Month: July 2022

Oh Snap

The key hits:

• Snapchat is no longer the shiny new toy for creators and publishers. 
• But the platform’s revenue-sharing program has helped it retain its luster.
• Snap has also taken steps to make its platform more attractive and amenable to video makers.

Remember when Snapchat was the platform for short-form vertical video? Now TikTok, Instagram Reels and YouTube Shorts have crowded the market and stolen the spotlight from the platform that previously had been preeminently associated with the Gen Z audience. Not that Snapchat has been resigned to the shadows, though.

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. And the app’s parent company Snap seems to be recognizing its window of opportunity by upping its efforts to court creators and publishers with money-making options.

Case in point: Vice Media Group’s Refinery29 had a drop in viewership on Snapchat in the last year and reduced its Snapchat publishing output as a result, but within the past few months, the publisher is “very much scaling back up again” on Snapchat, said Tamar Riley, vp of audience and content strategy for Refinery29 and I-D, who declined to share specific figures.

“Because of all the new products that they’re launching and the way that they’re learning into commerce, the way that they’re leaning into vertical, it makes sense that we would naturally want to lean into those new product developments that they’re working on,” Riley said.

After opening up a revenue-sharing program for Snapchat Discover publishers in 2015 and starting to share revenue with creators in 2018, Snapchat started testing a revenue-share program to insert mid-roll ads in creators’ Stories in February. A Snap spokesperson said that more than 200 creators globally are making money through the program.

Meanwhile, the platform has also allowed publishers and creators to repurpose videos posted to other platforms into Snap Shows and receive a cut of the resulting ad revenue, and “maybe a year ago or so made it easier for partners to create new shows and take more control over how many episodes are airing per week, so that’s really opened the floodgates,” said one media executive.

“There’s a line of income that creators can participate in that’s sustainable and renews month over month, and it’s a little bit predictable in the way that YouTube AdSense, for the most part, has been,” said Megan Frantz, a talent manager at creator commerce company Whalar, which works with creators like TikTok stars Emmanuel Duverneau and Leo González. 

“It’s consistent, guaranteed monthly revenue, and it’s a very built-out automated program. Having that in place to point to, it’s not a beta test or a new program that might come and go. It’s been in place for a few years now. There’s a reliable stream of monthly overall income, and that’s a big value-add for that platform,” said Joe Caporoso, president of Team Whistle. He declined to say how much revenue Team Whistle makes on Snapchat but described the amount as “meaningful” and said “that has not changed year over year and, if anything, has continue to become a bigger part of our overarching business.”

OK but if Snapchat is such a golden goose, then why does all the shine today seem to be going to TikTok and its clones and not appear to have a halo effect radiating on the predominant short-form vertical video platform? Well, a few things about that.

First, Snapchat may be a short-form video platform, but its sweet spot is three- to six-minute-long videos, which are exponentially longer than the sub-60-second videos being created for TikTok et al. That presents an obstacle for short-form video creators to extend themselves to Snapchat because it would require them to create either wholly new videos or stretch the ones they make for TikTok and co.

That being said, there are ways to use TikTok, Instagram Reels and YouTube Shorts to pilot programming for Snapchat. Team Whistle has been increasingly using YouTube Shorts and TikTok to test ideas that could be built into shows for Snapchat, Caporoso said. And conversely, “we still make a very high volume of original content for Snapchat, and there are many cases where Snapchat is the first window and we filter it down to other vertical video platforms,” he said, noting that Team Whistle is producing 15 to 25 shows for Snapchat at any given time.

Second, Snap took a while to embrace creators. The platform initially focused on traditional celebrities and media companies and didn’t really try to ingratiate itself with creators until a handful of years ago. But today Snap is actively supporting creators as well as publishers. For example, the company hosts creator education events and sends newsletters to publishers to keep them apprised of trends on the platform and new product features.

Snap’s head of talent development Brooke Berry “really has carved a role for herself to really be the person that educates content creators of the different opportunities on Snapchat, what they can be doing when it comes to the content and how Snapchat can help play a role in that,” said Amron Lopez, senior talent manager at Whalar. 

Finally, the short-form vertical video halo effect is, in fact, catching Snapchat in its light. More to the point, that light is reflecting the existence of Snapchat’s revenue-sharing program to catch video makers’ attention, especially short-form video creators that are looking to diversify to other platforms, preferably ones that provide direct monetization opportunities.

“Snapchat has been really smart in being forthright of reporting on what creators are making on the platform and how this could really be a sustainable business line,” said Frantz. “That’s a big reason we’ve felt in the last year and a half that they’re really starting to prioritize creators and understanding the things that are important to them. That revenue-share — over the bonus program or stuff like that where [the revenue potential is] not quite as predictable — really performs well with creators.”

What we’ve heard

“Microsoft isn’t really a huge player in the premium video space even with Xandr. We’re a huge buyer of premium video, and I don’t even know who my Xandr sales rep is.”

— Agency executive

Netflix’s Q2 2022 earnings report

Well, Netflix’s no-good year worsened in the second quarter of 2022. But on the bright side, it didn’t get as bad as the company expected. Instead of losing 2 million subscribers as projected in April, Netflix only shed 970,000 subscribers overall, though it did lose 1.3 million subscribers in the U.S. and Canada — oof.

The key details:

• 220.7 million subscribers, up 6% year over year
• $8.0 billion in revenue, up 9% year over year
• Lost 970,000 subscribers in Q2, compared to the company’s projection of losing 2 million new subscribers in the period
• Lost 1.3 million subscribers in the U.S. and Canada

Subscriber losses

Netflix’s subscriber losses are most acute in its most mature markets. For example, it lost 2.1 million subscribers in the U.S., Canada, Europe, the Middle East and Africa, and the company was able to partially offset those losses by adding 1.1 million subscribers in the Asia-Pacific region and maintaining flat subscriber growth in Latin America.

This subscriber shedding stands in contrast to the fact that Netflix is coming off a pretty solid period, viewership-wise. In Q2, the streamer released season four of “Stranger Things,” which people spent 1.3 billion hours watching to make it “our biggest season of English TV ever,” the company wrote in its letter to shareholders released on July 19. And then in June, Netflix’s share of TV watch time in the U.S. reached 7.7%, per Nielsen, the service’s highest mark since Nielsen began releasing its The Gauge TV watch time report a year ago.

Ad-supported plan

Netflix plans to launch its ad-supported tier “around the early part of 2023,” the company said in its shareholder letter. The company didn’t provide many other details about its advertising plans, which most recently will have the company relying on Microsoft’s ad tech and sales apparatus. “We’ll likely start in a handful of markets where advertising spend is significant,” the company said. 

Additionally, Netflix said that the ad-supported tier will be in addition to its existing tiers, suggesting its price will be lower than Netflix’s current basic tier which costs $9.99 per month.

Rosy forecast

After a tough first half, Netflix expects to recover in the second half of 2022. In the third quarter, the company projects it will gain 1 million subscribers to a total of 221.7 million subscribers. That’s still short of the 221.8 million subscribers that Netflix had at the end of 2021, but considering how 2022 has been going for the company, any progress is positive.

Numbers to know

82: Number of minutes per day that kids and teens spend using TikTok, compared to 75 minutes for YouTube.

47%: Percentage share of surveyed U.S. advertisers who said they have cut back connected TV ad spending because of macroeconomic issues, compared to 42% who have cut back traditional TV spending.

$9.99: Monthly subscription price for Disney’s ESPN+ starting next month, a $3 increase.

25%: Percentage share of U.S. households that subscribe to at least nine streaming services.

39%: Percentage share of streaming watch time in May represented by U.S. adults who were 50 years old and older.

What we’ve covered

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.

The cases for and against Netflix picking Microsoft to power its advertising business:

• Microsoft provides Netflix with an ad tech vendor that doesn’t operate a competing streaming service.
• However, Microsoft has yet to establish itself as a strong player in the streaming ad market.

Read more about Netflix’s Microsoft deal here.

What we’re reading

A deep dive into Hollywood’s diversity efforts:
The Hollywood Reporter spoke to a number of entertainment companies’ chief diversity officers about the work they are doing to keep companies’ eyes on the ball and the challenges they face in that undertaking.

Hulu outpaces Disney+:
Hulu has added more new subscribers than Disney’s flagship streamer for the last six quarters, though the ad-supported streamer has had a hard time holding onto subscribers, according to The Wall Street Journal.

YouTube continues to poach Twitch’s stars:
YouTube has been baiting Twitch’s top streamers to switch over to the Google-owned video platform for several years, and while money is a major motivator, streamers say that another lure is YouTube’s creator support, according to The Washington Post.

Hollywood’s COVID protocols stay in place:
Film and TV studios and unions have agreed to keep the COVID-related health and safety guidelines in place through the end of September, according to the Los Angeles Times.

Disney’s upfront haul:
Disney secured $9 billion in commitments during this year’s upfront negotiations, with 40% of that money earmarked for the company’s streaming and digital video inventory (the same percentage as last year), according to Bloomberg.

As online content and e-commerce have converged during the Covid-19 pandemic, large and small brands alike have been experimenting with live shopping to entertain and educate shoppers while also reaching potential consumers on new platforms. Despite social and e-commerce platforms investing in both tech and content, advertising agencies say that not all clients are open to buying what the tech giants are selling.

Yomei Kajita, svp of paid social at digital marketing agency 3Q/Dept, said it’s “super strategic” for social media platforms to integrate with e-commerce companies like Shopify. Although it’s especially helpful for small and mid-sized businesses that maybe don’t have many internal resources, he said the integrations aren’t enough on their own without other features such as product drop reminders, tags from creators and other features to help.

“Native checkout alone as part of the social commerce offering isn’t significant enough of a value-add for users of these social apps,” Kajita said. “Because they could just go to the website and purchase something.”

Live shopping has been popular in China for years, but adoption in the U.S. is more recent. In 2019, Amazon introduced Amazon Live — a platform for shoppers to watch live chats and learn about various products — which has evolved from influencers hosting online events to featuring celebrities like actor Kevin Hart and Miranda Kerr earlier this month during Prime Day 2022.

In 2020, Walmart became the first company to do a shoppable live stream on Tiktok and since then has hosted a number of others on other platforms such as Twitter. Last fall, Hasbro did its first live shopping event on Instagram and Facebook Live. Newer platforms have also gained traction such as NTWRK, a live video shopping app that’s collaborated with a range of clothing toy, art and accessory brands.

Introducing live shopping within existing social platforms has several key challenges, said Joe Gagliese, co-founder and co-CEO of the digital marketing company Viral Nation. Platforms like Instagram and YouTube are “battling psychology” because users haven’t been conditioned to buy directly through them yet. However, he also cautioned: “When you play with the audience too much or change things too quickly, you can really cause a negative effect.”

“What I find so frustrating in this space on behalf of these platforms is America is big,” Gagliese said. “And a 40-year-old woman in America is going to shop very differently than millennials.”

There’s also the question of whether influencers are influential enough: A January report by Forrester found that although 54% of U.S. adults that saw a shoppable video said they’ve bought something through a shoppable content link, just 17% of U.S. adults said social media influencers are a top way they find new brands.

Although some agencies have clients experimenting with live commerce, others are seeing slow adoption. Barry Salus, associate media director, activation and analytics at McKinney, said YouTube is still “more of the leaned back and be entertained type of space” rather than a place where people are in the mindset to make active purchases.

“Some clients are gung-ho and ready to do it and see the numbers move quickly and others don’t need to be first movers,” he said.

Forecasts predict live-streaming revenue to continue upwards. According to Statista, sales from e-commerce live-streaming in the U.S. are expected to rise from $11 billion in 2021 to $17 billion in 2022 before reaching $35 billion in 2024. The retail social commerce space also continues to grow. Forecasts by eMarketer predict sales from retail social commerce overall are expected to reach $45.7 billion this year and $79.6 billion in 2025 — more than double the $36.62 billion in sales seen in 2021.

Despite the growth, other marketers aren’t making shoppable commerce a priority. A survey of 400 marketers conducted by the digital agency 3Q found that CPG, retail, tech and financial services brands all said TV-like shopping content like live streaming was the least likely to be a priority for their social commerce strategies.

“There is just too much choice in the U.S. in my opinion,” said Sucharita Kodali, vice president and principal analyst at Forrester. “One cannot compare the U.S. to China. The Chinese consumer has far fewer entertainment options and alternative uses for their time and in that void, live shopping has legs. In the U.S., we’ve had QVC for decades. It’s a small market in the U.S.”

For better or worse, Faze has become a bellwether for esports. Since it launched in 2010, it has become arguably the most prominent branded company in esports. It has also struggled to turn a profit over the same period. Not many organizations can sum up both sides of esports so succinctly. No wonder its new status has sparked excitement and concern in equal measure. 

Here’s a sample of that chatter based on conversations with industry executives following the organization’s announcement.

For: Faze Clan can sell pretty much anything to its legion of fans

At least that’s the impression from the esports organization’s kaleidoscope of commercial partners. From crypto companies to entertainment companies like DC and Disney, anime sensation Naruto to NFL, there’s no part of popular culture that Faze doesn’t seem confident it can reach on behalf of marketers. It’s a confidence that seemingly grows with every partnership — each one brings more potential fans.

This flywheel effect has served Faze Clan well to date. It could become even more crucial moving forward. The days of investors being enamored with audience growth are over. Now, they want to know how media companies can convert that attention into money over and over again. Doing this every quarter will stretch Faze’s ability to negotiate bigger, longer partnerships with marketers. Not least because esports organizations aren’t contending for smaller pots of media dollars anymore. Increasingly, it’s the larger media promotion and partly below-the-line budgets that are being used by marketers to pay-to-play in esports. Then again, these budgets are the first to get cut by marketers when times get tough.

Against: Getting a fix on Faze’s value is tricky

For a time, Faze was heralded as the most valuable esports organization thanks to the $1 billion valuation of its plan to go public. Hype and partnerships will do that for a business — let alone one that wasn’t profitable. Not that there’s anything wrong with this per se. After all, immediate profitability has never been a prerequisite to going public for any business. It’s really about how well CEOs are able to convince investors that they will turn a profit eventually. Narrative spins are par for the course at these levels of corporate dealings. But these aren’t normal times: the economy is a mess. In turn, fast growth narratives are no longer enough on their own to loosen the purse strings of investors. Instead, they want to see more business fundamentals — something Faze bosses have struggled to overcome.

That was clear in April when Faze’s updated S4 filing radically changed the financial picture. The update revealed the company’s EBITDA (earnings before interest, taxes, depreciation and amortization) for 2021 was $9.7 million less than the $50 million it had projected. Earnings from 2022 through 2025 were also expected to take a hit. In short, inaccurate revenue forecasts knocked the company’s expansion plans and created further uncertainty over the success of the public offering. It suggests Faze may have been overvalued. Sounds strange, but that’s not as surprising as it sounds.

“In general, there is either decent esports knowledge or decent finance/investment/commercial knowledge, but it’s rare investors have both,” said Malph Mimms, md of sports marketing agency Strive Sponsorship. And he would know. Private equity and venture capital seek specific esports market advice from Striv to supplement their finance, investment and commercial knowledge, Mimms continued. That knowledge gap is even starker among smaller independent investors who don’t have the same resources available to them, and who make up a significant portion of public market investment. “As such you get the case where thousands of small investors essentially then assume a lot of risk for an esports business (via their cumulative investment),” he added.

For: esports is becoming more personality-driven

Few esports organizations understand the cult of personality better than Faze. Even fewer understand how the fandoms of those personalities can become the bedrock of a media business. To be clear, Faze doesn’t have it all figured out either. Chances are its financial forecasts would’ve been different if it had. But the organization does have a rough idea of how this could play out, which is essentially it becoming a platform for talent like a record label. This should come as no surprise given Faze CEO Lee Trink’s history in the music industry. The way he sees it, talent will leave if they’re not given the freedom and support to pursue the projects they want. Better to find a way to grow business and reputations in tandem. Do it well and there’s a lot of money up for grabs. Not least because media budgets for esports are growing. Turns out, it’s the culture around esports, not the competitions themselves, that marketers are really interested in. Personalities are a window into that culture — much more than any team or tournament. But personalities can also be a law unto themselves, which links directly to the next point. 

Against: personalities aren’t always on brand

Faze bosses know about this all too well. Most recently with Cented — the professional Fortnite player who was dismissed from the team earlier this month after he used racist language on a stream. These issues aren’t unique to Faze. Esports’ toxic culture is well documented. It’s just that Faze has had its fair share of issues. Members of the team have had to apologize for sexist, racist and homophobic comments over the years. CEO Trink has tried to be decisive in these moments, no doubt. That said, these instances haven’t gone away completely. Not that this has hurt Faze’s ability to get deals done — on the contrary. Moving forward, however, these comments will have to stop. Otherwise, it’s hard to see either marketers or investors wanting to spend their money with Faze.

For: it’s a good time to be greedy 

Faze has made it clear that it will use the capital generated from being a public company to go on the acquisition trail. It’s the fastest way to build a more rounded, sustainable business. It’s also expensive — though that may not be as much of an issue in the current economic climate. These days, it’s harder for entrepreneurs to raise capital, irrespective of the maturity of their business. If it wasn’t already, Faze could become an attractive suitor. Here’s a more detailed take, courtesy of esports journalist and longtime industry watchdog Jacob Wolf’s newsletter The Jacob Wolf Report: “As mid-sized gaming and tech companies progress through the economic downturn, some may find themselves seeking acquisition. Faze, now with presumably a few hundred million dollars cash on hand and potentially valuable stock as a bargaining chip, could be the ultimate acquirer.”

Against: esports isn’t recession-proof

In fairness, few areas of the media sphere will make it through the downturn relatively unscathed. So far it has been nothing short of a bloodbath for many companies. Netflix and Disney’s share price had tanked 75% and 45% respectively earlier this month. And these are the more established media companies. It’s hard — albeit not impossible — to see how esports organizations avoid these contractions. Right now, investors are down about the entire media category. The Netflix model — spend big and sacrifice profit in the name of growth — is not as alluring as it once was. Esports businesses, in particular, will need to read the room as they plot a course via public markets to sustainable growth. 

“Esports remain a very small part of the overall games sector, are generally unprofitable and primarily driven by marketing spend,” said Piers Harding-Rolls, research director at market intelligence firm Ampere Games. “The funds raised from this listing are important in helping Faze continue this transition, with the aim of being able to tap into more profitable revenue streams in the future.”

The announcement comes as many parts of the world are suffering record high temperatures that offer further evidence that man-made factors are creating a dangerous tilt toward devastating long-term climate change.

GroupM, in explaining the framework to reporters on Monday, repeatedly cited the need for industry-wide cooperation among media companies and fellow holding companies — using trade organizations as a means for establishing cross-industry collaboration. Important benchmarks such as agreed-upon standards of measurement of carbon usage across media are essential to the industry making progress, said the two GroupM executives who presented the framework.

“We think it’s very important that it’s not just GroupM’s measurement framework,” said Krystal Olivieri, global chief innovation officer at GroupM & Choreograph. “We’ve invested the time and the money and the effort to get here, but we really want universal adoption… all of the holding companies, clients, platforms to lean in and to help feed this similarly to how we did with GARM [Global Alliance for Responsible Media], to make sure we can move this forward.”

But there seems to be little unity at this early point, at least among fellow holding companies — and even a bit of reluctance among the 4A’s, the agency world’s trade organization and the Association of National Advertisers, both of which declined to comment.

Havas Media Group, IPG’s Mediabrands and Mediahub agencies each all declined to comment. Neither Omnicom Media Group nor Publicis Media replied to a request for comment. 

Peter Huijboom, Dentsu International’s global CEO of media and global clients touted his agency’s own efforts to combat climate change, pointing to research the company released last year calling for industry unity on the subject.

“Dentsu is a firm believer in the need to collaborate across the industry to truly address and tackle society-critical topics like climate change — this is not something one organization can do alone,” Huijboom said.

GroupM is fully aware the crisis won’t be solved overnight but is making strides to get to that goal, such as its recent move to consolidate the number of sales-side platforms it works with to reduce the number of middlemen, and therefore the amount of energy used to make investments for clients.

“We know, and we’ve accepted the fact that perfection here is a moving target, and it’s not going to be a snap of the fingers,” said Olivieri, who noted that such moves put data directly in the hands of advertisers to make more informed decisions.

Oliver Joyce, global chief transformation officer at GroupM’s Mindshare, who presented with Olivieri, argued that the industry needs to move much faster. “We have a track record of coming together” to solve other issues such as privacy. “But we need to move much much quicker on climate. And what we’re saying here is this is much more complex but there is absolute urgency and I think good intent in the industry to do this.”

The partnership includes out-of-home and social media ads, as well as sweepstakes designed to expand SKYY’s reach and mission. The sweepstakes will run until August 5 and will give entrants a chance to win tickets to see the movie. There will also be a series of signature cocktails inspired by the movie’s ominous themes that will be served at select theater chains across the country.

Through the campaign, SKYY is looking to connect with a new generation of vodka drinkers and tout the relaunch of its liquid and bottle design. “We thought this might be an opportunity on where to engage the promotion of the movie and the promotion of the product,” said Yelle. SKYY parent Campari now plans to take a more holistic approach to marketing with all of its divisions. Rather than have one team for each brand’s customer, the company wants to find ways to promote several products to a wide range of consumers.

It is unclear how much of Campari’s advertising budget is allocated to the campaign as Yelle would not share overall budget specifics. According to Pathmatics, the company spent $460,000 in 2021 on marketing efforts. Yelle noted that the spend was seven figures and most of it went toward digital over OOH advertising, which includes Instagram, TikTok, YouTube and Twitter as well as connected TV. Yelle also shared that 80% of the ad split on social platforms went to Instagram and Facebook.

It has become increasingly popular for marketers to work with movie studios like Universal Pictures to increase their audience reach. As previously reported by Digiday, Liberty Mutual, Bushmills and Booking.com have also recently partnered with film studios on co-marketing efforts to boost brand awareness.

After spending so much of the last few years isolated, Gen Z consumers are especially craving occasions worthy of dressing up and going out — hence SKYY’s tie-in with Universal Pictures.

“Jordan Peele’s movies are the ultimate conversation starters, and something like the NOPE x SKYY cocktails offer the perfect companion for a post-movie debate,” said Hannah Hickman, svp of client strategy and head of youth culture practice at Omnicom’s cultural consultancy Sparks and Honey. “This will be especially appealing for a generation that loves peeling back the layers and finding hidden meaning.”

It has become increasingly common for consumers to expect more from theater experiences, especially because they are leaving their homes for such experiences. “This particular co-branding benefits from a surprisingly-rare interest in driving genuine, practical types of engagement, particularly SKYY cocktails at theaters and an opportunity to win tickets to see the film,” said Brady Donnelly, global CMO of the integrated, tech-enabled, omnichannel global distribution platform for beauty and wellness brands PCA Group.

This year, Digiday’s survey found that 79% of agency pros said Instagram is appropriate for their clients’ brands, down from 88% last year — a stat that tracks with previous Digiday+ Research coverage that found the social platform is also losing brand-building clout. Meanwhile, respondents who said Twitter is appropriate for clients’ brands fell from 62% last year to 54% this year.

Survey respondents who identified Twitter as somewhat appropriate for their clients’ brands remained steady at 31% this year. But for Instagram, that percentage rose significantly: 21% of agency pros said Instagram is somewhat brand-appropriate for clients, compared with 11% last year — a potentially troubling sign for the Meta-owned property. But it is also worth noting that no survey respondents said Instagram and Twitter are not appropriate at all for their clients’ brands – even as news of Twitter’s business moves gets messier.

Digiday’s survey also found that Facebook and YouTube are down this year for brand-appropriateness, according to agency pros — despite research showing publishers continue to bet heavily on Facebook. The decline for these two platforms appears less steep than that of Instagram and Twitter.

Three-quarters of respondents said Facebook is appropriate for their clients’ brands this year, down from 80% last year. Meanwhile, 78% said YouTube — which is potentially getting ready to let third-party ad tech companies serve ads on the platform — is appropriate for clients this year, compared with 83% last year.

The number of agency pros who said YouTube is somewhat brand-appropriate for clients remained unchanged this year at 15%, while that percentage rose for Facebook from 16% last year to 21% this year. Just as with Instagram and Twitter, zero respondents said Facebook is not appropriate at all for their clients’ brands, and very few said YouTube is not at all brand-appropriate.