Havas Media’s Peter Sedlarcik On Using Data In A Crisis

AdExchanger’s Social Distancing With Friends podcast now has its own channel. Subscribe on iTunes, Google Play, Spotify, Stitcher, or wherever you listen to podcasts. As the economic downturn continues, marketers are focused on proving ROI. “There’s a doubling down on scrutiny in terms of where media dollars get invested,” says Havas Media chief data officer Peter Sedlarcik. ButContinue reading »

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‘Never given a clear path forward’: Black employees say it’s hard to get to middle management at agencies

On Friday, Interpublic Group CEO Michael Roth sent a company-wide memo to employees about what the holding company is doing to “combat systemic racism.” While a note from leadership has been par for the course over the last week or so—agency execs have sent dozens to reassure employees that they will do better and are listening following the nationwide protests against police brutality and systemic racism following the killing of George Floyd by a policer officer in Minneapolis last month—Roth’s note had something new: A transparent look at the diversity of the agency. 

In 2019, 2.6% of senior or executive level managers were Black while 84.9% were white; 4.3% of first- or mid-level managers were Black while 76.8% were white; and 7.2% of IPG ad professionals were Black while 68.7% were white. IPG released the data following an open letter to the ad world signed by 600 Black advertising employees calling for change and transparency with regard to diversity data within agencies that was published last week. 

Interpublic Group’s employee diversity data chart released last week.

Without much hard data until now, much of the discussion of the lack of Black ad executives in middle and upper management has been anecdotal. Still, even without published numbers Black agency execs say it’s obvious. “Look at the leadership pages on most ad agencies’ websites,” said Julianna Akuamoah, chief talent officer at Arnold and Havas Media in Boston. “Take note of the people on your Zoom calls. It’s right in front of us. The data is staring back at all of us every day.” 

The IPG data is a first, as holding company agencies famously have not released diversity data publicly. It’s also a concrete look at how few Black employees make it to middle management or to the C-suite at agencies compared to white employees.

Over the past week or so, Black employees at agencies in various roles told me that seeing how few Black people make it to the middle or to the top it’s difficult to plan for a future working at agencies. Some say that their only way up is to leave for other shops while others say that they have to start their own businesses to get management roles. 

“I was never given a clear path forward,” said a social strategist who has worked at four different agencies within one holding company and is considering leaving the agency business altogether. “Seeing the same thing at different agencies, it seems like they don’t know how to give feedback to Black employees to help them grow.”  

Another strategist echoed that sentiment and said that seeing how “Black people rarely make it to middle management, let alone the top” has her disillusioned with advertising altogether as she’s considering leaving the agency business. 

Without being set up for success at agencies, Black employees often don’t make it to middle management. If they do, that’s where they tend to drop out, according to agency executives and industry observers who say that agencies need to make getting to middle management not only more attainable but more inclusive for Black employees to enact real change at agencies. 

“I bear personal witness to this,” said Ericka Riggs, foundation and inclusion director at the Ad Club of New York. “Whether conscious or unconscious, the lack of investment, transparency and recognition of the talents Black professionals bring to their organizations is a failure of management.” 

That’s not to say agencies are unaware of the issue. Making agencies more diverse and inclusive has been a focus at many in recent years. Still, much of the work to make agencies more diverse has been in fixing a perceived “pipeline” problem in getting Black talent into agencies, but agency execs and employees say the issue isn’t getting Black talent in the door but rather fostering that talent and making sure Black employees aren’t squeezed out in the middle. 

“‘The pipeline problem’ has been a bullshit answer,” said Drew Train, co-founder and president at Oberland, adding that agencies need to not only rethink where they are looking for agency talent but address agency culture to help Black talent want to stay at agencies. “Not for nothing but there are lots of Black people in advertising. Talk to the people already in your agency — it’s really not that hard if you try.”

Making agencies more diverse and equitable for Black employees “has to include more than just getting through the door,” said Lanae Spruce, senior director of social strategy and special projects at iOne Digital.

3 Questions with Derek Walker, founder of Brown and Browner

Some people say clients have to push agencies to be more diverse for true change to happen. Do you believe that?

There’s a group of clients that will demand this from their agencies, whether they do it publicly or quietly, I know there’s a group of clients going, “Wait, our agencies aren’t diverse?” General Mills, HP, Facebook and Pepsi have already done this. Now, you’ll see more momentum. [When big clients do something it changes the industry.] Look at what happened when Procter & Gamble and Walmart pushed out payment terms to 120-days — everybody changed. We’ll see some real change and it will be client driven. 

When it comes to a lack of diversity at agencies some people say it’s a “pipeline” problem. What do you say?

I have changed my view on pipeline issues. There is a pipeline issue. Here’s why: It’s connected to the wrong source sometimes so you get the wrong output. Or it’s connected to the right source but there are leaks, clogs and obstacles that lead it not into the organization but in and [then] out. What you have are a group of agencies that people know of in the Black community that are famous for taking young Black talent in, chewing them up and spitting them out. Agencies go look, “They won’t stay!” but your pipeline was to the backdoor, it wasn’t up, it wasn’t vertical. People are hiring folks but what they’re doing when they hire them, that’s the important part. None of it leads to the C-Suite.

So the “pipeline” issue isn’t in getting people in the door but moving up?

If you are stellar you will be stuck going around and around the organization but never going any higher than a certain level. Those are some of the issues we haven’t come to address. It’s so much easier to pull in young students. The harder work is to hire someone who one day may replace you. I’ve worked at agencies and then it was like, I got to a certain level and you could go no further. Why would I invite my Black friends, people I know who could do the job, to a place where there’s no advancement? The bigger question for me was: Why would I stay? 

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Caught in the mushy middle: How Quartz fell to earth

In July 2018, Uzabase co-founder Yusuke Umeda addressed a room of anxious Quartz employees. 

Staffers were reeling from the news that the business publication had been sold by Atlantic Media to a Japanese company largely unfamiliar to the U.S. media world. What, they wondered, did Umeda hope to achieve by purchasing Quartz? 

Umeda said his goal, according to staffers at the townhall, was to turn Quartz into the number one business news site in the world within five years. Staffers blanched. Did he mean the biggest? The most important? Quartz to them was a quirky, chart-loving midsized publisher. The goal, not to mention the time-frame, felt unrealistic. Afterwards, someone at the company jokingly sent around a digital countdown clock to July 2023. 

Publishing has gone through about a dozen life cycles since Quartz emerged as a darling of digital media eight years ago, spinning out genuinely innovative features: a sleek website and app, a trendsetting newsletter before newsletters were cool, fewer but better bespoke ads and a data team that works inside the newsroom. In 2016, at four years old, Quartz announced it had achieved an operating profit. 

That would be the first and only year. Today Quartz is the latest victim of a digital media industry in crisis. Last month, the company laid off nearly half its staff in a major restructuring meant to retool the outlet around subscriptions in addition to advertising. The company eliminated 80 roles, shuttered physical offices in London, San Francisco, Washington D.C., and Hong Kong and reduced executive salaries by 25% to 50%. As of the first quarter of 2020, net advertising sales dropped by 54.1% year-over-year. In 2019, Quartz reported a $18.4 million loss on $26.9 million in revenue. 

Built for the native ads era, Quartz’s current situation marks the end of a distinct chapter in media. There was a time when “digital native” businesses like BuzzFeed, Vice and Quartz represented a new vanguard in contrast to languishing print dinosaurs like The New York Times, Wall Street Journal, or Washington Post. In recent years, more legacy outlets have caught up, in large part thanks to pure copying or poaching the digital talent for themselves. As industry furloughs and layoffs continue, Quartz has joined a growing club of publications that seemingly got caught in the mushy middle of 2010s digital media, like Mic and Mashable. Not quite niche enough to be essential to a small group of readers, but not quite big enough to compete at scale. Coronavirus didn’t help.

The company now finds itself in a familiar media predicament: searching for diversified revenue streams in a bleak market. “Coronavirus caused a really dramatic decline in advertising across the industry and for sure at Quartz, and if it were a short-term decline that we could easily see past, then that would have been a very different story,” Quartz CEO Zach Seward said in an interview.

This account of what happened at Quartz is based on interviews with more than 20 current and former employees, executives, competitors, and ad industry sources. Together, a picture emerges of a once-promising digital news outlet whose focus drifted amid the boom-bust cycle of recent media years. 

Once free, Quartz has a metered paywall. Once an ad-driven business, the company now hopes to build subscriptions in the middle of an ad market crunch. Once regarded internally as one of the nicest places to work in journalism, staffers learned in May that they too can be quickly cast aside, even during the economic and health uncertainty of a pandemic. The outlet’s story, Seward insists, isn’t over. “The history of Quartz won’t be written for quite some time. We’re only eight years into this.”

A more premium space

In 2012, Atlantic Media looked to launch a new publication covering the global economy. The business case made perfect sense. The media world was on the cusp of a huge resurgence. Digital advertising was growing at a rapid clip. The business journalism space had been mostly dominated by financial services behemoths like Dow Jones/The Wall Street Journal, Reuters, or Bloomberg, or high-priced print titles like the Economist or the Financial Times. These outlets were often tied to legacy structures or print products. While some digital newcomers like Business Insider aimed for massive reach, they pumped out slideshows and programmatic ads.

The Atlantic wanted to corner a more premium space, selling marquee advertisers on a new generation of yacht owners and Rolex wearers. A free and digital Economist for the budding millennial business elite. The concept oozed an Obama-era ethos of global interconnectivity. “When you walk through a busy Asian airport, nobody is talking about or thinking about the American economy. The world has gotten much bigger than that,” David Bradley, then the owner of the Atlantic magazine, told the New York Times upon the launch of Quartz. Under the leadership of editor-in-chief Kevin Delaney, a former Wall Street Journal editor, and publisher Jay Lauf, formerly of the Atlantic, the project began with a staff of 20 journalists and four premium sponsors — Boeing, Cadillac, Chevron and Credit Suisse. 

Staffers from the early years say that Quartz was marked by a culture of experimentation and innovation codified by an internal buzzword — “quartziness” — a nebulous term loosely defined as the meeting of creativity, quirkiness and intelligence.

In August 2013, when Steve Ballmer stepped down from Microsoft, Quartz’s headline highlighted the CEO’s personal windfall from the surging stock: “Steve Ballmer just made $625 million by firing himself.” The clever take helped Quartz’s version of the story rise above the rest in the early days of headlines engineered for the social web, where hundreds of thousands of pageviews, if not millions, hinged on framing. “That was a very archetypal way we responded to breaking news,” said Gideon Lichfield, then an editor at Quartz and now the editor-in-chief of MIT Technology Review. “We talked a lot in those days about ‘quartziness.’ To figure out the unexpected take or angle on something and write that.”

A Quartz style guide from the time encouraged reporters to “write at the intersection of the important and the interesting” and to “think social.” Stories should fall on the “Quartz curve,” meaning either short (less than 500 words) or long (more than 800 words), but not in the middle, a rejection of the typical length of a newspaper story in the mobile-reader ecosystem. The newsroom eschewed “desks” or “beats” and organized around “obsessions.” Africa’s economy is a beat, according to the style guide, but Chinese investment in Africa is an obsession — a phenomenon shaping readers’ lives and industries. “Obsessions” shift, while beats remain constant, in theory making Quartz’s newsroom more agile but in practice also permitting reporters to be more scattered.

Quartz quickly gained a reputation among media navel-gazers as one of the most forward-thinking newsrooms on the “future of news.” The company was regularly lauded across the trade press, including by Digiday, for experimenting with technology in ways both useful (compelling visual ads) and charming (a light in the newsroom letting staffers know when it was going to rain). 

Before data-related editorial roles became industry standard, Quartz melded the product into the newsroom, primarily through its “Things” team led by Seward. A combination journalism and coding squad, Things introduced a tool that allowed reporters to quickly publish their own crude charts. In traditional newsrooms at the time, placing a graphic into a story could be a time-intensive group endeavor. Given that a headline promising “one chart perfectly explaining” a certain topic was then a reliable traffic-generating trope, the tool allowed Quartz reporters to be more nimble and independent. Visuals and interactives spread across the industry, and Quartz helped set the standard for what digital business journalism could look like. In short order, the company was generating praise and awards.

“One of the great things that Quartz did was really inspire newsroom leaders around the world to see news as a product and not just a chunk of text,” said Dan Frommer, a Quartz editor from 2014 to 2016. “The fact that not only was everyone was allowed to — but was responsible for — their own charts led to a data and math literacy that a lot of places don’t encourage or mandate.”

As Quartz’s profile grew, so did its traffic. Less than a year after launching, Quartz hit 2 million unique visitors and surpassed the Economist, a moment seen at the time as a changing of the guard. It signed on more advertisers like Ralph Lauren, KPMG and Rolex.

Over the next few years, the Facebook referral gods delivered Quartz and a horde of other outlets booming traffic. The company expanded into new markets like India and Africa. By late 2015, it had a staff of 60 on the editorial side writing 50 to 60 pieces of content a day and was pulling in about 15 million monthly unique visitors. It dove into video and by March 2016, amid the video explosion on Facebook, reached 200 million views across platforms, the kind of milestone touted at the time by media executives who would later come to learn the fickle nature of Facebook video views. 

Competitors for ad dollars saw Quartz as a model publisher. “When I was running Slate, I looked at them with admiration,” said Keith Hernandez, that site’s former president. For the first two years of the business, Quartz rarely made concessions on price, scoring CPMs of about $75, according to people familiar with the matter. Its in-house sponsored content unit worked with big brands to fashion custom, sharp-looking (and less intrusive) native and banner ads, rebuking IAB standard display ad units. When Quartz opened up its chart building tool to the public, GE was the founding sponsor

The quality-over-quantity advertising mantra worked and Quartz’s prosperity reassured small and medium-sized newcomers that it was possible to score blue-chip clients with deep pockets. “There was a realization that the growth on Facebook was not going to be infinite, and that there might be a place for the middle class of publishing if you can create beautiful ads,” Hernandez said.

Lost focus

Quartz celebrated its fifth birthday in September 2017 amid a wave of optimism. “Quartz now reaches more than 100 million of you every month across various platforms. Just last month, our website had 22 million unique visitors,” Delaney wrote in a memo laying out the plans for the future. More expansion was on the horizon. There would be Quartzy, a new vertical expanding life and culture coverage, as well as Quartz At Work, to cover management and the workplace. An afternoon component was to be added to Quartz’s popular Morning Brief email. More video series would debut across Facebook, YouTube and Quartz’s site.

Meanwhile, the ownership structure at Quartz’s parent company had changed. A few months earlier, David Bradley, the owner of Atlantic Media, sold a majority stake in the Atlantic magazine to Laurene Powell Jobs, the widow of Apple founder Steve Jobs. Quartz remained under the Atlantic Media umbrella, but Bradley made clear to those around him that the next generation of his family had no interest in becoming media barons. Speculation swirled that Quartz, an albatross around Bradley’s neck, was also for sale.

Market forces were also starting to shift. Facebook, humbled by the press for its central role in the spread of misinformation, changed its News Feed algorithm in January 2018 to emphasize user content over publishers’. News companies coasting on the traffic bonanza saw their audience drop. Quartz, for its part, had experienced this kind of whiplash before. In the early days, the site picked up hefty referral numbers from LinkedIn only to have that evaporate when the platform pivoted to hawking its own content. Before the Facebook algorithm change, but especially after, publishers including Quartz renewed their interest in search optimization to diversify their referral sources. For legacy sites, returning in part to a Google-driven model was familiar. That’s how it was done before the Facebook gold rush (remember “What Time Is The Super Bowl?”). But Quartz had missed much of that era of media.

“There was definitely a point where the shift in our referral traffic left us not entirely sure what the levers were,” said Kira Bindrim, Quartz’s executive editor.

The ever-changing flow of how digital publishers bring in traffic has been a source of much self reflection since the algorithm change. “The era of digital media in which everyone was measuring themselves by overall total audience at best was relevant in that era, but probably even then it was a bit of a fallacy,” Seward said. “I think everyone in their heart knew this all along, and that what mattered was the center of that bullseye — that strongly defined audience that was genuinely loyal.”

The boom times at Quartz created a more confused newsroom, current and former Quartz employees said. Gone were the days when the publication was principally set on trying to communicate sharp analysis about the global economy. The site covered news across the map, from geopolitics to culture. It scrambled to find ways into the defining stories of our time, from Trump to Brexit. Writers complained that the site had lost the sense of what was, in fact, quartzy. They were encouraged to “take swings” and pump out more content to see what would work. Reporters were expected to write 20 stories a month (often short pieces of analysis). Quartz articles started to look more like commodity news stories one can find elsewhere.

“In a strategic sense, Quartz lost focus from its original mission of being The Economist for the current era,” said one former staffer. “It expanded into different types of coverage areas and, judging from its output, seemed to stop thinking about how it could explain the world and the global economy to an audience of up-and-coming business leaders.”

“There was a time at Quartz not so long ago where we were really trying to serve people in that full spectrum,” Bindrim said. “Not only the way you need to do your job and understand the global economy, but also how you engage day to day with people and culture around you. That’s the part that we have moved away from more recently in the interest of serving people in the narrower sense.” 

A slow contracting began on the business side. Native advertising became increasingly competitive. Every publisher across the industry operated their own custom ad shop. Campaigns at Quartz, one former business staffer said, needed extensive paid budgets to ensure traffic. “For a brand, getting some award because of a nice looking campaign — the value of that has diminished,” said the former staffer. “Brands aren’t willing to pay for that thing if it’s not really benefiting their business beyond sentiment. These were very expensive campaigns.”

Quartz’s ad work is high-touch, custom and by its nature difficult to scale. “The composition of our advertising is still tried-and-true display units and content work. But we have over the years adopted more standard ad units,” said Katie Weber, Quartz’s current president who has been with the company since 2014. The site, for instance, now offers a 300 x 600 mobile IAB unit, something that it did not a few years ago. The move echoes other native digital publishers, like BuzzFeed, who were automated ad holdouts until about two years ago.

Hernandez, formerly on the advertising side at BuzzFeed and Slate, said Quartz pushed the advertising envelope, but that it struggled to clearly define where it sat in the market. “Who were their competitors? Is it the Atlantic or Business Insider or are they up against the WSJ or FT? The answer was kind of ‘yes,’ so they became a smaller piece of the pie.” Brands today “love creative and the brand purpose, but at the end of the day they’re going to spend their money on things that work, and the things that work are Facebook and Google.” 

The move to subs

In July 2018, Quartz announced that it had been acquired by Uzabase for a price between $75 million and $110 million, based on future performance (final sale price: $86 million). Uzabase had reached out to Quartz for a content partnership, and the talks turned into a full-scale acquisition. It was a coup for Bradley. Sources with knowledge of the company estimated that he was able to basically break even. 

Staffers were stunned by the acquisition. Few had ever heard of Uzabase, which owns the Japanese subscription service NewsPicks. “In Japan, people were really willing to pay for the NewsPicks experience, and there are so many different alternatives in this market,” said a former business side employee at Quartz. “Japanese culture has a different relationship with media and less competition. I could just never see it taking off in the U.S.”

In late 2018, Quartz unveiled a paid membership offering — $14.99 a month or $99 a year — promising more content and events for Quartz devotees. Six months later it put in place a metered paywall. “The major change following the acquisition by Uzabase was to focus on building the subscription business,” Seward said. “There’s no doubt that having diversified revenue streams is critically important for us and any media business today. Any strong subscription business has only ever been built slowly and steadily.”

Some reporters balked at the paywall and subscription model, as writers who want their work seen by the most possible people often do. Others felt like the job itself had mostly not changed. Newer features were given prominence, like “field guides,” deeply-reported stories about the state of an industry or topic. Today, the Quartz homepage appears more like a NewsPicks-style curation tool — highlighting stories from other outlets in addition to Quartz — than a traditional publisher homepage.

As of the end of April, Quartz had 17,860 paid members. According to the latest Uzabase filing, the site makes $118,000 in monthly recurring revenue from subscriptions. “We’re covering the global economy for smart ambitious young professionals who want a more global view of business journalism than they get elsewhere, and trying to be as useful to that group as possible,” Seward said. Quartz is luring in new subscribers from places like its existing newsletter audience, according to Weber. She aims to grow the subscription revenue to 50/50 with advertising. “That doesn’t happen overnight and won’t happen this year,” Weber said.

Quartz employees question their parent company’s patience. Uzabase said the goal for the restructuring is to “build a foundation for profitability between 2021-2022.” According to Uzabase’s 2019 financial report, total revenue at Quartz, which primarily consists of advertising, dropped 22% to 26.9 million last year from $34.8 million in 2018 . 

Quartz today, current and former employees say, looks and feels a lot different. In the years since the acquisition, the company has shed some of the definitive products that made it a frequent subject for the media press. The Quartz app, an award-winning mobile news product in the style of a chatbot, was retired in 2019 in favor of a newer product built around the NewsPicks app infrastructure. It debuted with fanfare: “Quartz Pros” like Richard Branson and Sallie Krawcheck offered in-app commentary. But Quartz ended the contributor program and the service now looks like a typical news publisher app. According to Apptopia, the new Quartz app has been downloaded about 700,000 times since it launched in November 2018.

As the culture shifted, the company in the past two years lost some of its key editors to places like The New York Times, Reuters, and Medium, sapping morale. On the business side, chief revenue officer Joy Robins decamped for the Washington Post. The newsroom also had to deal with two tragedies, the deaths of editors Lauren Brown and Xana Antunes, both from cancer. “Both of their deaths hit us really hard,” Seward said. “We felt those deaths the way a family would feel them. I was really proud of how everyone was there for each other.”

In October 2019, the attrition culminated with the exit of Delaney, now an advisor and New York Times opinion section senior editor, and Lauf, who became chairman and later moved to an advisory role. “They were really the heart and soul of Quartz, and it could never be the same without them,” said one former staffer. Seward, a co-founder, was named CEO and Weber was promoted to president.

Returned to unparalleled

By March of this year, Quartz employees were bracing for layoffs. Two smaller rounds of layoffs in 2019 had already exposed some of the uncertainty surrounding the business. When the pandemic broke out, Seward indicated that cuts were on the horizon (at the end of last year, Quartz had 188 employees).

The layoffs were deeper than expected. Management rejected offers from the Quartz editorial union to hold buyouts or a workshare program, tactics that had been utilized by other struggling news outlets in Covid-19 times. The company declined to comment on negotiations, but Seward said it made more sense to do one severe cut than several over a longer period of time. 

For now, the layoffs have left staffers feeling dazed. Practically the entirety of Quartz’s geopolitics team was laid off ahead of an enormous political story. The award-winning video team was also shown the door. “None of the cuts we made were easy or obvious,” Seward said, adding that Quartz was proud of the quality of the video work but that it had never been able to figure out a way to generate significant revenue from it (particularly after Facebook curtailed its news video exploration).

Delaney said the core of Quartz hasn’t changed. “In the beginning, we built the premium advertising business around that connection with readers,” he said. “Today that forms the foundation for a business that’s both premium advertising and subscription.”

As reporters get back to work, those who survived the layoffs have returned to an unparalleled news moment, with coronavirus raging, a recession and protests erupting around the world. “My sense is that many in the newsroom are still very sad, and we’re all sort of reckoning with a company that made decisions that we didn’t expect,” said Annalisa Merelli, a current Quartz reporter. “It feels like dating after you’ve been married.”

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The 2020 Upfronts Will Require A Different Kind Of Playbook

“On TV And Video” is a column exploring opportunities and challenges in advanced TV and video. Today’s column is written by Fraser Woollard, senior vice president of business development at Mediaocean. Not long ago, the upfronts symbolized stability in the media world, with their guaranteed viewership against a predictable lineup of shows, all offered monthsContinue reading »

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Ecommerce During Covid Eclipses 2019 Holiday Season; Can Advertisers Hold Facebook Accountable?

Here’s today’s AdExchanger.com news round-up… Want it by email? Sign up here. Back To Normal? Ecommerce shopping reached $153 billion during April and May, surpassing spend during the 2019 holiday season by 7%, according to Adobe. Consumers spent $70.2 billion online in April and $82.5 billion online in May during lockdowns, $52 billion more than forecastedContinue reading »

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Digiday Research: 74% of publishers have seen ad CPMs drop

There are three concurrent crises at play: The coronavirus pandemic, the economic crisis and the wave of protests across the country protesting racial injustice, that amounts to a social crisis.

For the publishing industry, this confluence of disruption has had a massive impact of on advertising revenue. 

About 74% of 127 publishing executives surveyed by Digiday this month said the crises have driven ad CPMs down, while 75% said they’ve had difficulty in ad sell through. Programmatic ad CPMs have been driven down between 10% and 20%, with some publishers choosing to reduce inventory instead of selling it at an extremely low rate. 

Despite traffic growing, (see our earlier research) publishers, particularly news publishers, have found it hard to make ad revenue from that increased traffic. Some of this is is due to keyword blocking: Coronavirus-related keyword blocking is a problem for 43% of publishers as advertisers try to avoid buying ads adjacent to certain types of content. 

It’s been a similar problem more recently as protests and unrest have continued: As we reported earlier this week, the current news cycle makes more advertisers nervous, with keywords like “death” or “violence.”

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.

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‘Churn and burn’: Publishers are prioritizing subscription volume over immediate revenue

Like a lot of media trends spinning out of the pandemic and disconnecting legacy business norms with new in-market realities, there is a widening gap between the volume of publishers’ overall subscription numbers and the revenue that follows. And in that gap lies a cruel contradiction – growth twinned with downsizing.

Subscriber numbers have spiked across media companies but, coupled with a crash in other revenue lines, that’s still left robust subscription publishers vulnerable. Dennis Publishing said two-thirds of company revenue comes from subscriptions but plans to cut 15% (60 people) of its workforce. The Atlantic grew 90,000 new subscribers since March but had to cut 17% (68 people) from editorial, live events and marketing. The Economist Group, which has 1.6 million subscribers as of December 2019, had to cut 7% (90 people) in its events, client solutions business and its marketing communications agency. 

Aside from the tough ad market and global recession, subscriber acquisition economics are at play. Acquiring new readers costs more than keeping them: High acquisition costs plus high churn rates lead to low customer lifetime value and low revenue, making a solvent and profitable subscription business tough in the best of times.

Between March and May this year, the growth of revenue per subscriber slowed by 59% between compared with the 12 months prior, according to subscription platform Zuora. Publishers piled on to offering free or cheap trials, like $12 for 12 months. The subscription growth rate for digital news subscriptions grew 110%, Zuora found.

The last few months have been a perfect storm for publishers who can’t quit the sugar rush of cheap acquisitions. Reader thirst for information coupled with publisher subscription house ads are filling the dearth of brands buying inventory.

“There’s been massive traffic, five times the volume we’re traditionally used to, and there’s been a 10-times growth in closing subscribers,” said CEO of subscription platform Zephr, James Henderson. “But there will be a huge retention issue in between six and 12 months. When acquisition is a bit lazy or it’s a non-nuance product, you can churn and burn. It’s a legacy, media-wide problem.”

Ideally, publishers should never spend more than a third of their average lifetime customer value on acquiring new subscribers, he said. More tailored products and pricing improve publisher chances of increasing retention. For instance, segmenting coronavirus cohorts, understand their reason for subscribing, then build more value through ancillary products like event access, exclusive videos, podcast, puzzles or cooking apps. Re-acquiring lapsed users is also a missed opportunity, Henderson added.

Publishers have also dropped paywalls as a public service during a global health crisis. The Seattle Times, which felt the sharp edges of coronavirus before other parts of the U.S., recognized the need for unlimited access and lowered the paywall.

“The general sentiment across the subscription economy has been how can we give more access to critical information,” said Amy Konary, global vp of Zuora’s Subscribed Strategy Group. “Building relationships with subscribers around that time for information sharing is paramount.”

In April, the number of publishers offering free trials or subscription plans increased by 18%, Zuora found. For existing subscribers, it noticed a four-fold increase in pausing or extending the subscription. Subscription companies offering payment relief also increased by 2.5%. Cumulatively, this lowers the lifetime value of a subscriber and the amount of company revenue.

There is a strong argument for sampling and growing a new reader pool. The Financial Times lifted its paywall during Brexit coverage in 2016 it drove subscribers by 600%.

And smart pricing can be done without heavy discounting. Bloomberg Media will trial a two-year subscription offer for super engaged readers at a discounted price, the economics of lengthening the average lifetime customer value allows it to be able to do so. In any case, adding a third option—deploying the rule of three—should up the appeal of its middle offer, an annual subscription, said Lindsay Horrigan, global head of subscriptions & consumer marketing of Bloomberg Media. 

Coronavirus notwithstanding, publishers broadly have increased their average revenue per user. U.K. news publisher The Telegraph had a blended average revenue per subscription of £200.96 ($251.65) in April this year, up from £194 ($242.93) in January, when it started sharing self-reported numbers and pulled out of independent Audit Bureau of Circulations reporting. Last week, it announces it was repaying its furlough money after remaining profitable, growing subscribers by 200% in March to reach 500,000.

The line shifts as publishers have to decide to what extent their content is worth paying for and what is a public service. 

Business Insider defended its choice to put an article about Bon Appétit staffers experiencing inequality behind the paywall because it drove more people to subscribe than any other story it’s published, and this sends a message to the newsroom. Business Insider pumps out £1 for a monthly trial before increasing to £10 a month.  

“There’s a cultural transformation and skillset transformation,” said Konary. “People are making an educated guess about what will help drive paid subscriptions, it will evolve over time.”

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‘The glass is half full for me’: Martin Sorrell’s optimistic take on recovery

S4 Capital executive chairman Martin Sorrell describes himself as “a bit more optimistic than most.” In the early throes of the coronavirus, Sorrell was one of the few executives predicting a “V-shaped” recovery in the marketing services business: describing a graph showing a rapid decline, but then a sharp rebound back to normal.

Sorrell said at Digiday’s Programmatic Marketing Summit Live last week he’s slightly amended that shape to a “reverse square root”: a sharp decline, swift initial rebound, but taking a little longer to return to normalized levels of spending.

Sorrell also discussed marketers’ responses to coronavirus and the huge global conversation around equality and race following the killing of George Floyd. He also hinted at the upcoming acquisitions S4 has in its sights. This conversation has been edited for length and clarity.

Are you still predicting a V-shaped recovery?

The shape of the recovery depends on which vertical you’re talking about.

If you’re talking about tech, that’s certainly V-shaped If you’re talking about home entertainment and gaming, that’s V-shaped. If you’re talking about healthcare, that’s V-shaped. Online retail is another area of V-shape.

There are sectors like autos which are more U-shaped. I think they will recover as showrooms in many of the lockdown countries have been reopened.

Travel, leisure, that’s going to be more L-shaped. Attending sporting events is probably going to be L-shaped. Sports rights will probably be more U-shaped, maybe even V-shaped, as the platforms invade the sporting rights area.

I’ve always been a bit more optimistic than most. The glass is half-full for me, not half-empty and that’s for a very important reason. Trying to lead a business or trying to direct a business in these times, I think you have to be realistic. You have to tell the unvarnished truth to your people but similarly you have to give them a vision. The parallels can be to Shackleton and Napoleon: Telling the truth … but also giving them a modus vivendi — a way of thinking about what’s happening in a much more constructive way. 

It’s not good preaching doom and gloom. It won’t get you anywhere.

What happens to the ad market? 

April was probably the trough. We saw a slightly better May. Then June, probably a little bit better. Certainly the pipeline on the content side of the business is stronger in June than it was at the beginning of May. Q2 is going to be very tough. Q3 will get better, relatively. And Q4, better than that.

If you were looking for an overall shape for what’s happening, it’s what I would call a reverse square root. You had a sharp fall. A recovery coming in Q3, in Q4 and 2021 but maybe taking a bit of time to get back to pre-Covid levels. All in all: Not as bad as some predicted. 

In March I asked if you agree with the ad industry notion that if companies spend on advertising through a recession they come out the other side stronger. Your response was: “What you just told me is complete nonsense. Self-serving twaddle.” What about now? 

I think it was irresponsible from people in our industry. I heard it from one CEO of a holding company — I won’t name which, but he knows who he was [Editor’s Note: It was WPP CEO Mark Read]. It’s nonsense. That statistic he trotted out about 84% of consumers will judge companies by how they behaved in the [crisis] — well of course they will, but that’s got nothing to do with spending money on advertising.

After this terrible event — [the killing of George Floyd] — meaningful statements are meaningless. What people are looking for is not words. People are looking for actions. 

What you have to do in situations like that is act, not talk. In the last few days, we’ve set up a matching fund inside S4. We made a $50,000 matching contribution to our people’s contributions. We’ve progressed. Education and training programs and we will have quantitative and qualitative targets. Thirdly we’re setting up a fellowship scheme … so we can take minority graduates and non-graduates in.

Coming back to Covid-19, most companies understood that unauthentic responses were a bit disingenuous. If you took all the purpose ads and you removed the logos and the company names, they all looked the same. 

This recession and Covid-19 is different. This is like wartime. To suggest that clients should willy-nilly spend when they have an existential threat I think is a big mistake.

Our industry has to be more responsible. Our industry has to differentiate the things that are in our interests and what are the interests of our clients.

Where do you see M&A going?

We continue to be active. There’ll be another similar company to Digodat [a Latin America tech consultancy S4 acquired in May] but in a different part of the world in data and analytics. We’ll do something around one of the platforms — filling out and buttressing and developing our service around one of the … big six [platforms] shortly.

The issue for us, as it is for others, is to maintain as strong a balance sheet as you can. During the … beginning of [Covid-19] we did a lot of scenario planning and our cashflow actually has been stronger than even the most optimistic forecast.

[There is] still a lot of liquidity, still a lot of money out there on the sidelines and if pricing did weaken I think frankly it’s a very small window.

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How Vox developed new video programming remotely

Chad Mumm, svp of entertainment at Vox Media Studios, had his “oh shit” moment during the onset of the pandemic while he was on set to shoot the first episode of a three-year multi-show deal with Hulu. The set was built, the craft services table was set and Chrissy Teigen and David Chang were locked in and ready to go. Then, Tom Hanks was confirmed to have Covid-19, the NBA canceled its season and a realization set in that the show could not go on as originally planned. 

Vox’s studio was operating on a very finely tuned schedule this year having doubled production from last year. All 12 shows that were on the production calendar has been coordinated carefully against each other, Mumm said, and in one day, that schedule was blown to bits. “Everything went dark for us,” he said. 

Unlike other publishing companies, Vox’s studio is a “full service production company from soup to nuts,” he said, meaning that everything from ideation to production to editing is done by the studio, including accounting and legal.

But when coronavirus shut down nearly all of the company’s planned productions, all areas of that integrated business were affected and Mumm said the team had to pivot fast in order to stay on track. “We’re operating at 100%,” he said.

In the latest episode of The New Normal, Mumm spoke about how his team made the transition to remote production and how they were able to create new programming within that isolation.

Adapting to remote production

The first step Mumm’s team had to take was figuring out a remote post system for the shows that were going into post-production. These systems had to be approved by Netflix, Hulu and other distribution partners to have the security that would enable them to continue editing remotely. 

The second step was figuring out how to update production for its new Quibi daily show about video gaming, “Speed Run,” which was from Vox gaming brand Polygon. The set had been built for that show and was ready to begin shooting, but within a week, they moved that show into the host’s living room in order to ensure that production could stay on track. 

Despite a bunch of other shows needing to be put on hold, Mumm said his team was able to keep going and keep the teams working in order to produce both the shows that were able to remain in production and the new shows that came out of the pandemic. 

“For every show or production that has been stopped, we’ve been able to replace it with something that we can do now and that has meant that a lot of things that would normally take two or three months to set up, we’ve compressed to two to three weeks,” Mumm said.

At the start of the shutdown, Quibi asked for a topical daily show about the coronavirus called “Answered by Vox” and it was taken from ideation to being on air in four weeks. There are over 50 people now working on this show, who were hired from within other areas of the company and externally that weren’t working on the show a month before it premiered. 

One of Vox’s first show success stories explained 

“Explained” was one of the shows Mumm said his team pitched when they were going into Hollywood. From the beginning, the dream was to get the show picked up by Netflix, he said, which it ultimately was. This is because Netflix could provide an evergreen archive for the content that would not be seasonal or would get buried by other content as time went on. 

From the beginning, Netflix viewed the show as an experiment, but ordered 20 episodes for the first season, he said. Recently, the show was renewed for a third season, but when the coronavirus hit, the team pivoted to do a miniseries called “Coronavirus Explained.” While one episode of “Explained” could take upwards of 10 weeks to produce, Mumm said that they had to put together this series in two-and-a-half weeks, which was a challenging task.

Diversity on the screen and behind the scenes

Mumm said that there is a responsibility for Vox Media Studios to use platform, as well as the company’s publishing products, in a way that reflects the entirety of its audience of tens of millions of people as a whole.

There were already projects in development from Vox that he said are focused on telling Black and minority stories, however, these projects are more essential now than ever before to help educate people. The Studio team has been also having more conversations with networks about creating specific content that would help to showcase these stories more prominently. 

Opportunities with the New York magazine brands

New York Media’s brands have had a long track record in Hollywood, according to Mumm, including “Hustlers,” which was a New York story that got turned into a movie starring Jennifer Lopez. 

Previously, those brands would predominantly license IP to other producers and studios, but now, production is all in-house and deals can happen at a faster pace. Within a month of Vox acquiring New York Media, for instance, his team set up a show at HBO based on a recurring series by The Cut called “Sex Diaries.”

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Clients Need Grounding Agency Creativity Now More Than Ever

Over the past few months, optimists have focused on what we can all learn from the pandemic, including the health and economic crisis it has created. For the marketing and advertising industry, this crisis has served as a catalyst to hyper-focus agencies on what they do best, regardless of discipline: addressing a client’s business problems…