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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.

 

 

Digiday Video Summit Reflects Industry Changes

The Digiday Video Summit took place the same week the standards of data privacy totally changed, and as a result it was a meeting of video publishing executives wondering what their next strategies would be and sponsors from the world of “monetization,” “advertising,” and “mobile targeting” who knew even less about the future trying to help them. It was truly a conference of the blind leading the blind, because there were precious few of the people who pay the bills — brands and agencies–in attendance. Those people are focused on the larger question of how they can use their customer data.

As a result, we heard several publishers say they are not going to launch in Europe until after GDPR shakes itself out. Others without a big business on the continent have decided to withdraw completely. In Europe, the Digiday Video Summit will be even more fraught, because it takes place there on June 5.

Whenever there’s change, there’s opportunity. We think the future lies in several different directions, some of which are being discussed at the Summit, others not so much:

Original content

There’s still a market for original video content, if it is good. Netflix and Hulu are testimony to that. And although they subsist on subscriptions rather than on advertising, Hulu at least is going to try allowing subscribers who don’t pay the ad-free premium to download their programs along with ads.

It’s interesting that no one has yet tried what Leo laPorte and Twit.tv have been doing for a decade now, which is  live TV content downloadable as podcasts, supported by advertising. Leo long ago decided that he was going to trade quality programming for scale, and like many podcasts he mostly does his own ad reads. Most podcasts are content to be audio only, and they go for a different audience than the video podcasts. We predict more niche video programming, which will find its own audience without much targeting, because the audience is already interested in the content. It seems so simple to run brand ads against specific video content, but we think the agencies and brands haven’t washed their hands of data dependence yet. It will happen. It will have to.

Branded Content

Branded content is a tricky one. If it’s really good, like Red Bull, it can foster deep engagement. But it’s important to have the right brand and a totally immersive experience. Many agencies have focused too much on data and metrics the past decade, at the expense of great creative.

Content Based on Videogames

Some of the speakers at the summit did talk about how video content could be generated from videogames and attract viewers who have been playing those games.

LCI

This is a new one, and so big that it already has its own acronym. It stands for Limited Commercial Interruptions, and it means fewer ads but higher ad prices. TruTV has been doing this since its rebrand in 2016, with great success. Its viewers spend more “tune time” and their revenues have gone up. Their audience is Millennials with incomes averaging $70,000 — a very desirable demographic.

Like every digital media conference we’ve ever attended, this one made ample use of the words “wild ride,” “rollercoaster,” and a one I had never heard before, “calamitous.” Nevertheless, the conference was pricey and the room was full. Things can’t be that bad.

 

Publishers Don’t See Big Benefit from Tracking Data

A very provocative article in Digiday last week suggested that although ad budgets and ad revenues are up, publishers are not reaping the benefits. Nor are consumers. The writer, Jason Kint, asserts that user tracking is having a negative effect on the quality of content that is being consumed, and an even more negative effect on publishers’ revenues because all the extra  money generated by rising ad revenues is going to the services that track and retarget users.

The much-hyped automation of advertising is incredibly promising, but right now, it’s being used almost entirely to collect and bid on data to re-target audience using tracking cookies. This data is driving immaterial growth in ad revenue to publishers small and large. It is also feeding a frothy and endless market for ad tech companies.

The digital pie is rapidly shifting away from sites and services being consumed to the companies that track consumption. As digital continues to gobble up advertising share from its offline ancestors, it does so at the direct expense of brand advertising. The industry touts record ad revenues but ignores that more than 65 cents out of every online ad dollar is being spent on performance media fueled by data tracking.

As we move to mobile devices, more specifically to smart phones, tracking  becomes more abhorrent to consumers; they’ve said so in many ways, including installing ad blockers in their browsers, taking advantage of do not track options, and complaining to vendors.

But tracking doesn’t help brands, either. When they buy ads using tracking data, they’re buying performance metrics, not brand lift. And the performance end of the market doesn’t work anymore, because the same users who don’t like being tracked have ceased to click on display ads. We keep looking for the performance metric, and it may shift from CTRs to viewability to something else, but we’re always talking about measuring the individual consumer’s actions and buying on that data.

We’ve got a way to go before we arrive at the “right” way to use data to help the ecosystem. Right now, tracking data may be as harmful as it is useful.

The answer to this is for publishers to focus on ad formats that brands want. These almost always include video, and  should include ZINC’s InArticle and InView formats. If publishers ran those, they would get more brand dollars rather than performance dollars online and would therefore  increase their revenues.

 

 

 

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