Tags containing: "digital advertising revenue"

Despite Covid-19 setback, PwC forecasts modest media and entertainment growth

September 15, 2020 Rande Price, Research VP – DCN

Consumer behavior was transformed by the shelter in place lifestyle during the pandemic. Stay at home policies not only impacted the way we work and shop but also how we consume media. We’ve seen significant changes in consumer media habits as well as those of media infrastructure. Closures of movie theaters and shutting down film and television productions altered our entertainment sources.

To access the effects of the coronavirus and adjust the entertainment and media (E&M) forecasts, PwC delayed the release of its annual Global Entertainment & Media Outlook. The new assessment comes with the realization that for consumers, E&M is centered in the home. It’s now more remote, more virtual and more streamed. PwC estimates that in 2020 the E&M world declines by 5.6% or $120 billion in absolute terms compared to 2019. However, they project the sector grows by 6.4% in 2021. Further, overall revenue grows 2.8% at a compound annual growth rate from 2019 to 2024.

Additional findings:

Overall, advertising is expected to recover slowly through 2024. Digital advertising is the important vehicle with mobile advertising revenue as its growth story. Mobile ad revenue is expected to grow at 88.4% with a 60% share of revenue.

Cord-cutting continues to rise especially in North America and new over-the-top (OTT) services challenge the global dominance of streaming giants. pWC forecasts the OTT market to almost double in size from $46.4 billion in 2019 to $86.8 billion in 2024.
Subscription video-on-demand (SVOD) revenue is expected to exceed box office revenue this year. It’s projected to rise more than twice the size of box office revenue by 2024. Related, global cinema revenues are expected to drop plunge 66% in 2020 and is unlikely to regain momentum.

Newspaper revenue declines continue through 2024 declining advertising revenue combined with high paper production and distribution costs.
Consumer magazine competition continues to increase from major tech players, magazine aggregators and digital publishers.

Covid-19 fast-tracked many new business strategies for media companies. This shift amplifies the need for media businesses to closely follow changes in consumer media behavior. The ability to pivot operations to meet consumer needs helps generate and diversity revenue opportunities.

Industry-Research | Revenue

Advertising’s return to “normal” following Covid-19

June 24, 2020 Todd Krizelman, CEO – MediaRadar

Nearly every industry has faced unprecedented changes and challenges due to Covid-19. As a result of shifts in the economy, sectors have had to adjust their advertising spend. Some have fared better than others throughout the past few months. But with the U.S. entering the path to reopening and businesses slowly beginning to return to “normal,” more changes are upon us. Advertising is now making its own comeback.

Here at MediaRadar we took a deep dive into how the ad industry has fared throughout the pandemic and the sectors that are beginning to see a rebound.

How the advertising industry has fared

In January and February 2020, ad spend was up 8% YoY. When Covid-19 began impacting the U.S., ad spending plummeted. According to our data, the trough occurred the week of March 22, when spend was down -36% YoY.

Now, every state in the U.S. has started reopening business in some capacity and the ad dollars are beginning to return to the market. While some industries will be slower to return to “normal” than others, many who saw steep declines early in the pandemic are beginning to advertise more regularly again.

Industries making a rebound

Automotive

Amid the country’s reopening, spend from the auto industry is accelerating. Ad spend during the week of May 24 was nearly double where it was just three weeks earlier. Brands reviving their spend in recent weeks include Toyota, GM, Nissan, Subaru, and others.

Total car sales also recovered somewhat in May. The annualized sales rate, although still down nearly one-third YoY, jumped 42% MoM in May. China, which is further along in recovery than the U.S., saw car sales increase 12% YoY in May. This marks the second consecutive month of YoY growth. In the U.S., many consumers who do not own cars are now considering buying one to avoid public transit and ride-sharing, and to enable road trips and travel closer to home.

Domestic & regional tourism

Domestic tourism is beginning to pick up, as the pandemic eases across the U.S. The week of May 24 saw more than 3x the advertising spend than just one month prior, with more than 350 active local tourism bureaus buying.

YoY, spend during the week of May 24 still remains down 63%. However, this is a stark improvement over April, where spend was down 89% YoY.

There are other positive signs for the industry. Airbnb, for example, is experiencing a surge in interest, with more U.S. bookings between May 17 and June 3 than during the same period last year, much of which is being driven by relatively nearby trips. American Airlines is also boosting its domestic flight schedule as they see increased domestic demand, specifically to places like Florida or mountains out west. According to The Economist, Google search data reveals that travelers are much more interested in domestic travel for the remainder of 2020, favoring smaller attractions over large tourist destinations. All of this is likely to lead to a further increase in domestic tourism advertising.

Hair care

From March 8 through May 16, hair care ad spend was down 31% YoY. However, the last two weeks have both been up YoY, the first time since the beginning of March.

In April, Unilever estimated that people were using personal care products eleven fewer times per week due to shelter-in-place orders. Unilever’s CFO specifically called out shampoo as an example of a product consumers are using less as they stay indoors. But with people beginning to go outside again, hair care ad spending has now picked back up to levels consistent with last year.

Real estate

Real estate advertising was hit hard amid Covid-19. It was down 55% in April when compared to the January through March average. But ad spend levels in mid-May were 34% higher than where they were in early April, showing an early sign of recovery.

States that reopened earlier, like Texas and Florida, have seen real estate ad dollars return more quickly. The average weekly spend in April ($6.7M) was down by more than half, 55%, when compared to the average weekly spend in January – March ($14.9M).

New home sales also increased 21% YoY in May, according to a survey of 300 U.S. construction companies. And mortgage applications for the week of May 24 were up 17% YoY, their seventh consecutive week of increases, according to the Mortgage Bankers Association. Experts attribute the rise to pent-up demand, as well as a desire to move into a new home before a possible second wave in the fall.

Health & fitness services

The reopening of gyms around the country has resulted in a strong bounceback for health and fitness brand advertising. Ad spend during the last week of May was at its highest point in 11 weeks, bringing the last three weeks up to YoY levels.

Normally in the summer these brands typically begin to taper off their ad spending. But this year, they are rampi n g up to get customers back. Many states such as Minnesota, Florida, California, Pennsylvania, and others have begun reopening gyms, However, visitors will find things different when they return – with spaced out equipment for social distancing, caps on capacity, stricter hygiene rules, and more.

The road to recovery

While a full recovery is still far off, we can clearly see some segments beginning to reemerge and put ad dollars back into the market. It will take more time, But data that shows early signs of recovery is certainly a great start. It helps show that industries feel confident and optimistic about the road ahead.

Industry-Research

The impact of Covid-19 on ad investment: “We’ll feel this for a generation”

June 3, 2020 Michelle Manafy, Editorial Director – DCN

A new report from WARC predicts that the value of global advertising trade will decline by 8.1% – or $49.6bn – this year, to a total of $562.9bn. This comes only months after a pre-outbreak forecast of 7.1% growth, which it made in late January. As such, the absolute downgrade equates to $96.4bn. WARC’s latest Global Ad Trends report focuses on the impact of COVID-19 on global ad investment. It summarizes the latest ad spend projections by market, media and product vertical from WARC Data, and provides insights and commentary from industry experts.

Ad budgets have seen the sharpest cuts in 8 years.

Key findings

Key findings from the report, Global Ad Trends —Adspend 2020/21 — COVID-19 and ad investment:

1. This year’s downturn will be softer than in 2009, when the ad market fell by 12.7% ($60.5bn). This is for a number of reasons, including the U.S. presidential elections, stronger-than expected first quarter results, and a more established online sector – particularly within e-commerce.

2. Almost all product sectors will record a decline in ad investment this year. The most severe falls will be recorded among travel & tourism (-31.2%), leisure & entertainment (-28.7%), financial services (-18.2%), retail (-15.2%) and automotive (-11.4%).

3. Traditional media will fare far worse than online. Investment is set to fall by 16.3% – $51.4bn – this year, with declines recorded across cinema (-31.6%), OOH (-21.7%), print (-20.1%), radio (-16.2%) and TV (-13.8%).

4. Internet advertising is set to record mild growth this year (+0.6%) at a global level. However, a number of key markets will witness a fall. Social media (+9.8%), online video (+5.0%) and search (+0.9%) are all still expected to grow, though online classified – particularly recruitment – is set to fall (-10.3%).

5. A recovery is forecast for 2021, at +4.9%. This will still leave the value of global ad trade $21.9bn lower than its 2019 peak. Ad investment would need to rise 3.7% in 2022 to fully complete the recovery

WARC notes that any brands are currently assessing what the world will look like as lockdowns are lifted and consumers tentatively return to a “new normal.” They predict that, while advertising will recover from this shock (with global growth of 4.9% next year), it is certain that we will feel the economic impact of Covid-19 on the global economy for a generation.

Advertising | Industry-Research | Revenue

Q2 ad rates are at a historic low: This is how publishers should address it

April 15, 2020 Tyler Bishop, CMO – Ezoic

The coronavirus pandemic has caused ad rates to fall to a historic low. On April 3rd, an index score of 37 was recorded, as compared with an index score of 56 at the same time the previous year. The index looks at ad rates publishers are being paid for their ad inventory across the web, normalizes them, and then models the data on a scale from 1 to 100.

The industry is experiencing the lowest ad rates seen since Thursday, May 12, 2016. That was the last time the index was this low.

What we’ve seen throughout the last few years is ad rates having a linear improvement pretty much across the board. Ad rates go up and then drop down at the first of the month. Additionally, this oscillating pattern of ad rates occurs month-to-month, quarterly, and annually. This is due to the way marketers run their advertising budgets.

That’s why the rises and drops in ad rates are fairly predictable. They drop at the beginning of every quarter. Then they spike heavily on Black Friday, which is usually when the records are set. Q4 is consistently one of the highest-earning time for publishers across most verticals.

Looking at 2019 vs 2020 for ad rates, 2020 is a bit lower to begin with. In the second week of March, when the crisis started expanding into North America, advertisers adjusted their budgets and ad rates have continued to decline.

The impact on programmatic bidding

The industry as a whole is experiencing many advertisers having to hunker down, with whole industries asking for government bailouts. And this is resulting in the lower overall competition.

*Example:* Around March 13, a major hotel brand decreased its advertising spend on their ad campaign.

Yes, advertisers spending less. But this downtrend in ad rates is also impacting the competitiveness of the programmatic auctions on publishers’ sites.

These auctions are based on historical bidding data. This means the decrease in ad rates the industry is experiencing might get worse as more advertisers drop out of the mix and competition gets lower and lower.

This decline is compounded by platforms like Google Ad Manager because they will continue to help advertisers understand where they can bid lower and buy ad inventory more cheaply.

Supply and demand are critical factors

For many publishers, supply is at an all-time high. This is particularly true for news publishers that are writing about the coronavirus. In fact, they’re providing more and more ad impressions than they ever provided before. Additionally, other publishers are experiencing more traffic or trying to create more content than they have in the past due to the demands of consumers with more free time or to try to offset decreases in revenue.

This increase in supply is diluting demand even further. There is more available ad space with fewer advertisers bidding. The more ad space available, the lower advertisers will bid. This effect is compounding the negative effect falling ad rates have on publisher revenues.

Ideally what a publisher wants is a limited number of ad space with many advertisers competing for that space. What we are witnessing in the case of the coronavirus pandemic is the exact opposite.

One thing publishers need to be very cautious about right now is increasing their ad impressions (or the ads on the page) to better monetize their sites. By not testing different sizes and locations right now to provide the best competition, publishers are missing out on a strategy that can really turn the tables for them financially during these uncertain times.

Websites that are leaving the same number of ads, or increasing the number of ads, without testing sizes and locations will likely be the ones most negatively affected as we move through Q2 into Q3.

What will happen next?

As the pandemic gets worse, advertisers will try to stockpile as much cash as possible. Once people go back to work, Q2 is likely to start to improve. Traditionally, the end of Q2 has performed pretty well. So if advertisers are confident that things are going to start to improve, the ad spend will increase, and demand will start to go up.

Until then, publishers really need to be focusing on optimizing the number of ads on the page, their sizes, and locations. Ultimately, this is the only leverage they have to restrict the supply as the demand continues to diminish. This is especially true of sites that are in travel or other niches whose advertisers are most drastically impacted.

We look forward to economic and advertising recovery in the future. However, it is critical that publishers optimize their revenue in the meantime. And to do so, they need to think very carefully about creating the right ad placements and optimal number of impressions.

Advertising | Featured Post | Innovation | Revenue

Quick reflexes and hard news: The media industry’s new reality

March 26, 2020 Chris M. Sutcliffe – Independent Media Reporter

The onset of the coronavirus pandemic has galvanized the media industry into action. Even as audience numbers have “skyrocketed,” the advertising revenue that sustains much of the media ecosystem has taken a sharp hit. And this, even as a new batch of advertisers seek to reach a newly minted niche of stay-at-homers, big spenders in retail and luxury markets are suspending buying activity. According to chief executive of G/O Media Jim Spanfeller, the situation feels similar to that following 9/11.

For some publications that are dependent on local advertising – those in local and regional media and freesheets/ alt weeklies – the situation is acute. There have already been some high-profile newspaper closures. Some publishers are already making cuts, and taking drastic measures to keep costs down, while continuing to pump out the news people need.

Fiscal responsibility

Even some incredibly well-known media brands are being forced to reappraise models that have seemed sustainable in the past, with the Evening Standard freesheet in London cutting its circulation to manage costs as advertisers pull out. Its chief executive Mike Soutar noted that “in the context of currently lower advertising volumes, it makes good economic sense.”

Unfortunately, overzealous, often blunt, keyword blocking, and avoidance have long been an issue around news content, particularly as automation and advertising exchanges delivering “blind programmatic” have taken off. Of late, the situation has only grown more dire. In response, many have called for brands, agencies, ad verification firms, and other companies in the digital advertising supply chain not to block the news.

However, for every publication like Playboy – which is cancelling all print issues for 2020 – there are other media companies launching endeavors in the light of what seems likely to be “the new normal.” Given the uncertainty about whether the advertisers that have decamped will return, coronavirus has effectively pressed fast-forward on trends that have been ongoing for years, forcing publications to adapt quickly rather than relying on a slow tail of dwindling print advertising, news avoidance, and limited growth in subscription revenue.

Rapid digitalization

Jokes about Zoom being responsible for the outbreak aside, the pandemic has demonstrated the extent to which media businesses with events-based portfolios are exposed to mass shutdowns. Even with government support, some events-oriented media businesses are looking at furloughing employees, making redundancies, or shuttering entirely.

It’s been gratifying, then, to watch the speed which publishers large and small have transitioned to digital-only events. UK-based news start-up Tortoise, for instance, used its ‘ThinkIn’s (intimate events for members) as one of its key selling points in the first few months of its existence. Within a week of the (inadequate) UK government advice, it had transitioned to hosting Digital ThinkIns instead.

By doing so it is continuing to provide for its core audience, delivering on what its cofounder Katie Vanneck-Smith has described as a club-like mentality model of membership: “I think people will pay for what they value, and really brilliant businesses and brands have always built their businesses based on consumer insight, understanding what customers want, and then super-serving it.

“But I think, particularly in my industry, if you’re a newspaper – we’ve always had an arms-length relationship with the consumer, and that physical manifestation of the relationship we had actually became in many ways a cultural manifestation. And I think we lost that relationship. We forgot that ultimately we’re there at the service of our reader.”

Meanwhile, UK magazine The Big Issue is primarily there at the service of the seller. The magazine’s content is excellent. However, it is better known for the revenue-share model it operates with its street vendors, in order to lift them out of poverty. Noting that it – and therefore the vendors – will be hit hardest by a lack of footfall in cities, it has prioritized its digital subscriptions. While it is yet unclear about how the revenue share will work in the meantime, it has brought attention to the existence of the digital subscription offer at a time when readers are becoming habituated to paying in that way.

In the states, Gannett, which publishes about 100 local papers and 1,000 local weeklies, is trying its hand at supporting the local businesses that, in turn, are the lifeblood of its advertising. The media company launched a new website, Support Local, which encourages users to support local businesses in their community by buying gift cards for use at a later time.

Subscription trials

There is a separate debate to be had about whether news publishers should make their coronavirus coverage free to access. Many already have. What is undeniable, however, is that a raft of media companies have loosened or dropped their paywalls for the foreseeable future.

While many are motivated by a mandate to keep the public informed during this pandemic, some are doing so because event cancellations mean that they effectively have no product to sell. As sporting events are postponed or outright deleted from schedules, broadcasters with tentpole sports channels have transitioned to retention strategies. In the US, for instance, both the NFL and the NBA have offered free access to their sporting archives in lieu of new content. What this means for The Athletic, which has recently been on a hiring spree, is less clear.

Some brands have spotted the opportunity of opening the vaults to fitness apps and services. Popsugar bumped up the launch of its fitness service Active. While there are still plans to monetize it further down the line, for now the service will remain free in order to act as a lightning rod for audiences seeking at-home fitness classes. Digiday’s Kayleigh Barber reports that Active’s general manager Angelica Marden said: “We’re happy to introduce the people to this platform in this weird time and hope that they will come back to us.”

By doing so, the hope of many is that a newly captive audience will develop a habit. Whether that’s because of appreciation for a service when they needed it, or because they got a taste of the quality that exists behind the paywall, it doesn’t really matter. Once something approaching normality has resumed, the hope is that those habits linger.

Step up

For newspapers the ambition is greater still. Trust in a title is the measure by which audiences choose which outlets to subscribe to. In an age where perhaps only ten international English-language news brands can sustain themselves through subscriptions, this is a golden opportunity for papers to demonstrate their worth.

Even brands that haven’t historically been known for their hard-hitting coverage are stepping up. LadBible, the youth-oriented social publisher best known for its “lads lads lads” school of content curation, was praised by the World Health Organisation for its ‘Cutting Through’ COVID-19 campaign.

For subscription-focused publications, the coronavirus has acted as a Trump Bump or Brexit Bounce in fast-forward (COVID Crunch?), pushing audiences to well-known brands in order to find out the facts about the spread of the pandemic. Bloomberg and The Atlantic have seen spikes in subscriptions. Given that they are among the titles that have dropped the paywall for coronavirus coverage it suggests that audiences are either altruistically supporting titles they believe are fighting the good fight, or that vital news coverage has a halo effect on subscriptions.

The inevitable tide

That said, some of these moves were not entirely unforeseen. Playboy, for instance, was already several steps down the path to repositioning as a “luxury bookazine,” while membership-based journalism projects like Tortoise were already looking to build digital audiences through online events.

Membership schemes were already on the rise. However, coronavirus is providing publishers with a clarion call to which supporters can rally. Even the sports broadcasters were already looking at their stock of past broadcasts in an effort to set themselves apart from competitors.

While there have been a few entirely novel projects – like a mooted magazine about self-isolation – publishers are still playing catch-up with the pandemic, particularly as they scramble to set up remote working and reel from the health impact on their own staff. There will undoubtedly be new business and journalistic opportunities launched over the coming months as the new reality becomes apparent. For now, however the dreadful treadmill of survival is setting an unforgiving pace, and an industry that was already perilously close to the edge is now forced to sprint to keep up.

Advertising | Featured Post | Perspectives | Revenue

We need the news. And the news needs us.

March 19, 2020 Jason Kint, CEO – DCN

“In a pandemic good info saves lives.”

– Dr. Marc Lipsitch, professor of epidemiology at Harvard University

Like much of America, I was introduced to Dr. Lipsitch in the early weeks of our education on COVID-19 when he became a fixture of news coverage. His credentials are certainly impressive. However, it was also significant that Dr. Lipsitch was being presented as an expert by some of the most trusted news brands – from CBS News to The New Yorker, The Atlantic, and CNN.

On a normal day, I probably wouldn’t have been quite so attuned to his CV. (Hey, a Yale->Oxford->Harvard resume isn’t what it used to be!) But this was different. It was late February 2020, a period in which rumors and false information were running rampant across social media and our President was well, being our President, while the actual experts were warning about the seriousness of the pending pandemic. I was growing more and more uncertain and feeling vulnerable. Like many people, I was trying to figure out who I could trust to provide the closest thing to the truth in a rapidly evolving situation. In this case, Dr. Lipsitch earned my trust.

“It is universally recognized that trust can only arise under conditions of uncertainty and vulnerability, i.e., when the trustor encounters risk, and when there exists a state of dependence between the trustor and trustee.”

(Kelton, Fleischmann and Wallace, 2008, Trust in Digital Information, p. 3)

Big picture

Most people have a favorite news source, be it their local news brand, syndicated news outlet, or a national news organization. And really, regardless of our personal preferences, they each have different strengths.

For national and international news brands like The Washington Post, The Wall Street Journal, BBC, and their ilk, consumer trust is anchored by their reliability, consistency, and reputation established over time. This includes taking accountability when they fall short. Even the finest media brands occasionally make mistakes and self-correct as they pursue the truth. (“The truth is hard to find” and “worth it” ad campaigns from The New York Times brilliantly remind us of this.)

In local news, an area hit hard over the past decade, the journalists are part of the same community as their customers. They overwhelmingly share the same impact as their readers and viewers when they report the latest news and work to get to the truth.

For Seattle news reporters covering the ongoing tragedy in Kirkland, the risks are real in a way that is akin to working in a war zone. There is no doubt that the public appreciates the work they are doing, now more than ever. If it weren’t for the need for social distancing, it would definitely be “hug a local journalist day.” We’ll save these hugs for another time and deliver them when we can.

A higher mission

But today, we need much more than hugs. We need this trust to turn into funding for the costly work being done across the news industry. While these reporters are dealing with the same issues as the rest of America – shelter-in-place, vulnerable family members, work-from-home mandates, job and financial insecurity, and personal health risk – they’re not missing a beat in making sure we all stay informed.

At no time in the past century has the news industry been more vulnerable, for both the humans and the news organizations informing the body public. Trust has value. And we need to support the individuals and organizations in which we place our trust.

There is hope, signaled by the impressive growth of trusted brands’ subscription numbers over the past few years. Even in a world ruled by the attention economy, in which low quality and false information proliferates according to algorithms, the public’s willingness to invest in reliable valuable information is growing steadily.

We applaud the choice of so many media organizations to drop their subscription gates during times of crisis when getting trusted information out to as many people as possible takes precedence over the bottom line. The choice to make critical information freely available once again demonstrates how news providers feel compelled to inform the public, full stop.

It is heartening to see signs that subscriptions are coming in, despite publishers lifting these gates. However, publishers have made this move knowing full well that the likelihood of a widespread international recession may force difficult choices for everyone needing to reduce their expenditures in the near future.

Missed opportunity

However, the subscription model is far from the primary revenue source for news organizations. Most digital publishers still heavily rely on advertising support. And right now, there is a great deal of uncertainty in the advertising business. That said, we know that people are turning their attention to news at record rates. And we know that people need to make decisions about how and where they are going to spend their scarce resources of both time and money.

Normally, advertising follows audience attention. So, a surge in interest around a particular subject would lend itself to a nice uptick in advertising placements. News, unfortunately, does not always work this way. Overzealous, often blunt, keyword blocking, and avoidance have long been an issue around news content, particularly as automation and advertising exchanges delivering “blind programmatic” have taken off.

Advertisers are wise to be wary of the company their ads keep and should remain vigilant about the impact of context. However, now is not the time for advertisers to hide from so-called “hard news.” The fact is that news – now and always – is a critical component of consumers’ media diet. And right now, it is literally a lifeline.

The trust “halo”

There is a significant body of research to support how association with high reputation and trusted news experiences creates a “halo effect” for the advertising brands funding it. There is also the inverse, which shows the damage to a brand that can come from association with low-trust environments, like social media newsfeeds. DCN’s subsidiary, TRUSTX, was built entirely on the concept that trust must be married to transparency, simplicity, scale, and automation for real success.

On the local level, advertisers supporting their local news outlet is perfect karma. Local advertisers tap into the trust established by journalists who bring personal interest and community knowledge to important issues. (Contrast this with the “absentee ownership” of tech platforms with little direct experience or accountability to the local communities they serve.) Truly local advertising also helps keep these valuable publications alive and well to support communities and the businesses in them. It is a virtuous circle if ever there was one.

On the national and international level, advertisers that garner the public’s attention in the context of valued, authoritative media will accrue trust in a way that is only possible at moments like these. These opportunities are uniquely offered by news outlets such as the Associated Press, USA Today, NBC News, Vox Media, and the many dozens of other DCN members.

Step up, news matters

I was struck by a statement earlier this week from an executive at one of the “big four” advertising agency holding companies on the planet, in response to advertising technology companies marketing their capabilities to block hard news and coronavirus reports.

“I will say this again. Please, don’t block or harm news sites during this time under the pretext of brand safety. The Coronavirus topic is unavoidable, news impressions are increasing, and responsible brands should be there in respectful and meaningful ways.”

– Joshua Lowcock, Chief Digital Officer at Universal-McCann

I wasn’t being facetious earlier this week when I called on Google, the largest gatekeeper of advertising on the planet, to turn off the ability to block advertising against Coronavirus for the next six months in order to maximize funding of news organizations. Yes, by doing this Google could lose advertising business to their so-called competition. But a monopoly like Google could show the same sort of leadership for which Mr. Lowcock so beautifully advocated. We must support quality independent journalism because, as Dr. Lipsitch stated, “in a pandemic good information saves lives.”

Perspectives | Revenue

Numbers don’t lie. But Google continues to obfuscate

March 8, 2018 Jason Kint, CEO – DCN

People ask me why I think the “duopoly” conversation resonated so profoundly when DCN began to use the term in 2015. I think it’s because publishers had long-sensed something was wrong with the widely proliferated and utterly misleading growth stats of digital advertising. They were ready for someone to call b.s. and start open conversations about it because many weren’t seeing the purported “growth.”

I’ve been told that executives at Google and Facebook dismiss the term duopoly as a marketing gimmick invented by publishers to go after the two companies. They are dead wrong. This discussion didn’t surface in some public relations brainstorming meeting. Sure, it’s useful if you can describe an entire marketplace in one word. But at the end of the day, the duopoly label resulted from simple number crunching, the results of which challenged conventional wisdom on who was actually benefiting from the growth in digital advertising. Perhaps now is a good time to dig deeper and take a closer look at some Google math.

Google’s battle with transparency

A whopping 50% of the US Digital Advertising Market is recorded as a single line in Google’s financials, deftly titled “Google Properties Revenues.” This single line includes advertising on Google Search, YouTube, Gmail, Google Shopping and more and will surpass $100 billion this year – a number larger than the entire US digital advertising market. Let that sink in for a moment and then consider the fact that we hardly know anything else about it.

While fledging and century-old publishers live and die in the millions of revenues, Google doesn’t even specifically disclose revenues for its flagship growth site, YouTube. Their video business, which seeks to compete with broadcast television, is widely estimated to have revenues approaching $10 billion — a number larger than more than half of the companies in the S&P 500. Last week Bloomberg reported that the SEC had taken issue with Google’s lack of transparency but was sent packing after Google made the astounding claim that YouTube revenues aren’t important enough to hit their CEO’s desk. Say what now?

There is also near zero transparency in how this revenue is shared with the ecosystem. In the case of major cable companies, we know very clearly how much they pay each year, measured in the tens of billions, to the programmers who create valued news and entertainment for their services. This is helpful information, and revenue. Transparency is a hallmark of a healthy ecosystem. On the other hand, we have no idea how much Google spends on news and entertainment because they bury this programming expense in multiple places. In terms of YouTube, we’re left to run our own analysis and we only know the members of DCN see less than $100 million of the billions that YouTube is raking in.

Where have all the billions gone?

We also know that Google is using billions in cash to shore up its monopolies. Google invests heavily to secure the default position over any browser that competes with its “free” web browser, Chrome, including Apple Safari and Mozilla Firefox. It subsidizes its lock on a majority of mobile devices through its “free” operating system, Android. We also know that billions go toward populating the long-tail of the web with Google’s AdSense text links. Once again, all of this undisclosed money is lumped together and buried in a few lines of Google’s financials. This leaves everyone in the dark while making it easy for Google to spin its way around those who question it – in Washington and in the press.

Heck, we even learned that Google pays off ad blockers to whitelist its own ads. But once again: We don’t know how much. This is a distasteful situation considering the leadership position Google has chosen in the future of solutions for ad blocking. Google is literally blocking publishers’ ads while paying an undisclosed amount to have its own ads whitelisted. Say what now?

Numbers don’t lie. The simple, irrefutable (and unacceptable) fact is that the digital advertising landscape is more lopsided in favor of two companies than we’ve seen in any previous media market. This is especially striking when you recognize that neither of these companies contributes directly to the creation of the news and entertainment they so richly capitalize upon. They profit solely by directing and mining attention across the valuable assets others create. Please note I haven’t used the term Alphabet once here. To publishers, their layered corporate structure isn’t anything more than Google fighting tooth and nail to avoid disclosures. If Google and Facebook want to be seen as benefactors to the media world — or better yet, become honest, trustworthy partners in it — they’re going to need to provide a level of transparency that they’ve quite clearly avoided.

Perspectives

The Google PR lobbying machine rumbles back

November 20, 2017 Jason Kint, CEO – DCN

We’ve entered the perfect storm.

The press worked itself into a flurry last week about missed projections, mergers, acquisitions, staff reductions, doors closing, and political influence across its own industry. Amidst this activity, there is real momentum and honest discussion of the challenges in building a sustainable 21^st century digital news and entertainment business. And there is opportunity knocking. Newly compiled DCN member research shows early signs of marketer investment moving upstream towards quality content with sequential quarterly revenue growth for DCN members. News and entertainment companies are transforming into truly diversified revenue machines that are less dependent on advertising. More importantly, DCN’s “duopoly” analysis continues to reach wider circles of influence (and understanding) with reporters, think tanks, academics, and lawmakers now asking tough questions of both Google and Facebook.

Therefore, it’s puzzling to see these two companies operating with blinders on as we watch their reactions to inquiries from the press, partners, and lawmakers. It should offend us all that, despite gob- smacking earnings this month, Google is attempting to double-down on its argument that their platforms are merely weather-machines innocently reading data rather than a major source of the media storm itself.

It certainly offends me.

In a speech last week to the Society of Editors’ at The Tamburlaine Hotel in Cambridge, Ronan Harris, Managing Director of Google UK and Ireland, fed decade-old Google arguments into the winds, despite the current media climate. While acknowledging that, “the open internet has turned business models on their heads and raised all kinds of new questions and challenges for us all,” Harris systematically tried to distance Google from any negative affect and control over the demise of news media and its societal consequences. By opening his talk on the uniqueness of the company’s role, Harris makes his Google-eyed perspective clear with the company’s classic “But we’re a search company” retort to any attempt to hold them to the standards to which responsible media companies gladly adhere.

However, this particular PR rhetoric is far from the most egregious that Harris wove into his talk. As the UK’s News Media Association observed, my visceral response to some of Harris’ points—which I first expressed on Twitter—was that he was trying to reshape the escalating duopoly narrative. You have to wonder if he’s being willfully ignorant or overtly resistant to the discussion happening in every corner of our industry.

Harris attempted to refute the simple math that demonstrates how Google and Facebook capture a majority of the growth across western media’s digital advertising by stating he’s “heard lots of people say that Google and Facebook are ‘ruthlessly stealing’ all the advertising revenue that publishers hoped to acquire through online editions. That analysis just isn’t right.” He went on to claim that these analyses conflate search and display while boasting about the amount of traffic Google drives to publisher’s sites “for free.”

Huh. Let’s break that down, shall we?

The duopoly’s power defined

This notion of an internet advertising duopoly is not based solely on Google and Facebook’s shared and growing dominance of digital advertising. Rather, it considers that the two share a core business model that leverages “free services” that collect inordinate amounts of consumer data in order to micro-target advertising at a massive scale. Importantly, Google and Facebook suggest that because their services are free, they can’t commit consumer harm. They do this by using the Chicago School of antitrust theory out of the 70s and 80s, which is now being questioned as competition law experts attempt to consider these issues in the context of our 21^st century world. This is already something the European Commission is addressing in its fines of Google. And just last week, multiple Attorney Generals joined in Europe’s concerns. Regardless of your view on antitrust law, the point is that Google and Facebook have the same business model and their dominance begets more dominance.

Driving traffic or driven by content

Another shared trait between the duopolists is that much of the information that they are able to collect about consumers is based upon the content that they discover on these services. As any premium publisher can attest, you learn a lot from audiences by what they choose to read, watch, and share.

But that’s something Google knows all too well. This is a company that owns 96% of the mobile search market and 67% of search overall. Harris crowed about driving “more than 10 billion clicks a month to publisher websites — for free — from Google Search and Google News.” But the reality is that search—as a concept, much less as Google’s foundational business—would not exist without publisher content.

Revenue share

Another argument that Google’s Harris made was that publishers only share a minority of the revenue from their own sites with Google. This is an argument from a decade ago that fails to recognize Google’s dominant lock-in for search and data collection across the web, which is what they are actually monetizing—in a massive way. Yes, most publishers keep a majority of the ad revenue on their own sites—after they’ve paid out the significant costs for programmatic/automated delivery. But Google also has trackers (data collectors) on more than 750,000 of top 1 million sites. And, not even the biggest publisher has leverage to negotiate with Google to limit their data collection and use practices. This data collection allows Google to target audiences using the cheapest inventory and cheapest suppliers possible. (And for now, let’s not even go into the dank, dark places ads end up with this particular approach.)

Harris also claims that analysis of Google’s dominance in digital advertising “conflates two markets: search and display.” The majority of Google’s revenue comes from showing highly relevant ads when you search for a particular term.” In fact, in this way, search and display are not actually that different. Both target direct marketing ads based on data collection. This is what most of digital advertising is transacted on. And as we know, Facebook and Google are empires fueled by data, so this statement is more than disingenuous. It is absurd.

Newsworthy

Harris points to the lack of advertising on “Google News” as a clear sign that Google isn’t trying to compete directly with publisher’s hard-wrought news business. The fact there is a “Google News” vertical is something most people outside of industry don’t even understand. People are searching for and discovering news and information through many Google sites and channels (including YouTube and general search) where Google drives significant revenue—and data. Even though there aren’t traditional ads on Google News pages they are most certainly still monetizing that area of their business.

Revenue mix

Additionally, over the past five years, Google’s own revenue mix has migrated from Google’s network of publishers (where they have the lowest margins and includes their AdSense text ads and DoubleClick ads which serve across the web) to Google’s owned and operated businesses (where they have highest margins and includes sites such as Gmail, YouTube and Search). Google controls this effect.

Blocked

And here’s part of Google’s business model that Harris didn’t cover: ad blocking. The fact is that many EU pubs lose more than 30% of their site advertisements to ad blocking software which significantly impacts publisher revenues and the ability to pay for newsroom jobs. Google’s recent decision to include an ad blocker in its own browser is not the biggest issue here. Google has admitted to subsidizing major ad blockers in order to service the “whitelisting” of Google’s own ads. Let’s be clear: Google is paying companies that develop ad blocking software. Meanwhile, Google is also the dominant company in discovery, distribution, and delivery of ad blocking software. While the rest of the industry is bludgeoned by ad blockers, Google’s payments protect what is likely billions of its own revenues on its highest margin products from the effects of ad blocking yet they refuse to disclose the details of these deals.

That speaks volumes about the company’s priorities and tactics. Is this the behavior of a company that genuinely cares about the future of the media business? Harris claims that Google wants “to act thoughtfully and responsibly in our relationship” with the media industry. I can unequivocally state that transparency here would go a long way.

What’s next

I don’t disagree with every point that Harris made. As he said, “as more and more people interact with news in different ways, we need to take advantage of new digital tools and capabilities to develop new experiences and sustainable business models.” Believe me, digital media executives are thinking about this every single day.

And while Harris claims that we’re misunderstanding who they are and what they do, I think we actually have a pretty good idea how they are making money and where publisher content fits into the mix. We get it, Google: You hire really smart people to create your products and your PR pitches. But don’t think that means we’ve lost sight of the value of premium content and the fact that we should be able to sufficiently monetize it in order to continue to support the journalism Google purports such esteem for and derives so much revenue from.

It’s been a full year since DCN sent a letter to Google and Facebook asking for moonshots to better serve the news industry. Facebook spent a full year dodging tough questions while at times demonstrating signs of early self-awareness of the problem. Google, on the other hand, has acted like a monopoly with its much more advanced lobbying machine. The fact Google is turning up its spin in the UK and putting Facebook out front to take the shrapnel in Washington should concern us all. It certainly concerns me.

Industry-Research

Strategies used by digital-native news publishers to drive user engagement

August 23, 2017 Rande Price, Research VP – DCN

Getting ones’ news digitally is not just for millennials—it’s the norm these days. In fact, nine in 10 U.S adults get their news digitally either via desktop or mobile. We’ve also seen strong digital native brands, those originally founded on the web like Vox Media or Huffington Post, emerge as leaders in the news marketplace. The new Pew Research Center research looks at 36 digital native news outlets that averaged at least 10 million monthly unique visitors in Q4 2016. The analysis provides an excellent snapshot of the digital native news industry’s audience strategies to increase outreach and engagement.

Usage and engagement

Overall, digital native news outlets are performing well. Monthly unique visitors for the 36 sites for the digital native news outlets increased 12% in 4Q 2016. Users also spent a healthy 2.4 minutes per average visit.

The use of digital native news apps is an important part of audience strategies. Close to two-thirds (61%) of the highest traffic digital-native news outlets have apps available for either iOS or Android. Mobile compatibility is an important part of their overall strategy and user engagement. In fact, 42% of these new outlets have apps supporting both iOS and Android.

User outreach is key to building and sustaining engagement. Almost all digital native publishers (97%) offer newsletters. Three-quarters produce podcasts and 61% have comment sections on their articles to promote consumer feedback. Digital news outlets also rely on social media to engage their users: All of those covered have Facebook pages and Twitter accounts. Almost all have Instagram accounts (92%) and are on YouTube (97%). Less than 25% have a Snapchat channel or account.

Revenue growth

Digital advertising continues to grow as a proportion of total advertising revenue, a trend that Pew points out is driven in large part by growth in advertising on mobile devices. Interestingly, based on a Pew Research Center survey conducted earlier this year, more than eight-in-ten (85%) U.S. adults now get news on a mobile device compared to 72% just a year ago.

The report cites eMarketer estimates that digital advertising grew to $72 billion in 2016. Mobile advertising revenues accounted for 65% or $47 billion of the digital ad sales revenue. Desktop advertising revenue on the other hand continue to decline, now at 35% of total ad revenue. And, as ever, the report emphasizes the dominance of Facebook and Google in both banner and mobile display ad revenue.

Building a strong native digital news brands includes a platform native approach aligning publisher, platform and consumer strategies. Digital native publishers should experiment to find their unique voice and consumer connection. Importantly, the strength of a native digital news brand is deeply rooted in an engaged reader relationship.

Advertising | Industry-Research | Revenue

Q3 ranks highest quarter ever for digital advertising, but who’s making money?

January 4, 2017 DCN

Advertisers spent a total of $17.5 billion dollars in digital media in 3Q 2016, a 20% increase compared to same time-period last year and a 4.3% increase over prior quarter. This is the highest third quarter for digital advertising spending on record according to the latest IAB Internet Advertising Revenue Report.

Almost half of all digital ad buys (47%) were on mobile platforms with spending on desktop experiencing a 12% as compared to the same time last year.

But the real question is which media players are capturing these digital ad dollars? According to Brian Wieser, a Wall Street analyst specializing in AdTech for Pivotal Research, Facebook and Google received more than 75% of this revenue. Based upon his analysis, Digital Content Next CEO Jason Kint points out that while Facebook and Google registered strong quarterly profits, when these two players are excluded from digital ad revenue growth, digital media spending averaged a mere 1% increase in Q3 2016. So while digital advertising revenue growth is exciting, the overwhelming dominance of only two players certainly dampens any enthusiasm around the finding for the majority of industry players.

Perspectives

Media climate change is real. Are you ready?

December 8, 2016 Jason Kint, CEO – DCN

Many of our member companies have stepped into the industry’s latest fray around fake news and its potential impact. Our member companies are not immune. They have a lot at stake because in a world where false stories often can spread faster than the truth, trust matters more than ever. From The Weather Company’s response to Breitbart on the veracity of climate change to NPR’s call for healthy reader skepticism and Vox’s analysis of “Pizzagate,” reputable media outlets are eager to get to the root of the problem.

Our members have also called upon the technology enablers that make it so easy to share information to step up and help ensure our brands can serve as proxies for credibility and reputation to guard against further pollution of the web. Because we all realize that it is way too easy to retweet or to re-share news without vetting it ourselves.

Without a doubt, fact checking and fake news are a couple of the topics that dominated the media mindset in the final months of 2016. But as we head into the New Year—and a drastically different political landscape—it is a good time to take a clear-eyed look at what lies ahead.

So, here’s my “forecast” for DCN’s premium publishers in 2017:

1. Duopoly Powers (DCN Outlook: Cloudy start with clear skies ahead)

Unfortunately, the industry was seduced into seeing Google and Facebook as friends when the truth is they are better described, as they often are now, as “frenemies.” We must face up to the fact that two public companies operating effective monopolies in their carved-out lanes (search and social media, respectively) will never be “friends” with the serfs working their land.

The duopoly powers have three things in common: 1) they control much of the data collection across the web and app world; 2) they own the technologies to deliver and target ads; and 3) they often control how or if they’re even measured. So no one should be surprised that they also control 100% of the growth in the U.S. digital advertising industry. This is real. The press is talking about it. And regulators are asking about it.

However, one thing is certain: Monopolies eventually draw scrutiny which can open up competition. And a competitive distribution environment almost always leads to more opportunity and value for content companies. So, the ultimate question to be asked is how valuable would these two companies be without all the information, entertainment and news brands that populate them. I expect these discussions to continue into 2017. I also expect the New Year to bring warm hugs from Facebook and Google. If not, they really have let their egos and quarterly earnings usurp common sense.

2. Net neutrality (DCN Outlook: Stormy)

ISPs welcome Trump their savior. The consolidated large media distribution companies fought incredibly hard for many years to support “net neutrality” but avoid any legitimate regulation to enforce it. They ultimately failed in 2014 because, simply put, the rules make sense: Protect the 1^st amendment and emerging players by allowing content companies and consumers to unite without gatekeepers choking the access points to the world wide web.

Well something funny happened after the fight was thought to be mostly over: Republicans swept Washington and are now in position to roll back regulations. It’s not a question of when but how. The companies best equipped to fight this off, Google and Facebook (despite opposition from open internet advocates) are likely to stay on the sidelines as they have deep fears of the privacy rules that were also put in place. If net neutrality is overturned, the only certain losers will be publishers and their consumers. As Barry Diller said at Ignition: “It would be wildly criminal” to lose net neutrality.

If net neutrality is indeed neutered, expect more M&A activity as content companies marry up with the pipes in the blueprint of AT&T and Time Warner. The content company can then combine the data of its friendly distributor with its own media and advertising inventory. Unfortunately, there can only be so many suitors and even if mergers can get around the obvious consumer concerns, it still doesn’t get around the scale issue. ISPs see all of the data for only the percentage of market they control. Google and Facebook have the tremendous advantage of seeing nearly everything for everyone.

3. Advertising transparency will grow (DCN Outlook: Sunny)

In 2016, the marketers (ANA) released their landmark investigation on transparency practices. The agencies (4As) released their own transparency rules. Publishers mostly watched the tussle with the underlying sentiment that the more transparency from start to finish, the better the digital advertising ecosystem will work in providing value to brand advertisers. Simply put, marketers want to run their advertising in trusted environments that enhance their brands and messaging.

As comScore research showed, DCN’s members offer precisely these environments. Too often the complexity and opacity of the current programmatic digital advertising environment pushes quality marketing messages into invalid and often fraudulent impressions but also into inappropriate placements that hurt their brands rather than provide value. This discussion is far from over. Audits are growing, agencies are making waves and I expect more information to surface. The Department of Justice’s subpoena earlier this week only confirms it.

4. Golden Age of Journalism (DCN Outlook: Windy)

In 2013, Henry Blodget, Editor in Chief of Business Insider, famously wrote we were entering a “golden age of journalism.” Repeat after me “golden age.” His arguments were that the world was more informed, every journalist on earth had more distribution opportunities to reach consumers directly across devices and platforms, there is more talent than ever coming into the field, and the peril of newspapers and magazines were greatly exaggerated. When I get a minute, I want to ask Henry if he still believes this, particularly the last point.

Here is what I do know: Running uphill makes the heart and other muscles stronger. The pressures on media properties whether from CFOs, shareholders or from the President-elect will result in stronger brands. This is what motivates them. At the core of the matter, the public (particularly the next generation) wants an independent and strong press. The Constitution protects it. The well-documented acceleration of New York Times digital subscription business is a direct outcome of a unified vision for the company and a fight to double-down on its subscribers. So yes, it’s still possible that we are in a golden age. (And Dean Baquet, EIC of NYT agrees!)

While we may not be able to control the weather, our ability to predict it accurately (or not) can greatly affect its impact. Taking a clear, informed view and building our strategies accordingly will allow us to be prepared for anything from the extreme heat of consumer mistrust to the mudslides resulting from a torrent of bad actors.

As witnessed by The New York Times’ post-election subscriber surge; as seen through Dow Jones CEO Will Lewis’ belief that the furor around fake news will prompt Google and Facebook to own up to their role in the media ecosystem; and as expressed by Michael Rosenblum on the Huffington Post—there are also opportunities that come with fair winds and stormy weather alike. And we, as the trusted media brands, need to be ready for whatever is next in this rapidly changing media climate.