Month: March 2021

It’s odd timing, given the Covid-19 pandemic still looms and vaccine distribution has yet to reach the majority of the U.S. population. That being said, the space was designed with pandemic precautions in mind and in adherence to Covid safety guidelines, including face mask requirements, social distancing and appointments limited to one customer per hour, according to Miriam Kendall, svp of marketing at MakeSpace. 

“A lot of people think we’re crazy,” said Kendall, adding that MakeSpace found that customers wanted an in-person experience based on their feedback. “Why would you open a physical store when retail is dead? And why would you go to New York City when cities are dead? Why would you do it in a global pandemic if you’re going to do it at all? Really? But we think differently.”

MakeSpace worked with the NYC-based design studio Huxhux to develop the neon green, Instagramable pop-up space which was “designed specifically to be responsive to pandemic conditions,” according to Huxhux founder Justin Huxol.

While Huxol acknowledged that research is still ongoing for buildings to be pandemic-safe, the company “deployed some basic, yet effective, design tactics which became the core organizing concepts for this project.”

The project took about six weeks to complete and was met with positive reactions — so much so that the company is weighing a larger retail footprint in other major markets.

The DTC storage brand didn’t originally set out to become an Instagrammable pop-up shop. However, with the lockdown and work-from-home orders, more consumers are turning to online shopping.

That means marketers are trailing behind them and digital spaces like Google search, a major player in MakeSpace’s digital ad ecosystem, are becoming more crowded and more expensive. 

“It hasn’t changed our strategy, except being more aware of the competition [and] other people competing for the same ad space,” Kendall said.

This time last year, events were being canceled and delayed, devastating experiential marketing businesses, per Digiday’s previous reports. But as Covid vaccine numbers continue to climb and more consumers begin to venture outside, MakeSpace may be ahead of the game.

Lena Petersen serves as chief brand officer at MediaLink, an agency with experience translating events to the virtual world, including at the digital Consumer Electronics Show this year.

According to Petersen, MakeSpace’s move makes sense and she predicts it’s part of the first wave as experiential marketing returns post-pandemic. 

“People want to touch and feel even with masks on,” Peterson said. “I don’t think there’s any desire to forgo the live [experience].”

Experiential marketing was on the rise before the pandemic brought it to a screeching halt, Petersen said. But with vaccine rollout expected to increase exponentially by Q4 of this year, the CBO expects the industry will be back in business.

In the pandemic, brands leaned into digital activations. Last fall, Walmart moved to allocate more ad dollars to experiential marketing to pitch Walmart+. And at this year’s Super Bowl, Verizon leaned into Fortnite and digital activations. As we come out of Covid, expect to see technology and virtual experiences built into in-person events, per Petersen.

“If you don’t have some kind of engaging activity, you’re not going to have a strong event,” Petersen said. “The thing about experiential is [that’s] by design.”

It’s easy to get agencies to talk about their DE&I initiatives. It is an altogether different task to persuade them to share the numbers — actual results of their diversity efforts vis-à-vis human resources. 

Cheil Worldwide agency McKinney is determined to be more transparent. The Durham, N.C.-based shop, which works with brands like Samsung and Little Caesars, has for years made DE&I a top priority, establishing a partnership with North Carolina Central University to teach and mentor aspiring ad professionals, creating a DE&I team that encompasses members of management, and launching a program called Chroma with the goal of supporting multicultural employees and contributing to diversity education inside the company. It also became an inaugural sponsor of One School, a free portfolio program for Black creatives.

But for the very first time last year, the agency publicly revealed the gender, race and ethnic makeup of its entire workforce, in an effort to be more accountable. 

“McKinney made a true investment to promote Black talent in the industry,” said Chandra Guinn, the agency’s executive director of DE&I, a newly created position. Guinn joined McKinney last month from Duke University, where she was director of the Mary Lou Williams Center for Black Culture. In joining the company, she said, “Every industry needs to have a light shined on it. And advertising crosses industries and has the potential to reach far and wide, to support and contribute to and to elevate our consciousness around the questions of equity and justice.”

Josh Wand, founder, and CEO of New York-based ForceBrands, a recruitment agency serving brand marketers like The Coca-Cola Co. and General Mills, said more companies are seeking specialists in DE&I “to help them remodel their businesses to create a better environment,” including the recruitment of diverse professionals early in their careers. “It’s a long time coming,” he said. “Companies really need to systemically change and create an infrastructure that better allows for diversity and inclusion. It’s been proven that if you build an inclusive workforce, the probability of your having a more successful company is much higher.”

“It’s different this time,” added Jenn Gottlieb, global president of the healthcare marketing agency W2O Group. “There is [a] meaningful and positive change to fight racial inequality.” Corporations of every size have expressed solidarity with those protesting the killing of George Floyd, by donating to social justice efforts and taking greater steps to make their workplaces more inclusive, she pointed out.

W2O, with clients including Radius Health and Lupin Pharmaceuticals, has worked to imbed DE&I across all its operations, setting diversity targets and sharing metrics. Its efforts include supporting groups like the NAACP Legal Defense Fund and the LGBTQ Freedom Fund, building relationships with historically Black universities to foster the next generation of advertising professionals, and launching a DE&I client engagement strategy practice.  

Last August, another agency, New York-based Oberland, which counts The Nature Conservancy and the National Alliance on Mental Illness as clients, published a report called “Everything Changes When We Do” that highlighted how it has held itself accountable for DE&I efforts over the past two years.

After a wage gap audit, Oberland corrected pay imbalances impacting women. It also became a certified B Corporation, reserved for those companies that “meet the highest standards of verified social and environmental performance, transparency and accountability,” and registered as a Public Benefit Corporation, a classification of for-profit businesses that include in their charter one or more specific public benefits as a statement of purpose.

The agency also formalized its DE&I program, to which it committed $15,000 annually for programming and workshops. It committed to regularly conducting and publishing research to move conversations about social impact and purpose forward – including its inaugural “Purpose Forecast,” offering a blueprint for brands aiming to navigate issues of inequity. It also created Oberchange, an employee-led DE&I program designed to educate employees, create greater awareness and drive action on the heels of the #BlackLivesMatter movement.

“We believe fostering a healthy, inclusive culture has been a driver for growing our revenue in 2020, despite the pandemic and being 100% remote,” said Davianne Harris, partner and head of strategy at Oberland.

The New York-based Omnicom agency RAPP, with clients including Toyota and Pernod Ricard, also made aggressive moves to bolster diversity. Among them, it appointed three DE&I leads — one on the global level and one in each of its two largest markets, the U.S. and U.K. It also implemented KPIs for recruiting and retention among the agency leadership and introduced fireside chats, giving marginalized groups access to the c-suite (the first was held in February, in conjunction with Black History Month). The agency retooled its training practices as well, partnering with organizations like Factuality and Courageous Conversations to dive into bias in the workplace. In addition, it partnered with the career coaching group Sayge to develop BIPOC talent and threw its financial support behind associations like the National Urban League and Asian Americans Advancing Justice. 

Meanwhile, Atlanta-based agency Chemistry is working to transform good intentions into actions, partnering with Black-owned creative businesses to elevate star talent. Over the past year, the agency teamed with Cam Kirk Studios, led by photographer and entrepreneur Cam Kirk, on a program called the Ally Internship, a paid opportunity that strives to provide job opportunities for aspiring Black creatives. The agency has expanded the program, partnering with another Black-owned creative firm, October Social Media.

“We’re not going to solve all the issues with one broad stroke, but we believe if our agency attacks the problem with [an] urgency that we’ll continue to expand its reach and begin to change the fabric of the industry in Atlanta and hopefully across the nation,” said Chris Breen, chief creative officer at Chemistry. “The more the industry can unite around this common goal, the more we’ll see the creative fields reflecting the diversity we see in the world around us.”

The future of TV today

In a sense, the TV, streaming and digital video landscape today doesn’t look all that different from what many members of the industry had expected. It’s just that they didn’t expect it to look this way so soon. 

The legacy of the last year, when the coronavirus crisis overtook the world, is the rapid acceleration of the many changes already underway in the TV, streaming and digital video businesses.

The key hits:

• The rise in streaming viewership, especially on connected TVs, has narrowed the gap with traditional TV.
• That has spurred more streaming shows to go into production, TV network owners to prioritize their streaming services and the traditional TV ad market to reckon with itself.
• Short-form video platforms have stepped up, with YouTube sizing up its big-screen audience and TikTok, Snapchat and Instagram rolling out new moneymaking opportunities for media companies and creators.

All of that is to say, everything that has happened since last March has brought the future of TV closer to the present.

Streaming’s viewership surge

Let’s get this out of the way once and for all: The proverbial Year of Streaming was the 12-month period between March 2020 and March 2021. Netflix and Hulu and Roku may have been in market for more than a decade; free, ad-supported streaming TV services like Pluto TV may have been around for a handful of years; and Disney+ and Apple TV+ may have debuted in 2019. But the past 12 months have been the watershed year for the streaming market.

Case in point: On March 9, 2021 — two days before the one-year anniversary of the coronavirus crisis being declared a pandemic — Disney announced that Disney+ has topped 100 million subscribers. That eclipses the company’s own projection that it would accumulate at most 90 million subscribers by 2024 and may be the strongest signal of streaming’s widespread adoption over the last year. But it’s far from the only one. 

Not only did the subscription-based streaming market become more crowded with the launches of WarnerMedia’s HBO Max, NBCUniversal’s Peacock, Discovery’s Discovery+ and ViacomCBS’s Paramount+, but the ad-supported streaming market is also being flooded with an influx of 24/7 streaming channels on FAST services operated by everyone from Amazon and Roku to Samsung and Vizio to Comcast and ViacomCBS. 

Underscoring the point, Disney, NBCUniversal and WarnerMedia have each overhauled their organizations to put streaming at the center of their operations, potentially at the expense of their legacy businesses — as in the case of WarnerMedia’s plan to premiere Warner Bros. 2021 film slate simultaneously on HBO Max and in theaters.

Traditional TV’s decline

Amid streaming’s rise, traditional TV has continued its decline. Linear TV viewership dropped off last year even after major sports leagues like the NFL and NBA returned, and the pay-TV industry lost 6 million subscribers, according to research firm MoffettNathanson. 

Those trends were already in effect before the coronavirus crisis pushed TV’s most valuable programming, such as live sports and scripted shows, to pause production. And while that programming hiatus wouldn’t have helped traditional TV to retain a hold on audiences’ attentions, the bigger consequence of the past year is how TV networks have let their grip on their legacy linear businesses start to slip. 

In addition to the aforementioned reorganizations, some networks are prioritizing programming for their streaming services over their linear networks. Meanwhile, many networks are prioritizing advertising deals that account for their streaming and digital video inventory over linear-only ad buys. The networks’ profits still reside within their traditional TV businesses, but the companies have made clear those businesses are no longer the priority.

“[The coronavirus crisis] has just dramatically accelerated everything,” said one streaming executive. “It has taken CTV from a hobby to a real business. It’s still got a long way to go; it’s only a couple billion [dollars] in advertising versus $67 billion or whatever [spent on linear TV advertising], but the sea change is clearly happening.”

TV advertising’s breaking point

The TV ad market is finally beginning to break from tradition. TV advertising’s upfront model may have held up last year, and advertisers may have largely refrained from exercising their commitments’ newfound flexibility. But changes are coming. 

The viewership shortfalls and subscriber erosion have resulted in TV networks not reaching guarantees made to advertisers and pushing for advertisers to agree to having their ads run on the networks’ streaming and digital properties. And that is leading agency executives to call for this year’s upfront negotiations to serve as a correction for the TV ad market. They want the TV networks to acknowledge that linear viewership is on the downswing, and they acknowledge that advertisers need to become more comfortable buying networks’ streaming and digital video inventory.

“Is this the year to reset the base? We need a market correction of some sort, but it won’t happen in one fell swoop,” said one agency executive.

Production’s newfound nimbleness 

The legacy impact of the last year on production won’t be that it forced companies to learn how to produce shows, videos and ads remotely but that it has pushed them to be able to produce more programming overall. 

As stay-at-home orders and production advisories have lifted, the volume of projects in physical production has ramped up to the point where producers face more competition for shooting locations, talent and crew members. But remote production and especially post-production capabilities have remained in the mix, enabling companies to put out more projects and cut costs. For example, travel and personnel expenses can be reduced if a subject interview no longer requires sending a 20-person crew to the person’s home, but can instead be captured with one or two people working on location and others monitoring the production remotely.

The lower costs and lower barrier to production coincides with the rising number of original shows as companies try to stock their streaming services with as many exclusive series as possible in order to capture more subscribers. This emphasis on volume could be curtailing streamers’ appetites for big-budget productions, however. “One of the things we didn’t see this past year was huge, massive payments for hot projects. I wonder if the pandemic is speeding up a market correction where companies feel like they’ve been overpaying for content,” said one entertainment executive.

Social video’s maturation

The social video landscape seems to have been least affected by the last year. That’s something of a shock considering how unruly the early weeks of the pandemic were for media companies and individual video creators on platforms like YouTube, Facebook and Snapchat.

Platforms’ video viewership spiked as people were out of school and out of the office and found themselves with more free time for their feeds. But ad dollars evaporated as advertisers pulled back budgets to ensure their businesses survived the economic downturn, creating an economic dilemma for publishers and creators who had to pump out more videos to make as much money as they did pre-pandemic.

The situation has settled down since the spring, however. YouTube, Facebook and Snapchat ended 2020 on revenue high notes. And TikTok has not only survived, but thrived in the face of Instagram’s copy-and-kill attempt with Reels and former President Donald Trump’s demand for TikTok parent ByteDance to sell the mobile video app a quickly fading memory.

That isn’t to say the social video picture has remained unchanged over the past year, though. It has become more mature. 

Instagram, TikTok and Snapchat each rolled out new programs to pay publishers and creators for videos, such as Instagram’s IGTV monetization test, the TikTok Creator Fund and Snapchat’s Spotlight, respectively. All three programs indicate that the platforms recognize that they need to spend money to make money, recognizing that YouTube generated $19.8 billion in ad revenue last year in part because the Google-owned platform allows publishers and creators to directly make money from their videos. “They understand there has to be a relationship between having a broad group of content producers and the ability to drive ad dollars. Advertisers are asking the social platforms to upgrade their content offerings,” said one media executive.

Speaking of upgrades, YouTube is moving up to the big screen and into a more direct player in the streaming wars. The platform remains mobile-dominant, but an increasing share of viewership is happening on TV screens. “Around 20%-plus of our views on YouTube are on a big screen,” said a second media executive, who noted that the percentage of CTV views a year ago was around 11% to 12%. “It’s incredible if you think about it. The toughest things about this world is to change consumption and usage habits.” And to think how much —and how quickly — those habits changed in the past year.

Confessional

“Clients are tired of [TV networks] not investing in their traditional business model. All of their new investment around content, data and tech is for their future DTC model, which they’re publicly stating will be less reliant on advertising. And yet they want the folks that have been their best customers for 25, 30 years to support their old model as they invest in their new model — and they’re out of their fucking minds.”

— Agency executive

Stay tuned: TV distribution dogfights

As TV networks roll out their standalone streaming services, their linear distribution negotiations with pay-TV providers are likely to become even more combative.

During Dish’s most recent earnings call, the pay-TV provider’s chairman Charlie Ergen said that the availability of networks’ programming outside of their linear channels is becoming a major factor in distribution deals. In particular, he referred to Discovery, which launched Discovery+ in January, when he said “that you can get it on an a la carte basis, it’ll affect future negotiations.”

How exactly Discovery’s roll-out of Discovery+ — as well as the rollouts of standalone streamers from other major TV network owners NBCUniversal and ViacomCBS — will affect their pay-TV dealings remains to be seen.

While the pay-TV providers will likely use the streamers’ availability to demand that the TV networks agree to lower (or at least not raise much higher) the fees that pay-TV providers pay networks for each subscriber that receive their channels, the network owners that are rolling out the standalone streamers seem to have the advantage by virtue of owning networks that are virtually indispensable to the pay-TV providers. Discovery, for example, operates some of the most-watched cable TV networks, so a pay-TV provider would likely lose a lot of customers if those customers lost access to Food Network.

On the other hand, the networks still need that precious affiliate revenue from the pay-TV providers to pad their profits as they sink money into streaming. So for all the success Discovery+ has had so far, Discovery may have an upper hand at the negotiating table, but would not seem to be in position to be able to walk away from it altogether.

“Clearly there is one big, new variable that’s in the mix now, so all of these discussions are one notch more complex than they used to be,” said Discovery CFO Gunnar Wiedenfels at an investor conference on March 8.

Numbers don’t lie

$102 million: The narrowing gap between Disney’s ad revenue from ABC and its direct-to-consumer businesses, including Hulu.

34%: Percentage of people who subscribed to Apple TV+ in the first half of 2020 and are still paying for the streaming service.

$904 million: How much money Peacock lost in 2020.

Trend watch: Programming pipelines

After last year’s production shutdown, the market for original shows has bounced back but more so on the streaming side of the industry than traditional TV.

By the end of 2020, the number of show development deals that streamers signed had increased by 38% compared to 2019, whereas the figure for linear TV networks had dropped by 42% year over year, according to research firm Ampere Analysis.

The growing number of streaming services on the market likely fueled the streaming development figure, and it was likely further fueled by the importance of original programming to attract audiences and acquire subscribers. The declining development of linear TV programing, however, is surprising — at least on the surface.

TV networks have had their programming calendars disrupted by the production hiatus and have accumulated debts to advertisers for falling short of the networks’ viewership guarantees. So they would seem to be incentivized to ramp up development in order to refill their channels.

However, what seems to be happening is that network owners like Disney, Discovery and ViacomCBS have their own streaming services to pump with programming and are prioritizing them over their linear networks, according to an executive at a company that produces shows for traditional TV and streaming.

What we’ve covered

Advertisers’ linear TV ad dollars don’t carry as much clout:

• TV networks are pushing for advertisers to let their ads run on the networks’ streaming and digital video inventory.
• However, price discrepancies and programming uncertainties are leading advertisers to push back.

Read more about TV advertising here.

PopSugar Fitness expands health and wellness coverage after success with at-home workout videos:

• PopSugar is expanding its broader health and wellness content to complement its core fitness content.
• The publisher has hired Jennifer Fields as its deputy editor of fitness.

Read more about PopSugar Fitness here.

What we’re reading

Amazon wants the NFL all to itself:
Amazon is negotiating a deal with the NFL to pay roughly $1 billion to (almost) exclusively distribute Thursday Night Football games, according to CNBC. The deal would kick in in 2023, but the two sides are still sorting out whether the NFL would additionally air the games on its NFL Network. What’s most notable about this deal is that Amazon would be producing the games’ broadcasts, as opposed to airing a broadcast produced by a TV network. That change appears to be how Amazon would be in position to secure some exclusivity and to show how serious the e-commerce giant is about getting more live sports rights.

Facebook doesn’t want to pay for sports:
Facebook is sitting out this round of NFL rights negotiations because paying for live sports programming doesn’t fit its business model, according to an op-ed that Facebook’s director of sports league and media partnerships Rob Shaw wrote for Sportico. Shaw seems to be trying to make a case for sports league streaming live games on the social network for free because a lot of people are on Facebook, the leagues or rights holders like ESPN could use the free broadcasts to convert viewers into ticket buyers or subscribers and eventually there will be money to be made. But his statements really boil down to this: Facebook doesn’t think it should have to pay for live sports programming.

YouTube stars are starting up their own streamers:
The cycle of creators creating their own platforms to reduce their reliance on YouTube has returned, according to the BBC. Creators like Linus Sebastian and companies like Corridor Digital are not looking to directly rival YouTube but rather create a hub for their most-ardent (and therefore most lucrative) audiences who may be more willing to pay to directly support their favorite creators.

In 2020, Shopify’s app store nearly doubled in size, from 3,700 apps to more than 6,000. By contrast, a competitor like Magento has an app store of 3,819 apps (known as extensions); BigCommerce has about 900 apps.

“There are a lot of verticals that help along the merchant journey — marketing, customer service help, shipping and fulfillment,” said Fatima Yusuf, Shopify’s director of ecosystem partnerships. “Each one is a billion-dollar industry on its own.”

And those verticals are growing in Shopify’s app store. Several Shopify partners have even become lucrative businesses in their own right. Last November, Klaviyo, an email marketing company, raised $200 million in Series C funding. Shippo, an e-commerce shipping company, raised another $45 million in Series D funding in February.

Shopify’s merchants are taking advantage of the growth too. The typical Shopify merchant uses about six Shopify apps to run their business, Yusuf said, the same as the year before. And while Yusuf did not provide any specifics about the overall financial benefit of the app store to Shopify itself — the company is clearly invested in nurturing it.

“Because commerce accelerated so much last year, so did the need for innovation since everyone was trying to get online quickly,” she said.

Last year, Shopify app partners earned more than $230 million. Shopify has a revenue-sharing agreement with app developers, with Shopify taking 20%. Last year’s app partner earnings were the highest single-year earnings to date and up from $140 million in 2019, according to Shopify SEC filings. Shopify reported $2.9 billion in revenue for 2020.

Shopify also reported having 1.7 million merchants using its platform at the end of 2020, compared to BigCommerce’s 60,000 merchants, or Magento’s more than 250,000 merchants.

“The number of Shopify merchants far outpaces its competitors, so there’s a larger opportunity there for app developers,” said Paul Briggs, a senior analyst at eMarketer who covers Shopify.

Shopify has worked to make the connection between merchants and developers easy. The company offers Fundamentals courses for new app developers, extensive documentation on API use and integration, developer forums, and the Shopify Unite conference. In the pandemic, Shopify has also held virtual “Town Halls” for developers. 

“The Shopify ecosystem stands out because of its strong community feel,” said Fiona Stevens, head of marketing at Loyalty Lion, a customer loyalty and engagement platform. “These events and forums make it easy to share notes and learn from other developers, and see opportunities for integrations.”

“Compared to other e-commerce platforms, Shopify made their API kind of childproof,” said Dennis Hegstad, ceo of Liverecover, an SMS abandoned cart recovery app. “Developers have what they need, and it’s not too much.”

Those critical of Shopify’s offerings say, though, that minor improvements could be made, including allowing developers to see in the API how many people used a coupon code. Developers also pay the 20% gross revenue tax once their app is part of the app store and must use the Shopify billing API. Shopify currently pays out developers via Paypal.

“Paying the 20% helps you be seen in the store, and I think it’s reasonable for the traffic,” said Mark Geller, coo and co-founder of Happy Returns. The company services large Shopify+ retailers, like Rothy’s, but was added as a public app for small and medium businesses last November. 

“It was a big lift, but getting approved actually helped us to update our pricing and services,” Geller said. “We now have four times as many merchants using us, compared to last October.”

Putting in the work upfront to build those partner relationships has good returns for the company. “I think Shopify has made clear that its app ecosystem is core to its success,” said Rich Gardner, vp of partnerships at Klaviyo, an email and SMS marketing platform. “They see their app partners as part of what makes their platform special for merchants.”