Month: April 2023

The bank’s decline was a harsh reminder that in a fractional banking system, companies’ money is not really at the bank — and it never has been. Really, it’s being loaned out to others for various lengths of time and doesn’t have to be returned until that period is up. So when things go sideways and people rush to take all their money back from a bank, those same people are usually surprised to realize that it’s not actually there.

No prizes for guessing what happened when Silicon Valley Bank imploded. 

“We initially had one publisher reach out to communicate their desire for us to hold any payments to their accounts at Silicon Valley Bank because they had a concern about it, but then very quickly there was a tsunami of publishers asking the same thing,” said Andrew Casale, CEO of Index Exchange. 

Ad execs, like so many other customers of the bank, were dunked into disarray. 

One of them told Digiday that they immediately started working with investors to thrash out a bridge loan. Another told Digiday that their ad tech business lost all of its funding because of the financial meltdown. AcuityAds, which had over 90% of cash in the bank, had to halt the trading of its stock. Others like Place Exchange asked all clients to pause any scheduled payments until further notice. 

And all of that was just in the first few hours of the run on the bank.

Then the panic subsided. Silicon Valley Bank was backstopped by the Federal Deposit Insurance Corporation and the government. Ad execs, and the rest of the bank’s customers, were able to access their money. 

Catastrophe averted? Not quite. The collapse of Silicon Valley Bank shook a lot of chaff loose. And ad execs are starting to see things they may not have anticipated: namely that confidence in banks is all relative. 

Look at what happened to Credit Suisse, for instance. It didn’t get singed in the wake of Silicon Valley Bank’s implosion because there was something inherently unstable in it. It got burned because it was seen as the weakest link — just like Bear Stearns and Lehman Brothers before it. And once those narratives are up and running, they’re hard to stop. Banks are built on confidence. 

“We had never considered the origin bank account of a customer or a partner to be a risk vector up until now,” said Casale. “That’s been the biggest takeaway for us from this tough period; we’ve been doing the homework on our side to understand the organization of our customers across the banking sector.”

It’s a tough lesson for anyone — let alone those in an industry like advertising where financial discipline hasn’t exactly been endemic. That’s changing now, of course. The mindset of these execs is definitely shifting. And that’s made them more concerned than ever about liquidity in the supply chain, said Nick Carrabbia, evp of Oarex — a platform for ads businesses to obtain fast funding. Now, they want quick access to cash.

“I was a bit worried because all our expenses and salaries are paid to our employees from SVB bank,” said Sameer Ahmed Khan, the CEO of martech firm Social Champ. “I also realized that I shouldn’t have put all my trust in one bank. This incident made me spread out our investments.”

From chaos comes order, to paraphrase Nietzsche.

“Going forward, I think for many future startups in this space it will mean being a lot more strict about who they are banking with and lead to a lot more diversification,” said the founder of a digital media business, who traded anonymity for candor to share their experience of the collapse of Silicon Valley Bank.

Call it a flight to quality. But it could come at a steep price. Big banks have been overflowing with cash in the wake of Silicon Valley Bank. The last thing those lenders will want to do is put that money to work and start lending it out. It could be drained from accounts just as fast as it flooded them. 

Which is to say, banks are going to become more cautious about how much they lend and to whom. 

When this happens, economies tend to get tighter. And this never bodes well for advertising. True, the fallout from Silicon Valley Bank is more of a headwind than a hurricane to ad spending, but marketers, publishers and ad tech execs remain wary nonetheless. 

“My fear as one of the few minority-owned companies in the space is how many fledgling minority-led digital start-ups may NOT get the funding they once would have, given the banking climate and how VCs are approaching our digital communities of color,” said Rene Alegria, CEO of Bilingual and bicultural media platform MundoNow. “

There’s a fear now, and it’s rooted in sequential liability. Clauses written into ad contracts that stipulate if the company ahead of another in the flow of ad dollars doesn’t get paid, they don’t get paid. Normally, this isn’t a big problem. But it tends to become one when economies get knocked sideways. 

The pandemic made that all too clear for ad-tech bosses. Silicon Valley Bank made it even clearer, with ad bosses reviewing their existing relationships and pausing any they think are a risk, or introducing tighter insurance provisions.

“Everyone we’re working with right now is concerned about where the risk — or rather the ad dollars — are coming from across the supply chain,” said Carrabbia. “Sequential liability is, for the most part, the concern here. It’s always been a concern. But in the aftermath of Silicon Valley Bank, people are seeing how that can play out.” 

Often, it plays out with publishers holding the bag. The lessons drawn in hindsight are instructive as ever for them. They’ve been asking more questions about the financial health and integrity of their ad-tech partners since Silicon Valley Bank started wobbling. That’s bad news for any vendor that didn’t have strict credit policies — or those that were all in on growth, risks be damned. The weaker companies continue to be weeded out from the supply chain. 

“We’ve seen a fair bit of this in recent weeks,” said Casale. “Publishers are doing even more due diligence on their vendors these days.”

Add the collapse of Silicon Valley Bank to the ever-growing list of events contributing to a more consolidated supply chain. 

For the most part, these agencies working in TikTok’s world seem unconcerned about a possible ban — even if it were to happen, and that seems unlikely for now, they generally feel their learnings apply to other social platforms.

Dean Rojas and Michael Woolsey, the co-founders of TikTok specialist shop Gassed, said what separates them from traditional media agencies is the speed and volume at which they produce content on the surging but endangered platform.

Rojas and Woolsey founded Gassed in 2022 after working in media and creative teams at Dr. Squatch. Their goal was to bring together specialties in media and creative to serve the needs of clients in a fast-paced environment on TikTok.

“Rather than one brand working with a creative agency, then you’re working with a media agency — you just bundle it all in one,” said Woolsey, CEO of Gassed. “It’s very fast-paced out there. So that way, you’re able to keep up with the speed and really pull levers quickly in order to hit these core KPIs for these clients.”

“The whole goal with our content is for people not to realize that they’re watching an ad until they’re already 10 seconds into the ad and they’re already interested in the product,” Rojas added.

Ad business still on the rise

Despite growing security concerns and repeated calls for a ban in the U.S., there is no question that TikTok remains the top social network in growth. In 2021, TikTok reported surpassing 1 billion monthly users globally, and in 2023 it said the U.S. has reached 150 million monthly active users — up from 100 million in 2020.

In October 2022, research firm Insider Intelligence estimated TikTok’s global ad revenue to reach $14.5 billion in 2023. This month, it was downgraded to $13.16 billion for 2023, due to broader economic challenges in digital advertising overall, but also more risk-averse advertisers during this time, said Jasmine Enberg, social media analyst at Insider Intelligence. She added the change isn’t too concerning for its overall ad business.

“TikTok is the fastest-growing social network in terms of ad revenue, both in the U.S. and worldwide, significantly more than any other social platform,” Enberg told Digiday.

Indeed, Insider Intelligence this month forecasted a 30.7% increase to $17.2 billion in 2024 in TikTok’s net ad revenues globally. The ad revenue is expected to grow 28% to some $22 billion in 2025.

Producing with speed but preserving authenticity

Because of the fast-moving nature of short-form video content, TikTok agencies have to assimilate that culture to grow. Now with 14 employees and partnering with TikTok, Gassed says it’s among the more active TikTok agencies in North America. In the last year, it has spent more than $50 million on the app, expanding in strategy, paid media and creative for brands that include men’s skincare company Lumen, Crocs and Babbel.

Gassed uses paid actors, writes its own scripts and produces all the shoots in-house. The agency delivers about 20 to 25 ads per month for incoming clients to be able to test their content on the platform. Last month, it estimated completing about 100 ads per week, or 365 ads on average every month.

“We live in such a fast-paced environment where people consume so much content in a day,” Woolsey said. “You kind of have to keep up with the speed. On other channels … you’re trying to polish the ads so well, where you have to keep it as native as possible and deliver that. We try to deliver a high amount of data-driven creatives for these brands to really scale.”

And TikTok ads are shot differently, aimed at the type of selfie content seen on the app, Rojas added. “If somebody is holding a camera selfie style, we’re on the other side of it holding the camera like I’m holding their hands while they’re doing it. It’s very manipulated to look and feel like it is a real person, delivering these lines and giving their testimony.”

Using AI and performance data to match creators

Some TikTok specialty agencies are also employing artificial intelligence and performance analytics with their influencers and creators in their strategies. Influencer marketing agency HypeFactory uses its AI tool, HypeDetect, to identify content creators that match certain goals and objectives of a brand. For example, it can specify demographics, geography, psychographic criteria and audience quality or channel quality scores — using a total of more than 35 metrics for account analytics.

“While the AI is searching for content creators, HypeFactory’s talent management team negotiates with the creators to make the campaign happen,” said Regina Tsvyrava, COO of HypeFactory. “To create native and successful campaigns, it is crucial to find a personal approach to the creator, understand the cultural attributes of the country and speed up the discussion process by speaking their native language.”

What makes the agency different from a traditional approach is not performing targeted advertising, Tsvyrava explained. She said HypeFactory tries to partner directly with creators that match the goals of the brands they are collaborating with on campaigns. HypeFactory declined to share any client examples or results due to all campaigns being under non-disclosure agreements.

Jess Flack, CEO at influencer agency and platform Ubiquitous, said the company specializes in user-generated content as well – but does not do scripted content, as Gassed does. Ubiquitous also has a proprietary technology that it uses to execute and scale campaigns using performance and predictive data to pair creators with brands.

“We never, ever, script content,” Flack explained. “Freedom with guardrails is our mantra. Let the creator lead the creative. It’ll yield better, more authentic content and it fosters a better relationship.”

Some of its recent client examples yielded positive results on TikTok. With food and beverage company Magic Spoon, Flack said the campaign doubled engagement rates with more than 10.2 million views, at a $2.30 CPM and 35% engagement rate in under five weeks. Also, with health and beauty brand Hers, the agency saw its hair loss campaign reach 5 million views and 11,000 website visitors with a 62 cents CPC. Ubiquitous used influencers that had been speaking about their hair or skin care experiences.

“We use past performance and predictive data to pair the best creators with the right brands, and we really thrive in long-term relationships when we’re able to optimize performance over time,” Flack said. “Plus, our vertical integration allows us to be both cost effective for brands and lucrative for creators.”

At the same time, some are still investing in TikTok but with some caution to the business. Sanam Ghaneeian, cofounder at digital agency Blosm Brands, said media planning and buying on TikTok is still relatively new in the paid media space. Since it isn’t yet as competitive as Instagram, the agency is focusing solely on acquisition on TikTok.

“We haven’t found [TikTok] to be a strong bottom-funnel platform,” Ghaneeian said. “However, from an acquisition perspective, we’ve seen it outperform Instagram for CPM (-20%), and engagement (+35%) perspective – which makes it worthwhile for efficiency all around.”

But Ghaneeian agreed that user-generated content is key to performing on TikTok: “We’ve seen our strongest performance from UGC creators. Thus for certain clients we have an always-on approach for gathering new UGC in order to keep TikTok content fresh and performing at its optimal engagement level.”

What regulation concerns?

TikTok agencies so far aren’t overly concerned about a potential ban of TikTok in the U.S. Advertisers have been recently taking a “wait and see” approach, said Insider Intelligence’s Enberg.

“Most agencies are still hesitant to advise clients to reduce their spending,” said Enberg. “Advertisers are or at least should be getting backup plans in place, but they’re not yet pulling spending in big numbers. A broader TikTok ban isn’t going to happen overnight, and it would be premature to cut TikTok budgets right now.”

If anything shuts down, Gassed said its TikTok strategies and digital business can work on any other platform. Woolsey said TikTok is still hiring and actively reaching out as its marketing partner.

“I’m not too worried,” Woolsey added. “The content and the medium and what we do is so transferable, since we’ve had so many skills or so many past brands on Meta and other platforms that it really works everywhere. And in this day and age, everyone wants content and fast because they consume it so fast. If it’s not TikTok, it’ll shift over to Meta, right?”

Tsvyrava at HypeFactory anticipates a TikTok ban will impact creators and brands significantly, but agreed that they will just shift clients to other platforms. Many creators often post across several platforms. “More work will go into having the influencers’ followers migrate to other platforms with them, but this is achievable,” she added. 

Following the hearings in Washington with TikTok in March, Flack said TikTok’s risk mitigation in data and privacy “impressed” her. And asked how worried she was about a TikTok ban, Flack said, “On a scale of 1-10, about a 2.”

“Honestly, TikTok feels more secure than Meta and Google at this point. And if it does get shut down, it won’t go quietly,” she added. “There will be millions of people upset for a multitude of reasons. It feels too big to fail completely at this point, but never say never.”

Color by numbers

Despite the fact that agencies are quietly building out metaverse activations, new research out of the Advertising Research Foundation (using data compiled by Advertiser Perceptions that surveyed 100 or so executives in December 2022) shows that marketers are even more interested in the broader world of Web3, specifically VR and AR. — Michael Bürgi

Asking respondents to say where they’ll concentrate efforts in the next 12 months:

• 69% of marketers pointed to AR, where only 46% of agencies said AR. 
• 64% of marketers cited VR while only 36% of agencies cited it. And 
• And when it comes to metaverse platforms, 72% of marketers gave it a thumbs up to 50% of agencies.
• In-game advertising is where agencies responded more positively than marketers — 64% to 43%.

Takeoff & landing

• Havas Media Group bought a majority stake in Canadian performance, analytics and data agency Noise Digital to expand its Canadian footprint and reach. Terms of the deal were not disclosed, but Noise will maintain its brand, reporting into HMG Canada president Noah Vardon.
• European bargain airline EasyJet named mSix&Partners to lead its efforts on media strategy, planning and offline media buying, as well as Kepler to handle digital media strategy and investment.
• Personnel moves: Arun Kumar, IPG’s chief data and mar-tech officer, is leaving his post for a yet-to-be-announced new job. He’s been with the holding company for 13 years and will remain until July … Veteran media exec Lou Paskalis joined news advocacy organization Ad Fontes Media as chief strategy officer … Dentsu’s iProspect hired Whitney Fishman as evp, head of innovation, a new position charged with optimizing and innovating tech’s value and functionality across its client base. Reporting to CEO Danielle Gonzalez, Fishman most recently was group director of consumer insights and innovation at GroupM. 
• San Diego-based digital and tech agency BAM was bought by Spanish-based agency group LLYC in a deal arranged by Agency Futures. It’s part of LLYC’s move to grow its U.S. presence, and BAM will retain its name and management.

Direct quote

“We’re noticing that the narratives around the causes of inflation — because they’ve grown exponentially on just the coverage of inflation since we did the report last year — that has had a tremendous effect on the belief of what is causing inflation across party lines. Generally, we saw that there was an increase for both parties around corporate greed being the proponent of of why this is happening — corporate greed is leading a little bit by 13 points. But generally, Republicans do still feel that it is a government kind of issue versus corporate greed.”

— Maxine Gurevich, svp of cultural intelligence at Horizon Media’s WHY Group, on political differences in attitudes about inflation’s causes. 

Speed reading

• Digiday senior news editor Seb Joseph dug into how and why Havas Media Group is using AI, from optimizing lower-funnel campaigns to adjust social executions on the fly — and why it all feels like a big arms race.
• Digiday senior editor Michael Bürgi looked into the inflation-related reasons B2B agencies are experiencing a surge in new business requests.
• I covered Stagwell’s continued rollout of augmented reality offerings across sports teams, the latest being a deal with the Kansas City Royals.