Month: August 2020

DTC Twitter is obsessed with Tweet threads. Or, at the very least, they are frequently cited as recommended reads in industry newsletters like 2pm Inc. and Lean Luxe, and often serve as inspiration for further discussions in Clubhouse, Slack, or virtual events. 

In the past week alone, there have been Tweet threads critiquing the site design of beverage brand Recess, why more DTC startups need to market themselves as luxury brands, and what J. Crew can learn from an (of course) young, digitally-native startup.

Heavy Twitter usage is not unique to the DTC startup scene, although for people hellbent on disruption, many do seem to spend an inordinate amount of time tweeting about it. But these Twitter threads are a good proxy for what DTC personalities and startups in general are good at (marketing) and gloss over what they consistently struggle with (unit economics/profitable businesses). At their best, the DTC thoughtleader threads help people find others who are interested in the same niche e-commerce topics as they are or experiencing similar business challenges. At worst, they’re performative oversimplifications of what makes a successful e-commerce business. 

“I noticed that a lot of the ‘big players’ in DTC were sharing information in this medium,” said Kristen LaFrance, a senior content marketer at Shopify Retail who describes herself as “they mayor of DTC Twitter” in her bio. “It was clear that the industry was excited about this quick-win type of content that could go in depth while still providing actionable tips,” added LaFrance, who started writing threads last year critiquing the email and SMS marketing strategies of startups like Casper and Bombas. “I actually made a lot of connections through those threads because people were retweeting, tagging friends, and inviting people into the conversation,” she said.

Kevin Lee, the co-founder of a soon-to-launch CPG startup, said that he started tweeting more as he was doing more research. As he’s preparing to launch his own startup, he wanted to see how other companies structured their marketing teams. After learning how Oatly has tried over the years to reduce bureaucracy in its in-house creative team, he laid out what other marketers can learn from Oatly’s strategy in 28 tweets, which garnered 1,400 retweets.

“My purpose is — here is some interesting information, and hopefully it inspires you in some way,” Lee said. 

Baked into these threads are lessons on what is paramount to building a successful DTC startups, lessons that are biased towards the Tweeter’s professional background. As a content marketer, LaFrance often focuses on the marketing strategies of DTC startups. Graphic designers will critique the web designs of DTC startups, and so forth.

But what these threads often don’t focus as much on, is the non-public facing, albeit critical parts of the business like customer acquisition costs or churn rate. “It’s also a lot easier (and more engaging) to talk about “brand” in a tweet than it is supply chain optimization,” said Patrick Coddou, founder of razor startup Supply on — where else — Twitter. And, as many of these DTC startups are still young, unprofitable ventures, there aren’t as many lessons to glean from how they say, expanded into new markets or successfully gained market share over a competitor.

Lee acknowledges that some threads can feel self-serving, particularly if it seems that someone is heaping praise on a company they have a personal connection to. “It seems like they are trying to point to some conclusion that is a leading indicator for that product,” he said.

But, in speaking with fellow entrepreneurs, he feels that they can be too-self critical, and often veer on the side of not sharing their expertise enough. 

“We forget that we are experts, and it would be remiss to not share that knowledge,” he said. “Maybe someone’s expertise is not at the fact that they worked at or built a company, but that they are a good storyteller.”

With the Privacy Shield program dead with immediate effect, Google told its Ads clients that it will now instead use standard contractual clauses to validate the transfer of personal data from its advertising and measurement services to the U.S. from the European Economic Area, Switzerland and the U.K.

Here’s what every advertising and publishing business needs to know about the death of the Privacy Shield and how standard contractual clauses work.

WTF was the Privacy Shield?

The EU-U.S. Privacy Shield was adopted by the European Commission in 2016 and acted as an approved mechanism for the transfer of personal data between the EU and U.S. in a way that was compliant with GDPR.

The GDPR says you can only send data out of the EU under certain circumstances. One of those circumstances is if the EC determines the data is being sent to a location with an “adequate” level of data protection. Countries including Argentina, Canada, Japan and New Zealand are among those countries. The United States’ “adequacy” protection was limited to companies that were certified under the Privacy Shield.

The framework includes strong data protection obligations on the companies receiving the data from the EU, safeguards surrounding the U.S. government’s access to personal data and a commitment to effective protection and redress for individuals. The system was used by more than 5,300 companies, according to the University College of London’s European Instittue.

What happened to the Privacy Shield?

Let’s rewind back to 2013. Back then, Austrian lawyer and privacy advocate Max Schrems filed a complaint with the Irish data protection authority about the way Facebook transfers the data of users within the EU from its Irish subsidiary to the social network’s headquarters in the U.S. He argued such transfers — then made under the Safe Harbor agreement — didn’t offer users protection against U.S. public authorities accessing that data. In a 2015 judgment, the European Court of Justice invalidated the Safe Harbor agreement.

In a new complaint, Schrems effectively argued that the Privacy Shield was just the Safe Harbor under a new name and that the U.S. doesn’t offer sufficient protection of data transferred there. 

The European Court of Justice ruled on July 16 the Privacy Shield doesn’t adequately protect EU citizens’ privacy. The European Data Protection Board then said on July 23 there would be no grace period for companies that were using the Privacy Shield as the legal basis for the transfer of their EU data to the U.S.

Where do standard contractual clauses come into it?

These can be downloaded from the EC website and must be completed by both the importer of data and the exporter. The contracts include obligations on behalf of both parties and sets out rights for the individuals’ whose personal data is being transferred.

The clauses must not be amended from the EC wording, though the parties can include additional business-related clauses.

Do standard contractual clauses replace the Privacy Shield?

Not quite. While the ruling said standard contractual clauses as an instrument are valid, the transfer of the data still might not be depending on the country receiving that data, said Emerald de Leeuw, an independent data protection specialist.

Put another way, if Privacy Shield didn’t protect EU citizens’ data from potential U.S. government snooping — then why would these standard contractual clauses?

According to an update from the EDPC, data transfer from the EU to the U.S. would only be adequate if standard contractual clauses and “supplementary measures” were used. However, the EDPC didn’t define what those supplementary measures are. It might well mean data encryption, but the EDPC didn’t elaborate. An update is expected soon.

With Privacy Shield gone and “supplementary measures” unclear, what alternatives are there?

Large technology businesses — particularly cloud providers—have been setting up substantial European operations so that data doesn’t have to be transferred outside of Europe. (On that topic: TikTok said this week it intends to build a $500 million data center in Ireland to store data generated by European users.)

But for smaller companies, that might not be feasible.

De Leeuw said other companies could contact their cloud service providers, and perhaps pay a premium, to ensure EU data is kept in the EU.

“The lowest risk approach would be to essentially keep the data where it is, re-geofence and retrench what was globalization and bring it back the other way,” said Christian Auty, counsel at Bryan Cave Leighton Paisner LLP.

That’s not always easy for publishers who work with multiple multinational vendors, many of which are based in the U.S.  “GDPR has always been an expensive regime to comply with, felt more acutely by smaller businesses,” said Auty.

If I’m a data ‘controller’ — such as a publisher — that transfers personal data out of the EU what do I need to do immediately?

Stop using Privacy Shield and perform a risk assessment. 

In the case of Google’s move to standard contractual clauses, “The risk is with [publishers] rather than Google,” said Adam Rose, partner at law firm Mishcon de Reya.  That’s because Google is the processor of the data and publishers are the data controllers who are primarily responsible for what happens to the data that’s being processed, Rose added.

Granted, running an event about how to use white privilege for good during a time when many are trying to check their prejudices was bound to be a hot ticket. But as the proliferation of free-to-access virtual events grows, few companies will be able to make the switch from free content to paid.   

“You have to innovate on the value you create for your audience,” said Nichols. “If you look at publishers, a lot want to get a celebrity to talk for 15 minutes, but that’s just a live press release. There’s no value that is sustained from that one-off experience apart from a nice quote, there’s no new framework or structure to advance people professionally. What are they garnering and how are they being entertained? Those two need to exist and then you can charge for it.”

That concisely sums up the state of virtual events in the second half of 2020. Most agree that virtual events need to improve quickly. But a depressed ad market, global recession and a likely volatile few months ahead mean companies will batten down the hatches rather than innovate. 

Saturation of virtual events is close. Technology platform ON24 saw a 330% increase in live events run across its network after coronavirus hit. On average, companies hold two virtual events a week. Right now, a virtual event happens every minute on the ON24 platform, said Tessa Baron, vp of marketing at ON24.

With an abundance of free virtual events and webinars, publishers are at risk of undervaluing their content. Companies rely on peoples’ expectations being lower during this time of experimentation, commoditizing content. As the landscape gets more cluttered, supply tips the scale, returns diminish, and companies will need to again figure out a direct audience revenue model for virtual event products.

Tiptoeing around ticketing

The trouble is virtual event pricing right now is all over the place. Consumer-facing publishers are charging between $25 and $50 for experiences like Popsugar’s sold out Grounded fitness event, said Ben Hindman, CEO of event marketing software Splash.

The Financial Times is charging £45 ($59.25) for a three-day pass for non-subscribers to its three-day Weekend Festival, Sept. 3-5, featuring speakers like designer Paul Smith and Evan Spiegel. An event the publisher uses to help drive subscribers.

At the other end, MIT Technology Review’s flagship event EmTech online conference, Oct. 19-22, has a $650 price tag for general admittance (plus a $33.49 booking fee). That also includes virtual meetups, a year digital subscription to MIT Technology Review and “after hours with the editors.” All-access for $800 includes a wrap-up report, cocktail hour access and welcome gift.  

But that may be an anomaly. A lot of publishers, particularly business-facing publishers, are still tiptoeing around ticketing, said Hindman.

“[Pricing] is a total mess,” said media analyst Thomas Baekdal. “Nothing we see right now is really an indication of what people might accept in 2021. Once virtual events increase in numbers, there will be pressure on the price overall, forcing it to go down.”

The New York Times doesn’t intend to charge for events this year as it still figures out the model. Bloomberg Media also doesn’t charge for public-facing virtual events and didn’t charge for its in-person events. 

Future PLC has run roughly five virtual conferences that have been ticketed since lockdown, priced slightly lower than what people would have paid for attending the same event physically, said Jonny Sullens, events director at Future.

All of Future’s paid-for events are business-facing. New York City TV Week, for instance, has a single track pass for $99 and an all-access pass for $199. Other virtual events from Future charge up to $499. Were it to launch a brand new event, figuring out the price point would be tricker, Sullens said. 

“Virtual events are performing better than we expected, people are used to interacting in this way,” added Sullens. “Besides, we’ve all been stuck at conferences talking to people we don’t want to be, there are downsides and upsides.”

With no boondoggles, you make meaningful matches

The reason people — or their companies — pay for tickets in business-focused events is lead generation and interaction with peers or prospective customers, which hasn’t adequately translated to the virtual world yet. In publisher’s consumer-facing events, it’s the theatre.

As a producer, Behringer put a lot of thought into how Allyship and Action would look. It’s designed so that people walk through the main hall and can choose the different directions they want to pursue. The element of choice is key. You are not staring at a boxed talking head chosen by event organizers.

Hearst UK which has run free events like Country Living Fair and Women’s Health Live is thinking about including gifts such as a beauty box or food and drink hampers as part of a future ticket price, The goal: Attendees get the same premium experience that they are accustomed to face to face, said Hearst UK chief commercial officer Jane Wolfson.

Hindman sees a big opportunity in people paying for virtual events, as long as they have exclusive content, or access, or connections, but they have to be actually valuable.

“For payable value, you’re looking for that matchmaker experience,” he said. “The challenge for B2B is there is no boondoggle, there are zero boondoggles. There are no meetings, no carrot, you cannot take the top-funnel activity to drive lower-funnel. It’s very challenging and it’s hard to find new people. The question is how to make that connection meaningful.”

Virtual events make up additional content for paid-for Bloomberg Breakaway CEO membership community, where members get access to exclusive content like tools, best practices and feedback to grapple with the issues that are impacting businesses today.

Multiple revenue streams 

Right now publishers are largely content to simply collect registration data from attendees in order to deepen first-party data pools. With this, they can either target content, advertising, subscription bundles, e-commerce offers or other indirect ways of extracting dollars from audiences down the road.

Dennis Publishing doesn’t charge for virtual events. Since March it’s tripled the number of events its run and tripled revenue they generate.

“The thinking was if you put on a virtual event and someone has to pay for it, what that expectation is versus if it’s free,” said Paul Franklin, operations director for Dennis Publishing’s demand generating business, Nowse. “This is still relatively new since lockdown.”

For business-facing publishers, physical events typically made up half their revenue. While margins are only in the 20% to 30% range and virtual event margins are far more favorable, publishers still have to think about how they can generate such a large chunk of their cash flow for the year. 

“The virtual events, while very successful, haven’t replaced the revenue we would have expected on our live portfolio,” said Sullens. 

And that’s the issue for most, if not all, publishers. 

“Everywhere you look there is confusion, disrupted calendars and yield compression,” said media analyst Alex DeGroote. “There is no clear revenue model in virtual. It is a buyers’ market.”

More broadly, he added, the share prices of all U.K. events companies — Informa, Centaur, Ascential and Hyve —make for bleak reading right now.

Ascential, for one, has seen revenue fall 92% in the first half of 2020 compared with the same period last year, even as the company cited “customer engagement” on digital content “achieving record levels of audience reach.” For instance, The Money Pot podcast, focussed on the future of money, has grown downloads five times the levels of launch in 2019.

“Companies are forced to talk defensively about improving reach during COVID via podcasts and digital content,” added DeGroote. “But this is low yield.”

Each area consists of another list of initiatives that have target start dates, said Clarke. She is in the process of identifying owners for each point and from there will work with those execs to have project plans with set objectives, all focused on building a more diverse business and a stronger culture. Once those execs are assigned a project, targets will be set.

Those plans will lean on insights taken from a company-wide audit, which saw it update its employee profile systems as previously race was an optional field in its talent management system. For employees in the U.S. the company made it mandatory. WPP, Omnicom, Publics and Dentsu have also shared demographic breakdowns of their workforce in the U.S. Havas will review the data quarterly and publicize the numbers annually. 

Despite the commitments, there’s a long road ahead for Havas. Clarke, however, is optimistic the business won’t lose sight of its refreshed equality goals. Digiday caught up with the senior agency exec to hear more about the steps Havas is taking to create a more diverse and inclusive business. This conversation has been lightly edited for length and clarity.

Why has it taken the holding group this long to share this data? 

We didn’t just want to rush to share the data and do so without sharing a plan along with it. For us, the data was just the first step in better understanding our issues — because we have to understand where we are to figure out where we need to go. Fully committing to change and advancing our business at-large meant taking the time to create a thorough, transparent and actionable plan and sharing that plan widely with our employees and our industry.

To draft the plan, we had conversations with advocacy groups, industry leaders, as well as many of our black employees at all levels in the US and beyond. We assessed our business from end to end and produced what we feel is a comprehensive U.S. action plan that will optimize our ability to make real change in how BIPOC employees gain access and opportunities in our organization and how they experience our business overall.

Will Havas look to share the same data in other markets?

Like many, we have our work cut out for us, but we shared this plan openly with the ambition that we can all learn and grow together across our industry. For now, our immediate focus is on piloting our plan across the U.S., but we believe that our approach and many of our programs can be scaled globally, pending of course on the needs and context of each region.

Based on the feedback you’ve had from recent conversations, what are the main things that need to change about how Havas has dealt with diversity and inclusivity in the past?

I would say that the main change is the 360-degree approach to the plan. Since 600 & Rising’s Call to Action letter was published on June 10th, I have spoken to nearly all the Havas signatories as well as, along with my team, conducted several hundred conversations, with employees as well as industry thought leaders such as 600 & Rising, Allyship & Action and Curiosity Labs. We met widely with industry DE&I experts and completed a full 360-degree assessment of our current DE&I plans as well as the systems and processes that exist within our business. All of this was taken into account as the plan was developed. It encompasses initiatives, actions and programs that will be enacted across Havas US, with some having potential to scale globally.

Among the many notable issues brought up, the one that weighs so heavily on my mind is how many told me that while they love their teams, they do feel a profound sense of aloneness being the only black or person of colour on a team. The 7 steps above address how BIPOC employees enter our business, but also important aspects of their experience while they’re here.

How do you make sure Havas’ plan doesn’t heap more work and subsequently stress on those execs who aren’t white?

This is a very important question. We will leverage the insights of our BIPOC employees, but we have been very conscious that they cannot be burdened with bringing everyone else along. We’re committing to a cultural change and everyone in our business is responsible for looking inward, doing the work, and learning along the way.

Our plan has been developed with leadership roles for executives and senior management — particularly white executives — where they can help advance some aspect of our plan through listening, learning and leading. They will be accountable for these things as leaders in our business.

Within the plan, numbers of different areas of our business will have areas of accountability, and at all levels. One key aspect of this is education. Over the next few weeks, we’ll be rolling out the first phase of our education approach for our U.S. employees — this first tier will be mandatory for all employees. The education process then scales — the more senior you are the more education you will be part of — as when leading teams and organizations it is crucial to have inclusive leaders. We purposefully say “education” rather than “training” because learning shouldn’t feel transactional — education is an ongoing process.  

Without this keystone sales event at a time of the year when consumers have been conditioned to spend big money on discounted goods, publishers with commerce operations are seeing an opportunity to try their hand at creating their own shopping holidays.

This summer, The Strategist and Cosmopolitan both launched their first two-day long shopping events. And StackCommerce, an ecommerce platform used by hundreds of media companies, is looking to create a sales event that will span across many of its publishing partners’ commerce sites.

The New York Times’ commerce site, Wirecutter, previously tested its own version of a day-long shopping event with its Wirecutter Deal Day. But after two years, the publisher decided to pivot away from the single-sale day event model to do smaller series of sale events throughout the year.

The 2018 Deal Day featured three dozen exclusive deals from retailers and then doubled that number in 2019, according to director of business development and partnerships Leilani Han. Not only that, but year over year the number of units sold during the event doubled.

Han said it was more opportunistic to break up the WDD into smaller, more thematic events throughout the year, including “Sleep Week,” work from home deals early in the pandemic and a back to school event. These smaller events now happen about once a month.

Other publishers, though, are still bullish on the idea of taking a piece of market share back from Amazon through one large scale summertime shopping event.

Two months ago, The Strategist came up with the idea to create its “Two-Day (Actually Good) Sale” event coming off its all time best month for both traffic and revenue in May. Like most publishers, its commerce business was also booming in the second quarter with an 85% year-over-year increase in revenue.

Camilla Cho, head of e-commerce at The Strategist’s parent company Vox Media, said that the sale event was never intended to compete with the scale of Prime Day and, beyond that, if Prime Day still took place in July, The Strategist would have moved the date of its own event.

But in its absence, the “Actually Good Sale” took place July 29-30 and included 32 products on its website and three additional products that were exclusive for newsletter subscribers.

Cho said that compared to the site’s average performance of an article about retail sales, there was a 50% increase in average click-through rate as well as a 50% increase in earnings per click for the items included in the sale. 

Cho said that the items included in the sale came from a set list created by the editorial team, all of which had previously been covered on the site. However, the retailer had to be able to deliver its best discount of the year in order to be included.

“We did not want the usual 15% off that you could Google and find anywhere,” said Cho.

Based on the sale event’s success, Cho said that her team plans on hosting it again and possibly expanding the model out to Vox Media’s other titles.

Cosmopolitan’s svp and publishing director Nancy Berger said that the idea for its own sales event — Hauliday, taking place August 8-9— stemmed from manufactured shopping holidays like Amazon Prime Day and Singles Day in Asia. Created with shop now, pay later banking platform Klarna, Hauliday will have 96 brands participating and offering exclusive deals to Cosmo’s audience.

The idea had been in the works for over a year-and-a-half and initially was going to include in-person events and in-store sales at participating retailers.

But instead of pulling the plug and waiting until in-person events could take place post-coronavirus, Berger said there was still a strong opportunity for an online only event, due to the fact that Cosmos’ affiliate business is up 288% year over year during the pandemic, surpassing its revenue earned during the holidays.

StackCommerce, whose publishing partners include CNN, TMZ and Mashable, is also preparing to host its event, “VIP Day,” on September 18 across as many of its media partners’ sites as are willing to participate. 

“There is a pent up consumer demand” with the delay of Prime Day, said chief operating officer Karl House.

House said that part of the idea for creating its own cross-publisher sales event originated from the fact that the company’s manufacturers and retail partners report that they have a surplus of inventory that was ordered months in advance of Prime Day just sitting on their shelves after the day was postponed. Because of that, he said that manufacturers are more willing to offer larger discounts. 

For both StackCommerce and Cosmo, the aspirations for their manufactured shopping holidays are global and very high.

Berger hopes that Hauliday will be picked up by Cosmos’ international editions in coming years. “We have enough scale to move the needle,” to make it one of the biggest shopping holidays in the world, said Berger.

And House said that Amazon “manufactured a day to increase commerce with Prime Day. There’s no reason that a collection of e-commerce companies can’t do something similar and make it a worldwide thing in a couple of years … that consumers anticipate and get excited about every summer.”

S4 Capital acquired Amazon specialists Orca Pacific at the end of July, while You & Mr Jones bought influencer company Collectively earlier this month. JellyFish will also enter the M&A market before the year’s end. 

Marketing services firms aren’t meant to be making these sorts of moves, not when advertising is on the decline. In the U.S. ad spending is set to drop by 25% this year and won’t recover until 2023, per Forrester. But frugal advertisers haven’t been kryptonite to all marketing services firms in 2020, it seems. 

S4 Capital recently forecasted double-digit year-over-year revenue and gross profit growth for 2020. Similarly, You & Mr Jones appears to be in rude health in comparison to the traditional holding groups. For the first six months of the year, the marketing services firm grew organically by 20%, according to CEO David Jones. Conversely, Publicis Groupe’s organic growth was down 8% over the same period. It’s a similarly story at Jellyfish where the company’s revenue targets for the full year remain relatively unscathed. As CEO Rob Pierre explained: “We’re not going to do quite what we expected for the year, but it’s only going to be [down] a few percent.”

Granted, M&A activity isn’t the only barometer of a company’s stability. After all, the likes of WPP and Omnicom are still acquiring businesses. They will always have to because organic growth on its own won’t be enough to appease the stock markets.

But the recent flurry of M&A activity does reinforce, however, what the likes of S4 Capital and You & Mr Jones want to be, which is far more attuned to the growth of the largest ad tech and mar tech vendors than they are traditional media agency owners. There are around 20 tech companies including TikTok, Apple and Amazon that S4 Capital is forging closer ties with, while You & Mr Jones has shares in several companies including Pokemon Go developer Niantic. 

In fact, the two largest independent ad tech companies are now worth more than the four largest agency holding groups. The Trade Desk and Roku have a combined market capitalization of $42.8 billion, while the same figure for Omnicom, WPP, IPG and Publicis is $35.1 billion.  

“Big disruptions like the coronavirus have a history of accelerating existing changes, not creating new ones, which is what’s playing out with agencies in 2020,” said Jones. “That model is totally challenged. You can’t reinvent the agency model in the same way you can’t reinvent CD-ROMs, photographic film or fixed lined telephony. No one has ever reinvented big legacy businesses and made a success of it post the revolution.” 

In fairness, agencies aren’t going away anytime soon. Advertisers have been generally satisfied with how quickly their agencies have pivoted and adapted to the vagaries of the coronavirus, according to interviews with the likes of Burger King and Anheuser-Busch over the last five months. They do, however, want more services beyond the remit of traditional agencies. And while that does involve some media buying, particularly online, its also hits areas like asset optimization, data consulting, e-commerce, in-housing services, cloud software management and technology reselling. 

Unlike buying ads, advertisers have increased, rather than cut spending in many of these areas in order to find pockets of growth. These investments are reflected in how the pandemic has sped up digital transformation projects across several industries. Indeed, the pandemic has accelerated companies’ digital communications strategy by a global average of six years, according to a survey of 2,569 enterprise decision-makers conducted in June by cloud communications firm Twillio. 

“All these services, from asset optimization to data management, mean we’re not so reliant on advertisers having to spend media for us to make revenue,” said Pierre. “We’re effectively the service layer between our clients and the technology platforms they use to reach and understand consumers.”

Therefore, the marketing services firms that fare well in the second half of the year are going to be the ones that can truly navigate how owned, earned and paid lead to sales. But there’s no one-size-fits-all agency model for offering this service, which is why S4 Capital, You & Mr Jones and JellyFish have made flexibility a focal part of how they work with marketers.

In the post-coronavirus world, all bets are off when it comes to how advertisers structure and align themselves and it’s just as likely that more advertisers will bring parts of media in-house as it is there will be more pitches. 

“As the walls in the walled gardens have got higher clients to want to exert more influence over their marketing,” said S4 Capital CEO Martin Sorrell. “They’ve lost control and now CMOs want to take back control from outsiders. Clients are seeing the benefit of developing first-party data.”