Month: July 2022

“Gaming is more resilient to a downturn because it’s the cheaper form of entertainment compared to streaming services and movies,” said Michael Metzger, a partner at Drake Star.

Wait a minute, isn’t the gaming market set to contract this year? 

That’s what the analysts are saying. Ampere believes the market will shrink 1.2% this year to $188 billion globally. Sobering as gaming’s comedown from two years of massive growth is, there’s still a lot to be bullish about. Gaming is more profitable than it ever was; companies aren’t reliant on money made from selling as many units of $40 games anymore. They’re built on free-to-play services and subscriptions that offer countless avenues for recurring revenues. Moreover, companies tend to be self-funded and aren’t saddled with debt. All this will be music to buyers’ ears. Flipping a business requires more thought and less muscle than it used to.

“The M&A market was very hot in 2020 and 2021 when everyone was eager to get deals done,” said Metzger. “Now, there are more buyers that are a lot more focused on higher quality companies and how profitable they are.”

Don’t get too excited, the heady days of gaming are almost certainly over

The IPO exit route is closed for now. Private equity’s goldilocks era is coming to an end. Sky-high valuations are a thing of the past. All told, the deal market is more measured. Gone are the days when investors and acquirers were impressed by a fast-growing company that lost money just as quickly. Instead, they expect investments to grow sustainably. As these sentiments harden, expect valuation multiples to adjust. In some ways, that correction is already starting to influence activity. There were 60 M&A deals announced in the second quarter, compared to 74 deals per quarter in 2021 and 47 per quarter in 2020, according to Drake Star.

“The climate on the investment and financing side of M&A activity in gaming is still healthy,” said Metzger.

Has the crypto crash blown a hole in M&A plans?

Not really. More than half of the private financing deals done in the quarter went into the crypto gaming space. Investors weren’t seemingly put off by the crypto crash that routed the market. Not only are there more funds eyeing those businesses — now they’re sitting on more capital they need to invest. In recent weeks, venture capitalist firm Andreessen Horowitz launched a $2.2 billion crypto fund and a $600 million gaming fund.

“There’s so much more money flowing into the gaming space than there was three years ago,” said Metzger. “So while there has been a decline in deal value this year it’s nothing compared to the start ecosystem in general.”

Aside from less frothy valuations, what’s intensifying consolidation?

There are multiple factors at play here — some related to games, others not so much. And many act like dominos, falling to hit another.

A company with a portfolio of intellectual property is more sustainable than one that relies on a single brand, the more successful these deals, the more confidence buyers are likely to have in re-upping their M&A activity.

But it’s not just about increasing the size of a portfolio, it’s also about diversifying it and the influence the war for talent is having on deals can’t be overstated — robust technology is one of the big choke points in the industry, for example.

Which leads you back to M&A as one way to overcome this. Furthermore, it’s easier to line up those deals in the first place. Remember, gaming dwarfs many other forms of entertainment both in terms of size and upside. As a result investors and acquirers are able to access more capital that can be used to complete acquisitions. Finally, platform diversification drives acquisitions. In theory, betting on multiple platforms limits risk and boosts revenue.

What does all this mean for esports? TBD

For all the hype around esports becoming the next power players in entertainment, many organizations are still figuring out monetizing them. Media dollars and merchandise sales will only take these organizations so far. If that hasn’t already sunk across esports, it will. Downturns are good stress tests for businesses. In these unstable economic conditions, this will be one for esports.

Taking all this into account, what does a publicly traded Faze Clan say about the resilience of esports?

Everything and nothing. As much as Faze is a bellwether for esports, it is also idiosyncratic in a lot of ways. The founders built the brand on being the authentic, youth-inspired street voice in esports. So its talent has no issues being the edgy, raw counterpart to some of the more “cleaned up” brands (looking at you 100T) and it works for them. That’s an intriguing prospect for institutional investors and an emotional one for young retail ones — some of whom have the opportunity to put their money where their passion is. As said Dr. James Weiner, assistant professor of sport management at The University of Tampa explained: “If the past few years has taught me anything about the market, it is not to discount a bunch of internet-savvy, well-organized millennials and Gen Zs who have expendable income for the first time in their lives and may invest with their hearts rather than their heads.”

It’s a reminder that not all esports organizations are created equal. Faze’s road to its listing has not been straightforward even with it deciding to follow the SPAC route versus a traditional IPO. The delay to the deal means that it is coming to market at a much more unsettled economic time which will have arguably given the owners pause for thought. Despite it all, the deal went ahead. At least some of the rationale will have been driven by the long-term prospects of gaming. 

“I am not as terribly discouraged by recession fears eating into sponsorship dollars as many others,” said Weiner. “In a recession, people tend to spend more time at home, and in the case of gamers this means potential for a considerable increase in media consumption and gameplay.”

Running up that wall

The key hits:

• Registered users are 45 times more likely to become a paid subscriber than a non-registered user, according to Piano’s latest Subscription Benchmark Report.
• Metered registration walls can cause an inadvertent, negative impact to publishers’ paywall strategies, however. 
• The Daily Beast and Gannett are using registration walls to improve their relationships with readers who aren’t yet subscribed but are willing to share valuable information about themselves – i.e. their email address.

Registration walls are an intermediary for publishers to start building relationships with readers who fall in the murky middle between paid subscribers and anonymous readers. This cohort likely consists of repeat visitors, but without assigning these readers to registered accounts, little is known about their interests, which keeps the average revenue per user (ARPU) and lifetime value not much higher than a one-time reader.

But by implementing registration walls and known products that require readers to opt-in with their email addresses, publishers like Gannett and The Daily Beast have begun forming relationships that lead to more page views and eventually increase the likelihood of those readers paying for a subscription.

“We were focused on the binary of completely anonymous to completely loyal,” said Kara Childs, Gannett’s svp of consumer products. “That opportunity to create a registered user is really to acknowledge that there is a third state in between that may become a subscriber and may not, but there’s still [a] benefit for the user and there’s a benefit for us having them register.”

Potent with patience

According to the Piano Subscriptions Benchmark Report published earlier this month, the conversion rate of anonymous visitors to paid subscribers is just over 0.2%, but the conversion rate for registered users is about 10%. [Editor’s note: Piano is a contracted vendor with Digiday.] Gannett and The Daily Beast claim that their registered users do have a much higher conversion rate to paid subscribers than an unknown reader, but declined to disclose what those rates are. The report is based on Piano’s client base of more than 500 companies, which includes BBC, CBS and The Wall Street Journal.

The rate of conversion broadly ranges for the publishers included in the benchmark report, between 0.5% to more than 12%. Michael Silberman, svp of strategy at paywall platform Piano, said that it’s important to remember that obtaining an email from a reader is not enough to get them on the path to conversion. Instead, the right amount of value must be given to registered readers over a period of time, including access to content that’s otherwise paywalled or having a personalized site experience.

On average only 3% of registered users convert to paid subscribers within the first year of registering, making the registration-to-conversion funnel longer than might be expected, according to Piano’s report. Of that, only 21.4% make the conversion within the first month of registration. More than 40% of conversions take place between two to 12 months after registration. So maintaining as much desire as possible is key to making registration walls work.

Reward engagement, but don’t over-praise

One of the biggest pitfalls to publishers driving conversions in the implementation of registration walls is providing too much value in exchange for users registering with the site, said Justin Eisenband, a managing director in FTI Consulting’s telecom, media & technology industry group.

The Daily Beast has four different points of registration: push notifications, its app and newsletters, as well as its registration wall. The registration wall is used as a replacement for the paywall on certain content and is intended to bring readers who are not at the point of subscribing yet to get indoctrinated into the Beast’s content, according to CRO Mia Libby. The publication’s subscriber conversion rate for registered users is 300 times that of the conversion rate for unknown users, she said.

Gannett doesn’t use its registration wall as a precursor to a metered paywall. “Content is either premium or not premium and therefore we’re really making content [a subscriber benefit] as opposed to registration, which is more about the related benefits,” said Childs.

Instead, readers are prompted to register if they want to comment on an article or sign up for a newsletter, which puts value on readers’ desire to interact with the company’s news sites. “Those are the types of things that we think add value over time, and build that long-lasting relationship,” she said, adding that registered users, on average, view five times more pages per user than non-registered readers.

Eisenband said some publishers he’s worked with have pushed back their metered paywalls to make room for a registration wall. So instead of having the paywall hit after three read articles in a 30-day period, a reader will be prompted to register at that point and then will hit the paywall again once they reach five articles in a month. While the intention is to drive registrations, what happens is the publisher stops asking as many people to pay for content, strangling the conversion funnel in the short term.

“You can lose a little bit of the urgency to convert,” said Eisenband, and if you give too much access up front, readers might start to think, “why would I pay when I’m getting most of what I need?” he added. – Kayleigh Barber

What we’ve heard

“Most people on Twitter are announcing jobs now. I will admit, I feel like I did choose to get back out there — not at the worst time — but the job market as far as media goes is a little slim.”

— A journalist who recently left her job as a senior writer at a large women-focused digital publisher

3 questions with Vox’s Liz Nelson

Vox Media released two new products aimed at parents last week: a new season of the “Today, Explained to Kids” podcast and a weekly newsletter called “Extra Curricular.” Both were created to expand Vox.com’s explainer content, giving parents tools to help discuss difficult world issues with their kids.

Parents make up 56% of the audience of Vox’s daily news explainer podcast “Today, Explained” and 33% of Vox.com’s audience, said Vox editor-in-chief Swati Sharma.

While all four episodes of “Today, Explained to Kids” are aimed at an elementary school audience — with interactive education brand KiwiCo on board as the podcast’s first sponsor — the “Extra Curricular” newsletter serves as a resource for parents of teens. Digiday spoke to Vox’s vp for audio Liz Nelson to hear more about why Vox was investing in products for parents and kids. – Sara Guaglione

This conversation has been edited and condensed.

Why is Vox producing more content for parents and kids?

When we did that initial run of “Today, Explained to Kids” back in 2020, we did survey our [podcast] audience to ask them more about how they [and their kids] were using and connecting with Vox. We did find out that the percentage of parents who were sharing Vox.com content with their kids was highest in the 14-to-17 age range. 67% of parents who we surveyed were sharing Vox content that was not made for kids but made for our general audience and made for adults, with that age group. So with the newsletter launching this summer, we very much wanted to help parents share more of that content with their adolescents, their older tweens and teens. 

How much of the newsletter will be new content? 

What I really like about [the newsletter] is we are not having to create all of that content new and from scratch. It’s finding the things that we think will be really useful for that age range and sharing it directly with parents. Vox will always be the first place that I’m looking [for links to share], but we’re not limiting it just to that and we’re not just limiting it to news articles. For instance, we have a podcast on our network called “Longform” and they recently did an episode interviewing Alexandra Lange about her new book about malls. You can listen to why malls have always been a place of connection, especially for that age. It’s a place where young people often tried adulting for the first time.

Why did you choose to launch the newsletter and podcast in the middle of the summer?

With “Today, Explained to Kids,” we deliberately launched it in the summer the last time around and we called it “Summer Camp.” Parents were looking for ways to keep their kids engaged and occupied and it worked really well. With the podcast, that’s certainly why we’re doing it again this summer. With the newsletter, it was more timing than anything else. This is something that came together very quickly. But we also know there’s an end date. We’re only doing it for 10 weeks. We’ll make room for the next experiment, whatever that might be.

Numbers to know

$389 million: How much money events company Informa has agreed to pay to acquire business publisher Industry Dive.

16%: Percentage share of surveyed U.S. adults who said they have “a great deal” or “quite a lot” of confidence in newspapers.

$306.0 million (£255.8 million): How much revenue Guardian Media Group generated in its fiscal year that ended Apr. 3.

1.2 million: Number of Instagram followers that The Washington Post added in the past 12 months.

$27.2 million: How much money podcast company Acast has agreed to pay to acquire podcast database provider Podchaser.

Digiday experiments with NFTs

On Monday, July 24, Digiday will launch a special editorial report and project called Token to Play, which will include 10 stories exploring the challenges and opportunities associated with NFTs in media, marketing and gaming & esports.

In addition to this editorial package, we have also created 10 NFTs of robot avatars as art for the stories that are available to purchase on our OpenSea storefront. We’re using this drop as an opportunity for experimental journalism where we try our hand at creating and minting NFTs to get a better grasp of these digital assets to inform future reporting.

All of the proceeds from the sales of these NFTs will be donated to a charity that Digiday has worked closely with for years: Sandy Hook Promise. The non-profit organization is focused on preventing gun violence in homes, schools and communities.

Stay tuned for more information on the drop! — Kayleigh Barber

What we’ve covered

Snapchat’s standing in the short-form vertical video market for publishers and creators:

• TikTok, Instagram Reels and YouTube Shorts have stolen the spotlight from the platform that previously had been preeminently associated with the Gen Z audience.
• Snapchat remains on the radar for creators and video publishers, in large part, thanks to it being the rare short-form vertical video platform to share revenue with video makers.

Read more about Snapchat here.

A 2022 privacy regulation primer with Mayer Brown’s Dominique Shelton Leipzig:

• The lawyer and ad tech expert discussed the recent spate of regulatory activity on the Digiday Podcast.
• While a U.S. privacy law is unlikely to pass in 2022, global privacy pressure continues to mount.

Listen to the latest Digiday Podcast episode here.

Q&A with NBCUniversal News Group’s Catherine Kim about how Stay Tuned is stretching beyond Snapchat:

• Stay Tuned has a seven-person team programming its TikTok account.
• In the fall, the news property will revive its YouTube channel and release its first documentary short.

Read more about Stay Tuned here.

Journalism job seekers feel the squeeze of the job market:

• Hiring in the technology, information and media industries fell in June, per LinkedIn.
• Journalists are struggling to find job opportunities.

Read more about the journalism job market here.

Simone Oliver steps down as Refinery29 editor-in-chief:

• The former Facebook exec took the reins of the Vice Media Group-owned publication in September 2020.
• The company has started a search for Oliver’s successor.

Read more about Refinery29 here.

What we’re reading

Facebook deprioritizes publishers again:
Following 2018’s pivot away from news articles, Facebook is at it again. The platform is now dialing back its work on the Facebook News tab and Bulletin newsletter program, according to The Wall Street Journal.

Facebook-driven traffic to publishers in decline:
As Facebook cuts back on publishing, the platform’s impact on publishers’ site traffic is ebbing a bit as are the numbers of likes, comments and shares that publishers’ articles receive on the platform, according to Adweek.

Money turns a profit:
The former Time Inc. publication is now profitable after losing $1 million per year while generating $2 million in revenue, according to Axios.

Publishers can make money from Amazon Prime Day through an affiliate marketing model, where they get a commission from Amazon from sales driven through links and ads on their sites. The commission rates differ based on the product category. None of the publishers interviewed for this article were willing to share their commission rates.

“What we know about our audience is that they love a deal. They love Amazon. And nothing that’s happening in the current climate has really done anything to dampen that enthusiasm and if anything, we’re just seeing that grow,” said Eve Epstein, svp and gm at Leaf Group property Hunker. “With things like inflation, people are probably more attuned to a deal than ever before.”

Prime Day sales up this year 

• Total Amazon Prime Day sales were up 87% year-over-year for Hearst.
• At Leaf Group, revenue from the shopping event was up 130% year-over-year for home and lifestyle publication Hunker. Revenue grew 120% for wellness and lifestyle site Well+Good, and up 222% for health and wellness title Livestrong. “The smaller we were last year, the more we grew percentage-wise this year,” Epstein said.
• Future Publishing’s total U.S. sales from Amazon Prime Day deals were $26.4 million, though the company declined to disclose the percentage change year over year. People bought 347,000 products through Future’s properties during the Prime Day event this year, according to the company. The largest year-over-year increase was in the Kindle devices & accessories category, which was up 104% year-over-year. This was followed by sales in the kitchen and grocery category, which was up 96.4%, according to the company. TVs and home entertainment drove $4.9 million in sales for Future, followed by $4.6 million in the phones, cameras, & accessories category.
• Reviewed and Wirecutter declined to share sales figures, but are expected to be included in their respective earnings reports delivered in August.
• Reviewed’s gm Chris Lloyd said it was the site’s “biggest Prime Day ever” in terms of “total retail sales.” However, year-over-year growth was modest, in the single digits. Reviewed did see a “significant increase” in Amazon Prime Day fashion sales in particular, which went up 40% year-over-year for the publisher, Lloyd said.
• Wirecutter “reached and served dramatically more readers than we ever have,” said editor-in-chief Ben Frumin.

Inflation may have driven more sales

While many publishers drove sales of popular Apple products and other tech gadgets during Amazon’s Prime Day, some noticed differences in the items consumers were buying this year compared to last — such as subscription streaming services and household items like toilet paper and snack packs.

“After two-plus years of pandemic spending that we’ve seen, we anticipated that inflation and gas prices and other factors would drive a slightly different product mix. And that absolutely ended up being true,” said Lloyd. “People really feel savvy from an everyday life perspective versus the typical splurge on big countertop appliances or things like that.”

Due to the economic environment, inflation and talk of a recession on the horizon, Wirecutter’s Frumin believes consumers are looking for deals “more than ever.”

“Money is on people’s minds… I do think that increasingly, people are more judicious, more thoughtful about how and where they’re spending their money,” he said.

Less Prime Day content published earlier

USA Today’s product recommendation vertical Reviewed was able to generate more sales this year despite publishing fewer articles. In previous years, the site published 600 to 800 pieces of content in a four- to five-day period around Prime Day, Lloyd said. This year, Reviewed published 200 to 300 pieces over an eight-day window.

“We focused on a little bit more high quality, longer form pieces around the big deals categories, as opposed to doing a bunch of one-offs. [We did] lots of updates on fewer pieces of content,” he said. “The quality is now where we’re getting the most response and engagement.”

Hearst published content “earlier than ever, to start to understand the interests of our readers or product categories they were most excited about and watching,” said Emily Silverman, vp of commerce. The Hearst team started publishing Amazon Prime Day content in June, a few weeks earlier than in past years. “That also helped our teams internally really be able to focus our attention during the two days on making sure that the content was as set up for success as possible because we had so much lead-up time. It wasn’t a harried experience, as it sometimes can be.”

At Future, however, it was the opposite: Simon Rawle, e-commerce director at Future Publishing, attributes growth to the fact that more Future properties published Prime Day content this year. Space.com focused on telescope, virtual reality headset and space-themed Lego set deals and drove over 6,500 retail transactions — more than doubling the site’s transactions from last year, for example, Rawle said.

While generating sales and affiliate revenue from Amazon’s Prime Day is beneficial to a publisher’s commerce business, the data collected from those sales can inform future affiliate content.

“With each major retail event we better understand the search terms that drive purchases, we know what specific content resonated most with audiences, which of our buying guides are most appreciated by our audiences,” said Rawle. This data then informs Future’s content strategy and SEO approach for the next major retail event, such as Black Friday.

“It’s an audience development strategy as much as it is a commerce strategy,” Epstein said.

The drone delivery company isn’t alone in its pursuit of TikTok virality. Poppi soda brand, Covergirl, and of course Ocean Spray, have leveraged viral moments, cashing in on user attention. However, social media strategists and experts have warned advertisers that going viral isn’t guaranteed and thus, isn’t a sound social media strategy.

Manna Drone Delivery is a startup based out of Ireland, delivering groceries, coffee, hot food, frozen goods, books and medication to people throughout Dublin. For the last year, the company has been pumping out organic TikTok videos to its 17,000 followers via its in-house social media team. It’s a strategy that more so looks to boost brand awareness and build an online community as opposed to customer acquisition, Healy said.

“It’s not about advertising product. It’s about explaining the product and disarming some of the worries or the fears about what we’re doing,” Healy said, noting that shoppers are still unsure of drone technology, let alone drone delivery to their homes and businesses. “So think of it that way rather than customer acquisition.”

Back in March, Manna’s TikTok video showcasing how drone delivery works racked up more than 8.6 million views and 245,000 likes. By April, the company struck TikTok gold again with a similar video garnering more than 20 million views and 76,000 likes. Both viral videos, which were created by Manna’s in-house social team, leveraged trending sounds to capture user attention, even reaching people in the United States and United Kingdom, according to a Manna spokesperson.

“It’s a nonscientific system. So we focus more on the content and let the content do the work for us,” said Healy. Meaning, the team doesn’t have a set posting schedule, optimized by time and day. Instead, Manna builds its content schedule around promotions, discounts or cultural moments. 

While the delivery company’s efforts on TikTok are organic, Manna has a small media dollar investment in digital advertising efforts across platforms like Facebook and Instagram, according to Healy. It’s unclear how much Manna spends on those channels as the startup did not respond to requests for those figures in time for publication. According to Kantar, Manna spent just $1,300 on media in the first quarter of last year. Those figures do not include social media as Kantar does not track that spend. 

As TikTok continues to swell in popularity, marketers and advertisers are increasingly looking toward the platform to organically take advantage of cultural trends, hoping for their own viral moments. Especially in light of rising digital ad costs and data erosion thanks to iOS 14.

“While we don’t recommend boosting every piece of content, it is generally a wise move to reserve some funds for paid boosting in order to see the biggest impact,” Jay Powell, svp of communications and influencer at MMI Agency, a Texas-based, full-service agency.

Next year, Manna has plans to expand beyond Ireland, into the US and U.K. To reach those shoppers, global app TikTok will play a bigger role in marketing strategy, Healy said. At some point, there are plans to roll out an optimized strategy with media buyers and the works, he added.

“It’s probably going to be the platform of choice for us for the initial [benchmark] of marketing in reaching the markets we’re going to operate in,” he said.