Less BS, More Facts, Some Opinions
Here’s today’s AdExchanger.com news round-up… Want it by email? Sign up here. How To Finnish The Job In Finland, social media influencers join jobs like doctors, bus drivers and grocery store workers as “critical operators” who continue working during a crisis. It seems like a strange designation (especially in the United States, where some influencers have… Continue reading »
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Like so many other industries, the coronavirus crisis is rapidly separating the distance between the haves and the have nots in the software-as-a-service sector.
In ad tech in particular, there was a rush in the middle of the last decade for companies to switch their models from charging clients a percentage of the media they were spending to instead adopting a flat monthly fee for the use of their platforms. The latter model usually generates more predictable monthly recurring revenue — versus the ebbs and flows of advertiser spend — and SaaS businesses tend to fetch higher valuations than those relying on media-based income.
But predictability isn’t a trait of this current crisis. As the pandemic escalated in March this year, CFOs started forensically scrutinizing their companies’ monthly outgoings and began trimming discretionary spending in a bid to preserve as much cash as possible. Nonessential software fees are a logical first cut as a downturn looms. Take WPP, which said in a statement last month it had “identified savings in excess of £100 million ($124 million) in property and IT capital expenditure against an initial 2020 budget of around £400 million ($495 million).”
A whole host of companies in the SaaS space are now seeing their new business pipelines evaporate, experts told Digiday. Plus, there aren’t any in-person trade shows taking place for sales teams to chase new leads. Aside from the collaboration and video conferencing tools that are experiencing a boom right now as teams are forced to work remotely, large established players with multiyear contracts are best positioned to escape the chop, according to executives. But even those companies aren’t immune in an environment where businesses are seeking payment holidays and testing force majeure causes.
“It’s forcing major brands to just go back to basics,” said Ryan Kangisser, managing partner for strategy at advisory firm MediaSense, added that it’s not just the fixed cost of contracts companies are considering, but the internal resources required to run the software.
“One CPG we work with is considering whether to retain their DMP contract [with a large software provider] because of all the time and effort they put into it verus the output. There are other ways of driving growth beyond that platform,” Kangisser said.
The majority (70%) of SaaS billings take place in the first 15 days of the month, according to Cledara, a purchasing and analytics platform that helps companies manage their software subscriptions. That means the next two weeks will be crucial for the SaaS sector. Spend on lead generation tools already declined 8% between February and March this year, according to Cledara.
“My hypothesis is that companies are in freeze mode at the moment,” said Brad van Leeuwen, Cledara co-founder and COO.
SaaS companies will need to adapt their sales approaches accordingly.
“If you’re selling a solution that requires people to have a PhD in nuclear physics to figure out how to work it, or a three-month ramp up period,” those onboarding processes will need to be overhauled, said Eamonn Carey, managing director for London at Techstars, a startup accelerator.
“For a lot of businesses, the buyer persona has changed from the VP of engineering or an individual product lead to the CFO-type level. They will go, ‘I don’t understand what this tool even does — I don’t even understand what the description on their website says’,” Carey added.
To counter the potential for confusion — and instant dismissal from CFOs — smaller companies, who provide niche point-solutions could look to create a bundle of services with other companies in adjacent spaces to create a bundled subscription that is competitively priced to better-known full-stack services, Carey said.
Still, with new business under substantial strain, retaining customers is key — which may require wiggle room and forgiveness with clients.
“If you say to someone, we have a 12 month contract but I need to massively reduce, cancel or postpone my payment, if that person refuses, you say: ‘At the end of 12 months you’re gone,’” said David Jones, CEO of brand tech group You & Mr Jones.
SaaS companies that accept a haircut on price now, may be rewarded with longer contracts later.
“I’d expect to see some opportunity for sellers to lock in longer agreements with existing customers in exchange for price breaks,” said Eric Franchi, operating partner at Math Capital.
Ultimately, as with every other sector, the SaaS companies that were already executing responsible financial management and had strong cash positions going into the crisis will be better positioned to weather the storm and come out of it.
“SaaS can actually be a real minefield unless you have scale,” said Iain Jacob, who chairs on several company boards in the media, advertising and technology space and the former CEO of Publicis Media EMEA. “Many smaller companies and startups totally underestimate the cost of sales and marketing and overestimate how fast they can grow a license base that pays the bills.”
The post ‘Companies are in freeze mode’: Coronavirus crisis strains ad tech licensing model appeared first on Digiday.
Across the industry, as everyone scrambles to figure out new ways of working, one more quintessential part of agency life that’s gone virtual is the pitch. Without the ability to meet in person, agencies are cooking up ways to bring “pitch theater” — i.e. the physical presentation of an agency’s brand of creativity — to life online.
“An office environment enables us to create endless opportunities for pitch theater so we asked ourselves, ‘What would the Black Sheep do to take the same level of magic to people’s living rooms?’,” said Tim Harvey, chief growth officer, BBH Group, adding that the shop created an augmented reality experience for a pitch last week to do just that. “It was a comms solution born out of a world that recognized the production realities of [coronavirus].”
Due to the new work from home reality across the globe, agencies, brands and consultants are all adapting to pitching over Zoom and WebEx, among others. Instead of shaking hands or sussing out someone’s personality in office conference rooms or over drinks, agencies and brand marketers are hopping on video chats, seeing each others’ home offices and learning how to continue the norms of the business together, albeit digitally.
Whether agencies are pitching new creative concepts or new business, doing so has never been about simply shaking hands and showing a PowerPoint presentation. Agencies have spent decades perfecting how to immerse clients into a story and make them feel connected to an idea so that they buy it. Transforming how that’s done digitally doesn’t happen instantly and can be awkward, agency execs and consultants say as it can be difficult to get a sense of how a pitch is being received without seeing body language.
“Pitching by Zoom is tricky since we all know so much is based on team chemistry,” said Lisa Clunie, co-founder and CEO of Joan Creative. “I can’t say we’ve perfected the tool yet, but we’re working hard to keep our fun culture at the forefront of our client meetings.”
The lack of proper in-person pitch theater likely makes the work more important than the chemistry. “The work now truly has to speak for itself,” said Alison Moser, head of business development and PR, Forsman & Bodenfors NY. “It’s forced us to be more direct in our presentations and disciplined about their delivery. But this all comes with a much more transparent and honest communication line between agency and client. At the end of the day, it feels like we’re all rewriting the rules of pitching, and I hope they continue to evolve to an even more human place once we get through this.”
The types of pitches happening virtually vary. Some agencies are simply figuring out new ways to pitch current clients on new creative or media placements. Others are vying for new business via pitches, many of which are still on-going according to consultants who say that while some clients, particularly those in healthcare, have paused agency searches that the majority of their pitches are still running. According to a new report by IDComms, more than half of agency CEOs are confident their shop can respond to a new business brief with roughly 8% saying they have asked for new business activities to be put on hold.
“When it comes to reviews, it’s now about how urgent it is to do,” said Lisa Colantuono, president of the search firm AAR Partners, adding that all of her current pitches are still on-going save for one client that has paused. “The priority is to pay attention to day-to-day business and keep it afloat. It’s time-consuming to do a review so people may have to put them on hold a bit, it depends on the category.”
Whatever the pitch may be, everyone is making do simply because they must.
“You have to do your pitch theater in different ways,” said TBWA/Chiat/Day New York CEO Rob Schwartz. “Part of what clients are buying is the energy and enthusiasm of an agency. It takes a different kind of stagecraft to do it virtually.”
Typically, when pitching a client in a room an agency can showcase their work throughout the space and on the walls of a conference room, almost like a mural, explained Schwartz. Without being able to do that, agencies have to “make the storytelling more like chapters,” said Schwartz. “You have to really practice how you will do the hand off.”
Of course, beyond the potential awkwardness of the hand off or speaking over each other, adapting to doing everything virtually can be a pain. “One of the very first virtual meetings was a mess,” said a consultant who asked for anonymity. “The connection wasn’t strong on the marketer side. The voiceover was garbled. We couldn’t really hear the briefing too well from different team members. We must’ve stopped it three times to figure out what’s going on.”
Some agencies believe that incumbents will be more likely to hang onto a piece of business now as agencies are less likely to want to uproot their business but consultants say that if a marketer is looking to move now that it’s likely they will continue with the pitch anyway.
Aside from the brands that have pressed pause, there are business dynamics that are changing for the on-going pitches. Some that are still running pitches have reduced their estimated media spend and adjusted the scope of the pitches they are running, according to consultants. Those brands haven’t yet looked at changing the payment terms for the agencies that may win the business of those pitches yet but consultants expect that to be a possibility in the coming weeks as marketers look to retain as much cash as possible amid the uncertainty of the months ahead.
Consultants also worry that marketers might be more likely to run pitches without them, switching to doing so internally as a way to cut costs in the current uncertain market. “The business dynamics are changing and we all have to see how we manage,” said another consultant who asked for anonymity. “Right now we’re busy but we anticipate not being busy. It all depends.”
The post How agencies are taking client pitches virtual appeared first on Digiday.
This is the first installment of a weekly new column about the big changes and challenges facing direct-to-consumer startups. Join Digiday+ to get access to this and all articles, research and more.
The reckoning was a while in coming. It just wasn’t expected to come like this.
After all, people on Twitter, that favorite platform of the direct-to-consumer startup community — and plenty of articles on this site as well — love to talk about one of a few things: If there’s a direct-to-consumer ceiling; the best way to acquire customers, and the inevitable slowdown and burst of the DTC bubble as unprofitable businesses are due to run out of cash, with no investors left to fund them.
And thanks to the coronavirus outbreak, that last one seems to have accelerated.
“The coronavirus outbreak notwithstanding, there were a lot of issues that were spread out through the rest of the DTC ecosystem going into the first-quarter of this year,” said Jeremy Cai, founder of Italic, which sells luxury bedding, apparel and handbags. “I feel like we are settling into a new normal in many ways of being conservative,” he said.
Even for companies that are seeing any temporary improvement in sales comes with another one or two major headaches. And the understanding is things may change at any points.
At paint company Backdrop, co-founder Caleb Ebel said that while DTC sales have gone up, they’ve had to temporarily shutter entirely the service side of the business.
And while some e-commerce sales, particularly of essential goods like food, beverage and beauty are likely to continue to rise, few are betting their business on the fact that that will be enough.
As Shoaib Kabani, co-founder of bedding brand Buffy told me: “We are bracing for [the fact that] it is still early in this kind of crisis and we are planning for potential downturns in our sales.”
In a twist, the exact insularity of the DTC community that many point to as a problem has also helped. As founders brace for the fact that the worst is likely still to come, they’re turning to one another to try to figure out how to get their businesses through this crisis. Twitter may be filled with flexes of companies posting about their best sales day, or thankful emails they receive from customers, but Kabani said that in his text messages with founders is focused on practical steps.
The big questions: Understanding the Small Business Administration’s guidelines around the Paycheck Protection Program and whether or not their business qualifies for it (our own Cale Weissman has more on that here). Others: Disruption in their warehouse or fulfillment operations, as well as questions on where to pull media spend, as well as how to take advantage of the fact that advertising costs are falling on platforms like Facebook as other companies pull back their advertising spend.
It can be other issues too: Aishwarya Iyer, founder of olive oil company Brightland, told me that she’s on two different email chains with female founders where many of them are sharing work from home tips, as well as how to balance work while at home with family and kids. Cai said that he is sharing tips with other companies on how to renegotiate things like software contracts.
Pre-pandemic, the fact that the DTC community is so insular can sometimes be viewed as a disadvantage, especially if the discussion entered echo chamber territory. But now when everyone is in uncharted territory and no one knows exactly how consumer spending will shift and which businesses will survive, having a lot of other founders to use as sounding boards is comforting.
“We’re not all necessarily competitors, but at some point we’re all fighting for the same space and attention, but it’s great to see that people are willing to share advice whenever possible,” Kabani said.
But the one question that nobody wants to be the first to answer, is which DTC businesses won’t make it through the coronavirus outbreak. New data that just came out yesterday from eMarketer projects that online sales from direct-to-consumer startups is already slowing.
Founders all agree that the businesses that won’t survive are the ones that have taken on too much venture capital funding and aren’t bringing in enough money to justify that valuation. But everyone says their fundamentals are strong until suddenly, they aren’t.
Brightland sells its olive oil both direct-to-consumer, as well as through some non-traditional wholesale partners including Goop and Nordstrom. Some of its wholesale partners’ stores are closed due-to-shelter in place orders, but founder Aishwara Iyer said that one interesting new trend the company is seeing is that some restaurants in California have expressed interest in recent weeks in selling Brightland. That’s because while their dine-in service remains closed, they are looking to carry more pantry staples to increase the value of their takeout orders. That could be another way for food and beverage brands to grow sales during this time period.
EMarketer is projecting that online sales from direct-to-consumer startups in 2020 will reach $17.75 billion, up from $14.28 billion last year. Last year, that constituted 2.26% of all U.S. e-commerce sales. The big question though, is whether that number will come in above projections, as more consumers do their shopping online and remain hesitant to return to stores even when they are open, or below the mark as more consumers tighten up their wallet.
“This is a pandemic. This is not a business model.” — Blue Apron CEO Linda Findley Kozlowski during an interview with CNN on the uptick in demand the company has seen recently
The post As the DTC reckoning accelerates, founders turn to each other for advice and sanity appeared first on Digiday.
The coronavirus outbreak has been a mixed bag for individual video creators. View counts and watch time for their videos have increased as people stay in their homes. But with many advertisers pulling back budgets, those viewership increases have primarily served to offset declines in branded content deals and platform ad prices.
To deal with this dynamic in which viewership is up but advertising is down, creators are using this time to post more videos, including live videos on YouTube and Instagram, to attract new viewers in hopes that they will stick around after the pandemic is over and marketing dollars return.
“A lot of people view this as when the market is in a bear market and it’s really the time to invest and buy low and then hopefully yield the fruit afterwards,” said Preston Arsement, a YouTube creator with more than 12 million subscribers to his main channel and who serves as CEO of digital studio TBNR.
Across the nine YouTube channels that TBNR operates, viewership has nearly doubled since the quarantine took effect in mid-March, and for the full month, views totaled almost 500 million views, exceeding the previous high of roughly 300 million monthly views, Arsement said. However, over the past week or so, ad revenue has declined by 50% to 70%, though merchandise sales have tripled in that time to make up for the advertising drop, he said.
Other creators are facing a similar dilemma. Fullscreen, an AT&T-owned digital entertainment company that works with creators such as Cody Ko and Zach King, has seen the time people spend watching videos has increased by 30% but CPMs have fallen by up to 20%, said Parker Jones, vp of international at Fullscreen. Fortunately for some creators, the viewership increases have been able to mitigate the ad price declines.
“I don’t know if they’re making more money because of CPM drops, but they’re not being hit as hard,” said Jones.
In addition to the ad price drops, many marketers have canceled or postponed influencer marketing deals. “A lot of companies pulled back or postponed and said to reassess in June or July,” said Doug Shabelman, president of Burns Entertainment, which matches marketers with celebrities and influencers for campaigns.
Creators have adapted to these business challenges, however. With audiences holed up at home and more likely to tune into their videos, they are posting more videos in order to attract more viewers and counter the lower ad prices. Arsement and his wife Brianna Paige Arsement typically post four videos a week to their respective gaming channels on YouTube, but they have increased that count to 16 to 18 videos per week, he said. The creators that Fullscreen works with have increased the number of videos uploaded by 20% over the past two weeks, Jones said.
Creators are also producing more videos tailored to the quarantine experience. Dude Perfect, a group of creators best known for trick-shot videos, typically only uploads a video every other Monday. However, after sports leagues including the NBA and NHL put their seasons on hiatus, the group produced “The DP Quarantine Classic,” a series of five nightly livestreams on YouTube the week of March 16 featuring the creators playing sports like roller chair hockey. Those livestreams averaged 100,000 concurrent viewers, said Josh Grunberg, head of partnerships, insight and talent at Whistle, the entertainment company that works with creators including Dude Perfect. Those broadcasts are available on-demand and have received 23.2 million views, as of this writing.
In addition to going live on YouTube, more creators are going live on Instagram. Influencer marketing firm Digital Brand Architects manages 180 creators. Before the quarantine, those creators were hardly using Instagram Live, but now at least half of those creates are going live on Instagram, said Reesa Lake, partner and evp of brand partnerships at Digital Brand Architects.
Those live broadcasts do not directly make any money for the creators at the moment, but the hope is they will contribute to their businesses in other ways now and in the future. For example, food creators Gaby Dalkin and Courtney Kerr are using the ability for multiple people to participate in an Instagram Live video to broadcast live cooking shows and cross-pollinate their audiences, Lake said. And then after the pandemic has been contained and ad dollars return, Digital Brand Architects will have a portfolio of live video examples to present to potential sponsors.
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Publishers are grappling with how to say solvent while facing declining advertising revenue, lost event sponsorships and ticket sales and dwindling commerce revenue.
While the Digiday Publishing Summit couldn’t take place in person in Vail, Colorado this year, would-be attendees still gathered virtually to discuss the challenges they’re facing within their businesses and what their strategies are for weathering the storm. Like most of our in-person town halls, this conversation was conducted under the Chatham House Rule, which allows reporters to share what people say without identifying them by name or company.
Many advertisers are pausing ad campaigns due to financial strain and that is hard to debate. But for clients that are hesitating on their spend due to concerns around messaging against the coronavirus content, publishers can take a consultative approach to teach them how to make the messaging service related, in order to be a brand that is remembered as being front and center in having helped people during the pandemic.
“Not letting an advertiser out of whatever they want to do is a very short-term decision for your business. If you run this client’s campaign and it’s tone deaf and you force them to deliver you $100,000 or $500,000, when those lights come back on, they’re not coming back to you and that damage can be irreparable.”
One publisher said that advertisements running on coronavirus-related content are seeing a slight decrease in click-through rates. Though they attributed this dip to the type of inventory and campaigns running on those pages (more an increase of ads sold on the open auction versus higher impact ads) than to actual performance of the ads themselves.
Separately, an executive at a large digital publisher said it is seeing 30% lower CPMs on coronavirus pages versus non-coronavirus pages.
“Either supply chains are broken or they’re afraid of coronavirus adjacency — not because of brand safety but because they don’t want to sound tone deaf.”
For some publishers with non-news related content that audiences consume habitually, traffic may be down due to the break in the daily routine. One such publisher experiencing this found that traffic was down 25% last month. In these cases, subscriptions and direct sold campaigns were the most stable part of their business while programmatic is down upwards of 20% and other consumer products have not sold as much due to the decrease in traffic.
“If you’re not adapting your content strategy, you’re probably missing something. But from a product standpoint, I don’t think it’s time to change your products necessarily.”
When selling virtual events, obviously the networking and human interaction piece won’t be there, but the upside is amplifying the audience. While a live event might bring in a few hundred participants, a virtual event can be shared with more than 10 times that number. That value proposition is compelling and could potentially be a better product for partners.
Virtual events might not bring in as much revenue, but you can make up for that with saving time and money in planning it, such as turning out a new digital event in as little as 48 hours, according to one publisher.
“Our view is that we will see a dip in events revenue for this year just because it’s the nature of the beast. But through virtual events, there is a way to keep the business afloat.”
Making up all elements of the trade show is nearly impossible in a virtual format, especially for a two-or three-day conference because people won’t spend all that time in front of their computer. The other side of it is for trade shows that bring in tens of thousands of people and the loss of ticket revenue, which can be a few thousand dollars per pass, is significant. Therefore, rescheduling events to the fall is the best chance at recouping some of that money as a publisher, however that timeline is still hopeful at this point, several publishers agree.
“Sponsorships will be there but the pipeline for B2B media and those sellers are six to eight months. It’s not a consumer sell, so they’re going to need to get out a head of it here.”
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