Month: April 2023

Other small- to mid-sized publishers and media buyers are still uncertain about the state of the second quarter after seeing even more deals get bumped into the second half of the year, leaving Q2 just as precarious as Q1.

“It seems like Q2 will be in a much better place than Q1 was. I feel Q2 could be a really good quarter,” said a sales executive at a large digital publication who spoke on the condition of anonymity. “It could all change, but from what I’m seeing right now, clients are starting to open up and release those budgets.” 

The sales executive declined to share exactly how much they anticipate the company’s advertising revenue to grow by in the second quarter year over year, but that Q2’s projection will be “quite a bit stronger,” particularly in programmatic. They continued that one of the reasons for that possible growth is the fact that advertisers are more willing to talk about longer, multi-month or multi-quarter deals now. Whereas a lot of the campaigns in Q4 2022 and Q1 2023 were focused in-quarter and prioritized fast execution.

Not all advertisers can or want to secure longer-term deals, said Stacey Stewart, chief marketplace officer at UM Worldwide. “People want to keep a lot of flexibility right now so we’re not seeing a lot of longer term investments,” she said. This trend began about a year ago during the 2022 upfront cycle where clients began cutting back on year-round deals and that trend “continues to this day,” she said.

IAB’s Internet Advertising Report for 2022, which was published Wednesday, showed that digital advertising spend grew last year, but slowly. While internet ad spend in Q3 and Q4 were down year over year by 8.4% and 4.4%, respectively, the total annual spend was almost $210 billion, a 10.8% increase over 2021, per the report. 

As a whole, Stewart said her clients’ budgets are down on average between 15-20% year over year, depending on the category. Categories typically considered to be “tried and true” — like consumer packaged goods — are down.

“Q2 is slow. I don’t think we’re seeing any big massive change in spend [compared to the first quarter of the year,” Stewart said. And the secured advertising is focused on more flexible channels like programmatic and CTV.

Another publishing exec who also spoke anonymously with Digiday said Q2 is “looking relatively promising” when compared to the first quarter of the year, adding that advertisers that started coming back into play in the later weeks of Q1 seem to be holding steady and signing more deals in the second quarter.

“I’m cautiously optimistic about Q2,” said the second executive on April 3. The only caveat to that optimism is coming from the fact that more prospective advertisers than usual are ghosting their sales team after receiving an RFP response, meanwhile other advertisers are asking to delay launches of custom campaigns to later in the year.”

Otherwise, “I feel pretty good about the level of visibility,” the second executive said. “In Q1, we had a pretty good sense [by February] of where we were going to end up and it’s where we ended up — not that I wanted to necessarily end up where we ended up, but I knew what it was going to be. So I have largely the same degree of confidence that I have a sense right now of where Q2 will be — plus or minus a bit on the fringes.”

Not all publishers are in as comfortable a spot as the first two sources, however. In fact, it seems as though while advertisers might have more of a budget to work with, they want more reassurances upfront before any money exchanges hands — or even before ink dries on the contracts. And even then, it’s hard to keep a thumb on the deals that do close.

One publisher who was given the opportunity to speak anonymously under Chatham House rules during a working group session at the Digiday Publishing Summit on March 28 called it a “rinse-and-repeat” cycle of ad dollars getting approved and released on a week-to-week basis.

“We’re seeing a lot of deals [stay] at [the verbal stage] forever and they’ll push the campaign down [making it] impossible to forecast,” said another publisher during the DPS working group. They added that “campaigns that were supposed to start in January are now starting in July, or so they say.”

A third publisher at DPS said that they’ve resorted to only working on deals stemming from in-bound RFPs rather than trying to sell existing or prospective clients on larger tentpole campaigns this year to hopefully lockdown the ad dollars more securely in the coming quarters.

There is a degree of a “bumper car effect” in the ad market right now, said Seth Hargrave, CEO of media buying agency MediaTwo Interactive, where several of his clients’ ad budgets that were supposed to be approved for Q1 were bumped into Q2. That trend could potentially persist throughout the remainder of the year, however, until a recession is no longer viewed as a possibility, he continued.

“A bumper car effect is probably the safest way to think about budgeting through the remainder of the year,” Hargrave said. “Talk of recession is still everywhere and I do believe that there’s a tremendous weight on the shoulders of brands as a result of not knowing what the latter half of this year is going to bring. Until we’re at a point where the dreaded R-word is no longer being mentioned, I think you’re going to continue to see [delays happen].”

Hargrave predicated that Q2 2023 will end relatively flat in terms of the size of his clients’ budgets compared to their budgets in Q2 2022. Though a few notable categories are expected to be up year over year in terms of advertising spend, including finance and banking (up about 20%) and government and higher education (also about 20%), he added.

Mia Vieira, group media director at MMI Agency, oversees a higher education client’s ad budget and she said that she’s “pretty confident” that their budget will stay intact at least through the end of June. Even her client’s full-year budget — which has remained pretty flat from 2022 to 2023 — is relatively planned out, she continued, though admitted that come Q3 and Q4, there may be some changes to the budget or pre-planned campaigns depending on the economy or how well lead-generation has worked in the first half of the year.

“From a budgetary standpoint, a lot of [advertisers] are still banking those funds. I think they have them, they are just delayed to spend [them],” said Hargrave. And once they are ready to spend, they’re going to be a lot more strategic about how they execute on campaigns, he added.

What we’ve heard

“And I will say that sometimes you don’t have the resources to hire the way you want to [in terms of improving diversity] … but what you can do is think about what are other ways that you could support this. One of the things we’re doing, for instance, for our events is being really mindful that at least 50% of our speakers represent [people from diverse backgrounds] and/or are women.”

— Gina Joseph, chief strategy officer of VentureBeat, on the latest episode of the Digiday Podcast

VC market slowdown continued in Q1

U.S. venture capital activity fell in the media sector in the first quarter of 2023 compared to 2022, according to data from capital market research firm PitchBook. It’s a continuation of the slowdown that began in the latter half of last year.

Key numbers:

• There were 68 VC deals in the media sector in Q1 2023, compared to 137 in the same quarter in 2022. 
• Q1 2023 had the lowest deal count in the first quarter of the year since at least 2013, which is as far back as Pitchbook’s data goes.
• However, the value of deal activity in the media sector remained steady compared to Q4 2022, at $200 million in Q1 2023. 
• There were five VC exits (when investors sell their investment to exit the company) in Q1 in the media sector, the same as in Q4 2022. 
• Holistically, fundraising momentum has slowed across the U.S. venture capital market to just $11.7 billion in Q1 — compared to $170.8 billion raised in total in 2022 (notably, 74.4% of the capital raised in 2022 was closed in the first half of the year).

“The sluggish pace of fundraising for emerging and first-time fund managers could be a precursor to formidable fundraising experiences through the end of the year,” Pitchbook’s report reads. The report cited geopolitical tensions, inflation rates and bank failures for spreading “anxiety across the markets.”

Media analysts and investors told Digiday last year they were seeing the start of a market correction, bringing down media company valuations and making it a difficult time for publishers looking to raise capital to do so — especially from new investors. The first quarter of this year was a continuation of that trend, said Sam Thompson, senior managing director at M&A advisory firm Progress Partners.

“It’s a flight to quality. It’s larger investments into a smaller number of companies. We’ve seen a slowdown overall, whether it’s in venture or private equity. There’s no frothiness whatsoever,” Thompson said. “Revenue is of all importance.”

Bonin Bough, co-founder of Group Black, said at the Semafor Media Summit on Monday that the media collective, which is reportedly looking to acquire BDG, Vice Media Group or Vox Media, is waiting for the market to “settle” before swooping in. “We are not going to make a mistake and purchase something and acquire something where we’re upset at the price point,” Bough said. 

VC and PE-owned media conglomerates will likely start to shed assets that are “non-core” or underperforming, Thompson said. One recent example of this was PE-backed Recurrent Ventures selling off Saveur magazine on Monday – the only food publication in its portfolio of 20 titles. In an internal staff memo obtained by Axios, Recurrent Ventures CEO Alex Vargas cited the lack of “meaningful opportunities” to acquire other food titles as one of the reasons for offloading the publication. – Sara Guaglione

Numbers to know

<1%: The amount of money towards NPR’s $300 million total annual budget that comes from the federally funded Corporation for Public Broadcasting. Given this, Twitter still labeled NPR’s account on the platform as “state-affiliated media” – later revised to “government-funded media” – causing the nonprofit news organization to leave the platform altogether this week. 

$800 million: The valuation of Forbes by a consortium of investors that is looking to acquire the publication, despite losing its lead investor, Sun Group, due to concerns over its tie to Russia. 

10.8%: The amount that total internet advertising revenues grew by from 2021 to 2022, increasing by more than $20 billion to a total of $209.7 billion, per IAB’s Internet Advertising Revenue Report.  

What we’ve covered

How newsletter publishers are expanding and diversifying beyond inbox-based revenue: 

• A media company can only grow so much when sticking to one channel. 
• At least that’s what four newsletter publisher executives said when outlining their plans to Digiday about expanding into events, video and podcasts to diversify their businesses and grow their revenue this year.

Read more about revenue diversification in newsletter media here. 

SSPs break with the past as push comes to shove in ad tech: 

• Competition in ad tech is ratcheting up, especially among supply-side platforms as leading lights in the sector jostle for differentiation, or even just “stickiness.” 
• In certain cases, this involves exploring new routes to market and new revenue models.

Learn more about how ad tech is coming to terms with disintermediation 2.0 here. 

Publishers create task forces to oversee AI programs:

• What started out as an informal dabbling with generative AI technology inside publishers’ newsrooms has developed into a full-fledged focus area for some media companies. 
• New teams are being formed within BuzzFeed, BridgeTower Media, Forbes, Ingenio and Trusted Media Brands, all dedicated to overseeing AI initiatives within different parts of their respective companies, ranging from editorial to tech.

Read more about publishers’ approaches to AI strategy here.

Publishers test generative AI tools to boost SEO: 

• Generative AI chatbots like ChatGPT and Bing could present a threat to some publishers if the chatbots end up siphoning away search referral traffic from their websites. 
• But not all publishers are ready to let go of SEO-driven content, though their strategies to address this vary.

Learn more about how generative AI can assist in publishers’ SEO efforts here.

What we’re reading

Vox Media is spinning off NowThis ahead of the 2024 election: 

A year after buying the political video brand, Vox Media is letting go of NowThis, allowing it to become an independent media company ahead of the upcoming presidential election, The New York Times reported. The deal still gives Vox Media a minority share in the brand, meaning that it will earn financial benefits from NowThis without needing to cover upfront operational costs. 

CNN’s chief executive is backing Don Lemon after misogynistic allegations:

Following a report by Variety earlier this month that claimed CNN anchor Lemon of exhibiting a history of misogynistic behavior, Insider reported that the news network’s CEO Chris Licht will stand by Lemon.

Experts debate if AI-generated images will cause a misinformation crisis 

Reuters Institute spoke with several journalists, experts and fact-checkers to explore the possible impact of generative AI technology like DALL-E and ChatGBT on the misinformation problem. 

Elon Musk’s Twitter wants to take on the media industry:

The Wall Street Journal reported that Musk is expecting that citizen journalism shared on Twitter will be able to disrupt traditional journalism’s business model, despite a large constituency of the platform being employees of the media industry. 

Semafor’s first media event brought together top media executives: 

Semafor’s Media Summit on Monday – attended by Digiday’s media team – featured conversations with Group Black’s co-founder Bonin Bough, IAC’s chairman and senior executive of IAC Barry Diller, CNN Worldwide’s chairman and CEO Chris Licht and The Messenger’s founder and CEO Jimmy Finkelstein. The event covered topics ranging from the risks of generative AI in the media industry to the role of viewing reporters as talent. 

Lifestyle app Lemon8, which was launched on the Apple App store and Google Play store in March 2020 according to Apptopia, has been classed as a cross between Instagram (polished photos) and Pinterest (focused on products and categories). The app has close ties to TikTok, given they share not only the same parent company — ByteDance — but also a similar, personalized algorithm which in itself is what helped TikTok make a name for itself and stand out from its competition.

Lemon8’s current 24 unfilled roles (17 staff roles and seven intern positions) show this latest lifestyle app is preparing a foundation for monetizing content and, subsequently, its audience.

Creators are a must

The app has already relied on creators to soft launch and pull audiences over to the app, via the numerous videos of creators promoting Lemon8 on TikTok. And it seems keen on building on what momentum it already has among that part of the market. Most (13) of those staff jobs focus on creator partnerships across the app’s key content verticals: fashion, beauty, food and lifestyle.

And those roles are spread far and wide. Six of those associate positions are based in New York with a base pay range between $27.69 to $46.15. An additional three roles are in Ho Chi Minh City in Thailand, two in Jakarta, Indonesia, as well as an additional role in Bangkok — markets where Lemon8 is already established — and one in London.

Further, a content strategy manager role in London is expected to work closely with the creator partnership management team, while developing a go-to market strategy for Lemon8 in the U.K. — its second important market (after the U.S.) for the app outside of Asia.

So it stands to reason that courting creators is a viable strategy to grow a user base and fill those users feeds (and quickly), although it doesn’t necessarily guarantee success.

“ByteDance has an advantage here with its pre-existing creator relationships through TikTok,” said Jamie MacEwan, senior research analyst at Enders Analysis. “They may be hoping that using creators will make Lemon8 less reliant on marketing spend for user growth, though TikTok’s years of hefty marketing outlays suggests there’s no way round spending billions to achieve massive global scale.”

Lemon8 will have an ads platform

No matter what platform exists, social media channels rely on advertising to some degree (unless you’re BeReal, of course), to help keep money rolling in (or if you’re Twitter, the bills paid).

Lemon8 is no different.

While the platform’s privacy policy clearly states how advertisers collect and use consumer data — perhaps preempting any blowback from political parties, in a bid to provide a level of transparency — Lemon8 is hiring a monetization product operations role in Bangkok. According to the job spec, the role aims to provide a “best-in-class advertising experience” as well as “provide a variety of Lemon8 monetization solutions” for marketers.

Moreover, the platform has also advertised for a Tokyo-based “partnership manager – SMB market” to build relationships with ad agencies, as well as launch events in the Japanese market. And since SMBs are the bedrock of any platform’s ads business, it stands to reason that Lemon8 would try and lock that part of the market down early.

Notably though, none of the 24 open roles are based in ByteDance’s Beijing headquarters. “I wouldn’t be surprised if there is someone within ByteDance or advising the company not to associate ByteDance with Lemon8 in any way, given the spotlight TikTok is currently under with the U.S. Congress,” said Babar Javed, director of public affairs at martech startup accelerator, Z2C Limited. “It’s their way of flying under the radar of suspicion.”

But given that TikTok’s fate in the western world is still uncertain, it is arguably surprising that ByteDance has explicitly advertised these roles for Lemon8 via its own website, making clear distinctions (if there was any prior confusion) that the two companies are very much linked.

Under the ‘About ByteDance’ section on each job page, the tech company states that it has “a suite of more than a dozen products, including TikTok, Helo, and Resso, as well as platforms specific to the China market, including Toutiao, Douyin, and Xigua”. This is the first clear, public message that yes, Lemon8 is part of ByteDance.

“Since ByteDance is currently in the news for other reasons, I was speculating that they may be selective about when to make a splash with Lemon8,” said Jordan Robuck, director of communications at MMI Agency.

It appears that Lemon8 is already positioning itself as the next hip happening place for creators and users alike; almost like a scrappy competitor to its sister app TikTok. At the same time, it enables ByteDance to cover all bases across photos and short-form video, in some sort of bid for social domination, despite the ongoing controversies. After all, Lemon8 explains the team “never [shies] away from taking calculated risks and embrac[es] ambiguity as it comes,” according to its job descriptions.

Perhaps that’s the reason Lemon8 is already hiring for a global internal audit head, based in Mountain View, California, to get ahead of any potential questions over the app’s operations. After all, ByteDance defines the job as a “highly specialized position providing robust and objective assurance on, and insight and advice about, the design and operation of effective governance, risk management and internal control arrangements.”

What is clear though, is Lemon8 is far from giving up. ByteDance doesn’t appear concerned that the app may live the same fate as its sister app TikTok, due to those ByteDance / China ties. In fact, it appears more determined than ever. Right now, ByteDance has three apps that are on the top downloaded list in the U.S., said Keith Bendes, vp of strategy at Linqia. Those are TikTok, video editing app CapCut and Lemon8.

“Given the ban concerns over TikTok, it is not a bad strategy for the company to be hedging with investments around Lemon8 and even CapCut,” Bendes said. 

ByteDance did not immediately respond to Digiday’s request for comment.

To do just that, Poppi is partnering with influencers on social media to create short-form videos that promote the launch of its new grape flavor this month. Poppi has teamed with “Real Housewives of Salt Lake City” star Lisa Barlow, lifestyle influencer Julianna McIntosh, recipe creator Amali Kahaduwe and lifestyle influencer and track and field athlete Michaela Hedderman, and, at the same time, is using its own TikTok to show the behind-the-scenes process of rolling out the new flavor.

“So for us, we’re all about that top-of-funnel brand awareness and building that story slowly, and we’re not immediately hitting them in the face with, ‘Hey, purchase, purchase, purchase,’” said Ellsworth. “We’re using social media through the funnel and being able to bring more people into the Poppy family.”

Energy drink brand Zoa Energy invested heavily in user-generated content by enlisting the help of macro and micro social media influencers, according to Kevin Kruse, the brand’s director of e-commerce. The company decided which influencers were the right fit based on their audiences and passions, Kruse explained, adding that “influencers are all fueling something bigger within their respective communities.”

In the end, Zoa Energy determined the right mix of influencers included @happykelli on TikTok (with 8 million followers) and “So You Think You Can Dance” finalist and fitness influencer Alex Wong, also on TikTok (2 million followers). Although Zoa Energy has a Facebook page, the brand is focusing marketing efforts on Instagram and TikTok because Gen Z and younger millennials spend more time on those platforms. In addition, Zoa Energy is featuring these influencers in its digital out-of-home displays during XFL games this season.

For electrolyte drink brand Lemon Perfect, influencer marketing efforts are focused around genuine fans of the brand, and everyone the brand works with originally started as a fan of Lemon Perfect. Philadelphia Eagles quarterback Jalen Hurts, tennis player Sloane Stephens, college basketball player Jared McCain and San Antionio Spurs’ Dejounte Murray are among the brand’s most notable influencers.

“Whenever we announce a new partnership on our social accounts, we love leveraging the collaboration feature on social platforms like Instagram to showcase the announcement on both the brand and partner’s profile,” said Richa Anand, Lemon Perfect’s director of brand marketing. “This consistently lifts not only our engagement on that post, but our engagement on surrounding posts and our overall follower account.”

Lemon Perfect’s influencer marketing efforts follow its experimentation with OOH, which included billboards featuring the Eagles’ Hurts that were displayed in Philadelphia ahead of the Super Bowl. Anand said the effort increased brand awareness, and also significantly increased sales in the city. Lemon Perfect will continue using OOH in 2023.

It is unclear exactly how much of their marketing budgets these beverage brands are allocating to influencer efforts, as they all declined to share budget specifics. Anand did share that Lemon Perfect shifted marketing dollars to TikTok because Gen Z doesn’t use Facebook as much as previous generations. And Kruise said that social media spend makes up roughly 25% of Zoa Energy’s total budget, and digital display videos account for roughly 22%.

According to Sensory Tower data, Zoa Energy has seen an approximate 79% decrease in digital ad spend in 2023, compared with 2022. The majority of ads in 2023 have been served on Instagram, while most ads served in 2022 were found on Facebook.

All in all, the rise of social media platforms has made it easier for brands to connect with influencers, with Instagram being the most popular platform for influencer marketing campaigns, according to a survey conducted by market research platform Astute Analytica. Over 78% of marketers use Instagram for influencer campaigns, per Astute. In 2020, the average influencer marketing budget was $25,000 to $50,000 per campaign, according to the data, with some larger influencer campaigns exceeding $100,000.

Christian Brown, founder of influencer marketing network Glewee, explained that Gen Z consumers are smart enough to see through traditional marketing methods in today’s digital landscape, which encourages brands to focus on transparency rather than risk coming off as inauthentic.

“Gen Z consumers strive to find brands they can relate to, and typically, their first point of brand awareness and relation begins on social media, typically in short-form content on TikTok and trend-following feed posts on Instagram,” said Brown. “To drive this authentic feel, these brands are going right to the source and utilizing the power of Gen Z influencers and creators to voice their brand values, unique branding propositions and define themselves using the authority bias approach.”

Despite declaring bankruptcy, NCM plans to move ahead with operating under a debt restructure with its lenders, allowing the company to keep paying employees and forge on with its business. 

“As we take this important step to restructure our balance sheet, nothing changes for us at NCM in terms of delivering best in class advertising solutions to each of our clients,” read a statement from NCM’s Chief Revenue Officer Mike Rosen. “It is business as usual as we continue to provide the impact, value, and results that our advertisers have come to expect from NCM.”

Rosen’s statement also noted that box office sales year to date are up 26% in 2023 over 2022. “We are incredibly excited about our future, and we look forward to emerging with greater flexibility to innovate and grow,” he said.

Although NCM’s main competitor Screenvision declined to comment on the news, one executive who spoke on the condition of anonymity said the news is unfortunate — but not damaging to the industry — coming just ahead of the upfront season, during which the cinema ad firms plan to participate. The exec said NCM’s bankruptcy won’t materially affect Screenvision. In fact, it could end up letting Screenvision gain a bit of ground on its larger competitor, either through ad deals or winning exclusive access to more screens.

“Mainstream movie-going behavior is back, the advertising business is recovering around that, and we’re doing just fine,” said the exec. “It’s not a rocket ship but [Screenvision’s] financial structure is good. [It’s] building back advertising sales nicely, and relationships are strengthening. There’s a lot of really nice secular tailwinds finally coming back.”

Among those secular tailwinds is the fact that the content pipeline looks like it will continue to fill (barring a writers’ strike, which could adversely affect the entire filmed content landscape from movies to TV). Apple in March announced it will release a slate of movies targeting exclusive theatrical windows first before moving to Apple TV.

And Amazon just enjoyed a larger-than-expected box office take for its theatrical release of “Air” last week.

Even David Zaslav, CEO of a merged Warner Bros. Discovery company, was quoted in a recent Wall Street Journal article declaring the theatrical business to have greater value than perceived these last two years. “There’s an ecosystem of economic return when you open something in the theaters,” he was quoted in an article citing comments he made during an analyst conference last November. 

“The worst for this industry was in the thick of Covid,” agreed Barry Frey, CEO of the Digital Place-based Advertising Association. “Everyone sees that the cinema business is only going up from here — look at the ‘Super Mario Bros. Movie’ for proof. There’s strong management in this space to boot.”

That said, one executive with knowledge of the cinema ad space noted that upper management at NCM hasn’t been the same since Cliff Marks, its prior president, left in 2021. Marks had risen up the ranks at NCM for 19 years and was practically synonymous with the space.