Month: February 2023

‘Metaverse platforms’ are out, user-generated content is in

With crypto winter in full effect, metaverse platforms that are rooted in blockchain technology, such as Decentraland and The Sandbox, have experienced a massive decline in traffic. On the other hand, player counts in game-centric virtual worlds such as Roblox and Fortnite continue to rise. Brands might not have cared about user numbers in 2021 and 2022, when they were racing to stake a claim to the metaverse — but in 2023, they’re more likely to spend their marketing dollars activating inside the platforms people are actually using.

In recent years, the meaning of the word “metaverse” has been muddied by the rise and fall of the web3 space. Some experts believe that brands will allocate less money toward experimental metaverse marketing budgets and more to their gaming budgets, but that the outcome — virtual branded spaces, products and events — will be more or less the same.

“We call it the metaverse space, but the reality is, what we’re talking right now is UGC gaming,” said Margot Rodde, founder of the Fortnite Creative studio Creators Corp. “For sure, they will spend less, but not necessarily in UGC gaming, with its huge audiences and potentially new platforms that are going to pop up in that space, built by other gaming companies.”

Creating tangible revenue opportunities is key

At the moment, most brand activations inside metaverse platforms have not included any direct opportunities for e-commerce or the sale of virtual goods. Brands view the metaverse as more of a marketing channel at the moment — a way to raise brand loyalty or awareness and signal their commitment to future technologies.

As a recession mounts, brands will start to realize that they are leaving money on the table by not including direct commerce opportunities in their metaverse activations. Companies like Forever 21 have already sold millions of dollars of virtual goods by partnering with companies such as Virtual Brand Group, which helps connect Roblox creators with brands hoping to digitize their products.

“In a down market, you have to ask yourself, ‘why am I doing this?’ And if the answer is to build a sustainable, revenue-generating business, that’s a great answer,” said Virtual Brand Group CEO Justin Hochberg. “And if it’s anything else, you’re probably wasting your time.”

Experts on the brand side fully acknowledge the necessity of direct virtual commerce opportunities in the near future.

“We think the biggest monetizable opportunities in these spaces are from the sale of digital collectibles,” said an executive at a major brand that recently launched in Roblox, who agreed to speak to Digiday on background. “Some of those are going to be tickets, but [virtual merchandise] is a big part of it as well.” 

Entertainment brands will continue to spend more than consumer goods

The types of brands that activate in metaverse platforms will change as economic headwinds pick up — and as brands slowly but surely become more educated about the benefits of the metaverse.

At the moment, brands of all kinds have invested in custom metaverse experiences, from Invisalign to Walmart. But following its launch in September 2022, “Walmart Land” was widely maligned on the internet for its cavernous emptiness and apparent lack of activities. The reality is that many consumer brands simply lack the intellectual properties needed to populate virtual worlds and make them truly worthwhile.

As the potential for a recession picks up, some experts anticipate that entertainment brands will continue to invest in the metaverse, taking advantage of their wealth of homegrown IP. Warner Music Group, for example, recently opened its “Rhythm City” experience in Roblox, which the company will use moving forward to sell digital merchandise and host virtual concerts featuring WMG artists — the sort of tangible revenue opportunities that are lacking in experiences such as “Walmart Land.”

“Panasonic batteries or whatever — they’re not an entertainment brand, so why would they build their own standalone experience?” said Matthew Warneford, CEO of the metaverse development studio Dubit. “That doesn’t mean that they shouldn’t try and achieve awareness or tell a story about how great their batteries are in these spaces, but they shouldn’t be deploying hundreds of thousands of dollars to build something and then maintain it.”

They are doing so by testing more brand awareness channels, including ad-supported streaming services like Hulu, YouTube and now, Netflix, TikTok and other media channels. The purpose for maintaining that test and learn budget is to ensure advertisers’ eggs aren’t all in one basket, diversifying media spend.

At Fitzco advertising agency, an estimated 10-15% of client ad spend is typically dedicated to testing and learning. Overall, budgets have been either flat or down 5% across the board. Still, Claire Russell, head of media at Fitzco, says it’s almost mandatory that clients maintain that 10-15% experimental budget to continue testing and and learning throughout economic uncertainty.

“We’re working to try and retain the experimental bucket as much as we can by aligning it to an overarching learning agenda,” Russell added via email. “Even within flat to down budgets, we’ve still seen clients have an optimistic outlook and openness to experimenting.”

In the past, Fitzco clients have leveraged streaming video ads before, but minimally. Recently, they are investing more in platforms such as YouTube, Disney+ and Hulu. (She did not provide exact spend figures). “They want to look at, how do we get different creative in video, how do we spend more [ad dollars] there, how do we start looking at things like brand lift,” she said.

Meanwhile, independent media agency, Ocean Media, is seeing client growth in podcast advertising as well as streaming audio as more consumers use these services, according to Clintton Fleschere, chief client officer of Ocean Media. The majority of the investments are in Pandora, Spotify and iHeart radio network. “What was found was [that], where consumption goes, that’s where you’re going to be able to test out, learn and gain the best learnings,” he said. (It’s unclear what that testing looks like as Fleschere did not provide exact figures.)

Ad spend has slowed across the industry overall as budgets come under more scrutiny with economic uncertainty. This year, eMarketer predicted U.S. ad spend will hit $279 billion, a decrease from its original prediction of $284 billion last March, thanks to inflation, online advertising’s dwindling growth and, of course, data privacy changes. Social media is expected to suffer the brunt of those changes, while connected television will be a bright spot, per the report.

Efficiency over testing budgets

Many clients are looking for more efficiency, but aren’t necessarily wanting to test less or decrease testing budgets. Instead, clients are looking for channels where measurement and attribution is easy to obtain, like audio, which has yet to see slowdown, and video streaming, Fleschere added.

“All of our clients and brands are trying to find those new pockets of efficiency,” said Fleschere. “Whether the KPI is response or awareness, they’re looking for those new opportunities.”

However, experimentation with emerging platforms, like the metaverse, cryptocurrency and virtual reality, are either shelved for now or being narrowly tested during promotional campaigns, holiday marketing or other temporary events. This is mostly due to many unknowns in Web3 and thus, a steep learning curve. (More on metaverse skepticism here.)

“For our brands, they’re going to want to be able to make sure that their dollars are hitting on those that they feel are the most measurable and the best opportunity,” Fleschere said. 

The challenge, however, will be convincing clients to not make comparisons between the success seen during the height of the pandemic, online shopping, and thus, digital advertising, and the success of experimental channels today.

“It’s difficult to beat those comps and in turn justify why you’re experimenting at all because it always looks like it doesn’t work,” said Russell. “We’re all attached to real-time, mostly last click performance and it’s difficult to justify some of that brand spend in the downstream impact it can have.”

That’s not to say clients aren’t on board with moving back to experimental brand awareness channels, like audio and streaming. But that is to say it’ll take more coaching and hand holding from agency partners. “Not everything is going to be right out on a real time basis. And not everything is going to be so one to one,” Russell added.

Ultimately, experts say, it’s within a brand’s best interest to continue testing and learning, especially through economic uncertainty, where’s a chance to test and learn early enough to stand out in an increasingly crowded media landscape. 

In an emailed statement to Digiday, Andrew Kasprzycki, Dentsu Creative president of experiences, said, “While traditionally-defined ‘ad budgets’ will no doubt be cut, the best and brightest will shift some of those cuts to drive innovation and experimentation.” 

The same day that OpenAI announced its pilot subscription plan, content recommendation company Taboola announced a new beta test with ChatGPT for advertisers to generate campaigns informed by past ad performance data from past campaigns with Taboola. According to Taboola CEO and founder Adam Singolda, ChatGPT will generate content based on what people are most likely to engage with, which marketers can then select to use in ads across various websites.

Although Taboola and other companies in its category are sometimes known for creating clickbait content, Singolda said the goal is to generate ads that are more relevant and trustworthy. The feature will first be used internally to generate titles that Taboola account managers can pitch to clients, but could be available as a self-serve option in the future.

“We’re basically querying per-segment titles that we have data [on],” Singolda said. “Different segments in different formats and times have different parameters that get consumers to click… If you knew what’s a good position for your product, you would use it.”

Other companies are using OpenAI to build new chatbots powered by ChatGPT. Earlier this week, Intercom released its first chatbots powered by ChatGPT to help customer service agents with their jobs and also generate articles for website content.

How soon is now?

AI has been a part of marketing for years, but it’s increasingly playing a role in various parts of campaigns. And although AI-generated content is still fairly novel, the research firm Gartner predicts 30% of outbound marketing messages sent by large organizations will be synthetically generated by 2025. That prediction could come to fruition even sooner considering how quickly the AI space is evolving, noted Nicole Greene, a senior director analyst in Gartner’s Marketing Practice.

“It’s gone from the Wizard of Oz behind the curtain — now it’s here and we see what it can do,” Greene said. “It’s really important and hyped up right now, but we need to understand what it can do and can’t do.”

Ad agencies are also building out their own platforms powered by OpenAI. Late last month, an anonymous “AI-powered” agency called The Uncreative Agency gained some traction in the advertising world by using OpenAI to generate humanless proposals within minutes based on just a few basic inputs. Pitches are then emailed to users as a PDF that includes ideas and illustrations along with a disclaimer that says the ideas “were, obviously, not very good…At least, not yet.”

Some wondered who was behind the platform or if it was just some sort of stunt satirizing the current tech trend, but it turned out to be a project of DDB, which disclosed itself today as the agency behind it. In the first week, more than 12,000 people from top agencies and consultancies used The Uncreative Agency, according to DDB, which is now launching a new human-AI hybrid platform to implement AI tools for creatives and also incubate generative AI startups. (The platform, named RAND, named after DDB co-founder Paul Rand.)

“OMG, this is both amazing and terrifying at the same time,” DDB EMEA Chief Strategy Officer George Strakhov wrote in a LinkedIn last week before disclosing his team was behind it. “The ideas it generates are so bad that it’s almost good.”

AI’s growing ubiquity

ChatGPT has already been used in ad campaigns for a number of major brands. The genealogy website Storied recently used ChatGPT and the AI art generator Midjourney to create video ads for an online campaign. For Avocados From Mexico’s upcoming Super Bowl campaign, a QR code shown in the ad will direct people to a website where they can draft AI-generated tweets.

Not every company testing it thinks it’ll take over all parts of marketing. Last month, Mint Mobile had ChatGPT write a script for an ad starring Ryan Reynolds, but CMO Aron North said the “fun experiment” doesn’t mean AI will be a “critical piece of the marketing calendar.”

“It’s astonishing that a computer can write to the voice of Ryan Reynolds, but it’s not the most impressive,” he said.

Generative AI has also become increasingly popular on Fiverr, a freelance marketplace platform that connects companies with people who have a variety of skill sets. Searches for AI services have already grown by 1,400%, the company said, without revealing exact numbers. However, a search of Fiverr’s platform conducted by Digiday showed 1,600 services available by searching for the word “ChatGPT”.

To help organize growing demand, the Israel-based company also recently introduced new AI categories including those for ChatGPT application developers, Midjourney artists and chatbot developers. To promote the additions, Fiverr bought a full-page ad in The New York Times with the headline, “An Open Letter to AI,” assuring that humans “come in peace.”

It remains to be seen if the feeling is mutual.

Although it was later in the year that Amazon’s cloud computing arm played (what some are calling) its trump card with the launch of AWS Clean Rooms, it was an outing that the company hopes will assuage concerns over a “lack of clarity” in the sector. 

According to Synergy Research Group, Amazon commands more than a third of the cloud services market, followed by Microsoft’s Azure, which accounts for 21% of the market, and Google Cloud Platform, which has an 11% share. Indeed, some believe AWS’ 34% share of the cloud sector could prove a key unique selling point in accelerating Amazon’s pursuit of advertisers’ budgets.

AWS Clean Rooms was announced with several partners ranging from Amazon Ads to third-party ad tech outfits, agency holding groups plus media owners, and pitched as a means of helping companies collaborate over combined datasets.

“With AWS Clean Rooms, customers can create a secure data clean room in minutes and collaborate with any other company in the AWS Cloud to generate unique insights about advertising campaigns,” reads the pitch. 

Taking care of the little things

Presenters at November’s AWS re:Invent event made note of how those collaborating on the platform can “achieve in hours, what used to take days,” as a common web infrastructure can lead to benefits such as a reduction in latency between platforms.

The conference also saw the unveiling of AWS’ advertising and marketing technology team, led by former Xandr and AT&T data chief Tim Barnes. This unit is dedicated to helping AWS clients from the marketing and media vertical build applications on top of its infrastructure and then take the resulting solutions to market.

“The kind of things they’re asking partners is, ‘What are you tired of building and managing? What are the commoditized technologies?’ Basically asking them what they don’t want to do anymore, and need automated,” noted one AWS re:Invent attendee.

The source, who requested anonymity, added, “It’s like, AWS is an open platform for builders and the underlying data sits within their own environment … security and data is already well defined with AWS principles.”

Speaking recently with Digiday, separate sources noted how just about all of the Big Tech players looking to further market share in the advertising landscape will have to emphasize their cloud computing wares in order to satisfy privacy requirements — not to mention, offer simplicity and better pricing.

Myles Younger, head of innovation and insights at U of Digital, noted a convergence between ad tech and cloud infrastructure, and that many of the industry’s largest names were leveraging this as a competitive advantage. “While AWS Clean Rooms is not technically Amazon Ads, it’s clear to see how it is using it as a competitive advantage,” he told Digiday.

Meanwhile, Shiv Gupta, U of Digital’s founder, said that the Big Tech players’ various offerings were collectively pitched at the C-Suite event during this year’s CES event. “They’ve announced a lot of things over the last six months and you could see them bringing together things like [the Amazon Ads clean room] AMC, the [AWS] Clean Room offering, and then bringing that back to its [demand-side platform] DSP … those things are eventually going to converge, it’s not just ad tech anymore,” Gupta said.

Meanwhile, Bob Walczak, CEO of MadTech Advisors, described Amazon as the “800-pound gorilla in the room,” given its dominance in the cloud computing sector, and noted how this could significantly propel the company forward in the advertising sector.

Presently, the ad industry lacks technology standards in the clean room space (despite the hype around them), with the IAB Tech Lab hoping to usher in such interoperability benchmarks later in 2023, he noted.

According to Walczak, Amazon is well-placed to emerge as a frontrunner in the land grab. “With this launch, they instantaneously have a big swath of the industry using their clean room,” he added. “And now they become the standard, I frankly think they’ll collaborate with the IAB [Tech Lab] to steer it toward their standard.”

A separate source with direct knowledge of how the Big Tech giant is pitching its various wares to potential partners noted that Amazon’s ability to offer synergies was a key benefit, particularly as corporations’ procurement departments get involved in negotiations.

“Advertisers are increasingly looking at group negotiations and know that they can get better pricing on both fronts [if they discuss things like cloud computing and media],” added the source, who requested anonymity. 

“You can start with commercial synergies, and then move on to technological ones, more and more, these conversations are happening at a deeper level,” the source said.