Month: September 2021

Yasgar, a practice lead for marketing and agency strategy at Prohaska Consulting, was being pestered in that way sought-after people will find familiar: Getting multiple emails a week, reminding her of the date, just checking in.

This felt unusual. The cloud side of Google’s business had previously shown little interest in agencies or marketers in general. “Google is actively courting the marketers [for its cloud business],” Yasgar said.

As the media industry begins to turn itself upside down before Google ends its support of third-party cookies, large cloud tech companies including Google, Amazon and Microsoft are using the upheaval as an opportunity to try and grow their cloud businesses.

In taking third-party cookies out of digital advertising’s equation, Google has forced advertisers and publishers alike to focus on their own first-party data to an unprecedented degree. Without cookies to fall back on for targeting or measurement, they will need to bring more data into more clean rooms for matching. As the importance of e-commerce continues to swell, marketers will need to do more to tie their ad data to other kinds of data typically walled off in different corners of their organizations. And as advertisers, as well as publishers, reshuffle their always-on ad spending strategies, so will the need to use artificial intelligence to spot pattern growths too.

Signs of these growing needs are already visible. For example, searches for customer data platform software more than doubled last year, according to data from the business software marketplace G2.

But at the most developed end of the spectrum, most of these needs can be solved by cloud infrastructure and computing services. And its largest purveyors are ready to pounce. 

“As you get into the billions and above in revenue, it’s becoming one of the highest priorities,” said David Novak, the co-chair of the data and marketing practice at Prophet. Those largest firms, Novak said, are “driving a very tech-centric view of how to gain customer understanding that they didn’t have a few years ago.

“They [marketers] never had to understand unknown, or anonymous people. They were just buying return on ad spend through an agency.” 

Today, Novak and Yasgar see large organizations instead focused on trying to drive personalized interactions with their customers across many disparate surfaces; sharing data not just across their own different parts internally but with growing numbers of strategic partners externally.

All of that makes the need for strong cloud infrastructure more important.

“That need for the flexibility [of data], and the tech that CMOs need to deal with the identity graphs, cloud computing supports all of it,” Yasgar said. “All the infrastructure that’s needed, what both sides of the coin need, is absolutely set to grow.”

While the cloud providers are most interested in the largest marketers and media companies at the moment, this shift seems likely to spread to smaller publishers too, some, such as Amazon, are positioning themselves in a way that could hook even mid- and long-tail publishers into their clouds. 

A different kind of scale

In the great cloud battle, media would be a minor theater of war. Cloud computing is already a $100 billion business for Amazon, Google and Microsoft combined, and it is growing by more than $30 billion annually, said Timothy K. Horan, a cloud and communications analyst at Oppenheimer.

Securing the largest advertisers and publishers might amount to a single-digit percentage of their cloud revenues. “Maybe it’s hundreds of millions of revenue in a couple years,” Horan said. “They’re always pursuing these kinds of things, but it’s a minor product [in that context].”

But even if each individual marketer is small potatoes to the cloud purveyors themselves, committing to one kind of infrastructure or another represents a profound decision for most of their customers. 

“We’re talking about something that is incredibly complex,” Yasgar said. “There’s always that decision of, ‘Do I go all in on one vendor, or do I go best in class and match in my stack?’”

Winner(s) take all?

Viewed from one angle, all of that complexity, as well as the significant amount of time and investment needed to commit to a cloud provider and strategy, could create the kind of oligopoly that currently rules the digital advertising market: If marketers have to work more closely with one another, the incentive to use shared cloud infrastructure grows strong enough that it may force the largest marketers and publishers and agencies into the hands of Google, Amazon and Microsoft, freezing out independent services such as Snowflake. 

But others say that complexity may have the opposite effect, essentially buying time for competitors, which have made separate in-roads with marketers, to develop their cloud offerings to better suit these larger needs. 

“It could give them [Adobe and Salesforce] a dark horse position,” Novak said. “They are already working with marketers, hand in hand.” 

A cloud for the long tail?

For now, smaller marketers and publishers are mostly relying on agencies or less sophisticated software to handle these problems. But if you squint while looking at the moves that cloud providers such as Amazon are making, it’s possible to see them as part of the foundation of a much larger cloud-based services business for them. 

The company’s publisher services division, APS, already provides a server-side tool that allows them to manage ad requests. It is currently building an ad tech services marketplace inside APS as well, which would allow publishers to run many of the revenue-boosting (but often site-slowing) services on Amazon servers, rather than theirs. 

That basket of services could represent the strong foundation of a product that most publishers would have to at least consider subscribing to, sources say. It could sweeten the deal further by using its dominant market position to secure preferential pricing for APS customers. 

Amazon may not wind up building out that infrastructure to target smaller publishers. But the shadow of Amazon’s cloud ambitions already color the conversations it has, say sources at multiple publishers who work with Amazon, who asked not to be identified while discussing a key business partner.

“All they care about is their cloud business,” one said.

Mail Privacy Protection is expected to scramble many of the ways that marketers use email — one executive called it a “nail in the coffin” for certain kinds of ad selling — and it will also have profound effects on how publishers use email too, not just to engage readers but to attract and retain subscribers to paid newsletters.

Publishers hoping just to maintain their current understanding of their audiences will be forced to make some tough choices: Do they shift to engagement as a primary metric, and risk making their newsletters more clickbait-y? Do they gather more information from readers when they sign up — adding friction to that process? Do they lean harder into subscription revenue to make up for potentially lost ad revenue, even though a lack of open rates will make it harder to gauge how engaged their subscribers are at crucial moments?

“The first reaction is, ‘Try not to freak out,’” said Noah Keil, evp of growth at Group Nine Media, which owns brands including Thrillist, NowThis and The Dodo. “It is going to require changes.” 

While email opens are not the sole metric available to publishers and their audience development teams, they are an important one on a shortlist.  “Email is already pretty limited,” said Tyler Denk, the CEO of newsletter platform Beehiiv. “Clickthrough, open and unsubscribe. if you take away an accurate picture of opens, that’s one of three.”

How much less accurate open rates will become is unclear. While many publishers know that around half of their audience reads their content from an Apple device, the percentage that use Apple Mail is smaller. Only about 12% of BDG’s audience uses Apple Mail, even though more than half its audience uses iOS devices, said Wesley Bonner, vp of marketing and audience development at BDG, which owns editorial brands including Gawker, Romper, Mic and Nylon.

“It’s important to keep reminding everybody that this is an opt-in option,” Bonner added. “We’re not counting on 100% of those users opting in.”

But if open rates fall out of use, either internally among audience teams or externally with advertisers, publishers have few good options for replacing that picture of engagement.

On the advertising side, the shift may force publishers to change how they monetize their audiences. 

“Without accurate opens moving forward, I’d assume most newsletters will charge either a flat rate of CPM based on list size or set up a CPC model,” Denk said. “Or perhaps some hybrid of flat-rate + CPC.”

On the audience side, they will have to make different choices. 

“The biggest thing is heavily focusing on in-email engagement,” Keil said. “We do have a decent amount of surveying we run through our emails, but we’ll revisit whether we should be increasing the frequency of it.”

Apple’s move comes in the middle of a years-long resurgence for newsletters for publishers. Newsletter platforms including Substack and Revue have attracted both venture capital and acquisition interest from large tech platforms; earlier this week, the technology company Intuit acquired Mailchimp for $12 billion. 

Down at the individual publisher level, email’s strategic value has continued to grow too, not just as a source of audience and ad revenue but a prospective subscription channel as well. Earlier this month, Vox Media acquired Hot Pod, a newsletter about the podcast industry that costs $7 per month, and handed its reins to a senior reporter. 

Those with more developed consumer revenue are continuing to invest in newsletters too. The New York Times announced plans in August to launch a suite of subscriber-exclusive newsletters, many written by its most popular columnists.

Lockard & Wechsler Direct, a 30-year-old agency that specializes in buying and planing performance marketing campaigns for clients including Burlington stores and Tommy Bahama, is one of several shops trying to pick their way through a more complicated TV marketplace. Digiday spoke with Dick Wechsler, founder and CEO, as well as Ben Speight, executive vp of client services, who explained the opportunities and challenges. 

The following interview was edited for clarity and space.

You’re expanding into the connected TV space. What’s your approach? And are you attracting new clients from it? 

Speight: Efficiency is everything relative to DTC advertising — you have to get your targeting right, but you also have to get your pricing right too. In the linear TV environment, it’s a lot easier. We’ve been trying to leverage the hundreds of millions [of dollars] we spend there, and move it over to the OTT side to secure better pricing. There’s not a significant amount of ad inventory there. If you’re talking $15-20 CPMs, that’s good, but when you’re talking $50-60 CPMs, that has a major outcome on your campaign.

The tracking is what we’re really trying to crack. Everyone has some sort of deterministic model. In our world, we have clients who sell real products. They want tangible transactions, tangible ROI. In the world of privacy, it becomes hard — you can’t do transaction level [data]. We still are able to because we use IP addresses, which isn’t in the third-party world yet. We’re still able to make meaningful identification on transactions for our clients. It’s a big differentiator.

We just came out of a bonkers upfront marketplace. Did you get caught in a squeeze? 

Wechsler: We’re pitched in a battle, a tug of war with the broadcasters/programmers. Their model is driven by available impressions; that’s how they commoditize their world. And when impressions contract, they either have to push pricing or face a reduction in revenue. Or they add minutes to the experience, which drives viewers away and is a real death spiral. It’s a real challenge. 

But when they stream, they reduce the ad load. Obviously someone there is saying consumers don’t want that experience. As a result, there are fewer impressions and they charge a premium for it. The premium may not look extraordinary if you are Ford where you’re already paying a huge CPM in linear. But if you’re a performance marketer, the levels you have to pay in streaming, you go in saying I don’t see how this is going to work — because you’re paying 3, 4, 5 times as much. And the response isn’t any greater. 

Speight: The engagement is better, but the overall net response isn’t as great.

So connected TV is harder to buy because of the scarcity? 

Wechsler: In the world today — and NBCU is the best example I can think of — if you want to buy NBC or MSNBC or CNBC, they insist you put 30 percent of your dollars down into streaming. They won’t sell you the inventory unless you add the streaming in. Because they have a scarcity issue. They don’t have enough impressions to go around. 

My experience is, when you take such a self-serving position of that nature because your back’s against the wall, something breaks. What’s happening in the network sales organizations is, they’re no longer selling through different books of business. They’ve got old, experienced linear sales reps, many of whom we’ve known for decades, who are now selling streaming. So we’re now able to go in and rely on those relationships and buy on a network-by-network basis at really good rates.

How do you make connected TV work for you if you get the right pricing? 

Wechsler: My read on it is the future of connected TV is direct mail. I know that’s hard to understand, but direct mail was all based on sophisticated list compilation. You could get all sorts of selects and pool them together and come up with really powerful lists. 

Broadcast is really challenged, especially in the connected TV world. You’re living in 15- and 30-second units, and it’s really hard to communicate a persuasive message in that length. So you have to think of it as, that unit has become the outside envelope of a direct mail package. It has to capture the attention of the respondent.

Then the respondent goes to the URL and the URL becomes the package. That’s when it’s most effective. The challenge is, every step you take from the initial contact causes a deterioration in the response. Because sub-consciously, the further the consumer gets from the impulse, the less likely they are to respond.