Month: June 2020

In April, total digital display ad spending (which excludes video and social media) in Europe was down 38% versus the prior year, according to IAB Europe chief economist Daniel Knapp. In May, spend was down between 25-28% on the prior year — but an improvement on April. Knapp estimates that June spending will be down around 16% versus last year. (IAB U.S was still compiling its May buy-side trends report at the time of writing.)

“These early indicators suggest the crisis may not be as long as anticipated,” said Knapp. 

There are big caveats. With many businesses still teetering on the edge of collapse and high unemployment rates in many countries around the world, the economic outlook remains uncertain. The threat of a second wave of the pandemic before a vaccine becomes widely available also continues to loom large. Specific to the media industry: While programmatic spend is returning, direct deals have lagged behind, said publishing executives. Print advertising and events sponsorships are also business lines that are still clearly challenged.

“The question is if, and when, the market will get back to the pre-March … levels,” said a commercial executive at a large U.K. publisher. “Advertising always tracks GDP so the key to sustaining the gradual recovery will be whether consumer confidence stays the distance.”

The key issue with the first half of the year, according to Knapp, was a “supply crisis” — where many companies were forced to stop advertising because they had difficulty producing products and services and getting them into the hands of consumers. 

“What was disregarded is the risk of the second half of the year in 2020 of moving into a demand crisis where suddenly the consumer wallet is squeezed,” said Knapp. But, he added, “It’s legitimate to look with optimism into the future [because] the consumer demand crisis, if it occurs, is not going to trigger as severe ad spend declines as the” initial throes of the pandemic.

In March and April, companies were largely focused on trimming costs and preserving cash — as evidenced by the waves of layoffs, furloughs and pay cuts across a variety of sectors. In May, many companies began to rebuild, said Tom Jenen, chief revenue officer of Brandmetrics, a measurement platform.

“Everyone seemed to have shut down because they weren’t sure where the right place was to put their advertising investment. In May understood what they needed to do and what they needed to say,” said Jenen. “It feels like this was a correction.”

Last month when reporting their first-quarter earnings, the majority of public companies pulled their financial guidance, citing the uncertainty surrounding the crisis.  Last week, ad tech company Criteo released an interim update to investors saying May had turned out better than expected. Criteo specializes in retargeting, with travel advertisers and retailers making up a hefty proportion of its client base.  “A continued decline of the company’s revenues for the month of May compared to April had not materialized as anticipated.” A Criteo spokeswoman declined to comment beyond the statement as the company is heading into its quiet period.

In other positive news for May outside the media and ad sector: Adidas said last week that its revenue growth in Greater China turned positive in May, earlier than expected. The sports apparel company said Greater China quarter sales are expected to be around the same as last year.

On social media, the rebound appears to have happened a lot faster, according to VidMob, a creative technology platform that partners with the likes of Google, Facebook, Twitter, Snapchat and LinkedIn. Across the categories it tracks, in aggregate, March spending started slightly ahead of last year but fell back by approximately 25% as lockdowns began, but had rebounded by month-end. April was up nearly 70% on the previous year, said VidMob CEO Alex Collmer, driven by large increases in categories such as gaming that offset declines in sectors like travel. May was on a par with April, VidMob said, as spend from gaming and other categories decreased. CPMs, which had been anywhere between 17 to 45% lower than last year, began tracking up towards normal levels at the end of May and early June, according to VidMob.

“Flexibility is so important today at a time when none of our clients know what the world is going to look like next week, next month, next year,” said VidMob’s Collmer.

But let’s not call this a comeback just yet. As another U.K. publishing executive, elegantly summarized when asked about projections for June, “Still dreadful, but trending in the right direction.”

In Germany, where restaurants and schools are opening, most major media companies received subsidies covering up to 67% of employee wages to avoid making large scale redundancies. This has meant that the unemployment rate in April was 3.5%, up from 3.1% from April 2019, according to Eurostat.

“The question is, when will this [funding] stop?” said digital consultant Oliver von Wersch. “You could say this was postponing rather than solving the problem, pushing it to later on in the year. On the other hand, when the economy is down and you have this helpful instrument, employees are still getting paid, it’s the basis for rebooting and restarting parts of the economy.” Boosting economic confidence and morale is partly behind the country’s quicker control of the virus. 

Most German companies expect to return to offices in the fall when the situation is clearer. But in Germany, the ad market is still shrinking: advertising decline for the year is estimated between 10% and 20%. Digital advertising will rebound but it is unlikely print will return to the same level as pre-coronavirus. “That is a heavy task inside publisher organizations,” said von Wersch. In some organizations, there is just less to trim. 

Meanwhile, fears of a second spike are driving major economies into further debt. The rates of U.S. company fundraising have reached record peaks — borrowing $1 trillion this year, twice as much as 2019 — as companies shore up balance sheets now in case times get tough later on, according to Bloomberg data. 

“The key driver will be what can we do to save costs,” said independent media consultant Ian Whittaker. “The impact of a recession means business models collapse, companies cannot afford to employ as many people. A lot of firms will fall back on that adage, ‘never let a good crisis go to waste.’”

People, paper and property make up the bulk of news publisher costs. For one of the U.K.’s largest newspaper groups, Reach, 44% of its operating costs of £551 million ($700 million) in 2019 went on employee costs, its highest outgoing. Agencies fare worse, nearly 75% of Omnicom’s net revenues are employee costs, according to Whittaker.

“I can guarantee pretty much every single publisher will announce pretty material job cuts,” said independent media consultant Alex DeGroote, noting that the U.K. government’s subsidies paying 80% of wages will taper away.

While there’s scant clear evidence media companies use a crisis to trim the fat, it’s expected through any recession and economic downturn. That’s also the cyclical nature of media. “You make short-term cuts, you rightsize the teams and then you build it back up, but that’s what we’ve been doing for years,” said one global magazine publisher executive.   

Physical events teams at publishers like The Atlantic and The Economist have been cut. Elsewhere, the number of sales executives have thinned to match lower demand. BuzzFeed closed its U.K. and Australian news desks which weren’t driving much profit. Microsoft, which combined with Apple has a value capitalization worth more than the whole German listed market, has laid off 27 journalists who maintained the news on Microsoft’s MSN website and its Edge browser, figuring that artificial intelligence can do the job. 

Coronavirus has fast-tracked digital transformation to the point where it necessitates survival. WPP CEO Mark Read said there has been a 60-fold increase in Microsoft Teams in the last month, despite previous reluctance to use it. Goldman Sachs’ COO John Waldron said the crisis has removed the need for “human intervention” in areas where humans were previously considered imperative, said Whittaker.

It’s not novel to say that for most media companies, organizations on the other side will have less of a focus on print and more on digital. Print’s key route to market has been destroyed. Magazine sales, previously buoyed by people browsing at the checkout, suffer as visiting the grocery store is more of a gauntlet run than a humdrum chore. Automation in companies has been underway for years in programmatic ad trading, machine learning to tailor content and services, artificial intelligence tech to create more functional reporting. An ad-market bottoming out has led to a rush in building reader-revenues models.

“The volume [in audiences] is there for subscriptions, but commercializing it is the problem,” said Adam Hiller, partner at executive search firm SRI. “There’s a real race for reader revenue. There will be demand in skills for pricing strategies and retention modelling, how technical capability underpins digital strategy and infrastructure as companies seek hyper-personalization to drive reader revenue. It’s a good opportunity for companies and people to reset.”  

The talent agenda on the other side changes for publishers, and with other firms making people redundant, or employee aversion to the new reality of their roles, there will be opportunities for those who are in a more stable space. And some publishers are making tentative plans.

“There will be talent in the back half of the year, so we’re thinking about what we need from people,” said a commercial publishing executive who’s starting to see the light at the other side. “Perhaps we increase our bench strength with more telesales people or people with deep contacts who can work remotely. We’re looking at the top and the bottom of the spectrum.” 

Keyword blocking has been an issue for publishers ever since the coronavirus outbreak began. Even as many publishers have seen site-traffic grow, advertisers have been quick to add virus-related words to keyword blocklists, the idea being that this will avoid any fallout from their ads coming alongside articles about the virus, deaths and other issues.

Meanwhile, a previous survey found that 40% of brands are not advertising next to coronavirus-related news online, up slightly from the same survey conducted a month ago, when 37% said they will not buy ads alongside coronavirus-related content.

As our research has found, publisher revenues took a major hit in the first quarter, but publishers expect things to get worse in the second quarter. Only 2% of raised forecasts, 17% have kept them flat, and the vast majority — 80% — have lowered forecasts.

Our survey found that for 80% of publishers, traffic is up. For almost a quarter, it’s up more than 50% from pre-pandemic levels. 

Among business lines, ad revenue was hardest hit in the first quarter, decreasing for a whopping 65% of all publishers. This included direct sold and programmatic ad revenue.

There is a natural human progression for processing information that Silverman said has always had the tendency to lead to creating fictitious beliefs and conspiracy theories. But combining those natural human behaviors with a radically different digital environment consisting of new technology and social platforms has poured fuel to the fire, Silverman said. 

“It creates a more open and more decentralized environment that is way easier to manipulate and exploit,” he said, adding that governments and conspiratorial communities can end up being weaponized very inexpensively and in a way that reaches significantly more people faster than ever before. 

This is where misinformation and false news becomes a major issue in the media industry, but also an issue for education and public safety as a whole. 

In the latest episode of The New Normal, Digiday’s weekly show, Silverman said that the people working in the media and marketing industries have a responsibility to look closely at how they are feeding into the information cycle both from a content standpoint and from a monetary standpoint. The people who are winning in the misinformation game are the people who are making money off of it. 

“Every single person who works in media and works in advertising is empowered in this environment,” Silverman said. “If you think about that power … of where you spend your money and attention, that’s a positive thing and that’s something that you can have an impact on.” 

Why “fake news” is not a good term

Fake news has gained a strong political connotation in the United States since 2016, despite world and non-political news also falling victim at times. Silverman said that one benefit from having an unprecedented global pandemic is that people are opening up their eyes more than ever before to the problem of misinformation since it has become a matter of public health.

“The term ‘fake news’ has become useless to a certain extent,” he said. “It is a good wakeup call for some people who viewed this stuff as a political messaging” issue. Now they realize that misinformation revolving around coronavirus can and will lead to significant safety and health issues.

Using a new code for misinformation

Since “fake news” itself has become a polarized term, Silverman said that his team has started uses a different code for identifying information that is not known to be 100% true.

• Unverified can be used to classify information that does not have sources or evidence behind it. It can also help to identify claims made or articles written that do not include original reporting behind them. This information should be treated with healthy skepticism, according to Silverman’s team.
• Misleading is a term that can be used to describe a real occurrence that is taken out of context, like mis-captioning a video or photo. Additionally, it works for images presented at a deceptive angle or descriptions of events that cherry-pick facts. This information should avoid being spread or engaged with, according to Silverman.
• False is a term that can be applied to information that reliable sources or clear evidence have refuted. This can be applied to images or videos filmed at a different time or location but are presented as being recent or coming from a different place.

Platforms’ problems are too big to handle

When platforms first came out, Silverman said that there was a lot of naivety around the impact that open social platforms could have on the sharing of information. Now, Facebook and its other property WhatsApp, are two of the largest contributors to the spread of misinformation on the internet. 

Silverman said that it is a good sign that the platforms are interested in attempting to fix the issues coming from false news on the platform. The issue is, however, that there are so many people on the platforms that the platform corporations themselves don’t have the human power to make a substantial impact on decreasing the amount of false information in circulation. 

“[Platforms] have hired tons of people to work on content moderation, security and integrity, but they probably could quadruple or quintuple — who knows how many people that they need — to actually have a meaningful handle on applying their policies,” said Silverman.

Polarized media sites are a breeding ground for conspiracies

“There is a phenomenon called group polarization The more people who agree with each other stay together and talk to each other, the more extreme their views become,” said Silverman. So by that virtue, having a very large right-wing media ecosystem, over time it can move into posting about more extreme elements.

While right-wing media tends to be more susceptible to gaining conspiracy theories, Silverman said this happens in left-wing media as well, pointing to the anti vaxxer movement. Regardless of the political affiliations, however, Silverman said that these media sites do not have to solely be sharing false information, but they could share unverified or misleading information, or put out counter-programming that distracts from other news going on in the world.

Join us for our next episode of The New Normal on Friday, June 12 at noon ET. Chad Mumm, svp of entertainment at Vox Media Studios, will talk with Digiday editor-in-chief Brian Morrissey about the studio’s approach to remote video production and the future of live-streaming. Register here.

Even as shelter-at-home orders have eased in some states, publishers have seen viewership remain high as CPMs have ticked up across Facebook, Snapchat and YouTube. Those factors, combined with publishers posting more videos and longer videos that can carry more ads, has helped to reverse the revenue slide for publishers.

“RPMs and CPMs are on a steady trajectory up, and we’re starting to see them on most platforms back to where they were in early March,” said a second publisher, referring to the revenue received for every thousand views and the price per thousand ad impressions.

Publishers saw their platform video ad revenues begin to decline in mid-March after many advertisers stopped buying digital video ads or dialed back their budgets in light of the coronavirus outbreak.That pushed platform video ad prices down by at least 20% for many publishers in April, and it pushed publishers to increase their video volumes and lengths to boost views and watch time in order to counterbalance the decreased ad prices. As a result, publishers were able to lessen the revenue drop-off. That put them in position to recover more quickly as ad dollars returned to the market and the increased demand pushed up ad prices.

Four of the publishers said the recovery has been strongest on Facebook and Snapchat, though all said that YouTube has rebounded, albeit at a slower rate for some. 

On Facebook, publishers saw video ad CPMs fall by roughly 20% in April compared to March. “They almost went down by 50% between February and April,” said a third publisher. This publisher said that CPMs increased by 28% in May but are still 20% short of the February mark.

One publisher saw Facebook video ad CPMs bottom out at $7 in early April and pick back up to $10, which is near the $10+ range this publisher had seen the week of March 9. A fourth publisher said that Facebook video ad CPMs hovered around $8 by the end of May, compared to averaging $9 CPM prior to the crisis. 

On Snapchat, the recovery has been even more notable. Two of the publishers said their revenue per thousand unique views fell to $1.50 in late March and early April and is now around $3, which is near their pre-crisis highs of $3 to $4 RPM.

Although some publishers said that YouTube has picked up at a slower pace than Facebook and Snapchat, a fifth publisher said the rate of recovery has been roughly the same across all three platforms. This publisher typically generates $17 to $18 million a month on YouTube. In April, the publisher’s YouTube revenue fell to roughly $10 million and then rose to $14 million in May. The first publisher said that CPMs for ads sold in YouTube’s auction had fallen from $25 in March to $20 in April and are now around $23. “YouTube is stabilizing,” this publisher said.

While the publishers were glad to see revenue headed in a positive direction, some lamented the money they could have been making with the viewership they have experienced since March. “The problem is consumption went up and revenue declined,” said the fifth publisher. 

Now, with revenue trending up, publishers are worried about viewership dropping off. The publishers have yet to see that, but with school years wrapping up and states reopening, they are unsure whether people will continue to spend as much time watching videos. Their hope is that an increase in ad dollars will offset a potential decline in viewership. “Political [advertising] is starting, and that’s a really good thing because there’s a lot of money in political,” said the fifth publisher.

1. It’s all about finding Reach. Reach carries a disproportionate amount of value relative to every other fundamental measure in media. A broader focus creates more longer term customers and more developed brand equity. Look to extend Reach through complementary opportunities in high quality content and contexts, and through audience-based buying from platforms that are able to provide transparency, safety and validation. 

2. Have a robust multicultural strategy. More than 40 percent of the population identify as multicultural. Some of them consume mainstream content, but many do not. A differentiated strategy that touches Hispanic-American, African-American, Asian-American, or LGBTQIA audiences (for example) in more culturally relevant contexts extends Reach, focuses messaging and connects with consumers whose tastes deviate from the sociodemographic averages that they are part of. Harnessing nuanced music content and cultural affinities can yield profound effects and supplemental impact to any media plan.

3. Think nationally, act locally. With 30 percent of the U.S. population consolidated in the top 10 markets and half in the top 25, localized advertising extends audience Reach when a national plan may be under-delivering where consumption volume is highest. Advertisers can copy-split their creative, and even take advantage of granular digital geotargeting. Political elections this year will drive demand and ad supply will be limited in many local markets even during the current health crisis, as different regions relight their economies at different times. 

4. Invest in well-distributed content. With great consumer choice comes great consumer fragmentation, so even the largest singular owned-and-operated audience platforms have limited upside. By looking for content that is broadly distributed across a multitude of platforms, advertisers will benefit from a waterfall effect, capturing audience breadth on every downstream platform. As different types of consumers use different platforms for different reasons, investing in broadly-distributed content will also help advertisers quantify differentiation between platform audiences, illustrating complementary delivery. 

5. Ask for Reach guarantees. Currencies like Nielsen Digital Ad Ratings are extremely valuable as they report delivery against demographics with more dimension than gross impressions alone. Advertisers can learn what level of scale is possible based on which sellers would even accept or refute a Reach guarantee based on such reporting. Though measurement gaps exist, advertisers can now access an unprecedented breadth of data to inform Reach goals, managing frequency on a weekly or even daily basis. Measuring or even buying a rating places the onus on the seller to deliver audience goals as efficiently as possible.

6. Stress-test media choices. It’s far more valuable to find Reach thresholds across a broad range of avenues than to obsess over duplication and leave Reach potential on the table. Advertisers should assess how five different target rating points (TRPs) or even five Reach points deliver across a range of different media outlets. Look at the proportion of Reach to frequency within your impression volume. The proportions should be telling: Where the data do not tilt towards Reach, advertisers may be overinvested. And where frequency is modest, advertisers may have room to grow. Once deliveries are maxed within your budget or time constraints, pick apart the duplication from the measured campaign and reallocate to the next flight.

7. Look for reasonable ad loads. Advertising-based video on-demand and its subscription counterparts (AVOD and SVOD) have taught us that audiences overwhelmingly gravitate toward ad-light experiences. A linear TV-style ad load drastically diminishes the effects and subsequent resonance of a marketing message. There are a limited number of ads any consumer might absorb cognitively; ad clutter leads to softer impact. Sparser ad experiences have set high expectations for consumers. 

8. Leverage shorter ads. Decades of TV research has taught us as an industry that the most valuable part of the thirty-second ad is the first five seconds. It’s remarkable that most major advertisers still heavily rely on 30-second ads. Vevo’s own research has shown that the six-second ad is one of the most valuable non-skip formats today, retaining about two-thirds of the value of a thirty-second spot at a fraction of the cost. Seventeen percent of streamed ads are now under 10 seconds, according to Innovid. That’s a good start.

9. Look for co-viewed and family-viewed experiences. Not only do co-viewed environments drive audience Reach more quickly, but research shows that people watching content together are generally more open to ads. This is a strong reason to build campaigns for delivery through all those living-room devices that create co-viewing experiences for these receptive groups.

10. Measure if viewers are even in the room. Technology now enables advertisers to measure whether viewers are in the room when their content is on the screen. So far, we’ve found that Vevo content on CTV is 11 percent more likely to have viewers in the room than the 133-network average that measurement-provider TVision maintains, and more likely to have viewers than any individual broadcast network. Visual inattention has been a major challenge throughout the history of TV advertising, and adding frequency has often been the solution by many marketers. By taking additional steps to put living room experiences into context, advertisers can start to change this, scaling back frequency for more impactful ad exposures.

Again the single-most important concept to keep central in all these strategies is that of reach, squarely the focus of media metrics and a conduit through which all insights travel and emerge.

For more details and approaches to the upfronts in 2020, Vevo has also published a Homecoming announcement and the first of its Digiday articles in this series.