Month: March 2022

Programmatic upfront and center

The key hits:

• Programmatic has become a pillar of the annual upfront ad market.
• TV networks prefer programmatic guaranteed deals, whereas advertisers and agencies prefer private marketplace deals.
• The divergent views stand to make programmatic a potentially contentious topic at the negotiating table.

An increasing amount of money committed in this year’s annual TV advertising upfront market will likely be spent programmatically. “We’re projecting 15% to 25% greater amount of dollars going programmatic streaming this year versus last year,” said one agency executive. However, programmatic is not necessarily overtaking the upfront.

The buying method associated with real-time bidding is not so much updating the traditional upfront model as it is reinforcing the advertising futures market. That’s thanks to the preference among TV networks for striking programmatic guaranteed deals in the upfront, which is rankling some ad buyers. “It’s like modifying an upfront model for programmatic. It’s taking the upfront mode and shoving it into a programmatic market,” said a second agency executive.

Programmatic figures into the upfront deals struck between TV networks and advertisers and their agencies in two primary ways: programmatic guaranteed deals and private marketplace deals. In both instances, the TV networks are giving ad buyers programmatic access to inventory that either isn’t available in the open programmatic market or before it becomes available for any advertiser to buy sans commitment. However, there’s a crucial distinction between PG and PMP deals. In the former, the seller controls the transaction; in the latter, the buyer has the control.

“With a PG deal, buyers don’t decision; sellers are decisioning on behalf of buyers,” said a the first agency executive. “Digital and programmatic people [on the advertiser and agency side] have grown accustomed to buyers calling the shots. That’s where some of the hang-up has been.”

That snag evinces a natural collision between the upfront model and programmatic buying. The upfront originated as a way for TV networks to secure ad revenue months in advance in order to ensure they could cover their programming costs. Meanwhile, programmatic buying originated as a means to make it easier for advertisers to pick up inventory on the fly through real-time auctions. Therein lies the rub. TV networks don’t want to give up the revenue assurance that the upfront has provided them for decades. 

Enter PG deals that require advertisers to commit to spend a specified amount of money ahead of time but take advantage of programmatic tools to fine-tune when their ads are run, including to whom they are shown and when.

As TV networks have amassed more streaming and digital video inventory to sell in the upfront — and as more digital-native advertisers like tech companies and direct-to-consumer brands participate in the upfront market — the networks adopted programmatic as an option for upfront ad buyers. But in embracing programmatic, the networks didn’t want to let go of the upfront’s revenue assurance. So they have been pushing advertisers and their agencies to agree to PG deals instead of PMP deals.

“PMP commitments aren’t commitments against audience or inventory. That’s why networks don’t want them because they can’t manage yield,” said a third agency executive.

“If you talk to the sellers, all they talk about is PG. PMP doesn’t come out of their mouth,” said the second agency executive.

To be clear, the TV networks do agree to PMP deals in the upfront. But they tend to limit the level of inventory and audience available to be secured via that route, whereas they are willing to open up more of their inventory, including in-demand audience segments and categories, to PG deals. “The only way you’re going to get a commitment of scale against an audience like [the hallowed 18-34-year-old age group] from NBC or Disney is when you commit to buying that audience across all quarters in a PG form,” the third agency executive said.

Advertisers and agencies, for their part, would prefer PMP deals because of the control they provide to the ad buyers in managing how and when their ads do — or do not — run, which helps them keep a handle on how much money they spend overall. “We’d rather do everything as PMP. I’m OK fixing the price of inventory, but variable volume is what we want. We don’t want to commit to specific volume levels,” said the second agency executive.

The opposing programmatic preferences sets up for something of a showdown in this year’s upfront market.

The agency executives interviewed for this story plan to push for PMP deals and expect the networks to push back with PG deals. How the stand-off will resolve itself remains to be seen — though this year’s upfront does seem set to be another seller’s market — but there appears to be at least one assurance: “Programmatic is a pillar of the upfront negotiations now,” said the first agency executive.

What we’ve heard

“Overestimating to be safe is working against us as a marketplace. Because when we all do that, you’re going to drive up inflation even higher.”

— Agency executive on advertisers and agencies overcommitting in the upfront market

Numbers to know

$16 billion: How much money a group of private equity firms will pay to acquire Nielsen.

15.4 million: Number of people who tuned in to the Academy Awards this year.

497 million: Number of people in India who used streaming services in 2021.

18%: Year-over-year decline in cable TV viewership so far in 2022.

<4,000: Number of TV episodes that YouTube is making available on its free, ad-supported platform.

37%: Percentage share of streaming subscribers who canceled a subscription in the past six months.

What we’ve covered

‘Hell’s Kitchen’ producer Arthur Smith reflects on how production has and hasn’t changed since the pandemic:

• Smith had six shows set to start production when the pandemic brought the industry to a halt.
• In the past year, his company has produced more than 200 hours of programming, including two seasons of “Hell’s Kitchen.”

Listen to the latest Digiday podcast here.

Why more TV ad dollars aren’t following audiences to digital and social video:

• Advertisers’ marketing mix models don’t properly value digital and social video.
• The models’ limitations, in turns, are limiting TV ad dollars from shifting online.

Read more about TV ad dollars’ holdup here.

Why some esports organizations are prioritizing growth on TikTok:

• Esports organizations’ TikTok strategies split between producing original videos or uploading in-game footage and gameplay highlights.
• The organizations are also making an effort to post a new video at least every day on TikTok.

Read more about esports orgs’ TikTok approaches here.

What we’re reading

Measurement accreditation delay:
The Media Rating Council is unlikely to accredit Nielsen’s and Comscore’s measurements in time for this year’s upfront negotiations, according to Broadcasting & Cable.

YouTubers’ video catalogs are a cash cow:
Companies like Spotter and Jellysmack are paying thousands to millions of dollars to YouTube creators to license the rights to their back catalogs, according to Bloomberg.

Broadcast TV networks’ slim pilot pickings:
Broadcast TV networks are ordering 20% fewer pilots for new TV shows than they did a year ago, as they shift away from the traditional model of timing their new show stock-ups to the upfront presentations in May, according to Variety.

Patreon’s role in the creator economy:
Subscription platform provider Patreon sees half of people’s payments going to creators who make $12,000 to $120,000 a year and is expanding its work with creators with an upcoming native video product, according to Fast Company.

But this progress raises an important question: what should be considered the benchmark for media companies’ DE&I goals? While the latest U.S. Census numbers show the country’s population is around 62% white, the benchmarks at some of these companies seem to revolve around becoming more reflective of the markets and audiences they serve.

National numbers of working-age population can be “a good starting point” for publishers who have a U.S.-based audience, but it’s also important for companies with larger operations in specific markets to reflect those communities too, said Matt Krentz, DE&I global chair at Boston Consulting Group.

The L.A. Times, for example, compares its employees against the demographics of L.A. County, as benchmarks. Over the next four years, the company’s goal is to “achieve a newsroom where Latinos make up at least one-quarter of our staff,” its diversity report reads. To get to that goal, execs are planning this year to adopt a new candidate-sourcing tool to monitor diversity indicators for potential candidates for future roles, revamping job descriptions to ensure they use inclusive language, implementing metrics “to monitor adherence to recruitment procedures and hold managers accountable,” training managers on behavioral interviewing “to ensure that selection decisions are based on objective and fair criteria” — as well as creating new editorial positions to cover communities of color.

The goal at BuzzFeed is to have its “employee population represent the world around us and the audience that we are trying to serve,” said Dionna Scales, director of diversity, inclusion & belonging and learning & development at BuzzFeed Inc. While the company doesn’t have “a particular target number in mind,” Scales wants “to see diversity increasing” in three groups — race and ethnicity, gender and gender identity and representatives from the LGBTQ+ communities.

At Hearst, it’s a bit vaguer. When asked if the company has set goals on the path to diversifying its workforce, a spokesperson said: “Our overall goal is to show progress every year and come closer to mirroring the markets we serve.”

However, it’s not just about hiring more non-white employees. It’s also about retaining talent, and promoting them to senior roles, according to Krentz. “At the company-wide level, moving these types of numbers is difficult and takes time,” he said. Krentz identified three main factors to consider when working to improve workforce diversity: the people you hire, and the retention and promotion of those employees.

Below are some of the diversity statistics Digiday is compiling in a running breakdown of publishers’ self-reported data.

Reflecting the diversity of the U.S. population

White employees at BuzzFeed, Vox and the L.A. Times’ staff reflect the same proportion in the U.S. Census (or less than), while Hearst and Gannett have a larger share of white employees. (At G/O Media, 65% of its employees are “diverse,” up from 63%, which G/O Media defines as a woman or a person of color.) Notably, each of these media organizations — except Vox Media and the L.A. Times — had notable layoffs or voluntary buyouts in 2021, which may skew the data.

Less diversity in editorial

New hires & promotions

New hires at these six companies were mostly people of color and women — other than at BuzzFeed, where 46% of new hires self-identified as non-white (though 69% overall were women). Scales noted that sometimes new hires often “have so much paperwork to do that they don’t always disclose, so it can be difficult to pinpoint that exact number.”

New hires at Hearst in 2021 were 61% white, down three percentage points. 51% of new hires at Hearst were women.

Just under a third (31%) of new hires were white in 2021 at the California Times, parent company of the L.A. Times and the San Diego Union-Tribune. 57% were women. The California Times did not provide this data in its previous report.

At G/O Media, 73% of new hires last year were considered “diverse,” up from 69% the year prior.

50% of new hires at Vox Media in the past year identified as non-white, down four percentage points.

As for promotions, white people made up 59% of those who were promoted last year at BuzzFeed, and women made up 63%.

Gannett did not report diversity numbers on new hires, and Hearst, Gannett, G/O Media and the L.A. Times did not report diversity numbers on promotions year over year. (Although, the L.A. Times report does state that between June 2018 and June 2021, newsroom management moved from 68% white and 65% male to 62% white and 62% male.) Krentz believes this is where the real problem lies.

While increasing the percentage of new hires who are people of color is the “number you can move the most quickly… The big watch out we need to be thinking about for all these companies: are they putting equal effort behind retaining diverse individuals?” Krentz said.

Senior management — who tend to be “white hetero men… over 40” — often focus DE&I efforts on recruiting, Krentz said. But “if you talk to women or ethnic minorities — they think the biggest issue is companies aren’t doing enough on retention and advancement,” he said. This leads to a “disconnect,” in which hiring more women and non-white employees improves, but if turnover also increases, it could keep its leadership diversity stagnant.

But companies need time to attract, develop and promote people to management and senior leadership roles, Krentz said — meaning it will take “a while” for a change in the diversity of a company’s leadership to be reflected in its reports. Krentz outlined two approaches: the first would be to set clear goals and reach specific percentages of diverse representation by a certain time. The second would be to have a metric that tracks the retention and advancement of non-white, non-male groups, such as promotion rate.

This is similar to what BuzzFeed does. When there is room in the budget for promotions, BuzzFeed looks at the percentage of people who were promoted from each group and tries to match that to the group’s representation at BuzzFeed. For example, to see what percentage of Black employees in the last year were promoted and what percentage Black employees represent at the company overall, Scales said.

Managers are mostly white

Share of diversity

While these media companies improved their representation of some racial and ethnic categories year over year, in other categories their share declined.

The share of Latinx/Hispanic employees went down at BuzzFeed and Hearst among overall employees (by one percentage point each), but up at G/O Media and Vox (by one percentage point). In 2021, 32% of employees at the L.A. Times overall were Hispanic or Latino — while this is up from 29% in 2020, it is still significantly disproportionate to the 49% Hispanic and Latino population in L.A. County, according to 2019 U.S. Census data cited in the report.

The representation of Black employees increased at BuzzFeed by three percentage points, and by one percentage point at Hearst, Vox and the L.A. Times. But the share of Black employees fell at G/O Media by two percentage points. 

And for Asian employees, their share of the employee make-up went down at G/O Media (by three percentage points), down at L.A. Times and Vox by one percentage point, up at Hearst (by one percentage point) and stayed the same at BuzzFeed.

At BuzzFeed and Hearst, Black and Asian employees made up the largest racial and ethnic shares at the company after white people, at 13% each at BuzzFeed and 9% each at Hearst. At G/O Media and Gannett, Black people made up the largest share, at 12% and 10% of the company, respectively. At the L.A. Times, the largest share was Hispanic or Latino employees. At Vox, it was Asian or Asian American employees, at 11%.

“We focus on diversity and inclusion and belonging,” BuzzFeed’s Scales said. “You can hire for diversity but then you can have people come into [the] organization and we don’t want them to feel unwelcome or that they don’t belong. We think about the entire employee life cycle.”

This year, Merrell footwear said that more than half of its ad dollars went toward digital video efforts, up from the 5% spent last year. With the increased ad spend, the shoe brand is running three campaigns across ad-supported streaming platforms such as Roku, Pluto TV, Sling TV, DirectTV and Hulu. 

“It’s the most significant investment for us this year,” Jane Smith, senior director of digital marketing at Merrell, previously told Digiday.

It’s a similar story for insurance startup Quility, which this year doubled its brand awareness budget to dedicate more ad dollars to CTV and OTT spots across streaming platforms, including Hulu and television digital offerings, ABC local channels, A+E, BBC America, CBS and CNBC. Other brands, including Dr Teal’s, Adore Me and Shutterfly, have all taken similar measures over the last year, ramping up their media mixes to include more digital video as people continue to stream their favorite shows.

“It’s trackable, it’s all programmatic and you get results,” said David Song, CEO of Rosie Labs ad agency. “So why wouldn’t we put more money into it?”

Media buyers say the shift started last April, when Apple rolled out its App Tracking Transparency as part of iOS 14.5. As a result, advertisers faced measurement challenges within social media advertising and instead started pouring more ad dollars into CTV and OTT, per media buyers. For example, last year Rosie Lab clients spent 30% of their ad dollars on Facebook. That spend has fallen to about 10-15% of budget, per Song, who did not provide specific figures. 

Research firm eMarketer points to CTV as one of the fastest-growing channels in digital advertising as of last year. In the US, investments were expected to more reach than $13 billion and double by the end of that forecast period in 2025. On a monthly basis this year, advertisers are reportedly spending at least $1 billion on OTT efforts, according to a recent report from digital ad analytics platform Pathmatics. (It’s unclear what those figures were the year prior as Pathmatics ad intelligence data capabilities began last November.)

Per a media buyer, current CPMs for streaming services like Tubi, Pluto, Hulu and Discovery+ can run advertisers anywhere from mid-teens to 20s dollar amounts. Meanwhile, CPMs for streaming platforms like HBO Max and Peacock cost dollar amounts that are closer to the mid $40s. 

Last year, Rosie Labs’ Song estimates that clients spent about 5 to 10% of their ad budgets in the CTV and OTT space. That number has since increased to upwards of 25 to 30%, according to Song. He did not disclose specific figures. Rosie Labs works with clients such as Coca-Cola, Egglife foods and Orbitz travel brand.

From a creative standpoint, it’s a similar story, according to Phil Patriarca, director of west coast partnerships at QuickFrame by MNTN, a video creation platform. According to Patriarca, the platform has recently seen an influx of requests for audience-targeted creative built specifically for CTV/OTT channels. He declined to provide specific figures.

“We are seeing advertisers focus more of their time and creative budget on CTV/OTT to utilize this as a real performance channel,” Patriarca said in an email.

As the space grows and new players enter, Erica Sperry, svp of investments at Hill Holliday, cautions advertisers to continue testing to find what works for them as there’s no one-size-fits all approach to CTV/OTT. 

“Continue to test,” she said. “Just because something maybe didn’t work yesterday doesn’t mean it won’t work in the future.”

“I’d say that we’re actually trying just to catch people who are on social media, and it just so happens that a lot of the content that people engage with on social media is gaming,” Nino said. “Conversely, I would say, a traditional gaming giant is more likely to come from the angle of the quality of the game, the reviews of a game. We’re much more interested in what people are saying about the game, not so much how good the game is.”

Though Dexerto’s traffic numbers were already trending upward pre-pandemic, they’ve exploded since 2020. Between 2020 and 2021, Dexerto’s total views jumped from roughly 1.5 billion to 2.3 billion, with revenues similarly growing by 50 percent to reach 8 figures, according to data provided by Nino, though he declined to pinpoint a specific number. The company has also doubled its workforce over the past year, employing around 100 people spread across global time markets such as Australia, India, Argentina and the United States. “We offer dedicated language subdomains, with native writers for French and Spanish,” Nino said. 

This growth has made Dexerto into an attractive potential partner for brands and marketers looking to reach gamers endemically, though ad revenue has been a part of the company’s model from day one. Like many other endemic esports publications, Dexerto does not have paid subscribers. Some of its current and former partners include leading endemic and non-endemic brands such as Razer, Chipotle, Coca-Cola and Buffalo Wild Wings. The site offers both media production and creative strategy services to its partners, including sponsored content in the form of short- and long-form videos and written articles. Dexerto is also able to integrate brands into its pre-existing intellectual properties, such as the Dexerto Originals documentary series. 

It was these services that led Huw Davies, chief communications and campaigns officer for HIV/AIDS charity organization Red, to partner with Dexerto to organize the group’s first-ever “Creator Cup” fundraising event in December 2021. In addition to producing sponsored content related to the event, Dexerto worked closely with Red on the strategy, planning and production of the fundraiser. It connected Red with digital creators to make a custom Minecraft world promoting the tournament, which ultimately raised over $127,000.

“They were instrumental in managing the process from start to finish,” Davies said. “We are also grateful that their team helped connect Red to key gaming orgs and creator managers, meaning we could build relationships that we hope will grow in the years to come.”

Wholesome activations notwithstanding, Dexerto and its staff have been known to court controversy from time to time. Dexerto editor-at-large Richard Lewis, for example, is infamous for making abrasive comments on social media disparaging various esports communities and their members — in addition to his hard-hitting coverage of the esports industry, which recently included a bombshell report about TSM’s firing of League of Legends coach Peter Zhang. 

To Nino and his fellow Dexerto founders, these potential controversies are a feature, not a bug.

“Actually, it’s opened up a lot of business for us — not just Richard Lewis, but other journalists who have been outspoken about being bold and bullish in their reporting,” Nino said. “And it brings a lot of positive attention to Dexerto, maintaining integrity by having a wide variety of opinions and styles of reporting.”

In any case, any controversy stirred up by Dexerto staffers is largely limited to the esports community, and brands see the publication as a safe and welcoming conduit into the gaming space.

“Dexerto is definitely viewed as a safe platform, with their content and the way they speak about content,” said Frank Puma, executive director of investments at Mindshare.

Ultimately, Dexerto’s ongoing success in the brand partnership arena is further evidence of that gaming is expanding into other areas of culture and society. By focusing its content on gaming influencers and the communities around them, the website has naturally expanded its footprint to include the many varied interests and passions that gamers carry with them everywhere.

“When people say gaming, they sometimes put it in a bucket, but it’s not — it’s about a younger culture,” said Puma, who has worked with Dexerto on numerous brand partnerships. “They’re cinephiles, they love music, they’re all those culture things. Dexerto allows for [Mindshare] clients like Volvo to stay within that environment, that conversation, in a unique way.”