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This week’s Media Briefing looks at which advertising categories are or are not buying campaigns from publishers this quarter.
The key hits:
So far, the overall trend for publishers’ advertising revenue is down in the first quarter but not all advertising categories are to blame.
While several publishers have reported that their direct-sold ad businesses are pacing between single-digit percentages to 25% lower than forecasts and open programmatic market RPMs are down between 20-55% year over year, the auto, travel and finance are all strong advertising categories, according to five publishers who spoke with Digiday for this story.
“I think the traditional assumption is that when a slowdown comes, everyone’s impacted — all of the economy is impacted equally. That doesn’t seem to be the case for the last few quarters, including the start of this year,” said a media executive who spoke to Digiday on the condition of anonymity.
On average, advertiser budgets are down between 5% to 20% this quarter over Q1 2022, according to two execs who sit on the buy-side and were also granted anonymity in exchange for candor. While this range is broad, the buyer added that each client is approaching budget cuts differently and the category they fall under is impacting spending as well right now.
Here’s a breakdown of which advertising categories are spending, aren’t spending or are semi-spending with publishers this quarter.
Nearly every publisher referenced travel as the advertising category spending the most year-over-year right now, with confirmation from one media buyer that those budgets have been least impacted by the economic downturn.
The travel category has been steadily strong since COVID vaccinations became widely available and over the past couple of quarters, that travel spend has increased beyond what it was in 2019. “Travel has now eclipsed pre-pandemic levels for us,” said the first media executive.
Despite one media buyer saying that their auto clients’ budgets were down this quarter, three media execs said the auto category was performing well for them.
“Auto is super hot right now. There’s a ton of car launches coming this year. Super heavy [electric car] focus [and] there’s a lot of marketing dollars that are going to go into the launch support,” said the first anonymous media exec.
Three media executives said that CPG was a top spending category this quarter.
“[Consumer packaged goods] are seeing pretty good returns in their business and they haven’t really slowed down [on advertising],” said the first media exec.
Both non-food CPG and the food and beverage categories are seeing growth this quarter, according to a fourth publisher who spoke on the condition of anonymity. And while not specifically a CPG category, they added that pharma was up inline with both CPG and travel.
Citing the improvements to the supply chain, a fifth publisher who spoke on the condition of anonymity said “CPG is where we’re seeing a huge amount of opportunity come in.”
The tech category dropped 2% in ad spend from January 2022 to January 2023, per MediaRadar data.
Tech was the most commonly cited, non-spending category this quarter by every media exec interviewed for this piece. This is unsurprising given the amount of layoffs happening in the tech industry right now.
“Tech is one of our biggest categories [and] you look at the layoffs and for obvious reasons, they’re just not willing to engage on marketing budgets,” said a second media exec who spoke on the condition of anonymity. And despite Google, Amazon and Salesforce all being top advertisers for this publisher, they will not be spending on ad campaigns until the second quarter this year.
Not quite unusual, as the tech category often swings heavier in the back half of a calendar year, thanks to many product launches that are anchored to the fall season, but the first media exec said that “some of the big tech companies are seeing a big slowdown,” even compared to traditional pacing for the first quarter, “whereas in the middle to end of last year, they were still running pretty hot.”
“Beauty, I think the overall sentiment we’re hearing from clients is that holiday sales weren’t great and that’s impacting some Q1 budgets,” said the third media exec.
The financial category dropped 16% in ad spend from January 2022 to January 2023, per MediaRadar data.
In-line with tech, business/B2B and finance are “pretty soft,” according to a third publisher who spoke on the condition of anonymity. Three additional publishers agreed that this category was down for them in Q1.
“Finance was so slow and so quiet … and the RFPs that we usually get in November, we just got [in mid-January]. And so that means they might not hit in the first quarter, but we’re just glad that we’re seeing them,” said the second media exec, who added that despite their late arrival, the RFPs do not have any budget cuts compared to this time last year.
And yet, the fifth publisher said that finance, specifically around credit cards, banking and personal finance, is an extremely opportunistic category this quarter, so much so that they’re planning to launch a new personal finance editorial vertical on their site.
The retail category dropped 12% in ad spend from January 2022 to January 2023, per MediaRadar data.
Retail is “way down,” said the fourth media exec, who added that this is not unusual coming off of the holiday season.
Luxury fashion, however, is still spending, the exec added, which was backed up by the third executive.
“We seem to be talking ourselves into the slowdown [versus it] being a reality. We see the macro consumer economic indicators are being pretty resilient in terms of spending and GDP. It’s more like we’re just speaking into existence than being a reality at this point.”
– An extremely positive media executive
The New York Times Company’s business was buoyed by increases in digital subscription revenue as it continues to aggressively push readers to pay for its bundle. However, digital advertising revenue growth was flat for the company in the fourth quarter of 2022.
The company added 1 million net digital subscribers last year – its second best year for net new subscribers since 2020 – and now has 9.6 million total subscribers, inching toward its goal of 15 million subscribers by the end of 2027.
By the numbers:
Bundle keeps the Times growing
The New York Times reached “record highs” in both the total volume of new bundle subscribers and the share of new subscribers choosing the bundle by the end of 2022, CEO Meredith Kopit Levien said on a Wednesday morning earnings call.
More than 30% of new subscribers chose to pay for a bundle subscription versus subscribing to a single product, Kopit Levien said, which includes access to all of the Times’ digital news products, Games, Cooking, The Athletic and Wirecutter. “That’s roughly six times more than in the prior year,” she added.
Ad revenue slowdown
Despite its subscription business success, The New York Times was not immune to the economy’s impact on the advertising market. When adjusted for a change in the company’s fiscal calendar (which meant Q4 2022 had six more days than Q4 2021), total ad revenue fell by 2.4% and digital advertising revenue declined by about 4%, said evp and CFO Roland Caputo.
Digital advertising revenue was $111.9 million in Q4 2022, compared with $111.1 million in Q4 2021.
Though The New York Times Group – which does not include The Athletic – “exceed guidance” in its direct-sold and programmatic advertising businesses in the quarter (plus the additional ad revenue from The Athletic, which started selling display ads in September), Caputo said. However, lower creative services revenue dragged down the year-over-year numbers.
Cost savings
Despite the Times’ efforts to cut costs last quarter, the company’s total operating costs were up nearly 10% year over year in Q4. This was primarily due to an increase of product development costs (such as expansions to the team), which increased 30% compared to the same period in 2021.
Sales and marketing costs decreased year over year by 36% in Q4 to $62.5 million.
Cost of revenue at the Times increased by about 11% year over year due to the additional days in the quarter, headcount growth in the newsroom and higher print raw material costs, Caputo said.
While the company is continuing to expand its newsroom, engineering and data teams, the Times has slowed headcount growth across most of the company, Kopit Levien said. The Times has also “reduced headcount in a few areas,” she added. A New York Times spokesperson said some open roles were closed last year, and the Kids beta app was sunset.
Plans for 2023
The Times announced on Wednesday that its board had approved a new $250 million Class A share buyback program – where the company will buy its stock back from shareholders so they can cash out on their investment – and will aim to return at least 50% of the company’s free cash flow to shareholders, Caputo said.
The Times expects total subscription revenue to increase by 6-9% this quarter compared to Q1 2022, Caputo said. Digital-only subscription revenue is expected to grow 13-16% year over year this quarter.
However, the company expects overall and digital ad revenue to decrease in the “low-single digits” this quarter, Caputo said, slightly better than what several other publishers have reported in regards to their Q1 advertising businesses.
The Times expects to slow cost growth in the second half of 2023, he added.
— Sara Guaglione
$100 million: The amount of money Vox Media raised in investment from Penske Media, which gives the Rolling Stone and Variety publisher a 20% stake in Vox Media, making it the largest shareholder of the company.
$800 million: The valuation of Forbes by a group of investors led by India-based Sun Group that is putting a bid for the media company.
$50 million: The amount of money that former owner of The Hill Jimmy Finkelstein has raised for his new media venture, The Messenger.
40%: The amount that The Guardian U.S.’s advertising revenue is set to grow year-over-year once its fiscal year ends on March 31.
The Athletic’s Sebastian Tomich is looking beyond ads and subscriptions to reach profitability:
Listen to the conversation with Tomich here.
How newsroom unions intervene when members get laid off:
Read more about how unions get involved during media layoffs here.
Despite Q1’s slow start, publishers are bullish about events revenue for 2023:
Read more about the state of event sponsorship here.
Digiday+ Research: The economy will hit the media and marketing industries this year, but differently:
Read more about how publishers and marketers are viewing 2023’s challenges here.
With the sale of the National Enquirer, the era of print tabloids comes to a close:
The sale of the scandalous gossip paper, the National Enquirer, is the latest of a series, marking the end of an era of print tabloids in the U.S., wrote Axios. This has led to an opening for digital influencers and websites to take over the role of sharing celebrity gossip, which often leads to even less accountability.
The Arena Group is using multiple AI technologies to write articles:
The publisher of Sports Illustrated is using artificial intelligence to help produce articles and pitch potential story topics to journalists, according to the Wall Street Journal. The company is reportedly using AI startups Jasper and Nota, as well as tech from ChatGPT’s creator OpenAI.
Pitch deck: Why Morning Brew bought short-form video platform Our Future:
In its pitch deck, Our Future advertised that it had more than 450,000 subscribers on YouTube and about 470,000 on TikTok, according to Insider. This is partially what led Morning Brew to acquire the business this year for an undisclosed amount.
ChatGPT makes creating fake news really easy:
A fake newspaper called the Suncoast Sentinel and a fake editor byline for Michael Martinez were created in less than half an hour by ChatGPT, according to Poynter. And while the fabrication of news can happen by the human hand just as well, “in just a few hours, anyone with minimal coding ability and an ax to grind could launch networks of false local news sites … using ChatGPT,” the article read.
Marketers suspect in the years to come that TikTok will eventually dethrone Twitter to become the go-to second screen, or the platform for real-time reactions to the nation’s most widely watched moments.
Historically, Twitter has been the industry’s standard for live, online conversations and reactions around events, like the Super Bowl, World Cup and Grammy Awards. But after its acquisition by mogul Elon Musk, there’s been turbulence, opening the proverbial door for competitors. Meanwhile, TikTok has been gaining traction with users flocking to the short-form video app to weigh in on live events.
“Just given the instability we all know about from Twitter, that’s placed more of an impetus on brands to think in other platforms,” said Aaron Shapiro, chairman and founder of Product marketing agency. “That’s definitely made TikTok become much more important.”
To put it in perspective with numbers, Twitter hashtags around the 2022 Grammys racked up nearly 12.5 million mentions, according to data Hootsuite provided to Digiday. In comparison, #Grammys2022 racked up 885 million views on TikTok.
Ahead of Sunday’s Super Bowl, TikTok is vying for ad dollars, offering incentives to advertisers to rival Twitter and own the second screen for the Big Game. Between Twitter’s ailing ad business and dwindling user numbers (the app lost more than 10 million users between last year and this year, according to eMarketer), the bird app’s problems spell potential big gains for competitors, like TikTok, per Shaprio.
For about the last two years, advertisers been placing their bets, and ad dollars, on TikTok, using it as a growth channel in hopes to go viral. That momentum has only continued as TikTok has built up its ad formats, personalization and bidding strategies. (More on that here.) The two are similar in their ability to amplify a message. For Twitter, that’s retweets, quote tweets, replies and hashtags. For TikTok, that’s duets, hashtags and stitches.
The biggest difference is that TikTok’s algorithm isn’t about real time engagement in the way that Twitter is. A tweet could go viral in a matter of hours as opposed to TikTok, which can have trending content days or even weeks later. TikTok’s strength, however, is in its algorithm, discovery element and viral nature, giving marketers a newer, viable way to participate in cultural moments.
“What TikTok is very good at is creating cultural memes and cultural moments that get amplified,” said Shapiro. “It’s less about what happens that nanosecond, but whether it creates a cultural cache that gets widely amplified with lots of TikTok creators.”
But the dethroning won’t happen overnight. This year, at least, Twitter will remain the reigning champion of live events. The proverbial door has been opened thanks to Twitter’s mishaps, but it’ll take a while for users to make the first step through to other platforms, particularly TikTok, marketers say.
“There’s no way TikTok is bigger than Twitter this year. It’s enforced behavior that we’ve spent years learning,” said Noel Cottrell, partner, creative chair at Giant Spoon. However, in two to three years’ time and as people continue to change their social media consumption habits, TikTok could very well become the next live event town square, Cottrell added.
At present, TikTok has a higher barrier to entry than Twitter. It takes longer to create a video. And for some brands, longer to get said video through red tape and approval processes. Plus, its algorithm can take content considerably more time to trend or reach viral status, unlike Twitter’s instantaneous reactionary nature.
“Where you’ll see TikTok showing up in a more real time approach is when the event that’s going on is longer than one evening. For example, the Olympics,” said Shelby Jacobs, senior social strategist at Dentsu. Meaning, TikTok may be a platform better suited for live events with longer lead times.
However, all hope on Twitter is not lost just yet. While advertisers have fled the coop, the platform made a play ahead of the Super Bowl to incentivize advertisers and regain their trust. McDonald’s has already returned to Twitter, at least with organic posts to the platform. Meanwhile Amazon is reportedly planning to resume ad spend on the platform as well, per Business Insider.
“The idea that TikTok will ‘replace’ Twitter is silly,” said Brendan Gahan, chief social officer and partner at Mekanism, in an emailed statement to Digiday. “Despite the rise of TikTok and short form video, written content will not be completely replaced.”
To Gahan, it’s less about Twitter or TikTok and more about the decentralization of social media in which each platform serves a different purpose. “We’ve seen a bundling and unbundling of social media over the years. New platforms emerge serving different purposes. It’s rarely as simple as a zero sum game,” he said.
As more artificial intelligence tools are being built for generating content — and getting an influx of investment and attention from tech giants like Microsoft and Google — startups in the marketing space are hoping to take advantage of this new AI wave.
While much of the hype has been focused on AI-generated text, images and videos, one new startup, called Rembrand (after the Dutch painter Rembrandt) is looking to expand on that hype by going after the $23 billion product placement market.
On Tuesday, Rembrand — founded by adtech veteran Omar Tawakol — announced an $8 million seed funding round for its platform that uses AI to place realistic-looking products in digital videos. Rather than manually placing products on real-life TV and movie sets, Rembrand uses a process called neural inverse rendering to digitally insert sponsored items into movies, shows and social media content made by millions of influencers across various platforms.
Even before the current boom began, marketing-related generative AI startups have raised funding. In 2021, Copysmith — a startup based in Birmingham, Alabama with a platform for generating AI-written content — raised $10 million. Late last year, San Francisco-based Sellscale — which helps clients write AI-generated emails — raised $3 million. And in October, the Austin-based generative content platform Jasper AI raised $125 million.
In the case of Rembrand, the plan is to start with talk shows before expanding to other categories such as sports, wellness and gaming. Tawakol — who co-founded the data management platform BlueKai and also the enterprise voice AI platform Voicea — wouldn’t disclose any specific brands or content creators that have agreed to test his company’s latest tech. However, he hopes Rembrand’s automated tools — and the advertising revenue that comes with them — will win people over.
“It takes four to six weeks of negotiation to get your product in a video,” Tawakol said. “If you’re shipping product, you can only afford to talk to the top tier, which is really expensive… If you scroll a little bit deeper in the curve, it opens up hundreds of thousands of other influencers, if not millions, who have very passionate followers.”
Rembrand is just one of a growing number of marketing tech startups hoping to profit from the emerging category of generative content. With giants like Microsoft and Google rapidly rolling out new AI-powered products and services more marketing-related startups focused on AI-generated content are also taking advantage of the increased attention on the topic and increased financial investments.
“What you see sometimes with a virtual product company is they try to go with big shock and awe,” said Sam Wick, the head of UTA Ventures, which invested in Rembrand. “But that’s probably a considerable amount more work for them to insert it there. And it’s not repeatable for another video.”
The broader market of generative AI startups continues to grow. According to a recent report by market intelligence firm CB Insights, total funding for the category grew from $271 million in 2020 to $1.5 billion in 2021 to $2.7 billion in 2022. Meanwhile, total funding deals have nearly tripled in four years, from 42 in 2019 — the same year OpenAI raised $1 billion from Microsoft — to 110 in 2022. Last year, around $317 million in funding went to startups focused on social media and marketing content while just $10 million went to startups making visual ads and marketing materials.
Other startups are taking a more bootstrapped approach. For example, the co-founders of Daydrm.AI developed an AI model trained on learning from award-winning campaigns from Cannes Lions, D&AD and The One Show. By using the platform, a marketer can enter a brief from which the AI will generate ideas specifically for creating a viral YouTube video, a user-generated campaign for Instagram, a live event, in-store activation, and/or various digital campaigns.
“Brand strategists have felt a little bit left out of this AI revolution,” said Daydrm co-founder James Fox, adding that strategists have to develop ideas with limited knowledge and short timelines. “Our model has an encyclopedic model of effective case studies and what creative briefs actually look like from the inside.”
Fox and his co-founder Aaron Adler are plenty familiar with the world of advertising. Fox was previously global head of brand strategy at Goldman Sachs, following two decades at various ad agencies. Adler is a front-end software developer whose past project partners include LinkedIn, IBM, Facebook, Eileen Fisher and Patagonia. But rather than replace strategists, Fox and Adler think they can help automate the idea iteration process with what Adler describes as a “creative calculator” that doesn’t have to be based in reality.
“We don’t think that AI is creative,” Adler said. “What it’s doing is finding the patterns and feels creative to us, but it’s really just doing correlation problem-solving in the background.”
Companies that launched before the boom are also seeing the benefit. For example, two-year-old Jasper AI now has 100,000 paying customers, according to Jasper CMO Meghan Keaney Anderson. Although she wouldn’t disclose the company’s most recent revenue, Jasper previously reported 2021 annual recurring revenue of $35 million and Anderson said the last two quarters have been the “strongest yet.”
Anderson, who joined Hubspot in 2011, said the generative AI space is now going through the education phase in a similar way that social media marketing underwent more than a decade ago. Rather than promote itself with flashy big campaigns, she said the company is focusing on its community of users who share tips and tricks and attend boot camps.
“It’s definitely a rising tide moment when suddenly we don’t have to explain to businesses what this means,” she said.