Month: September 2020

“There’s been constant replanning, a constant shuffling of budget,” said a media buyer who requested anonymity. “It seems like a lot of clients are possibly in some kind of internal fight to get budgets signed off. They cannot commit to a plan. It’s like, ‘Do a plan and I’ll tell you right at the last minute if we can go ahead.’ I’ve never worked on so many replans in my career.” 

Buyers say they are used to last minute adjustments from clients, but that this year is different. 

“It definitely seems like we’re having to do things more on the fly these days,” said Keith Martin, co-founder and director of digital strategy at digital agency Lunar Solar Group. “We’ve certainly had to adjust and readjust plans seemingly nonstop here over the last few months.”

Overall, the continued uncertainty has advertisers scared to make firm commitments to campaigns which means that buyers are spending more time figuring out alternative plans or talking to clients about where the budget should go. That’s trickled down to planning for holiday or Q4 advertising which has been more difficult due to “abnormal consumer behavior” this year as well as inventory issues which has had an “impact on forecasting budgets and cash flow as it relates to marketing goals,” said Kevin Simonson, vp of social at Wpromote. 

Retooling advertising budgets and plans can make it impossible to unplug and unwind. Buyers say the pressure to not only replan but maintain performance during this moment can be difficult to manage. For some buyers, the job has become more difficult not only due to the continued uncertainty and constant replanning but unrealistic expectations from clients. 

“Now I get Slack messages [from clients] 24/7, literally 1 a.m. on Sunday people are messaging me,” a media buyer for DTC brands recently told Digiday. “The work/life balance has completely gone out the window for me — and for others I know too — due to this pressure to perform. People freak out if there’s a single bad day whereas in the past there was a little more leniency.” 

Others say that the pressure is inherent in the job and that it’s easy for buyers to fixate on finding ways to perfect a campaign’s performance, especially now that most are working from home. “It can be very easy to sit there all day, stress out, constantly refresh, tinker and think about it when you’re going to bed,” said Martin. 

Some agencies have started to tell employees they need to set boundaries while working at home and take time away from the computer. For example, Dallas-based independent media agency Arm Candy has mandated that employees take 15 days of vacation this year and to limit responding to email or after hours messages to maintain some work/life balance, according to Arm Candy COO Lauren Miller. 

“We’re asking employees to take a Summer Friday or incentivizing people to take vacation days so that they’re able to come back focused and to do better work,” said Miller. 

Even so, buyers say the push to constantly replan as well as to generate “good results” for clients even with economic uncertainty has been draining.

“The stakes across the board were so much higher,” said one former buyer who has since gone client-side due to the stress.

Considering that AT&T spent $85 billion to acquire Time Warner (before renaming the business WarnerMedia), a WarnerMedia sale would be a massive retreat from the media and advertising business. But then consider two reasons why the DirecTV and Xandr sale explorations may signal that AT&T is already in the midst of that retreat. First, in May 2018 AT&T’s then-CEO Randall Stephenson said that the Time Warner deal was about advertising, specifically targeted video advertising. Second, AT&T acquired AppNexus to serve as the foundation of Xandr and create its own programmatic marketplace for targeted TV and digital video advertising, with WarnerMedia and DirecTV being its primary inventory sources. 

In other words, AT&T was building its advertising business around the triumvirate of DirecTV-WarnerMedia-Xandr. Now it is weighing the removal of two of those three pillars.

The potential DirecTV sale may have triggered the exploration for a Xandr buyer as well. AT&T executives have talked about the company’s wireless customer data being used to target and measure ads, but Xandr’s ad tech has largely relied on customer data from AT&T’s pay-TV services, especially DirecTV. “For Xandr, it’s important to have that TV data. If they sell [DirecTV] off, how do you maintain the data for media and ad sales, which is what Xandr was built on?” asked one agency executive. 

To be clear, WarnerMedia could stand on its own and for the most part has. That is why AT&T could hold onto it despite selling DirecTV and Xandr. But the fact that WarnerMedia can stand on its own and, for the most part has, is also why AT&T could sell it.

WarnerMedia’s work with Xandr was not exactly going smoothly before Xandr CEO Brian Lesser left the company earlier this year and AT&T folded Xandr into WarnerMedia. WarnerMedia and Xandr have been collaborating more closely this year, such as by proactively setting up joint meetings with ad buyers. However, WarnerMedia’s own inventory, from its TV networks to its digital properties, remains the primary area of interest among advertisers instead of the broader marketplace of third-party inventory that Xandr has been building, according to agency executives.

“I’ve been really surprised at how little progress they’ve made in the marketplace,” a second agency executive said of Xandr.

HBO Max’s ad-supported tier, slated to debut next year, would seem poised to give Xandr a boost. After all, during AT&T’s earnings call on July 23, AT&T CEO John Stankey said the company had folded Xandr into WarnerMedia “so we could accelerate our progress in building software-based entertainment platforms, supported by both subscription and advertising, like the AVOD version of HBO Max we plan to launch next year.”

However, WarnerMedia has not aggressively pitched HBO Max’s ad-supported tier in this year’s upfront negotiations, according to agency executives. “It was part of our upfront discussions [with WarnerMedia], but it’s all pretty loose because there weren’t a lot of details on it,” said a third agency executive.

There could be any number of reasons why WarnerMedia is not orienting its upfront around HBO Max. Pandemic-related delays. Xandr’s organizational shakeup. Uncertainty around the size of HBO Max’s ad-supported audience. Its continued connected TV distribution standoffs with Amazon and Roku. Etc. 

Agency executives said they believe the muted HBO Max pitch has to do with the uncertain audience size. However, Xandr would seem to offer a safety net if HBO Max’s ad-supported tier struggled to attract viewers. Its ad technology could redirect ads to impressions available elsewhere, on WarnerMedia’s own or other companies’ properties, and use AT&T’s data to ensure an advertiser is reaching the intended audience.

Without Xandr, WarnerMedia begins to resemble the media businesses owned by other conglomerates, such as Disney’s media division and Comcast’s NBCUniversal, that are increasingly reorienting their media operations around streaming by linking their linear and digital properties. But that wasn’t why AT&T had acquired Time Warner. The company has been looking to dominate the advertising market and contend with the likes of Google, Facebook, Amazon and Comcast, which owns Xandr rival FreeWheel.

If AT&T sells off its pay-TV distribution arm and its ad tech operation, it re-raises the question that dominated the discussion around the time of its Time Warner acquisition: Why does the phone company want to be in the media business? AT&T’s previous reply was advertising. Selling off Xandr and DirecTV would diminish that answer and raise a new question: Does the phone company still want to be in the media business?

Confessional

“Everybody is going through a reckoning. Legacy folks are having to shed legacy structures, and then all the new entrants are really being tested in terms of profitability.”

— TV network executive on the economic downturn’s impact on media companies’ businesses

Stay tuned: TV networks’ fall schedules

The physical production hiatus has pushed broadcast TV networks to rejigger their traditional fall programming lineups. The broadcasters are largely delaying to late October and November the premieres of scripted shows that were most likely to have productions put on hold and filling the void with unscripted fare and programs pulled from their own streaming services or licensed from other companies.

Whether a dearth of sitcoms and dramas will impair the networks’ viewership remains to be seen. But for now, the broadcasters’ atypical fall schedule isn’t a big deal to advertisers. The broadcasters have made such a habit of canceling fall shows that advertisers have come to expect it. This year is no different. The only cause for concern would be if the NFL has to halt its season.

“If the NFL is on and doesn’t get shut down, that will eat up a big amount of the [fourth quarter] schedule. Then there’s the reality programming. Once you piece that together, there are not that many holes to fill,” said one agency executive.

Numbers don’t lie

121 million: Number of households in the U.S. with TV screens in the home.

19%: Streaming’s expected share of Disney’s total revenue for 2020 (the percentage is likely helped by the fact that Disney’s theme parks and resorts revenue has fallen off a cliff).

What we’ve covered

Advertisers lobby to add pandemic clauses to TV upfront deals:

• Advertisers are asking for contracts to include clauses to let them out of upfront commitments because of the pandemic.
• However, the clauses’ terms and conditions can vary, leading to pushback from TV networks.

Read more about pandemic clauses here.

Facebook’s surging video pages spark brand safety concern for ad buyers:

• Over the past month, the number of Facebook pages eligible to carry in-stream video ads has increased by more than 30%.
• The surge has made it challenging for advertisers to manage which videos can and cannot carry their ads.

Read more about Facebook here.

TikTok gets publishers’ attention by including them in $1 billion Creator Fund:

• Publishers are eligible to apply for payments from the TikTok Creator Fund.
• Some publishers have been reticent to invest in producing original content for TikTok, but the payments could be motivation enough.

Read more about TikTok here.

The ad tech hitch in Disney’s and ViacomCBS’s streaming upfront pitches:

• Disney and ViacomCBS are each unifying their digital video ad inventory to address advertisers’ calls for better control of how often individual viewers are shown their ads.
• However, to truly tackle the issue, the companies will need to consolidate their underlying ad tech stacks.

Read more about Disney and ViacomCBS here.

What we’re reading

Roku’s rise to streaming gatekeeper:
As Roku’s connected TV footprint has grown, so has its power over the streaming landscape, as Variety reports. The piece explains how Roku has reached this position where it’s able to face off against the likes of WarnerMedia and NBCUniversal, but it also identifies some of the company’s vulnerabilities, like how smart TV manufacturers are trying to compete with it for advertisers’ dollars and how Amazon’s and Google’s CTV platforms have a larger presence internationally.

Comcast’s connected TV platform play:
Comcast may soon become another rival to Roku. The pay-TV and internet provider has pitched TV manufacturers on using Comcast’s software to power their smart TVs, according to Protocol. Amazon, Google and Roku have struck similar deals with smart TV makers, which provides a way for the companies to acquire users of their CTV platforms — But this market is becoming pretty crowded. In addition to the aforementioned platform providers, smart TV makers like Samsung and Vizio operate their own CTV platforms on their devices. So it’s unclear how many smart TV makers would look to take Comcast up on the offer, especially since it’s unclear whether people would be more likely to buy a smart TV with Comcast’s software than one with Amazon’s, Google’s or Roku’s.

Cable TV’s last surviving franchise?:
TLC’s “90 Day Fiancé” may have emerged as the Marvel Cinematic Universe of cable TV, according to Vulture. That’s a wild claim until you consider that the series’ spin-off has been attracting more viewers than would-be franchise contenders like “Real Housewives” and “Below Deck.” Meanwhile, TLC is trying to milk this cash cow for all its worth. An agency executive told me last week that TLC is demanding broadcast prime-time level ad prices for the new season that is set to premiere in the fall.

Sports viewership down because too much (daytime) sports:
Turns out that advertisers were right to be concerned that live sports’ return would lead to congestion. Ratings for the NBA playoffs, for example, are down by 34 percent compared to last year. However, that doesn’t necessarily mean that fewer people are tuning into games, according to Yahoo Sports. For one thing, there are a lot of games being played during the traditional workday. People can tune in between Zoom calls, but that flitting in and out can drag down the average number of people watching in any given minute. Also, it’s August, and even though there’s still a pandemic going on, I’ve talked to a lot of people who have gone on vacation in the past month and are enjoying time away from their screens.

Indeed, some advertisers like Burberry are due to restart global reviews that were postponed at the onset of the coronavirus crisis, while others like Unilever are long overdue one. Should both reviews take place before the end of the year then it would represent more than $4 billion in media billings, per COMvergence.

“Based on recent conversations I’ve had with agencies and industry analysts, it seems that the number of multi-country and local pitches are increasing again as advertisers who had planned to review their media arrangements this year will go ahead, while adapting to the new ways of running a pitch virtually,” said Olivier Gauthier, CEO at COMvergence. 

Events like this have become a regular occurrence over the last five years. The first mediapalooza happened in 2015, only to be followed by another three years later and now another is on the way. 

Corporate cost cuts amid shifting commercial priorities are making advertisers think long and hard about how much they spend on marketing — and therefore their agencies — coming out of the pandemic. 

“There’s a mediapalooza happening now, but it’s not public,” said John Donahue, CEO at media consultancy WLxJS. “A lot of processes that lead to global reviews started on March 14 when lockdowns came into force.”

Behind the scenes, advertisers are busy doing all the things that eventually lead to reviews. 

“While a review process is very public there’s a whole other process to get to that point; there are audits to run and questions to ask before ruling whether the relationship with your agency is set up the right way,” said Donahue.

But whereas previous mediapaloozas revolved around advertisers’ concerns over how agencies spent their money, now there’s a greater focus on redefining what agencies do. When the world changes as much as it has in 2020, so do go-to-market strategies. Businesses that were traditionally reach-based advertisers are being forced to act like direct-to-consumer ones, for example. Little wonder then why those advertisers are debating whether their agencies are up to the task. 

“From the many pitches we’re seeing in the works, they’re less about advertisers being inherently unhappy with their current agency and more an acknowledgment that they need different things from them,” said Ruben Schreurs, managing partner at digital media consulting firm Digital Decisions. 

With so much financial and civil unrest, advertisers are marketing in a faster-moving marketplace, and that means two things. First, advertisers need more insights into shifting media trends they can exploit. Second, they need the flexibility to adapt media plans in response to those trends. 

Both concerns have put newfound pressure on the perennial list of advertiser concerns around strategy, operating model, efficient use of technology, compliance of data use, in-house plans and brand suitability. In response, the holding groups are pitching advertisers more integrated models capable of tapping into various expertise across their agencies, from data management platforms to e-commerce strategists.

“The briefs for pitches we’re seeing come through now are more transformational,” said Martin Kelly, CEO of Infectious Media. “Marketers are questioning whether they have the right marketing mix and subsequently the right operating models with the right partners, and that’s leading to these more strategic briefs.’

Neverthless, brokering cheaper media prices will still play a role in upcoming negotiations, especially given the financial straightjacket advertisers now find themselves in. 

“If the business is hit hard then there will be logical cuts to the budget and with that also likely a shift in scope with an underlying need for savings,” said a marketing procurement director at a pharmaceutical company who asked not to be named.

For many global advertisers, recoveries will be driven by efficiencies, rather than top-line growth. While an extreme example, the recent Kraft-Heinz review is emblematic of how ruthless advertisers are prepared to be in pursuit of cost efficiencies needed to maintain margins on media. The advertiser had asked agencies on the pitch to agree to its 120-day payment terms, for example. By pushing out payment terms to four months, Kraft-Heinz has more cash for other areas.

“There are some advertisers like Kraft-Heinz that see the pitch they’ve just concluded as the last opportunity to drive some hard savings from their media before more of their money moves toward auction-based channels,” said a consultant with knowledge of the CPG company’s plans. 

As much all these pitches represent a chance for agencies to win some much needed cash they’re also an additional cost. Already short-staffed in light of cost cuts, agency bosses will need to weigh up their chances of winning new business with the impact it will have on work for current clients. From there, it’s a slippery slope for those CEOs struggling to balance short-term commercial gains and the longer-term stability of their business model.

“There’s a risk that clients will become unsettled as agencies continue to cut out headcount — the effects of which will only be fully understood once the government’s furlough scheme draws to a close,” said the CEO of an independent agency in the U.K. on condition of anonymity. “Given the cost-cutting challenges that the agencies face themselves I fear that there will be a number of players who are willing to continue the race to and through the bottom just keep media billings coming in.”

The cuts, which in many cases were tiered, reduced pay for junior staffers by a few percentage points and for senior managers by as much as 40%, and were a defensive move designed to limit layoffs. Though in most cases, the cuts did not prevent layoffs altogether: Almost every media company that announced pay cuts this spring also laid off or furloughed other staffers, according to a running tally of media’s cuts and layoffs maintained by Poynter.

The scope of the cuts also differed. Some publications, such as Meredith or A.H. Belo, parent company of the Dallas Morning News, imposed the cuts on all salaried employees (A.H. Belo announced on a July 28 earnings call that it would restore full pay to all employees earning $60,000 or less). At publications such as Vice Media, the pay reductions only affected those in management roles, though the company halted other benefits for the rest of its workforce, such as 401k matching.

(Digiday Media, which had furloughs and pay cuts of its own, decided last month that it would roll pay back its cuts gradually as well)

In some sense, the choice of cuts, rather than layoffs, were the result of many workers trying to work together. “People were very receptive to the idea of shared sacrifice, even to the point that they’d start that conversation,” said Lowell Peterson, the executive director of the Writers Guild of America, East, which works with unions at publications including Vice Media and Vox Media. “Everyone was committed to the idea of shared sacrifice.”

While the return to normal pay shows that the bumpiest months of the crisis are over, sources at many of the publications that made cuts cautioned against overreacting.

“It’s more a function of having to provide the organization enough time to adjust expenses on the hit in advertising revenue, than the revenue coming back,” said an executive at one publication that had pay cuts, then rolled them back. “Ad investments have stabilized, but not returned to pre-COVID levels.

“There is a good chance they [the pay cuts] will have to be reinstituted in the future if ad spend remains depressed,” that source added.  

While many publishers have found bright spots in a few different parts of their businesses, including programmatic advertising and an ability to work more closely with partners they already know, most media companies remain well off their original revenue projections for 2020.

Many ad sellers remain unable to have conversations with advertisers about the fourth quarter, as brands remain wary of committing to investments in a year when the economic, political and emotional outlook for the country keeps changing.

The digital advertising market as a whole, while expected to grow slightly in 2020, figures to be well off the original revenue projections for the year, according to eMarketer data. eMarketer has gone from projecting 16% growth to 1% growth.