Month: June 2020

For DTC brands in categories like home goods, wellness, athleisure and beauty as well as office and outdoor furniture, increasing the ad budget generally led to higher conversion rates at cheaper than normal ad rates which allowed them to make “their second quarter bigger than any of their [previous] fourth quarters,” said Kevin Simonson, vp of social at Wpromote, adding that the DTC brands that could increase their ad spend during the second quarter probably spent between 50% to 100% more than planned. 

For example, Toy said that “one brand increased their ad budget from low five figures in January to over $1 million in June [going 20X what it had been spending.] They’re seeing profitable growth including their ad spend, so they’ll spend as much as they can.” 

As many major marketers decreased advertising during the second quarter, CPMs on Facebook went down. Facebook CPMs bottomed out at $4.83 the week of April 5, according to Simonson, who added that those rates went back up in May (the week of May 25, CPMs were $8.22) but had gone down again in early June (the week of June 8, Facebook CPMs were $7.59; the week of June 15, Facebook CPMs were $6.72). “That’s good for us because it means the deal is still on,” said Simonson. 

While taking advantage of lower than normal ad prices is savvy, media buyers say that the DTC brands that were able to during the second quarter didn’t do so simply because of the cheaper prices. Instead, improved conversion rates for in-demand products gave the DTC brands that took advantage the push to spend more in the second quarter. 

“The brands who are spending more are doing so because they’re seeing better conversion rates,” said Toy. “The lower ad rates have been more incidental than anything. A nice to have, but not the driver.” 

That DTC companies are more “nimble” than major marketers makes it easier to take advantage of the moment, according to Duane Brown, founder and head of strategy at Take Some Risk, a performance marketing agency. It’s unclear if DTC brands that spent more during the second quarter will end up reducing their ad spend in the third or fourth quarter because they did so. 

“DTC companies in general are much more fluid and opportunistic with their advertising budgets than larger entities,” said Simonson. “So it’s not so much that our fourth-quarter spend is going to the second quarter but more that they’re like, ‘We’re going to find a way to spend more now because it’s working better than ever.’” 

For those that were able to spend more in the second quarter and hit better than normal conversion rates, “they essentially got a head start on their annual goal,” said Simonson, adding that DTC brands have short and long-term goals imposed by investors. “They don’t have to be under the gun. There’s less pressure because they frontloaded in the second quarter.”

Hitting revenue goals earlier in the year thanks to spending more on advertising during the second quarter will be helpful for some brands, according to buyers. That said, others aren’t as optimistic that spending more on advertising in the second quarter has eased pressure to hit revenue goals for the year as the fallout from the coronavirus is not over and hitting those goals will likely be harder later in the year.

“Cheap CPMs are part of the conversation, but mostly talk has been around revenue goals,” said Jeremy Sonne, managing director of Moonshine Marketing. “You’re going to see things get really busy again from an advertising perspective, however, there’s very real economic hardship that has and continues to exist from the fallout of the lockdowns.” 

Sonne continued: “Companies are eager to get back on track with their revenue goals, but the economy we came into the lockdown with isn’t the one that we’re leaving with. All these very eager advertisers lured by the promise of cheap CPMs are going to find themselves fighting over a much smaller pie of consumer spending [later in the year].”

“By the time you are entering the fourth quarter of the year, you would have a fairly decent idea of what you are going to be spending next year and how you are planning your activities next year,” said Mastercard CMO Raja Rajamannar, who is among the advocates for moving to a calendar-year model that would also align better with many upfront advertisers’ own corporate fiscal calendars. 

However, some advertisers remain set on signing upfront deals under the traditional broadcast-year model that starts Oct. 1 and runs through Sept. 30. That could have an impact on what inventory is available for advertisers waiting until the fall to do their deals. It could also put pressure on advertisers with a shorter history of participating in the upfront to get their deals done this summer so they aren’t locked out of networks’ most in-demand programming if they were to wait.

A split upfront market throws the haggling over TV networks’ inventory into disarray. It’s akin to conducting an auction at two different times. Since networks package up their programming for upfront advertisers to purchase, a network would need to decide how much inventory in a given show to sell during summer and how much to withhold until fall. That’s a delicate calculation that could scuttle deals now or later if advertisers are unable to access the inventory they want.

Assuming traditional upfront advertisers such as Ford and McDonald’s will seek out similar programming in the next round of upfront negotiations, “it would be very easy for networks to set that inventory aside. But a new advertiser would be subject to what’s available in the calendar marketplace,” said one agency executive.

Advertisers’ desire to delay this year’s upfront negotiations until the fourth quarter is warranted. Normally advertisers and their agencies would be finalizing their upfront budgets in early summer and signing deals over the next couple months. However, ad buyers are still waiting to see how the economy recovers, people’s spending and viewership habits shake out and TV networks’ programming pipelines shape up. 

“We don’t even know if we are out of Covid phase-one or if wave two is coming. In that scenario, how do you go ahead and plan?” said Rajamannar.

Not all advertisers desire delaying this year’s upfront negotiations, though. While major advertisers including Mastercard, Bank of America and Procter & Gamble have backed the ANA’s call for a calendar upfront, there are advertisers and agencies actively talking with TV networks about doing deals under the traditional broadcast-year model, according to executives at agencies and TV networks.

TV networks do not sell all of their inventory in the upfront but reserve some to sell in the so-called “scatter” market, where networks sell the inventory left over by upfront advertisers for advertisers to buy weeks and even days before an ad airs but usually at higher prices compared to upfront rates, though the pricing divide has recently narrowed. Broadcast networks usually keep 10% to 15% of their inventory for scatter and cable TV networks usually retain 30%, said the agency executive. “So there’s inventory to buy, but it may not be the exact inventory you want,” the executive said.

The questionable desirability of the inventory available in the scatter market as well as the higher prices is what keeps advertisers in the upfront. And TV networks would prefer to keep advertisers in that market because of the revenue security that year-long commitments provide. So while advertisers consider whether they can sit out the traditional upfront window to do their deals in the fall, networks must weigh what to sell now or later.

“We’re going to look for predictable money and money that’s ready to be committed,” said Barbara Bekkedahl, svp of ad sales at The Weather Channel. In that hunt, the cable TV network will talk with longstanding advertisers to gauge what opportunities they will be looking for. But even then, Bekkedahl said the economic picture remains so unpredictable that “it will be hard for us to lay out a plan based upon [advertisers’] past investments.”

“Not only does this increase the reach of live sports content, but it also creates new advertising slots, options for new formats and potential brand exposure,” said Gareth Capon, CEO at video tech platform Grabyo. “For example, one of the first major football leagues to restart was the K League, which broadcast its season opener live to Twitter and YouTube in May, achieving over 3.5 million views across both platforms. While in Germany, the resumption of the Bundesliga broke TV audience records for Sky, as over six million fans tuned in to watch various games live.”

A possible drawback of all these sports trying to complete schedules as soon as practically possible is a bottleneck of events over the summer and into the fall. That could splinter the TV sports audience and subsequently spread media dollars too thin. 

“Live sports as a whole will drive a significant share of the audience once it returns, but that could split sideways in a lot of ways because there’s so much content competing against each other,” said Jeff Gagne, svp of strategic investments at Havas Media. 

In the U.K. this logjam of sports, from the restarted Spanish and German football leagues to upcoming European golf and Formula One events could even eat into what was thought to be untouchable media money reserved for the return of the Premier League on Wednesday. 

Advertisers know those matches are likely to have a hugely inflated audience after so long away from screens but are wary of how long that will last. After all, the league could be decided within a week of its return and there are only a handful of marquee match-ups left on the fixtures list. It’s little wonder then why some advertisers remain cautious over committing large sums of money to broadcasters of the league when there are other major sports on the calendar including Formula One, PGA European Tour and the NBA happening at the same time.

“The natural pattern of football tournaments at this time of year is that there will be high viewing figures to start off with and then the audience and the demand will start to settle,” said Simon Bevan, chief investment officer at Havas Media Group. “That could happen with the current season, particularly if Liverpool go on to win it early on in the schedule. The broadcasters are trying to work out how to maximize their yield in a short period of time.”

To allay those concerns, Sky is letting advertisers buy in-game inventory for most of the 64 games it will broadcast at a fixed price safe in the knowledge that fees won’t inflate if audiences do. Normally, the fees for those matches would have been priced against ITV’s ad rates.

“We felt that offering a fixed price hedges versus the likely ITV inflation on male buying demographics — as those audiences will probably choose to watch the football over other content,” said a Sky spokesperson in an emailed statement. “This gives advertisers more certainty of the price or cost of football and prevents us from having to pass on possible inflation unnecessarily.”

Still, some advertisers remain skeptical over whether they really benefit from a fixed fee in the uncertain economic climate. Based on Sky’s estimates to media buyers, advertisers will need to fork out £170 ($212) per cost-per-thousand to reach 16- to 34-year-olds, said one agency trading director who has met with the broadcaster’s commercial execs. Currently, the average CPM is around £138 ($172), meaning Sky expects the return of the Premier League to have as much as a 20% shift on the cost of TV ads. 

“There’s still a lot of uncertainty in the U.K. where you have government warning about business bankruptcies toward the end of the quarter,” said James Elliott, head of audio and visual media at Bountiful Cow. “As a result, advertisers are still cautious about what TV content they buy because it requires significant budgets to make it work.”

The same could be said of media deals for the upcoming NFL season. 

From when it will start to whether owners and players will cooperate on revised financial deals, advertisers are wary of committing dollars even though summer is traditionally when those media dollars are locked in for the fall, according to four media buyers interviewed for this article. And not when there are other, potentially cheaper, sports they could pick. 

“Nothing tends to do well against the NFL, but its never had so much competition from other sports before in a market where the price [of commitments] is having such a huge impact on decisions,” said Gagne. 

With more money spent across more sport, it could lead to a situation where broadcasters don’t have enough inventory. 

“A lot of the inventory that was sold for the regular season and playoffs is still in play as there were many advertisers that decided to pause campaigns,” said Adam Schwartz, svp of sports media at Horizon Media. “That money is going to have to be squeezed into a truncated season and if it can’t then the networks are going to have to give money back to advertisers. The broadcasters are going to have to try and figure out ways to retain as much of that money as possible.”

The attention economy hasn’t just proven to be a losing proposition for media businesses financially. It also encourages quick, outrage-based political coverage that thrives off of (and feeds) poor governance, according to Steve Hayes, CEO and co-founder of the Dispatch.

“Everything we’re seeing in our politics has an emphasis on performance,” Hayes said on the Digiday Podcast. “The economic incentives and business models that everyone has pursued in this space in the past 10-15 years have contributed pretty significantly to that.”

With the Dispatch — a newsletter-first media company that leans conservative — Hayes is aiming for subscribing members who aren’t monetized by the minutes they spend reading the company’s coverage.

“We don’t need your clicks. Come, learn and then go. Live your life,” Hayes said. The Dispatch put up a paywall in February, and now has 12,000 paying members — around 450 of them paid $1,500 for lifetime memberships when the company launched in October, according to Hayes. “It’s growing faster than we had anticipated.”

The membership model has also helped the Dispatch forgo venture capital or billionaire ownership, the risks of which Hayes learned first hand as the last editor-in-chief of the Weekly Standard, a conservative institution that billionaire owner Philip Anschutz shut it down in 2018.

The Dispatch and its staff of 12 aim for the same conservative readership. Despite concrete evidence of growing polarization, Hayes also gestures toward a middle ground in U.S. politics representing perhaps 70% to 75% of the U.S. population.

Here are highlights from the conversation, which have been lightly edited for clarity.

Aiming for a big middle ground

“You can go to some Twitter feeds and every single tweet will blame what’s happening on the Democrats. You can go to other ones, every single tweet will blame what’s happening on Antifa and the left. Reality is a lot more complicated than that. Our view is that 70% of America understands that reality is a lot more complicated than that and is willing to actually take a moment and think about these nuances and actually explore these things in greater depth. If you frame the question in such a way that you say ‘are you frustrated with what you’re seeing from national leaders and from our government generally?’ — you’re talking about 70% to 75% of people who say ‘yes.’ And we think that we’re speaking to those people, including people on the center left who might not agree with most of what we would come up with as policy prescriptions, but are willing to listen to what they would regard as sane conservatives. “

No venture capital

“We decided early — not early enough, probably — that we weren’t going to take any venture capital money because we were not building the kind of business that was conducive to hockey stick growth and we didn’t want venture capital investors coming at us and telling us to do the kinds of things that might get us there a bit faster. We set out to build something that would be slow and deliberate based primarily on reader revenue supplemented by events and sponsorships and growth from there. If this thing exists in 50 years and we’ve managed to keep its editorial integrity protected — and it makes money and we can pay our people well and provide good healthcare and we’re providing good journalism — I will consider that a success. “

Bite-sized coverage breeds bite-sized politics

“There’s no question that part of what’s incentivizing people to do the ‘so-and-so owned so-and-so’ two-paragraph story is that that gets them eyeballs and they can monetize that. But independent of that, everything we’re seeing in our politics has an emphasis on performance. It’s performative politics. Look at Congress. Congress is barely a legislative body anymore. They’ve ceded most of their power, willingly, to the executive branch. And what you have seemingly increasing numbers of members of Congress doing is trying to get contracts with one of the cable networks by saying things that will rile up the base and get them on television so they can write a book or get a contract or give paid speeches. So we’re seeing a lot more of that out of our political world in a way that exacerbates those existing, polarizing tensions as well. The economic incentives and business models that everyone has pursued in this space in the past 10-15 years have contributed pretty significantly to that.”

Join us this Friday, June 19 at 12 p.m. ET on The New Normal, a weekly interactive show focused on how publishers are adapting their businesses. Gina Joseph will talk with Digiday editor-in-chief Brian Morrissey about adapting the site’s live events — including an upcoming three-day event focused on AI — to a world that continues to live in confinement. Register here.

Back in 2017, the advertising industry was up in arms over brand safety. The Times of London had just run its “Big Brands Fund Terror Through Online Adverts” investigation and advertisers were finding out the hard way that they should have tightened their brand safety restrictions far earlier to avoid appearing alongside offensive or illegal content.

At the time, U.K. communications consultant Tanya Joseph — who at the time was consulting for U.K. advertiser industry trade body ISBA — was attempting to rally the industry to stop referring to the term “blacklist” when referring to the list of sites and content providers advertisers sought to avoid appearing on and “whitelist” for the list of approved content. An alternative, she suggested, was to use words like “safe list” and “block list” to avoid using a connotation that links the word black with bad and white with good.

Joseph, who is Black, said she was met with “lots of eye rolling.” 

“It’s a sort of institutional microaggression. People don’t realize constantly associating black with [a] negative is insidious and tiring,” Joseph said. “I know in the grand scheme of things it’s not the most offensive thing, but it’s the everyday mundanity of it that makes it really exhausting.”

The use of the words blacklists and whitelists is still commonplace in the ad industry three years later.

According to the Oxford English Dictionary, the word “blacklist” originated in the 17th century and referred to a list of individuals suspected of antisocial behavior or being a traitor, Kristza Eszter Szendroi, a professor of linguistics at University College London told me. Use of the word picked up again in the 20th century and referred to all sorts of power relations: Employers would create a blacklist of individuals suspected to be partaking in trade union activities; in turn, trade unions created blacklists of employers, Szendroi said. Also at the turn of the century, during Prohibition, blacklists were created for suspected habitual drunkards likely to face the consequences of the law. Later in the 20th century came the “Hollywood blacklist,” where people believed to be Communist sympathizers were denied work in the entertainment industry.

Szendroi told me that we should think of words and the meanings they represent as a network of nodes, connected via wires in the brain. Each word corresponds to a node and they are connected to other nodes via those wires, creating a sort of 3D web. If words sound similar, have close meanings, or are often used together, those words are often connected in the brain.

Szendroi explained that if you use the word “black,” it’s immediately wired with the word “white,” which has the opposite meaning. The use of “black” and “white” divides individuals, or products, companies or internet sites into two distinct groups — you can’t be on both. And, clearly, they are wired with racial definitions — and tensions.

“The way language is … no matter what meaning you are using the word under — all the connotations also come up,” via those nodal connections, said Szendroi. In the instance of blacklist/whitelist, Szendroi said, “I don’t think the terms were used with any racial background but that doesn’t mean we can just make that [association] go away, because of the way our brain works.”

In a paper published in the Journal of the Medical Library Association in 2018, academics Frank Houghton and Sharon Houghton wrote that the use of terms like blacklist and whitelist are inherently racist and needs to cease. 

“Such terminology not only reflects racist culture, but also serves to reinforce, legitimize and perpetuate it,” they wrote.

The use of blacklists and whitelists isn’t just confined to the advertising and media industries. Over the years — and especially in recent days — a number of tech companies organizations behind coding languages and other tech development platforms have sought to instead use terms like blocklist/allowlist instead. Web application framework Ruby on Rails, for example, made the change in 2018 having initially dropped references to “Master/Slave” terminology that is pervasive in technology. “Master” refers to the original version of a device, process or repository, which subsequent or replica devices, processes are controlled by. Better alternatives? “Primary” and “Replica,” or “Main” and “Secondary.”

For most advertising industry executives, replacing “blacklist/whitelist” doesn’t require rewriting an entire codebase. They can simply commit, from today onwards, to instead use terms like “blocklist/allowlist,” “safelist/denylist,” or “inclusion/exclusion” from this moment forward. 

Last week, GSK EMEA media director Jerry Daykin posted on LinkedIn to implore the industry to stop using the “blacklist/whitelist” nomenclature. Stephen Loerke, chief executive of the World Federation of Advertisers, responded, “You’re right … words have weight. We’ve decided WFA to drop black [and] white lists from our vocabulary. We call them inclusion [and] exclusion lists from now on.” I’m told the IAB in the U.K. is also talking to its members to ask them to change their terminology.

As Joseph put it to me, communications companies should pride themselves on using the simplest language possible that can’t be confused or misconstrued. Clearly there are more important and very necessary changes required for advertising and media companies to address race that will take a period of reflection and a long time to implement.

But, Joseph said, “This is one of the quick things you can do to change things.”