Month: September 2020

To be clear, the ad-supported streaming war is already underway. Hulu and YouTube have been vying for TV ad dollars for the better part of the past decade. Over the past couple years, Amazon and Roku joined the two dominant ad-supported streamers in the annual upfront market. The increased competition and continued linear viewership declines pressured TV networks to step up their streaming pitches in 2019.

However, the fight for streaming ad dollars reached a new pitch in 2020. While TV networks have been building up their streaming strategies over the past several years, their pivots to streaming have taken on greater urgency in the wake of the coronavirus crisis. 

Cord cutting has accelerated — several top pay-TV providers collectively lost more subscribers in the second quarter of 2020 than they did in the second quarter of 2019 — and jeopardized the money that pay-TV providers pay networks to carry their linear channels and put added pressure on the networks’ linear advertising revenue and streaming businesses. Following shelter-at-home orders in March, streaming viewership has surged and stayed high while linear TV viewership increased and then ebbed. The return of major live sports, like the NFL and NBA, may provide a boost to linear TV viewership, but any assistance may be countered by TV programming schedules that have had to be pushed back because of the physical production shutdown that has only begun to abate within the past couple months.

With streaming’s rise and linear TV’s demise as the backdrop, TV networks are finally expanding their streaming pitches beyond the people who subscribe to traditional TV. Disney, for example, took full control of Hulu in 2019 and NBCUniversal debuted Peacock in 2020. And the number of TV networks operating streaming services untethered to their pay-TV businesses will continue to grow in 2021. Early next year, Discovery will roll out a streaming service that will not require people to log in with a pay-TV subscription. Meanwhile, WarnerMedia’s HBO Max will debut an ad-supported tier sometime next spring. ViacomCBS’s CBS All Access has been around since 2014 — but is set to receive a major upgrade early next year when it is rebranded to Paramount+.

ViacomCBS seems to have been at the forefront of this trend. In addition to operating CBS All Access, the conglomerate acquired free, ad-supported streaming TV service Pluto TV in 2019 and made the streamer a centerpiece of its upfront pitch. In 2020, Disney and Fox followed suit by bundling Hulu and Tubi, respectively, into their upfront deals, while ViacomCBS has started to connect Pluto TV’s inventory with that of its other standalone streamer CBS All Access. NBCUniversal did not aggressively pitch Peacock in this year’s upfront negotiations because its launch sponsorship deals run through next year, but it did direct advertisers’ attentions to its One Platform, which the company will be able to eventually use to sell Peacock’s inventory alongside its other linear and streaming inventory.

Amid a weakened ad market, the TV network groups’ streaming properties propped up their slumping linear TV businesses. Linear inventory may have attracted the majority of ad dollars, but the main reason networks didn’t see ad dollars drop dramatically in this year’s upfront was the increased amount of money going to their streaming inventory, according to agency executives.

“How freaking lucky were NBC and Fox and then WarnerMedia, once they add advertising to HBO Max, that they onboarded some streaming platforms during this upfront,” said one agency executive.

For the TV network groups to capitalize on their streaming fortunes, though, they will need to show they have enough ad-supported viewers to merit advertisers’ money. The networks may benefit from more people having adopted streaming this year and the people who canceled their pay-TV subscriptions looking to subscribe to streamers offering TV programming. 

But, people will still need to pay to access that programming on the networks’ streamers’ ad-supported tiers and that may be a harder sell outside of the pay-TV bundle. It may be an even harder sell when, in competition for people’s subscription budgets, the networks’ ad-supported streamers find themselves pitted against one another — including their respective streamers’ ad-free tiers— as well as the likes of Netflix and Disney+. At that point, the ad-supported streaming fight merges with the subscription-based streaming battle into a full-blown streaming war.

Confessional

“There have been a sizable amount of unders at this point.”

— Agency executive on TV’s sports return falling short of viewership guarantees

Stay tuned: The NBCUniversal-Roku accord

NBCUniversal’s and Roku’s months-long stalemate has come to an end. On Sept. 18, the two sides finally reached an agreement to make NBCUniversal’s Peacock streaming service available on Roku’s connected TV platform. However, considering how acrimonious the road to the resolution was, the settlement raises the question of who actually won the pyrrhic victory and what does that mean for the future of connected TV distribution deals.

Both NBCUniversal and Roku are keeping mum on details. Per Roku’s statement, the companies have reached a deal to distribute NBC programming on Roku’s The Roku Channel and “a meaningful partnership around advertising.” Whatever that means. So what might it mean? Here are some possibilities:

• Roku won: All the CTV platform had to do was wait out NBCUniversal. If Peacock struggled to convert the 15 million people that have signed up for the streamer into regular viewers because those registered users could not tune in on Roku’s platform, NBCUniversal would have eventually reached a point at which it couldn’t afford to not have Peacock available on Roku. That timeline may have been sped up by NBCUniversal’s distribution deals with Roku for its TV networks’ streaming apps coming up for renewal. NBCUniversal likely could not afford to sacrifice those apps’ Roku distribution because of their importance to this year’s upfront deals and NBCUniversal’s One Platform push.
• NBCUniversal won: NBCUniversal may have pulled a Littlefinger. The media conglomerate may have acceded to Roku’s demands that NBC put some shows on The Roku Channel, but NBCUniversal may have secured ad sales rights against that inventory. And instead of offering to split Peacock’s ad inventory with Roku, NBCUniversal could have offered the olive branch of allowing Roku’s OneView to be one of a limited number of automated ad-buying platforms to bid on Peacock impressions whenever the streamer opens its inventory for programmatic purchases.
• A draw: NBCUniversal may have agreed to a licensing deal to put some of its programming on The Roku Channel for Roku to sell ads against and retain the resulting revenue, and in exchange, Roku may have agreed to let NBCUniversal retain full ownership of Peacock’s ad inventory with the caveat that Roku’s OneView would eventually be able to bid on Peacock’s impressions. This would be the tidiest of resolutions — and therefore somehow the least likely outcome.

Numbers don’t lie

-7.5%: Estimated year-over-year decline in traditional pay-TV subscribers in 2020, according to eMarketer.

-15%: Estimated year over year decline in national TV ad revenue, including election-related ad dollars, in 2020, according to Magna.

Quibi watch: Potential buyers

Quibi is for sale, according to The Wall Street Journal. The mobile video platform is not exactly a hot commodity considering how it has struggled to attract much positive attention since its April debut. But the Jeffrey Katzenberg-founded company may still have enough allure to lure a buyer (despite the fact that it doesn’t own any of its programming and it’s in the middle of a lawsuit over its flagship technology). Here are some potential suitors.

Verizon
Like someone who thinks they can be the one to reform an unpromising partner, the telecom giant seems to rarely turn down a chance to acquire a struggling media platform (see: AOL, Yahoo, Vessel). That’s kind of it for Verizon’s case.

Apple
Even before Quibi launched, the iPhone maker had been considered a likely landing spot for the mobile video service. That speculation was rooted in Quibi being a high-end mobile platform and Apple making a high-end mobile device combined with Apple’s foray into high-end entertainment with Apple TV+. There’s also the idea that Apple could use Quibi’s technology to remake Apple TV+ for mobile viewing, but Quibi has yet to prove that technology can elicit much audience interest.

Microsoft
Microsoft’s willingness and failure to acquire TikTok could suggest the company is looking to make a digital entertainment play. Quibi has failed where TikTok has succeeded — getting a lot of people to use its platform — but Microsoft could use the former’s programming and platform to retry transforming Xbox from a gaming console into a living room device.

Facebook
Facebook and Quibi each offer what the other lack. Facebook has billions of people that use its platforms, and Quibi has a platform that’s actually made for people to watch videos. Perhaps together they can overcome their respective inabilities to produce a breakout hit. Then again, Facebook could just wait for another company to acquire Quibi and then churn out a copycat product.

Disney, NBCUniversal or WarnerMedia
The media conglomerates have already put money into Quibi as investors and they are each building up direct-to-consumer entertainment platforms. However, Disney and WarnerMedia’s parent AT&T may be reticent to sink more money into Quibi given how the former’s business has been strapped this year by its theme park closures and the latter is looking to offload its debt. NBCUniversal, meanwhile, could coax its parent company Comcast into combining Quibi’s mobile video service into some triumvirate with Comcast’s Xfinity Flex connected TV platform and NBCUniversal’s Peacock streamer.

TikTok Global
Whatever becomes of TikTok’s corporate structure, the mobile video platform makes as much, if not more, sense to pair with Quibi as any other company. Quibi could effectively become the Snapchat Discover or IGTV to TikTok’s main user-generated platform. As with Facebook, TikTok would provide Quibi with the audience it sorely lacks, and Quibi would offer TikTok the premium programming that would help the platform to attract ad dollars from big brands.

What we’ve covered

Facebook video powers a user-generated content surge:

• The coronavirus crisis has spurred a surge of demand for user generated video.
• Facebook video views for content not produced by brands or media companies has grown steadily all year.

Read more about Facebook here.

Advertiser concerns about TikTok’s unusual spinoff:

• Walmart’s minority stake in TikTok could be welcomed by CPG brands but breed distrust among retail advertisers.
• Oracle’s partial ownership of the platform could spark advertiser interest if it’s able to take advantage of TikTok’s data.

Read more about TikTok here.

Discovery aims to launch Discovery+ streaming service in early 2021:

• Discovery’s standalone streamer will offer ad-supported and ad-free tiers.
• Discovery+ is intended to appeal to twenty- and thirty-something viewers less likely to tune into traditional TV.

Read more about Discovery here.

NBCUniversal tests new ad measurement program to prove it can push sales:

• NBCUniversal’s Total Investment Impact will track ad performance against advertisers’ product sales.
• The company aims to eventually use the measurement and planning program to guarantee sales against an ad buy.

Read more about NBCUniversal here.

As sports return, Twitter eyes ad boost:

• Sports organizations have flocked to pursuing ad opportunities on Twitter to offset lost game-related revenue.
• Some organizations worked with sponsors to create short-form videos.

Read more about Twitter here.

What we’re reading

Hollywood’s coronavirus insurance crisis:
The return to production has been held up by insurance. As Variety reports, insurance prices for TV and film productions have skyrocketed. The usual insurers are unwilling to cover coronavirus-related claims, which has made it harder for producers to secure completion bonds from banks. Some newer insurers have entered the market, but they are limited in how many projects they can take on and come with risks, like a lack of independent ratings.

Fox’s $2 billion NFL bet:
Fox intends to spend as much as $2 billion per year to hold on to its rights to air Sunday NFL games, according to Bloomberg. That’s nearly double what Fox is estimated to currently pay, per the report, and shows how valuable the NFL is to TV networks’ businesses — and how the league is poised to squeeze rights holders for even more money in the next round of rights negotiations.

Apple TV+’s bundle boost:
Apple is pulling a page from Amazon’s playbook to prop up its streaming service, according to The Verge. The tech giant’s Apple One subscription-based bundle will give subscribers access to Apple TV+ as well as Apple’s other services like Apple Music and Apple News+. That lowers the barrier to entry for people to try out Apple’s streamer, even if it’s not a main reason they are paying for Apple One. And then if they so happen to find they like Apple’s shows and movies, all the better.

“While the skincare category has been on a steady incline for some time, in [the second quarter] it saw a 317% growth in consumer search demand according to Google, fueled by COVID-19 stay at home orders and greater emphasis on personal self-care,” said Tierney Wilson, managing director at digital consultancy January Digital, who leads digital strategy for several beauty clients. “Health has officially become a lifestyle.”

In March, BDG’s namesake brand, Bustle, had the highest amount of traffic to health-related content this year, clocking in at 24% higher than its monthly average for the category in 2020, according to Google Analytics and Apple News. Not only that, but 13% of Bustle’s traffic — it had 24 million unique visitors that month, per Comscore — was to health-related content.

Its younger women’s lifestyle brand — Elite Daily, with just under 18 million unique visitors in March — saw a 52% increase in average monthly traffic to health content from March to June, compared with January and February this year.

With increased interest from readers on health and wellness, Emma Rosenblum editor-in-chief of the lifestyle brands at BDG, said her team built out a new hub for all of this content on the site called Your Health A to Z. This hub will also be rolled out to Elite Daily and BDG’s millennial mother-focused brand Romper, she said. 

But the ultimate goal, Rosenblum said, is to build out BDG’s own endemic health and wellness brand within the next two years. 

Her goal is set as the increase in reader interest in this category is matched by interest from health and wellness advertisers.

In August, ad revenue from pharmaceutical and wellness advertisers was up 34% year over year and consumer packaged goods ad revenue lifted 17% year over year, said Elizabeth Webbe Lunny, evp of revenue at BDG. Not only that, but the sizes of deals in terms of dollars has increased by 15% and 20%, respectively, and its health and wellness events business tripled year over year.

“It’s a virtuous cycle. More consumers are buying products in this category so brands are increasing their spend, thus increasing demand and feeding the cycle,” said Jeff Rosenblum, Co-Founder of digital agency Questus. “We have seen a massive increase in spend in the wellness category.”

“This is a category that we’re serious about,” said Webbe Lunny, adding that next year, the publisher is planning to have an upfront for the category.

Self, an endemic health and wellness brand, has served as a bridge for helping Condé Nast’s non-endemic titles take a step into health and wellness.

Modeled off a popular newsletter penned by editor-in-chief Carolyn Kylstra called “Checking In,” Self created a new, six-night virtual event series from October 6-15 by the same name that’s focusing on mental health and wellness.

To scale up the potential audience, the event will be simulcasted using the company’s CitizenNet Live platform on GQ’s and Allure’s Facebook and YouTube channels.

As a men’s fashion and lifestyle brand and as a beauty and makeup brand, GQ and Allure respectively do not have the endemic authority of health and wellness that Self has, but during the pandemic, their audiences are in a similar position of prioritizing self care, Kylstra said.

And partnering with GQ and Allure exponentially grows the audience that the health and wellness event will have. On Facebook, GQ has 2.8 million followers on its main page and 5.5 million subscribers on YouTube while Allure has 1.5 million followers and 1.6 million subscribers on the respective platforms. Self has a comparatively smaller audience of 750,000 subscribers on YouTube and 1.7 million followers on Facebook.

The event’s structure is also part of the company’s strategy to increase the scale of its virtual offerings, which allows for more lucrative brand deals from advertisers, as was outlined in the company’s virtual event upfront in August.

So far, Jen Mormile chief business officer of Condé Nast’s lifestyle division said the event already had 1,000 people register in just the first few hours of going live. One sponsor, supplement brand Viviscal, has jumped on as a sponsor as of publication.

Health and wellness is likely not a temporary popularity play while people are seeking self care during the coronavirus crisis, however.

TheSkimm had been working on building out a new wellness vertical — Skimm Well — well before March after finding that nearly 80% of its subscribers were seeking more health and wellness content.

The Skimm Well lives on the newsletter publisher’s website as well as in its own section in the daily newsletter.

“Our audience and brand partners alike have consistently asked us to bring our unique voice and perspective to the health and wellness category over the years. [Now] we are able to execute with our partners in a much bigger way,” said Alexis Goldstein, svp of sales at theSkimm.

Launched with WW, formerly Weight Watchers, the sponsorship partnership is running through early 2021, though the company would not disclose the size of the deal. However, according to a company spokesperson, Year to date, theSkimm’s advertising revenue is up around 16% year over year.

According to data, insights and consulting firm Kantar, the grand total of ad dollars spent by the health and beauty industry — which consists of cosmetics and beauty aids, vitamins and minerals, weight loss and weight gain aids, and nutritional supplements — from January to June this year was $1.5 billion. That’s about $300 million, or 17%, lower than the same period in 2019.

However, within that, there were two categories that increased their year- over-year spend by approximately 4% each: vitamins and minerals and nutritional supplements, Kantar reported.

CBD products, a category that is not classified under health and beauty by Kantar, but is often marketed for its health and mental wellness benefits, has seen its ad spend grow more than five times from March through June 2019 compared to the same period in 2020 from $800,000 in ad spend to more than $4 million.

“In the last three to six months we have seen dozens of CBD-based brands now running paid social and Google Ads whereas before there were almost non-existent because they were getting flagged by those same channels,” said Jed Wexler, executive director of the Luxury Meets Cannabis Conference, which offers consulting services for brands in the cannabis and CBD categories.

Rich Gagnon, evp and health and wellness practice lead at Havas Media, said that pharma and health are two categories he’s seen increase spend, with a particular emphasis on targeting healthcare professionals.

And Steve Bloom, managing director of enterprise partnerships at OMD said that even for non-endemic health and wellness brands, this type of content tends to make for brand safe and engaging content for advertisers, which makes this category even more sought after given the news cycle as of late. 

“This is two giant leaps ahead of the polls that are out there,” said The Economist president and managing director Bob Cohn. “We aren’t just recycling other [polls], although they are among factors that go into the model, but the sophistication makes it feel worthy of The Economist brand. Our expression of data journalism is very popular, we’re uniquely known for creating complex data journalism that’s easily digestible.”

North America is already the publisher’s highest region by circulation, where 56% of subscribers are based, the U.K. is second wuth 17% of its circulation. As of June, it has 1.6 million subscribers globally, according to The Audit Bureau of Circulation.  

“They have room to grow,” said Rob Ristagno CEO, The Sterling Woods Group, pointing out that other U.K. titles like the Guardian have had to scale down in the U.S. before the pandemic hit. “There is an appetite for a more objective third-party view, they can have a very healthy business if they focus on their intellectual niche.”

So far the presidential forecast model is gaining traction, but Cohn, former president at The Atlantic, expects this to grow exponentially as the clock ticks down. The presidential forecast model page is the most trafficked page, (outside of The Economist homepage) netting four times the volume of traffic compared to the second most-trafficked page, which is this graphic detail chart on excess coronavirus deaths.

These models are one of a few U.S. election-focused products recently launched to grow the audience, new subscribers and help retain them. Newsletter and podcast Checks and Balance came out in January, marking its sixth podcast and sixth newsletter, highlighting the best of its election coverage. 

Podcasts have fared well for the publisher too, which has nearly doubled podcast revenue year on year thanks to spot ads and sponsorship revenue, although it wouldn’t share from what base. The Week— highlights from the latest magazine issue — has 2.9 million subscribers and its daily newsletter has 2.4 million, (not de-duplicated). 

Pre-coronavirus, Cohn said this year’s focus was covering the upcoming election, building up the leadership team and creating an aggressive three-year growth plan (the publisher wouldn’t share any of those growth goals). 

The last 12 months have seen many new leadership appointments. Aside from Cohn, CEO Lara Boro, who joined in Sept. 2019, also instated chief product officer Deep Bagchee, chief marketing officer Kim Miller, chief information officer Richard Peers and chief talent officer Gnosoulla Tsioupra-Lewis.

The Economist has found that subscriber trialists who came in on a one month or three-month tier during March and April are retaining at a rate higher than the publisher budgeted for and higher than last year, although it wouldn’t say how much.

Over the past year, it’s seen a 21% increase in the number of subscribers who are “highly engaged” with its content. That’s thanks to focussing on retention, surfacing related stories and recirculation modules, improving the product and user experience — “we’ve become much more of a testing culture,” said Cohn, adding the brand had seen more value through subscriber-only products like events — it has five subscriber-only events coming up focussed on the election.

This year, it rolled out a subscriber-only newsletter for eager Economist fans, delving into how each Economist cover is chosen, exposing the interplay between editors and cover designers.

In May, as the coronavirus took its toll, The Economist announced it was cutting 90 jobs — 7% of its global workforce — in events, clients solutions and marketing agency, as well and closing the print version of culture and lifestyle magazine 1843 and absorbed into the main site, “a necessary but regrettable step,” said Cohn who added he is optimistic about the future, saying the move has set it up for future success. 

“That was a one-time restructure,” he said. “Now we’re done with that we’re in a very good position, there is a lot of hiring, building and positioning for the future.” 

In doing so, some of those advertisers have started to question whether they should be spending so much time pushing supply-side platforms to take a smaller percentage of their bids in the belief that those fees can indirectly affect a campaign’s performance.

The assumption is that the smaller the cut for the ad tech vendor the more there is in the actual bid to compete for impressions that it may have otherwise lost. When an SSP reduces its take rate from 20% to 10%, the marketer begins to win impressions that it was previously losing, for example. But some advertisers are turning this received wisdom on its head

In fact, large changes in bid price can often produce small changes in an advertiser’s ability to win those auctions, according to six programmatic execs interviewed for this article. They all agreed that lower exchange fees matter, but only to a point and only for campaigns that have well-balanced bidding strategies. When advertisers over-bid on impressions to compensate for high exchange fees — or when they buy them via auctions that aren’t even considered by the publisher — exchange fees are inconsequential to campaign ROI, they said.  

“The algorithms that manage programmatic auctions were first written to prioritize speed and consider how quickly a bid for impressions was made and executed versus if the bid was simply the highest but really late to the auction,” said Bob Regular, CEO of ad tech firm Infolinks.

When programmatic consultancy Jounce Media bought banner ads on one of the top 500 sites, per Alexa, in August it found that when the exchange handling the auction reduced its fee doing so had a minimal impact on the advertiser’s ability to win more impressions. The chances of winning those impressions were around 36.0% when the ad was bought on a $5 CPM and those odds rose to 39.1% when it was a $20 CPM. It suggests a slight benefit from increasing the bid price above $4 to $5 CPM.

“If marketers could attack one problem when it comes to improving their ability to win impressions then go after something other than fees,” Jounce Media founder Chris Kane. “Fee optmization is one of those neccessary, but insuffcient aspects to programmatic advertising.”

Aside from the size of a bid, an advertiser’s chances of winning impressions are also affected by a myriad of technical issues, from the auction closing before a bid has been made to bids from certain ad tech auctions having priority over others in certain auctions.   

Even the way demand-side platforms bid on behalf of advertisers can’t always mitigate the perceived benefits of lower exchange fees, as Omnicom recently discovered. 

“We’ve done some controlled testing and discovered that the bidding algorithms that are built into DSPs aren’t actually sensitive enough to small price fluctuations to take advantage of reduced SSP take rates,” said Ben Hovaness, managing director of marketplace intelligence for Omnicom Media Group.

According to Hovaness, tests showed that the potential for winning additional impressions as a result of paying a lower fee to SSPs was blunted by the fact that they created such a small change in the total cost of impressions that the DSPs didn’t adjust their bidding behavior.

In a programmatic buy, if an agency DSP bids a dollar for an impression, the SSP takes a 15% cut and subsequently sends 85 cents to the publisher’s auction that it eventually wins. Ideally, if the SSP’s cut shrank to 10%, the DSP would react by reducing its initial bid from a dollar to 95 cents. In the real, world, however, DSPs aren’t able to automatically capitalize on those small shifts in SSP fees.

“Advertisers should be very suspicious of anyone in the market claiming that there’s a direct link between reducing exchange rate SSPs and actual media savings,” said Hovaness.

While some advertisers including Bayern have tested this theory, it’s mainly media agencies searching for conclusive evidence currently. 

At GroupM, for example, the media agency’s buyers have been quantifying the impact of exchange fees as part of their own attempts to broker preferred rates with SSPs. As those preferred partnerships become more common, the agency is getting a better perspective on the benefit to its clients of buying from those SSPs where the fee is low. 

“Price is still the most determinant factor [in auctions] and so anything that we can do to influence that in a positive way for our clients is a route worth pursuing,” said Mike Moore, director of programmatic partnerships at GroupM. “However, having lower exchange fees doesn’t preclude having sound bidding, audience and inventory strategies around programmatic campaigns.”

That these discussions over the value of exchange fees are becoming more frequent speaks to a wider shift within programmatic. The likes of Omnicom and GroupM alongside a handful of advertisers are starting to exert more control over how ad tech vendors curate their impressions and in doing so are putting themselves in a position to have the best view of performance, ad rates and inventory availability across many platforms. 

‘Whether its the take rate, the data, attribution or the quality inventory of the inventory, these things don’t work in isolation of each other when it comes to winning auctions, said Paul Frampton, CEO of Goodway Group’s European arm, Control v. Exposed. “Advertisers need to be able to be able to bring all those pieces together to properly manage because auction dynamics are complicated.”