Month: December 2022

As Vickie Segar, founder of influencer marketing agency Village Marketing, explained, direct-to-consumer brands were quick to embrace influencers 10 years ago when she started her business. But now Fortune 500 companies are realizing they should have been investing in influencers as well — and are trying to catch up fast. As a result, Segar’s firm was acquired by WPP to join the Wunderman Thompson network earlier this year and expand creator partnerships.

“Direct-to-consumer companies got on board early,” Segar told Digiday. “I do think that there is a correction that’s happening with big brands who are now understanding that they cannot spend $400 million in TV and $300,000 in influencer. That makes no sense to anybody whatsoever.”

In some cases, companies are bumping spending from hundreds of thousands of dollars in influencer marketing to millions, Segar said. “These were [companies] that were like, ‘We weren’t doing this. We should have done it. Now we need to invest,’” Segar added.

The growth in this sector shows there is a bigger appetite in the industry. In 2022, the global influencer market is estimated to hit $16.4 billion, up from $13.8 billion in 2021 and $9.7 billion in 2020, according to Statista. And influencer marketing is becoming a more common marketing tactic, as HubSpot’s 2023 marketing strategy and trends report notes. According to HubSpot’s survey of more than 1,200 global marketers, 89% of marketers currently using influencer marketing will maintain or increase their investment in 2023.

Increasingly, social media and influencer agencies like London-based Goat have expanded this business across markets and approached influencer marketing as a newer form of performance media. The agency said it expects influencer paid media to become the best performing channel in the overall social media strategy. Similarly, holding companies including Publicis have developed creator-led commerce solutions with TikTok and Spotify, because younger consumers prefer this type of influencer content over “scripted sponsorships,” Amy Lanzi, COO of Publicis Commerce, previously told Digiday.

Independent agencies and holding companies alike are refining their influencer strategies to incorporate smaller creators and develop large-scale campaigns. While influencers might be known for large followings, smaller creators, who perhaps have thousands to tens of thousands in followers, can be a gateway to more niche audiences and generate better engagement. More than 56% of marketers investing in influencers are working with micro influencers, per HubSpot.

Micro influencers may also be cheaper and more relatable, added James Creech, svp of strategy at consumer intelligence company Brandwatch. Oftentimes, this type of content works well across social platforms, and brands can generate attention by using several smaller creators. “Well-known influencers are great for generating buzz or increased awareness, but niche content creators can often drive more engagement and action,” Creech added.

Brandwatch’s marketing trends report for 2023 also predicts virtual influencers will be an emerging area of influencer marketing. These virtual influencers are computer-generated characters, or bots, created for social media that interact with users online, whether as part of a service or promotion. In 2022, 35% of American consumers bought a product or service promoted by a virtual influencer, and 40% of them were Gen Z or millennial consumers, according to Brandwatch.

For example, Prada developed a virtual influencer named Candy, named after the fashion giant’s perfume. Clothing brand PacSun also created virtual influencer Lil Miquela to promote its store through the hashtag #pacpartner. Lil Miquela has gained 2.9 million Instagram followers, surpassing PacSun’s main Instagram account, which has 2.7 million followers.

“Fans can feel a strong sense of connection to their favorite characters — think Pokemon, Barbie or Marvel superheroes,” Creech said. “Virtual influencers can help bring some of these iconic characters to life. Fans get a chance to follow virtual influencers’ online content and interact with them via social media comments or livestreams, which helps develop a parasocial relationship and nurture the connection between virtual influencer and fan.”

But influencer marketing is not without its challenges. As Segar mentioned, now more competition over influencers is driving prices up. As larger companies start to adopt influencer marketing, content creators will begin to charge more for their services.

“If you’re a DTC brand, all of these big brand players are coming in and now you have more of a crowded marketplace. You have so much demand on these creators, and these creators are increasing their rates,” Segar said.

“I actually am really happy to see Disqo put out this report because a lot of media stories this year have really downplayed social because of public market comps,” said Rachel Tipograph, CEO and founder of MikMak, an e-commerce analytics software company, who works with clients including Procter & Gamble, Anheuser-Busch and L’Oréal. “And everyone needs to remember that those are two different things. The efficacy of [a social] platform as a conversion driving tool is often divorced from Wall Street’s numbers.”

Anne Hunter, Disqo’s vp of product marketing, said the origins of the research — which spans several other efforts the firm has put out over the last 18 months, including on outcomes and single-source measurement — stemmed from clients not taking social seriously enough as a branding tool. 

“I was personally surprised to see the brand impact on social, because we think of social for the engagement. And the results of the study show that not only does it drive engagement, but branding that then drives actual sales behaviors — even off the social platforms,” said Hunter. “Advertising on social doesn’t mean that the impacts of that advertising are entirely happening on the platform. In fact, the study shows that advertising on social can cause positive impact everywhere else the brand is trying to drive results.”

Though it’s harder to measure the effect of marketing on paid social (the study only looked at paid not organic) due to Apple’s app-tracking limitations, Hunter said the study aims to clear up that just because you can’t track the success of a campaign doesn’t mean it wasn’t successful.

“Marketers have less tools than they previously had to look at the impact of social, so they’ve had to make assumptions about performance based on things like engagement and hope that that was reflective of brand and outcomes impact,” she said. “We’ve looked at this data so that we can … give you some guidance as to whether that social media advertising is actually working for brand and for outcomes performance — even if you can’t see that on your traditional social media engagement dashboard.”

The challenge for many marketers is to not think of paid social as a one-size-fits-all bucket, said Maggie Malek, CEO of MMI, a Stagwell-owned integrated agency that handles clients including P&G and Amazon. “I would 100% agree with the overall finding [of Disqo’s research] that paid social can and should play a role in the full funnel,” said Malek. “However, you have to think about channels differently.” 

Take TikTok, for example, she added, which “is designed to be the most addictive platform in the world. When we use it, we find that that’s more of an awareness and consideration driver. But we don’t see as much success driving traffic from a TikTok media asset directly.”

Hunter said one challenge for paid social is the lack of forethought it gets from some clients. “Marketers put less attention overall into ensuring creative and audience fit because the assumption is that they can optimize away things that don’t work,” she said. “But in a resource-constrained media environment even running one impression to one person that is ineffective is waste. And even worse, it could drag the brand lower and have and make the remaining ads have to work even harder to get back the same level of brand preference they started with.”

Not every social agency thinks Disqo’s research is that valuable, mainly because some of the findings are obvious and easily gotten without going through the company. “I run a company focused on ad efficacy,” said Elijah Schneider, CEO and founder of social agency Modifly, which is owned by Court Avenue. “If the tools that I have don’t help me promote better content for driving brand awareness, brand credibility, brand engagement, in addition to potentially purchase actions or retention actions, to me those tools are less valuable. I can pull most of this information on my own in about 10 minutes.” 

Nintendo did not immediately return a request for comment.

The fracas surrounding the Smash World Tour highlights Nintendo’s uniquely skeptical approach to competitive gaming. Unlike other publishers such as Activision Blizzard and Riot Games, which have pumped millions of dollars into organizing and marketing esports leagues for their titles, Nintendo has never run its own competitive tournament or offered prize support to grassroots Smash events.

At times, Nintendo has actively worked against the competitive Smash scene. When Evolution Championship Series 2013 hosted a Smash bracket, Nintendo tried to force the event not to stream the tournament, only to reverse the decision after receiving backlash from the online gaming community.

Antipathy toward competitive Smash notwithstanding, it is likely that Nintendo will eventually have to embrace esports as a potential revenue stream and marketing channel, much like it gradually reversed its policy against film adaptations of its intellectual properties. But the competitive Smash scene is used to organizing its own events and negotiating its own brand partnerships independently of Nintendo. The blow-up of the Smash World Tour shows what happens when the cold realities of the gaming business collide with the passion of a grassroots community.

For the latest edition of Digiday’s Confessions series, in which we exchange anonymity for candor, Digiday spoke to a Super Smash Bros. tournament organizer to explore how Nintendo’s involvement — or lack thereof — has stymied the growth of the game’s vibrant esports scene.

This interview has been edited for length and clarity.

Can you summarize Nintendo’s involvement in the competitive Smash scene for me?

They shut down The Big House Online. They banned Major League Gaming from streaming Super Smash Bros. Brawl. They tried to shut down the EVO Super Smash Bros. Melee stream. They prevented the scene from using UCF [a modified version of the game that fixes controller issues], and thus we have to use a stealth version of UCF to avoid Nintendo’s wrath.

With all this in mind, were you surprised by the cancellation of the Smash World Tour?

Yes, I was very surprised by the news. Every single event [in the circuit] prior to the championship ran as intended, and there seemed to be no complications publicly.

Nintendo told the Smash World Tour that it rejected its license application due to safety and security concerns. Did the company have legitimate reasons to feel this way?

I mean, yeah. Do you think Nintendo is OK with a top player walking onstage at [Smash tournament] Double Down coughing up blood and having the venue staff do nothing about it, or letting [YouTuber] Technicals sneak into the venue as a banned player? Does that sound like something that Nintendo would be fine with, with regard to safety guidelines? That is one of the reasons Nintendo did not want to give them a license.

Nintendo also expressed concerns over tournaments’ use of modified versions of Smash. Haven’t some licensed events in the Panda Cup used game mods like UCF?

Yes. Additionally, [Smash World Tour organizer Calvin “GimR” Lofton] did literally everything that he could do to prevent Nintendo’s wrath. He told every single person who ever appeared on stream not to talk about netplay, not to talk about any modification of the game. He went as far as to prevent Nintendo-branded things from appearing on the stream — for example, he rejected the idea of commentators wearing Pikachu and Mario costumes because he didn’t want any potential issues. 

The Smash World Tour and Panda Cup were both attempts to elevate Smash to the level of other mainstream esports. Is this something the Smash scene needs or wants?

In a vacuum, I think that every top player, every commentator, every person who has done anything administrative for the scene, would like more money. A lot of the great tournaments that we have experienced over the years have all operated on a loss. Most players after rank 11 make less than minimum wage off of Smash. So the blanket answer to the question of whether we want to be a legitimate esport and get developer support and money is a resounding yes. 

Do we need more money? No. We survived during quarantine, when there were no tournaments whatsoever. People keep giving this analogy that Melee is like a cockroach, and that you just can’t kill us, and I think that’s correct. We’ll just go back to some dirty little hole, some crevice of a wall of a murky apartment building. We don’t need the developer support.

How has Nintendo’s lack of support shaped the evolution of the Smash scene?

I’m going to give an example of a different company, Capcom. They’re the developer of Street Fighter, and Capcom supports competitive Street Fighter. So when Street Fighter 4 came out, everyone moved to Street Fighter 4. When Street Fighter 5 came out, everyone moved to Street Fighter 5. 

The Smash community is still split between Melee, the 21-year-old GameCube version of the game, and Ultimate, the newest edition. Are you saying that Nintendo’s lack of support is a cause for this split?

Yes. If Nintendo supported MLG for Brawl, and then continued to put a bunch of money into the game for Ultimate, there would not be nearly as committed and thriving of a Melee scene as there is right now.

Without developer support, how can the Smash esports scene continue to expand in the future?

I think the ideal future for the Smash scene lies in independent influencers. Hopefully, we get more influencers and YouTubers — more Ludwigs — to support our scene, and not an actual company.

The ongoing crypto bear market and a backdrop of economic uncertainty have some marketers questioning if it’s even worth spending time and money on blockchain-based projects. However, Starbucks’ brand ubiquity and history of digital innovation put Odyssey even more under the microscope. Marketers and industry observers say they are watching the rollout of the program as it could be a bellwether for how much consumers are willing to care about branded NFTs.

Odyssey — which was first announced in September and that will expand to more people in January 2023 — makes Starbucks one of the largest brands to integrate NFTs into its loyalty program. That’s something companies have begun exploring while others look for ways to make digital assets more useful as interest fades for collectible NFTs. Activities will include taking a virtual tour of a coffee farm, learning about Starbucks history and playing interactive games. The rewards for collecting “stamps” (NFTs) include virtual espresso martini-making classes, access to merchandise and artist collaborations and invites to events at Starbucks stores and coffee farms.

The company declined an interview to elaborate on Odyssey. However, in a blog post, Starbucks CMO Brady Brewer described it as the “next big innovation” and a way to reward customers. “We are leveraging Web3 technology to reward and connect with our members in new ways, such as offering collectible, ownable digital stamps, a new digital community, and opening access to new benefits and immersive coffee experiences — both physically and digitally.”

Odyssey was built with the help of Forum3, a Web3 loyalty platform co-founded by someone who knows the brand very well: former Starbucks chief digital officer Adam Brotman. He developed the coffee giant’s existing loyalty program and also led the design of its mobile ordering and payment systems. Starbucks is also partnering with Nifty Gateway, a popular NFT marketplace.

Some marketers in the Web3 space say it’ll be worth paying attention to whether Web3 enthusiasts are open to a brand like Starbucks entering the space — or whether they feel the brand has over-simplified it.

“The Starbucks Odyssey launch is a litmus test for Web3’s readiness to help a major QSR brand take customer engagement to the next level,” said Israel Mirksy, a partner at the innovation firm House of Attention. “As much as it is a test of the brand’s ability to build compelling experiences on top of that foundation.”

According to Mirsky, Starbucks is right to focus Odyssey on community building, fan engagement, and keeping it consistent with other parts of the brand such as its existing rewards program and digital platforms. However, success will depend on how creative the experience ends up being.

Liron Shapira, a former investor in the crypto giant Coinbase who is now a crypto-skeptic, said companies should watch for whether Odyssey succeeds as a loyalty program. But if it does, he said other companies should copy it but ditch the blockchain part since many might not even need it.

“They’re saying the user might not even know it’s a blockchain thing, which means it’s simply a loyalty program,” Shapira said. “The choice of blockchain technology to track the ledger of who currently has what in this system is insane since Starbucks is fundamentally a trusted party in the system.”

Matt Wurst, CMO and co-founder of Mint, an NFT platform for brands, said there are several key groups that will be paying close attention to whether Odyssey is a canary in the coal mine including established brands that have been early to adopt Web3 tech, other brands that have been watching from the sidelines and investors wondering whether it’s worth funding the space.

Starbucks could also introduce a potential data strategy that others might want to learn from, Wurst said. The biggest challenges will be articulating the value for customers and keeping people engaged over time.

“This is a [customer relationship management] play, make no mistake,” Wurst said. “The opportunity — whether this is loyalty or membership — is to continue engaging your consumer in a different way. Email is limited. Search behavior is limited. But now we have a direct way through proof of ownership to connect with advocates, loyal consumers, or people who have visited a store or restaurant.”

Over the past year, J.C. Penney has made a bigger push into digital marketing than in years prior, spending at least three-quarters of its ad budget on performance marketing, paid search, social media, influencers and comparison shopping engines over linear television and newspaper inserts, per Cunningham. (He declined to offer further details on J.C. Penney’s media spend.)

In fact, J.C. Penney completely eliminated newspaper ad inserts out of its media mix ahead of Black Friday shopping (which has been starting earlier every year). “We really took stock of that and focused on putting all our energy and efforts against a digital ad versus putting our energy into a newspaper inserted ad,” Cunningham added, “which was historically how we would have approached the peak of the season in the market.”

The move by Penney’s is an attempt to capture a portion of online shoppers and keep up with global e-commerce trends, which have seen online sales steadily climb since the onset of the pandemic in 2020. By 2023, forecasters expect e-commerce to make up 20% of retail sales worldwide, up from 19.7% this year, according to eMarketer. In 2019, eMarketer reported that e-commerce made up 14% of global retail sales. There is a lot at stake for J.C. Penney when it comes to e-commerce, especially as the retailer has been lagging behind competitors in sales and continues to deal with a high amount of debt that worsened when it fell into bankruptcy not long after the pandemic began in 2020. (More on how the brand hoped to turn it around in 2019 here.)

Cunningham said launching holiday marketing earlier than normal and focusing on digital has resulted in earlier shopper interest and engagement. (He did not offer further details, including sales or website metrics.)

From January to June of this year, J.C. Penney spent more than $161 million on advertising, up from the nearly $113 million spent last year during that same time frame, according to Kantar. Per Pathmatics, the retailer spent at least $35 million on digital media so far this year, slightly less than the nearly $38 million spent in 2021. (Kantar does not track social media spending as Pathmatics does.)

For a legacy brand like J.C. Penney, a digital-first strategy allows the brand to not only tap into online communities, but also build its own community, thus boosting brand awareness and relevance, said Rebecca Sisson, brand strategist at Proverb marketing agency.

“A predominately digital strategy can be a good move for brands at several different growth stages,” Sisson said in an email. “The data you can harness alone is a powerful enough tool that can make the investment in digital worth it for any brand.”

It’s something Target has done well, by bringing audiences together via user-generated content and harnessing the power of content like “Target Shop with Me” on YouTube, Sisson added.

Since at least last year, Penney’s has steadily been putting more investment behind online channels to create a direct line of communication with shoppers, per Cunningham. Next year, Cunningham said the brand will look to boost brand consideration to push shoppers to purchase and engage them to keep the brand top of mind in 2023.

“We’re really focused in on reaching our customers in a one-to-one approach and really focusing on targeting to customers the items, the products and the statements that resonate most with them,” he said.