Month: February 2023

And since the pandemic, Wall of Productions’ business has gone from strength to strength.

Wall of Productions’ evolution

The company started out as an online comedy network in 2015, and today it is well on its way to becoming the production arm of a broader marketing services business. Now, Wall of Productions is one of three subsidiaries alongside the original Wall of Comedy (distribution and marketing) and Wall of Talent (talent management) that live under the Wall of Entertainment umbrella. 

The idea of the business is to give marketers a fresh take on their most perennial of problems: how to strike a chord with people who are either no longer seeing or are no longer interested in watching a typical 30-second advertisement. Instead, Wall of Productions could create a video, whether it lives on YouTube, TikTok or even a streaming service bereft of ads entirely, that conveys a brand’s ethos but carries none of the traditional branding hallmarks that audiences are used to seeing in a commercial or a pre-roll video. 

As Taf Makopa, group managing director at the company, pointed out, Wall of Productions was one of the first platforms to produce engaging and entertaining lockdown content for brands including YouTube, Amazon Prime, Badoo, Footasylum and Azar — whose videos were all shot on iPhones at home. And since the pandemic, the business has grown stronger, increasing overall revenue from around £500,000 ($601,400) pre-pandemic to around £3 million ($3.6 million) now, with forecasts of £7 million ($8.4 million) for next year.

“We’ve honed in on our production arm because it’s our strength,” said Makopa, who identified co-founders Wade and Ascott as instilling in the company excellent production skills, creativity and ideas since the beginning.

Demand for this sort of expertise seems to be growing. Or at least it is if Wall of Productions’ momentum is anything to go on. The business expanded from an 11-strong headcount pre-pandemic to 27 people today. Makopa was brought on in December 2018 to evolve and elevate the platform into a sustainable business. “We currently have about four vacancies, but we’re looking for the right people,” he said.

Straddling the line between entertainment and marketing is a tricky thing to do — it’s something marketers have arguably been trying to perfect since the emergence of the soap opera. Wall of Productions, however, says this is exactly what it has been designed to do. That’s clear in the way it goes about developing ideas for marketers.

Wall of Productions’ overall strategy

For any show produced by Wall of Productions, talent is developed and engaged via sister brand Wall of Talent, and the finished product is promoted through Wall of Comedy.

“We spent a lot of time developing formats, which enabled us to sustain the business,” Makopa said. “Now they’re coming into fruition, so we’re flying off that success.”

Especially since Wall of Productions’ platforms of choice, YouTube and Instagram, are currently going through major structural and strategic changes — neither of which is an easy feat for any marketer to navigate.

But being a relatively small fish in a rather large pond hasn’t deterred Makopa and his team from competing against bigger rival agencies for budgets. In fact, he believes that in a couple of years, it’ll become a much fairer fight. 

“Traditional TV is dying and that’s worked in our favor,” he said. “Brands now spend more on digital so the market is growing for us. It feels like everyone is now in our playing field, which is where we were seven years ago. We’ve been waiting for this trend to arrive.”

This is exactly what Ali Mankani, associate creative producer at Z2C Limited, a venture accelerator for marketing tech startups, has noted. He explained that since covid, the growth of over-the-top and digital content viewership has increased exponentially, and it’s still growing year over year.

“Brands are resorting more towards subtly branded content integrations to generate awareness without interrupting the viewing experience of consumers,” Mankani said. “Exposure of brands increases significantly as well when brands get virality through third-party content, which is more socially shareable and relatable for a contemporary audience.”

Take Wall of Productions’ flagship show for Footasylum called “Does The Shoe Fit?,” for example, which first aired in 2020. Episodes varied in length from just over seven minutes to just short of 18 minutes, depending on the content, the episode and the structure needed to make the best video. The show’s 27 videos have amassed almost 23 million views to date.

“A lot of the production companies before us know how to create ads which are set lengths, but we create content as long or as short as it needs to be. And that’s alien to how other businesses think,” Makopa said. “We’re not worried about the length of a piece of content. Our primary concern is the engagement and retention of that piece of content.”

While YouTube and Instagram best serve the business and its core audiences, Wall of Productions now invests a lot more time into TikTok, especially given its rapid rise, its premise centered around short-form video and, of course, its heavy use among Gen Z.

Creating packages that span across platforms

Despite adding another social network to its media mix, the crux of the Wall of Productions team’s creative process hasn’t changed. Makopa explained that once a brand gives the team a brief, people at all levels in each department prep ideas for an ideation meeting, and the best ideas are put forward to the client. 

“We’ll go back and finesse the chosen idea based on the client’s feedback — this is where our writer, head of production, producer, director and talent managers now come together to really develop the idea,” Makopa said. “Our content needs to stand out and so our capabilities are limitless — this is one of the reasons why our clients like our approach.”

In comparison with traditional production agencies, Wall of Productions has a crucial unique selling point, said Mankani.

“With the help of a unified in-house framework that supports the produced content, from ideation to execution and delivery, they can execute more focused top-level branded-content campaigns for their clients by cutting down talent sourcing, production and distribution costs helping them achieve better margins,” Mankani added.

The most important aspect of the Wall of Productions’ creative process, though, is ensuring each idea can service more than one platform.

“It’s never a TikTok or YouTube or TV idea. The content needs to work across at least two platforms and be sustainable,” Makopa said.

This strategy requires a deep understanding of each platform and audience. As such, Makopa said he is very hands-on with obtaining feedback, whether by asking industry peers for their thoughts,  dipping into comments on the content or having a team debrief after each shoot and once a show has been released.

“We’ve got expectations about how we think people should react,” said Makopa. “If someone says a video isn’t great, there’s something about the product that we need to work on.”

PubMatic, for example, saw its revenue for the final quarter of 2022 dip 1.7% on the same period the year prior to $74.3 million. It was a bitter end to an otherwise sweet year, during which time the business raked in $256.4 million, 13% on the previous year. 

Still, execs at PubMatic are trying to remain upbeat about it all. They saw enough in those final three months of the year to believe that their business remains insulated from the worst of the pressures weighing down on the ad tech industry. That is to say the business continues to see a steady flow of ad dollars into its platform. Over the fourth quarter, the business saw its automotive and food and drink advertising verticals grow at 25%. It helped soften the loss of dollars in shopping, tech and personal finance, all of which in aggregate declined 13% in the same period a year ago. 

Looking ahead, the business believes things will continue to be bumpy until the second half of the year. This is when it expects its finances to take a turn for the better on the back of more ad spending, better profitability thanks to cost cuts and optimization to its tech. 

Oh, and there are also the unintended benefits that will undoubtedly come as a result of rivals like Yahoo and EMX no longer being around. The closure of those SSPs, especially the Yahoo one, eliminates one route to publishers advertisers would’ve used and as a result those ad dollars will be redistributed to other SSPs that work with the same publishers. Chances are that both Magnite and PubMatic would expect to be in the frame for that money. Granted, those gains won’t be felt anytime soon. Yahoo has said it will shut down its SSP until the end of the year.

“Whether it’s via supply-path optimization or through some of these SSP closures, the industry is clearly consolidating around fewer, bigger platforms,” said PubMatic CEO Rajeev Goel on the company’s earnings call. “We see ourselves as a winner in the process as recognised by our historical share gains, and what we would expect to see in the future. This economic situation is only going to accelerate the consolidation that many of us have felt should’ve already have happened on the sell-side, not least because it has already done so on the buy-side of ad tech.”

Elsewhere, Magnite continued to chug along. Things aren’t great for the ad tech vendor. Like PubMatic it has its fair share of problems. Even so, its  far from going the way of the dinosaur. On the contrary, it raked in $156 million in the final quarter of 2022, up 10% on the same period the year prior but flat on the previous month. 

In simple terms, the performance was fine, just not stellar. Magnite attributed some of this to CTV. But it was quick to talk up the chances of things picking up sooner, not later. Not least because it continues to lock down more quality inventory in a CTV market where it is in limited supply. 

However, all that supply is nothing without demand so Magnite has been trying to lock that down too. CEO Michael Barrett told analysts that.a recent deal with Horizon Media and an expansion of its existing one with GroupM would help do just that. In fact, there’s arguably much more value in a business like Magnite doing this (aggregating advertiser demand), than trying to sustain a business on non-exclusive aggregated supply. 

Execs at PubMatic subscribe to the same rationale: more money is being spent on developing new tools that give marketers more control over how they source inventory in CTV. The hope being that by showing marketers how to be smarter and more efficient about how they buy CTV ads and from whom, it will encourage them to continue to consolidate their ad dollars into those ad tech vendors that do this the best. As Goel explained: “We see a whole slew of innovation opportunities to help the publisher and buyer get closer together and remove friction from the transaction process.”

Demand for this sort of thing is clearly there. Over 30% of the activity on PubMatic’s programmatic marketplace is via these so-called SPO arrangements where it has essentially agreed to give advertisers more insight into the provenance of the ads they’re buying in exchange for ad dollars. Two years ago, around 20% of activity on PubMatic was the result of these deals. Moreover, the average 2022 net spend retention rate for SPO partners who have worked with the SSP for three years or more was 124% per year.

“The SSPs that have embraced and prioritized curation — pairing data and inventory through the supply path — are healthy and growing big businesses today,” said Greg Williams, president at tech curation platform Audigent. “Those that have not yet focused on curation will continue to struggle and fall further behind the innovators given the robust demand from media buyers and the performance lift and privacy boost that curation provides.”

Outlooks like this run counter to the narrative defining SSPs these days. They’re framed as commoditized and redundant players in an ad tech market going through a correction of sorts. And for good reason. The closures of SSPs run by Yahoo and EMX within days of one another brought the value of those ad tech vendors into sharp focus. Correction, it brought the value of certain SSPs into sharp focus — i.e. those companies with little to none direct publisher relationships. Remember, the reason an SSP is valuable (at least to a demand-side platform like The Trade Desk) is that it works as a buffer to having to work with multiple publishers. In other words, it’s single point of integration, and subsequently a single bill to pay. That’s valuable.  

“Some industry pundits have concluded that this might be the beginning of the end for the SSP industry,” Barrett told analysts on the earnings call. “We couldn’t disagree more. What we’re seeing now isn’t the beginning of the end of the SSP, but the death of the undifferentiated SSP. For years, the market has borne the weight of a raft of SSPs with little innovative technology and little more to offer than recirculated DSP demand.”

That’s changing albeit as a result of consolidation spurred by agencies. They’re consolidating their programmatic ad dollars into fewer SSPs in exchange for lower fees, clearer transparency into what those fees are and better reporting. In turn, SSPs are being incentivized to find an approach to their business models that balances the interests of their prime customers (publishers) with their new(ish) ones (advertisers).

Exciting as those opportunities are, they’re also riddled with political potholes. The more valuable the advertiser-side of the SSP business gets the more uncomfortable publishers could get over whether their ad tech vendor of choice has their best interests at heart. It’s easy to see how that wariness could turn into cynicism that these deals could potentially pave the way for undisclosed deals with agencies where they received kickbacks as an additional incentive for choosing one SSP over another. All told, SSPs must tread carefully. 

In the wake of such signal loss, an abundance of replacements have flooded the market with certain technology labels, such as “data management platforms,” losing favor among some, given the perception that they are associated with third-party data. 

In parallel, overlapping technologies are entering the fray with more than a third of all marketers piloting new technologies last year for this reason, according to a survey by Gartner. Additionally, the same survey depicted the average respondent as allocating a quarter of their entire marketing expenditure on such technologies last year. Further still, disagreements remain as to what actually constitutes de rigueur technologies, think “customer data platforms” or  “data clean rooms.”

For instance, it was only recently that the IAB Tech Lab issued a series of tech standards of data clean room technologies for public comment — see more here — with the trade body hoping its latest initiative will promote interoperability among the current vendors pushing their wares on the market. Many hope it will prevent a scenario whereby a new product category is dominated by the industry’s Big Tech players, such as Alphabet and Amazon.    

It’s a scenario that is challenging marketers, not to mention publishers, as the skillsets required to operate such utilities, not to mention the legal basis they have for using any available technologies, are not always readily available.  

Anthony Katsur, CEO of IAB Tech Lab, recently told Digiday the current paradigm presents marketers with a “conceptually complicated challenge,” particularly as they seek to ensure that consumer consent is honored throughout their supply chain. 

“There are more vendors than ever before that you’d have to interconnect with,” he commented, adding the contemporary marketing stack requires a “portfolio approach.”  

Katsur further commented, “Things like your CDP have to connect with no less than half-a-dozen vendors, then you have to ensure your supply-side platform has an integration with your demand-side platform, and ad server, on the other side.”  

On top of this, more centralized technologies such as CRM systems, DMPs, and data clean rooms (whatever the industry eventually agrees they are) also have to be taken into consideration. 

It was observing the current dynamic take shape over the past three years that led MadTech Advisors CEO Bob Walczak to conceive of and launch his MadTech Connect. An offering his consultancy claims can help companies laden with otherwise ungainly tech stacks integrate between platforms. 

“So far, most connection between platforms and audience enrichment, attribution and targeting etcetera has all been cookie-based,” he explained, adding that the erosion of cookies now requires direct platform integrations. 

Theoretically, this sounds simple, but multiple sources within brand-side marketing departments explained the complications involved with Digiday, particularly as many seek to bring more of their online marketing activities in-house. 

Separate marketer sources, all of whom requested anonymity given their employers’ PR policies, noted how privacy requirements such as GDPR meant their legal teams are mandating a more buttoned-up approach which, oftentimes, requires such direct integrations between platforms. 

“Because you have to make sure that audience consent is respected with the company that you’re integrating with, it can become harder, and you have to restrict the number of companies you’re working with,” added one source from a multinational brand holder. “That means you have to take on more work yourself, and you don’t always have the skillsets to execute [and] this can really delay progress.” 

MadTech’s Walczak further explained some of the intricacies involved, which eventually lead to headaches for marketing teams, particularly as the current milieu requires API integrations, a prospect that fills many marketers’ hearts with dread. 

“A lot of this is happening on top of their current infrastructure, and instead of being able to transfer data through cookies, what’s happening is that first-party data has to connect directly from platform to platform which means you have to have integrations,” added Walcazk. “We were spending some time doing platform integration work, and connecting these systems for clients rather than doing strategy and looking what they would output.”    

The intention of MadTech Connect is to act as a “universal connector” between different platforms according to Walczak — who was formerly the GM of BidSwitch, a tech layer that essentially performs similar facilitation between buy- and sell-side ad tech.

“The thought occurred that instead of having to build a connector over and over again to connect two platforms,” he added, “we essentially build one connector… and then connect their systems through toggling.” 

In an emailed statement, Liz Salway, a media executive with experience working with multinational corporations’ online marketing teams, explained that many international marketing outfits are moving from “monolithic tech stacks to multi-platform ecosystems.” 

This is oftentimes governed by local necessities — for instance, the legal requirements in one market may practically mean it’s best to use a particular piece of technology in that one geography only.  

Although, such an approach can be awkward, not to mention expensive which often makes it difficult to demonstrate ROI, particularly as trade orgs are challenged with establishing consensus on tech standards.  

“There may not be many commonalities between two brands operating in two very different spaces — a CPG compared to a luxury retailer for example — but they will both want access from the same enterprise solutions to clean rooms, martech stacks and their data,” added Salway. “Creating a master connection to enable this will go some way to providing a much quicker, less costly way of connecting the various dots in most marketing use cases.”

The ebb and flow of streaming subscription growth over the past few years settled into a semblance of normalcy. Meanwhile, the ad market continued its downturn but did not nosedive into the ground to the extent some companies had feared. Nonetheless, the TV and streaming economy — as with the global economy — remained in a precarious position with companies pressed to cut costs and prove profitability, especially on the streaming side.

Here is a rundown of the top takeaways for the TV and streaming industry from the most recent earnings season.

Streaming subscriptions

For a sign of normalcy in the subscription-based streaming market, look no further than Netflix solidifying its position at the top. The company added 7.7 million subscribers in Q4 to surpass analysts’ estimates. No, Netflix didn’t break out how many of those subscribers signed up for its new ad-supported streaming tier.

“We’re seeing take rate and growth on that ads plan is solid” was about as much as Greg Peters, who is replacing Reed Hastings as Netflix’s co-CEO, was willing to say during the company’s earnings call on Jan. 19.

Surprising as the strength of Netflix’s subscriber growth in the period was, similarly stunning was Disney reporting a 1% quarter-over-quarter subscriber downtick for Disney+. Disney attributed the subscriber shedding to its Disney+ Hotstar service losing 3.8 million subscribers in India and Southeast Asia after ceding Indian Premier League rights. By contrast, Disney+ added 200,000 subscribers in the U.S. and Canada, though that was only a quarter of the subscribers gained by sibling streamer Hulu in the period.

Streaming subscriber growth was a bit of a mixed bag across the rest of the major services in Q4. Paramount’s Paramount+ attracted 9.9 million new subscribers, but Warner Bros. Discovery’s HBO Max only added 1.1 million. And NBCUniversal’s Peacock split the difference with a 5.5 million subscriber increase in the quarter.

At the close of 2022, here were the subscriber standings among the major streaming services:

• Netflix: 230.1 million
• Disney+: 161.8 million
• HBO Max and Discovery+ (combined): 96.1 million
• Paramount+: 55.9 million
• Hulu: 48.0 million
• Peacock: 20 million

Advertising downturn

The TV and streaming ad market “bottomed out” in the fourth quarter of 2022, NBCUniversal CEO Jeff Shell said during the company’s earnings call on Jan. 26. Of course, NBCUniversal was in a somewhat enviable position as the owner of Telemundo, which broadcast the World Cup and was cited a primary contributor to the Comcast-owned company’s 4% year-over-year increase in advertising revenue. 

But Roku’s Q4 earnings report appears to provide further evidence of the advertising downturn, if not evening out, then at least not steepening to an entirely vertical tilt. The connected TV platform owner’s CEO Anthony Wood warned in November, “We are seeing signs that Q4 is going to be worse in terms of the ad market than Q3 was.” But then it turned out to be not that terrible. Roku doesn’t break out its advertising revenue, but its platform revenue segment — which includes revenue from ads as well as streaming subscriptions sold through Roku — increased by 5% year over year. “Q4 platform revenue came in above our expectations,” said Roku’s outgoing CFO Steve Louden during the company’s earnings call on Feb. 15.

That’s not to say the TV and streaming ad market looked all that rosy in Q4. Disney-controlled Hulu’s ad revenue, for example, decreased year over year in the final three months of 2022, though Disney didn’t disclose specific figures. The traditional TV ad market, in particular, ended the year on a cold streak. Paramount’s linear TV ad revenue slid by 7% year over year. AMC Networks’ U.S. ad revenue dipped 12% year over year. Warner Bros. Discovery’s linear TV ad revenue fell even further, down 17% year over year.

Profit and costs

Subscription sales are fine, and ad dollars are nice. But what really matters at the moment is the revenue companies keep as profits after covering their costs. That prioritization is fueled, in large part, by the long-term profitability of the traditional TV business and has been augmented by the evidence in Netflix that streaming can also be a successfully solvent business.

Yes, once again, Netflix is the yardstick. After covering its operating expenses, including property and equipment costs, Netflix had $332 million left over in free cash flow for its Q4 operations. 

By contrast, Netflix’s rivals from the traditional TV business continue to sink more money into their streaming businesses. Paramount’s streaming business reported a $575 million adjusted operating loss in Q4 2022 compared to $502 million in Q4 2021. And Disney lost $1.1 billion on its streaming business in the final three months of 2022 after losing $593 million in the year-ago period.

But again, Netflix has shown there’s a path to profitability in streaming. The company had gone through its period of backing up the Brinks truck to plug its service with programming in order to amass subscribers — the period its emergent rivals are currently in — but it has begun to pare back its programming costs. In 2022, Netflix spent $16.8 billion on content, a 5% decrease from 2021.

Warner Bros. Discovery has been especially aggressive in cutting its streaming costs to approach profitability. The owner of HBO Max and Discovery+ still lost $217 million on its streaming business in the fourth quarter, but that was less than the $728 million it lost in Q4 2021.

“On the cost side, all of the trends are pointing in the right direction. We see better engagement, better churn, which makes marketing efficiencies come up. We’ve right-sized the content investments,” said Warner Bros. Discovery CFO Gunnar Wiedenfels during the company’s earnings call on Feb. 23.

All of this is to say, the fourth quarter of 2022 wasn’t the blockbuster period of prior years, but it wasn’t altogether bleak either. More sober than somber, if you will. Considering the undercurrent of unease still circulating among TV and streaming companies, that companies’ fourth-quarter results didn’t send alarm bells blaring may even be somewhat reassuring amid a still-gloomy start to 2023.

As Netflix said in its letter to shareholders on Jan. 19, “2022 was a tough year, with a bumpy start but a brighter finish.”

What we’ve heard

“There are thousands of FAST channels that exist today. But when you look at those FAST channels, most of the platforms that have FAST channels have somewhere between zero to maybe two Black content-focused channels. And so we see that as a massive opportunity.”

— Revolt CEO Detavio Samuels on the Digiday Podcast

Numbers to know

96.1 million: Number of streaming subscribers that Warner Bros. Discovery has across HBO Max and Discovery+.

25 million: Number of people who use TelevisaUnivision’s free, ad-supported streaming service ViX each month.

7.3: Number of streaming apps that the average U.S. household used in the second half of 2022.

22%: Percentage share of iPhone owners who subscribe to Apple’s Apple TV+ streaming service.

>1 minute: Minimum length for videos to be eligible to receive money through TikTok’s updated creator payment program.

What we’ve covered

Revolt’s Detavio Samuels says advertisers have fallen short on commitments to Black-owned media companies:

• While the Black-owned TV network and streaming operator has seen movement among advertisers, brands have not fulfilled their pledges, Samuels said on the latest Digiday Podcast.
• Revolt’s digital revenue has grown to surpass its linear TV revenue despite the latter revenue stream continuing to grow.

Listen to the latest Digiday Podcast episode here.

When it comes to the talent working on TikTok, more agencies are eying personal profiles:

• Ad agencies are scouring the platform to hire people for their internal teams.
• The TikTok-based recruiting stems from brands asking agencies to produce more content for the platform.

Read more about agencies’ TikTok talent evaluations here.

How agencies are testing live shopping and seeing potential in accelerating conversions:

• Live shopping continues to be a shiny new toy among ad agencies.
• Apparel and fashion products are most the popular categories for live commerce.

Read more about agencies’ live shopping experiments here.

What do creators really want from TikTok?:

• TikTok creators complained that the platform doesn’t pay very well.
• They also criticized the platform’s unpredictable algorithm and onerous oversight.

Read more about creators’ TikTok critiques here.

What we’re reading

Apple hires a streaming ad seller:
Apple has tapped Lauren Fry, former CRO of TV ad targeting firm Simulmedia, to steer its Apple TV+ service into the streaming ad business, according to The Information.

Netflix cuts subscription prices abroad:
Just as Netflix ramps up its crackdown on password sharing, the company lowered its subscription prices in more than three dozen countries, according to The Wall Street Journal.

Advertisers approach this year’s upfront with caution:
Advertisers are not slashing their budgets ahead of this year’s TV advertising upfront negotiations, but they are preparing to extend the annual haggle and angle for less lengthy commitments, according to Ad Age.

Talent agency preys on TikTok creators:
Carter Agency has failed to pay TikTok creators, including BIPOC creators, for brand deals that the talent agency secured on their behalf, according to The New York Times.

Warner Bros. Discovery v. Paramount:
A few years after Paramount struck a lucrative licensing deal for WBD to carry “South Park” episodes on HBO Max, the latter company is suing the former for undermining the deal by pushing other “South Park” programming on Paramount’s own Paramount+, according to Variety.