Digital Video Grows, But Upsets Duopoly

We like research, especially when it aligns with our own corporate strategy. We invested heavily in digital video several years ago, and have been waiting for the market to catch up. Now, apparently, it has, but in a very lopsided way

Pivotal Research Group LLC is an equity research firm that provides research on media, communications, advertising, Internet, and most other major industry sectors to hedge funds and other major Wall Street players. Its major purpose is to identify industry trends and events. It  recently issued a report based on its analysis of Nielsen’s August 2018 data, showing that over the summer, digital media content consumption continued to grow steadily, with double digit percentage gains in August that mirrored the growth reported earlier in the year.   Consumption of digital content on PCs, tablets and mobile handsets  grew 15% to 34 billion person-hours.

This should mean marketers are happy, but actually they don’t know what to make of the rapid changes in the industry. We went back to the source of the research, Nielsen.  According to the Nielsen CMO Report,

There has never been a more dynamic and challenging time to be a marketer. Since the advent of the internet, fueled by available high-speed broadband and ignited by the proliferation of smartphones, marketers have more access to consumers than ever before. We are awash in data and should be living in a nirvana of actionable insights. The reality, however, seems disconnected from this promise. Over the last 18 months, some of the largest and most influential advertisers in the world have spoken up about their concerns with digital advertising, calling the supply chain “broken” and pointing to high incidence of fraud and lack of brand safety. Subscription video on demand (“SVOD”) services are decreasing reach of traditional marketing mediums like TV and radio. The launch of GDPR in the European Union and related privacy challenges have added complexity to the collection and management of consumer data. Combine this with changing consumer preferences and zero-based budgeting and it’s clear that the job of the CMO has become a more delicate and dangerous catwalk. At Nielsen, our job is to provide the science behind what’s next. 

Digital ad spend has eclipsed traditional channels and we expect that trend to continue. When forecasting the next 12 months, 82% of respondents expect to increase their digital media spend as a percentage of their total advertising budget. By comparison, only 30% of respondents plan to invest more in traditional media channels in the near term.

Google gets the lion’s share of digital media viewing, because of YouTube. It alone showed 20% gains and accounts for 18% of all digital content consumption. If you took out YouTube from the results, they’d only be 12%. Google’s YouTube, Google and Waze combined to account for 32.8% of digital media consumption, up from 29.4% in August 2017. Google-related properties accounted for 56% of the growth in overall consumption of digital content.

Facebook, as you might suspect, is having problems. Even with the inclusion of Messenger, Instagram and WhatsApp, it was down to 14.3% of all digital consumption in August 2018 from 16.9% in August 2017 and 18.5% in August 2016. Pivotal says while the number of core Facebook users was up 7.2%, the average time per person was down 6.7%. Total company-wide usage decline was 13.0%. And now several Direct to Consumer brands, specifically Glossier, which had used Instagram to reach customers, are building their own platforms.

After Google and Facebook, Verizon properties were the third-largest platform of digital content time spent. Including Yahoo, AOL and Tumblr (but excluding MSN inventory), Verizon had a 3.2% share of digital media content consumption against 3.5% in August 2017. No real growth here. Same with Amazon. Looking at all activity — including Twitch and Audible — it was at a 1.8% share against  2.1% in August 2017. Snap is more difficult to judge, because it grew monthly users by 20%, but time on the site fell 23%

 

So, as we predicted, the duopoly may be running out of steam, but digital video is not.

New York Ad Week Reveals Facebook’s Problems

New York Advertising Week was very revealing, both about the state of the industry in general (existential angst), and about Facebook’s problems in particular. I predict by next year there not only won’t be a duopoly–that’s well on the way because of Oath and Amazon–but will be a considerably more open marketplace.

Facebook has begun selling video ads through a program called In-Stream Reserve. Similar to YouTube’s Google Preferred program, In-Stream Reserve puts a velvet rope around Facebook’s most prized video inventory and sells it as a standalone package. However, what Facebook considers prized programming may not match with advertisers’ expectations, especially among TV ad buyers who are accustomed to buying individual programs on linear TV and may be unfamiliar with Facebook shows like “Fear Pong” and “Truth or Drink,” which along with MaxNoSleeves are also part of In-Stream Reserve.

When Facebook pitched the program as a test earlier this year, it asked advertisers to commit to spend $750,000 over three months. The price tag has since dropped to roughly $250,000 over three months, according to two agency execs with knowledge of the matter. A Facebook spokesperson declined to comment on pricing.

And from Casey Newton’s newsletter, another problem:

“One, my people are mad at Facebook for requesting that they register as political advertisers in order to promote their gay cabaret shows. Eli Rosenberg reports in the Washington Post:
The Washington Post found dozens of advertisements mentioning LGBT themes and words that the company blocked for supposedly being political, according to a public database Facebook keeps.
The rejections, the majority of which Facebook told The Post were in error, underscore the company’s challenges in regulating the massive amount of information flowing through its service, an issue that burst into the fore after the disclosure that Russian-state actors used advertisements on Facebook to sow discord during the 2016 U.S. election. But they also touch on a deeper tension as the company seeks to better regulate political uses of its platform. Though Facebook has taken pains to appear neutral, the censorship of LGBT ads, however inadvertent, points to the company’s difficulty in finding a middle ground in a tense national climate where policy increasingly hinges on fundamental questions about race and identity.
It’s too much to say that these ads were “censored.” Registering as a political advertiser is certainly a hassle; it involves the US Mail. But Facebook didn’t reject the ads so much as it requested more information about the advertiser — which, as the Post notes, the company later admitted that it did in error. Securing the platform means hassling lots of people, some of whom will be hassled unfairly. “
All this serves to convince me that next year will be a better year. And as Will Smith said, “nothing is more valuable than your gut. The metrics are there just to train your gut.” I trust my gut about the state of the ad business all the time, and we’re still here.

Salesforce Study Shows Rising Customer Expectations

This is the year that control of the advertising industry has once and for all passed to the customer. Events from the last year like the launch of more personal digital assistants and the passage of GDPR have altered the industry forever, raising expectations and changing corporate norms. Back in the “Mad Men” era, it was common to tell consumers what they wanted. From now on, consumers are going to tell US. Consumers know we have their data, and now they’re demanding something in return — a more individualized buying experience.

The big elephants in the advertising room are artificial intelligence and the changing expectations of the connected consumer. Salesforce’s 2018 State of the Customer Experience points to exponentially rising customer expectations.

Tethered to their smartphones and accustomed to nonstop innovation, today’s consumers and business buyers are more informed and less loyal than their predecessors. In this era of exponentially disruptive technological change, often referred to as the Fourth Industrial Revolution, products and services that are cutting-edge one day are outdated the next. In this context, the experience a company offers is increasingly its differentiator. But the scope of customer experience is changing, too. To win hearts and wallets, companies must not only deliver amazing marketing, sales, ecommerce, and service interactions, but also prove that they have the customers’ best interests in mind.”

In other words, you have no room to let customers down. And you have to continually show them they can trust you or they won’t buy from you.95% of consumers say they only buy from companies they trust. This is going to be a big challenge for, say, the automotive industry, whose  new car dealership model is going to have to change from the old haggling with the finance director experience. Horsepower and beauty are no longer the selling points they once were.  Instead, sandwiches in the waiting room while your car is being serviced and a salesperson who will likely deliver a car directly to you like Tesla and Carvana do will be the norm.

And they want companies to know who they are as individuals. It’s almost as if customers were saying, “look I know you have my data, so why don’t you use it to engage with me as an individual rather than as a demographic segment.” 86% of customers are more likely to trust companies with their information if the company explains how that information is used to make a better customer experience.

Here’s something that surprised us: customers are no longer afraid of new technologies, Instead, 56% of them want to buy from the most innovative companies.

Even in B2B sales, buyers would like an Amazon-like experience. In fact, B2B sales are increasingly becoming “consumerized.”  However, only 27% of business buyers say companies generally excel at meeting their standards for an overall experience, signaling ample room for improvement.  Business to business selling will have to change.

 

 

Criteria for Acceptable Mobile Ads Released

Nothing is black and white. While it is true that 25% of users block online advertising, surveys conducted by Eyeo, the makers of Ad Block Plus, have revealed that there are some ads even users of ad blockers don’t mind. That led to Eyeo setting up a “white list” of companies that agreed to run only the acceptable formats. While this action was dismissed by the most vocal anti-advertising people as “pay to play,” time has passed, the industry has moved on, people are beginning to realize how much it would cost to subscribe to everything they wanted to consume, and an uneasy peace reigns as the number of new people installing ad blockers dwindles.

To make its peace with the industry, Eyeo also formed an Acceptable Ads Committee, consisting of representatives from the publishing, advertising, and ad tech communities. Eyeo then spun the committee out as an independent entity, and that group of representatives has now released a list of criteria for Mobile Acceptable Ads. ZEDO has been represented on this committee since its inception/

Mobile-specific Acceptable Ads Criteria

Placement Requirements

  • Static ad types (e.g. 6×1 banner and 1×1 tile ad without animations) are allowed to be placed anywhere on the mobile page. For an example of a 6×1 ad, this time placed on top of the content, please see thishere is an example of a 1×1 ad unit.
  • Small ads (6×1 banner or smaller) are allowed to be placed as a sticky ad on the bottom of the screen. Other formats are not allowed to stick. For an example of a 6×1 sticky ad unit, please see this.
  • Large ad types (e.g. “native” tile ads) are only allowed to be placed under the primary content on any page. For an example of this type of ad unit please see this.

Size

Ads shown on mobile screens are bound to the following size restrictions:

  • Ads implemented on the scrollable portion of the webpage, before or inside the primary content of the page, may not occupy in total more than 50 percent of the visible portion of the webpage.
  • Ads implemented as a “sticky ad” have a maximum height restriction of 75px or 15% of the screen height. All sticky ads must include a close button or some other easily-identifiable closing mechanism.
  • Ads placed below the primary content may not exceed the height of 100% of the screen height (i.e. the ad may not be more than one “full scroll” height).

Animations

Animations are allowed for the 6×1 ad type when placed as a “sticky” ad on the bottom of the screen. Animations have to comply with the LEAN standard for animations.

Next year, the committee is going to work on standards for mobile video. This is not easy work, because we have to run everything by our audience. Feedback from this round was generated by conducting a survey in partnership with Hubspot. Our conclusion is that we need a larger sample so we can get even more feedback on the tolerance of users who run ad blockers to mobile ads.

In other news, people who haven’t been as willing to work with ad-blocking users have develped other ways to reach those users, and Eyeo has invested in AI technology to help its customers better spot “native” ads that aren’t easy to distinguish from actual content.

AI and Blockchain Dominate DMexco (But Not Reality)

We withdrew from doing business in Europe temporarily until GDPR sorts itself out, so we didn’t feel the need to attend DMexco.  However, the people who did reported back that it was a more heavily European-market focused conference, and like Cannes, a bit smaller. As usual, following it on Twitter gave us an overview, and since we have deep technology chops we were able to understand that most of the presentations were about the future, and not about the present. Neither AI nor blockchain are ready for prime time.

The most common current use of artificial intelligence outside marketing is for predictive analytics in industry. It is used in factories, where connected devices have produced a kind of industrial “internet of things.’ Thus present day AI can tell us when a machine will need maintenance, based on historical data. But most consumers are not machines, and AI is still not in a position to predict big changes in consumer sentiment, such as the fall-off in demand for soda. Large trends in consumer sentiment have caught marketers unaware, if all they’re using is data from AI. So AI is still somewhat backward facing rather than forward facing. That’s why IBM Watson still does not make 100% accurate medical diagnoses.

For example, there were a dozen presentations on AI, including Deutschebank’s, despite the fact that most people in advertising don’t now how best to use it.  The most heavily used AI applications require vast datasets, and when companies say they are using AI to target customers at every stage of the customer journey, what can they possibly mean in the context of GDPR? Moreover, AI cannot yet tell us what customers want, since the action of an individual is fine-grained. At best, it can tell us what classes of consumers want.

Eventually, AI will be used to identify targeted ad buys, but it is not quite there yet. 

The classic example of programmatic advertising is SEM advertising on channels like Google (AdWords), Facebook, and Twitter. Companies like PredictiveBid and Israel-based Albert have decided to put a significant amount of their focus on programmatic advertising specifically.

Programmatic ads bring a tremendous amount of efficiency to bear on the “inventory” of website and app viewers. Platforms like Google and Facebook have set the standard for both efficient and effective advertising – and it can be supposed that these systems will become more and more user-friendly in terms of allowing non-technical marketers to start, run, and measure campaigns on line

Yes, but! What we’ve been hearing more and more lately from marketers is that Facebook ads, despite the granularity of their targeting, do not convert.  We said this years ago:-)

Where AI is actually useful today is in improving search,.especially for smaller ecommerce sites. Obviously Amazon and Google have their own search, and those heavily use AI.

Closely related to search is recommendation, and if you watch Netflix or shop at Amazon you can understand that although recommendation engines have been around for a long time, and are depended on by consumers, they’re far from perfect.

Another area for exploration is text-to-speech or voice. There are a number of possibilities for AI here, from digital assistants to conversational commerce.

But if you went to DMexco wondering what you could put into practice today, there was probably precious little.

 

 

 

Peretti Says Electing Trump Changed the Media Business

Jonah Peretti is traditionally an optimist about the media business, and especially about his own business, which has been a beacon for digital first media businesses. But in the past six months, even he has had to come to grips with the fact that reach and scale don’t necessarily turn on the revenue spigot as everyone used to believe. As an example, in a recent Digiday podcast he cites his Tasty business, which has over 100 million visitors on Facebook, and yet he makes NO money from Facebook and has had to develop different revenue streams. Tasty makes money through recipe and product sales, and through native advertising.

Peretti missed his numbers in the last quarters, which was a surprise even to him. But when asked whether this was Facebook’s fault, he was quick to explain that there’s no way Facebook can solve the problem for the digital media industry. He has divided the industry into segments, and he feels each segment has a different problem and a different potential solution.

For high end media companies like Conde Nast and the NY Times, legacy cost structures mean that digital advertising can never match the declines in advertising revenue that have taken place over the past two decades.

Facebook cannot solve the problem for those media players through revenue sharing. For these, only subscriptions can point the way forward. Low end companies are often revenue-generating on digital advertising, but this is the domain of fake news, conspiracy theories and misinformation, and Peretti certainly doesn’t want Facebook revenue sharing with those players.

But for the middle tier, of which Buzzfeed is a member, Peretti thinks that Facebook could do what YouTube currently does: share revenue equitably with the publishers who generate the most traffic.

However, it does not, and thus Buzzfeed has to create its own new revenue streams. One of those traditionally was native advertising, where the site was a pioneer. But an unusual thing happened when Trump was elected: digital marketers realized how divided the country was, and were no longer sure who their audiences were. Marketers began to ask themselves questions like “Should we reach out to Trump voters”? “Should we show the LBGT community  and immigrants we still support them as a brand”? Brands didn’t know what they wanted to say after the election, so that took away the impetus for native advertising. In addition, native advertising had become commoditized, and was no longer as attractive to site visitors.

Instead, marketers retreated to brand advertising. Banners came back, as did performance ads, and  Buzzfeed , which had sworn never to run a banner ad, had to diversify backwards! In the meantime, the digital audience continued to fragment, making niches profitable and sites with Buzzfeed’s reach less appealing – especially since GDPR.

Nevertheless, almost two years past Brexit and Trump, brands have figure out that they have to take one side or the other, and they’ve figured out what they want to say so they’re coming back to native.

 

 

Values Re-Enter the Marketer Vocabulary

A number of trends have converged in my mind this week to convince me that marketing has to change — AGAIN. A pendulum has swung too far without us noticing it, and it’s about to hit us in the face as it swings back if we aren’t careful.

Here are six trends that point to the need for change:

1) the #MeToo moments that have altered the career trajectories of a number of (mostly male) influencers,

2) the publication of Clayton Christensen’s new book Competing Against Luck: The Story of Innovation and Customer Choice, with its core theory that we hire a product or service to do a job, and products and services must be designed to be hired by the right customers,

3) the growth of the mindfulness movement in Silicon Valley, with entrepreneurs who have made it going off on ten-day silent retreats and starting organizations to curtail the influence of companies they helped to build,

4) the disillusionment all of us early adopters feel about social media, especially Facebook, especially after young, red-headed Christopher Wylieexposed how our own personal data was used against us. This includes a plaintive post by Brian Solis about taking control back, and a five-year old crusade by Randi Zuckerberg to put digital technology into perspective for our children,

5) the coming of the values-driven Millennial generation into the job and consumer markets (hint: they buy on values)

6) and, the launch of the Global Data Privacy Regulation in May.

These are big events that don’t leave marketers untouched.

For the past two decades, we’ve been focused on becoming data geeks in the marketing department. Old style CMOs were forced out by quants, and the goal was to get “more accurate data” about where the ”customer” was on her “journey” to buying our product.

But one thing data has overlooked is values, and I believe values will be the most important piece of marketing in the future. Companies will have to declare their values and live by them. And this is not a mission statement that gets put up on the office wall in the break room. Values are different. You can’t lie about your values, because they’ll show and customers will know. Southwest values employees, Starbucks values connectedness, RichRoll.comvalues a healthy lifestyle.

Once companies have figured out what their values really are, marketers will be able to begin the search for human beings who naturally align with the company’s values, and turn those people into customers. It should be easy, because it converts what used to be a sales process into a reaching out and calling to the people who naturally value what you have to offer.

Wouldn’t it be cool if marketing evolved again from shoving things on customers, to prying into peoples’ lives to find out more about them, to naturally aligning with people who already share our values — for whom we’re the right product or service for the job they want done?

We’d like to be part of that transition.

Publishers Need a New Understanding of Business Models

Jason Hirschhorn is a man with an illustrious past in the media business and much to say about the future of media. The industry ought to be listening to him now that he’s writing again.

Born in New York, home of the media business, he cut his teeth on a company, Mischief New Media, that was bought by MTV, and joined that company as Chief Digital Officer. This meant he worked for the great Sumner Redstone. As if that weren’t enough, he went on to work for Rupert Murdoch as CEO of MySpace.  His belief that the media business was going to change then led him to work for Blake Krikorian, the founder of Slingbox.

Since then, he has served on the boards of MGM and Pandora. But the most interesting thing he has done, from our standpoint, is found a free newsletter service called MediaRedef, which quickly became a source for all the industry changes the content business was undergoing. Here at ZEDO, we read MediaRedef voraciously, as everyone in the media business should.

That’s how we learned in advance of most people who were still in the weeds that the TV business was shifting to digital, and with it the business models and the ad dollars. In October 2016, Redef put out a 3-part series on the future of the video business.  

He believes new fortunes will be built on video, as they were on TV. In the deck he uses to discuss this future, he details the changes.

  • Why the television business is less stable than it appears
  • How the fundamentals of video industry has been upended – not in the sense of “digital distribution”, but also in how you make, fund, release, discover and share content
  • The seven consequences of the new video status quo, from the commoditization of content to the emergence of new storytelling formats and the monopolistic dangers of digital distribution
  • Why we’ve seen over-the-top efforts from incumbent media companies struggle and new entrants pursue growth in under very different operating models
  • To this end, we put forward our take on new models of distribution – not AVOD versus SVOD – but brand new operating models. We define them in five ways, “Scale Feeds”, “Social Feeds”, “Identity Feeds”, “Feed Navigators” and “Feedless SVOD”

What are these business models? Well, SVOD stands for subscription video on demand, which is the model of Netflix and Hulu. TVOD is transactional video on demand, which is the model of Amazon and Apple.  And then there is AVOD, ad-based video on demand, which is the segment we are in.

Two years ago, Jason predicted the changes we are seeing now, but he also predicts further change. If you are a publisher in our business, you should have already seen this deck. 

It should be reassuring if as a media company you are willing to change, but it is terrifying if you think your current models will survive.  Media companies focused on ads v. subscriptions are fighting the wrong battle. The war is over content.

There will always be an audience for niche passionate users, and publishers should now concentrate on encouraging and creating their niches. Once the niches (the audience) have been created through good content, there will be multiple distribution models

 

Are Techniques Like Microtargeting and Retargeting Worth it?

There was a very interesting article in the NYTimes last week about how Facebook has “weaponized” ad tech. Although the article was really meant to highlight the abuses of political advertising on Facebook as we move toward the 2018 elections, the impact of micro targeting in the political sphere carries over to all publishers.

Facebook has made a mint by enabling advertisers to identify and reach the very people most likely to react to their messages. Ad buyers can select audiences based on details like a user’s location, political leanings and interests as specific as the Museum of the Confederacy or online gambling. And they can aim their ads at as few as 20 of the 1.5 billion daily users of the social network.

Brands love it. So do political campaigns, like those for President Trump and former President Barack Obama, which tailored their messages to narrow subsets of voters.

But microtargeting, as the technique is called, is coming under increased scrutiny in the United States and Europe. Some government officials, researchers and advertising executives warn that it can be exploited to polarize and manipulate voters. And they are calling for restrictions on its use in politics, even after Facebook, in response to criticism, recently limited some of the targeting categories available to advertisers.

Commercially, the worst offenders of microtargeting are high frequency users of retargeting, often e-commerce sites. Retargeting has now grown so accurate and often so intrusive that it does things like target people off Facebook who have had a conversation about a product on Facebook or the converse: showing Facebook ads to someone who has had a conversation about a product over, say, Gmail. Retargeting is the activity folks who are sensitive to privacy violations refer to as web stalking.

Not only that, but according to some experts retargeting isn’t even a good way to measure whether ad spend works. Retailers tend to think it helps cure the problem of cart abandonment, but they never can tell whether retargeting brought the consumer back, or perhaps payday did. Or a competitor’s ad did. We’re measuring what’s easy to measure, rather than whether our ad spend really works. This is one writer’s cynical view:

Since there is no easy way to measure if ads drive incremental revenue, it is in the best interest of performance-marketing directors, retargeting companies, ad agencies and Google to aggressively target consumers who are highly likely to purchase anyway. It amounts to a retargeting conspiracy among willful participants, and it threatens to drag down digital people-based marketing’s potential long into the future.

We think it would be much easier to measure attribution if more media buys were done with context in mind. Perhaps that’s what Amazon has in mind when analysts predict its ad revenues will surpass its AWS revenues by 2020.

 

 

New Game: Consent String Fraud

Well, that didn’t take long. GDPR went into effect at the end of May, and as we all return from summer holidays we are already the victims of consent string fraud. I guess fraudsters don’t vacation. They spent the summer generating fake consent string numbers.

Digiday has already run its “WTF is a Consent String” piece, which signifies that the term has already entered the ad tech lexicon. You’re probably still applying your mosquito repellant, so here’s what it means:

A consent string, also referred to as a “daisybit,” is a series of numbers added to an ad bid request, which identifies the consent status of an ad tech vendor. That means whether or not they have a user’s consent to use their data in order to serve them personalized advertising — a stipulation now needed under the General Data Protection Regulation. The Interactive Advertising Bureau Europe has assigned a consent string to every vendor that has signed up to its global vendor list.

Of course Google does not use IAB’s consent scheme framework and has developed its own analogue for companies that use its Funding Choices platform. That makes things even more complicated.

The difficulties in achieving compliance have led many smaller vendors to write off Europe as a market until things settle out and they know how onerous the enforcement will be.

But those are the good guys. As always, the fraudsters are undeterred and while you were trying to spend quality time with the kids they were designing fraudulent GDPR consent strings.

Some ad tech vendors have already identified fake consent strings , which means they may have inadvertently served personalized ads to users who have not given their consent. This has the potential to become an escalating crisis, since once a user has decided not to give consent, she’s not expecting to have her data misused and her privacy violated.

In the nearly 20 years we’ve been in ad tech, we have seen this game of whack-a-mole over and over again. The good guys try to fix the ecosystem, and the bad guys quickly catch up and pass them. One form of fraud gives way to another.

We long ago decided to be one of the good guys, and we’re not bitter. If you are interested in compliance, Prebid.org has you covered with its GDPR Compliance Module. Prebid.org is an independent organization designed to ensure and promote fair, transparent, and efficient header bidding across the industry. Funded by dues-paying members, it manages the open source projects Prebid.js, Prebid Mobile, Prebid Server, Prebid Video, Prebid Native, and others.

The problem is that these open source industry resources, along with Github, are also accessible to people who are out to mess with the system, so now we have to develop a way to spot and expel fraudulent consent strings.

Sometimes I wish consumers understood even a little bit about how hard those of us in the industry work at combatting fraud.