Tag Archive: media agency

  1. What happened at WeWork?

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    WeWork has been lauded by many as one of the huge success stories of the 21st century. Before they came along, renting office space was run-of-the-mill, boring. You paid money, you got a room and installed some desks, some chairs, a printer. You moved in. That was it.

    Not just an office space

    WeWork, however, wants you to believe that you aren’t simply paying for space. Of course, you get a beautiful new office, but you are also paying to be a part of something new, part of a community of like-minded people. Indeed, part of WeWork’s mission is that it is “a place you join as an individual, ‘me’, but where you become part of a greater ‘we’.” WeWork positions itself amongst those big disruptors of this century – Netflix, Uber, even Facebook, and an IPO was a natural next step for this real estate/tech behemoth.

    A failed IPO

    Dreaming of a huge $47 billion valuation, the cash-hungry We Company, WeWork’s parent company, aimed to sell enough shares to raise $4 billion and had, according to the New York Times, ‘lined up a $6 billion bank loan that was contingent on the IPO’.  By the end of September, though, those heady days were over. WeWork discovered that investors were sceptical about their huge valuation, large amounts of debt and corporate governance issues. They pulled the IPO, Founder-CEO Adam Neumann was forced to step down, are looking at redundancies and are reconsidering their expansion strategy into China.

    Positioned as a tech firm

    So how did WeWork value itself so high? What was it doing right? A lot of it came down to brilliant brand-building and marketing. As touched on earlier in this piece and explored by Mark Ritson in this article, WeWork didn’t position itself as a real estate or office rental firm. It wanted to be seen as a tech firm, or, as Ritson says, there was a “vague, socially-constructed idea that this is another big disruptive tech firm with another massive IPO.” 21st century tech firms have of course seen phenomenal success over the past two decades, and many have an aura of community and purpose to humanise the vast profit they turn over. WeWork, with its mission to ‘Create a world where people work to make a life, not just a living” embodies that tech ethos, and as such pushes its community app. This wasn’t just a forward-thinking branding decision: if it worked, it was a sage financial decision, with tech companies raking in revenues far higher than those of more traditional businesses.

    Shaky foundations

    From the outside, this approach seemed to be working for WeWork: in the first half of 2019, for example, it earned $1.5 billion in revenue. However, the gloss loses its sheen a little when you discover that in the same period it lost almost $900m. And the sheen disappears completely in the context of information that it was looking to raise between $3 billion and $4 billion in debt to tide it over.

    A future in debt

    And that’s the key to this story: the losses and associated debt. While investors don’t necessarily insist that start-ups are profitable before they go public, it helps to be able to show a path to profitability. We Company’s revenue and operating losses are moving in tandem, rather than showing an increasing gap. They may find some cold comfort in the fact that they aren’t alone in this plight: ‘fellow’ disruptors Netflix and Uber, to name just two, show no sign of becoming profitable in the near or even mid-future. Netflix must continue its huge investment ($15 billion this year) into original content in order to survive stiff forthcoming competition in the shape of Disney, Amazon and Apple. To finance that, Netflix is estimated to have a debt of around $12 billion – and with a net income of just a twelfth of that, it seems unlikely that it will ever be able to pay that off.

    What does this all mean?

    Is WeWork’s failed IPO the first sign of a difficult, uncertain future for the big disruptive organisations of the last 10 years? Perhaps the tech disruptors of the future will bring the focus back to business strategy and creating revenue streams. Brand positioning and purpose are of course crucial to a business’ success, but they must be founded in a robust business and financial strategy to guarantee success.

    Disclosure: ECI Media Management’s UK office is a tenant of WeWork in London

    Image: Shutterstock

  2. The growth of Sky’s AdSmart: the saviour of TV?

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    TV’s struggle to retain its dominance

    TV has long reigned supreme in the advertising world, but in recent years it has started struggling to hold onto its throne. Consumers are turning away from live TV – Britons, for example, watch five hours of video content a day, but only three of those are live TV. They are being lured away by the on-demand streaming services such as Netflix and its competitors. Part of the allure of the streaming services is their lack of ads: tolerance for irrelevant, interruptive ads has decreased dramatically, which TV has historically been unable to respond to due to its lack of addressability. This is one of the factors that has made Google and Facebook so successful – their ad services offer greater targeting and buying flexibility, an attractive proposition for brands seeking to reach their audiences with highly engaging, relevant advertising.

    Is addressability the answer?

    But TV is fighting back. In 2014, Sky launched AdSmart, its addressable TV advertising service. It tailors ad breaks based on the viewer’s profile and location: this enables advertisers to better target their campaigns and improves the effectiveness of TV advertising. Furthermore, due to an ad only playing when the specified audience is watching, it ensures advertisers’ money is spent efficiently. This is a crucial modernisation of the TV format which means that it can better compete with its digital rivals. Critically, it can be used across both linear and on-demand TV, and to target niche or region-specific audiences – particularly relevant for smaller or regional brands.

    Clear benefits

    Sky’s ‘AdSmart: Five Years and Forward’ study, published in August, found that addressable TV can increase ad engagement by 35% and cut channel switching by 48%; what’s more, viewers of addressable TV ads are 10% more likely to spontaneously recall an ad compared to linear TV advertising. This has clear benefits for advertisers – especially as TV doesn’t suffer from the brand safety issues that have plagued the likes of YouTube over the years. By mid-September 2019, AdSmart has delivered 17,000 campaigns for more than 1,800 advertisers.

    Increasing reach

    Three years after it launched AdSmart in 2014, Sky began its pan-European roll-out into Germany, Italy and Austria. Significantly, in 2019 two important UK players and competitors of Sky’s – Virgin Media and Channel 4 – confirmed that they would be joining the AdSmart platform. Virgin Media went live on the platform in early July; Sky Media will act as ad sales agents while Virgin Media will use both AdSmart and tech developed by its parent company Liberty Global. Virgin Media will also be trialling AdSmart on Virgin Media One in Ireland towards the end of 2019. This month, Sky announced that Channel 4 would be joining the platform in a deal that includes Channel 4’s own channels as well as broadcasters for which it handles advertising sales, including UKTV and BT Sport.

    AdSmart’s roll-out across Europe as well as its partnerships with key players in the UK gives international advertisers the ability to target and reach consumers in key western advertising markets, and the uptake of addressable TV will surely only grow over time.

    ECI’s view: great for clients new to TV, but not ideal for those looking for mass reach

    AdSmart is a great tool for clients who are new to TV advertising or who have a niche/hyper-targeted audience or regional demographics they want to deliver a message to at potentially a fraction of the cost of traditional TV campaigns.  It allows TV to have an addressable function, driving impactful messages to the correct consumer 100% of the time. It is a union of the brand building ability of TV with the precise targeting capabilities of digital.

    However, this is not a silver bullet. The extra cost of addressable ads often outweighs the targeting gain, meaning that every contact in the target group is more expensive – and you’re not benefitting from the overspill of traditional TV activity, reaching unintended consumers, as AdSmart treats the TV screen as a solely digital platform. Additionally, AdSmart activity is not independently reported through industry bodies such as Barb: reported outputs come from NBCU’s CFlight, an internal tool developed by NBCU. Finally, AdSmart ads cannot be dropped into live programming – spots during major events such as live sports must be purchased in the traditional way.

    Addressable TV is an exciting development and gives TV a more level playing field when competing with digital, but it’s not right for all brands all the time, particularly those who seek mass reach.

    AdSmart is just one of the media developments impacting on inflation that we examine in our Inflation Report Update, released this week. You can read it here.

    Image: Shutterstock