Month: March 2022

“We can’t shove 10 to 20 minutes of ads in… and function just on all dynamic, pre-produced ads,” said Dan Granger, CEO and founder of audio ad agency Oxford Road. “A lot more spots mean they will be worth a lot less money,” he added. “If you have double-digit minutes allocated per hour [of ad breaks]… the magic is gone.”

The benefits of dynamically-inserted ads explain why this shift is accelerating

Advertisers, buyers and large media networks like that dynamically-inserted ads make the process automated, quicker and easier — and usually cheaper. It allows for one creative spot to be inserted across multiple shows. With targeting capabilities maturing in the podcast space, it also means advertisers have more control over the audience and geographic regions they want to reach. Pre-recorded spots also mean they don’t have to go through a lengthy approval process with a podcast host over an ad or worry about what a podcast host might say during the live read of the ad spot they paid for.

iHeart adopted a fully dynamic ad-insertion model after it acquired How Stuff Works in 2018 — but the ads dynamically inserted are pre-recorded and read by podcast hosts. Conal Byrne, CEO of iHeartMedia Digital Audio Group, attributes iHeart’s continued podcast revenue growth to this shift. In 2021, iHeart’s podcast revenue totaled $252.6 million, a 148% increase compared to 2020.

“Burned-in ads” — as Byrne called the non-dynamically-inserted ads that are embedded in the podcast file and part of the episode’s content — have “tons of limitations… You cannot audience-target, you cannot refresh creative, you cannot test and learn.” 

All of the ads at Acast, a podcast monetization and hosting platform, are also delivered dynamically — the company doesn’t sell baked-in ads (the smaller podcasts tend to have pre-produced ads, while the larger ones are more likely to have host-read sponsorships). At audio company Tenderfoot TV, it’s a mix: Most ads are inserted dynamically, while some are burned-in, depending on the partner and project, said Tracy Kaplan, operations & partnerships at Tenderfoot. And QCODE, a podcast network and production company, sells primarily presenting brand sponsorship spots that can be baked into content, as well as “spots and dots” ads that are dynamically placed, said chief strategy officer Steve Wilson. Most of the clients Oxford Road are working with are spending their ad budgets for podcasts in dynamically inserted, host-read ads, said Granger.

Agencies worry about impact of automation

But agencies and podcast monetization platforms are wary of the growing desire for programmatic ad buying in podcasts, after seeing what it did to video and digital display, said  Elli Dimitroulakos, head of automation, Americas at Acast. Automation makes pre-produced ads easier to buy, with the potential to drive down the price of CPMs and lead to higher ad loads (and poor quality ads). 

“We see this dichotomy and struggle happening,” said Hilary Ross, vp of podcast media at agency Veritone One. While she believes there’s a place for all these ad types in the podcast ecosystem, she described host-read ads as the “gold standard.” Ross acknowledged that “not all pre-produced ads are created equal” and “smoothing out” a “seamless integration” from a pre-produced ad to the content of a podcast is not always done well by networks and publishers — as opposed to host read ads which by nature of having the same voice can be less jarring to a listener.

Stephen Smyk, svp of podcast and influencer marketing at Veritone One, warned that “30-second scripted ads” could mean the podcast medium will mirror the higher ad loads in radio. Smyk admitted that the changing tide is also tough on folks who have been in this business for a while and have formed ties with podcasters and advertisers. “We’ve spent a long time building relationships. We don’t want to go to a DSP and click a button,” he said.

As the industry leans into pre-produced ads, Oxford Road’s Granger is concerned about the death of the host-read, live-read ad, which he believes is the most valuable form of podcast advertising and is dwindling in favor (according to an IAB report, those ads dipped to 33% of podcast ad revenue in 2020, from 52% in 2019). A Nielsen study from 2020 found host-read podcast ads have an average brand recall of 71%, compared with 62% for non-host-read podcast ads. “Save the live read,” he said.

It’s a debate that won’t seem to die down, sparking lively conversations at last week’s Hot Pod Summit at On Air Fest in New York City and at the IAB’s Podcast Upfront in September.

Carter Brokaw, president of digital revenue of iHeartMedia Digital Audio Group, noted they have not seen CPMs go down, even when ad loads are increased for certain shows. Average time spent listening, and skippage rate on podcast ads haven’t changed, Byrne added (the latter remains around 10-15%, he said). He believes if ad loads get too heavy in the podcast industry, “marketing, creators, audiences will tell us immediately… engagement and time spent will decrease and we will pull back.”

One thing everyone seems to be able to agree on — not overloading a medium notoriously light in advertising.

“If host-reads and live reads have driven return on ad spend and then in comes all these hundreds of thousands of ads that are prerecorded and aren’t as intimate, it could be a potential threat,” Acast’s Dimitroulakos said. “But there’s a happy medium in this that allows the content side to make money, fully monetize, reach more users, become more discoverable and if you’re not just focused on sell-through rates like publishers were in the display world, you can achieve those goals and not ruin the experience for everyone.”

Subscriptions could support content that is tricky to attract advertisers

Amid the debate comes the growing prevalence of subscription podcast offerings. QCODE, Tenderfoot, Acast and Wondery all launched subscriptions services last year — as did the big players like Apple and Spotify.

QCode subscriptions doubled since September. The QCODE+ service now has 20 shows. Wondery+ launched with about 40 shows, and now has over 200 as part of its subscription service. Tenderfoot+, which has eight shows behind its paywall, launched its first daily podcast this week. 

All of these subscription offerings provide an ad-free listening experience to paying listeners. But it also is a way for podcast creators to monetize content that might be less appealing to advertisers.

At Acast, smaller and independent podcasters can use the subscription as a main source of revenue “if they didn’t have the scale for larger sponsorships,” such as religious podcasts, said Lauren Tharp, product manager at Acast. It can also help monetize a podcast that creators want to publish and don’t want to wait around for the next ad cycle, such as Tenderfoot’s new daily show, This Day in Crime. “We were ready to go… the ad market, they just need longer lead times,” said Kaplan.

Despite the increase of options for listeners to enjoy podcasts without advertising, iHeart — arguably one of the largest podcast publishers — is bullish on keeping its podcast content free. And there’s data to back up that decision: a 2021 survey by YouGov and Variety found just 16% of respondents say it is either “very” or “somewhat” likely they will pay or donate money to access a podcast in the next 12 months. 

On the one hand, subscription growth is slowing as people return to normal activities outside the home. On the other hand, competition for ad dollars among streaming services is intensifying as more people reach the limit on how many ad-free services they can pay for.

“I took the role because it wasn’t just about soft marketing, it was about the commercial side of the business too,” said Oki, who joined Rakuten earlier this year. “CMOs are working at a time when we have to be more conscious of the financial value we can bring to their businesses.”

Nowhere is this point clearer than in the narratives dominating the earnings season that’s just closed. 

A year ago CEOs were focused on the pandemic — the word Covid-19 repeated countless times by them to explain to analysts performance and forecasts. 

Now, the recurring word is “headwinds” — Covid-19 being one of many. If it wasn’t macroeconomic issues, it was the need to continue contorting their businesses around an ever-fragmenting media landscape. CMOs are having to do more as a result. And in doing so work across more disparate parts of their businesses than ever before. 

“We’re relied on more to do more of what the sales operation has done in the past,” said ​​Jennifer Smith, CMO at video player Brightcove. “And we’re expected to work right across product, sales and customer divisions to be able to deliver insight on purchasing habits and past trends and future predictions. I spend a lot of my time looking at the past to predict what the next quarter is going to look like.”

CMOs are no stranger to this sort of reinvention. Their role seems to shift every few years. In fact, it was only 2017 when there was talk of whether the role was even needed after Coca-Cola replaced it with a chief growth officer. Two years later the CMO was reinstated. Regardless of the moniker, the seemingly never ending stream of anxiety-inducing events to eclipse the world since then has proven why businesses need someone who innately understands how those products and services fit in society.

Recent events in Eastern Europe bring those shifts into sharp focus. 

Russia’s invasion of Ukraine triggered a chain reaction of geopolitical and economical events. Naturally, CMOs are watching the situation unfold with concern. It’s too early to predict the human toll, though the short-term implications are clear: Sanctions will dampen, not suppress inflation in living costs, while supply chain blockages will curb growth. 

Unsurprisingly, CMOs are weighing up whether to keep advertising. 

Some of them are excluding news and politics content as a whole category during this time so as not to align with the wrong coverage. Others are asking for exposure reports to see what kind of content they were against in regards to the crisis to determine further adjustments to advertising.

“Technology exists that can enable advertisers to create a nuanced approach to their targeting so they don’t need to shy away from news content and rely so heavily on blunt keyword blocking tactics,” said Peter Wallace, svp of sales across EMEA at GumGum, an ad tech company that specializes in contextual advertising. “Advertisers are becoming increasingly aware of this, particularly following the outbreak of the Covid-19 pandemic and the issues we saw with overzealous use of blocklists.”

No surprise then that the tone around ad spending is muted. And it looks set to be that way for some time.

There are so many markets on the cusp of one of the largest monetary tightening cycles in recent history as the Federal Reserve, European Central Bank and the Bank of England all look to reduce the level of support for the economy. 

Not only will people have less money as a result of those fiscal changes from the world’s most influential financial institutions, they will also have to pay more for certain goods in an inflationary market. Senior marketers at L’Oreal are already weighing whether they should cut marketing to offset higher production costs, for example. A year ago dilemmas like this weren’t as pronounced — the costs of advertising across the board being a case in point. 

Back then, the average cost per thousand to reach for a 30-second TV ad was higher than it has been in the U.K. for seven years. To reach the lucrative 16 to 34-year old demographic, advertisers had to fork out more than £50 on average for a CPT, per Barb data compiled by Warc and the Advertising Association. 

But the inflation doesn’t stop there for CMOs. They are paying a lot more to advertise online too. In fact, the cost of advertising across search, social media and retail media rose by double digits in Q4, according to Warc. 

Price inflation is a “very emotive” factor, said Matt Hill, director of research and planning at the marketing body for TV in the U.K. Thinkbox at an event earlier this week. It doesn’t tell marketers anything, however, about the value of that media for their businesses, he added. 

Figuring out that value, however, is easier said than done.

The numbers bare this out: more than four in ten CMOs (46%) believe cross-media measurement will never happen, with a higher proportion (49%) citing self-interest of the online advertising industry as a key limiting factor, according to a study of over 100 global senior marketers conducted by advisory firm MediaSense and the trade body the Incorporated Society of British Advertisers.

Simply put, there’s less data available, but that means that better analysis of what CMOs do have access to becomes more important than ever. And yet, it looks further away than ever for most of them. 

How the online platforms have responded to growing pressure to protect consumer privacy makes this clear. The received wisdom among marketers is this: what each platform wants is better performance than other alternatives, but imperfect measurement between them. This enables silos of spend and keeps budgets sticky and prevents them from moving too quickly or rapidly between publishers. What they don’t want is third-party measurement of effectiveness and then frictionless movement of ad spend between any publisher.

“Five to 10 years ago CMOs weren’t having to think so strategically about these issues because they were happy with agencies selling them tech, data and content that did it all,” said Ryan Kangisser, managing partner for strategy at MediaSense. “Now, they’re having to be more self-sufficient.”

Even the way CMOs work with agencies is shifting as a result of that expanded remit.

Current agency reviews, from Burger King to Nike, are focused on bringing together different disciplines like retail, data, technology and even the metaverse into a model that’s easier for them to access expertise. Granted, it’s been shifting this way for years if marketers are to be believed. That said, CMOs seem further than ever in overhauling their own teams to manage those models.

“Clients are looking for more expertise in their organizations not just because of the in-house trend but to better oversee and orchestrate their partners,” said Kangisser. “What CMOs are trying to get their head around is what does their internal organization look like.”

In an interview, VAB CEO Sean Cunningham discussed the work that the trade organization is doing to create new standards for TV measurement, when those standards will be announced and whether the VAB can be an objective party considering it counts some measurement providers — but not Nielsen — as dues-paying members.

The interview has been edited for length and clarity.

It’s been nearly a year since the VAB alleged Nielsen was undercounting viewership during the pandemic. Since then, you’ve formed the Measurement Innovation Task Force to create “unified best practices and standards for the national TV ad industry.” With the task force, where is the VAB in terms of progress on creating those best practices and standards?

We’ve actually been busier than we thought we would be because we had a second discovery of a second layer of undercounting that was in late December, very innocuous few sentences from Nielsen of 16 months of undercounting. We actually found through exhaustive analysis that there had been this second layer of significant undercounting that was brought by the omission of an entire dataset that went back to September 2020. So we were busier than we thought we’d be on doing more forensic work than we thought we’d need to. But it was important work. It revealed an undercounting of another 54 billion impressions and another $700 million worth of advertising that couldn’t be bought or sold.

The other thing we’re doing is we are moving along with the establishment of standards around content, context, quality, duration, which is quite the undertaking and definitely a team sport. We’ve scoured the landscape of the full compendium of work that’s been done on it to date, which is extensive. We ultimately want to bring to the marketplace and to our friends at the [Association of National Advertisers], for cross-media measurement, not only the best of all the current thinking but taking it to a place that anticipates the needs of [the 2023-24 upfront cycle] and cross-media measurement and putting very visibly, very transparently in front of the whole marketplace the best compendium of what we think are the fairest standards on content, context, quality and duration.

On that first point and even going back to last year, how are you able to determine that Nielsen has been undercounting? What are the data sources you’re using here?

It’s Nielsen. I mean, we’re using their own data. In this most recent round, the 16 months’ worth of calculations, they reprocessed those 16 months’ worth of data. So there had been a data set out there that was incomplete, which had been the trading currency and which [TV ad buys] were done on. There wasn’t an entity in the marketplace that took it upon themselves to essentially calculate all of that reprocessed data very the original dataset and find where the gaps were. But to us, it was worth doing because we found there were double-digit shortfalls against really important targets [such as] adults 18 to 34 [years old]. There will 11 and 12 billion impressions missed that undercounted against Blacks and Hispanics. Marquee programs, a lot of playoff sports, the Super Bowl, things like that consistently had high single-digit and double-digit undercounting. This was not going to be something that was going to be made public to the marketplace unless the VAB Measurement Innovation Task Force stepped in and did it.

Is that something you’re looking to turn into a product or spin it off into its own objective entity? Part of what you have there is kind of the job the MRC was supposed to be doing. So maybe you spin it off and make it part of the MRC. Because what you’re bringing to light is raising questions that will face every measurement provider, not only Nielsen. So it feels like there is going to need to be some active, regular and independent auditor.

There’s definitely that need in the market. Every one of these players understands the need for real verification, real-time verification, transparency. Transparency is one of the real table stakes into the marketplace and one of the real keys to not only being taken seriously but getting into active currency tests with blue-chip marketers and major agency holding companies. We need to really look at the speed component when we’re talking about verification and standardization and auditing. The speed component’s really key and, as things are happening in the marketplace, the ability to call them out, to count them up and point to them objectively — that’s the void that we fill and still continue to fill.

On that point, largely your members are the TV network owners. But you also have a number of measurement providers that are members of the VAB as well. ISpot.tv, ComScore, VideoAmp are in there; Nielsen is not in there. The fact that you have these measurement providers as members but one of the main measurement providers is not a member, does that compromise your position?

I don’t even think about it to tell you the truth.

Shouldn’t you think about it?

I don’t. I really don’t. Whether Nielsen is a quote-unquote “member” or not doesn’t change a thing for me. We subscribe to their data. We’re a customer of theirs. And we have been a very athletic user and customer for many years. 

In terms of membership, there’s different brackets of membership. We have what you call your premiere members, which are our governing-level members. Those are the publishers, the [pay-TV providers], cinema advertisers. And then we have a tremendous amount of membership that’s throughout the ecosystem, who are professional members. They get access to all our insights. We do a lot of collaborative work with those folks. The key for us in all this is somebody’s got to be Switzerland in looking at all this. And that may sound funny from an entity that gets its funding from the publishers and distributors in the video ad ecosystem. 

And the measurement providers.

Yeah, and the measurement providers. But the key thing is, since I’ve been here, we have over a decade and a half of bulletproof, objective reputation with the buy-side. We’ve got if you will, that set of members, our sell-side members. We have a huge buy-side membership. Those memberships are free; we authenticate them; they get access to all of our insight, data and everything; but they’re members nonetheless. And we are an incredibly efficient habitual provider of an enormity of objective information on all things having to do with ad video.

The reason that we have a voice in the marketplace is 15 years of bulletproof objectivity. Of everything we’ve distributed in 300 or more reports, no one’s ever come back and said, “This fact or figure’s wrong” or “I think it’s misleading” or “It’s got a hype purpose to it.” We have a soul of insights, and we’ve grown now this second voice, which is advocacy. And the advocacy voice is really, in terms of it being a full-time job, we’re really just into year three on that.

But how do you address the question: If these measurement providers are members, how can the VAB be objective? Or how can anyone be sure that the VAB isn’t doing things that serve its members and maybe don’t serve those members’ competition?

Our objectivity comes from the fact that we never have had any knd of bias that advantages any of our major members, any of our publishers or any of our [pay-TV providers]. Everything is, if you will, what is the rolled-up look? What is for the greater good of the marketplace? What’s the what we call “unified voice”? And the same is true with respect to the rest of the ecosystem. We have to have relationships with all these executives. But because we have a relationship across the board with all the C-level executives of all these companies, they also have to trust us that we’re always going to be objective or none of this works. The key is our objectivity here. And the key is being able to bring everything down to whether it’s source-level material or it’s something I can substantiate and verify five ways to Sunday. That’s how something becomes a VAB fact.

On that point, standardization is the role that you all, especially the Measurement Innovation Task Force, are really serving here. In your involvement with OpenAP, for example, you’re charged with ensuring that there are standards created. What’s the progress there? What are the standards that are being created?

They, meaning OpenAP, had done a yeoman’s amount of work in getting a lot of the standards set up that were enough for them to get launched. We’ll be looking at substantiating everything that they’ve got up and working, which is working fine so far. But we need to make sure that all the data — whether it’s crosswalked [between different companies], whether its usage, its permission, its hierarchy, whatever it is, is being done by the first four or five providers and [OpenAP’s measurement framework] XPm to the specific specifications that they’ve all agreed to. And the other is what are improvements? What are tweaks? And those are things that all of the measurement providers will know about. 

It’s more about it’s another layer and another function that has to [do] with disclosure, transparency and verification. When we do come up with the standards, those aren’t going to be buried in a website somewhere. Those are going to be put in full view of the marketplace for all the buy-sell scrutiny.

What’s the timeline for when you plan to start publishing what the standards are?

TBD. We’ll be able to announce something in 2022. It’s really important to be as candid as possible with the market as soon as we know, as opposed to speculating to try to appease a timeline. Until we know specifically, I’m respectfully putting a TBD, and that’s to be as candid as possible.