Data-Labor-Technology

From a consumer perspective, Group Nine’s chief insights officer Ashish Patel said that as people spend increasing amounts of time on social media platforms, the more they’ll become inundated with transactional ads. “I can’t tell you how many random mask brands I get targeted with,” he said. “You don’t really know the brands that pop out of thin air. It’s hard to gage quality and where things are coming from and how things are made.”

As a result, Patel said there is a major opportunity for publishers that have years of accrued audience trust to work with advertisers beyond pushing awareness in campaigns and making seriously considered product recommendations. 

“It’s affiliate-plus,” Patel said, adding that affiliate is in now way a new revenue model for publishers. However, he said that Group Nine in particular is very interested in extending out the traditional affiliate model to include the scale play of social media, as well as using data gathered from the affiliate side of the business and working directly with advertisers to leverage those insights and drive more transactions. 

The long game

Meredith has been signing more multi-year, multi-media deals with advertisers during the pandemic and, according to chief digital officer Catherine Levene, that trend is not expected to slow down anytime soon. During the pandemic, Levine said that the company closed 10 joint business partnerships, some of which were renewals and some of which were new business for the company. 

These are partnerships that often include a product developed by Meredith using the publisher’s first-party data in order to determine what audiences would be willing to spend their money on.

“These deals don’t happen overnight. They take months and months of development in order to understand each others’ businesses. They don’t want short term deals either,” said Levine. “We’re in this for the long game.” 

Virtual engagements here to stay

While people were stuck at home with few options for offline entertainment, Joanna Lambert, head of consumer at Verizon Media, said that the online options for written, video and virtual entertainment became limitless. As a result, it became more competitive for publishers to “break through the noise,” she said, and forced media companies to develop new personalized, real-time coverage to their audiences.

And while real life activities are now slowly coming back into the mix, Lambert said the virtual habits that were formed during the pandemic will still have consumers coming back to the media companies who can deliver on new, innovative content. 

Verizon Media, for one, has been prioritizing augmented reality development, she said, because it’s “well suited to amplify shoppable video content, journalism, virtual events, concerts, classrooms and more,” for both editorial and advertiser products. Additionally, after garnering nearly 1 billion video views in the past two months on the 30 virtual events the company hosted, she said “virtual events will be a strategic part of our programming moving forward.” 

The more first-party data the better

Regardless of pandemic, the media industry is still racing headlong towards the day that the third-party cookie will vanish. “The current crisis didn’t change our path to the future. It just accelerated the need to get there faster,” said Kristen O’Hara, chief business officer of Hearst Magazines. This is because as advertising dried up and ad inventory spiked, only the most guaranteed deals were being closed because marketers wanted to make sure that the money they spent would get the greatest return.

“The ability to analyze that data is even more critically important now,” said Meredith’s Levene. “It’s not just the data but the ability to derive insights from the data and react in real-time” by creating new content and helping marketers adapt their messaging around that data. 

Companies that are able to produce insights from content, audiences and commerce transactions will be the most successful going forward, O’Hara said. 

Monetization to drive culture shifts

“Employees and consumers are holding companies accountable more than ever around their actions supporting their words,” said Vox Media CRO Ryan Pauley. For publishers, this means they will need to be more cognizant of the diversity on their teams as well as the diversity they are putting forth in their content. For brands, this means a shift in where they invest their marketing budgets to more closely align with their company values. 

Vox started a new paid fellowship program for minority employees and committed $1.5 million to marketing and advertising services for projects aligned with racial equity and justice, according to Pauley. But sweeping change can’t be made through siloed actions, he said. 

Some brands, Pauley said, have begun thinking about the monetary endorsements made through marketing spend and have aligned to join the Facebook advertising boycott, but industry-wide, “this has been an underrepresented part of marketing strategy for a long time for a number of brands,” Pauley said.

Which is why Haile’s contemporaries have been mostly forgiving about Scroll, the ad-free subscription service he teased for three years before finally launching widely six months ago.

For now, Scroll has produced barely any revenue for its partners, a slow uptake that has made some media executives question how much to promote it on their sites. Some executives say it’s still early. They are rooting for Haile to succeed — and bring them more revenue. But for the time being, Haile’s grand promise of creating a better internet for publishers remains undelivered. 

Scroll’s reason for existing has always been fairly easy to articulate. Online advertising is by and large terrible. The race to the bottom has created sites that are cluttered and slow, with struggling local news outlets particularly unreadable. Facebook and Google, who have swallowed up the online ad market, offer little more than blood money in the form of journalism grants to stave off regulators and win some good press. Turning to subscriptions, publishers have learned that just a tiny percentage of their audience converts. They’ve long searched for another savior. 

Enter Scroll. For $5 a month, the service offers subscribers a speedy, ad-free reading experience across more than 300 media properties and then splits up the revenue to publishers according to how much time readers spent on their site. In January, when Scroll launched widely after years of anticipation, participating publishers took a wait-and-see approach. It would take potentially millions of subscribers for Scroll to truly impact their bottom lines, but there was reason to give it a try. A partnership with Mozilla’s Firefox browser was still on the horizon. Scroll promised it would at least deliver more average revenue per reader than advertising.

And so far, it has honored that pledge, though on a very small scale. Haile said the service pays publishers an average of 30 cents per reader per month. “Every time someone who is a normal visitor to your site becomes a Scroll visitor, they are basically worth three-to-five times what they were worth before, so that’s promising.”

Haile won’t say how many people are Scroll subscribers, but according to publishers, the overall revenue has not been meaningful. Justin Wohl, the chief revenue officer at Salon, said the political news site makes “a handful of dollars every month” from Scroll. Salon’s average revenue per Scroll user is 11 cents, Wohl said — a better figure than it gets from advertising.

Ad block party

At the time Scroll was conceived, ad blocking was one of the most talked-about scourges of the media business. With the rise of AdBlock Plus and other free services, publishers saw a mortal threat to their businesses. Media has since changed. It turned out that, through a variety of counterstrategies, ad blocking became more of a commonplace irritation. Meanwhile, advertising in general has fallen increasingly out of favor among publishers, and many media companies today are refocusing on drawing revenue directly from consumers through subscription products or things like commerce. 

That has created a little bit of a promotional conundrum for Scroll. Wohl, for instance, said he will use his site’s inventory to promote Salon’s subscription service, which also gives readers an ad-free experience, over Scroll’s. “It makes sense to lean into promoting your own product,” he said.

Scroll, which now has 14 employees, has a long roster of other partners to tap into. Haile also has a name brand-name list of investors, such as Axel Springer, The New York Times, and News Corp. Unlike Chartbeat, however, Scroll is a consumer-driven service — and its success hinges on the company’s ability to bring in subscribers as well as media collaborators.

Many companies have endeavored, with limited success, to create a similar one-stop shop platform for sustainable journalism, from Dutch pay-per-article company Blendle, to digital newsstand Texture, which was acquired by Apple in 2018. After lots of hope and panel discussions, buzzy trends like blockchain or micropayments haven’t provided a journalism lifeline after all. “This is a path littered with the bones of other people that have tried,” Haile said.

Scroll’s early figures point to the success of the model, even if the user base isn’t particularly big yet, according to Haile. “One of my board members was wise and said, ‘If you get the economics right, you can always scale. If you don’t get the economics right, then scaling is just pissing up a wall.’” About 18.5% of people who start a free trial with Scroll put in their credit card information at the end of the free period to continue with the membership, according to Haile. After six months, he said Scroll has a 91% retention rate. “Now that we feel confident about the unit economics, we can start to turn on the scale thing.”

The scale thing won’t be so simple. After months of keeping cash on hand amid coronavirus, the company is ramping up its own marketing spending plan. But Scroll needs its publishing partners to help advertise the product.

Some partners are on board in at least a limited fashion. Michael Zimbalist, chief strategy and innovation officer at the Philadelphia Inquirer, said the newspaper will soon roll out messages for readers using an ad blocker. When they hit the Inquirer’s metered paywall, readers will receive a message promoting Scroll.

Other publishers are reluctant to help, either because they have their own subscriptions to promote or they are not sure if Scroll is going to succeed. A source at one large digital publisher said that it had made just a few hundred dollars from Scroll so far and didn’t intend on making any tech or development investment until the service gained more traction. 

“The key thing for me with all the publishers is whether every check they get the next month is bigger than the last,” Haile said. Scroll, in Haile’s view, can help publishers monetize “casual fans” who would not sign up for a regular subscription but would pay a little bit for a better reading experience.

Acknowledging it’s still early, an executive at another large digital publisher said total revenue from Scroll was in the thousands of dollars and has been growing. “We participated because we’re hopeful that there are new models of paying for premium content that are going to emerge and work,” the executive said.

Coronavirus crunch

Like all media companies nowadays, Scroll has faced the coronavirus crunch. Haile said the company put its user acquisition spending on hold to keep more cash on hand during the crisis. Across the media landscape, ad-based publishers are scrambling amid the bleak ad market to emphasize their own subscription products and shore up their businesses. Executives, in other words, have bigger problems to deal with than Scroll, though they’re still interested.

Plus, executives like Salon’s Wohl are still waiting to see one of Scroll’s biggest promises that hooked them into the project: the partnership with Mozilla, which was first announced in February 2019. After a year of testing and a further delay because of coronavirus, that offering got off the ground about two weeks ago to 1% of Firefox’s desktop audience, Haile said. The service, a browser extension incorporating Scroll into a suite of other privacy features on Firefox, will now launch to a wider audience, Haile said.

Scroll might be off to a slow start in a tough media environment, but Haile’s contemporaries are largely rooting for him. They are happy participating as passive members in Scroll’s fleet of media partners, since they can learn from the project and don’t have to cannibalize their audience. And if the future of media is really The New York Times vs. everyone, a publishing collective that can bring subscriber dollars to smaller outlets is a worthy endeavor for media executives who do not work at The New York Times.

Zimbalist said he admired the idea of establishing a co-operative that can help local news outlets. “This idea that he has — that he actually has made work — is this self-governing collection of sites where the rules are baked in about how everyone shares in the profit,” he said. “That is really compelling and has a place.”

When asked if they believed if the current boycott will actually result in Facebook implementing meaningful changes, 55% said they didn’t believe it would.

While brands have “boycotted” Facebook before, this year’s movement seems to be bigger. Calls from civil rights groups have asked Facebook to enforce policies about hate speech differently, fueled by mass anger at systemic injustices and racism in the U.S. after the killing of George Floyd and Breonna Taylor. Advertisers like REI and Patagonia have joined in, along with big agencies.

It’s yet to be seen if this makes any actual difference. Most brands were planning to cut spend anyway, because of the current crisis.

Reasons on what the “demands” of the boycott were varied. The vast majority said Facebook’s brand values did not align with client brand values, while their clients would spend more with Facebook if it had a “better reputation.”

About 41% said they expect client to resume spending by the end of July, while 26% said it would be at the end of the third quarter. About 17% said it wouldn’t resume until Facebook makes “meaningful changes.”

The scrambling worked: From March to June, Moret said that Curie averaged month-over-month revenue growth averaged 110%.

Curie’s not the only DTC brand to have reported astronomical sales growth during the coronavirus pandemic. Even the most bullish consumer investors I’ve spoken with have been surprised at just how much sales growth many of their portfolio companies have seen during the pandemic, unless they are in a category where appetite for those products has all but vanished, like formalwear or travel accessories.

The big question though, is just how long this astronomical growth will last. As coronavirus cases have started rising again, forcing some states like California and Texas to re-close some businesses — meanwhile Congress squabbles over how much to extend enhanced unemployment benefits — I wondered whether or not this may hamper some of the e-commerce growth that DTC brands have experienced.

It’s a mixed bag, but so far, the five DTC startups I spoke with said they aren’t seeing many troubling signs of headwinds. And, they’re confident that cash preservation steps they took at the beginning of the pandemic, combined with their customer acquisition costs having decreased during the pandemic, will help carry them through the rest of the year.

Two startups — Lalo, which sells strollers and kid’s furniture, and paint brand Clare — said that their July revenue is on track to surpass June’s. “We are in a category where there is always demand, and in paint, there is generally a spike in the spring and summer months,” said Clare CEO Nicole Gibbons.

Moret said that while Curie saw a single-digit decline in sales the first two weeks of July compared to the same period in June, sales have since picked up again. Athleticwear brand Vuori, whose e-commerce sales have grown 329% between March and July, said that it’s still seeing increased demand in July, but is also having trouble keeping items in stock, which CEO Joe Kudla said may hamper sales growth a bit.

“It tells me that this broader shift to e-commerce — it’s feeling like it’s here to stay,” Kudla said.  He said that Vuori has acquired 220% more customers in the second quarter of this year compared to the first quarter, so retention will be a key focus for the company for the rest of the year in order to maintain momentum.

Back to basics
Caraa, which sells luxury sports bags, has been the hardest hit among the DTC brands I spoke with, because its bags are designed for many activities that aren’t feasible right now, like traveling and going to the gym. CEO Aaron Luo said that Caraa’s sales dipped in April and May, and then started rebounding around the beginning of July.

He said that some activity he’s seen in recent weeks has made him more optimistic for the rest of the year. Namely, one of its most expensive collections is now one of its best selling. What’s more, customers are spending more time on Caraa’s site before buying than they usually do. “It almost felt like she has been holding back on purchases,” he said.

Still, in preparation of a tough year, Luo got to work in the spring negotiating with as many of Caraa’s vendors as possible. He said that those steps, combined with the fact that Caraa is a vertically-integrated company, and thus can more tightly control its inventory, makes him confident that the business will remain “in a healthy position” at the end of the year.

For the early stage DTC startups who are seeing higher-than-expected sales growth, they are not resting on their laurels either. Gibbons said that Clare has had to put a few initiatives on the back burner during the pandemic, and has instead spent the past few months focusing on making improvements to its website like adding a loyalty program, making it easier to “bundle” products, and improve analytics reporting. Moret said that while Curie’s sales have been up, she’s spent more on inventory over the past few months. Curie’s products went out-of-stock a few times last year, which she doesn’t want to repeat this year because “it was a lesson that you can’t lose momentum.”

While Moret is thankful for the sales growth her company has experienced over the past few months, she said that she’s not betting on it to last forever.

“[Sales] are not always up and to the right, ” she said. ‘There is a lot that is in flux and is changing, and as entrepreneur you have to know those downs are going to be followed by ups.”

That might be changing now as agencies are undergoing massive changes due to the coronavirus pandemic. Early on in the crisis, agencies cut out any remaining frivolous spending but that hasn’t really been enough to mitigate the fallout from the coronavirus.

In recent weeks, agencies have undergone another round of layoffs (last week, storied creative agency Wieden + Kennedy had to cull 11% of its staff). Now, with a recession in the works, paycheck protection program loans running out, ad budgets shrinking and brand marketers focused on short term results, agencies have little time — or patience — for anything not in direct and efficient service of returns.

“People have to be more aware of bullshitters now,” said an agency exec, adding “People have to be more risk averse due to tighter margins and bullshit ideas tend to be more nebulous, and therefore not as tied to accountability/reality.” 

If you ask agency employees about the industry fakery they’ll also tell you they’re fed up with it. Katy Wellhousen, senior account director at influencer marketing agency RQ, said that some industry circles refer to these industry types as “Prophet Twitter” or “people sermonizing what are usually quite basic tenants of the industry as a way to appear almost philosophical in the way they look at advertising.” And with everything happening in the world now there’s very tolerance for that type of colleague or boss, according to the Wellhousen. 

“We all need to see a little bit more of realism,” said Wellhousen. “Experience, aptitude and even talent in some ways can be easily faked — it’s the people we have real relationships with (whether online or off) that we will trust and respect in a time where no one knows what’s going to happen in our world today, tomorrow or six months from now.” 

Without the merry-go-round of industry events, where big ideas are lauded on stage or in-person office meetings where charisma can win the room, it’s more obvious when people are bullshitting to get by, explained one creative. Prior to the pandemic, people could glob onto someone else’s idea in a meeting or pretend to contribute to a project by pontificating big ideas without contributing meaningful work. Now, any lack in contribution is clear. That coupled with employees feeling maxed out or burnt out at home has made agency employees less likely to tolerate empty calorie behavior. 

“Lofty vision statements that have fallen out of favor — I think those worked in a ‘normal’ world because companies had the luxury of really thinking about what future progress looks like one, two or three years down the line,” said Jake Goldstein, senior business development manager at Code and Theory. 

“But the reality is that during the pandemic, everyone is focused on the now and the types of real tangible solutions and ideas that will help them succeed at this moment,” Goldstein said. “That type of tactical, real-time problem-solving is what they need to actually leverage to have a future.”

At the moment, many brands are still forgoing subway ads and other “underground” ad locations. But startup brands, which halted many of their contracts when the pandemic began, are now targeting potential customers near outdoor-focused reopening in effect in urban areas. Brands like United Sodas and Revel Scooters are aiming to get within eye-view of potential customers who’ve been quarantined for months.

In the coming weeks, newly-launched soda brand United Sodas will utilize LinkNYC kiosks for its first out-of-home campaign. The company began thinking about OOH in its home market of New York City last fall, co-founder and CEO Marisa Zupan told Modern Retail. But the original plan to hit mostly subway cars and stations was modified at launch. Now, two months after the drinks first hit the market, the campaign has been “shifted to above ground kiosks” in New York City — nearby to where people are currently congregating, she said. 

The fundamentals of the United Sodas’ strategy are still the same. Despite the changing commute patterns, “there still needs to be a blend of traditional placements in large cities,” Zupan said. The vendors themselves, LinkNYC and its New York operator Intersection, were open to brands having new approaches or changes to the ways they’d typically go about using them, she said. For example, hand-picking units in specific public spaces, like parks and squares. Intersection will also provide weekly reports to show data variations of post versus pre-coronavirus impressions, to help with ongoing campaign adjustments and conversion optimization.

United Sodas’ Link debut is set for late July, and will revolve around pedestrian-heavy areas and long walking corridors, such as Broadway and Madison Ave., said Zupan. “You can follow someone from Times Square all the way to Brooklyn,” she said of the planned kiosks.

That’s a change from the strategy a month ago, when the brand would have aimed for more grocery stores. This is because new consumer patterns are emerging. Even so-called deserted neighborhoods, like Times Square, are inching back up in foot traffic. The area’s June foot traffic jumped to an average of 45,000 daily visitors, compared with 33,000 in April, during the virus’ peak in the region.

These numbers line up with the city’s current reopening phase, in which most residents are working and playing in their own neighborhoods. Much of the indoor leisure scene, including restaurants, bars and theaters, are still prohibited from operating by Governor Cuomo.

As the launch got closer and the city’s reopening mandate moved to allowing outdoor dining, there was a slight shift. “We thought, ‘how can we play on that?’” said Brian Rappaport, CEO of Quan, an OOH agency specializing in DTC brands that helped facilitate the campaign. Its past clients include DTC players like Away and Casper. The company is also currently working on a similar strategy with Revel Scooters.

This is also a great time to try out an OOH marketing strategy given the discounts and deals, noted Rappaport, who declined to disclose the campaign’s budget.“Nobody should be paying 100% of what they did pre-pandemic,” he said.

The initial trial, set to run through the first week of September, is also a way to get sense of the new commutes and conversion rates. This is because, despite a pickup in sidewalk activity, it’s still unclear how many office-related businesses have had workers return to their desks. “We’ll have to see how they perform before shifting dollars between units,” Zupan said. 

For United Sodas, a young brand still working to reach its local demographic, the flexibility of the digital signage was equally important, explained Zupan. Not only are the new creatives aimed at specific neighborhoods and demographics the way subway ads would have been, “they also allow us to modify them as many times as possible” based on evolving daily factors, she said. Using the data-driven backend, changes can be made based on hourly weather, news cycle and even nearby restaurants, she said. For example, a rainy forecast would potentially call for certain United Sodas flavors.

For Quan, DTC clients’ strategy to go “above ground” is picking up; the agency is seeing a pickup in business from both existing and new brands interested in taking advantage of the advertising opportunity right now. For some of Quan’s DTC clients who halted their OOH spend when Covid-19 hit, “they want to jump back in,” Rappaport said.