Month: August 2021

This spectrum of confidence was on full display during the latest earnings season. On the one hand, some of the world’s largest advertisers in Coca-Cola, Netflix and Kimberly Clark talked up plans to nudge ad spending toward levels similar to 2019 for the remainder of the year. On the other hand, Nestlé noted that while ad spending would surpass 2020 levels, it would stop short of 2019.

In many ways, the lack of consensus on the future is to be expected. Yes, everyone is living through the same pandemic but their experiences through it differ. And it’s this unevenness that’s making it harder for marketers to get a read on how the recovery will play out.

In fact, it’s hard to know where to even start. 

Consumers emerging from the pandemic are in the mood to light some money on fire — and increasingly they want to do this online. L’Oréal’s e-commerce sales, for example, rose 29.2% over the latest quarter and accounted for 27.3% of company-wide sales. This compared with 25% over the same period last year. But how long can this last if there’s a chance that government stimulus packages dry up or, worse, many of those people slip into a crisis of long-term unemployment that’s looming over markets like the U.K. and the U.S? Not to mention the fact that office reentry for many businesses is proving harder than last year’s sudden exit. There’s also the potential that vaccine-resistant variants of the coronavirus cause a stop-start economy. The global rebound is proving robust but chaotic. 

What is certain, however, is inflation. So much so that the prospect of sustained price hikes cast a long shadow over the earnings season. CEOs at WPP, Omnicom and IPG were all asked to give their take on whether the current inflationary spike is one-off or formative. While the overriding response was it’s something they’re watching closely, the jury is out on whether this spike filters through to media markets. Reading between the lines, agency bosses seem to believe the media markets are in a good spot given where things were a year ago. Indeed, ad spending tends to rise during an inflationary period since advertisers are generating more revenue. Often they allocate media dollars based on share-of-revenue models. 

“For example, looking at large companies who reported second-quarter earnings such as PepsiCo, JP Morgan Chase, Wells Fargo, Bank of America and Citigroup, we saw growth in spending on advertising or marketing of more than 30% on a year-over-year basis,” wrote Brian Wieser, GroupM’s president of business intelligence in a weekly report. “While the numbers were up against soft comparables, rapid levels of growth in media spending nonetheless have inflationary consequences.”

One of those consequences is a rise in the cost of online ads. The price of those ads swelled in the second quarter, per data from performance agency Tinuiti: The average CPM on Facebook (excluding Instagram, Messenger and Audience Network) rose 44% over the same period last year; Similarly, ​​the cost of CPMs on YouTube was up 35% while CPMs on Pinterest spiked a whopping 166%. ​​

“In a recession, companies cut back, often radically, on their advertising expenditures; it’s an easy budget to cut and often cut first,” said John Rosen, an economics professor at the University of New Haven. “Then, when things bounce back, as they are now, every company wants to rush in and spend lots of money right [away] so as to (often quite literally) avoid being left behind in the rush to capitalize on the good times.”

It’s worth noting that last year was massively deflationary over the same period and offered value for money. Spending this year should exceed 2019 levels so it is still inflationary versus that year, which is where advertisers, media owners and agencies should be focusing their attention. In other words, it appears that advertisers are entering a period of extended favorable economic conditions and at least some mild inflation. It also helps to explain why agency bosses aren’t too bothered about the inflation in media prices since so much is spent online where there’s an abundance of inventory. WPP went so far as to raise its revenue forecast for the year from mid-single digits to a growth range of 9% to 10% on the back of earnings from a second quarter that saw it post a 19% jump in underlying revenue, the fastest rate of growth the holding company has ever posted. 

That said, a lot of the outcome will depend on the pandemic and how governments maneuver economies. After all, inflation isn’t necessarily a bad thing for the ad industry – but it can turn nasty fast. Just last week, the Bank of England warned inflation will hit 4% this year as it set in motion plans to ensure the subsequent rise in costs of living didn’t derail the economic recovery.

“It’s all a matter of within limits — if we wind up going into stagflation, it’s going to hurt everybody in the economy. And if you hurt everybody in the economy, you sure hurt the ad industry,” said Mark Penn, CEO of agency holding company Stagwell Group. “We’re one of the first things people pull back on in corporations. So between the pandemic and inflation, there’s a couple of danger spots. But today, — right now – the marketing industry is seeing a very strong resurgence coming out of the pandemic. And people are saying there’s a lot of consumer money up for grabs, and I want to get my share and get out marketing. That’s what we’re seeing across the board.”

Broadcasters across Europe saw similar shifts in the second quarter. Four of the largest ones in Spain-based Mediaset Espana, TF1 and M6 and ITV in the U.K. saw ad revenue more or less return to 2019 levels over the period. It’s a testament to how quickly media dollars are flowing back into the market — and that the decline in viewing that many of those broadcasters grappled with last year has started to ease. 

“Advertising rates in the U.K. are essentially determined by demand and supply,” said David Mulrenan, head of investment at Zenith. “Outside of TV, inflation is relatively low in the U.K. at the moment. However, on TV depending on the audience, we could well see inflation rates of up to 35% to 40%.”

Still, marketers can’t afford to be taken in on the numbers alone. Otherwise they could end up reducing the effectiveness of their ads. If TV is twice as effective at driving short-term returns as out-of-home advertising, for example, then if the price of the former goes up 10%, it shouldn’t be a problem. Ultimately, it is about effectiveness rather than inflation.

“Advertisers will need to be creative in managing inflation by shifting budgets from high value to less costly media,” said Angelica Gianchandani, professor of brand marketing at the University of New Haven. “With more robust analytics and AI, technology brands will continue to analyze the data to optimize media buys. However, inflation will always persist and be a reality and high value will provide long-term strength and brand building.”

A survey by the Partnership for New York City, a nonprofit group comprised of CEOs across industries, shows that 71% of employers plan to adopt a hybrid model; of those employers, 63% will require employees to be in the office just three days per week.

Those desires — of employees and employers — present logistical challenges.

San Francisco-based investment management software specialist, Juniper Square has reimagined its workplace into three hubs, with physical offices in San Francisco and Austin, and a third hub in the cloud  — a central online space where remote workers share work and collaborate.

Alex Robinson, CEO and co-founder, Juniper Square serves as the general manager of its cloud hub. He believes it is critical for leaders to rethink their cultural and work norms to be digital-first. “By making digital the default mode, you level the playing field for employees and ensure that everyone has the same access to information, regardless of location.”

Juniper Square is being rigorous about documenting and re-establishing those norms as many employees return to the office. For example, it has established a standard for collaboration hours — 9 a.m. to 3 p.m. Pacific time — so everyone has a shared understanding of when meetings will happen. “We’ve set expectations that all meetings need to include a Zoom invite and can be attended virtually,” added Robinson.

Kissflow, a workflow software company with offices in India, the U.S. and the Middle East, gathered extensive feedback from employees before developing its “Remote+” hybrid model. Teams can choose one week a month to go into the office and work from anywhere for the remainder. “We have rolled out our digital workplace platform which supports both synchronous and asynchronous communication so that no one feels left out of discussions,” said Suresh Sambandam, CEO, Kissflow.

The company uses its platform in conjunction with Google Workspace. “The digital workplace platform helps keep the work in context so that we can have conversations and manage tasks from the same place we do the rest of our work,” said Sambandam. “This also means no-one is left out.”

Being a good communicator is an essential skill as a leader, and embracing some of the plethora of digital tools can help to connect with a distributed workforce. “It’s important you ensure everyone is always in the loop with what’s going on – and that they are ok,” said Laura Weldon, creative director at Studio.LWD, based near Blackpool in the North West of England.

The company uses a mix of tools to schedule projects, including Toggl Plan and Trello, which allow everyone to check the status of a project, along with Slack for team communication and Zoom for the weekly meetings. 

Digital is also key to replicating informal communication — the water-cooler chats and team building that happens organically in an office environment. Berry encourages leaders to use digital to “create moments for serendipitous communication and discussion between members of different teams” in order to avoid cementing pre-existing silos.

Kissflow achieves informal connections through the creation of KAFE, a virtual cafeteria which is ‘always on’ for employees to hang out and have casual conversations.

But while a digital-first mindset can aid effective leadership in a hybrid workplace, there are also potential pitfalls of which to be aware. James Berry, director of the University College London Online MBA and an assistant professor in creativity and innovation, said to maximize creative collaboration over Zoom calls, leaders should put the right foundations in place.

“It is most likely to happen if team members already have connections to each other that allow them to follow each other’s chain of thought with the minimum amount of extra effort possible. In-person interaction can help ensure that these connections are formed, so they’re a must for teams that want to get the most out of their people in the long run.”

He added that while digital meetings can be productive, leaders need to make sure that teams plan ahead. “Creative employees should be intentional about their preparation for meetings, as well as their active contributions to them. This will mean that the ideas and information shared in brainstorms or other meetings will be relevant, timely, and productive.”

It is also important to be mindful of ‘Zoom fatigue’. Karen Meager, organisational psychologist and co-founder of Monkey Puzzle Training and Consultancy in Bristol, South West England believes varying the methods of communication can prevent this. “Instead of hours of video calling, intersperse long conferences with shorter voice calls or quick direct messages. We’ve noticed some organizations encouraging ‘video free Fridays’ to give everyone a break from the rigors of screen time.” 

Finally, when managing a distributed team, it is important to facilitate engagement within virtual spaces. “Make sure that, as a leader, you are active on group messaging, setting up virtual events and entering conversations with enthusiasm,” said Meager.

In other words, digital is invaluable in a hybrid workplace but leading by example remains just as important as it was before the term ‘Covid-19’ had ever been uttered.

This is the first installment of a two-part feature on how leaders need to prepare for hybrid workplaces.

3 Questions with Timothy Armoo, CEO, Fanbytes

As CEO of an agency operating in an industry that went through a lot of growth at the height of the pandemic, how have you had to become better at delegation?

I got better at delegating the problem and not the task. I see a lot of people who delegate the task and not the problem. This is very important because when you can’t see the root problem — and this can be particularly challenging with remote working — you can’t solve it.

Did the delegation help you manage stress? Company leaders face pressure and subsequently burnout just as their employees do. What else have you done to manage those stresses?

As Founder/CEO, that work-life balance where you can completely switch off work and do other things isn’t realistic. I think it’s a silly way to try and manage stress because the honest truth is you are always thinking about work. The pandemic helped me to be more comfortable with this. Before the pandemic, it was easier to associate work with the office and not working with not being in the office. My reality has always been that the lines are more blurry than that, and the pandemic helped me see that. It’s important to realize as CEO you might never fully turn off, which is fine. The crucial thing for me with managing stress is not feeling guilty about it.

How have the experiences you and your colleagues have gone through over the past 18 months influenced the way you run the company, from who you hire to how often you’re all in the office?

It has made us want to hire more senior people who can own and drive the various divisions in the business. We are growing fast, so putting in place a strong senior leadership team has been a big priority. A big focus for them is nurturing and empowering their respective teams, and working effectively with each other so we are one big, united squad. We are about to bring on a head of people who will join our leadership team and work closely with them to ensure we are achieving this across the business. We are about to move into our brand-new London HQ which is pretty exciting. We know going back to the office won’t be a one-size-fits-all approach, and we fully trust our people to do their work wherever is best for them. We’ve learned a lot from each other about remote work and working from home. We don’t want to forget these learnings, but use them to our advantage to ensure that we’re all feeling healthy, productive and able to do our best work. Our intention is for the new office to be a space of collaboration and connection, for productive and energizing work. — Digiday senior brands editor Seb Joseph.

By the numbers

• 49 days is the median time it took among 400,000 applicants on LinkedIn to be hired for engineering roles once they started looking, from June 2020 to March 2021.
  [Source of data: study by LinkedIn’s Economic Graph team]
• Among 500 college students in North America and Europe, 83% believe a hybrid model of in-person and virtual classrom should the future of learning.
  [Source of data: Splashtop survey]

What else we’ve covered

• The timeline media companies have set to bring employees back into the office is in flux at the moment, given the threat of the spreading Delta variant of the COVID-19 virus. We took a look at how publishers are reacting.

• Employees told one media company that they felt more productive working from home. It’s left execs wondering what to do with lingering office space in Pennsylvania.
• Marketers are trying to stay flexible with their messaging and planning as the delta variant poses another hurdle to returning to normal.