Less BS, More Facts, Some Opinions
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Benjamin Franklin once said, “An ounce of prevention is worth a pound of cure.”
This year, many organizations have in one way or another contemplated how to prepare their business for broader economic changes, including downturns. According to Digiday+ Research, 53% of agencies think a recession will occur in the next six months, and 66% think one will occur in the next year. The American Association of Advertising Agencies president and CEO Marla Kaplowitz has been preaching preparedness with constituent agencies, media and otherwise — from how to retain talent to honing their financial acumen.
Call it what you will — economic uncertainty, economic downtown — or as Kaplowitz refers to it, the “R” word. With a potential recession still on the table, the 4A’s leader spoke with Digiday about her best advice in talent, business development and finance for agencies in the current economy.
In terms of the business growth and financial knowledge, Kaplowitz argued that agencies should keep investing in business development as well as tools such as automation, even in a slowdown. On the financial side, there is also a lot that agencies can sharpen during this time — from diversifying client rosters to having a screening model for pitches.
“If we go back to that 2008, 2009 recession, resilient agencies … did all of these things,” she said. “They really focused on how to protect their talent, protect their clients, but also look at what was new and next and make sure they invested in the appropriate way.”
This interview has been edited for space and clarity.
What challenges are agencies facing on the talent side?
As it relates to talent, we know that when there is an economic downturn, agencies can start pulling back on discretionary expenses, like training and development. We are really encouraging agencies not to do that, that this is an important time to actually be investing in talent — especially now, given what has happened in the past couple of years: the shift to hybrid work, the intensity of the past couple of years, as well as the fact that there’s been a lot more pressure because there was a talent shortage.
Now is the time to really make sure that you are not only investing in talent, but investing in people who have been promoted into managerial roles and need that training. People are looking for companies that are going to offer them career pathing opportunities that are going to invest in them not just in the short term, but the long term. And that’s actually why we’ve really changed a number of [4A’s] learning and development offerings. For example, we launched something called team leadership certification for managers that has been very popular, because people don’t have time to train.
So how can agencies improve talent retention and recruitment?
You have to make sure that you are investing in them, whether that’s their salary, but also making sure you have strong benefits for the employees and making sure that it’s not only fair, but competitive. Many agencies are doing pay equity analyses to ensure that they have the right approach. We see a lot of members augmenting their parental leave policies, for example, and making sure that they’re providing new offerings for their employees. Making sure that leaders know that by investing in their talent, they’re going to actually reap the rewards of that through greater retention and loyalty. And that’s going to be incredibly helpful, especially if we are going through a really challenging time and … the forecast is still a bit uncertain right now.
What can agencies do on business development to prepare for a downturn?
I know that seems very obvious, but sometimes [agencies] just need to be reminded that they need to maintain a diversified client roster. We tell them to think of it like an investment portfolio. … You don’t want to be saturated in any way. We also remind agencies that as they are looking at new business opportunities — and we know that’s the lifeblood of any agency — they really need to vet those opportunities carefully and make sure that they [are] looking at the category that the particular brand does and making sure that they have each category experience within the agency, or they have a very unique perspective or building idea for that brand. They know that they have the right kind of relationship also with the key decision maker as they accept that.
We also believe that agencies that don’t have a screening model already should absolutely develop one, because they may be dealing with a situation where they have scarce resources. They’re not going to have the ability to potentially get involved with as many pitches as they typically would have in the past. Automation is so important right now, as well as sustainability. We think it’s important to remind agencies that there are automation tactics that they can use to not only help them with potential talent gaps, help them increase accuracy, but it also allows the ability to free up time for people to focus on other areas that can add greater strategic value to that business growth and development.
How about an agency’s financial operations?
Agency operations is an area that tends to be under-appreciated and ignored. While it may seem obvious, it’s so important to remind agencies of the opportunities they have to eliminate discretionary expenses and focus on those related to how you’re going to keep your clients happy — client retention, client satisfaction, employee retention and motivation. And then be very laser focused on business development. We remind agencies to avoid any sort of long-term financial commitments, to keep a close eye on their business, their accounts receivable, their cash flow.
One of the more challenging aspects when we hit economic uncertainty is that marketers and brands get a bit brazen about asking for extended payment terms. It’s really unfortunate, and you see costs going up for everybody when someone is trying to push that — and smaller agencies really can’t handle it. It’s not a good way to do business if you want to truly have a partnership and be in it together. Agencies should reconsider the amount of new business pitches they have, and we also want to make sure that they are bringing current clients unsolicited new business building ideas. We think that’s an opportunity from a consulting standpoint, to address areas where they may be struggling.
What keeps you up at night?
What worries me is when marketers and brands don’t value agencies the way that they should, and treat them like a partner versus a vendor. And that’s when payment terms come up. That’s just not how you should be treating them if you want them to really be partnering with you. I very strongly believe in the power of creativity and the power of an external perspective with a breadth of understanding that has incredible talent. There’s a very unique type of people in agencies. It’s not for everyone. It’s very fast paced. I love having… people that are very entrepreneurial, creative and love to figure it out. So I really want to make sure that agencies get the respect that they deserve.
A hacking scheme that hit Fast Company on Sept. 27 has kept the website dark for nearly a week as executives investigate. The event should be taken as a warning sign to other publishers to take cybersecurity seriously, three current and former heads of technology at media companies told Digiday.
“This could happen to anyone,” said Eli Dickinson, co-founder and CTO at Industry Dive. “We are all vulnerable.”
A “dedicated attacker” is difficult to defend against, said Dickinson, who oversees tech and security at the publication. All it takes is “to just trick one person.”
Suggestions of nefarious activity began last Tuesday, after Fast Company’s content management system was hacked and offensive push notifications were sent through Apple News. This came after an “apparently related” hack of Fast Company’s website on Sept. 25 which shut down the website for a few hours, according to a statement on its website. (Inc., Fast Company’s sister site owned by Mansueto Ventures, was also shut down as a precaution). As of Monday evening, both sites were still down.
Jordan Scoggins, former IT director at Quartz, said this should be a “wake-up call” to other publishers. “Too many companies don’t take security seriously enough until it’s too late,” he said.
In its statement, Fast Company said it has retained a global incident response and cybersecurity firm to investigate the security breach, though it did not name which firm. Fast Company has posted a few stories to Medium and LinkedIn in the meantime, but wouldn’t comment further.
When asked what security measures — if any — were in place at Fast Company at the time of the attack; a company spokesperson declined to comment.
To prevent these types of attacks, Scoggins said, publishers should have a “multi-pronged approach” to cybersecurity that is “constantly assessed and evaluated and evolved over time.”
Here are some notable tactics, from conversations with current and former media company CTOs and IT directors.
Technology executives Digiday spoke with stressed the importance of multi-factor authentication. At its most basic, this process often requires an employee to log into the company’s website, get a text to their cell phone with a code and enter that code to get into the CMS, authenticating that employee’s identity.
Some companies use a hardware security key, which is essentially a thumb drive that an employee plugs into a computer to log into the website from a new device. This “rules out a whole category of attacks,” said Dickinson.
In terms of access, Dickinson said “the principle of least-privileged” can also help minimize the possibility of getting hacked: each employee has the least amount of access necessary to do their job. “Probably only very few people need to be able to send push alerts, for example,” he said.
A buzzy term in the world of cybersecurity is “zero trust.” This is the idea that “every person and every device has to authenticate every service individually,” Dickinson said. Services like iboss create an “edge” security platform — or firewall — where a user can’t get into a CMS unless they are using a device with that service installed, for example. Zero-trust services essentially whitelist certain VPNs or IP addresses. Christopher Park, CMO at iboss, likened it to a TSA security checkpoint at an airport.
Getting every employee to have a strong password is difficult, sources said. Multi-factor authentication and the principle of “zero trust” are tactics that can help prevent hacks, even if an employee has a weak password.
Companies should have security training for all employees, at least annually. This is often in the form of online classes, which walk employees through the dos and don’ts of cybersecurity, such as not clicking on suspicious links in an email and not sharing passwords. While described as “boring” and “annoying” by a few tech executives Digiday spoke with, these training sessions can help employees understand best practices, how to look out for phishing attacks and how to use more secure tools such as password management systems.
Publishers can pay an outside company to try to hack into their websites to find weaknesses in their cybersecurity measures. These services “test for holes” and should be done at least once a year, Scoggins said.
“With the pace of technology, environments change constantly… so it has to be constantly assessed,” he said.
Internal IT teams at media companies — especially smaller ones — are usually stretched thin. Few companies have dedicated CTOs or information security officers, or a team devoted to overseeing these responsibilities.
The shift to remote work has also made some companies more vulnerable to cybersecurity threats, with more employees using personal devices and unsecure home Wi-Fi networks.
“The way that data applications and users interact with other services has all changed. They used to be in data centers; they used to be in offices. Nowadays, with applications like [software-as-a-service] applications in the cloud and users being remote, those applications that people log into are now exposed to the public,” said Park.
If and when a security breach happens, there needs to be a plan in place to determine what to do next to minimize harm and recover, Dickinson said.
Productivity platform Notion is ramping up its out-of-home efforts with ad placements across the globe to boost brand awareness beyond U.S. borders. In August, the brand rolled out its first international brand campaign with billboards across eight cities: San Francisco, New York, Toronto, London, Dublin, Paris, Tokyo and Seoul.
“We can invest a little bit more in the U.S. to build our awareness there, as well as these markets where we’ve already seen some traction and some adoption,” Kira Klaas, Notion’s global head of campaigns, said, referring to the brand’s recent growth and brand awareness efforts.
Notion is a U.S.-based, project management and note-taking app founded in 2017. As the business has grown, it has started gaining traction in other markets outside of the U.S., like Asia and Europe, Klaas said. In response to “the majority of our business being international,” Notion is ramping up brand awareness efforts via a global OOH campaign to capitalize on the interest, Klaas said.
At present, about half of Notion’s media mix is dedicated to awareness, which includes OOH and streaming video. The other half is made of a more targeted mix, which includes social, according to Klaas. She did not provide further details. According to Kantar, Notion has spent more than $7 million on marketing this year, nearly doubling last year’s spend of $3.8 million. Those figures do not include social, as Kantar does not track those numbers. Per Pathmatics, Notion reportedly doubled its digital investment, spending $6.2 million on marketing this year, compared with $2.6 million last year.
Notion isn’t alone in placing its bets on OOH ads. Startups babycare brand Coterie, Sunday Scaires CBD and BellieWelli snacks have also launched OOH campaigns this year. According to a recent report from the Out of Home Advertising Association of America, OOH ad revenues in the second quarter of this year hit $2.62 billion, putting it on par with the pre-pandemic record highs of 2019. As conversations around an economic downturn heat up, marketers have said they’ll continue investing in OOH.
Prior to its most recent campaign, OOH marketing wasn’t included in Notion’s media mix, Klaas said. “We’ve never advertised like this before — to this scale, to these types of channels,” she said. “We haven’t invested in brand marketing or advertising before because Notion has seen really incredible organic traction with its community and social.”
As Notion revamps its marketing strategy to build more brand awareness, the company has dialed down effort and spend on things like display and discovery ads to lean more into YouTube ads, where there’s more “time and space to explain what the product is,” Klaas said. For this specific campaign, channels like OOH, streaming video and podcasts make up a big chunk of Notion’s media mix. Klaas did not provide further details.
“Budgets for Q4 may tighten with limiting travel, expenses and spending,” Patti McConnell, co-founder and managing partner of ad agency Something Different, said via email. “But if the concept is impactful, it can be timeless, provide brand longevity, showcase the brand at its best and be authentically unifying.”
As Notion and other digitally-native brands continue growing, OOH is becoming a bigger part of the conversation and media mix as they look to boost brand awareness, grab more shopper attention and better position themselves as competitors to major legacy brands, said Joe Burns, group communications strategy director at ad agency BBH USA.
“My hunch about this is that we’re seeing a lot more outdoor being used by direct [to] consumer brands, digital brands and brands that have really grown online,” Burns said. “They’re looking to take their advertising dollars and move them into the offline space.”
Going forward, Klaas said OOH may not have as much dedicated ad spend as it did this year for Notion. “We might be spending a little bit more on the direct response side so that we can pay off that awareness investment that we made,” she said. The company said it is already strategizing around the holidays, planning to double down on successful channels and experiment with new ones.
Brands and agencies alike see the importance of social media when it comes to marketing success.
But, similar to how Digiday+ Research found that brands and agencies don’t see eye-to-eye on how much marketing spend should go toward Google, a survey of 90 brand and agency professionals in the third quarter revealed significant discrepancies between how brands and agencies allocate their marketing budgets on social media.
Digiday’s survey found that brands and agencies are in almost perfect alignment when it comes to how confident they are that social media platforms drive marketing success. Both groups said they are most confident in Facebook, with just over half of brand and agency pros saying they are confident or very confident the platform drives marketing success. Instagram and YouTube followed closely behind, with slightly more than 40% of brand and agency respondents saying they’re confident each platform drives marketing success. TikTok brought up the rear, with around a quarter of brand and agency pros saying they’re confident in the platform.
When looking at how brands and agencies allocate marketing budgets on each social platform, however, the groups’ marketing spends look very different.
When it comes to brands, Digiday’s survey found there are large discrepancies between brand pros’ confidence in the marketing success of each social media platform and the share of their marketing budgets that they allocate to each platform. For instance, while 52% of brand respondents said they are confident that Facebook drives marketing success, a mere 28% said they spend a large portion of their marketing budgets on the platform.
This pattern was repeated for each of the social media platforms Digiday asked about: 42% of brand pros said they’re confident that Instagram drives marketing success, but only 21% said they spend a large portion of their marketing budget on the platform. Forty-one percent said they’re confident in YouTube, but only 11% said they spend a large portion there. TikTok followed fairly far behind the others: Only 28% of brand respondents said they’re confident the platform drives success, and 7% said they dedicate a large share of their budget to TikTok.
For agencies, on the other hand, Digiday’s survey found that confidence and marketing spend are much more aligned for this group. When it comes to Facebook, 51% of agency respondents said they are confident the platform drives marketing success for their clients, and 43% back that confidence up with marketing spend by allocating a large portion of their clients budgets to Facebook. Instagram similarly followed Facebook, with 42% of agency pros saying they’re confident in Instagram and 36% saying a large portion of their clients’ marketing budgets are spent there.
The remaining social platforms were a bit further behind than their Meta-owned counterparts, however: 41% of respondents said they’re confident in YouTube, compared with 22% who said the platform gets a large share of their clients’ marketing budgets.
And TikTok lagged with 23% of agency pros saying they’re confident the platform drives marketing success and only 6% saying their clients spend a large portion of their marketing budgets on TikTok.
After the U.S. Securities and Exchange Commission fined long-time, and billionaire, influencer Kim Kardashian for failing to disclose an Instagram endorsement paid for by a crypto company, some think the broader influencer sector could face more scrutiny.
On Monday, the SEC announced it had reached a $1 million settlement with Kardashian over her 2021 post promoting the crypto asset EthereumMAX. Although the post mentioned the often used “#Ad,” the agency said Kardashian should have also included that she was paid $250,000 for the post. As part of the settlement, Kardashian has agreed to also not promote any cryptocurrency for three years, according to the SEC, and will also be required to pay an additional $260,000 in disgorgement.
“The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source and amount of compensation they received in exchange for the promotion,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a statement about the settlement. “Investors are entitled to know whether the publicity of a security is unbiased, and Ms. Kardashian failed to disclose this information.”
Although the fine is a drop in the bucket for Kardashian, it also opens new questions about whether federal regulators are more willing to go after social media influencers and celebrities alike.
Over the past few years, several celebrities have settled with the SEC after promoting cryptocurrencies without proper disclosures. In 2018, the agency settled with boxer Floyd Mayweather Jr. and music producer DJ Khaled after they failed to disclose their payments related to promoting Centra Tech, a company that was charged by the SEC with deceiving investors out of tens of millions of dollars as part of a proposal to create a virtual currency debit card. In 2020, actor Steven Seagal settled with the agency over failing to disclose payments from B2G.
Alexandra Roberts, a law and media professor at Northeastern University, said professional influencers like Kardashian know not to skip disclosures and should be penalized when they don’t. However, when it comes to micro-influencers, it should be the responsibility of the company hiring them to make sure they’re educated and that disclosures are in place.
“It’s a reminder to brands that there are rules and there will be scrutiny,” Roberts said. “And also a reminder to the general public that when you see people shilling these investment opportunities or brand that they’re talking about that you should think of them like you would think about traditional TV ads.”
In 2016, the group Truth In Advertising (TINA) released a report that found more than 100 instances where Kardashian and her celebrity sisters didn’t follow the FTC’s endorsement guidelines. More recently, TINA has investigated beyond the Kardashians. In August, the organization released a report claiming that more than a dozen celebrities have promoted NFTs on social media without properly disclosing their relationships with various companies and projects.
Laura Smith, TINA’s legal director, said it’s frustrating to see celebrities “continue to flout the law,” but also encouraging to see the SEC taking the issue of undisclosed promotion seriously.
“Deceptive marketing sells,” said Smith, adding that “until there are costs with deceptive marketing… if it’s still profitable, it will continue.”
Kardashian and Mayweather are also co-defendants in a class action lawsuit filed in January, which claims they—along with former Boston Celtics player Paul Pierce—promoted EMAX as part of a “pump-and-dump scam.”
“We see the SEC order as validation of the claims in the EthereumMax litigation, particularly those against Defendant Kardashian,” John Jasnoch, an attorney with Scott + Scott LLP, which is representing the plaintiffs in the lawsuit, in an email to Digiday. “Promotors who mislead investors should be held accountable.”
The fines come as another U.S. agency, the Federal Trade Commission, is considering updates to regulations for endorsements and testimonials related to products and services. (The FTC — which last updated its guide in 2009 before the rise of the influencer industry — had begun proposing chances in February 2020 but then paused during the pandemic.)
Some trade groups including the Association of National Advertisers and the Interactive Advertising Bureau say the FTC’s plans go too far. Others, such as the American Association of Advertising Agencies (the 4As), say they’re more in line with the proposals.
Lartease Tiffith, the IAB’s EVP for public policy, said that the trade groups have issues with how the FTC’s plans to require influencers to have disclosures that are “unavoidable,” arguing that the definition could be “pretty murky.” Instead, he said, the agency should rely more on the platforms and built-in transparency tools.
“For a lot of influencers, it’s a cautionary tale,” he said. “I think a lot of them get caught in a lot of the crypto NFT type promotions that a lot of people are doing and they have to realize they’re going to be held to a certain standard by the SEC.”
Ryan Detert, co-founder and CEO of the influencer marketing company Influential, said the FTC’s requirements are already clear and that disclosures are needed to maintain consumer confidence.
“Disclosure is a necessity for consumer confidence and to be FTC compliant,” Detert said. “These moments remind creators that with great power comes great responsibility.”
Influencers are responsible for properly representing themselves and the companies they work with, said Kyle Wong, co-founder and CEO of Pixlee, a content marketing startup. When they’re not transparent, he said they risk their own credibility and regulatory consequences.
“The majority of influencers aren’t celebrities,” Wong said. “They’re passionate content creators who have built an engaged community based on shared values. Those influencers who have worked to build relationships that emphasize transparency remain credible.”
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It’s been nearly a year since German-based Axel Springer acquired Politico for over $1 billion, which included both the U.S. and EU iterations of the brand, in addition to the almost 3-year-old technology-focused title Protocol. Since that acquisition, the Politico brand has started undergoing a merger of sorts internally as well.
Despite sharing a brand name and founder — Robert Allbritton — Politico U.S. and EU have operated as separate businesses until earlier this year. Now, Politico EU’s chief revenue officer Nicolas Sennegon said the Washington, D.C.-based and Brussels-based teams have developed global ambitions that include working together to sell ads across both regions, bundle subscriptions and find ways to editorially cover unfolding political news for readers around the world.
Most of the cross-brand collaboration has originated at the advertising level, which represents about one-third of Politico EU’s revenue currently (the other two-thirds come from its subscriptions business, which runs about €17,000 per year), according to Sennegon. But as the brand pursues its global expansion, he added that there are opportunities to further link those two sides of the business, by turning subscribers into advertisers, where Politico EU already sees about a 50% overlap.
On the latest episode of the Digiday Podcast, Sennegon said that over the next year, Politico will be further branching the two brands together, though he would not disclose exactly what a global Politico will look like or when we can expect its launch.
Below are highlights from the conversation, which have been lightly edited and condensed for clarity.
Realizing a global brand
Rebranding or working on a brand is not something that you do overnight. It’s a bit of everything, but we need some time to make it happen. But the first thing is [looking at] the existing assets that we have across the pond and from existing resources [and figuring out] how do we provide the most [from] these two things. From the newsroom perspective, you can have stories coming from Europe and stories coming from North America. From a subscription model, we can have some clients that want to subscribe to both Europe and North America. So we need to facilitate that.
What is the new brand? What is the new operational structure? It’s still in conversation. But our priority is to use existing resources and processes and optimize them as far as possible, in a more combined and aligned way. It’s an evolution more than a revolution.
Taking an agnostic approach to selling advertising and subscriptions
My role is to optimize revenue and optimize client relationships across the pond. The interesting thing [about] my role in Europe is overseeing both B2B subscription and media solution revenue. I can facilitate revenue growth by being agnostic, client centric and agnostic of business. I can take one client and have a conversation across the pond and not separate between B2B subscription or media solutions. My motivation is growth, but not specifically one versus the other because they complement each other.
The selling strategy is about the value proposition we bring to these clients. So we have access to the information, the data, and we help them understand and anticipate how situations like the war in Ukraine, impacts policies and politics. But on top of that, within this period of uncertainty, these brands still need to communicate on specific topics either related to their business or related to a specific policy that has been discussed in Brussels. So it’s more about providing them with access to all different opportunities we have across the organization, and just finding a win-win solution for them and for us.
Covering politics for a global audience can be tricky, but the key is keeping news nonpartisan
Nonpartisan journalism is a value, which is core to Politico in both North America and Europe. So the way the newsroom approaches stories is the same. I live in Europe, so I’m more specifically knowledgeable about this part of the world, [and] the expectation from an audience in Europe is to be nonpartisan. So to be a global brand, which is the ambition of Politico, you need to be nonpartisan, you need to have a global perspective. And you need to have the same approach to the way you cover stories. The stories may have a flavor that is slightly different in North America versus Europe, but the principles [and] values are the same, which is, we need to cover that story with a nonpartisan approach.
Marketers are pumping the brakes on new business pitches, according to agency execs and search consultants who said pitches have slowed in recent months, with marketers in a state of pitch paralysis. They said that the ongoing economic uncertainty, midterm elections and the Russia-Ukraine war have marketers unable to read the market and uncertain what to do next.
The second and third quarters of this year were slower than usual for pitches, according to agency execs, who said there’s a sense of pullback across the board from marketers this year. There’s also an overall sense of indecision among marketers now, according to search consultants, who added that marketers typically are ready to run pitches when they seek search consultants, but now will seek consults only to put off pitches or run pitches only to take weeks or months to make a decision.
“Clients are just very uncertain,” said Ann Billock, partner at search consultancy Ark Advisors, adding that clients are taking longer than usual to make decisions on pitches, needing more input from more members of the C-suite. “Pitches are expensive but new business is the pipeline for increased earnings. It’s a tough time for agencies. Hopefully this is a period where they are working on shoring up the clients they do have.”
This pullback on pitches isn’t just anecdotal. Lisa Colantuono, president of search consultancy AAR Partners, said that 15 pitch opportunities came through her desk in the first three months of the year, versus just seven in the second half of the year. Per data from search consultancy R3, there have been 50% fewer pitches in the US this year and 22% fewer pitches globally.
“Every marketer is being challenged with unique issues in 2022 from inflation to supply chain to a decline in e-commerce growth post Covid,” noted Greg Paul, co-founder and principal of R3. “As a result, there’s been far less new business activities as budgets remain under stress. We would anticipate an uptick in 2023, but this year looks to be one of the lightest on record for reviews.”
Agency execs said there’s some panic and unease among agencies, given the lack of new business pitches. Some expect that there will be hiring freezes or, for those based in the U.K., fixed contracts for those who are hired as hiring is more permanent in the U.K.
Colantuono also noted that the clients who are running pitches have held off on signing agreements, and that there’s a sense they are doing so to see if they can get more for less out of agencies by holding off a bit longer.
“It’s more than the perfect storm right now,” she said.
What’s Kasasa’s current marketing strategy?
[It’s] a lot of trying to bridge grassroots things into social media and PR so that we can take very small budgets, lots of decentralized budgets and lots of little bitty community buys all across the country, and aggregate them into something that feels bigger than each individual one would alone. We can’t afford to go run a big national TV campaign and expect to get the ROI on that.
Do increasingly expensive CPMs and a crowded digital advertising space impact your strategy at all?
With a limited marketing budget, the earned media side is always super attractive, super exciting for us. It’s a more attractive way to try to stretch a small marketing budget than trying to duke it out against Credit Karma, SoFi and Chime on who’s got the best algorithm for buying words to show up.
As talk of an economic downturn continues, does that impact Kasasa’s marketing strategy?
It doesn’t change what we’re going to spend. It changes what products we would focus on. This is both at a consumer level and [financial institution] level. In a recession, each individual [financial institution] is going to have different ways that impacts them. Normally, for a bank or credit union in a recession, what ends up happening is…they don’t they aren’t able to [get] enough loans, and they get too [many] deposits. They have a balance sheet that’s heavy on deposits, but they don’t have any loan flow and then unbalanced and it makes it makes it hard for them to make money. What we can do is we have products that drive big balances and we have products that drive lower balances that are more transactional. — Kimeko McCoy
As the possibility of economic uncertainty looms, advertisers are holding their dollars a little closer and scrutinizing ad spend a little harder. In fact, more than half of e-commerce advertisers across the globe are excluding less profitable products from their pay-per-click campaigns, according to new research from DataFeed Watch, a data company. See below for more insights:
“A lot of brands seem to be shifting to a more full funnel [approach] a.k.a. ‘We care about branding right now.’ With a deeper recession coming in 2023…the brands that do well and survive are those that build the brand and keep advertising. Brands who focus on branding in a recession coming out ahead of a recession when it is over.”
— Duane Brown, founder of performance marketing shop Take Some Risk, on the shift some previously performance marketing-focused brands have made recently.
The start of the American football season is like ringing in the new year for the sports betting industry. And this latest season seems to mark a new austerity era for dealings between sportsbooks and publishers.
“[Two years ago] was like the silly season of investing in massive marketing budgets that return [bettors acquired through paid marketing] at really gigantic levels, and all of that was in search of scale,” said Liam Roecklein, svp of content at sportsbook PointsBet. Now, “there’s much more of a search for fiscal responsibility [so] we need to take this approach [of prioritizing organic customer acquisition]. As a disruptor brand, we have less money to invest in traditional marketing.”
Unlike the past few years, 2022 is not seeing a growth economy. Therefore, the marketing budgets that some sportsbooks are working with are a lot leaner than before. Caesars, for example, announced during its first quarter earnings call in May that it was cutting marketing spend on Caesars Sportsbook by $250 million. And The Washington Post reported that U.S. sportsbooks are trying to get savvier about the use of high-yield promo offers that promise first-time bettors deposit matches of thousands of dollars or no-risk first bets up to $5,000.
As a result, the relationships between sportsbooks and publishers are changing as well, particularly with deals moving away from the traditional cost-per-acquisition model. That model was a win for publishers with audiences that had a high propensity for sports betting, as it paid anywhere from $250 to $500 for each first-time depositor they referred to sportsbooks. But it is also a risk for those media companies whose audiences did not fall in that category.
The CPA model is no longer as affordable, and sportsbooks like PointsBet and FanDuel are reconsidering how content fits into their content acquisition strategies altogether, including looking for ways to bring content production in-house and signing deals that rely on different payment models like revenue shares or flat fees. Meanwhile, publishers are looking for deals that offer them more guarantees.
The content team within PointsBet, which Roecklein oversees, is working to build a media brand that “delights” the platforms’ users. The hope is they become evangelists for the content and the platform, and get their friends to sign up for the sportsbook and make a deposit by word of mouth or sharing the content his team produces.
One content product Roecklein is working on is a thrice-per-week newsletter called PointsBet Hustle that was created through a white-labeled content and technology partnership with Front Office Sports, which was a flat-fee payment deal. The newsletter is produced by PointsBet’s senior editor Teddy Greenstein, but uses FOS’s expertise to craft the subject lines, body and other elements.
The origin of this partnership came from PointsBet’s desire to find ways to decrease its customer acquisition costs, according to Adam White, CEO of Front Office Sports, who spoke on stage last month about this deal during the Digiday Publishing Summit in Key Biscayne, Fla.
By creating and operating this newsletter, PointsBet can, in theory, organically grow that readership and convert those subscribers into bettors without paying anything for the acquisition. What’s more, White said once that subscriber base is established, PointsBet has the opportunity to make money from the newsletter with advertising, which will be the next stage of this partnership.
PointsBet still uses affiliate marketing in its overall growth strategy. But from a content perspective, Roecklein said he is solely focused on organic growth that doesn’t use a CPA or revenue share model in the content deals he oversees.
So far, Roecklein said his team is seeing a positive correlation between growing the audience for PointsBet content and the number of deposits into the sportsbook’s betting platform. However, “one of the challenges for attribution of organic content is that it’s not direct linking to [the sportsbook],” he said, adding that conversion rates are not clearly measurable.
FanDuel’s chief content officer Mike Raffensperger said that while a lot of the other sports betting companies in the industry have pulled back CPA spending, FanDuel has leaned into this area, given it had 51% of the market share in Q2 of this year. He added that this enables the sportsbook to get away with lower CPAs than its competitors. This lets the company to earn back what it spent on acquiring the customer within 12-18 months, versus the industry average of 24 months, according to Patrick Keane, CEO of sports betting publication Action Network.
Despite that, FanDuel TV is a new initiative Raffensperger’s team is launching, which will feature programming on sports betting odds, in addition to airing live sports, with the goal of growing an organic viewership.
FanDuel still uses a CPA-based payment model or traditional media buying model (such as a flat fee) in the majority of its publisher-focused content deals though, Raffensperger added. For example, one of the ongoing, flat fee-based deals is with The Gist, a sports newsletter aimed at female and underrepresented audiences.
From the publisher perspective, CPAs or revenue shares might sound like the best deal, given sportsbooks have historically paid top dollar for their audiences to convert to bettors. But this model is risky when it comes to audiences that aren’t typically considered to have a high propensity for betting.
This year is the second in which The Gist has worked with FanDuel in a large-scale content sponsorship, which The Gist’s co-founder Jacie deHoop said has been the publisher’s largest sponsorship to date from a revenue perspective. Though she declined to provide hard revenue figures, she said the terms of the deal are initially based on a flat-fee model, with the opportunity to build in a CPA or revenue share model at a later date depending on the campaign’s performance.
Year one was focused on FanDuel’s fantasy sports business. The Gist created a branded weekly fantasy football contest for its readers, who paid a $2 entry fee and were eligible to win $500 each week or a grand prize worth $5,000.
However, this year’s deal with FanDuel is primarily focused on sports betting. DeHoop said this was a natural progression, as about 30% of the almost 4,000 readers who participated in the contest ended up registering for a FanDuel account or depositing money to bet on the sportsbook’s platform following the fantasy contest.
“We see fantasy as a really interesting first step in somebody’s journey to sports betting,” deHoop said. However, “our audience [is] still very early in their sports betting journey and still getting their feet wet and understanding the space and if there’s really interest there.” Because of this, there is a lot of risk for The Gist in working off of a CPA-based or revenue share-based model.
If The Gist’s audience isn’t interested or ready to start betting, a CPA or revenue-share model will not have the payouts needed to justify how much time and effort goes into creating the custom content for the FanDuel campaign.
In theory, a CPA-based partnership using the number of first-time depositors driven by last year’s FanDuel partnership (which included about 500, according to deHoop) would only yield about $150,000, based on an average rate of $300 per new acquisition. It’s unclear how that figure compares to the amount that FanDuel is paying The Gist.
While this is not a miniscule amount, and there is a possibility that a sports betting-focused campaign will increase that 500 first-time depositor figure, the flat-fee promise of a media campaign spanning the entire NFL football season, as well as the start of the NBA Playoffs and the Women’s World Cup, was a lot more appealing.
That’s not to say, however, that if the audience is really embracing sports betting in the next few weeks that deHoop’s team won’t negotiate for a CPA or revenue share add-on, she said.