every CMO is pausing their ad spending, economic uncertainty and disruption are dragging down the media industry as a whole. Research released late last month by the IAB found that digital ad spending is down 33%, and traditional ad spending is down 39%. The start of a new quarter and a new month, when spending is typically slower, have added more pressure to the situation.

One CRO of a major publisher told Digiday that they usually can know within 2-3% where the quarter will end up; now that is a 20% margin of error.

News publishers are under particular pressure as coronavirus content makes up the bulk of ad impressions yet advertisers are blocking ads from appearing near virus-related content — and some have gone so far as block any “bad news,” which is to say, for the most part, all news. Two separate CROs estimated that coronavirus-related content fetches 30% less revenue compared to non-coronavirus content.

And while the sting from the coronavirus has been immediate, few business leaders have a firm idea of what its ultimate economic impact will be. (Though many have developed grim expectations: That same IAB research found that nearly three quarters of respondents expect the coronavirus impact on ad spending will be worse than the 2008 financial crisis was).

The uncertainty is forcing many CMOs to take things slowly, allocating marketing budgets just one or two months at a time, rather than several months or quarters ahead. The moves are prudent as publishers seek to be flexible with advertisers who have their own business challenges, even to the point of not knowing whether they’ll be able to make products with supply chains in disarray.

That, in turn, has compelled some publishers to drop their
prices, sources said. “I’d say the velocity and the level of discount has
really accelerated from our competitors in the past 2-3 weeks,” said Doug
Olson, president of Meredith Magazines, who declined to name specific
competitors.

In response, Meredith has gone the other way. Last week it
brought a new offer to market, guaranteeing any advertiser that buys a minimum
of five ads across two of Meredith’s print titles will get a guaranteed
business outcome. Those outcomes can vary from product purchases to website
visits to conversations with doctors about a pharmaceutical product.

And while the price will vary depending on which titles and
types of ads are involved, the price for such a program will typically start at
several hundred thousand dollars, Olson said.

“The vast majority of what we’re seeing are what we call value buyers,” Olson said. “What we’re seeing from lots of large advertisers is them asking whether they can be cost-effective [in their ad spending].”

Publishers are scrambling to keep revenue theoretically committed by delaying programs. Many branded content programs are on hold, as production is made more difficult and skittish advertisers look to rework messaging. But these programs slated for March and through the second quarter are creating a potential logjam come fall. There are only so many programs that can run at once. Publishers are faced with a best case scenario that resembles the entrance to the Holland Tunnel on a late afternoon in July.

The scramble is also leading publishers to wring more revenue out of what were once afterthought “incremental” sources such as content licensing. One midsize publisher has found a bright spot in licensing news content to portals like MSN and Yahoo, which are seeing surges of interest in news content and are willing to pay.

Commerce is another bright spot. While some big publishers are getting squeezed by Amazon, others aren’t seeing the pain and report growing revenue as they shift to cater to “quarantine life,” in the words of one publisher.

Some media companies are trying to pique advertiser interest by collaborating with one another, hoping that offers of more scale might entice advertisers to unpause their spending.

“We’re seeing competitors wanting to find ways to
collaborate,” the chief revenue officer at one sports-focused publisher said. “Inventory
across multiple sites, packages together; one company may be good at linear,
one good at storytelling.

“There are categories where we believe we can open up [new
business] if we were able to bring new thinking.”

 In particular, that CRO said, there was a lot of
“scrambling” around the upcoming NFL Draft, with different publishers looking
for ways to team up on campaigns for advertisers.

Though publisher approaches to the crisis differ, the main
priority in every instance, the revenue heads said, was remaining helpful and
top of mind for advertisers. “You don’t want to have to reintroduce yourself
next year,” the head of revenue at one sports publisher said.

At Meredith, for example, that has meant adapting the consumer insights and research it distributes to partners, focusing on what is happening right now rather than insights that might be useful many months from now.  

“Typically the work we do with clients is focused on a
longer time period,” said Alysia Borsa, Meredith’s chief business and data
officer. “What we’ve pivoted to in the last month is, what is happening on a
daily and weekly basis?”  

There are a few reasons why. With advertisers pulling spending or putting coronavirus coverage on block lists it’s nearly impossible for publishers to monetize the traffic surge that they’re seeing. Add to that the crippling of their events businesses (once a bright spot to help diversify publishers’ revenue and mitigate fallout from the duopoly gobbling up most of the internet’s ad dollars in recent years) as well as calls from readers to pull down paywalls, and you’ve got a perfect storm. 

The question then becomes one we’ve asked before: Do advertisers, especially the ones that have been boasting the importance of brand purpose and helping news organizations in recent years, have an ethical or moral obligation to save the news business? 

Arguably they do. Publishers are facing a Catch-22. They can publish pieces related to coronavirus, serving the need for that content, and see a traffic bump but get little to no advertising revenue to support making said content. Or they can publish pieces that avoid mentioning coronavirus, the economy or bad news altogether and get some advertising revenue. There’s no good answer. And revenue from marketing is reduced no matter what: Digiday Research recently found that 75% of buyers were reducing their ad spending due to coronavirus. It’s an impossible position and one marketers shouldn’t put publishers in. Especially as those same marketers have been saying for years they can save the news.

I’ve been asking media buyers about that conundrum this week. Of course, the people who’ve been putting coronavirus, economy or all negative news coverage, in some cases, on block lists for their clients over the last few weeks don’t see it that way. Avoiding that coverage isn’t simply a measure designed for brand safety but a way for brands to be more “human” in their approach as they pivot away from selling to be more helpful in this environment. If that’s the approach brands want to take, then it’s “icky” to use advertising to pitch consumers on buying the sweatpants they should be wearing while self-isolating, or whatever product they may be selling, next to coverage of the deaths due to coronavirus. 

On its face, that argument makes sense. Consumers will interpret the advertising negatively and it could hurt the brand. And even though brands have spent the last few years leaning into brand purpose, pitching consumers on the idea that they are good because of the stands they take as brands and preaching as much in their advertising (think Nike’s support of Colin Kaepernick or Patagonia’s famous “Don’t Buy This Jacket” ad), they don’t have a moral obligation to news organizations. 

At least, that’s what former author of The New York Times’ The Ethicist column Randy Cohen said. “If you want to have a free market economy, what the marketing department has to do is think about what’s best for their company,” said Cohen. “So it could be a foolish policy to pursue, without marketing that could lead to the end of the very outlets they rely on, but it’s not an ethical obligation. Domino’s Pizza has no ethical obligation to NBC.”  

Cheryl Foster, a philosophy professor for the University of Rhode Island, doesn’t see it as an obligation for marketers either. “Crisis points tend to force us all into a Sophie’s choice between elements we normally see as co-existing,” said Foster. “While it would be an act of genuine generosity for advertisers to renew ad contracts or continue to purchase space at times such as these, despite negative news content, they are under no legal or even professional obligation to do so if the relationship is one of business pure and simple.”

That’s true. And the especially savvy marketing departments may realize that an earned media approach will still generate buzz for their brands right now from the very organizations that are bleeding without their ad dollars. As one media buyer noted, brands that do good by creating products needed to help consumers during this pandemic are going to get coverage by media organizations regardless. 

Others believe brands are morally obligated. “Advertising pays for the free internet,” said freelance copywriter and Sleeping Giants founder Matt Rivitz. “It pays for the good and bad. When we’re in a situation like this pandemic and we need information if they’re the ones paying for us to get this information, then they do have a moral imperative to support it when we need it the most.” 

There could be an easy solution for advertisers afraid of putting ads next to coronavirus content who want to help news organizations navigate this crisis: Support news organizations by sponsoring pulling down the paywall. “If a brand paid to take paywall down for two months, I bet that company would be rewarded handsomely,” said Rivitz. 

3 Questions with Forrester’s principal analyst Jay Pattisall

How do you think marketing will be changed from this pandemic? 

The economic fallout from the pandemic will accelerate a number of changes already underway. First, marketing organizations and CMOs will become more nimble and accountable. The fast response in creative and the media mix are good examples of this. From an accountability standpoint we’ve seen this play out with the CMO rebranded as chief growth officer or chief revenue officer. The new normal for marketers is integrated business strategists. Agencies were already adopting, purchasing or building technology. But now automation inside the agencies will be paramount to achieving efficiencies and speed. This will change how agencies work, the tools they work with and the skillsets of their employees. The new normal for agencies will be fewer, more senior staff using technology for strategy and execution in both media and creative.

As companies look to manage cash flow, will that give procurement an even bigger role in the months and years to come?

Procurement and finance’s involvement in agency hiring will increase in Q2 2020 and into 2021 as happened during the 2009 downturn. The impact will be low margin deals the push agencies to only provide execution, when in fact marketers need strategic thinking and problem solvers. This sets up a showdown between marketing and procurement. The best case scenario is the CMO and her CEO boss demonstrate to the CFO that treated services designed to differentiate and drive growth cannot be treated like commoditized goods.

Do you think we’ll see more mergers and more agencies close? 

The industry entered this downturn in a compromised position having reported low single digit growth for 2019. Mergers and agency closings are inevitable. Furloughs and more likely layoffs will be the first step. Mergers and dispositions will follow. Ultimately followed by closures. Hundreds of agencies are in jeopardy. That said, the agility of managing marketing in a pandemic makes certain agencies more valuable. Digital and PR agencies with consulting, strategy and data practices are reporting high volumes of activity. Full service media agencies are experiencing similar demand. Advertising agencies (depending upon the category of their clients) and events agencies find themselves in more challenged positions.

Great expectations

Kantar has been checking in with 30,000 consumers in 50 markets to keep tabs on consumer behavior as well as what they are thinking during this crisis. In the company latest report, Kantar found that 47% of people now expect “companies to support hospitals during the crisis,” up from 41% in the first edition of the survey. The company also found that 39% (up from 35%) survey respondents believe “that companies should be making themselves available to governments.”

Quote of the week

Four weeks into working from home, agency employees are feeling burnout and Zoom fatigue. “I’m feeling more drained at the end of the day versus our days in the office,” said president Erin Riley of TBWA/Chiat/Day L.A., adding that she’d been on nine Zoom calls that day.

Usually, audience shifts like these are like catnip for advertisers. The coronavirus, however, has thrown up an unusual set of issues for advertisers. 

Media budgets are in constant flux and the money advertisers do spend tends to be on tried and tested areas like search over emerging ones like esports. And even though advertisers like Chipotle, Subaru, Chupa Chups have followed viewers from live sports to esports during the pandemic, they’ve taken a light-touch approach. 

“While esports is more mainstream than it ever has been, it’s still a big niche at this point for many of our clients,” said Adam Schwartz, director of video investments for sports at Horizon Media.

Financing prize money for tournaments, providing products for free giveaways and funding the streams themselves are among the low-risk high reward tactics advertisers are currently brokering with teams and leagues. This way advertisers support the creation of content in a way that’s less likely to be viewed as a cynical marketing stunt by viewers versus being more exposed at the center of an esports sponsorship. 

“The conversations we’re having with marketers now are more focused around how we can help accelerate the awareness of their brands’ values instead of trying to help them hit a harder [key] metric,” said Glen Calvert, chief operating officer at esports entertainment business Fnatic. And while these conversations differ by advertiser, Calvert said they’re all motivated by wider corporate shifts away from sales-driven promotions toward a more helpful tone. 

Fnatic’s commercial strategy has pivoted accordingly. Normally, Fnatic’s commercial deals are built on how the reach of its content converts into a media value for the business. “It’s a different conversation we’re talking about whether the tone of the content is going to be suitable for the fans and if it is then as long as the costs are being covered for doing the entertainment bit then that’s all we care about.”

But for every marketer having those conversations with the likes of Fnatic, there are others that are reluctant to do the same until they know when live sports will return. 

“Most of the advertisers we’re working with are taking their dollars and parking it to the side while they wait for the leagues to provide some sort of direction on when live sports will return before they make any decisions on how to spend that money,” said Michael Neuman, managing partner, Scout Sports & Entertainment, a division of Horizon Media

Broadcasters may be pivotal in answering some of the lingering questions advertisers still have over the reach of esports. With advertisers looking to do more with fewer media dollars, esports programming could be a worthwhile bet as CPMs can vary anywhere from $10 to $30 for that sort of content.

Turner and ESPN are among a handful of broadcasters that have bought the television rights to show content from games like FIFA, but there are many others that haven’t done as much. The coronavirus, however, has put a hole through media schedules and sent broadcasters like Fox Sports scrambling to plug those gaps with esports. But it takes time to monetize the audience with new sponsorships and partnerships, especially when it comes to non-endemic brands who are being forced to branch outside their norm media mix.  Turner, which partnered with Twitch to launch an esports take on the irreverent variety show in January, is banking on its investments in culture and lifestyle content in addition to the pure esports gameplay to pull advertisers into esports while it has their attention. 

“In the short timeframe since the pandemic started any advertiser that hasn’t decided to go dark is looking at these sorts of live experiences as areas of interest,” said Seth Ladetsky, svp of client partnerships and head of Turner Sports Digital and eSports sales and strategy at WarnerMedia. 

“Categories like consumer goods, beverages, delivery services and insurance are gravitating toward media channels that are new, cool and growing.”

Despite the scramble from sports networks for esports, they’re not pitching the new content hard to media buyers. In the case of Fox Sports, the sports network worked with existing advertisers to place them in those races to either make up for past unfilled inventory or help offset future losses, said Schwartz.

“Some just try to avoid news, but then some are rethinking it,” said a second agency executive. For the latter clients, this executive said the thinking goes, “If we can change our message and people are watching news and the message resides in news well, then maybe we should do that because news could be driving some people to order out or something like that.”

As that statement implies, advertisers are not necessarily warming up to the news purely out of some sense of duty. That may be a contributing factor, but the bigger motivation appears to be that those companies still advertising are seeing that, with so many people tuning into the news these days, it can be better for their businesses to advertise against the news than to avoid it.

With sports not happening, news shows have stepped in as the programming genre that offers advertisers the largest live audience, according to agency executives. For some advertisers, such as streaming services, the reach that news offers right now has sufficed to convince them to redirect the ads that were intended to run against live sports to run instead against live news. “News is an area that some clients want to gravitate to because they know they will get more reach,” said a third agency executive. 

A streaming service can ask people tuning into type of programming to check out another without coming across as tone-deaf. But for other advertisers, before they can run ads against the news, they have needed to come up with new ads to run. “Clients are shifting the tone of their creative so they might feel more comfortable in news if they have creative that is sensitive to what’s going on right now,” said a fourth agency executive.

In addition to some advertisers and their agencies taking it upon themselves to craft new campaigns to suit the news, TV networks have been working to incentivize companies to run ads against news shows. The networks have not dropped their ad prices for news inventory, but they have been offering creative services at no charge to design PSA-style ads for advertisers and dropping fees for custom marketing programs, the agency executives said.

The agency executives said that seemingly every TV network group is offering the aforementioned incentives for companies to advertise against news shows, but they cited NBCUniversal as the most publicly representative example. The company has created public service announcements that call out individual advertisers as sponsors, and it has waived fees, such as talent and integration fees, for the custom marketing programs it creates.

“As an advertiser, our goal is always to negotiate those fees away or have networks cover it themselves. In situations like these, the networks are much more amenable to covering the costs,” said the third agency executive.