Month: January 2023

It’s put more ad dollars on social media platforms like TikTok where Gen Z spends the majority of its time. And marketers’ creative approaches became more authentic and unfiltered to reach the ad-adverse cohort. (Here’s Digiday’s full guide to marketing to Gen Z). Marketers and agency executives expect that this trend will continue in 2023.

Gen Z-driven channel

Brands learned that over-allocating marketing dollars to platforms such as Facebook, Instagram and YouTube wouldn’t cut it for the younger generation, so they added TikTok into the mix. This allocation is expected to continue into 2023, according to marketers.

They are also planning on taking advantage of Gen Z’s affinity for purposeful brands that want to create change.

“This means that more marketing teams will have good grounds to convince other departments that it’s finally time for their strategies to change and take themselves less seriously,” said Erifili Gounari, founder and CEO of The Z Link, the first Gen Z-led social media agency.

Per a study conducted by Morning Consult, 56% of Gen Zers report that social media is an integral part of their daily lives, and almost 2 in 5 (38%) are spending more time on social media than what is recommended. It is recommended to use social media for 30 minutes a day for better mental and physical health, according to the Journal of Social and Clinical Psychology.

Brands are heading into the new year with an understanding that being bold on social media will pay off more than playing it safe. Take the success of brands like Arm & Hammer and Sourse which invested in influencer marketing on TikTok to reach Gen Z.

How Gen Z influences culture

Many social media trends and internet subcultures have been shaped and driven by Gen Z, including memes and communication styles. These change all the time, and can directly influence the zeitgeist of a given period.

The head of youth practices at Sparks & Honey, Hannah Hickman, also shared her thoughts on Gen Z’s transition from influencer to creator — i.e. the side hustle economy to the passion economy as Gen Z wants to become their own creators and run their own businesses without a corporate backing. “Gen Z are approaching what they want to get out of being an influencer or a creator a little bit differently,” said Hickman, “and brands are going to have to react to that.”

Part of that trend, too, is feeling empowered to reshape a conversation online. Take body positivity, said Monica Rigali, vice president, global brand management at JanSport. “This not only pertains to body types and skin tones, but it is also important to include different capabilities of consumers, including those who use mobility devices in their daily lives,” said Rigali.

Gen Z has grown to feel empowered when they see themselves in digital marketing materials — a media environment they have uniquely grown up in, Rigali said.

Gen Z user habits

Also in 2022, Gen Z has shifted from publishing content on Instagram to TikTok as they are spending more time on the app. Rather than merely liking and commenting, Gen Z is looking to participate in social media, whether it’s by recreating popular dance moves or joining in on viral trends. Instead of passively observing the story, users want to be a part of it.

Due to the increasing popularity of TikTok, there has been an increase in competition between brands looking to engage Gen Z there.

Still yet, TikTok hasn’t overtaken Instagram just yet. The Meta platform will still be popular in 2023, said Michael Boccacino, senior director of content partnerships at the media publisher The Soul Publishing. However, people will use it differently as TikTok continues to evolve.

“TikTok shifted the utility of social media away from ‘finding things you already like’ to discoverability and Gen Z is more interested in finding new trends and opportunities, or learning things they don’t already know,” said Boccacino, as he added that the brand makes sure content is inspirational, entertaining, and relatable to people’s own experiences. “Viewers want to relate to shared experiences of others, and they want to feel like the content they are consuming is relevant to their everyday lives.”

Gen Z values authenticity and self-expression — a trend that will likely continue as they stay true to their values, including sustainability which can be seen in trends like shopping second hand and buying locally.

“In 2022, Gen Z’s value of sustainability and authenticity will continue to drive local focused trends,” said Wendy Mei, head of product and strategy at Playsee, a map-based social media app.

That search for authenticity is about understanding what matters to Gen Z and who they want to be and how they want to move through the world, Hickman said. If brands are going to spend their marketing dollars on Gen Z influencers, they need to figure out what type of authenticity they are tapping into.

“We’ve seen brands succeed where they’re really clear on what authenticity means for them and how they want to show up authentically,” said Hickman. “And we’ve seen a lot of brands misstep when they’re trying to do too many things or one that feels like they don’t have that clarity on and there’s no one right answer, but you have to commit to a specific version of authenticity.”

The joint hegemony of the corporate duo, formerly known as Facebook and Google, in an industry worth $567.49 billion (as of 2022) is set to remain on course, according to figures from Insider Intelligence, even if Amazon and Apple cast an ominous shadow.

After all, let’s not forget how the iPhone maker’s implementation of privacy measures such as intelligent tracking prevention, or ITP, and App Tracking Transparency, a.k.a. ATT, have hamstrung the advertising strategies of countless companies.

Not least for the likes of Meta, Snap, and a host of smaller app developers and publishers, all of which have noticed a distinct downturn in their revenues since ITP and ATT took effect.

And now, as advertisers express an increasing appetite for retail media, arguably the direct result of wholesale changes such as the decline of third-party cookies, many think Amazon’s rise in adland (as well as Apple’s) is fait-accompli.

Stats counter prevailing sentiment

Although figures recently shared with Digiday by Insider Intelligence put the rise of the duo — whose combined market cap was in the region of $3 trillion as of December 2022 — into some perspective. For example, the rise of Amazon in the media rankings over recent years has led some to speak of “a triopoly,” a means of describing how the e-commerce giant’s ad revenues combined with those of Facebook and Google account for more than half of all digital ad spend.

Although that’s only the case in western markets with Insider’s numbers suggesting that Chinese e-commerce giant Alibaba is actually the third-largest ad company in the world with revenues of $41 billion.

Such a statistic edges Amazon into the fourth spot in the revenue charts with an intake of $37.99 billion as of 2022, a period where it came in just ahead of TikTok-owner ByteDance which had revenues of $29.07 billion.

Meanwhile, Apple with its burgeoning advertising ambitions remains on the periphery of the global top 10 with revenue of $7.06 billion, a number that is little more than half of Microsoft’s $12.23 billion ad dollar haul during the same period.

Shifting dynamics

In fact, the combined advertising revenues of Amazon and Apple are not even 10% of the $567.49 billion spent on digital media in 2022. Although, as they ramp up their respective operation over the next two years (see graphic below) some dynamics are expected to change.

According to Insider’s forecasts, Apple will remain in the 10th spot of the global media rankings, but, by 2024, it will have largely pulled level with China-based search engine Baidu as its pursuit of Madison Avenue executives grows evermore productive. Similarly, per Insider’s estimates, Microsoft’s continued push into retail media and pursuit of CTV will help it accelerate past China-based multimedia giant Tencent (see charts below).

The triopoly truly arrives

Although, arguably, the most notable trend over the next two years will be how Amazon eclipses Alibaba with revenues of $55.99 billion in 2024 (see graphic below) compared to the Chinese player’s revenue of $48.91 billion, a development that truly would take “the triopoly narrative” global.

The media industry is heading into 2023 faced with a lot of uncertainty, thanks to a less than stellar 2022. But based on the conversations Digiday Podcast co-hosts Tim Peterson and Kayleigh Barber have had with media executives and brand-side leaders, the murky waters could be tricky to cross without taking on collateral damage. Hear from the editors on Digiday’s media beat about the top trends they’ll be following in the new year.

Highlights from the conversation have been lightly edited and condensed for clarity.

Cloudy forecasts for the coming year

Kayleigh Barber, media editor: So far, a lot of conversations I’ve had with CROs and CEOs on the media side have been really focused on not being able to expect what’s coming in a week’s time, let alone a full year. So we’ve been really sticking to that first six months time period when we’re talking about areas of focus or expectations for 2023. By and large, what I’m hearing is that there’s a lot of optimism for the second half of 2023, but the first half is going to be a little bit of a struggle. And I think it’s going to rely on a lot of lessons learned in 2020 to make sure they can pivot in a moment’s notice and cut costs if needed.

Tim Peterson, senior media editor: I’ve been talking recently with a lot of TV ad buyers and sellers about the upfront. And I look at that as something of a canary in the coal mine because they’re already starting to prepare a bit for what they expect the upfront next year to look like. And for anyone listening who’s not super in the weeds on the TV business, the upfront is basically this yearly cycle where over the summer, TV networks and advertisers and their agencies figure out how much money a brand or an agency is going to commit to spend with that TV network for the next year. 

And these are big commitments. It’s similar to leasing a car or leasing a house. This isn’t an impulse purchase and so they’re already trying to figure out how much money [they’re] actually going to be willing to invest, especially because the upfront negotiations are going to be kicking off right around that time where things may be looking better, or things may have gotten so much worse at that point.

Cost cutting a little too deep

Peterson: On the cost cutting side of things, there’s the consideration of which costs can actually afford to be cut and not so much necessarily like, which teams can we cut or experimental budgets, but in streaming, one of the big stories at the moment is just how much money these companies — whether it’s Netflix or Disney or Paramount or NBC or Warner Brothers Discovery — have spent on programming for their streaming services and how they aren’t generating enough revenue to give that clear sense on when they can turn a profit. They’ve been dialing back their programming budgets [and] some of them aren’t buying [new programming at all]. Warner Brothers Discovery went on a pause over the summer around how much it was buying, or they’re looking to buy cheaper shows. And they’re not necessarily spending on so-called premium stuff. 

But then that creates the question of ok, but if you just invest in lower quality stuff, can you expect the audience to be there? They’re going to recognize, “I’m paying $9 or $10 or $15 a month for the service and the stuff on it isn’t as good anymore.”

Barber: There was a lot of bloating that happened [in 2021] and a lot of chasing after revenue streams that might not have been as permanent. I’m thinking more about Web3 innovation or more of the crypto stuff. That was really great revenue to get when you could get it, but it wasn’t long term.

So I’m curious about the cohort of publishers that were getting really experimental, or were investing in specific teams that may add more overhead than revenue right now, if there’s going to be more layoffs in the coming year around that area. I think experimental budgets are not going to be as full in 2023, at least for the first half. That’s not solely directed at Web3. I think in other areas, like perhaps investing in VR, or more tech-oriented things.

I do think that the tried and true businesses might be the ones that publishers cling to. 

Pivoting to short-form, vertical video and hoping the money will follow

Barber: Publishers are also embracing short-form vertical video because it is significantly cheaper to produce.

One of the criticisms that I’ve heard from another publisher for a piece I wrote about what publishers would like to see from platform platforms in 2023, was that the ad formats on Snapchat Discover aren’t as robust as other platforms. But for platforms like TikTok and YouTube Shorts and Reels, the less polished the piece of content, the better it tends to perform. The whole idea of having a personality-driven piece of content that was created in the app and edited using the tools that are native to the app still seems to be performing pretty well, as publishers more embrace these platforms. So I’m wondering if that will help save some costs if maybe there’s fewer projects going through the studio route, and more projects that are being filmed in an office.

Peterson: [Publishers’ success with short-form vertical video] all depends on how much revenue these publishers are able to get from those platforms. The revenue program for Shorts is launching in February and so there’s still going to be that time needed to assess how much revenue is going to be coming in to creators and publishers through Shorts. But then also, how reliable is that revenue going to be? Because it was only May 2022 when YouTube started running Shorts ads and selling those to advertisers. And so, to what extent are advertisers actually buying that stuff?

The challenge of how TikTok and YouTube Shorts calculate rev share, like TikTok Pulse is basically a post-roll program but not every video from a creator or a publisher qualifies for it. It’s just the top 4% of videos on the platform. So you could be a publisher or a creator who qualifies for revenue and have absolutely none of your videos actually get a rev share in a given month.

Authenticity over perfection – whatever that means

The way that brands create content for social channels has shifted with the rise of TikTok and the push to focus on Gen Z. That means brands — and influencers — are moving away from a perfectly curated Instagram post to a seemingly more authentic TikTok video. 

“There has been a rise in backlash against ‘perfection’ on social media over the last few years,” said Katy Tenerovich, director of social strategy at Carmichael Lynch. “People are demanding authenticity, but even so that word lacks authority. Brands and agencies need to start tapping into this and stop spending absorbent resources on producing perfection that consumers don’t relate to.”

The kind of competition marketers are up against when it comes to consumer attention has also changed the game, and will continue to do so in 2023. “Today’s audiences are tuning out Hollywood-quality content because they are content creators themselves,” said Ternerovich. “They want to see and engage with things that look like they made it themselves. Marketers used to have to compete with other brands and the entertainment industry for space and attention. Now they have to compete with every single person with a social media account.”

TikTok as a search engine

Marketers and agency execs expect TikTok to continue to rise in 2023. That’s certainly a carry-over trend from 2022, but marketers say the approach to TikTok may change in the new year as they seek to find ways to master search on the platform. 

“It finally clicked to me how well search works on TikTok and how valuable that is,” said Victoria Vaynberg, CMO of Zola, when asked about her marketing New Year’s resolutions for the brand. 

Douglas Brundage, founder and CEO of creative consultancy Kingsland added on, saying, “Gen Z routinely cites TikTok as their favorite app, and it’s usurping Google as the go-to search engine for the world’s youth.” This makes marketers’ desire to master search on the platform logical. However, the increased scrutiny of TikTok by the government may make achieving this tricky, especially if the app is outright banned. 

“Spending will continue to increase on TikTok because the product is incredible,” said Brundage. “It simply seems to work better every day at generating leads, increasing revenue and building community for brands. However, the U.S. and Western European governments continue to increase their scrutiny of the platform, and it could all come to a head in 2023. Legislation in the U.S. is already heating up again from some states banning the app on government employees’ phones to the ‘ANTI-SOCIAL CCP Act,’ a bipartisan bill to outright ban TikTok.”

Should the legislative threat prove moot, marketers and agency execs expect that an “always-on” approach to content for TikTok will become common. 

“We’re also going to see brands digging deeper into their brand presence here and moving from campaigns to launching their own channels with always-on programming,” said Gabe Gordon, CEO of Reach Agency. “This shift is a sign of the platform’s effective algorithm — grounded in user interest versus creator/influencer follower base — being able to deliver the right content to niche, targeted and passionate audiences.”

Ripple effects of economic uncertainty

Marketers and agency execs have spent the last few months (and years) navigating economic uncertainty and a looming recession. Many believe a recession will actually hit in 2023. The ripple effects of that will be continued flexibility built into ad planning as well as marketers looking to cut costs and prove out effectiveness to CFOs. That will mean lots of tried and true spending.

“With the looming recession, there will be more emphasis on tried and true like search, Instagram and Facebook,” said Grace Teng, Chief Media Officer at Scale by Zambezi, the agency’s media arm. “Advertisers are asking to tie media to ROI so anything that can show movement towards results will be emphasized.”

Teng continued: “Online video will continue to grow as the SVODs become AVODs. Also, people are back out so OOH and cinema will continue to increase compared to 2021 and 2022.”

Aside from spending shifts, some expect the ripple effects of the economy to impact CMO positions, possibly making the fractional CMO — a role that’s gained traction in recent months — more popular. 

“The biggest thing on brands marketers’ minds for 2023 is recession planning, there’s no way around it,” said Joseph Saroufim, head of creative at Wheelhouse Labs. “With more brands exploring cost-cutting measures and the constantly revolving door of CMOs, I think that more brands will explore fractional CMOs to help guide their marketing efforts. Fractional CMOs offer objectivity, fresh thinking and a willingness to shake things up without an exorbitant price tag.”

Whatever happens, the unusual state of the economy will prove difficult for marketers to manage, as the previous trend forecasts haven’t been as reliable through this downturn. 

“The unusual economic environment will continue to require a watchful eye as it relates to investment, pricing and consumer sentiment in general,” said Lachlan Badenoch, Chief Strategy Officer and senior partner at Carmichael Lynch. “Regardless of whether we technically just avoid or enter a recession, it will be atypical.”

“Employment is high and consumer cash flow (spending power) is likely to rise through the year,” Badenoch added. “The nuances will vary, but more than even with past recessions the brand winners will be those spending cleverly but ultimately spending more relative to their market share than the competition.”

3 Questions with Christena Garduno, CEO of Media Culture, a multichannel brand response media agency

What have you heard from your end about the topic of the recession and how are you talking to clients about it?

The economic and global situation is fragile. From global instability to the economic downturn to climate catastrophe, advertising must engage customers in a manner relevant to their daily lives. Smart marketers recognize that to succeed, campaigns must naturally resonate with viewers to get results.

Why do you think out-of-home has become more popular while we’ve been dealing with economic uncertainty?

OOH allows companies to maintain a consistent presence in the real world and gives unique options to engage target consumers. The greatest approach to spending money in a recessionary market is to invest in activities that cost-effectively engage customers and foster long-term loyalty and trust. Investing in OOH strategies may increase ad spending even during a recession since OOH advertising is much less expensive while still generating valuable consumer data and conversion rates.

Thoughts on direct-to-consumer brands using TikTok for holiday campaigns this year?

DTC brands communicate directly with customers through social media, create and enhance their goods based on ongoing customer input, and depend on exceptional customer service to advertise their value. TikTok is advantageous for direct-to-consumer marketers since it is currently one of the most popular social media platforms. The platform is rapidly expanding. To stand out in a sea of promotional material, direct-to-consumer [brands] need a distinctive marketing approach that speaks to their customers’ ambitions. Influencers on TikTok might be a hidden weapon for boosting Christmas ads and skyrocketing sales. — Julian Cannon

By the numbers

Since the advent of Apple’s iOS 14 and Google’s threat to crumble the third-party cookie, marketers have been kept on their toes as data privacy regulations have gotten more assertive. Next year will be more of the same: Going into 2023, app marketers cite privacy as their top concern, according to a new report from growth acceleration platform Liftoff. More key details from the report below:

• 43% cite the industry shift toward being more privacy-first as their top challenge of the past year and clearly the biggest hurdle to overcome in 2023.
• 58% of marketers said they felt positive or neutral about the industry, versus 42% who said they had a negative outlook.
• 52% of respondents said they plan to increase their overall ad budget, and only 12% expect to reduce it in the coming year. — Kimeko McCoy

Quote of the week

“When I talk to our clients they’re certainly preparing to pull money. The questions we get asked revolve around things like ‘what would be the triggers for money back,’ ‘where would I redirect it,’ and ‘what are the best practices for advertising in a recession.’ That said, my sense is that Q4 has been pretty solid so far, and depending on how the year wraps up will determine (to a degree) how ad spending shapes up for next year.”

— Eric Schmitt, senior director analyst at Gartner, when asked about the decoupling of advertising from the economy and the ad recession’s biggest misconceptions

What we’ve covered

• Agencies plan to focus on TikTok, among other channels, in 2023
• Here are some of the quirkiest brand collaborations that got us talking in 2022
• How social platforms changed digital marketing in 2022

The connections between in-game advertising and the metaverse were on full display at the Interactive Advertising Bureau’s PlayFronts event in April. Many of the presenters were intrinsic in-game ad vendors, and with the IAB on the cusp of releasing updated measurement guidelines for in-game advertising, they were ready to assert their product’s role as the base layer of programmatic advertising inside the virtual universe to come.

“We’re still super bullish in the long term,” said Sam Huber, whose company, LandVault, pivoted from in-game advertising to the production of virtual experiences in June, only two months after Huber’s metaverse-focused presentation at IAB PlayFronts. “Obviously, there is a bit of a crypto winter right now, but it doesn’t really affect us, because most of the brands that are entering the metaverse now are not doing it for crypto reasons.”

Not all in-game advertisers share Huber’s bullishness about the metaverse. The in-game advertising company Frameplay kept the metaverse at arms’ length during its own PlayFronts presentation, wary of playing into marketers’ misconceptions about the space. In the months since, the company has occasionally mentioned the metaverse in some of its forward-facing messaging, but it has primarily leaned on its roots in gaming, a more tried-and-true marketing channel.

“We never have gone and said, ‘hey, do you all your metaverse stuff here,’ because that would just be inaccurate,” said Frameplay CEO Jonathon Troughton. “If you said you wanted to go into Roblox, you could argue maybe that’s a metaverse-like experience, but I certainly don’t think that necessarily is what people have been promised.”

Part of the issue is indeed that marketers’ expectations about the metaverse often don’t line up with the reality on the ground. Hollywood films such as “Ready Player One” have sketched out a vision for a fully immersive and interoperable virtual world, and as the metaverse picked up steam in early 2022, in-game advertisers did not necessarily go to great lengths to clear up their association with this tantalizing concept.

“Advertisers and brands are a bit misled,” said Natalia Vasilyeva, evp of marketing and strategy for the in-game advertising company Anzu. “They’re intrigued, and they’re excited about the metaverse, but they don’t know where to get started — and there are companies that say, ‘yeah, we are in the metaverse. I’m part of the metaverse.’”

Experimental channels in a recession

The crypto winter has acted as a preview for a potential economic recession, which could further reduce brands’ interest in activating in the relatively experimental metaverse space. In contrast, gaming has come into its own as a marketing channel, thanks to both the explosion of gaming during the COVID-19 pandemic and developments such as the IAB’s new measurement guidelines.

“When recessions hit, the first thing that gets caught is always marketing budgets,” said Jude O’Connor, CRO of the in-game ad company Bidstack. “So when there’s less money to transact, a brand tends to have to lean into their more proven strategies. The things that kind of fall by the wayside are the bigger picture ideas, the checkbox things.”

In-game ad companies’ decreased focus on the metaverse in the back half of 2022 was more of a cooling period than a full retreat from the concept. The in-game advertisers that Digiday spoke to for this report were unified in their belief that the metaverse, if it happens, will flow from gaming — they’re just less confident that both brands and consumers are as interested in the current state of the metaverse as the hype would lead some to believe.

As in-game advertisers enter 2023, it feels inevitable that they will eventually return to the metaverse — but for now, gaming is king.

“I think gaming is, ultimately, the core of the metaverse, and is what any good media agency partner is pushing brands towards,” said Sarah Salter, global head of innovation at the WPP agency Wavemaker. “A safer, more understood space, where this is scale and opportunity.”