Tag Archive: advertising

  1. Is this the end of the entertainment mergers?

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    Last week, AT&T announced a $43 billion deal to combine its content unit, WarnerMediawith factual TV network DiscoveryThe telecommunications giant will unwind its acquisition of Time Warner, which it renamed WarnerMediato create with Discovery a new media company that could be worth as much as $150 billion. The move is a sign that the huge conglomerates which resulted from a flurry of mergers just a few years ago are no longer big enough to contend with the major streaming giants Netflix and Disney. 

    What’s the context behind the deal?

    The much-discussed streaming wars are currently being won, by a large margin, by Netflix and Disney who both enjoyed significant growth during the pandemic. But even Disney is struggling to keep up with Netflix. Netflix has a huge 206 million subscribers and is still growing, albeit more slowly than Disney, which had 106.6 million subscribers as of early April. Netflix had a significant head start over the other streamers, and has a huge international footprint – crucial for continued sustainable growth in this competitive landscape. What’s more, Netflix is finally able to sustain itself financially, and no longer has to borrow money to fund its programming.  

    The American media conglomerates anticipated this situation, leading to a raft of mergers and acquisitions in recent years, such as Disney’s acquisition of Twenty-First Century Fox and AT&T’s purchases of DirecTV and, of course, Time Warner. These deals created huge entertainment companies, but the WarnerMedia/Discovery news suggests that even they are not big enough.  

    But the new company created by WarnerMedia and Discovery just might be. 

    Teaming up to win the streaming wars

    The Economist neatly summarised the four key things that a streaming service needs to compete successfully in the streaming wars: scale in the domestic market, high-quality content, a flexible balance sheet and the ability to expand globally. WarnerMedia’s HBO Max meets the first two criteria, but falls down on the third and fourth. Parent company AT&T’s financial woes made it difficult to keep up with Netflix in terms of programming spend, while the decision to licence content to foreign companies, such as Sky in the UK, means that its international footprint is very poor. The merger with Discovery will help WarnerMedia to address both of those problems: it will no longer be held back by AT&T’s revenue sheet, and Discovery+ already has a significant presence in Europe and India.  

    The resulting company will present a significant headache for the current winners Netflix, Disney and Amazon. WarnerMedia and Discovery’s combined content library will be huge and diverse: it will include HBO’s critically acclaimed dramas, Warner Bros’ blockbuster films, Discovery’s unscripted shows and a variety of sport and live news services. It will be very interesting to watch how the company unfolds. Will they merge their streaming services, creating a ‘one-stop shop’ that would compare favourably to Netflix but would undoubtedly have a high price point (HBO Max currently charges $15 a month, significantly more than competitors)? Or will they ‘bundle’ existing services and new ones for a discounted subscription price? 

    An admission of failure by AT&T

    The merger between WarnerMedia and Discovery is a de facto admission by AT&T that its foray into entertainment has failed. When it acquired Time Warner, which it renamed WarnerMedia, just a year after its purchase of satellite service provider DirecTV, the plan was to vertically integrate the businesses of content creation and content distribution – but that plan has been shelved. AT&T’s CEO John Stankey said that the telco giant lacked the global reach necessary to build a successful streaming business that could match the likes of Netflix and Disney. DirecTV will be sold to TPG. 

    What does this mean for advertisers?

    The question on every advertiser’s lips is ‘how many unique individuals can I reach through as few companies as possible?’. By merging, WarnerMedia and Discovery may provide the most convincing answer yet to this question. They will aggregate more inventory than the separate companies already do, and will provide advertisers with a huge, diverse audience. This will put them in a very strong position, particularly as Netflix does not currently host any advertising on its platform. 

    Interestingly, however, WarnerMedia’s ad tech arm, Xandr, is not part of the merger, and will remain under AT&T’s ownership. This is likely because it would take a lot of time, effort and money to disentangle Xandr from AT&T’s customer data, but given the importance of targeting and measurement in TV and streaming, and of mining media companies’ first-party data, it is would certainly be an advantage for WarnerMedia/Discovery to have its own tech stack. 

    A scramble to create more mergers

    With the streaming landscape now dominated by three giants – Netflix, Disney and now the company formed by WarnerMedia and Discovery – the rest of the industry is now scrambling to form mergers of their own. One of the most significant is Amazon’s purchase of Hollywood studio MGM, confirmed this week for a price of $8.45 billion. The deal will bolster Amazon’s TV and film library for its Prime Video service, and the jewel in MGM’s crown, the James Bond franchise, will help Amazon to compete in the streaming wars, even though it will only own 50% of 007. 

    AppleTV+ is yet to take off, despite giving away a huge number of free subscriptions – more than 60% of its 40 million users are thought to be on a free trial. However, it does of course have plenty of money to spend on acquiring another media company if it chooses to do so.  

    The other giants of American entertainment, NBCUniversal and ViacomCBS, themselves the products of huge mergers a few years ago, have found themselves in a difficult position. The very fact that WarnerMedia and Discovery have decided to merge is a sign that even NBCUniversal and ViacomCBS aren’t big enough to compete with Disney and Netflix. The problem? There isn’t really anyone left for them to merge with. They have too much competing content to merge with each other and anyway, the Federal Communications Commission prohibits such a move. That is unlikely to change given the current White House’s stance on antitrust. They could purchase smaller media companies, but this wouldn’t give them the global scale they need. 

    The race to grow and consolidate audiences continues

    As the world opens up again after the pandemic, people will be spending less time in front of their televisions. Many may decide to unsubscribe from some of their streaming services as TV no longer plays quite such a central role in their entertainment schedules. The race to grow and consolidate audiences – and therefore advertising dollars – continues, and the company resulting from the WarnerMedia/Discovery merger will be well-positioned to catch up with the current leaders. 

    Header image: atk work / Shutterstock

  2. Is the future all talk?

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    For 100 years, radio dominated audio media, entirely unchallenged. It still attracts the lion’s share of listeners and therefore advertisers: 92% of Americans listen to AM/FM radio every week – more than TV viewership (87%), PC use (54%) and smartphone use (81%). However, its dominance is becoming less certain with the rise of podcasts and now, social audio. So what does the future of audio look like?

    The impact of the pandemic on our listening habits

    The pandemic has had an impact on the way we live our lives, and that includes our listening habits. Despite fears that radio listener numbers would crash as commutes turned into 30-second walks to the kitchen table, in many countries, numbers increased as people turned to this trusted medium for information, comfort, connection and entertainment. In the UK, 40% of people working from home listened to the radio for an extra two hours and eight minutes a day. However, there is a belief in some quarters that, despite this increased listenership, advertising may have suffered because of radio’s great reputation for brand-building: amidst the hardships and budget cuts of the pandemic, marketers have been under pressure to deliver short-term sales results at the expense of longer-term brand-building ambitions.

    Podcasting followed an interesting trajectory over the course of 2020. Podcast downloads decreased by 10% when the US went into lockdown, and it seemed that the pandemic was threatening to throw off podcasts’ meteoric rise. However, as people adapted their routines, download figures recovered and are even improving. The top 10 US podcast publishers saw a 20.6% increase in downloads in the summer of 2020 compared to the previous summer.

    2020 was also the year that saw the rise of ‘social audio’: with people seeking connection but sick of screen time, social audio apps came on the scene, offering the ‘Goldilocks’ of connection – not too much, not too little, but just the right amount. But more on that later…

    Ad dollars are following ears

    More and more people are listening to podcasts: about 41% of Americans aged 12 and up now listen to one podcast a month, compared to 37% in 2020 and 32% in 2019. Ad dollars have inevitably followed: IAB PwC estimated that US podcast ad revenue would increase by 14.7% to near $1 billion in 2020, despite the pandemic. In 2020, 37% of marketers said they would likely advertise in a podcast over the next six months – compared to 10% in 2015. The highly engaged audiences that podcasts enjoy have shown a propensity to take action when hearing an ad, which is of course very attractive. What’s more, digital audio has the great advantage of not being reliant on cookies in the same way that other digital channels are. It offers other, privacy-centric ways of targeting listeners, such as topic-based targeting – indeed, this type of contextual targeting is likely to become more common across other digital channels after the death of the cookie.

    That said, it is difficult for marketers to track which users end up purchasing their products after hearing a podcast ad. Many are hoping that Spotify and the other podcast platforms will develop a pixel tool, similar to Facebook’s, which will be able to track user activity across the platform. Podcast platforms are aware that marketers need more tools if they are to continue growing their investments in the platform. This awareness has led to acquisitions such as Spotify’s purchase of Megaphone, a podcast ad tech company, in late 2020 in order to expand its self-service advertising platform. Megaphone claims to be able to target ‘types’ of users, so only listeners who fit a specific demographic will be served an ad.

    Social audio – the new kid on the block

    With the popularity of social media and podcasting, it was perhaps only a matter of time before someone created ‘social audio’, where people connect through conversation. The pandemic was the optimum time for these chat rooms to take off, with people yearning for connection but fed up with their screens. Clubhouse is making waves with conversations that people can sit in on or participate in, and its success has spurred established platforms like Twitter and Facebook to create their own equivalents. Twitter’s Spaces and Facebook Rooms are still in the beta phase.

    Clubhouse is, so far, ad-free and seems to actively discourage hard-selling. This means that working with the app’s influencers to create relevant, interesting conversations is the best way for brands to share their messaging with users – and has the added benefit of reaching people who have chosen to be in the room. However, as the social audio apps mature, it’s likely that advertising will become more prolific, as happened with the social media platforms. Experts predict that the explosion in social audio platforms will lead to a secondary explosion in analytics and marketing tools that will help influencers and, most significantly, brands understand their reach and impact in the social audio space.

    Digital audio: the new frontier

    Digital audio is the new frontier in advertising, with plenty of opportunities to engage with interested, relevant audiences. There is still some way to go in the development of tools for marketers to understand the impact of their investment, but they are in the making – this is not a space to be overlooked.

    The future may not be all talk, but there will definitely be more talk.

    Header image: atk work / Shutterstock

  3. Purpose and authenticity: this year’s ANA Masters of Marketing

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    Our US Business Director Victoria Potter attended this year’s ANA Masters of Marketing from the comfort of her own home. Here are her key insights.

    It’s October, and that means one thing for the US advertising industry. No, not Halloween and no, not even the looming Presidential election. The ANA’s Masters of Marketing takes place every fall, and this year was no different – except of course, it was completely different. The ongoing Covid-19 pandemic forced the convention online, and the ANA really rose to the challenge. They hosted some of the industry’s biggest names on virtual stages, all presenting their ideas on this year’s theme, ‘Force for Good. Force for Growth’. This theme was, of course, pertinent in a particularly difficult year, as the world has grappled with how to contain and manage the coronavirus, and how to come to terms with and tackle racial inequality. Brands play a huge role in people’s lives, and therefore have a huge potential to be a force for good. If that comes from a place of authenticity and is tied to the brand’s values and identity, it will resonate with consumers – and that will lead to growth.  

    As marketers from some of the world’s most famous brands spoke to their virtual audiences, some powerful ‘sub-themes’ emerged, all dovetailing back into the official theme. Time and again, presenters emphasized the need to move from consumer-centric to human-centric, how chaos has acted as a catalyst for change, and the importance of authenticity in marketing 

    From consumer-centric to human-centric

    There is a tendency amongst advertisers and marketers to talk about ‘consumers’, which inherently defines people by their capacity to ‘consume’ media messaging, products and services. That can allow us to forget that ‘consumers’ are, in fact, humans, with human desires, values and foibles. There does seem to be change afoot, however: many of the speakers at the Masters of Marketing focused on people as humans and what brands need to do to appeal to this humanity. Marc Pritchard, Procter & Gamble’s Chief Brand Officer, talked of opening up conversations with people, in order to create understanding between them and the brand. That understanding leads to empathy, which drives action. A person is more likely to buy from a brand with which they feel a connection, so acting on what that person values makes good business sense. 

    CVS Healthcare also did a deep dive into how empathy is at the heart of their strategy; indeed, their stated goal is to become the world’s most empathetic company. They have demonstrated that being a force for good can indeed be a force for growth: back in 2014, they acknowledged that selling tobacco went against their purpose of ‘helping people on their path to better health’, so they removed it from their stores, wiping out $2 billion dollars of revenue at a stroke. However, through other efforts based on the same philosophy, they have in fact increased their revenues by $100 billion in five years, making them the largest healthcare company in the US. Force for Good. Force for Growth. 

    Walmart has long adhered to founder Sam Walton’s belief that ‘there is only one boss – the customer’. For them this year, that has meant embracing racial equality and representation, as CMO William White explained: their Diversity and Inclusion review included having 50 marketing professionals weighing in on all aspects of their marketing. But it wasn’t just about ads: they have pledged that 40% of all production will be from women and/or minorities, and they have donated $100 million to organisations that promote racial justice.  

    Chaos as a catalyst for change

    Racial justice has loomed large on the 2020 landscape. The death of George Floyd at the hands of police and subsequent demonstrations have led to a moment of reckoning for the US and indeed much of the world. Many brands responded positively to societal pressure to demonstrate their support for racial equality. The Facebook boycott was one result of this movement, but brands also implemented internal changes. 

    LVMH’s Global Brand Officer Mathilde Delhoume talked about how the luxury powerhouse captured the mood with its ‘acts not ads’ philosophy. Sephora, its chain of beauty product retailers, was one of the first major retailers to commit 15% of shelf space to black-owned companies, and cast its own employees in its most diverse campaign ever,  ‘We belong to something beautiful.’  

    Of course, the coronavirus pandemic has wreaked unprecedented chaos on the world, upending economies, ways of living and indeed lives. Walmart occupies a unique place in American society, with 90% of Americans living within 10 miles of a Walmart store, so it was well placed to help its customers cope with the changes to their every day lives. It has positioned itself at the heart of the community, creating free Walmart Drive-In movie showings, turning their parking lots into town squares, with gameday experiences and farmers’ markets, and launching health centers. It also launched its Walmart Plus subscription service, helping families dealing with extra pressures to save time and money, safely.  

    CVS Healthcare has also sought to support people through the Covid-19 crisis. It has offered drive-thru Covid-19 tests, free home delivery of essentials and clinics with at-home diagnosis. It has placed an emphasis on life research, rather than relying on data alone. 

    Authenticity is critical

    The changes implemented by these brands, and many more, have undoubtedly been a force for good at a time when the world needs positive brands more than ever. However, from a growth perspective, they would be irrelevant if they didn’t come from a place of authenticity. Successful activations around issues that matter must be rooted in the brand’s identity and values, and not just be a nod to prevailing trends. People are savvier than ever and will quickly call ‘bs’ on a brand’s efforts if they are inauthentic. The only thing worse than not acting with purpose is using purposes solely as a marketing tactic.  

    Purpose is here to stay

    Purpose has been a recurrent theme at the Masters for several years, but never has it seemed so important as in 2020, when the world is in crisis and people are turning to the brands they trust. As Danone’s SVP Brand Marketing (Yogurt BU) Mark Spanos said in his presentation, ‘Purpose is no longer a fad, it’s a norm’. Danone has weaved purpose throughout its product portfolio in a way that speaks to their values and identity, addressing hunger, food waste. Spanos quoted Patagonia’s Alex Weller: ‘You can’t reverse into a mission and values through marketing. The organizations that are struggling with this are probably the ones that are thinking about marketing first.’ 

    In our rapidly changing world, where the customer holds the power, success lies in meaningful, authentic activations which speak to customers’ values and needs. A brand that can do that is a brand that will succeed. 

    Image: fizkes / Shutterstock

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