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.

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.

 

 

Luma Partners: The Match.com for Ad Tech

AdExchanger’s podcast last week had an interview with Luma Partners’ founder Terry Kawaja. You probably know a little about him  because of his famously crowded Lumascape slide, which features all the old-time ad tech companies that got a piece of the action between advertiser and publisher in the media buying business. You may notice that many of the companies on that slide are gone.  And their demise has probably enriched Kawaja,who seems preternaturally able to spot trends. In ad tech he was able to see a wave of consolidation coming in and ride it from the earliest days, as both a supporter of entrepreneurs who loves to advise them and position them for the best outcomes and a strategic advisor to larger companies threatened with disruption. He learned that these transactions work best when they’re a win-win for both sides when he worked on two other industry consolidations, radio and telecom, before going out on his own to found Luma.

Typically, investment bankers work in the background when they buy and sell companies, but Kawaja has not escaped a certain notoriety,  because he has advised on the majority of ad tech mergers and acquisitions, as the industry continues to mature and consolidate.  Terry personally has advised on the Oracle Moat acquisition, Singtel’s purchase of Turn, Criteo’s acquisition of HookLogic, Adobe’s of Demdex, Neustar’s swooping up Aggregate Knowledge, and Google buying both Admeld and Invite Media. Over half the 44 deals Luma completed were ones in which they asked the buyer what its major strategy was, given the trends in the market, and what capabilities it would need to accomplish that strategy. Then, drawing on expertise developed from talking to all the entrepreneurs in the space, Luma is able to match the startup to the enterprise strategy.

New industries always spawn many startups, most of which don’t make it. Of the ones who do, most are sold to provide an exit for the founders. Here in digital, because there were so many companies formed,  Terry knew the inevitable wave of consolidation would be longer.  And nobody else really wanted to advise media companies. The combination of massive fragmentation and high growth made most merger advisors run in the opposite direction.

There’s an old adage is that it’s better to be bought than sold, but the clients of Luma Partners are both bought and sold, because Kawaja does something more like  strategic matchmaking than simple mergers and acquisitions. He spends a lot of time with the buyers, not just the sellers, to figure out what they want to accomplish. Usually the sellers desire an exit to a stronger partner so they can continue to grow, whereas the buyers are looking to acquire a missing piece of an end-to-end offering. That’s certainly true of Oracle, which made most of its digital media acquisitions like MOAT and BlueKai because it was looking to transition all of its business to the cloud, and its existing database products were all on-premise. To rebuild all their legacy products would have cost Oracle a window of opportunity that it couldn’t afford to miss, so it acquired companies that were already digital.

In 2018, consolidation continues, albeit not as quickly.  One reason is that GDPR has created uncertainty, which gives people pause. But another is that the entire media and telco world is awash in deals — about 300 of them. That’s a tectonic plate shift that needs to be resolved before people return to thinking about what capabilities they need from the digital world.

Perhaps ominously, there are also fewer independent companies. But just you wait: the blockchain is coming.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising in the Post-Advertising Era

As usual, we’ve been thinking about advertising, and about its future.  To help us grapple with the days ahead, we’ve read two very interesting pieces this week. One  is from a book called Frenemies by longtime media journalist Ken Auletta who has written “Annals of Communication” for the New Yorker since 1992.  Auletta’s book is about the disruption of the ad business by all the new technologies that have affected it during the past two decades. His thesis is that advertising won’t go away, because it is necessary for consumers to get information about products and services, and subscriptions can’t reach all of the people who need to know. Auletta reminds us that both Clinton and Obama agree that consumers are strapped, having not gotten wage increases in over a decade.

Thus advertising, he contends, is still necessary to feed the free or nearly free content that we all want to see.

 In a non-state-dominated economy, advertising is the bridge between seller and buyer. It would seem an obvious statement, but I’ve found it bears repeating. And that bridge is teetering, jolted by consumers annoyed by intrusive ads yet dependent on them for “free” or subsidized media. In this sense, consumers are frenemies.

Because he begins from this premise, Auletta can spend most of his book talking about what’s happening to the agency business. He calls frenemies the brands who are taking their work in house, the consulting firms like Deloitte that now run their own digital agencies, tech firms that buy and sell media, and the usual competitors who now have to deal with each other because few brands have a single “agency of record” anymore. He can also focus on some of the colorful characters in today’s agency world like Martin Sorrell and Gary Vaynerchuk.

On the other hand, media marketing guy Andre Redelinghuys takes a far more pessimistic view of the future of advertising, because he believes the need for advertising is dependent on a need for distribution that can be met in ways not possible previously.

Terms like ‘Disneyflix’ and ‘Apple Prime’ essentially describe how the most powerful global brand owners are coming to terms with the new rules of engagement. This is not just another story of new versus old, it’s a fundamental shift in the natural order of consumerism. Brands have traditionally been prized, while distribution has been more commoditized. The ‘must have’ things held the power. But if the pipes into people’s lives have become more powerful than the products that go through them, then we’re in the beginning of a new era. and the change is just beginning.

In his view, “pipes” into the home, car or phone now have all the power, and consumers no longer value brands — they value convenience. Ordering household goods from Alexa is one of his big examples. as is using a Nespresso machine and ordering whatever pods fit the machine rather than choosing a coffee brand.

Brands have always fought for a place in consumers’ hearts, and then relied on their loyalty for repeat business. Pipes are structural relationships that don’t rely on such fickle factors. They are built on more vertically integrated distribution channels and behave more like utilities — a way into people’s homes and lives attached to an account.

Amazon is the ultimate pipe. Their entire value is that they bring things to you — the things can change as necessary: movies, pickles, sneakers. They own the interface, the invisible moving parts, and the household. They understand your preferences intimately and have become arbiters of choice in many homes.

I’d argue here that Amazon is also a brand, in the same way Facebook is a pipe, and that the “convenience” of pipes is constantly being weighed against the sacrifice of privacy we make for the convenience. Thus, Facebook lost some brand equity through Cambridge Analytica, and who knows what inevitable mishap can befall Amazon, whose personal assistant already send private conversations to one family’s contacts.

I’d also argue that while things have changed, we are still feeling our way around the post-advertising world.

Cannes Lions: Are They Even Relevant This Year?

This is the week of the Cannes Lions Awards, the Oscars for the ad industry. Early reports say it is a smaller, more serious awards festival this year, perhaps because it had become too overrun with tech companies to feel creative anymore, and perhaps because the advertising industry is too  engaged in navel gazing for clues about its own continued existence to spend $20,000 an executive to send the large delegations of previous years.

Sir Martin Sorrell will be there talking to author Ken Auletta as previously planned, although Sorrell has, we think, had a #metoo moment this year and has stepped down from GroupM.  Preliminary reports say there are also fewer branded  yachts, and especially fewer ad tech yachts.

Behind the scenes, outside Cannes the industry soldiers, on trying to solve its problems, which are multiple. Viewability was a problem we were supposed to have solved five years ago. Only at the same time we tried to attack that problem we were also worried about ad fraud, malware, and scale.  Nobody wants to believe that to prevent everything else we have to let go of scale. But we probably do. Remember three years ago at the IAB Leadership Summit when attendees were literally running between town halls on each of these multiple subjects?

None of these worries have gone away, and advertisers are losing patience with ad tech. Perhaps one of the reasons brands have pulled back on their participation in Cannes is that the combination of angry consumers, unviewed ads and the spectre of regulation has made advertising more of an infrastructure business than a creative business. Who cares what brand or agency made the best ad last year when that ad probably wasn’t viewed? There’s more important knitting to be minded.

Because advertisers have wised up about the cost to their bottom lines of unviewed ads, exchanges have had to change their business models to eat the cost of those ads. Their solution to this problem is to run campaigns on private exchanges guaranteeing viewability. But then what happens to scale?

These concerns appear to us to be the canaries in the coal mine. Far more important is the larger movement away from brands entirely. For example, the online merchant Brandless offers everything from dishes to popcorn at prices listed proudly as $3.00. The Brandless site talks about the “brand tax” consumers pay for name brand merchandise.

Brandless is only one of the seismic shifts happening to advertisers. Generic brands have steadily gained power. Another, larger threat is Amazon. At first, Amazon cooperated with brands, offering them Dash buttons and other methods that made it easier to re-order your favorite laundry soap. However, Dash buttons have given way to Amazon Basics, a competitor to Brandless that can be ordered from Alexa.

It’s too early to tell whether millennials, as they gain spending power, will develop any brand loyalty at all to consumer products. A study last year pointed out that 51% of them had no brand loyalty. When they do like brands, they tend to favor Apple and Nike, not Tide.

 

 

 

Time to Re-Examine Google’s Ad Server?

After more than two years of saying very little about its preparations for GDPR, Google has now made several changes that reveal how things will change for the rest of the ecosystem. During a call with the IAB Europe GDPR Transparency and Consent Steering Committee, Google disclosed that it has a new tool in beta with some DFP and AdSense customers called Funding Choices.  Funding Choices limits the partners a publisher can share consent with to a dozen.

This is a similar consent tool to other Consent Management Platforms like Admiral and Sourcepoint. A full list of IAB-registered CMPs is here.

The Google consent interface greets site visitors with a request to use data to tailor advertising, with equally prominent “no” and “yes” buttons. If a reader declines to be tracked, he or she sees a notice saying the ads will be less relevant and asking to “agree” or go back to the previous page. According to a source, one research study on this type of opt-out mechanism led to opt-out rates of more than 70%.

Google’s and other consent-gathering solutions are basically a series of pop-up notifications that provide a mechanism for publishers to provide clear disclosure and consent in accordance with data regulations.

As a company that began its life as an ad server, we have been struggling to find out whether we play at all in this full-employment scheme for lawyers, since we do not hold data or sell it. The situation is made more fluid because publishers do not have to accept the Google solution, and large publishers like Axel Springer have developed their own CMP technology.

Another announcement made by Google last week seems to have made  multi-touch attribution attribution much more difficult, because as of May 25 google will no longer provide DoubleClick IDs for data from its had server and DSP, or Cookie IDs and IP addresses from its exchange.

According to Martin Kihn, Research Vice President for Gartner,

Without these IDs, exported DCM log files can’t be used to determine true reach and frequency or to build MTA models, which are by definition user-level. MTA is not the only way to measure the true impact of ads but is theoretically the most accurate and provides by far the most detailed results.

Of course marketers are scrambling. But didn’t everyone in the industry expect this? This, after all, is the objective of GDPR, to preserve the consumer’s privacy.  The consumer does not care about the accuracy of Multi Touch Attribution customer campaigns, and for Google especially there is no other alternative. Google doesn’t really have to care about its ad-serving business (DFP), which it acquired over a decade ago and which is responsible for a very small part of Google’s revenue.

And it’s not as though a company the size of Google can slip under the radar of the GDPR, because it has already been fined and I’m guessing that other than Facebook, Google’s going to be under the greatest scrutiny by GDPR enforcers.

Remember, not everybody has to use Google as an ad server.

 

 

Advertising isn’t Going Anywhere

Lately almost every quality publisher is experimenting with paywalls and subscription services.  They are now viewed as a panacea against the need to handle consumer data, and a hedge against the increasing use of ad blockers.

Of course subscriptions to newspapers and magazines were available back in the days of print, too. So why did print publications also run advertising?

One simple reason: subscriptions cannot support most publishers, unless they are in a niche category without a competitor. The Information, a technology business publication aimed at wealthy investors, falls into this category. But most publications do not. Even the Wall Street Journal, the leading financial publication and one that many people WILL pay for, cannot get by  on subscription revenue alone. Nor can the leading news sites like the New York Times and the Washington Post  support themselves solely by instituting paywalls.

Why not? Because the average middle class consumer, who has been reached in the past through advertising, cannot afford to subscribe to everything she needs to read, see, and hear. We live in the Information Age, and very few of us can afford to ignore the need to stay abreast of a very rapidly changing world.

She’d like to get the national and world news from a reliable source, so she visits the New York Times. But finding it too biased, she must also often visit the Washington Post.  Neither of them covers news from her hometown, so she reads her local news site. And since she’s a homeowner, she reads a lifestyle publication. Or a fashion magazine. Or Consumer Reports.

To save money, she cut the cord on cable TV a year ago, so for entertainment she relies on Amazon Prime video and Netflix. But some shows are only on Hulu. Her husband subscribes to ESPN. He’s also a reader of Bloomberg and Wired, and they just instituted paywalls, too.

And then there’s Spotify.

At the end of the year, she and her husband look at their iTunes bill and their credit card bills and realize that they have spent over $2000 on subscriptions to both video and text sites. They blew right through their budget. So they decide to cancel their subscriptions to save money.

Eventually they trade off the need for privacy and gravitate to sites where they can get news and entertainment free, just by tolerating a few ads. In the mean time, publications that have instituted paywalls find that they are experiencing a great deal of churn among their subscribers, leading to unpredictable revenue projections. Despite their paywalls, they must also run some, although perhaps not quite as many, ads.

And that’s how the great paywall experiment plays itself out. Advertising isn’t going anywhere.

 

 

 

It Will Soon Be Illegal to Sell Smart Home Info to Advertisers

Gizmodo has a marvelous article on the smart home and its continuous information stream entitled “The House that Spied on Me, ” written by a woman who connected all the smart devices (including her bed) in her home to the internet and then had a colleague “spy” on her by reading the data.

There were a number of pretty astonishing revelations, including the fact that the house gave up data even when no one was home. And that the data, which was almost completely what we refer to comfortably as “metadata,” (meaning it isn’t really describable in total detail), could piece together a pretty accurate portrait of the home’s occupants. The writer, who after all writes for a gadget magazine and can’t be that much of a privacy freak still lands here :

Overall, my takeaway is that the smart home is going to create a new stream of information about our daily lives that will be used to further profile and target us. The number of devices alone that are detected chattering away will be used to determine our socioeconomic status. Our homes could become like internet browsers, with unique digital fingerprints, that will be mined for profit just like our daily Web surfing is. If you have a smart home, it’s open house on your data.

I wouldn’t call that a positive result for her experiment.

Because I own more than one connected device myself (in my home the robots talk to each other), I’m more interested in how this new datastream will be affected by the new General Data Protection Regulation soon to go into effect in Europe (and by extension in the US) in May. It seems there are two especially relevant portions of the regulation:

Consent must be clear and distinguishable from other matters and provided in an intelligible and easily accessible form, using clear and plain language. It must be as easy to withdraw consent as it is to give it.​

And this paragraph, called The Right to be Forgotten

Also known as Data Erasure, the right to be forgotten entitles the data subject to have the data controller erase his/her personal data, cease further dissemination of the data, and potentially have third parties halt processing of the data. The conditions for erasure, as outlined in article 17, include the data no longer being relevant to original purposes for processing, or a data subjects withdrawing consent. It should also be noted that this right requires controllers to compare the subjects’ rights to “the public interest in the availability of the data” when considering such requests.

So this could potentially stop the data in your smart home from being used by publishers or advertisers for targeting and profiling. It also may mean that the value of many connected devices goes away.  Although most of them don’t keep data more than two days, they sometimes have built into their business models the right to process and sell the data. If that goes away, along with it may go many smart devices.

We’re in the advertising/publisher support business, so we don’t handle or keep data. We don’t have a dog in this hunt. And we have long been active in data privacy and anti-fraud initiatives. But many people around us in the industry depend on data for either their success or their business models, and we see some changes ahead.

IAB’s TAG Program Works, but Too Expensive

Just in time for all the changes in the global market that GDPR will bring next year comes the welcome news that Trustworthy Accountability Group (TAG) certified companies experienced 83% less fraud this year than the market as a whole. TAG, as you may remember, was an initiative we worked with two years ago when it was getting under way. This year, the group introduced Certified Against Fraud, a self-attested certification for companies that were willing to have  compliance officer who will inspect the company’s policies and priorities and tell internal people how to comply.

This year, 170 companies joined the program to combat ad fraud. Certain large advertisers have already said they will not do business with companies that have not been certified. IAB has also made the program mandatory for all its members in 2018.

A study conducted by The 614 Group assessed the rate of invalid traffic in 6.5 billion digital ad impressions executed by three large media companies — GroupM, IPG, and Horizon Media on behalf of their clients between July and October. Every impression was delivered through a TAG certified channel. So how did 614 Group know what the rate of invalid digital traffic is overall? They benchmarked it at 8.83% for display and 12.03% when video was included. On TAG channels the rate fell to 1.48%.

We’re thinking the one thing wrong with this TAG certification process is that it is only available to large industry players. Currently, it costs $15,000 annually to join TAG and another $10,000 to get certified. If IAB is going to require this next year,  they need to add a program for smaller players and startups, which I bet is where some of the remainder of their invalid traffic comes from.

And for smaller players and startups that are legitimate, the cost is prohibitive. Yet many startups have promising new ideas and technologies that marketers need to be able to try to get new ideas. On behalf of all those small but important and innovative players, who will help move digital advertising forward in the coming years, we intend to say something at the IAB Leadership summit in Palm Springs in February.