Month: May 2020

Facebook is trying to transform itself into an e-commerce platform because it is necessary to continue getting retailers to spend their advertising dollars on Facebook, instead of Google or Amazon. Retailers want to spend their advertising dollars with the platform that has the most data about their customers’ behavior, and where they know their customers are going to in order to discover products.

But, DTC brands who take advantage of Facebook’s new e-commerce tools also risk losing control over their relationship with their customer. If a customer thinks of Facebook as the place to discover new products, why should they go to one company’s website in particular to see what’s new, rather than browsing through hundreds of storefronts on Facebook? It may be worth it in the name of lower acquisition costs. But, Facebook also needs to convince these companies that it’s not going to direct traffic away from the branded storefronts they worked so hard to build.

Enter: Shopify
Hence in its announcement, Facebook said that it would be working closely with Shopify, BigCommerce, and WooCommerce to help roll out Facebook Shops to their merchants. On Facebook Shops, companies can either direct customers to purchase either through their own website, or through Facebook’s own Checkout, if the company has that enabled.

Shortly following Facebook’s announcement, Shopify put out a press release trumpeting its role in the launch of Facebook Shops. The company stated that as part of the rollout of Facebook Shops, it would be building a new channel to more easily connect their Shopify business to Facebook, and also offering Instagram Checkout to select merchants who are interested in testing the feature.

Shopify is largely considered the go-to e-commerce provider for direct-to-consumer brands, and as such, stands to benefits the most right now from Facebook’s aggressive e-commerce push. But that could change if Facebook gets into services that more directly compete with Shopify’s business. Now that Facebook is getting into storefronts, could it get into fulfillment services in several years?

Facebook and Shopify, of course, say they don’t see themselves as competing. “We see this partnership as a way to bring buyers and get that visibility for our merchants, but Shopify really manages the core of a merchant’s business,” Zabrina Hossain, product lead at Shopify said. A Facebook spokeswoman noted that, beyond Shops, Facebook was working with Shopify to “power end to end full transaction experiences like Facebook Marketplace and Instagram Checkout.”

In the short-term at least, what Facebook needs in order to encourage more people to turn to its properties to do their shopping is a supply of brands and retailers that its users are interested in. The quickest way for Facebook to onboard those customers is to work with a partner like Shopify who can its large base of merchants on board.

“Facebook’s native tools in terms of all of the backend on-boarding, are not great,” Monish Datta, a former product marketing manager at Facebook and currently vice president of growth at Glamsquad told me. “There is so much heavy lifting on the backend that is required to set up a storefront, that is Shopify’s specialization.”

And, by touting Facebook Shops as a way for merchants to drive sales back to their Shopify-powered websites, Facebook can ease the concerns of merchants who might be wary of giving ownership of customer data over to Facebook.

The DTC quandary
Data has been one of the challenges Facebook has encountered in trying to get more brands to test out Instagram Checkout. An anonymous DTC brand marketer told Glossy this year that that was one of the reasons why their company decided not to test Instagram Checkout. At the time, Instagram would only give them enough data about the customer to fulfill and ship their order. Shipping confirmation and order confirmation emails were to be sent from Instagram, not the brand.

“If they’re not allowing us to market to a customer, that’s not necessarily our customer anymore. It’s Instagram’s customer,” the marketer told Glossy.

One year in, Facebook said that Instagram Checkout is still in closed beta, and only that hundreds of brands are using it. Many of the brands that it currently highlights as using Checkout are larger retailers like Uniqlo, H&M, and Zara.

Instead, by partnering with trusted back-end partners like Shopify, Facebook seems to be aiming the launch of Shops at small and medium-sized businesses. The advertising piece is what makes Facebook Shops so attractive to the DTC executives I spoke with. Josh Knopman, growth lead at cookware brand Caraway said that, long-term, what excites him about Facebook Shops is that “there’s lot of really interesting opportunities on the analytics front, to evaluate what consumers are spending on, and what type of images are the most successful.”

What that could ultimately lead to, he says, is that retailers can more accurately serve ads to what customers may potentially be interested in their products, which could ultimately lead to lower advertising costs, or acquiring more high-value customers.

But that also presents a risk, if a DTC startup goes all-in on Facebook Shops. Optimizing for advertising on Facebook is like a game of whack-amole, where companies are constantly trying to figure out some new bidding strategy to keep their customer acquisition costs low, before all of their competitors figure out that secret and then advertising costs rise again.

Additionally need to be aware about what type of customer they may be acquiring through Facebook Shops. “This kind of purchasing structure works really well when you are dealing with low ticket items,” Aaron Luo, CEO of DTC handbag brand Caara said. “When you have an average order value of $300, $400, [customers] have to learn about your brand, learn about your product, before purchasing, and  I I don’t know whether Facebook Shop will bring that experience to your customer.”

But all the DTC brands I spoke with said that they are interested in testing out Facebook Shops — at least to get a better sense of what types of conversion rates they could draw through it. And, the integration with Shopify and other e-commerce providers makes it easy for them to set up a storefront on Facebook because they don’t have to go about uploading a product catalog.

There will inevitably be tension between what’s best for Facebook in order to reduce shopping friction, and what’s best for Shopify to help its merchants grow and keep its own partners happy. But, as long as the set up is easy, and DTC brands don’t have to give away data yet, expect a rush of them to test out Facebook Shops.

“CPMs have come to a range now where there’s less risk to test,” said Brad Geving, vp of media at TV ad buying firm Tatari.

While direct-to-consumer marketers have dipped a toe into TV for years, they have historically been bidding for whatever inventory is left over by upfront advertisers and sold in the so-called “scatter” market, usually locking them out of networks’ prized programming. But the combination of more people tuning into TV and major advertisers pulling out of deals created an opportunity for these digital-first advertisers to buy ads in otherwise hard-to-get shows, such as broadcast networks’ primetime programming, for one-third to half of the usual price, according to Tatari.

TV is not the only medium to see ad prices drop. Facebook and Instagram CPMs dropped by 62% from early March to early April, according to digital agency Gupta Media. However, social and search ads have also seen performance dip. Between late February and mid-March, conversion rates fell from 14% to 4% for Facebook and Instagram ads and from 8% to 6% for Google search ads, according to performance marketing agency Tinuiti.

TV’s lower ad prices and higher inventory availability has enabled these digital-first advertisers to not only test TV but to test some of TV’s biggest shows. For example, DTC men’s grooming company Manscaped was able to run ads within ABC’s “20/20,” said Joey Kovac, senior director of marketing at Manscaped. The weekly news show “wasn’t on our radar to test. Historically a primetime spot on ABC can be pretty expensive. But with the state of the current market, it allowed us to test a few things like that that we probably typically would have passed on,” he said.

Under normal market conditions, “I’m like a year or two away from buying broadcast primetime. But [because of the lower prices and higher availability], I’ve done multiple fire sales with big, chunky spots where I’m spending $10,000 to $20,000 on a spot, whereas the fourth quarter of last year, I was spending $40,000 to $50,000 a week,” said Fairbairn.

In the cases of Gabi and Manscaped, both digital-first advertisers had begun to buy TV ads last year and have pounced on the discounts to see if they may want to move more money into TV. But, the lower risk and lower barrier to entry is spurring some digital-first advertisers that had previously ruled out TV for budgetary concerns to reconsider. 

A marketing executive at a technology company that primarily buys social, display and digital video ads said they are considering buying ads on TV in May to see if the expanded reach could accelerate the company’s revenue growth rate to reach a level it didn’t expect to hit until the first quarter of 2021. 

These digital-first advertisers’ willingness to test TV creates an opportunity for TV networks to offset the dollars they are losing from traditional advertisers. However, these digital-first advertisers’ budgets can be even more difficult to pin down because the marketers are accustomed to evaluating short-term performance and increasing or decreasing the money they spend in response. As a result, they are as likely to pour more money into TV if ad prices remain low as they are to pull back budgets once traditional TV advertisers return to the market and ad prices return to pre-crisis levels.

Manscaped has not increased the amount of money it is spending on TV during the crisis, Kovac said. He declined to say what share of the company’s advertising budget goes to TV because the company evaluates the figure on a weekly basis. “Some of the tests we’ve been able to do now are sort of taking advantage of the good rates. But at the same time, some of the tests have proven to work really well,” said Kovac, who declined to share specific figures.

For Gabi, which works with Tatari to track site visits against its TV ad airings, the lower ad prices and higher inventory availability has led to a 50% reduction in how much money the company is paying for each site visit attributed to its TV ads, according to Fairbairn. That has led Gabi to allocate a larger share of its advertising budget to TV, from roughly 30% before the crisis to more than 50%.

However, the good rates are beginning to go away for networks’ best inventory. In late April and into early May, Gabi saw access to networks’ primetime inventory begin to evaporate, Fairbairn said. Geving concurred that primetime fire sales have subsided. After falling as low as 80% of the typical rate, primetime fire sales now offer 10% to 15% discounts. However, ad prices in the broader scatter market, on average, are still 55% below the normal rate.

There is a possibility of the primetime fire sales returning with upfront advertisers expected to cancel a significant share of their third-quarter commitments. One agency executive said that more inventory will open up in the third quarter and, as a result, the share of TV ad inventory going to the scatter market for direct-response advertisers, such as these digital-first companies, will increase. “The DR pie is going to grow,” said this agency executive.

Meanwhile, social issues organizations increased impressions by 132% over the same period to 2.3 billion, according to iSpot.tv. Those organizations include the likes of Feeding America, Salvation Army, Global Citizen and Habitat for Humanity. Last year, 50 social issues organizations aired at least one ad on linear TV — versus 61 this year. Those organizations were also getting a higher impression in primetime — specifically Sunday primetime — than last year.

The sharp increase in impressions didn’t necessarily mean those organizations were spending more on advertising than a year ago. Airtime is negotiated at a discounted rate for non-profits on a per-network basis, making it difficult to capture whether overall spend was up or down. ISpot.tv does not estimate ad spend for nonprofits within its dataset.

Plus, the supply and demand nature of the TV market means that while viewership soared as shelter-in-place measures were implemented, the pullback in spend from some advertisers in sectors like travel and entertainment meant rates have declined.

“Most mainstream advertisers are pulling back significantly on TV and radio, which opens up two things: one, inventory availability; two, decrease of costs,” said Parks Blackwell, vp of client development at marketing agency PMG, which is currently working on a digital campaign expected to go live early summer for nonprofit organization United Way. “Networks need to fill the space and are much more willing to provide that either at no cost or low cost.”

American Red Cross has been running separate spots encouraging Americans to give blood during the crisis, which includes the lines, “We need heroes now” and “You can make a difference.” The organization accounted for 34.6% of all impressions in the healthcare and awareness sector over the period analyzed. It was among the top 100 brands on TV by impressions, above brands including Dunkin, Rocket Mortgage and Lexus, according to iSpot.tv.  American Red Cross increased its TV impressions to 1.9 billion from April through May 17 2020, up 33% versus the same period last year.

“The American Red Cross quickly produced new PSAs to raise broad public awareness about the need for blood donations during this pandemic, while also reassuring donors about new safety measures in place at our blood drives and donation centers,” said an American Red Cross spokesperson. “Media companies across all platforms stepped up and supported our PSAs at unprecedented levels giving our message the highest reach and frequency of any campaign we’ve ever run.”

Elsewhere, AARP reoriented its marketing in March to focus its messaging around the coronavirus. It moved money allocated for the fourth quarter to instead be spent during April and May, including some additional buys on television and radio. AARP’s impressions were up 23% through the crisis period, compared to the same time period last year. Its commercial, featuring CEO Jo Ann Jenkins talking directly to the camera about how AARP has pivoted to providing useful information about the coronavirus, landed 471.7 million impressions in the time period analyzed.

Nonprofits are facing an unprecedented challenge: Revenues have plummeted and at the same time, demand for their services has skyrocketed, said Rick Cohen, chief operating officer at the National Council of nonprofits.

“Nonprofits that utilize advertising do so with the double mission of reaching potential donors and ensuring that people know how to access their services, if they need them,” said Cohen, who also serves as the Council’s chief communications officer. “With so much about our everyday lives being different right now, there are new needs to address and a need to reach more people than ever, whether to help them or to ask for their support.”

A similar story has been playing out in the U.K., where charities have been quick to adapt their appeals to focus on the current crisis.

In the first three to four weeks of the crisis, the drop in overall advertiser demand and increase in audience supply led to TV ad rates that had not been seen for 40 years, said Marcus Orme, CEO of U.K.-based  media agency Medialab, which works with a number of nonprofit organizations.

“In the early days of the U.K.’s Covid-19 pandemic, the cheaper pricing did not immediately drive significant performance impact for charitable organizations as consumers adjusted to and started to take in the enormity of the crisis,” Orme said. 

That began to change in April, according to Orme. TV networks were also quick to adapt and began to remove traditional barriers to TV investment like creative development and production, reducing costs and increasing the speed at which ads could get on air — to less than a week in some cases. 

“Audiences continued to grow and consumers started to tune in to and react to the growing number of charity emergency campaigns on TV, which started to drive impressive response rates,” he added.

Minute Media, owner of seven digital content brands covering everything from sports and gaming to culture and entertainment, is one publisher that’s enacted these approaches, designing revenue-driving solutions that service multiple teams. Digiday spoke with three Minute Media executives across their content, tech-and-product and commercial teams to get a sense of how this approach is playing out for the company and its partners.

Digiday: How has your company’s use of technology and automation evolved during the pandemic?

Matan Har, CCO: As we all face the challenges of COVID-19, our team has had to be savvier with less, including creating content from home instead of within our video studios or on-set. The lack of live sports and events also brings its own challenges. As a result, video output has declined. Luckily, technology has enabled us to supplement our existing content while also automating SEO, semantic-content matching and dynamic content creation — all of which has taken some of the strain off of our team.

Digiday: What have you learned about the impact of technology on team performance? 

Har: Over the years, I’d say the biggest thing we learned was that a lack of communication between teams can lead to inefficient workflows and mediocre results. The most important thing that came out of these learnings was how crucial it is to use a singular technology that services the needs of all three departments —  content, tech-and-product and commercial. After building and implementing this solution in-house, we’ve been able to free up time and resources while increasing audience development and revenue.

Digiday: What roles do tech, product and content play in Minute Media’s go-to-market strategy?

Rich Routman, President and CRO: Tech and product play a huge role, including the ability to create engaging user experiences in tandem with our advertising partners. They also enable us to distribute branded content at scale. Lastly, the insights that technology enables are pivotal to our commercial business. We’re not only able to optimize campaigns as a result of real-time analytics, but we also use data to guide our strategies. In addition to branded-content development, we work closely with our content team to identify and develop strategic partnerships and acquisitions that will drive increased traffic and engagement, which in turn, results in increased revenue opportunities.

Digiday: The media industry is always in motion, how can publishers future-proof against the more challenging turns it can take?

Routman: One of the most crucial things is to diversify your revenue, and in order to successfully do that, your sales team should be more than just a traditional ad sales team. They should also be thinking about content syndication opportunities as well as new distribution channels. By leaning into partnerships with other like-minded publishers and tech providers — even ones we may consider competitors — we all win. By doing so, we’re able to focus on our own strengths while allowing others to fill in the gaps.

Digiday: How can publishers better build products and tech that meet the needs of many stakeholders at once?  

Sharon Weiss, CTO: As publishers ourselves, we’re able to draw from our own experience and build solutions from there. We then test those solutions on our own content brands, and, once perfected, offer them to our partners. And while it may sound like a simple solution, it’s also important to ask around. Diligently seek-out partner feedback, network and swap ideas with external partners. There’s a lot that can be gained from other points-of-view, experiences and expertise. Host and attend meet-ups, ask for product demos, etc. More is more. 

Digiday: As you develop new publishing solutions, what emphasis do you put on product flexibility? 

Weiss: It’s important to understand that one size does not fit all. It’s better to build innovative, smart solutions for the most common use cases, and accept that they may not service every need or partner — but it’s better to have really strong products that scale. With that said, your products should be built with flexibility in mind, and your teams should be open to pivoting when needed. In our industry, algorithms change, and so does user behavior, so you must constantly evolve if you want to keep up and stay relevant. These are volatile and ever-evolving times in our industry; we are committed and focused on helping publishers, like ourselves, grow and navigate the landscape using product and technology to power publishing-as-a-service.