Month: February 2023

Digiday+ Research surveyed 112 publisher professionals to find out how this is affecting their revenue sources, if at all.

Digiday’s survey found that, overall, the number of revenue sources publishers rely on has fallen very slightly since the first quarter of last year. To be exact, publishers are currently relying on 6.41 revenue sources on average, compared with 6.60 revenue sources last year.

The change is a bit more significant when we break down publishers by size. Small publishers (or those with a revenue last year of less than $10 million) get their revenue from an average of 4.83 sources as of Q1 of this year, down from 5.41 a year ago. Meanwhile, large publishers (or those with last year’s revenue at least $50 million) are relying on 7.68 revenue sources on average, compared with 8.02 sources at the start of 2022.

The fact that both large and small publishers are relying on fewer sources of revenue this year indicates that media companies are likely streamlining their businesses. The state of the economy and smaller staff counts are potential reasons for this.

Additionally, it’s likely the difference between small and large publishers can be attributed to resources, at least in part. Large publishers are more likely to have a bigger staff with the capacity to dedicate time and skills to a longer list of potential revenue sources. Smaller publishers, on the other hand, will naturally have smaller teams who have to work with what they’ve got (or do more with less).

This year, direct-sold ads are the top revenue source for publishers overall, Digiday’s survey found: 54% of respondents said a large or very large portion of their revenue comes from direct-sold ads.

This remains the case even when segmenting the data for large and small publishers. Nearly two-thirds of large publishers (63%) said direct-sold ads account for a large or very large portion of their revenue, and 42% of small publishers said the same — making direct-sold ads the No. 1 revenue source for both groups.

Programmatic ads will also be an important source of revenue for both large and small publishers this year. Programmatic is the No. 2 source of revenue for large publishers this year, with 49% of respondents from this group saying they get a large or very large portion of their revenue from programmatic. And it came in at No. 3 for small publishers, with 31% saying programmatic accounts for a large or very large portion of their revenue in 2023.

Video advertising ranked much higher for large publishers than for small ones. Just under a third of large publishers (32%) said they get a large or very large portion of their revenue from video ads, putting the revenue source at No. 3 on large publishers’ list of revenue sources. (Only 11% of small publishers said a large or very large portion of their revenue comes from video ads.)

Meanwhile, branded content ranked much higher among small publishers. About a third of small publishers (31%) said branded content accounts for a large or very large portion of their revenue, ranking it at No. 2 for small publishers. (By comparison, 20% of large publishers said they get a large or very large portion of their revenue from branded content.)

Overwolf is one of the largest game modification platforms on the web. Every month, 35 million users navigate to its modification platform CurseForge to download mods for popular games such as “Grand Theft Auto,” “World of Warcraft” and “The Sims.” To play using these mods, players must navigate through Overwolf’s launcher application, which the company has leveraged as ad inventory for brands such as Procter & Gamble and Hulu.

In other words, Overwolf has devised a way for brands to advertise alongside premium games — without having to partner directly with game developers to be hard-coded in. Banner ads are served in the margins of Overwolf’s launcher app, and the company can also implement in-game pop-ups that notify players about branded events and other activations.

The entire gaming experience is facilitated and controlled by Overwolf, and the publishers and game developers themselves are not involved, similar to how they aren’t involved in the development of the “modpacks” distributed on CurseForge.

“Overwolf’s cutting-edge capabilities were an excellent match to our marketing challenges and allowed us to expand our reach amongst our target gaming audiences,” said Don McLean, director of Dentsu Gaming.

Video games have grown to become one of the most popular forms of entertainment worldwide, but not all gaming advertising businesses have benefited as much as Overwolf.

Last year, the entire intrinsic in-game advertising industry — producers of ads placed inside games via natural locations such as in-game billboards and posters — made only an estimated $20 million, according to Jude O’Connor, CRO of prominent in-game advertising firm Bidstack. That’s less than half of Overwolf’s ad sales alone, and far less than the revenues of over $395 million reported by The Trade Desk for the third quarter of 2022.

“We’re now kind of unwinding from a window of tremendous exuberance in all things technology and digital and advertising,” said Dave Madden, president of in-game advertising company PlayerWON. “And it sounds like an amazing idea — but I’m not sure that anybody checked with the brands to see how excited they were about it.”

The main sticking point is that intrinsic in-game ad firms haven’t yet locked down large amounts of premium gaming inventory — the popular, high-production-value releases that enjoy widespread popularity among core gamers. At the moment, most of the inventory of intrinsic in-game advertising companies like Anzu and Bidstack is located inside free-to-play PC and mobile games.

“I spent two years at Anzu and came on board with the promise of premium games, console games — and that never really materialized,” said Mike Jablon, a former sales director at Anzu, who joined Overwolf as a director of brand partnerships last month. “Really, the greatest objection that I have from clients is just the quality of the inventory, and running in premium games. Everyone wants ‘Fortnite,’ everyone wants ‘Call of Duty’ — and mobile, casual and hypercasual advertising is kind of a dime a dozen.”

Overwolf’s exploding ad sales in 2022 were certainly an endorsement of its advertising inventory — but the company will have to evolve further if it wants to truly satisfy marketers’ demands for premium console inventory. For now, the platform is limited to PC games, but its sights are set on the console market.

“I used to work on the ad agency side for PlayStation, and of course, that is something they were always interested in doing,” said Jablon’s co-director of brand partnerships Christina Grushkin, another recent Overwolf hire who previously served as vp of brand partnerships at StreamElements. “But from what I’ve seen, I would say the trend really isn’t to run your branding within the console games specifically — it really is just, where are we reaching the most engaged audience, and how can we engage them?”

However, while some buyers have little to no interest in buying ads through a DSP, others are planning to test out or put more money into buying ads programmatically this year, as the technology and targeting and measurement capabilities continue to improve and more inventory becomes available to buy programmatically, according to conversations with four buyers.

The share of podcast ad dollars being spent programmatically remains a sliver of podcast ad spending. In 2021, programmatic represented 2% of total podcast spend, per the Interactive Advertising Bureau. By 2024, it will account for just shy of 10% of U.S. podcast ad spending, predicted Insider Intelligence.

“Programmatic is still relatively in its infancy in the audio space compared to other channels in media,” said Robyn Meyers, vp of programmatic for AdsWizz.

Why the hesitancy around programmatic ad buying?

Why are some podcast ad buyers resistant to buying ads through a DSP? One of the reasons is certain inventory isn’t yet available to buy programmatically, buyers said. Larger buys, sponsorships, host-read ads and custom formats are typically bought directly from a platform such as Spotify, Pandora or iHeartMedia, buyers told Digiday.

Maria Tullin, vp and managing director of advanced and digital audio at Horizon Media, said buying podcast ad inventory through a DSP is “not appealing to my team.”

Kristen Coseo, director of podcast and digital audio strategy at Ocean Media, said her team prefers to work directly with networks due to the relationships they’ve built. “The majority of the reps that we work with, we’ve been working with them for a lot of years now. So the trust is there.”

Buying podcast ads through a DSP would also, in some ways, mean more work for the agency, Coseo said. Her team would need to ensure everything is running efficiently and monitor results, she said. When working directly with a podcast network, the network “sets everything up based off the parameters we give them. By going direct, we are putting trust in our partner to make sure they are selecting the correct targeting parameters and setting up our campaign as we requested,” she added.

It’s also more difficult for brands with smaller budgets to bid for a “preferred placement” — such as an ad placed in a top podcast show — on a DSP, said Mark Pappas, svp of innovation at CMI.

One buyer — who did not feel comfortable speaking on the record to summarize agencies’ hesitancy to buy podcast ads programmatically — said there is a “sect of the podcast ecosystem that is anti-programmatic that does not exist in other mediums,” which they believe is due to being “burned” by issues with programmatic display ad buying.

Why some buyers prefer programmatic

For those buyers who are transacting through a DSP, the biggest benefit is better reporting. Buyers can see which shows and episodes the ads ran in and can control frequency management, or how many ads were served in a specific household. This can’t be done (yet) with direct buys, two buyers said. That being said, iHeartMedia CEO Conal Byrne said the company offers that level of reporting for its direct-sold inventory.

Molly Schultz, svp of integrated investment at UM, said her team prefers to buy through a DSP because they can target a specific audience segment across networks. Because of this, buying ads through a DSP is also better for clients that have smaller budgets and can’t “commit to massive spends,” CMI’s Pappas said. Clients can test the podcast space with those smaller budgets going into DSPs to get their “feet wet with audio,” he said.

It’s also a pricing strategy: programmatic buying means “being able to pay what the market demand is,” Schultz said. Programmatic buying gives a “real-time rate,” she said.

Despite Schultz’s preference for buying podcast ads programmatically, she noted her team still has to vet a host and the content of a podcast series by having direct conversations with networks. “The same types of third-party verification tools that we use [for other media channels] aren’t available when within podcasts. So we do have to rely on a lot of first-party intel to help ensure safety,” Schultz said. “Just buying an audience or buying a content vertical doesn’t give you quite enough guardrails. You still have to dig in a little deeper,” she added.

Expect to see more programmatic buying in podcasts

Bob Hunt, senior director of audio at Omnicom Media Group’s Hearts & Science, said the agency is spending slightly higher than the 2% share in IAB’s report of advertisers’ podcast spend in programmatic channels. But his team wants to put even more money into DSPs. 

“There is a desire to grow that percentage,” he said. Hunt declined to say how much more of a share will go to programmatic channels, but said he believes more money will go into DSPs as more advertisers test out the podcast space. 

“We are increasingly having conversations with both the partner landscape, as well as clients, about the ability to transact programmatically. About 12-18 months ago, it was very much an idea, something that you could do, versus in 2023 we are actually trying to make that a reality,” Hunt said.

The main reasons for the lag are a significant portion of podcast inventory is only available to buy directly from a network and many top podcast shows sell out of their direct inventory, with no inventory leftover to place into an SSP, Hunt said. However, both Hunt and Schultz said they are also seeing more networks make more inventory available on SSPs. That, combined with the fact that DSPs have improved their analytics to provide show and episode-level reporting, means buying podcast ads through a DSP has become “a much more attractive proposition,” Hunt said. 

Coseo said Ocean Media “might start to dip our toes” in buying ads through a DSP this year, to see if programmatic buying is a more efficient or effective way to purchase inventory for clients, she said.

Buying podcast ads through a DSP is “fairly new in podcasts,” said iHeartMedia CEO Conal Byrne. “It could be a bit of another inflection point for our medium honestly, in the next 12 to 24 months as [agency holding companies] come in and start to buy more and more that way.”