Month: January 2021

But as 2021 begins, it is clear that a lot of media and marketing’s defining features did die last year, or begin to fall away. That’s why, over the past week, all four Digiday Media brands — Digiday, Glossy, Modern Retail and Future of Work — have published stories examining some of those changes. We rolled them all up into a package titled Endgames.

In some cases, all the drama and trauma of 2020 caused changes at the bottom of the industry that have begun to trickle up. Kristina Monllos reported on how in 2020, with consolidations picking up and margins under pressure, agency employees are no longer staying at jobs just because their employers offer a cool culture or office perks (especially if said perks are all virtual now).

In other cases, the spread of the disease and its knock-on effects caused a tectonic economic and cultural shifts. China’s swift crackdown on the spreading disease, combined with years of meteoric economic growth, put China, quite suddenly, at the heart of the global fashion industry, where the U.S. once stood on its own.

Some of the things that 2020 got rid of were due for a mercy killing, like the Instagram Brand that had become a kind of parody of itself by the start of last year, or the identity workarounds that skirted Apple and Google’s ever-changing user privacy rules.

Some of the changes were little signs of maturation coming for nascent businesses. Modern Retail editor Cale Weissman wrote about how DTC startups, which had spent years chasing growth and expecting easy venture capital to follow, are now being forced to consider different sources of funds – and their consequences.

But more than anything, the coronavirus’s sweep across the globe put an end to the patient wait for change that has defined so much of media for the past decade.

The rest of Digiday’s Endgames coverage is here; Glossy’s Endgames coverage is here; Modern Retail’s coverage is available here. 

While 2020 was a year of struggle and strife for many publishers, London-based Future PLC ended its 2020 fiscal year up 65% in total revenue from last year, bringing in a total of just under £340 million (approximately $459 million), according to the company’s 2020 annual report.

As a special interest-based publisher, Future PLC has the advantage of having niche, passionate audiences that trust the publications they read. But with over 130 titles, the company also has the scale of a mass media company, with a total audience consists of upwards of 400 million monthly unique users. That extensive database of user behavior, interests and shopping habits is what the company’s CEO Zillah Byng-Thorne said helped the company grow over the past year.

“We’ve invested a lot of money and resource around having a proprietary tech stack, which just makes it easier for us to reach our audiences and to work together cooperatively,” said Byng-Thorne, adding that this decision was first implemented eight years ago.

Today, the company owns four pieces of technology, including a content management system, an advertising tech stack, a commerce platform and, most recently, a first-party audience segment database that streamlines all the data together.

In the latest episode of the Digiday Podcast, Byng-Thorne discusses how Future positioned itself over the last year to grow not only its e-commerce business during the coronavirus pandemic-induced online shopping boom, but also its advertising business.

Here are a few highlights from the conversation, which have been lightly edited for clarity.

Strength in global scale

Some of our hobbyist publications are quite small and quite niche. But at the same time, we’ve got the number one brand in the English speaking world in PC gaming. And PC gaming is a big audience. We must not fall into the trap of thinking that because it’s a hobby, it must be small. We very much view ourselves as being about loyal communities and areas of passion for people. That’s what got us thinking about global, which was, you know, if you’re an enthusiastic PC gamer, you’re just as enthusiastic in Australia as you are in the U.S., and therefore, why would we want to limit our reach to just the market we operate in? That’s been a core driver of us pivoting into a U.S.-first mindset, because that’s the largest audience that we have available to us.

Enthusiast audiences have high-intent

We’re really at the point of helping people make buying decisions. However, rather than put that monetization into the ad, what we’re saying is, you can advertise around it. We want to kind of keep [e-commerce] separate, because we want to make sure that the editorial sits in its own right. What we do find is that if advertisers advertise around that type of content, and they’re in the list, then they’re going to get a much better clickthrough rate because there’s a reinforcement of the brand. But we don’t actually put the clickthrough directly into the app.

First-party audience data is key

The third-party cookie’s going away and so the ability to buy an audience based on the cookie is going to be much harder for advertisers. And therefore the bottom of the advertising stack is much less valuable. What we’re adding in is an extra premium layer at the top, which is really well identified audiences using the first-party. However, I think businesses like ours still continue to be able to monetize more the direct-sold element, because people will buy based on brand. If you can’t identify your audience or identify your user, you’re still going to buy brands.

This apparent bet-hedging did not seem to go over well with investors, who were asked by Bakish to overlook the company’s dismal fourth-quarter earnings that included a net loss of $273 million. Within hours, the company’s stock price dropped by 16%.

Since February, ViacomCBS’s stock price has recovered, as of Jan. 4, to being about 2% up from the $35.67 mark it closed at the day before the February earnings call. Nonetheless, the company remains at an inflection point heading into 2021. The company will relaunch its CBS All Access streaming service as Paramount+ and officially (re)join the streaming wars to compete against the likes of Netflix and Disney+. However, in that foray, ViacomCBS — like every other major TV network group owner — will have to deal with the dilemma of how to build up its streaming business quickly but not so quickly as to tear down the linear TV business that is the company’s cash cow.

“What all these companies are trying to do is to have their cake and eat it too,” said Doug Shapiro, former evp and chief strategy officer at Turner. “They’re trying to construct streaming services that are going to be, at the same time, attractive to consumers and additive to their linear TV experience. And it’s an open question of whether they can solve for both of those at the same time.”

A year after the merger of Viacom and CBS in December 2019, the combined company is in the process of remaking itself from a media conglomerate with a business primarily based in traditional channels like linear TV and theatrical films into one whose operations are oriented around streaming. What the company will look like on the other side of that shift remains to be seen, but out of economic necessity, ViacomCBS in the future will need to look different than its current incarnation.

A ViacomCBS spokesperson said that company executives were not available for interviews.

Traditional TV’s transition trouble
TV networks had initially tried to establish streaming businesses that were complementary to their linear businesses. Some, including Viacom, simply set up websites that made their programming available to stream online but only to pay-TV subscribers. Others, including CBS, opened themselves up to people without pay-TV subscriptions as a way to incrementally expand their linear TV businesses. 

But now networks have reached a tipping point. As cord cutting continues to accelerate and streaming viewership surges and ad dollars follow, the networks can no longer afford to allow streaming to remain a secondary business. 

Except streaming does not yet generate enough revenue to replace linear as the networks’ primary businesses. In the third quarter of 2020, ViacomCBS’s U.S. streaming and digital video revenue reached $636 million. However, that remains a fraction of overall TV revenue, which totaled $5.4 billion when including ads sold on its linear TV networks as well as the affiliate revenue it receives from pay-TV providers that pay to carry those networks. That affiliate revenue, in particular, binds ViacomCBS to its linear TV business and potentially compromises its streaming business’s development. 

“One of the issues with ViacomCBS is they’ve got more channels than anyone else,” said Alan Wolk, co-founder and lead analyst at consulting firm TVRev. “I think there’s resistance internally to getting rid of this linear business, which they’re super invested in on so many levels.”

Right now, ViacomCBS gets paid fees for every pay-TV household that receives one of its linear channels, whether or not those households ever watch them. By contrast, a person has to actively choose to pay for subscription-based streaming. That lowers the likely subscriber base compared to traditional TV and all but requires a company to pay to promote its streaming service, which adds to its expenses and cuts into its profits. “The streaming business is structurally less profitable,” Shapiro said.

Changing tides
Those less appetizing economics may have contributed to what some agency executives perceive as the company being slower than some of its competitors in shifting to streaming. Additionally, while Disney, WarnerMedia and NBCUniversal underwent massive internal reorganizations in 2020 to orient their operations around streaming, ViacomCBS has yet to announce such a sweeping overhaul. Instead of reorienting its entire organization around streaming, in October 2020, ViacomCBS formed a new global streaming division and appointed Pluto TV CEO Tom Ryan to oversee that part of the organization.

“Those guys are basically trailing everyone else as a media company,” said one agency executive. Said a second agency executive, “They were early to recognize the trend of streaming but not capitalize on swift movement in that direction, but they do have a leg up in that they already have a consumer base and experience in the subscriber streaming category.”

CBS was early among the major TV conglomerates in standing up a standalone streamer, having launched CBS All Access in October 2014 and the streaming-only subscription version of Showtime in July 2015. Those services have 17.9 million subscribers between them, as of Sept. 30. While ViacomCBS has not disclosed subscriber numbers specifically for CBS All Access, Janedis estimated the service has more than 8 million subscribers. “There’s really no one else that went off on their own early to start a direct-to-consumer streaming business that’s done as a good of a job from a standing start,” said John Janedis, managing director at research firm Wolfe Research.

However, agency executives say Viacom did not step into streaming in a meaningful way until the acquisition of free, ad-supported streaming TV platform Pluto TV in March 2019. Prior to that acquisition, Viacom’s streaming pitch centered on the shows it allowed pay-TV subscribers to stream as well as the digital videos published to its sites and platforms like YouTube. Pluto TV has since grown to reach 28.4 million monthly active users and is considered by agency and media executives to be the dominant free, ad-supported streaming TV platform. 

Pluto TV allowed ViacomCBS to broaden its streaming ad sales strategy in this year’s upfront to span its full portfolio of streaming and digital inventory through the ViacomCBS EyeQ ad platform introduction. 

“They’re moving slowly in terms of their merger and haven’t had a clear story, but the tides seem to be changing,” said the second agency executive.

Pluto TV can also serve as a gateway that converts its viewers into subscribers of Paramount+, a strategy the company has started to deploy with Showtime. But the service needs a hit show for that strategy to work. And even though ViacomCBS has announced it will stock Paramount+ with original series related to existing franchises including “The Godfather” and “SpongeBob SquarePants,” it doesn’t yet have a zeitgeist-capturing hit like “The Mandalorian” or “House of Cards.” 

“I have a hard time thinking about what the Paramount+ must-have is,” said the first agency executive. 

Then again, WarnerMedia’s HBO Max and NBCUniversal’s Peacock debuted without must-have original programming but have been able to attract subscribers. Additionally, ViacomCBS has the advantage of owning Pluto TV, which can serve as a gateway to convert viewers of that free service into subscribers of Paramount+, a strategy the company has started to deploy with Showtime. That way when the subscription-based streamer does have a hit show on its service it can use its freely available sibling to help to promote it. “It all feeds each other,” Wolk said.

The top of the second bucket?
But most importantly, ViacomCBS needs to figure out how to funnel as many pay-TV subscribers to Paramount+ as possible. It will likely fall short to some extent, but even if ViacomCBS were to convert all of those pay-TV subscribers to Paramount+, “every home you trade from linear to streaming is a bad trade because you’re going to generate less revenue and have higher costs,” said Shapiro.

Until ViacomCBS can grow its streaming operation to more than surpass its linear business and offset the lost profit, the company — like almost every other TV network group owner — risks having to undergo some level of downsizing in the interim as it transitions from being one of the biggest companies in traditional TV and move deeper into the streaming market. 

“They have a really good shot of being in the second bucket in terms of tier, the first tier being Netflix, Disney+ and Amazon,” said Janedis. “I think there’s going to be a fight for relevancy in that second bucket. I think they’re at the top of that bucket, ultimately, in terms of what this can be.”

Those variables will continue to motivate CMOs this year to reevaluate traditional ad deals and push for flexibility to be built into them. “Having fixed buys where you can’t reallocate ad dollars and change quickly is a problem,” said Anthony Rinaldi, vp of media activation at Essence. “The focus on flexibility will continue through 2021.”

At the same time, buyers will still gravitate toward lower funnel media placements that already offer the flexibility to stop spending quickly. For example, some advertisers may plan to continue to allocate more of their ad dollars to programmatic buying rather than committing a set amount to spend with a publisher, according to buyers, as doing so allows them to turn off advertising on a dime. Others may continue to spend more on performance marketing via social channels rather than traditional TV spots as doing so allows that same flexibility.

Of course, flexibility isn’t the only thing marketers are focused on going into 2021. Buyers say they’re having more conversations about measurement and attribution as CMOs are even more interested in being able to accurately prove the effectiveness of their ad dollars. With ad budgets increasingly tied to the performance of a brand, being able to prove the effectiveness of advertising on boosting sales is more important. Finding ways to align the different types of attribution — be it last-touch, multi-touch or custom analytics — is top of mind for media agencies and CMOs.

“Every CMO knows they fundamentally need to change their media plan,” said Mike Piner, svp of video and data-driven investments at Mediahub of the changes accelerated by the pandemic. CMOs typically say, “‘I know I need to change my media plan. How much [should change?] When? And how will I know it works?”

Trend watch

Direct-to-consumer brands are known for using performance marketing via platforms like Facebook and Instagram to acquire new customers and scale their brands. Many have done so by partnering with performance marketing agencies — though, some aren’t entirely forthright about having worked with agencies, as the ability to manage customer acquisition in-house can make a brand more appealing to potential buyers. Now, performance marketing agency execs are considering creating their own DTC brands to take the skills they’ve put to use for DTC founders for themselves.

“Almost every performance marketing agency I know is launching their own internal DTC brands,” said Jeromy Sonne, managing director of Moonshine Marketing. “[They’re] splitting time between client work and doing their own [brands].”

Quote of the week

“Any change to targeting does have an impact,” said Brian Wieser, GroupM’s global president of business intelligence, of the changing landscape when it comes to ad targeting. “If you can’t persuade your consumer to part with their data then maybe, as a marketer, you haven’t earned it.”