Month: October 2020

Since the beginning of the year, the Post’s subscriptions business has grown by over 40% year over year, while its global subscriptions business, in particular, is up over 60% from last year, according to King. King did not disclose the publication’s total number of subscribers.

“Part of the growth that we saw was a result from things that we’d done prior to this year that began to gain traction and allowed us to be poised [for] this moment,” said King.

Currently, just under 10% of the publication’s subscriptions come from outside the U.S., though the goal is to double that number to 20%, which would be commensurate with the amount of readership that takes place outside of the U.S., King said. In September, the site had a total of 91.6 million unique visitors, according to Comscore.

And the majority of the news publisher’s international traffic comes from countries that have large populations of English speakers, including the United Kingdom, Canada and Australia, she said. Because of that, most of her team’s growth efforts have been targeted in those areas. 

To date, that’s been done through newsletters and paid social media marketing that uses global content at its center. King said that 90% of the publication’s marketing uses article excerpts or graphics as its hook and in international locations, her team found it beneficial to include global perspectives while marketing outside of the U.S.

Additionally, King said she wanted to remove any friction from the signing up process, such as making sure the currency on the page matches the country the user is in. This was a change that was implemented within the first couple months of this year.

The other way that the Post has been getting new audiences, in the U.K. in particular, was through an introductory bundle deal with the Financial Times that gave the FT’s readers a discount to sign up for the Post and vice versa.

King said that her team is just “dipping their toes” into bundling with the FT campaign that ran for a couple weeks, ending in mid-October. But she said she sees a significant opportunity with the FT again, and is looking to initiate bundling campaigns with regional publishers in Canada next year.

There are two main groups that are likely targets for U.S. based news publishers expanding into international markets, according to Pete Doucette, the managing director in the telecoms, media and technology practice at FTI Consulting. 

The first are expats, or U.S. citizens who have since left the country, but want to stay abreast of the national news. The second are people from international countries that want to stay up-to-date on all that’s happening in one of the largest economies in the world. Not to mention keep up to date on the country’s political story, which has its own global ramifications. 

“I would have to assume that interest in the U.S. is at an all time high,” said Doucette.

While the U.S. is treated as a single region from a pricing standpoint, prices for subscriptions differentiate based on the country or region that the Post operates in outside of the U.S. This is because, local news outlets likely have the authority of being the first thing that people subscribe to and King said the Post has to be cognizant of where locals are spending (subscription or advertising?) their dollars.

“Our presumption is that if you live in Toronto, the Washington Post isn’t going to be the first publication that you subscribe to. We are going to be priced below your local publication because that’s your first news subscription, but we want to compete aggressively against the other global publishers in that market,” said King. 

Doucette said, however, this has to be a short term strategy, otherwise there is the risk of losing out on additional subscription revenue.

A year and a half ago, the Post hired Nancy Cutler as its head of global brand partnerships and marketing to help continue this growth process, and it continued to build out its global newsrooms. King said the idea was not so much to compete with the local publications in those areas, but rather to offer a global news perspective familiar to those regions. 

“If you’re really going to scale this, there is only so much growth that you can do that’s controlled from Washington,” said Doucette. “To go to level 2.0, you will need some local presences to understand the pulse of these markets and understand trends.” 

Start with the good news. While ad spending over the last quarter was uneven and fragile, generally it wasn’t as bad as expected. Five of the six largest holding networks beat estimates for earnings in the third quarter or at least generally met them. The consensual view from those results was that the third quarter represented an uptick in advertising that will quicken throughout the remainder of the year.

“Economists have wildly different views on how long the recovery will be but the fundamentals remain the same,” said CJ Banagh, a partner at PWC. “As long as people are able to pay the majority of their bills, and the large banks have made appropriate provisions for bad debt, then you’re not looking at a cliff — it’s just the continued challenges in a broader economic environment.”

Moreover, online media owners like Snapchat and Pinterest held up surprisingly well, with advertisers choosing to concentrate what limited cash they do have on those areas in rude health. Consumers’ pivot from in-store retail into e-commerce has accelerated and, unsurprisingly, Google, Facebook and Amazon were among the biggest beneficiaries of this trend over the summer. Rinse and repeat for the final quarter. 

That said, significant change is in the offing in the near-term quarters.

“Marketers are going to have to think differently about brand marketing because consumers simply aren’t spending the time in some of the other places that were the primary brand marketing vehicles in the past,” said Banagh.

Now for the not so rosy bit. As the latest forecasts show, many economies are essentially registering no growth, or are even shrinking. With private-sector confidence shattered, and the struggle to best the virus far from over, the risks of extensive and long-lasting economic trauma are on the rise. 

“Given the tightening of Covid-19 restrictions around the world and uncertainty in the global economic outlook, we remain cautious about the pace of recovery, said WPP CEO Mark Read on the company’s latest quarterly results. 

Take France, where a nationwide lockdown has been imposed through December. The government there has calculated that 60 billion euros ($69) will be hacked off economic activity for every month in which a lockdown is imposed. Bars, restaurants and other non-essential businesses have closed, forcing marketers to reconsider how much they should be advertising to reach a population in lockdown. Similar debates will happen in Germany where non-essential businesses will be shut down for four weeks starting 02. November.

“If businesses need to close then they may decide to advertise less, which means inventory is cheaper because there’s less demand for it,” said Mathias Chaillou, global deputy managing director at Zenith. “It’s a double jeopardy scenario where you have a risk of strong price deflation and declining overall ad spending. I’m worried about what happens to the ecosystem if those contractions occur.”

There will be casualties if Chaillou’s fears materialize. Some media owners, particularly newspapers, scraped through the first lockdown. Now, for those businesses, a full recovery is a distant dream. The festive season, usually a period of opulence in the industry, is facing a 10.5% dip to 6.2 billion in ad spending in the U.K., per the latest Advertising Association and Warc’s expenditure report. And like the 2008 financial crisis, this downturn is as pervasive as as it is staggered.

“We’ve had deliberations about scaling back our own ad businesses,” said a publishing exec in Europe who spoke on the condition of anonymity. “One of our titles, which is one of the biggest papers in print, and one of the most visited sites here, is seriously considering pulling out from our advertising tech stack and implementing a very small-scale non-cookie-based advertising solution for the minimum of campaigns.” 

To be a media buyer right now is to be in the eye of the storm. Nationwide lockdowns, global health crisis, record unemployment and protests. These headwinds are starting to swirl, leaving media buyers bracing for choppy economic climes and closely watching indicators — namely, what happens to media prices should consumer spending remain in free fall. If this week’s grim third-quarter earnings reports from both Visa and Mastercard are anything to go by — as reported by the Financial Times — the future isn’t bright. 

“If you have a huge allocation of consumers who are going from being middle-class to being now lower-class at the same time as the upper-class, who are actually benefiting more than anticipated from the crisis, then you have this re-orientation towards luxury, higher-priced inflationary goods,” said Bob Regular, CEO of ad tech firm Infolinks. “It reorientates the advertising market.”

That doesn’t bode well for the whales of the ad industry — CPG marketers. The crisis has already forced a pause in low-performing products, pruning of pack sizes and consolidation of shipping units and ingredients. Fewer shoppers put even more pressure on those low-margin, high volume businesses. And when those businesses hurt so do agencies. CPG advertisers account for around a quarter (26%) of all WPP’s revenue, for example.

As Regular explained: “If you’re a media buyer for those clients then there’s less horsepower available for you to move the needle for them. It makes the places where you can do that increasingly competitive. And that will only continue as the channels where those businesses can drive performance are reduced to a handful of partners.”

These aftershocks will reverberate for years. And as the economy adapts so to will the ad industry it fuels.

The spread of the coronavirus pandemic coincided with, and to an extent accelerated, the decline of the agency holding group model built on media buying margins — the agency industry expected to grow just 1% after the pandemic, according to Credit Suisse.

Whether it’s being disintermediated the likes of Google and Facebook, challenged by upstarts like S4 Capital or seeing more of their services go in-house to clients, the coronavirus has inflicted deep wounds in the agency model’s death by thousand cuts. 

The election isn’t the only thing on direct-to-consumer startup executives’ minds — after all, once the election is over, Black Friday is right around the corner. But Election Day also can’t be business as usual. Some startups are pausing or scaling back their advertising spend on digital platforms — particularly on Facebook — as they wait to see how the election plays out. That’s because as political ads flood Facebook, they’re anticipating ad costs will rise. But they’re also just anticipating that people aren’t going to be in the mood to buy new clothes or furniture.

If this year has taught DTC startups anything, it’s that that they need to prepare for the unexpected, and not bombard people with ads in times of heightened anxiety. Even though Joe Biden has a clear lead in polling, people around the country are still going to be obsessing over whether Biden or President Donald Trump win until a victor is declared. And until the election is over, companies are are realizing that they need to watch their ad spend cautiously.

Michael Wieder, co-founder of toddler and baby product brand Lalo, said that his company has been cutting back on its advertising budget since the beginning of October, and plans to ramp it up sometime after Election Day. “We don’t think it’s necessary to compete in this ad environment, and it isn’t effective,” said Wieder. “The election is on a lot of people’s minds right now.”

“With our clients, we’re kind of just planning on sitting out Monday and Tuesday — and maybe Wednesday,” said Brandon Doyle, founder of Wallaroo Media, which works with DTC brands like Cotopaxi and Rhone.

The biggest increase in political ads came in the past few weeks, as the Biden and Trump campaign rushed to get in more ads a week before the election, after which Facebook said it would not allow any new political ads. However, older ads are still allowed to run between now and election day. 

With so many more mail-in ballots being cast this year, which some counties are waiting to count until Election Day or the day after, there’s a potential that the election results still won’t be known on November 4. So buyers aren’t given a hard date as to when they will scale ad spend back up “We’re kinda playing it by ear,” as to when to resume ad spend, freelance media buyer David Herrmann said in an email. He said that three of his clients decided to pause their Facebook advertising spend roughly ten days before the election, and plan to resume spend potentially two days after.

Then there’s the fact that many startups are closing their offices on Election Day — including their warehouses and/or retail stores. As such, running paid advertising might not be the most effective on a day when they can’t fulfill orders. Lalo is one such startup that is making Election Day a paid holiday for its employees, and is also putting an away message on its customer service chat encouraging customers to vote, said Wieder.

Some chief marketing officers at DTC startups, like Prose’s vice president of growth marketing Guilhaum Ceccaldi, had previously told Modern Retail that they would wait to finalize their holiday marketing plans until after the election had passed. That’s because the election will have a significant bearing on what mood consumers would be in. “We are working on four different scenarios for the holiday season, depending on whether we want to emphasize Black Friday slash Giving Tuesday moments, depending on how we could adapt to social unrest movements,” said Ceccaldi.

For his part, Wieder said that once the election results become clear, it still won’t alleviate the the biggest issue Lalo, and other DTC startups faces this holiday.

“The pandemic doesn’t go away, that’s the most important piece right now,” he said. “We can’t ignore this holiday season how many families are grieving, how many families are without jobs and don’t have the same discretionary spending for gifting…and I think it would be remiss for any marketer or business leader to forget about that.”

Sitting alongside Quibi founder Jeffrey Katzenberg during a conference session at the Sands Convention Center titled “The Future of OTT,” Pritchard explained that not only was P&G the first advertiser to sign up, but that his support for the short-form mobile video startup could be traced way back to 2017.

As AdAge reported at the time, “Pritchard’s input started when Katzenberg handed him a book that looked like a photo album with boards for all the creators he expected to work for Quibi. Pritchard describes his reaction as ‘Oh My God!’ Because he knows everybody in Hollywood.”

P&G was one of 10 advertisers — alongside the likes of Walmart, Taco Bell, PepsiCo and Anheuser-Busch, T-Mobile — who signed upfront deals collectively worth $150 million to be the exclusive launch advertisers for Quibi’s first year.

As we all now know, Quibi lasted barely half that time. After raising more than $1.75 billion from a high-profile set of media and tech companies and wealthy investors, Quibi said earlier this month it was winding down its operations having tracked well short of its first year subscriber target of 7.4 million users.

It looks as though those investors will be left severely out of pocket. Quibi’s rapid fall from grace also serves as a cautionary tale for advertisers.

Initially, according to two media buyers who were pitched by Quibi pre-launch, the company was seeking commitments from advertisers of north of $20 million for a one-year, category exclusive deal. An upfront payment was required on signing, with the rest of the balance paid monthly during the term of the deal from the launch of the service. Quibi later reduced the price of the total commitment to around $15 million, one media buyer said.

The deal came with little safety net. The pitch stated there would be no refunds or makegoods. Unlike NBCUniversal’s Peacock — which had a similar launch model of a handful of advertisers making upfront commitments — there was no additional linear or digital inventory to reallocate ad dollars were Quibi to underperform. Plus, while Peacock is similarly asking advertisers to pay on a monthly basis, the deal is structured to scale up as the subscriber base grows — Quibi was asking for an even amount for the duration of the deal. The Wall Street Journal reported in May, just a month after Quibi’s launch, that some advertisers were seeking to restructure their deals owing to its disappointing viewing figures.  

There was the potential that the gamble could pay off. For P&G, with its annual ad budget of more than $7 billion and dozens and dozens of different brands to advertise on rotation, $15 million might have seemed like a reasonable sum to lock out the likes of Unilever from a platform that could be the next big thing.

A Procter & Gamble spokesman said the company didn’t have a comment that it would be issuing at this time. Quibi did not respond to a request for comment in time for publication.

“Here comes this guy with an incredible track record, he’s got a bunch of VC money behind him to get the thing off the ground — you don’t get to be a big Hollywood producer without being able to spin the story and get people excited about your vision,” said Jim Nail, principal analyst at Forrester Research. 

“That’s exactly what the TV upfronts are about: They trot out the big stars, show clips from upcoming shows to get you excited, [present] market research about which consumers will like the shows and you make a bet,” Nail added.

Still, as the old saying goes, hindsight is a wonderful thing, but foresight is better.

With the rise of ad-free subscription streaming services and the increasing fragmentation of traditional TV audiences, advertisers are “clawing for anything that makes it viable” for the ad-supported TV and video model to continue, said Dean Crutchfield, CEO of marketing and growth consulting firm Crutchfield + Partners.

Ultimately, advertisers who took the plunge on Quibi fell victim to a bad case of “marketing myopia”, Crutchfield said.

“They were looking from the inside out and not the outside in — that was a major calamity for them,” added Crutchfield. “They made too many assumptions … they believed [Quibi] had permission to be in the market, where, actually, they didn’t have permission from users.”