Month: December 2022

Although the holiday season got off to a record-breaking start over Thanksgiving weekend, nearly half of brand pros told Digiday they agree that the economy will hurt their sales during the all-important holiday quarter. Meanwhile, less than a third of respondents said they disagree that the economy will hurt their sales in Q4.

Looking forward into 2023, the percentage of brands who anticipate lagging sales jumps to just short of two-thirds: 65% of brand pros said they agree that the state of the economy will hurt their sales next year, compared with only 18% who said they disagree that their 2023 sales will take a hit due to the current economic conditions.

Breaking the data down further reveals that brands’ pessimism regarding sales is slightly less extreme than it might seem: The largest set of respondents said they agree somewhat that the economy will hurt sales in Q4 and 2023, as opposed to agreeing strongly. To be exact, 26% of brand pros said they agree somewhat that the state of the economy will hurt their sales in Q4, and a very significant 52% said the same about 2023.

Brands’ pessimism when it comes to how sales will be affected by the economy won’t translate into more discounts though, as it turns out. Digiday’s survey found that nearly half of brands (45%) said they disagree that the economy will drive them to discount their prices more aggressively.

This attitude is well-supported by the current consumer environment: Given the record-breaking start to the holiday shopping season, it’s clear that people are ready and willing to spend, despite all of the economic headwinds at play. Brands are likely looking to do what’s best for their bottom lines with the decision to forgo steeper discounts, and bet on shoppers’ willingness to pay full price (or close to it) to shore up their sales as much as possible heading into the uncertain environment waiting for us in the new year.

Interested in sharing your perspectives on the media and marketing industries? Join the Digiday research panel.

In a survey published last week, the Reuters Institute and University of Oxford revealed that 25% of people between the ages of 18 and 34 are using TikTok for news. About half of the world’s top newsrooms are now regularly posting on TikTok, according to the report. The Washington Post’s popular TikTok channel has 1.5 million followers. Vox, Vice, BuzzFeed, The Los Angeles Times and Condé Nast have all recently expanded their efforts on the platform, as well.

At The Wall Street Journal, the TikTok channel is managed by the publisher’s visual storytelling team, which falls under its broader social team. The team collaborates regularly with different departments across the newsroom, such as the video and live journalism teams. The New Ventures team, which was created in the spring of 2021 to expand audio and video initiatives across Dow Jones, is also working with the Journal’s TikTok team. 

“We need to introduce The Wall Street Journal brand to audiences that might not otherwise engage with it,” said Ann McGowan, svp of New Ventures. “If we’re only reporting in text, we miss that opportunity.”

Adam Puchalsky, global head of content at GroupM’s Wavemaker agency, agreed with that logic: “It would be a missed opportunity to not distribute their programming on TikTok because that is where people go for news, where they consume entertainment,” Puchalsky said.

The Wall Street Journal does not have a revenue share deal with TikTok and has not yet worked with advertisers on the platform. “Right now we are just working on the content, and getting the right content out there and engaging with the audience and seeing how things go from there,” McGowan said.

Puchalsky said he sees a lot of opportunity for Wavemaker’s advertiser clients to work with the Journal. “As long as it’s authentic to the platform … and not just a plug and play in a different format,” Puchalsky said. 

Clients at GroupM’s MMI agency in sectors like financial services, recruitment and employer branding who have previously worked with the Journal “are looking for the right partners to work with on TikTok,” Dana Busick, MMI group director, said in an email. “The opportunity for them to work with the [publisher] on this platform is very appealing. I also think players like WSJ and other big publications open the door for a lot of other brands to start considering playing in this space,” she added. 

TikTok also gives the Journal’s journalists another platform for their reporting. For instance, personal finance reporter Julia Carpenter has discussed salary negotiations on TikTok, Munslow said. Graphics reporter Emma Brown is featured in a video discussing the maps she created for a Journal story on the World Cup. During the midterm elections last month, the Journal’s TikTok team worked with about a half dozen reporters from the Washington, D.C. bureau to produce videos for the app, said Patrick Hedlund, the Journal’s off-platform editor. Even journalists who prefer not to be on camera but are avid TikTok users flag trends they’re seeing on the platform. Additionally, editors flag stories they think will resonate with a TikTok audience. 

“I have seen [the Journal] posting more about current events as well, which I think is a smart move to hop on current cultural moments and trends to increase followership and engagement,” Busick said.

The Journal’s turnaround time to publish a TikTok video ranges from within an hour to a week, depending on how complicated the topic or concept is, Munslow said. Videos are posted on the platfrom about twice a day on weekdays and once a day on weekends. They are shot from the publisher’s New York City office (“When we’re carrying a ring light around, people know what we’re going to do,” Munslow joked.), from home or onsite.

A number of TikTok videos are associated with specific Journal articles and will feature a screenshot of the story. The Journal’s TikTok team also wants to produce more videos from the publisher’s live events, where some of the team’s members interview speakers and guests. Content from The Wall Street Journal’s Tech Live conference drew over 1.5 million video views, and its WSJ Magazine Innovators event brought in over 1.2 million video views, Munslow said.

The Journal’s TikTok team also wants to get more involved with the comments sections of their videos, by responding to questions with TikTok videos to drive engagement, Munslow said. They will also experiment with more coverage areas going forward. “While we want to deliver on what people expect of us and our journalism and our core coverage of business and finance, we also see it as a great opportunity to expose people to things they may not immediately associate with The Wall Street Journal,” Hedlund said, such as sports and lifestyle. 

“Trends and topics of conversation come and go quickly on the app, more so than on other social media platforms,” Busick said. “Publishers need to be ready to change up their strategy and plans for content fairly quickly and regularly.”

Granted, it was inevitable because the rampant growth spurt online advertising has been on was always going to run out of steam. This slowdown is providing a much-needed reality check of sorts for swathes of the market. Inevitable because the rampant growth spurt online advertising has been on was always going to run out of steam.

Online ad spending is maturing and a look at the data gives grounds for cautious optimism — for now, at least.

Whether it’s GroupM or IPG, investment banks or Enders, the data all points to the same thing: so far this slowdown has been only up to a point — the point where digital ad spending aligns with pre-pandemic trends. 

Ad spending could slow down to below 2018 and 2019 growth levels — there’s too much uncertainty over everything to think otherwise. But for now, at least, advertisers continue to spend more, not less. There aren’t too many reasons for them not to right now. 

For starters, this downturn isn’t triggering the same sort of reverberations as previous ones. 

Unemployment, which usually goes hand in hand with a financial crisis, is low in mature markets like the U.K., the U.S. and Australia. Which is to say more people feel like they have economic support to wriggle through this downturn. That’s always good for marketers, especially those being asked to convince people to accept price hikes as a result of higher production costs. 

Remember, prices are sticky, marketers like to say. Once they go up, they rarely go back down quickly (if at all). Why would they if shoppers haven’t balked at the hikes? But if they did erode then it would only be by a bit. That’s what normally happens. Companies give shoppers a bit of an ease, but not too much to squeeze already widened margins.

“When the cost of inputs goes up and advertisers are able to raise the prices and recoup that from consumers then revenue goes up as does advertising because it’s budgeted as a percentage of revenue,” said Kate Scott-Dawkins, global director of business intelligence at GroupM. “It’s arguable that inflation has had somewhat of a positive effect on advertising.”

So while there is clearly some contraction in ad dollars from cautious marketers, this ad slowdown has been more defined by where ad dollars have gone, rather than what got cut. 

Retail media is a case in point. Procter & Gamble already spends around 11% of its media dollars on retail search.

“A lot of this money being spent is incremental because its from a shopper marketing budget that hasn’t included in ad spend yet,” said James Chandler, CMO at the IAB U.K. “This is new money coming into the market which will have a good effect on digital ad spend.”

None of this is to say that the future is all sunshine, rainbows and lollipops for the ad industry. 

On the contrary, these are precarious times. 

Think about the economic factors that are putting the word recession in people’s mouths. Ad spending has slowed this year (beyond the obvious pull-through effect fade) due to a grim confluence of waning ad measurement, rising shipping costs, newly-sober public markets, rising online ad prices and smaller-than-expected customer bases for direct-to-consumer businesses. 

The economic headwinds have’t really hit marketers yet. But there’s every chance they will sooner, not later. After all, there are many households grappling with real income declines, some more than others. To say nothing of the cost of capital and how that will take its toll on smaller advertisers.

“One thing we have noticed is that a few of our clients are looking to start running on media that they can easily pause,” said Will Jennings, head of paid media at performance agency, ROAST. “They don’t necessarily want to have to fulfill commitments with publishers, if they can see that money isn’t working. There’s still budget in the brands but they’re more cost sensitive about turning it on and off. They want to be more agile about how they spend that money.”

That certainly seems to be the main concern emanating from many 2023 budget meetings so far, according to several agency executives interviewed for this article. The consensus being that scenario planning is priority number one. Marketers want to know what the impact would be to their business if they cut their ad budgets lightly, notably or aggressively. They know that ad dollars are the least accountable in any organization and will be the first to go if things go sideways. A time to plan for the worst, and hope for the best if ever there was one.

The next quarter will be one of the first real stress tests for this approach.

“In many markets the upfront commitments are a good signal to the strength of demand as well as what channels advertisers are going to put an emphasis on,” said IAB Europe chief economist Daniel Knapp.

It’s one of many indicators giving off very mixed signals to marketers.

On the one hand, interest rates look like they’re going to continue to rise to suppress inflation, but on the other it looks like central banks are going to change tact. 

Sometimes it seems like consumers are going to be left out in the cold, but at other moments it looks like governments will bail them out should the worst case scenario flicker into focus. 

Perhaps, there will be a wave of mass unemployment given recent layoffs across industries like tech and media, and yet all signs (at least for now) point to concerns about vacancies not being filled. 

That’s a lot of ifs, buts and maybes marketers are having to hedge against. 

“Unlike I guess the rest of the industry, we continue to see strong top-line [revenue] growth, for the nine months at 28%, and for [third] quarter at 29,” said Sorrell, who spoke with Digiday along with Joe Olsen, who has been chief growth officer for Media.Monks since 2018.

Sorrell and Olsen talked about who they see – and don’t see – as their competition, as well as global threats and opportunities and clients’ attitudes toward digital transformation.

The following conversation has been edited for clarity and space. 

Who do you see as your competitive set?

Sorrell: We have three businesses: content, which is digital advertising content; data and analytics and digital media, which I think speaks for itself (media planning and buying, and data and analytics that drive that); and then last but not least, technology services which is really covering the third function that we talk to clients … the IT function.

So our competitive set for all three is probably Accenture. For Technology Services, it’s more Globant, EPAM, Endava, Perficient and ThoughtWorks rather than Accenture. It’s definitely not the holding companies — it’s  the bits of bits of the holding companies. It’s VML or AKQA or RGA or Wieden [& Kennedy], and then specialists like Oliver or Jellyfish.

What about Stagwell, which aspires to be digital first? 

Sorrell: Explain to me the similarity — it’s lost on me. We’re just focused on digital. They’re a holding company. We’re not a holding company. I can’t see the similarity but maybe maybe Joe can.

Olsen: We get compared to them a lot but it’s a different business. I feel like a lot of the time the comparison happens because Stagwell compares to themselves to us, which I really think is them just using our name to try to find a space in the business world that’s working. But I don’t consider them a competitor.

So who do you run into when you’re pitching new business? 

Olsen: Like Martin said, Accenture is probably the one that I look at the most. Our business is pretty broad from a digital perspective, so we’re going to run into a lot of players … But what Accenture Song is trying to do is very similar to where we’re going. My feeling has always been that they’re coming from the top down and we’re coming from the bottom up, and we’ll meet somewhere in the middle.

Regionally, you’re spread across the globe, but APAC was your slowest area. Is that because of China’s woes?

Sorrell: Yeah. When we’ll look at the final figures for the year, they will have done well over the year, but APAC has been affected by China. But I think the lockdown will be eased in Q2 next year. The forecasts for the Chinese economy for the full year next year is about 4% actually. It’ll be a slow first half in China because it will take time for all the lockdown issues to be solved. But I think by H2 of next year, China will be back to significant growth, and 4% is very significant given the forecast for next year is 1.1.5% for the globe.

What about the rest of the regions? 

Sorrell: North and South America to us offer huge opportunity. The Middle East offers huge opportunity. Europe is in the doldrums. I mean, it’s our fastest growing region, generally it’s in the doldrums. Africa is very volatile. And then you’ve got APAC, which remains very strong, but with the uncertainty about China’s policies to Taiwan — clients are getting nervous and you see it with Apple, you see it with Foxconn, you see it with others. They’re looking at alternatives for their supply chains. 

And that’s where India comes in, because we’ve seen huge growth there and in Vietnam, Indonesia, the Philippines, Malaysia. Southeast Asia as a whole really become really important. India is the biggest beneficiary following uncertainty about what China’s policy in Taiwan means and the security issues. 

Without naming names, another one of our clients is shifting their supply chain from Eastern Europe to Latin America. We have 3,500 people sitting in Latin America who happen to be amongst the best creative and technical technology people probably in the world.

How do you feel positioned for next year? 

Sorrell: When things get difficult next year, clients will be focused on activation and performance and media measurement and media mix modeling. We’re well positioned for that. 

You can argue that the world has become more activation or performance driven, that attention spans and brand promiscuity all leads consumers to switching more aggressively. Agility becomes really important and quick solutions. Not necessarily the perfect solution, but a solution that can be honed through digital media. 

Olsen: The idea coming out of COVID that a lot of brands are basically entertainment brands and they’re building fans, and they’re looking at ways to maximize that fandom, is creating new opportunities for P&Ls. Which is a lot of the conversations that we’re having with clients. And as they adopt these things, and these things accelerate, they need new tools. They need new tech, they need it faster, and they need it more effectively. 

Color by numbers

Data platform Data.ai has five predictions for mobile apps and ad spending in 2023, covering gaming apps to time spent on devices. While global mobile ad spend faced some economic headwinds throughout 2022, investments are expected to grow some 7.5% year over year to surpass $300 billion in 2023. Short video apps are expected to drive ad spend for social platforms, while gaming spend will face challenges as privacy regulations become clearer. — Antoinette Siu

• Mobile ad spend will hit $362 billion in 2023, according to Data.ai. Mobile will continue taking a major share of the advertising market as people spend more time on their devices. In 2022, the total time spent on Android phones was 4 trillion hours.
• The midterm elections and sporting events like the Beijing Winter Olympics or World Cup resulted in the high ad spend in 2022 – $336 billion by Data.ai’s estimation.
• Consumer spending in mobile games in 2022 acutally decreased by 5% and is expected to drop 3% in 2023 year over year due to the economic downturn. This sector will also be impacted by Google’s upcoming privacy changes and a crackdown on other identification factors.
• Next year, retail dollars and engagement are expected to increase in travel, events, sports and meditation apps. Data.ai projects a 297% growth in engaged hours for attraction and tourism apps and 81% rise in meditation categories.
• Video streaming and user-generated content are poised to “fuel growth in the next six years.”

Takeoff & landing

• IPG’s UM media agency formally launched UM Commerce, which has grown out of UM Shopper and will be responsible for some $1 billion in media spend. Specialized units such as a health-driven offering for client J&J are being rolled out, and the agency’s internal access to Acxiom data will be used. 
• WPP-backed media agency mSix&Partners landed media AOR duties for smartphone maker OnePlus, handling strategy, planning, investment and data/analytics.
• Horizon Media’s Horizon Next unit landed full media AOR duties for A Place for Mom, a senior living consultancy, without a review. Horizon Media had handled traditional media since 2020. 

Direct quote

“There are certain companies who will be spending more and will be trying to take market share in this process. They will look for new modes of engagement by betting on the metaverse. They’ll be using strategic bets to drive people into this digital world where people are escaping these challenges we face as individuals — at an economic, emotional, and relational level, with all the things we’ve all lived through in the last few years. And they’re gonna be like, ‘Hey, we have a value proposition for you to engage with us there.’ Like Chipotle did: roll burritos in the metaverse then come on out and get them in the store.” 

Chad Engelgau, CEO of Acxiom, on how some companies are handling economic uncertainty. For more of his thoughts, check out this Q&A.

Speed reading

• I covered consumer experience intelligence platform Disqo’s latest research showing social media generates better outcomes and brand lift than it’s credited.
• Digiday senior news editor Seb Joseph and senior ad tech reporter Ronan Shields paired up to cover friction and pushback on the ANA’s audit of programmatic transactions. 
• Media agency reporter Antoinette Siu looked into the latest developments around influencer marketing, including the relatively new use of bots as spokespeople for brands.