Month: July 2022

Proven enough to be recession-proof?

The key hits:

• Brands and ad agencies’ commitments to support and invest in Black-owned media companies have had an incremental but positive impact on some of those businesses.
• The threat of a recession has executives worried that those allocated ad dollars will be the first to get cut if budgets get squeezed.
• Others argue the industry has changed enough that advertisers won’t renege on the commitments made – and that if budgets shrink, it will not have an outsized impact on Black-owned publishers.

Black-owned media businesses are seeing some impact from the ad spend and investment commitments made since 2020 by brands and ad agencies. While some executives worry that a possible recession may cut back those improvements, others believe these publishers have proven their value to advertisers and should be able to withstand any brand budget-tightening.

Sticking to those commitments amid the gusts of economic headwinds will be another way for advertisers to show their claims to support Black-owned publishers were made in good faith.

Brands that have made these spending commitments “on paper” allocate around 2% to 10% of their budgets on media with “diverse media” (non-white owned media or media targeting non-white audiences), according to Lisa Torres, president of Publicis Media’s multicultural practice Cultural Quotient. Historically, that money would be at risk amid an economic downturn, but Torres said she believes clients “will maintain” that spending should a recession hit.

However, even if maintaining that spending was sustained — it still only represents a sliver of advertisers’ budgets, executives of Black media businesses told Digiday.

“Brands could use that incremental lift that diverse media provides, that will positively impact [a brand’s] bottom line in the recession,” said Dévon Christopher Johnson, CEO and founder of BleuLife Media Group and co-founder of non-profit organization The Black Owned Media Equity and Sustainability Institute. Budgets, he argued, should get cut from the top “because you’ve already been spending there. You want new customers, to grow your customer base… Give it to us, don’t take it from us.”

Incremental improvements

After the Black Lives Matter movement reached fever pitch in the summer of 2020, marketers vowed to support Black-owned media companies with a portion of their ad budgets. Agencies got in on the conversation — last July, as an example, Publicis Media formed a two-year initiative called the Once & For All Coalition to support and invest in minority-owned media. It now includes over 30 of Publicis’s clients.

Group Black — which was co-founded last year by CEO Travis Montaque, chief strategy officer Bonin Bough and chairman Richelieu Dennis to urge marketers and agencies to shift more of their ad spending to Black-owned media outlets — has brought in about $500 million in ad-spending commitments from companies such as Procter & Gamble and agencies like WPP, Dentsu and IPG, according to The Wall Street Journal.

These efforts have led to ad revenue growth for some Black-owned media businesses, according to four executives who spoke to Digiday.

Morgan DeBaun, CEO of Blavity, said ad revenue has grown by 56% in the first half of 2022 compared to the first half of 2021, though she did not provide specifics.

Thanks to some deals with new advertisers, annual ad revenue for digital media company Her Agenda increased by 140%  in 2021 compared to 2019, said Rhonesha Byng, CEO and founder of Her Agenda and co-founder of BOMESI.

There are “way more” advertisers working with Black-owned media businesses this year — though the ad budget increases have been “incremental,” said Johnson, without naming specific companies.

Diverse media investment and vendor lists have grown, according to Torres. O&FA client members have a 27% higher budget allocation toward diverse-owned media than Publicis Groupe’s non-member clients. O&FA members advertise with 16% more diverse-owned and targeted suppliers than non-members. (Publicis declined to share specific investment figures).

‘The first thing that gets cut in a recession is us’

Losing this investment as the economy faces unsteady conditions has some executives worried.

“The first thing that gets cut in a recession is us,” said Joe Anthony, founder of creative and digital agency Hero Collective and media and tech company Hero Media, which formed this month. “If you are brown, you get turned down. We start being looked at as a ‘nice to have,’ not a ‘need to have.’”

During a recession, brands increasingly focus on lower-funnel marketing (such as performance-based metrics, like conversions) as opposed to upper-funnel marketing (such as brand building metrics), Anthony argued. That can “filter out” investments in diverse media, with business models and ad tech infrastructures that are often not fully built-out for those lower-funnel metrics, he said. Diverse media “will suffer as a result,” Anthony said.

‘We have changed behavior’

However, Group Black’s Bough is “not worried” about brands and agencies cutting diverse media ad spend should a recession hit. “The results that we see in the partnerships that we do is outsized returns. So as long as organizations continue to look at the business case behind this investment, then I’m not worried.”

Publicis’ Torres agreed: “Enough has changed in our industry, to prove and show value in [diverse media’s] proposition.”

If anything, the recession would reduce ad budgets across the board. Overall ad spend will decrease, but the list of publishers that get those dollars will stay the same, Torres said.

“That’s the change. Historically [that budget] would just go away, and [brands] would cut all of it,” she said. “But that’s not happening. We have changed behavior over the last two years. They have developed partnerships and see the value in the media… so they’re willing to keep it on. What we want is equity in that. We don’t want just one set of vendors to get cut.” – Sara Guaglione

What we’ve heard

“The financial services space is more complicated. There [are] compliance issues that don’t exist in other categories. You have to sort of prove yourself with a lot of issuers of credit cards, as an example, before you can become an accredited affiliate partner for them.”

— Dow Jones chief revenue officer Josh Stinchcomb

The role of registration walls in sparking subscribers

Publishers’ subscriber growth is slowing compared to the Trump era and early days of the pandemic, but a “subscription slump” may be too harsh of a classification, according to Michael Silberman, svp of strategy at paywall platform Piano. Editor’s note: Piano is a contracted vendor with Digiday.

In Q1 2022, the median number of active subscribers across 120 of the largest sites on Piano’s platform grew by 5.2%, down from 11.5% growth in Q1 2021 and 13.5% in Q1 2020, according to Silberman. To slough the subscriber slowdown, publishers may benefit from running readers into a registration wall since they cannot necessarily count on converting loyal readers as frequently, as indicated by Piano’s 2022 Subscription Performance Benchmark Report.

In the first report Piano conducted in 2021, a larger group of readers converted after spending 10 days on the site then in 2022. Meanwhile, more readers are converting on their first day of visiting the site, suggesting publishers should focus on ways to convert new readers more, including by implementing registration walls.

“That’s always been the assumption [that] it’s the loyal users who subscribe, but over time, the number of loyal users that are in that pool have either chosen to subscribe or decided not to subscribe [and] that available pool shrinks,” said Silberman.

Registration walls are proving to be a boon to publishers’ subscription businesses. The conversion rate for a registration wall is about 10 times higher on average than a paywall, Silberman said. And registered users are 45 times more likely to convert to subscribers down the line, serving as another avenue to get readers on the path to becoming a paid subscriber.

“You need to think about [registered users] as a tier of customers that you want to communicate with,” said Silberman. “And not just send them messages about why [they] should be a subscriber, but also provide them some value” in exchange for the information they’ve willingly shared. – Kayleigh Barber

Numbers to know

-50%: Percentage decline in interactions with news articles on social platforms since the start of 2022.

$2 million: How much money seven BIPOC-led news outlets in Georgia will receive from The Pivot Fund.

$36 million: How much revenue Morning Brew generated in the first half of 2022.

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

In esports media, layoff season is in full swing:

• Esports media outlets are in the midst of a wave of layoffs that began in the spring.
• Last week Inven Global laid off the majority of its editorial staff.

Read more about esports media here.

Why The Wall Street Journal is centering personal finance on its new commerce site Buy Side:

• The Wall Street Journal has finally entered the commerce space after spending a year figuring out what that business will look like.
• Dow Jones chief revenue officer Josh Stinchcomb and Buy Side head of content Leslie Yazel joined the Digiday Podcast to talk about the commerce site’s launch.

Listen to the latest Digiday Podcast episode here.

What creators say separates TikTok from Instagram Reels from YouTube Shorts:

• Creators are taking advantage of the short-form vertical video platforms’ similarities to cross-post videos.
• But they have noticed that trends are more powerful on TikTok, augmented reality effects do well on Instagram Reels and YouTube Shorts is a shortcut to long-form video.

Read more about short-form video platforms here.

While some publishers are slowing hiring plans, publishers like BuzzFeed and The Washington Post are not:

• After focusing on “critical” hires through April, BuzzFeed has resumed its regular hiring process.
• The Post is still on track with expansion plans set out at the start of this year.

Read more about publishers’ hiring plans here.

House of Highlights’ creator-led content triples revenue:

• Creator-led content accounts for 35% of the Bleacher Report-owned property’s overall revenue.
• That share has grown by 25% in the past year.

Read more about House of Highlights here.

What we’re reading

Dotdash Meredith wants to be Consumer Reports:
The media company has been rolling out product recommendation sites connected to various Meredith publications in an effort to increase its commerce revenue, according to The Wall Street Journal.

Semafor preps video push:
The upcoming news outlet founded by Ben Smith and Justin Smith has hired the co-founder of Vox.com’s video division Joe Posner to do the same for Semafor, according to The Hollywood Reporter.

Clubhouse survives:
Clubhouse has shed 72% of its monthly active users from February 2021, but the live audio app has been able to manage its costs to subsist on the $310 million in funding it’s raised to see it through several more years, according to The Information.

Google offers to (sort of) spin off its ad tech business:
To appease antitrust regulators, Google has offered to spin off its ad tech business into a separate company that would still be owned by Google parent Alphabet, according to The Wall Street Journal.

“What [some brands] really believe is in white supremacy,” said Rachael Kay Albers, creative director and brand strategist at RKA Ink, a branding and marketing agency. “That’s what their actions are proving. And yet, they’re using PR campaigns to tell the public a different story.” 

For example, telecom giant AT&T joined the slew of companies promising to reimburse travel expenses for employees seeking out-of-state abortions. At the same time, it came under fire after news outlets reported that the company was, “the biggest corporate donor, sending more than $1 million to backers of these [anti-abortion] laws in 13 states,” Business Insider reported. (AT&T did not respond to request for comment in time for publication.)

And last spring Atlanta-based brands like Delta Air Lines, The Home Depot and Coca-Cola faced backlash and calls for boycott from grassroot activists who criticized the brands for taking a soft stance on Republican-backed voting legislation, which caught the name Jim Crow 2.0.  It’s also worth noting that Delta specifically faced major blowback given its political donations to the sponsors of that legislation, according to Slate. 

The advertising industry at large has failed to follow through with public promises made to support racial justice for Black people in America, according to Naakie Nartey, strategy director of content and brand at Dagger ad agency. When looking at the social issues of today, from abortion rights to voter suppression, “it’s difficult to assume these topics would follow a different trend,” Nartey said. Meaning, since brands let racial justice fall by the wayside, it raises the question if issues such as abortion, voter suppression, marriage equality and others will meet the same fate.

The pressure on brands to voice their support for social issues has been mounting for at least the last two years, reaching a fever pitch after the murder of George Floyd and the rise of the Black Lives Matter movement. Yet, advertisers have notoriously treated these moments as “tentpole events” for marketing messages as opposed to the massive calls for awakening that they are, said Jess Weiner, founder and CEO of Talk to Jess, a strategy and consulting company. 

“They’ve got to be part of real systemic change, whether that’s money, whether that’s corporate policy, whether that’s withdrawing support [for political candidates who do otherwise]” she said. “They can’t get on the right side of this issue without taking a risk.”

To Weiner’s point, U.S. companies like Starbucks, Amazon and Nike have committed to cover travel-related costs for emplolyees wishing to obtain an abortion in another state. (Not all employees, however, are covered and whether or not there will be legal implications has yet to be determined.) 

That’s not to say every brand needs to have an opinion on everything. According to Deb Gabor, founder and CEO of Sol Marketing, a brand strategy consultancy, “Sometimes, neutrality is a stance.” She added that a brand could ruin its reputation, and thus sales, by picking and choosing issues that aren’t aligned with its DNA.

It’s an ongoing debate in the marketing industry, considering the social responsibility of brands and businesses. Oftentimes, brands will find themselves pitted against making money or being ethical, as “those two things are often in conflict,” Albers said. Still, as much power and influence companies have, there’s something to be said for brands who do take a stand. 

“We live in a globalized society, where even more than our individual governments, the brands, especially the multinationals, they run the world,” Albers said. “It’s inevitable that we do need brands participating in the change.”

If the last two years have proven nothing else, it’s that brands are ultimately risk-averse and it’ll take time to authentically support the issues of today, said Nartey.

“It takes hard work and intentional action over an extended period of time to make a true impact,” she said via email. “And brands have to honestly ask themselves if they’re in it for the long haul.”

Instacart+’s streaming advertising campaign began with a 30-second animated spot marking an all-new creastive direction that shows consumers what happens when another person is added to their account and how they can “plus it up” by adding that person’s name to the order.

“Our goal is to connect the brand closer to bringing people together,” Jones said. The brand is looking to move people away from thinking about Instacart as simply a transactional service that does their shopping and position it as an inspirational shopping experience that allows them to discover new items outside of food from brands including Sephora, Best Buy and Lowes.

It is unclear how much of Instacart’s advertising budget is allocated to marketing initiatives, as Jones would not share overall budget specifics. According to Kantar, the company spent close to $82 million on advertising in 2021 and close to $20 million so far in 2022. Jones noted that the spend was on paid ads for Twitter, Facebook and TikTok. 

Instacart’s previous strategy was focused on the everyday grocery shopper before the Instacart+ rebranding. However, the casual consumer did not fully grasp Instacart Express as a delivery option. “We thought it was really nice that we could speak to the full suite of benefits that Instacart+ represents,” said Jones, adding that the company wanted to get away from the express branding to emphasize Instacart+ has more capabilities.

“So we realized, ‘hey, this is a bit confusing for consumers. How might we rebrand this program to make it a bit more clear?” said Jones, adding that the meaning implies “you plus me, plus roommate, and mom plus dad.”

“The delivery companies are taking a page from the streaming business. By sharing accounts, they reach customers who will become independent account holders in the future,” said Mitch Ratcliffe, partner at Metaforce.

Since the pandemic, delivery intent, which had originally been viewed as inessential, has now become more the norm. It is important to note that during extended periods of free delivery or $1 deliveries, the most common hindrance for users had been exorbitant delivery fees. With Instacart+, users will have unlimited deliveries.

“Providing free delivery helps increase order frequency by removing this obstacle, while the subscription creates a slight sense of urgency to leverage the benefits. Both increase the lifetime value of customers as a result,” said Caleb Hutchings, vp and director of search at global creative media agency Mediahub.

The impending recession could lead to platform prices on Doordash and UberEats becoming too high as inflation rises and merchant commissions increase. The Instacart+ relaunch was not rolled out because of the recession, Jones said, but the company is looking to be prepared. “Obviously, we look at the data on a daily basis. So I think we all saw inflation and we were aware of the factors that contributed, but it wasn’t proactively planned to coincide,” Jones said.