Month: May 2022

How severe? Interest rates are rising, forcing central banks around the world to throttle the flow of money, which means the economy slows. That’s compounded by Russia’s invasion of Ukraine and the reverberations it’s sending across supply chains and consumer sentiment. Oh, and the largest single driver of global economic growth — China — is sputtering as its strict covid stance wrangles with a pervasive virus spike and widespread lockdowns. 

Worse still, so much of what’s happening is out of marketers’ control: public sentiment, government fiscal policies and — probably the most complicated factor — the unexpected contortions of the financial world. Predicting the future is, obviously, a fool’s errand. Not that senior marketers aren’t trying. On the contrary, many are trying to get out in front of the imminent economic storm. 

Procter & Gamble took ad dollars out of its pot for Q1 and poured them straight into its bottom line. Coca-Cola will do more advertising to try and justify price hikes as and when they happen. Peloton has pumped the brakes on ad dollars so far this year. They’re not in a recession yet, but that hasn’t stopped marketers preparing for that eventuality. 

So much so that in conversation after conversation with ad execs at the Advertising Week Europe and Upfronts this week, everything kept coming back to one word. Well, one word besides cuts and uncertainty — anxiety. 

“Most of the first half of the year has been relatively strong from an economic standpoint and that’s fuelled a fair degree of advertising over that period, ” said Chris Skinner, president of UM’s EMEA business. “The second half is going to be different as there’s a good chance there will be a broader downturn with people becoming more cost conscious in an economy that’s more restrictive.”

There is, of course, plenty marketers can do to prepare. 

In the short term, maybe they spend more on ads to justify price hikes in an inflationary marketplace. Perhaps they create more flexible commercial structures with their agencies to manage any volatility of spend, or rise in media inflation. And some might be thinking even further ahead, to what bets made now could pay off come the rebound. All these options and more are being considered by marketers at the moment, said Ryan Kangisser, managing partner for strategy at MediaSense. No one wants to be caught off guard if this downturn flips into a rout.

Ad spending is reflecting that angst. Or, at least it’s starting to as advertisers try to hold on to their media dollars for as long as possible. 

“We’re not seeing advertisers cancel budgets — it’s too early to do that,” said Dave Mulrenan, head of investment at Zenith U.K. “There is, however, a cautionary note in a lot of the plans we’re working on now. Clients want to hold on to as much of their budget as possible while they wait to see what happens.”

Cue lots of worried media owners. After all, media is an incredibly hard business even in the best of times. And it’s obvious those times are over. 

The glass-half-full takeaway from larger publishers at Ad Week Europe: their businesses should at least still see an expansion. To them, macroeconomic disruption accelerates change that creates grounds for new winners to emerge. 

A bleaker conclusion came from media buyers at the Upfronts stateside, who warned that the downturn will suck a lot of money out of the pockets of broadcasters. In fact, there’s a growing realization that many of these macro headwinds will remain in Q2, Q3 and potentially into 2023. As one media buyer explained: “I don’t think I’m going to find a whole bunch of money coming over the transom like I’ve done the last four or five years.”

The more this happens — advertisers moderate or slow spending — the more their media mix will shift in emphasis too. If anything, the volatile state of the economy is impacting where media dollars go just as much as how much is spent. That could mean good news for some businesses and bad news for others. It all depends on where they are in the ecosystem and more broadly the world. The state of TV advertising in Q1 is a case in point. Overall, it was fine. Locally, however, it was uneven. 

Total linear TV ad impressions among top U.S. CPG advertisers were up 13% year over year in Q1, while total impressions among top U.S. automotive advertisers were down 13%. Downy, the top U.S. CPG advertiser, drove a particularly high increase in impressions in Q1 2022, running both English and Spanish language ads.

In the U.K, the trends were reversed, with the CPG category down 19% and automotive up 11%. Several luxury automotive advertisers supported the increases in the U.K, including CUPRA, Lexus and Polestar, though the number one advertiser Hyundai saw the highest increase.

”Q1 was a bit of a mixed bag as it relates to linear tv advertising both in the U.S. and the U.K.,” said Dallas Lawrence, head of brand at Samba TV, which analyzes viewership data from millions of smart TVs. “Supply chain issues and increasing interest rates kneecapped auto sales in the U.S. driving decreased automotive ad spend. And in the UK rising prices have stalled consumer demand for packaged goods leading to a nearly 20% drop in CPG ad spending in Q1.”

Bottom line: No one knows what’s going to happen — least of all marketers. 

Rajeev Goel, CEO of publicly traded ad tech vendor PubMatic, pointed to the state of the U.S. economy to ram home the point: “It shrank in the first quarter. That left people wondering whether it was an aberration or a sign of the new normal.”

Marketers know in their guts, as well as their brains, that they can’t afford to cut spending entirely — not when people are still showing a tolerance for high prices amid rampant inflation. They can, however, be more cautious, opting to slow or even delay spending as they balance the need to persuade consumers not to trade down to lower-priced competitors with the need to offset some of their own higher costs or increase profitability. In other words, inflation is additive to advertising as a whole until it isn’t. And there’s the kicker. No one can quite figure out the trigger for the likely blowout across the economy. 

“Marketers will start to get concerned if they see signs that consumers are trading down to cheaper alternatives like house brands or not buying at all. The other big signal would be a major cooling off of the currently red-hot job market,” Chris Vollmer, managing director at strategic advisory firm MediaLink.

Clearly, there’s more pain to come. But there’s always a rebound. Right? The biggest economies in the world are still fundamentally strong: people — aside from the lowest income levels — are still spending, the largest advertisers appear ready to have good balance sheets and there were some encouraging outlooks to emerge from the latest earnings season considering the grim forecast. Until there’s a rebound, the agecny holding companies are banking on the diversifications they’ve made in recent times to see them through. 

“In short: 31.5% of the Group and 36.5% of Dentsu International’s revenues now come from Customer transformation & technology – a structural growth area that is much less cyclical than media & creative,” said a spokeswoman at Dentsu. “As the portion of this business grows we get greater visibility and confidence in our full year guidance.”

While TV networks, advertisers and agencies will incorporate alternative measurement providers into their upfront deals this year, their inclusion will be largely limited to tests, and Nielsen’s measurements will be the currency on which upfront transactions are agreed to, according to executives at TV networks and agencies.

“We’re paying for Nielsen ratings anyway, and we won’t agree to [an alternative] currency without having done tests against Nielsen,” said one agency executive.

Omnicom Media Group has been participating in tests of alternative currencies with multiple clients, “but that being said, we’re not 100% confident that that’s what we should be transacting on this upfront,” said Sharon Cullen, president of integrated investment at Omnicom Media Group’s Hearts & Science.

“I don’t think we’ll do a lot of guarantees on anything other than what’s traditionally been done,” said Stacey Stewart, U.S. chief marketplace officer at UM Worldwide. “I think we’ll do some deals where we look at alternative measurement or consider alternative measurement as part of the deal in some way, shape or form. But I think those will be on a client-by-client basis with a handful of partners.”

The TV networks, meanwhile, are not aggressively pushing for advertisers and agencies to adopt alternative currencies in their upfront deals this year. For example, they are not issuing mandates that advertisers and agencies commit to using non-Nielsen measurements as currencies. “It feels like 2022-23 is going to really be another year of testing and learning,” said a second TV network executive.

“Everyone wants more timely, accurate and effective cross-platform measurement. You can’t deny that. And the industry has been calling for it, and no one has been able to nail it down yet,” said a third TV network executive.

The mess of measurement

Somewhat ironically, measurement discrepancies kicked off the TV ad measurement shift and are now slowing that shift. As Ad Age reported, advertisers and agencies have discovered disparities in the results and methodologies among measurement providers. “Our research group was looking at it, and every two weeks the numbers would change. You can’t transact when it’s this volatile,” said the first TV network executive.

Another obstacle is that the various measurement providers are at varying levels of interoperability with TV buyers’ and sellers’ ad tech stacks, said a fourth TV network executive. “They need to do some work to get the data structures in place to actually work seamlessly inside of buyers’ and sellers’ ad tech stacks. That’s an important thing,” this executive said.

For the most part, TV network and agency executives seem to be collectively breathing a sigh of relief that the alternative measurements are not ready to be adopted as currencies en masse in this year’s upfront. Both sides are still operating under the assumption that the TV ad market will move from a single-currency era to a multi-currency one — eventually. However, they are taking care not to rush it. There’s still a lot of work to be done, questions to be answered and billions of dollars at stake. 

“It’s not like let’s jump into the deep end without having done our due diligence. We feel that there’s a lot of work to make sure on the validity, the validation and where are the outages,” said Cullen.

“My question with all of this stuff is who’s paying for all of this? If the marketplace comes to us with 20 different flavors [of measurement], who pays for it?” said the second TV network executive.

“The economics are huge… As an agency, I’m going to subscribe to Comscore, iSpot, VideoAmp and Nielsen?,” said a second agency executive. “So there’s a lot of economic factors that fall into play. And it’s more complex than just how are buyer and seller going to transact. How does that fit into the planning and the mix modeling and all of these things? That is the complexity that needs to change, which it will, but it wasn’t going to change in the timeline before this upfront.”

“I really want to take this year and learn because there’s a lot of complexity. How stable is the data? Can we project off of the data? How does it to clients’ [marketing mix models] and then client goals? We need a lot of answers. Are these measurement solutions scalable? A lot of them right now are very manual to manage. We need to figure out all of those answers before we make a mass switch,” said Stewart.

To that end, industry groups the American Association of Advertising Agencies, the Association of National Advertisers and the Coalition for Innovative Media Measurement are about to embark on a study of the multi-currency TV ad market that will entail interviews with advertisers, agencies, publishers, tech providers and measurement companies. However, the study is unlikely to be finalized before this year’s upfront deals are signed. “The hope is for us to be able to consolidate and cumulate the findings and release [the study] around the August-September timeframe,” said Ashwini Karandikar, evp of media, tech and data at the 4A’s.

Backdoor currencies

To be clear, none of this is to say that there won’t be upfront deals transacted against non-Nielsen measurements in the upcoming upfront cycle. Horizon Media, for example, has said that it plans to use alternative currencies for up to 15% of the upfront deals the media agency will sign this year. And there’s a possibility that upfront deals that initially tab Nielsen as the currency shift during the deals’ lifecycle to using an alternative measurement provider, according to the fourth TV network executive. 

“That’s what I think is going to happen throughout the course of this year. As we get better at this, you’ll see more advertisers want to wade in. Those advertisers already have X million dollar upfront commitments with us; they’ll use some of those to work off the commitment via alternative currency,” the fourth TV network executive said.

Here are five takeaways from the event:

Expand the audience without diluting the audience.

When publishers expand their commerce offerings, it’s important to not dilute what part of the audience those products already reach.

Take it from Samantha Baker, who is the vp of commerce and partnerships at Vice Media Group. Baker maintained that affiliate content would — and should — only appear in appropriate places across brands. That especially means placements not anywhere near news coverage.

It also means not applying a one-size-fits-all approach to where affiliate content would appear across non-news brands. Instead, Baker and her team have focused on driving audiences back to new affiliate content from their social channels. ”We didn’t want to alienate our audience or have them think the content would be tainted,” Baker said.

Direct relationships with advertisers can help inform new strategies.

Leaf Group found success in creating an in-person activation to reach audiences. Called Hunker House, in Venice, Calif., the house was designed to create a space that could tout products in person and provide an area where influencers could create their own, organic content.

In that instance, Leaf Group’s home brand, Hunker, relied on contracts with advertisers who had direct relationships with the publisher’s sales team to sign packages that included those that placed branding in the house, a print version of Hunker and digital components.

“While affiliate can function as its own revenue stream and its own method for diversifying, it also is becoming a larger part of the partnerships conversation with folks across the board,” said Eve Epstein, svp & gm, Hunker.

It’s a strategy Vox Media has also deployed, especially given its profile of brands, that have grown to include New York Magazine, NowThis and Thrilist. With direct relationships, Vox Media’s team has worked on advertiser terms that have longer lead times.

“If we understand a metric you’re moving on this year or this quarter… we can take that into consideration and plan accordingly, pitch our editors on moments that would align well on our sites. And share data,” said Camilla Cho, svp, commerce at Vox Media.

KPIs are changing and advertisers/publishers are coming to new contractual terms.

Contractual agreements between advertisers and publishers are changing as measuring successful affiliate content is also shifting. “Retailers and advertisers specifically are valuing content more than ever,” said Nilla Ali, BuzzFeed’s evp, commerce. “And this is publishers’ bread and butter, there’s a mutual incentive to crack these formats and trends.”

Whether that means measuring value in CPA or a CPC or negotiating a flat fee, publishers are working through the terms. And oftentimes, that informs where – and how – publishers package content recommendations to audiences.

At Vice Media Group, for example: “When we want to convert our audience, we really lean into our stories,” Baker said.

With the state of the economy and inflation, publishers shouldn’t forget consumers’ purchasing power.

With inflation and a downturn in the economy likely, publishers should consider their audiences’ purchasing power, so therefore the types of content recommendations they should make to reach them.

Vox Media has seen success in offering deeply discounted content recommendations surrounding key moments as a way to introduce new brands to its audience. It works with the content team at The Strategist to make sure the types of products would align with readers.

“We can also share data and let [advertisers] know that they’re starting to gain some steam with readers,” Cho said.

Shoppable video has some bumps in the road.

Both Vice Media’s Baker and BuzzFeed’s Ali teased new offerings built around shoppable video, a topic that drew outsized attention at this year’s NewFronts, but a channel that is seen as still struggling with industry consistency across measurement and accessible inventory.

“Shoppable video hasn’t been cracked yet,” Baker said. “That’s where the largest true opportunity lies.”

Especially within the social platforms, Baker noted, which can provide publishers with the infrastructure for live stream shopping, such as Pinterest, which is built around conversion. “I’m just cautiously optimistic they’re going to figure it out,” she said.

“This is the beginning, not the end,” Wollner said. “The future we see is a future where a customer can come in, interact with an intelligent teller here and actually conduct business.”

Wollner made sure not to refer to the location as a “branch,” pointing out that the term legally implies that financial transactions are taking place inside the location — meaning Quontic would need regulatory approval to describe its Decentraland location as such. Instead, Quontic is using terms such as outpost, site, virtual presence, and even “fortress” to describe the space.

Legal concerns notwithstanding, Quontic’s plans for its Decentraland location show that the bank is approaching the metaverse as a functional space for every day use, rather than an escape from reality. The company chose Decentraland for the activation because it views the platform as more practical than competitors such as The Sandbox, or other, less blockchain-focused metaverse platforms. “Decentraland is, we think, where there’s critical mass and real momentum to pull people in,” Wollner said. “Decentraland very much still feels like a video game, but we saw it as the best bet.”

The relatively down-to-earth ethos of Decentraland could make the platform a better fit for metaversal banking than the candy-colored experiences in Fortnite or Roblox.

“Decentraland feels like Second Life,” said Simone Berry, co-founder of People of Crypto Labs, a web3 innovation hub that designs its experiences inside The Sandbox. “Here’s my house; here’s where I hang out; here’s where I socialize; here’s a bank.”

The blockchain focus of Decentraland is another aspect that makes the platform a good fit for Quontic, which was the first FDIC-insured U.S. financial institution to introduce a Bitcoin Rewards debit card in 2020.

Quontic’s longstanding connection to blockchain tech and decentralized finance gives it credibility as a bank operating in the metaverse. “There’s a huge amount of potential for them to do things like financial education in that space, and look at how they can provide learning and resources to help the next generation become more financially literate,” said Tom Head, a web3 expert and CEO of crypto research firm Crypto Comparative Linguistics. “Though I sort of laughed a little bit at the fact that they were going to have a DJ area out back — in reality, are you going to go to a bank to hang out with your mates in the metaverse?”

The DJ booth behind Quontic’s Decentraland outpost may have been a source of chuckles for Head — but as more brands begin to offer functional virtual spaces and services, it is not far-fetched that Decentraland users will become more comfortable hanging out inside metaversal banks and other “practical” locations. In the physical world, banks typically don’t allow dance parties, so there’s no reason to socialize inside them. But Quontic’s inclusion of a DJ booth and NFT drop shows that it is viewing its metaverse outpost as both a functional space and a place for the Quontic community — whatever that might be — to congregate. “It’s a concentric-circle approach, and the first inner circle is our customers,” Wollner said.

In time, users in the metaverse might not bat an eye at the inclusion of more social, community-based features inside practical locations such as banks. “If you spend six hours in a virtual world, it becomes your new reality,” said Marcel Hollerbach, chief innovation officer of the commerce software company Productsup, “so perceptions will change as metaverse usage grows.”

In the case of Vista, hiring a team with a rich and varied CV has also paved the way for a dramatic brand recasting.

“We know that this transformation requires the best teams we can find,” said CMO Ricky Engelberg, who joined the company in 2019 and has been instrumental in reshaping the company, once known for printing business cards, into a multifaceted design and marketing partner for small businesses.

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