Month: January 2023

It’s Google’s most serious antitrust challenge to date. Not only is it anchored to a real harm — the fact that Google’s ads business has foisted a heavy tax on struggling digital publishers — it also outlines how this behavior has hurt users. 

The latter point harks back to Sections 1 and 2 of The Sherman Act, articles the DOJ along with eight Attorneys General filed in the U.S. District Court for the Eastern District of Virginia in a 139-page lawsuit last week.

Here’s the short version: Google’s sell-side tools are the target. The DoJ is demanding divestiture of Google’s sell-side advertising assets, or the Google Ad Manager suite, including both Google’s publisher ad server (DFP) and its ad exchange (Adx).

The lawsuit doesn’t, however, call for the same to happen to Google’s buy-side ads business, which would cover paid search, YouTube, as well as its demand-side platform Display & Video 360. 

Unsurprisingly, marketers aren’t saying much. They rarely do on matters this sensitive around Google. Not because they don’t necessarily have an opinion. 

Chances are they will, given they’ve probably seen enough over the years to have at least a basic understanding of how Google edged out its rivals to build the world’s dominant ad business. It’s just that whatever opinion they had about Google’s practices was long overridden by the realities of being a marketer. Indeed, the very mechanism that makes Google so appealing to marketers — its so-called network effects — happens to be considered monopoly evidence by antitrust authorities. 

None of this should take away from the underlying issue here: irrespective of what side of Google’s business is in the crosshairs, it’s difficult to think about spending money on a platform that increasingly looks like it could get broken up. Let alone one that is (or has been) the subject of other investigations into whether it abused its power. Even if there are many marketers who have made peace with the more domineering aspects of Google’s business, the DoJ’s lawsuit will have given some of them pause.

“We don’t predict significant changes to how Google operates or for there to be a material impact to users for multiple years, as we expect Google to fight this suit,” said Goodway Group CEO Jay Friedman. “In the meantime, marketers need to weigh the combination of the switching cost plus the delay in learning other platforms against the value Google is bringing them today.”

What this period of reflection actually amounts to is anyone’s guess. Especially since any resolution could be a long time coming: the likelihood of any action from this lawsuit could take years, as well as depend on the priorities of a given administration. And that’s before the costs of walking away from Google are factored into things. Lawsuits of this complexity are always more a slow burn than a blaze. 

Making the case 

Much of the suit is rooted in how Google was able to maintain the 20% revenue share fee it has charged on its ad exchange since 2009. And it paints that against the vast, influential scale Google has across publishers, the ads they sell, and the data that informs it. 

“It’s hard to convey to the public why this is important,” said Ana Milicevic, co-founder and principal, Sparrow Advisors, adding that one potential way of demonstrating how Google’s alleged dominance of such ad auctions is to compare it to how Big Tech dominates more tangible marketplaces.

For instance, Google’s control of both the buy- and sell-side of an ad auction is similar to Amazon’s visibility of both buyer and seller activity on its marketplace for physical goods. The fact that Amazon has this ubiquitous visibility, and then introduced its own Basics line in certain categories to the detriment of third-party merchants is one parallel. 

“You need to demonstrate the loss of dollars by the free press,” Milicevic added. 

The muted reaction from marketers to the lawsuit starts to make sense. It’s a moment to really understand what it does and doesn’t mean. That’s what the four agency execs who spoke to Digiday for this article said they had spent the intervening days since the announcement doing — and there’s a lot for them to unpick.

Among them, is whether this lawsuit will change everything and nothing about the way Google sells ads. 

Why? Let’s say the suit resolves in not forcing advertisers to use Google’s bidding tech to buy from its online marketplace. Does that really get to the heart of the matter if the real impact is that Google pulls even more money away from publishers into its own owned and operated properties?

Advertisers weigh up the odds

“This move by the DOJ has been a long time coming and creates an industry imperative for independent ad tech, which we are seeing advertisers embrace,” said Bill Wise, CEO, Mediaocean in a statement too Digiday. 

And, with time, advertisers have begun to consider the true cost-benefit of working with Google and whether it makes sense to have so much of their money running through its tech. In some cases, they’ve even acted on those concerns. 

For example, in 2018, British Gas ditched the search giant’s ad server in favor of an independent one, and since then the power company hasn’t regretted its decision. Perhaps unsurprisingly, other advertisers have explored similar moves in the intervening years.

“We’re getting more holding groups and independent agencies come to us looking for a secondary alternative to the Google ad tech stack because clients don’t want to put all their eggs in one basket,” said the managing director of an ad tech firm on condition of anonymity that declined to go on the record over concerns of breaching confidentiality terms with clients.

“There’s enough lawsuits, investigations and analysis in the press out there on both sides of the Atlantic to make it hard to ignore the outstanding issues with the way Google runs its ads business.”

True as this may be, don’t expect this lawsuit to breathe new life into the “breaking up with Google” narrative — at least not yet. Sure, those marketers who have already done it — or are doing it — will feel vindicated by what the DOJ is trying to do. But for everyone else it’s more a case of wait and see.  

“This lawsuit comes after a string of growing concerns and increasingly substantial fines for opaque practices, not just in the U.S., but the U.K. and Europe as well,” said Anders Pilgaard Andersen, the general counsel of legal, Adform.

“If the DOJ is successful in its litigation, the move the DOJ is demanding will unlock a renewed wave of innovation and competition in the advertising industry and has the potential to be a landmark moment in the move toward re-establishing a fair, open internet.”

Will Google actually benefit?

Aside from the debate over which sector of the media industry would benefit most from any such break-up, some are pondering potential benefits for the Alphabet-owned entity?

Prominent ad tech commentator (and ex-Googler via way of DoubleClick) Ari Paparo told Digiday its ad stack has become an albatross around the neck of the online giant, claiming that it would make it a “leaner, smarter company.”

According to Paparo, CEO Marketecture, deprioritizing its ad tech operations, which yield low margins compared to its core competencies while also drawing fire from various corners, will let Google hone in on future profit-making ventures.

“If they had less conflicts of interest and less worries about regulation and antitrust, they could instead focus on things that they are really good at including search, cloud, and other initiatives,” he concluded.   

“If you get a Marvel movie… that can drive 20 million people to see the movie over the course of Friday and Saturday night, that’s a lot of scale. And the audiences tend to be younger and more diverse than what you can get in prime-time television,” said an investment lead at a holding company media agency who declined to speak on the record because of business relationships with all video sellers. “When you think about the CPMs, that we’re paying in prime-time television, and you can shift it to cinema, that shift resonates to me.”

Forrester principal analyst Kelsey Chickering says the competition from the rest of the video landscape will remain intense, leaving the cinema ad firms close to the back of the line. “The video landscape keeps fragmenting. Media companies serving in-cinema advertising aren’t just competing with each other, they’re competing with a plethora of new entrants, with CTV growth, Netflix introducing an advertising tier, and TikTok competing for consumers’ entertainment time,” said Chickering.

Another holding company investment exec added it’s common knowledge the cinema ad firms will be expecting to win more dollars — but it agreed won’t be an easy task. “We believe that the partners are going to push for more upfront commitments and do their best to steal share from video dollars,” said the exec. “The challenge will be that spending in general will be down for the remainder of 2023 and into 2024 due to economic headwinds that clients are facing.  Growing revenue in a down market is always difficult. Their best bet is to go after traditional linear money, and specifically prime time within linear.“

That’s definitely what both NCM and Screenvision are planning to do. But they remain on the expensive side themselves, with the buyer estimating a CPM of between $50-70 for a marquee position in their pre-movie rafts of content, ads and trailers. 

The marquee position, at least as privately held Screenvision sells it, is the final ad unit that runs after all trailers and right before the film starts, explained Christine Martino, Screenvision’s CRO. She pointed to 97% attention paid and 80% ad recall to the ad, with a 38% increase in unaided brand awareness vs control, and the same percent increase on likelihood to interact with the brand within two weeks of seeing the ad.

“We’re looking to prove to brands that building brand awareness impacts all aspects of the lower funnel — it changes consideration, and it changes purchase intent,” said Martino. “And we have the data to prove that cinema does that now. But I think we don’t want to step away from being about brand awareness.”

NCM has its own case studies of showing the impact of its medium on advertisers. One Q4 case study involving a retailer it declined to identify showed 52% lift in store visits for those exposed to the onscreen campaign vs. control, and 27% lift in store visits for those exposed to the digital campaign vs. control. 

Both NCM and Screenvision are in various stages of pursuing attention metrics as well, although neither company would discuss their efforts except to say that the relative captivity of the audiences lends itself well to scoring highly in attention. 

“Premium to us is not about price — it’s about effectiveness, it’s about the results you get. That’s what premium should be, not just a a CPM against exposure,” said Mike Rosen, CRO at NCM, which is a publicly traded company. “Premium should be a higher value that you’re getting from that media. So we are very much in favor of any data or any research that brings us out of that legacy exposure-based thinking to the types of thinking like engagement or attention that gets into the the true value of one media option versus another.”

There’s a certain irony that entertainment advertising, including streaming services, video games and toys, are among the most frequent purchasers of in-cinema inventory — given they compete with moviegoing for their free time. Still, a buck’s a buck. 

Helping both firms in the space is the fact that the film studios seem to have ironed out hiccups in the release schedule, moving away from simultaneous release in theaters and streaming services and back toward an exclusive in-theater window.

Screenvision’s CEO John Partilla also noted that 2023 heralds a solid lineup of films he believes will drive increased attendance at the box office. “We feel really good about the breadth and depth of slates” the studios have lined up, he said.

NCM’s Rosen agreed. “The movie slate for 2023 is incredibly full of a great varied slate of movies for everyone, from young audiences and beyond to families and some older audiences. So the good news is we go into 2023 with a lot of momentum.”

Still, the efforts the cinema ad firms put into growing revenue will likely feel like an uphill climb. “In-cinema media companies face two major headwinds: shifting consumer behavior and marketers flush with choice,” said Forrester’s Chickering. “Forrester data found that 52% of U.S. online adults say they would prefer to see newly released movies on streaming services at home rather than movie theaters. This is up from 47% in 2021. Movie theaters are struggling to survive as at-home viewing behaviors endure post pandemic.”

Color by numbers

Creative agency Ah Um this month surveyed 286 leaders and 5,000 employees in tech, AI and analytics companies, focusing on content consumption habits related to purchasing and procurement decisions in the B2B sector. The finding: The three criteria for B2B content marketing are visual, varied and valuable content. — Antoinette Siu

More stats:

• 67% of senior decision makers read print, while 65% of business leaders like visuals when looking at B2B content
• 63% prefer video content over other formats
• 59% of respondents said they read all of the content given at events.
• Managers at a typical Fortune 500 company can waste more than 500,000 days per year on ineffective decision-making, according to McKinsey.

Takeoff & landing

• Brian Wieser, who for the last four years has been global president of business intelligence at GroupM, left his position at the end of last week. He is replaced by Kate Scott-Dawkins, who’s worked closely with him the last year. No word yet on Wieser’s new direction.
• Publicis Media’s performance marketing unit CJ acquired Perlu, an influencer networking and technology platform that specializing in creators, which will get folded into CJ’s influencer unit.
• Speaking of influencer networks, creative and media agency McKinney, part of Cheil Worldwide, purchased influencer marketing agency August United from Audacious Studios, as well as a performance media firm called Tailwind, also owned by Audacious. 

Direct quote

“2023 is going to be [another] busy year for privacy, with five U.S. state privacy laws going into effect and more bills coming through state legislatures. And European regulators got off to a fast start … The shifts in the privacy landscape show no sign of slowing down, so it’s a critical time for marketers to get involved in their organizations’ privacy programs.” 

— Forrester analyst Stephanie Liu, in a report assessing the gap between marketers and privacy efforts. Jan. 28 was Data Privacy Day. 

Speed reading

• I wrote about growing frustrations media agencies have with The Trade Desk, whose power and influence over programmatic has grown immensely — and who strongly refutes their frustrations. 
• I also spoke with Tyler Moebius, founder and CEO of SmartMedia Technologies, about the evolution of NFTs into actually valuable marketing tools in loyalty and data gathering. 
• Digiday’s media agency reporter Antoinette Siu looked into Snap’s transformation into a leader of augmented reality among the social platforms, and whether that’s a competitive advantage or not. 

But the next challenge is getting its digital publishing business to profitability this year before it looks for more investment. Webster declined to share how much money Atlas Obscura lost last year.

“Overall, we expect to be profitable this year. That’s our plan,” Webster said. “Probably the biggest change inside our business is we’re thinking more about sustainable profitability rather than just top-line growth at all costs. I think that’s maybe a healthy correction from the days of pushing, pushing, pushing on top line and not being so concerned about the bottom line. We addressed that, and are making sure that every project we do and every department within our company is either profitable or heading on a path to profitability.”

Atlas Obscura is currently conducting a search for a new head of brand partnerships and a director of media. Webster said the company is on track for profitability by the second half of 2023, and that part of Q4 2022 was profitable.

Atlas Obscura restructured its trips business to conserve costs by outsourcing some operations and “eliminating a few positions” last August, Webster said. He wouldn’t say how many people were let go or how much money these moves saved the company.

A former Atlas Obscura employee who left before these layoffs told Digiday, under the condition of anonymity, that they had heard the company was having trouble raising investment. Atlas Obscura’s last funding round was a Series B round in 2019, in which it raised $20 million from investors like Airbnb, A+E Networks and VC firm New Atlantic Ventures.

Webster said that he is currently “taking the temperature” of investors, but is holding off on the next funding round until the business and market have improved.

“We want to make sure we are raising at a time when the business is profitable and growing organically. That’s always the best time to raise. And when the market is in a place where there’ll be the most favorable terms. So we are taking it slow,” Webster said. “I think by the middle of next year, my prediction is things will become a lot more clear in the venture and funding world.”

Rightsizing in the meantime

Atlas Obscura isn’t alone in this approach. Many publishers are feeling the pressure to rightsize their organizations, according to conversations with two media investors and a consultant. The recent wave of media layoffs is also evidence of this.

Data from capital market research firm Pitchbook confirms this too: There were just five U.S. venture capital deals involving publishing companies (defined as providers of print and internet publishing services, such as newspapers, magazines and books) in the fourth quarter of 2022, with a total deal value of just $4 million. That’s down from 15 deals in the same quarter in 2021, 14 in 2020 and 13 in 2019. It was the smallest deal count and deal value in the fourth quarter since at least 2015.

“[Private equity] firms everywhere are scrutinizing their potential investments more. I think we’ll see some prospective investors not committing to new investments until they see how the market performs in the next [three to six] months,” Andrew Perlman, co-founder of VC firm North Equity and Recurrent Ventures, said in an email.

Sam Thompson, senior managing director at mergers and acquisitions advisory firm Progress Partners, called Atlas Obscura’s strategy a “level-headed” one. He said now is the time for media companies to take advantage of the slower market to “clean up” their businesses before investors return, especially companies looking for middle-stage and later-stage investors.

“I’m sure publishers’ CFOs right now are working overtime to restructure their businesses to be as solid as possible, and if not profitable as possible,” Thompson said. 

Investors’ media interest cools

Perlman predicted that there will be smaller funding raises going forward. For now, most companies are focusing on “optimizing their operations and profitability,” he said.

When it comes to what kind of companies Recurrent is looking to invest in, Perlman said the firm wants “brands that have authority in their space, dedicated enthusiast audiences, a diverse revenue model, and strong partnership opportunities.” The company’s M&A strategy is focused on deals that would add value to its existing verticals, as it watches “how the market evolves,” he said.

Notably, VC firm Lerer Hippeau — co-founded by Ben Lerer, who sold Group Nine Media to Vox Media last year — no longer invests in new media companies, and media is not currently a priority sector for the firm, a spokesperson said. The company recently invested in areas like Web3, health, data and software platforms. The last investment Lerer Hippeau made in a content production company was in 2020, when it invested in Meet Cute, a company that produces short-form audio rom-coms, according to its website.

What this means for valuations

Last week, CNBC reported that Vice News is restarting its sales process with a much lower valuation of under $1 billion, compared to $5.7 billion in 2017. The company sought a valuation of about $3 billion when it attempted to go public via a special purpose acquisition company in 2021, but instead raised $135 million from existing investors.

Vice’s valuation drop wasn’t a surprise to the media investors Digiday spoke with, as valuations have continued to slide downward amid an uncertain ad market and high interest rates that have slowed down the private markets. Because demand isn’t high and competition is lower, “irrational” prices that people were paying for businesses have come back down to earth, Thompson said.

But Vice’s valuation is a contrast to Axios’ sale last August to Cox Enterprises that valued the company at $525 million, roughly five times its projected 2022 revenue of over $100 million. However, Axios was profitable — Vice is not (though CEO Nancy Dubuc told The New York Times the company is aiming to break even this year). Thompson said Axios’ sale and Vice’s valuation “will be used as market [comparisons].”

Times like these — when competition is low — are also when traditional media companies go out to purchase assets to grow their own businesses, Thompson said. Insider reported this week that Vox Media is looking to raise $200 million to do just that.

Clearly, this isn’t good for advertisers — they could unknowingly bid against themselves and subsequently drive up the price they pay as a result of this practice. But, on the flipside, it makes publishers a lot of money. 

The longer this impasse continues the worse off the open market is. Think about it: auction duplication tends to be prevalent across a certain type of publisher. Hint: It’s not necessarily premium publishers. Sure, it’s something they do, but more often than not it’s the made-for-advertising sites — those that exist for the sole purpose of aggressively monetizing traffic so they don’t have to worry about the cost of acquiring it in the first place. 

Simply put, the lowest quality supply is occupying a growing share of programmatic inventory on the market as a result of auction duplication. 

And yet publishers aren’t exactly scrambling for fixes. That’s if the size of their ads.txt files — the document that lists all the programmatic partners they work with — is anything to go by. 

In January 2020, the top 10,000 sites, apps and CTV apps based on ad spending from the clients of programmatic consultancy Jounce Media ran their programmatic auctions across 205 supply paths. By late 2022, they authorized 622 supply paths. It has essentially tripled over that time.

“There’s too much of the open market,” said Ryan Eusanio, managing director of digital activation at Omnicom Media Group. “It’s just not cost-efficient to listen to it all so everybody in the market is in some way kind of throttling how much of the open market they manage.”

This has been happening for a while now. The trickle of ad dollars out of the open market into private marketplaces is a testament to this. 

But It’s a trickle not a tide for a reason: irrespective of how they’re dressed up, one-to-one private programmatic trading deals are a heavy lift even for the largest media agencies. Not to mention expensive. 

The open auction, for all its faults, doesn’t have those same hangups. On the contrary, there are many advertisers that crave the apparent ease and relatively low cost of buying from the open market where the price ads are set in real time via an auction that any advertiser can participate in.

“The majority of buyers still simply buy open auctions,” said Rob Webster, global vp of strategy at digital marketing consultancy CvE. “Sadly many buyers are still attracted to the ease and apparent low cost of the open web and haven’t yet got the memo that there is a (much) better way.”

This better way revolves around curation — but on a much bigger scale than ever before. 

Rather than try and curate a premium programmatic marketplace on the back of many one-to-one deals with publishers, agencies (and the odd advertiser) are trying to sustain their own supply pipelines of curated inventory on the back of one-to-many deals with publishers. Moreover, they’re using supply-side platforms to do it. Think of them like a safer marketplace to buy ads from, where they avoid lower quality impressions, and shady publishers. 

Big picture: eventually these curated marketplaces of sorts could become the agency’s equivalent of the open auction. 

Or at least that’s the plan. More on that here, but the cliffsnotes are this: agencies are trying to use the curated marketplaces to pull money out of the open auction. Do this and it helps them teach their clients where the best audiences are. The more intel these advertisers get on what publishers perform best the easier it is for them to start spending more money directly with them. It’s like a flywheel effect in that regard. 

For now, ad dollars continue to pour into the open market. Remember, it’s not a complete quagmire. There are checks and balances in place, and ad tech vendors are constantly trying to sort the wheat from the chaff, doing everything from imposing limits on the number of auctions each programmatic marketplace can issue to removing obviously low quality inventory from the supply chain entirely. The issue is these efforts can only do so much. 

Indeed, private marketplaces still account for a smaller (albeit growing) portion of online ad spending. In the case of the clients at media management firm Ebiquity, it took up a little more than a third (36%) of the dollars its clients spent online, including in the open programmatic market. That’s up from 27% in 2020. 

“The complexity of DSP custom bidding models and the headache of deal ID activation means that most programmatic buyers continue to spend most of their money in the open auction,” said Chris Kane, founder of programmatic consultancy Jounce Media. “But the quality of the open auction continues to degrade.”

Needless to say, the next few months are going to be notable. More money could pour into the open market just as easily as it could seep out. On the one hand downturns make the cheaper ad prices found in the open market more palatable, but on the other hand that may not be enough for many marketers who are being pushed to account for every dollar they spend. It’s too close to call at the moment. 

There are a couple of early signs that suggest more money could move out of the open market. Emphasis on the early. For starters, advertisers like Hershey’s are taking more money out of the open auction to fund direct deals with publishers, Then there’s the fact that agencies and demand-side platforms continue to develop more sophisticated ways to filter out the lower quality impressions from the auctions they take part in. Not to mention the rise of more carbon-conscious media buyers. They could create the first real financial incentive for publishers to reduce auction duplication.

“I really like the Netherlands, and the ultimate goal would probably be to stay here,” Gurevich told Digiday. “But I don’t really know how possible it will be.”

Gurevich’s successful visa application is part of a wave of policy changes signaling governments’ acknowledgment of the rise of esports. For instance, the government of North Carolina opened a $5 million esports grant fund in November 2021. Meanwhile, French president Emmanuel Macron announced that Paris will host a “Counter-Strike” major in Paris this year. And the EU Parliament recently passed a resolution to support and fund gaming and esports.

Governments’ interest in esports is encouraging, but despite this groundswell of policy-level support, not all countries are equally enthusiastic about the space. The Indian government, for example, has banned games such as “Free Fire” and “Battlegrounds Mobile.” And while the U.K’s shadow culture minister Alex Davies-Jones has spoken up in support of the country’s esports industry, the current Conservative government there has never acknowledged the presence of esports in the country.

“Look at France, with President Macron supporting esports and wanting to bring the ‘CS:GO’ major there, inviting all the French esports industry personalities to an event — it seems like he has his own little passion for it,” said Dom Sacco, who interviewed Davies-Jones for his website Esports News UK. “We have Alex Sobel and a few others, but we need more MPs in the UK that have a good understanding of games and the potential of esports to start supporting this stuff properly.”

In Gurevich’s case, Team Liquid originated as a “StarCraft” organization, and with the high-ranked free agent Gurevich living at its headquarters, it made natural sense for the org to sign him on. But he required a visa to work for the company — and the Netherlands had only ever issued visas to athletes in traditional sports, never esports.

“They usually give these to football players coming into play for Ajax or something, with these big salaries and all this marketing and all that,” said Team Liquid senior esports manager Brittany Lattanzio, who helped steer Gurevich through the visa application process. “‘StarCraft’ is also one of the smaller esports, so it’s a lot harder to show them — I had lots of calls where I was explaining, like, ‘here’s the structure of ‘StarCraft;’ he’s like a tennis player, he goes to circuit events,” Lattanzio said.

Team Liquid’s advocacy, as well as Gurevich’s extenuating circumstances as a displaced Russian citizen, did the trick. In early January, the Netherlands approved Gurevich’s visa, and on Jan. 6, he was announced as the newest member of Team Liquid’s “StarCraft II” roster.

“He’s spoken up publicly against that invasion, so he literally can’t go back,” said Ryan Morrison, a leading esports lawyer and CEO of talent agency Evolved. “And I think the fact that he was out of the country and in the Netherlands for esports as a profession, to work and win and compete, is a really compelling argument, where many others probably would have failed on that application.”