Month: May 2023

Snapchat’s latest ad offerings aim to change the platform’s narrative to advertisers. Namely, that the platform is worth their time and worth investing in.

The crux of the revised narrative is that Snapchat is an outlier in a social media landscape that’s going through a shift. These days, social media has become more about watching content by strangers and getting involved in viral trends, without a personal connection. Snapchat is pushing back against that as it wants to be seen as “the home of real relationships.” This message was abundantly clear throughout Snap’s recent events for advertisers.

Following Snap’s annual Partner Summit on April 19, which focused on improving user (and business) engagement through AR innovations, the platform announced a number of new updates to its ads platform at the IAB NewFronts event. The plan was to entice advertisers to part with their cash, which would ultimately help get the platform back on track.

While it’s still too soon to judge how these new additions will actually pan out, early signs from marketers show that they are, at the very least, somewhat encouraged by what they heard. 

This is what has piqued their interests.

First up, Snapchat has launched First Story

First Story enables advertisers to reserve the first video ad that Snapchatters see between Friend Stories, and has a potential daily reach of more than 50 million, according to the team. 

The platform has officially launched ads in Spotlight

Snapchat began early testing on ads in Spotlight last year, CEO Evan Spiegel had previously highlighted on the platform’s Q4 2022 earnings call. Having expanded the testing earlier this year, Snapchat has officially launched ads in Spotlight to all advertisers, globally.

According to the team, more than 350 million users watch Spotlight each month, meaning advertisers now have a chance to reach a mass audience by using the placement.

Snapchat is introducing a Snap Star Collab Studio

The Collab Studio is currently in the U.S., (for now) and enables brands to work with creators, by Snapchat helping brands to identify the most Snap Stars for their goals. The platform also helps brands determine contracts and final deliverables as well as produce creative across sponsored stories.

Added to that, Snap has evolved its MyAI chatbot, which includes early testing of sponsored links in conversations, as well as upcoming content partnerships — namely sports sponsorship — across events including the 2024 Paris Olympics and the Women’s World Cup in addition to the NBA, NFL and WNBA.

But will these efforts be enough to set Snapchat on the right track with advertisers?

So far, marketers are hopeful for these new ad placements. Which makes sense. Anytime Digiday has caught up with them, they always cheer for Snap, but had yet to find a reason to spend on the platform. 

The love for the app was there, but the ad inventory was not.

Previously, the mobile messaging app felt like a dying platform with limited ad options, said Martin Harris, head of digital at Tank. But he would now consider using Snapchat for clients with the new offerings.

“The First Story feature offers a premium placement option that could be particularly useful for major launches or campaigns with wider appeal,” said Harris. “Its potential reach of over 50 million daily users in the U.S. alone is promising and not to be snuffed at.”

Comparing Snapchat with other tier two platforms, Pinterest’s global monthly active users currently sits at 463 million, while Reddit currently has around 500 million MAUs.

Further, Harris noted that ads in Spotlight, poses a significant opportunity for brands to reach a large and receptive audience.

But while the prospect of mass reach via Spotlight seems promising, Benoit Vatere, CEO and founder of Mammoth Media previously told Digiday that the ad products still weren’t as good as they are on TikTok or Instagram. “We tried Spotlight [in testing] but we’ve yet to see any positive performance results from it,” he now said.

Another challenge Snap faces is how aware advertisers are of these new ad placements, in order to part with their ad dollars. Sure, the efforts sound encouraging and bring the app more in line with its peers. For example, while First Story is similar to Twitter’s First View and TikTok’s Top View products, Spotlight ads appear to mirror TikTok’s Pulse offering. But there’s not been much outreach to really push them out to the market, at least not yet.

Harris said the only email he’s received from Snapchat was about updating its terms and conditions. He hasn’t actually received anything yet about these new features. “If they did reach out and it was the first time seeing it, I would definitely consider it,” Harris said.

Vatere noted that Snapchat is pitching big brands right now, but he hasn’t had any conversations about these latest updates himself.

So while marketer reaction to these updates seems positive, it doesn’t guarantee that ad dollars will come rolling in.

“As advertisers, we’re interested in getting a better understanding of how the product will come to life – What measurement capabilities will be offered? Will it be truly national? Will certain types of targeting exclusions be available? Finally, what will the pricing look like?” said Adrian Crasto, senior manager, paid social at PMG.

Snap’s tricky road

It’s certainly a tricky time for Snap. Last week the company announced a decline in revenue during its Q1 2023 earnings call. Snap achieved $989 million in revenue during Q1 2022, down from $1,063 million in Q1 2022, a 7% decrease year over year. 

This is despite daily active user growth to 383 million (a 15% increase YOY). So it looks as though the company is going to have an uphill battle to better convert those users to revenue. Which is exactly what advertisers need.

All that to say whether these latest updates, for both users and advertisers, will have a material impact on the business remains to be seen.

“The focus on ad inventory is good and the new products are going to help,” said Vatere. “Is that enough? I don’t know. I surely hope so because I’m a big fan of Snap but it’s just still very small compared to Meta and Google. I don’t think it’s going to change much. I think they are in a spot right now where they could be acquired in my opinion.”

On the third day of the Interactive Advertising Bureau’s four-day NewFronts, digital video platforms and publishers discussed the latest advancements in connected TV measurement with a focus on identity tracking and the future of artificial intelligence. There was also a showcase of a number of Spanish-language and bilingual media companies.

Key details:

• AI is the new buzzword in ad tech
• Measurement and identity need to be “stitched by the hip”
• Spanish-language CTV offerings get the spotlight
• The BBC returned to the NewFronts stage for the first time in two years. Read Digiday’s exclusive story on why here.
• Revry was onstage on Wednesday as the first LGBTQ-focused presentation in the NewFronts’ history, with an energy-fueled performance that included dancing and Wizard of Oz costumes.

The goal of the NewFronts’ third day was to “give underserved voices a voice,” IAB CEO David Cohen told Digiday. Nearly half of the days’ sessions were dedicated to diverse media companies, he said. “That was by design. The marketplace is changing — and society is changing.”

The new buzzword

AI is officially the new ad tech buzzword. As Digiday reported on Tuesday, Snap, Roku and Samsung made announcements around AI-powered ads. That trend continued on Wednesday, with a number of companies including the term “AI” in their presentations.

Samba TV’s NewFronts session mentioned using AI technology to produce creative as well as to target and measure performance across screens and platforms.

Ashwin Navin, Samba TV co-founder and CEO, said AI and machine learning technology will “affect the way we work, how we understand audiences – even the way the technology is being built into the television will basically transform the viewing experience.”

Addressability is key

At long last, NewFront presentations got more into the weeds on CTV ad targeting, with companies like Innovid, LG Ad Solutions and Samba TV breathlessly promoting their data and measurement tools. 

Innovid and Disney announced a new partnership, where Innovid will take Disney’s first-party audience segments, starting first with digital and CTV ads on Hulu. The partnership will give Disney insights and help measure both local and national advertisers’ outcomes to give them more visibility into how the inventory they are buying is performing. It will also use Innovid’s clean room technology.

And as the connected TV world’s walled gardens and audience fragmentation continues to challenge media buyers when it comes to targeting, attribution and measurement, Dan Aversano, svp of data, analytics and advanced advertising at TelevisaUnivision, argued in an interview that addressability is an imperative. 

“I don’t think anybody can be a measurement company only anymore. If you’re not working in and around identity – in how we plan, [buy], optimize and activate [media] – you’re dead in the water,” Aversano said.

Measurement and identity need to be “stitched by the hip,” he added.

Spanish-language CTV offerings

Wednesday’s event featured Spanish-language and bilingual media companies such as Canela TV, Estrella Media, LATV and Americano Media, which focused on the fact that Hispanic, bilingual and Spanish-language audiences make up a significant portion of the U.S.’s streaming audience and yet are underrepresented in the streaming marketplace.

Jacqueline Hernández, CEO and co-founder of New Majority Ready, cited a recent Horowitz Research study, which found that 85% of Hispanic people said they view streaming TV content every week. “40% are just streaming,” she said, adding “Seven out of 10 [Hispanic households] have smart TVs.”

Hispanic viewers “are over indexing the total population” in the U.S., Hernández added. Out of over 1,400 FAST channels, 252 are Spanish language, while just 21 channels are dedicated to African American audiences, she said.

LATV CEO Andres Palencia and president Bruno Ulloa also called on advertisers to help close the diversity gap in Hollywood by spending budgets with them to reach Latino audiences.

With the slogan, “No más fake news,” the Americano Media — founded just last year — is positioning itself as a “brand safe” outlet focused on mostly hard news each day alongside a few hours of opinion and commentary commentary.

“There are a lot of things that people are pushing, a lot of misinformation and misinformation in hispanic media,” said Americano Media Founder and CEO Ivan Garcia-Hidalgo. “We’re here to report the facts. We’re here to give both sides an opportunity to speak freely and fairly without canceling or shutting anybody down.”

New businesses

A handful of companies announced rebranded or newly launched businesses on Wednesday. CafeMedia and AdThrive rebranded as Raptive last month and outlined how they’re helping creators with their businesses. Chicken Soup for the Soul Entertainment debuted its recently-formed ad sales division Crackle Connex. The company said it reaches over 80 million monthly active users through Crackle, Chicken Soup for the Soul and Redbox, which it acquired last year. Canela Media announced Canela Connect, a new data and audience product for advertisers.

Preview of Day 4

The fourth and final day of the NewFronts will include just four presentations— Condé Nast, Vevo, Meta and TikTok — with TikTok’s pitch only open to partners and closed to press.

Both TikTok and Meta have faced continued scrutiny on a number of fronts. TikTok is also facing increased pressure from regulators, with state and federal officials considering bans on the platform. Meanwhile, the Federal Trade Commission on Wednesday proposed banning Meta from monetizing data from users under the age of 18 and forcing the company to pause launching new products, services or features unless receiving approval from a third-party assessor and limiting new facial recognition technology.

According to the FTC, the parent company of Facebook and Instagram violated a 2020 privacy order as well as the Children’s Online Privacy Protection Act Rule (COPPA). In a tweet on Wednesday, Meta spokesperson Andy Stone described the agency’s proposal as “an abuse of authority and wrong on the facts” and claimed Meta hasn’t violated the existing agreement.

According to the FTC, Meta has 30 days to officially respond to the agency about the claims and the proposal. However, it’s far from a done deal, with FTC Commissioner Alvaro Bedoya already questioning whether the FTC even has the authority to impose the restrictions on Meta.

— Digiday senior reporter Marty Swant contributed reporting.

As agencies have moved more aggressively into the domain of commerce media, one has to wonder about the role of Amazon — specifically, how the holding companies and independent agencies setting up retail units impacted their all-important relationship with the 800-lb. gorilla of the space.

Given Amazon’s share of the e-commerce market, it clearly is the dominant force, challenging agencies to grow their media spend, said Bertrand Fraboulet, global managing director of Havas Market, which is Havas Media Group’s entry into e-commerce.

As so many different parties — including the legacy agencies, pure-player Amazon agencies and Amazon itself — now wield power over disparate segments of retail media, the playing field has leveled somewhat. “In the current state of play, all parties are interdependent and need to leverage each other’s strengths to build the most efficient client e-commerce strategy,” Fraboulet said.

Legacy agencies and Amazon pure-player shops, meantime, have engaged in what Fraboulet described as fierce competition, as the old-line agencies have had to demonstrate that they offer more value for their clients than simply managing Amazon search campaigns. At Havas Market, for example, while retail is a key component of the business, it also provides services like e-commerce strategic consulting, forecasting, e-retail operations management, content production and an integrated approach to sales analytics, combining sales and media data.

Even as Amazon reigns, numerous retailers have built out their own retail media solutions, including Walmart Connect, Target’s Roundel and Carrefour Links, part of the European supermarket chain. Thus, advertisers have rapidly expanding choices that extend far beyond Amazon search, especially in the fast-moving consumer goods (FMCG) category. That means advertisers need agencies more than ever to “navigate across this profusion of offers,” Fraboulet said. 

The strength of legacy agencies lies in their ability to integrate commerce media into a full-funnel, 360-degree media approach, he added, “levering synergies between traditional and commerce media to strike the right balance between awareness and short-term performance.”

“The opportunity and where brands need agencies to move — and where we’ve moved — is in delivering connected commerce,” said Megan Pagliuca, chief activation officer at Omnicom Media Group, who has oversight of commerce media. 

OMG’s partnership with Amazon has accelerated in recent years as it has used the close ties and leverage it has with the e-retailer to develop unique capabilities for clients, according to Pagliuca. For example, at Cannes Lions last summer, OMG announced an agreement with Amazon to share aggregated insights, new tools and talent training. The deal enables OMG agencies to access insights from the Amazon Marketing Cloud (AMC) to improve e-commerce planning, media mapping and sales forecasting. 

This month, OMG established another program with Amazon to further educate its own client leads, as well as Amazon’s teams, by breaking down the holding company’s complex relationship with the retailer and its benefits “so everyone’s on the same page,” Pagliuca said. That arrangement includes a tracker that reports which Amazon tools are used by a client.

When it comes to standards for data in the retail media space, meanwhile, the synergy between Amazon and the agencies is what’s moving the needle. While Amazon —having been in the game for so long and being such a dominant force — may have an edge when it comes to data, it still needs agencies that understand how to use its datasets appropriately to move business forward, said Paul Williams, head of commerce product strategy and business development at Publicis Commerce. 

“Amazon’s an incredibly important benchmark — they are the most advanced in the way they’ve been thinking about data,” said Williams, noting that Publicis has worked with Amazon to join retail data with marketing data to provide brands with better insights. But, he added, “We can kind of help bridge that to the agencies, and subsequently to the clients, using it to better their media programs or better their experiences with their products to put in front of their customer bases.”

Amazon isn’t the only e-retailer benefitting from agency relationships. Publicis Groupe last fall announced a deal with Carrefour Group to use the holding company’s technology, CitrusAd powered by data giant Epsilon, to provide media and data solutions for advertisers, backed by merchant transactions. 

Jay Pattisall, vp and principal analyst at Forrester, noted that the relationship between agencies and big tech, including Amazon, has generally evolved from an ostensibly competitive positioning to more of a partnership in recent years. “There is acknowledgement among the largest tech players that their partner programs oriented toward media agencies are developing in their sophistication because they see them as important clients that have to be served, and they develop programs to enrich those relationships because they are [tied to] ad revenue,” he explained.

While Amazon is the largest player in commerce media, it is far from a one-on-one matchup between the e-retailing giant and the agencies. As Pattisall characterized it, there are “hundreds, potentially moving toward thousands of players” in commerce media. That increasingly puts Amazon on the defensive, he argued, adding that the growing number of parties jumping into the space is partially to blame for the weak performance of, and subsequent cutbacks in, big tech.

Amazon, he said, “remains the behemoth in digital advertising — they just have many more competitors for ad revenue.”

This week’s Media Briefing takes a look at Boostr’s 2023 Pricing & Yield Trend report to understand ad spending in the media industry.

• ‘Regressing back towards the mean’
• Overheard at the NewFronts
• Vice Media faces bankruptcy, Paper Magazine has layoffs and more

‘Regressing back towards the mean‘

Publishers are heading into earnings season with a dark cloud over their heads, but the state of ad spending in the digital media industry doesn’t seem to be as bad as they’re making it out to be. 

Two years ago, many publishers got swept up in a false spring where ad dollars were flowing, subscription sales were solid and experimental channels like NFTs were contributing unexpected, yet welcome, revenue.

That spring led to a high average growth rate of 49% year over year for publishers’ advertising revenue in 2021, according to the 2023 Pricing & Yield Trend report from Boostr, which was shared exclusively with Digiday. What’s more, three-quarters of the approximately 100 digital media companies — the company declined to name them publicly — surveyed for this report fully exceeded their pre-pandemic 2019 advertising revenue totals that year as well.

The report comes as the industry is beginning to embrace that ad levels seen this year were a correction for ad growth seen before the pandemic.

But shortly into 2022, the false spring refroze and publishers faced a “rapid deceleration in growth rates” between Q1 and Q4 2022, according to Patrick O’Leary, CEO and founder of Boostr.

“It’s not surprising that this Q1 [was so] difficult [for publishers] to be up, because you were up two years in a row pretty significantly. So the denominator is pretty big,” said O’Leary, who was the author of the report. 

While it might feel like Q1 was painfully bad, it really comes down to publishers being off their growth targets versus being significantly down year over year, O’Leary continued. “Everything’s regressing back towards the mean. We’re going back to normal growth rates. The COVID stuff is washing itself out [from] when everything was hyper inflated,” he said. 

Downward spiral 

So how did 2022 net out for digital media company’s advertising businesses? The report found that the annual growth rate for publishers’ advertising businesses ranged from an average of 9% to 48% depending on the size of the publisher, but on the whole, the industry saw close to a 26% growth rate year over year. 

O’Leary said that as early into the year as February, the war in Ukraine ignited some instability in the ad market and by the summer, inflation and the unstable economy had advertisers reenacting their early pandemic-era plays. Despite that, O’Leary said he was still surprised to see just how slow the ad market could get in an election year.

Boostr grouped the media companies into four cohorts based on their total annual revenue: $100 million-plus, $50-$100 million, $25-$50 million, and sub-$25 million. While the largest group (companies earnings $100 million-plus per year) had a relatively stable 2022, the other cohorts experienced significantly more volatility over the course of the year.

Churn and no burn 

A significant reason why there was still growth in 2022 for some publishers, particularly at the end of the year, was because several media companies were able to sign new advertisers, even when their repeat clientele stopped spending. 

In fact, there was a lot of slippage when it came to repeat clients not resigning in the fourth quarter. Net revenue retention (NRR) ratings, which calculates how much revenue is retained from a cohort of customers in one period versus another, dropped steadily throughout the year.

While the publishers with high NRR ratings — meaning those who were able to resign a majority of advertisers they had in Q4 2021 in Q4 2022 — also had the highest growth rates of the quarter, O’Leary said publishers with lower NRR ratings still were able to grow in their ad business thanks to new clients.

“Let’s say you were flat in Q4 last year, and you’re a $100 million publisher and your net revenue retention was 54%. That means 46% of your revenue came from new [advertisers]. That’s a lot. So either the endemic money dried up, or they built an apparatus to go find new logos to cover [the gaps],” said O’Leary. “If you weren’t measuring this or watching it, I don’t know how you survived.” 

During Q4, many publishers and media buyers reported that there was a heightened focus on programmatic and display advertising campaigns due to publishers wanting to highlight the quick turnaround times and keep those ad dollars coming in-quarter, as well as advertisers wanting to burn up their remaining budgets before the year concluded. Leaning on programmatic, and the open marketplace in particular, there is a chance that new advertisers found their way on the publishers’ pages from categories that said publishers don’t typically sell to directly. 

And looking ahead, can publishers expect that those new advertisers will stick around in 2023? 

“If I were a CRO in a media company, I’d be laser focused on this,” O’Leary said.

Less demand but steady prices

Interestingly, even in a weaker demand market, the price points for ads remained pretty steady, O’Leary noted. Likely a saving grace as well for publishers last year.

Below are charts showing the average price that advertisers paid to reach 1,000 impressions (CPMs) for ads bought in private programmatic marketplaces (PMPs), in programmatic guaranteed/direct deals (PG/PD) and insertion orders (IOs), which include branded content, events and other creative-led campaigns.

Looking ahead

Magna Global is projecting that ad spend will grow less than 4% year over year in 2023. Boostr’s 2023 Pricing & Yield Trend report, however, is predicting that “strong” media companies could end the year 10-15% up. Others might be happy reaching 4% at all. 

What we’ve heard

“I was on YouTube Shorts for about six months, reposting all my TikToks with no success. The videos will get roughly 500 to 2,000 views each… I was 80 Shorts in until my first one took off. And when that one took off, all the other ones took off as well.”

— Jorge Soto, in the third episode of the Digiday Podcast’s four-part series on short-form vertical video creators.

Overheard at the NewFronts

Six marketers and advertisers Digiday spoke with at the Interactive Advertising Bureau’s NewFronts in downtown New York City on Wednesday said the primary benefit of coming to the annual event was to hear about new companies and ad tech developments that they were not previously familiar with. 

This year, those developments were primarily around AI, diversity, interactive ads, Gen Z and identity, with “AI” being the new buzzword thrown around onstage.

Two marketers said they appreciated the format on Wednesday, which were short, showcase-like segments from nearly 20 different organizations. 

“I like the fast-paced stuff. It keeps you awake,” one marketer said. “If I’m into it, I can go deeper” later, they added. The second marketer added: “I appreciate all the math [in the presentations] behind the reasons to work with” these media and connected TV platforms.

However, a third marketer said that while the “energy is good” in the shorter format on Wednesday (compared to the five longer sessions on Monday and Tuesday), some of the presentations felt “surface-level and short. “I would like more of an emotional connection to the storytelling” of each content platform, they added.

The second marketer agreed that they felt they were missing an “inspirational mission” behind some of the companies’ presentations that would entice their brand to spend media budgets with them.

An agency exec particularly enjoyed Revry’s presentation, which featured CEO and co-founder Damian Pelliccione (and others) in Wizard of Oz costumes, dancing on stage. It was the NewFronts’ first LGBTQ-focused presentation.

While none of the NewFronts presentations so far directly addressed ongoing economic headwinds, this Digiday reporter noticed more mentions than in years past from executives onstage that media dollars need to “work harder.”

“Every working dollar needs to drive outcomes,” Michael Scott, vp of brand sales at Samsung Ads said during the Samsung session. – Sara Guaglione

Numbers to know

150: The number of journalists that The Messenger is launching with on May 15, out of 200 total employees. 

49: The number of content farms that have chatbots pretending to be journalists writing content for their sites, all of which published at least one article that contained error messages like “my cutoff date in September 2021” or “as an AI language model.”

$1 million: The amount of money spent on digital ads in the first week of President Joe Biden’s reelection campaign. 

74%: The percentage of Americans who believe that news media is causing more political division in the United States than reducing it, per a survey of 1,002 people conducted by The Associated Press-NORC Center for Public Affairs Research and Robert F. Kennedy Human Rights 

100+: The number of employees Vice Media Group laid off last week as part of a larger reorganization.

What we’ve covered

BBC simplifies website, apps to attract U.S. readers and advertisers:

• The BBC is consolidating its digital website and apps in the U.S. this fall to attract readers and advertisers on this side of the pond. 
• BBC Studios, the commercial side of the business, is setting its sights on the U.S. — one of its largest markets outside of the U.K.

Read more about the BBC’s expansion strategy here.  

Digital content platforms and streamers pitch new ad formats in short and long-form video on NewFronts day two: 

• Snap announced it is testing new ads with its new ChatGPT-powered chatbot.
• Peacock focuses its pitch on ad-supported movies and four new ad formats. 

See what else you missed from day two of the NewFronts here. 

Digiday+ Research – Publishers are a lot less optimistic about NewFronts this year: 

• Digiday+ Research surveyed about 50 publisher professionals to find out how they expect buyers will spend during this year’s NewFronts and upfront cycle. 
• The short answer is there’s a lot less optimism among publishers this year than there was last year.

Read more about the reception of this year’s NewFronts here.

Why BuzzFeed News couldn’t replicate HuffPost’s business model: 

• HuffPost remains the sole news arm within the BuzzFeed Inc. portfolio, and yet characterizing its content as breaking news may be a misnomer.
• For BuzzFeed News, former and current staffers say following the HuffPost model caused what was once unique about the brand — its investigative reporting — to vanish. Left behind was a product that was undifferentiated in the advertising market.

Take a deeper dive into HuffPost’s business model here. 

Publishers pull marketing budgets away from Twitter under Musk’s ownership, changes to verification: 

• Publishers are following in the footsteps of advertisers that have pulled money out of Twitter since Elon Musk took the helm six months ago. 
• Some media organizations are now doing the same, and no longer paying to promote posts on Twitter to draw more eyeballs to their stories or sponsored content.

Read more about how publishers are spending on Twitter here.

What we’re reading

Vice Media faces bankruptcy:

Once valued at $5.7 billion in 2017, Vice Media Group is now preparing to file for bankruptcy six years later, according to The New York Times. If the company cannot find a buyer at its present $1 billion price tag in the next few weeks, Vice Media has taken the necessary steps to possibly file for bankruptcy.  

Paper Magazine faces layoffs: 

Due to economic headwinds, Paper Magazine laid off 20 to 30 full-time staffers and its editor-in-chief Justin Moran will leave the company at the end of May, but editorial operations have already ceased, reported Adweek.

Politico founder is launching an educational non-profit to support journalism: 

Robert Allbritton, the founder and publisher of Politico, is launching the Allbritton Journalism Institute to help train aspiring journalists and has committed $20 million to the cause, Semafor reported. 

Reader revenue now accounts for half of the Guardian Australia’s total revenue:

After a decade in Australia, the Guardian’s Australian arm has increased its audience to more than 7 million readers in the country and according to the publication, this has resulted in an increase of reader contribution revenue to be half of the publication’s total earnings. 

Former NBCUniversal CEO Jeff Shell accused of sexual harassment: 

A journalist/anchor at CNBC filed a complaint with the company alleging that Shell had pressured her for sex over several years and called her derogatory names, The New York Times reported. The complaint started an investigation into Shell’s workplace behavior that ultimately  led to his dismissal last week. 

As part of the Digiday+ community, you’re invited to a member-only live analysis on how publishers are using AI. On May 11 at 2 p.m. ET, Digiday Media research director Li Lu and Digiday senior media reporter Sara Guaglione will reveal the results of the AI installment of Digiday’s research series on emerging technologies and dive deep into its findings, including how publishers are fueling data-driven personalization efforts, what natural language processors, like AI chatbots, publishers are using and in what ways, and where publishers expect growth and challenges with generative AI. Register for this virtual event.

Times are hard in the esports industry, particularly for teams. Through such a barren spell, the biggest teams are leaving behind the publishers that chose not to share their spoils when times were good.

Apex Legends has faced such an exodus of teams after EA, which together with the game’s developer, Respawn, halted plans to introduce a revenue-sharing initiative for in-game item sales with 20 esports organizations, according to six sources who spoke exclusively with Digiday.

Esports organizations have been unwilling to say too much; game publishers are the power players in esports, given that they own the underlying IP of the sports themselves. They make the final call on just about everything. As such, orgs want to avoid their bad side. What follows is a signpost for teams: esports titles with engaged publishers, pitching fair economic models, are far more inclined to attract and retain esports teams.

EA shut down talks of esports revenue-sharing from in-game item sales on Sept. 16, 2022, according to email correspondence to executives at two of the esports orgs that were involved with talks with EA. Specific details of the failed rev-share project have not been revealed or verified until now as the esports organizations were cautious to avoid ruining relationships with EA.

In esports, publishers rule the roost, given that they own the underlying IP of the sports themselves. EA, which owns Respawn, declined to comment on this story.

Since then, at least five tier-one orgs — Team Liquid, G2 Esports, Cloud9, NAVI and Spacestation Gaming, all of which were involved in these revenue-sharing talks for Apex Legends’ ALGS — have let go of their rosters and left the the esports title for good. While the first of these teams began to leave in September last year, executives involved have been reluctant to talk about it until now.

For months, EA and Respawn explored several revenue-sharing models of different scales for ALGS — or Apex Legends Global Series — according to several team executives. And while these talks were promising, a deal was never inked.

“It was more of a ‘trust me bro’ situation,” one executive said; “Rev-share for digital goods was always the context for all discussions there,” said another.

Re-negotiating efforts

EA and Respawn eventually decided against this. Instead they offered teams $60,000 each as a flat licensing fee — far below what teams felt was fair. For context, tier-one orgs, particularly in North America, can make $1 million or more per sponsorship deal per year. “I make that [$60,000] in one quarter in [game name redacted], times two,” said one senior executive at an org involved in the discussions with EA, in reference to a revenue-sharing arrangement at another title. 

In response to EA’s offer, the teams collectively drafted a letter — led by TSM and Team Liquid — rejecting it.

“We are not comfortable with the proposed licensing offer, nor do we believe that the decisions made around it have been done so in good faith,” the letter reads, which was shared with Digiday. The letter was signed by executives from 14 of the 20 orgs involved in revenue-sharing discussions. They are as follows: 100 Thieves, Alliance, Cloud9, Complexity, DarkZero, Faze Clan, Fnatic, G2 Esports, NAVI, NRG, Sentinels, Spacestation Gaming, Team Liquid and TSM.

The execs offered a counter proposal of an uncapped 50/50 revenue split for in-game skin sales, as well as minimum guarantees.

EA came back with a revised offer based on sales performance instead of a flat licensing fee: the three orgs whose skins sold the most would get $160,000; the next three would get $120,000; the next six would get $80,000; and the bottom eight would get $60,000. There was still no revenue-sharing included.

The teams then responded with another counter-offer, imploring EA and Respawn to explore an uncapped revenue-sharing model as close to 50/50 as possible. “Our collective experience in dozens of esports titles and leagues can provide the ALGS with a different perspective in the pursuit of creating the world’s best esports league,” the email read.

After this counter-offer, EA shut down talks altogether, citing tight timelines and so it could “internally discuss how we can best work together with teams to build meaningful, mutually beneficial partnerships around Apex Legends and the ALGS.”

A dying esport

There have been rumors for months of insufficient financial proposals by EA, and of an unwillingness from Respawn to accommodate esports teams. There have also been leaks of esports team skins in Apex Legends from September last year, around the time EA and Respawn shut the initiative down. One team executive said design and development of the skins, in collaboration with developer Respawn, began as early as March 2022.

According to the emails sent between EA and the teams, team-branded skins were supposed to be in the Apex Legends marketplace in mid-October, but the two parties were still negotiating financial terms in mid-September with no guarantee in place.

Teams spent manpower developing the skins. When EA decided to “pause this particular sale” (as communicated to teams via email), executives felt they had wasted money despite not having a contractual agreement in place.

EA did throw the teams a bone in mid-2022 when team-branded ‘banners’, which are in-game items in Apex Legends, were released. But sales were modest. “It was really little money,” said one team executive. According to one team executive, some teams did not sell more than the $60,000 minimum guarantee in banners. Another executive said this was because teams were not involved in their design, and the items were less desirable than weapon or character skins. “In the first season, that was a very rough thing, because we weren’t involved in design. It was a product that nobody wanted.”

Because of the poor sales numbers, EA and Respawn determined that a rev-share deal on weapon and character skin sales would not be worth it financially. Some sources spoke of EA’s philosophy as a business, and how this affects its attitude toward esports.

“So [EA and Respawn are] like, OK, if we make $100 million from this bundle and we’re giving $20 million to the teams, we don’t feel like the teams are going to bring $20 million in sales’,” said one team executive. “From a P&L standpoint, sure, maybe that’s the case. But that’s the problem with them … other developers would say, ‘Maybe the teams are not going to push the sales 20% more than what it would have been, but you know, these teams invest in our ecosystem, they do free marketing for us with them being in an esports programme’. … Respawn and EA don’t think like that. If you look at the FIFA stuff [arguably pay-to-win Ultimate Team mode and loot-box mechanism, which has led to past bans in the Netherlands and Belgium], they’re just revenue-focused, they don’t care about marketing and stuff like that; they want everything in the green no matter what it is.”

Financial support from publishers, in the form of revenue-sharing and stipends, is a hot-button topic in esports. Teams, who are largely struggling financially, are heavily reliant on sponsorship revenue, and unlike traditional sports cannot look forward to significant media-rights revenue. A potential solution to this problem is for publishers to give teams a leg-up; in return, teams can focus more effort and resources toward promoting the publisher’s game. One part of this equation is revenue-sharing: publishers put purchasable esports-team-branded items in their game, and share the revenue generated from such sales with teams.

One team executive was critical of EA. They believe the publisher-developer relationship between EA and Respawn leads to laborious management of projects. “I’ll be honest, EA is the worst [publisher in esports]. It’s like, a giant step down from everybody else,” they said.

There’s room for finger pointing for these failed revenue sharing talks: EA was in charge of communication with esports teams, but according to at least two team executives, the revenue-sharing initiative was shut down because EA could not get Respawn, the company it owns, on board. Another executive told Digiday that their organization was told EA’s executive team was the one that didn’t want to go ahead with rev-sharing, rather than Respawn’s.

Most esports competitions have minimum guarantees. Riot Games has organized its Valorant ecosystem to emphasize favorable revenue-sharing for teams with no hefty buy-in, and like other competitions, it guarantees a yearly stipend to partnered teams. ESL guarantees that the Pro League in CS:GO shares 25% of total revenue with teams, as per the Louvre Agreement.

It is clear that for esports to thrive — or even to scrape by at the moment — some help from publishers is in order.

Mark ‘Cashflo’ Flood, founder of Disrupt Gaming and former Director of North American Operations at Astralis, said: “Let’s just say that all of esports as we know it, with the teams, and this, like, professional atmosphere, just totally got wiped away, and we went back to only grassroots, and maybe the publishers put in a million-dollar prize pool, but everything is run through Challonge [grassroots tournament platform]. I think there’s a strong case to be made that that version of esports is just as helpful to the publishers as this one that we’re currently in, which is this huge amount of production, and crazy salaries and professionalism.”

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