Tag Archive: online advertising

1. Netflix with Ads: room for improvement

   May 11, 2023 12:57 Comments Off on Netflix with Ads: room for improvement

   It’s been six months since Netflix launched its ad-supported tier. The streaming giant announced that it would introduce ‘Netflix Basic with Ads’ following a string of disappointing results in terms of subscriber numbers in 2021 and 2022. Despite vowing in years gone by that Netflix would never have ads, CEO Reed Hastings announced the move in the spring of 2022, and the new, lower-priced tier, launched that fall. There was great excitement amongst advertisers that the notoriously difficult-to-reach Netflix audience would finally be reachable. So how’s it going?

   An encouraging reaction from consumers…

   Whether through sheer luck or clever forecasting, Netflix’s cheaper ad-supported tier launched just as the cost-of-living crisis hit households in many countries. Many people view streaming platforms as a necessary expense, with entertainment providing a release valve for the strains of living through an economic crisis. What’s more, the proliferation of streaming platforms means that people are eager to spend less where possible. Young people in particular are switching to ad-supported tiers, driven by financial pressures and perhaps a greater tolerance of advertising. All this means that, two months after its launch, Netflix with Ads had one million subscribers in the US; it plans to increase that figure to 13.3 million by the third quarter of 2023. This will be music to the ears of advertisers; how times have changed since the early days of streaming when advertisers feared that consumers would be lost to ad-free environments.

   …but a lukewarm reception from advertisers

   While consumers have been relatively enthusiastic about Netflix’s ad-supported tier, the streaming giant had a more difficult start on Madison Avenue. Advertisers and media buyers were frustrated by the high CPM, which started at $65. While it is now lower, complaints centered around the fact that Netflix’s targeting capabilities and audience numbers did not warrant this price level; indeed, Netflix was forced to issue rebates after missing viewership targets. In December, it was reported that they had only delivered 80% of the expected audience.

   While Netflix’s CPM has now been lowered to around $55, many believe that $45 would be fairer given the platform’s current targeting capabilities, which are not yet up to par with those of other streaming providers, although to be fair, the likes of Disney+ and Max already had advanced ad sales operations up and running from their linear and cable set-ups. But advertisers are understandably not interested in ‘fair’ – they need to know that every dollar is being spent in a way that drives value, especially in the current economic context. For that, they need better ad targeting and third-party measurement. Campaign delivery was largely manual in the early phases of ads on Netflix and third-party measurement wasn’t available, but it is gradually opening up to third-party measurement in a signal that it will increase bidding volume.

   Netflix will host its inaugural Upfronts presentation next week (although it has pivoted from a live event in New York to a virtual, streamed one – likely because of picket lines for the WGA strikes), and will be eager to assure advertisers that innovations in the pipeline will bring its ad product up to scratch. Advertisers who attend Netflix’s session will be looking for three key things: ad capabilities on a par with those of its competitors, lower pricing and a larger audience. Because, despite the difficult start, brands know that once the creases are ironed out, Netflix’s ad product has huge potential. That’s why they haven’t abandoned the streaming giant just yet.

   What’s Netflix doing to address advertiser concerns?

   Netflix is acutely aware that improvements need to be made, and there are changes being made both to how it runs its ad sales operation and to its product offering. To address the former, it has hired Jon Whitticom, formerly the CPO of Comcast-Freewheel, to consult on whether it should build its own ad tech, or acquire a company with existing, high-quality capabilities. Netflix is currently partnered with Microsoft, but the issues that its ad offering has experienced so far, alongside Whitticom’s role, suggests that this partnership may not last much longer as Netflix seeks to in-house its ad sales operation.

   A few weeks ago, Netflix’s VP of global advertising sales teased some of the features that the streaming platform will soon launch. These include more advanced ad targeting capabilities; at launch, advertisers could only target by country, but more categories have been added including age, gender, state and designated market area (in the US). More interestingly, Netflix now also supports targeting by eight content genres, such as comedy, romance and action, as well as targeting by first impression, which guarantees a brand will be the first ad shown to a user during their viewing session. This product is likely to be sold at a premium.

   Advertisers will also be excited about the ability to buy inventory against Netflix’s Top 10 list, which is generated on a daily basis and ranks the top shows and movies by total hours viewed, and is displayed to viewers when they log in. This would give advertisers the ability to reach millions of viewers in a concentrated period of time.

   Netflix with ads has huge potential

   Although the launch of Netflix with Ads was a bit rocky, the streamer seems to have recognised that and is implementing solutions and features to make its ad sales operation worthy of its content. But there’s still more potential, for example creating a data clean room. Layering in first-party data, incorporating conversion-attribution and allowing for measurement of reach and frequency beyond the Netflix buy would be an extremely exciting proposition for advertisers.

   Netflix is home to some of the best streaming content in the market. If it can complement that with market-leading targeting and measurement capabilities, it will be a hard proposition to beat, and then, for many advertisers, worth the premium price.

   value@ecimm.com

2. Is it game over for TikTok?

   April 5, 2023 19:26 Comments Off on Is it game over for TikTok?

   It’s a rite of passage for all social media platforms: the scrutiny that comes with increasing size, power and revenue. National and supranational bodies in the US, the EU and others are constantly probing Meta and Google, handing out fines before apparently starting the process all over again. But the scrutiny that TikTok is seemingly more serious. Thanks to its Chinese ownership and concerns around whether the Chinese government has access to TikTok user data, the social platform has already been completely banned in India, and the governments of the US, the UK, Belgium and Australia have banned staff from using it on work devices – as have the three main institutions of the EU. Some countries including, crucially, the US, are considering a total ban. This would have significant ramifications for the ad industry and for marketers who rely on access to TikTok’s passionate, engaged, Gen Z audience.

   TikTok is big – and it’s getting bigger

   TikTok is a major player in the digital ad industry globally and particularly in the US. In 2022, its share of US digital ad spend – 2.4% – was comparable with YouTube’s. That share is expected to grow to 3.1% in 2023 and 3.5% in 2024. Its net ad revenues could double in two years, to $11bn in 2024. Three in four US advertisers expect to increase their spend on TikTok in the next year. There’s no denying TikTok’s growth is impressive. It has surpassed Twitter and Snapchat, but it isn’t even in the same ballpark as Google and Meta. However, what it does have over these two tech titans is cultural cachet. That’s what makes it so exciting and so important for advertisers.

   Should advertisers continue to invest in TikTok?

   As suspicion of TikTok increases, particularly in the West, advertisers will need to consider if it’s worth the risk to their brand safety. Even if there isn’t a ban in the US or other major countries, advertisers will need to monitor the situation. Theoretically, negative rhetoric alone could translate into a drop in the number of users. There’s also a possibility that the US administration will stop short of a ban, but will pressurize advertisers to divert their ad dollars, in a similar way in which brands adhered to the trade embargo on Russia after the latter invaded Ukraine in 2022.

   However, there is one crucial factor to consider; how much TikTok users love TikTok, especially Gen Z. 45 million American Gen-Z-ers use TikTok, and it’s their most-visited site. They will not give it up easily, doubtless claiming that a ban would violate their right to freedom of expression. For that reason, it’s safe for brands to continue investing in the platform, at least for the time being. Just look at the #StopHateforProfit Facebook boycott – when things had quietened down, brands re-instated their spend on the platform, without any backlash, because people still wanted to use Facebook.

   What are the alternatives to TikTok?

   But even if it is safe for brands to continue investing their ad dollars in TikTok, it’s wise not to rely solely on one platform – even less so when its future is in question. So where else can marketers reach the lucrative Gen Z audience?

   These younger audiences love TikTok – there’s no doubt about it. But it’s not the only digital platform they use, and short-form video isn’t the only media they consume. Advertisers don’t have to invest in like-for-like media to reach them. If TikTok is banned, the war for attention – both from consumers and advertisers – will be intense. That’s especially the case for Instagram and YouTube, who have developed copycat products (Reels and Shorts respectively) with the sole aim of replicating TikTok’s success. These products also have the advantage of more capabilities such as retargeting. Instagram’s parent company Meta will be rubbing its hands in anticipation. It was only last year that it paid a consulting firm to create a US-wide campaign to turn the public against TikTok.

   Snapchat, the other ‘challenger’ social media network, will also be hoping to seize the opportunity. There may even be new players rushing to fill the vacuum left by TikTok by creating a platform that mimics the Chinese app’s virality and rapid rise in popularity.

   But there are alternative approaches to simply reallocating budget that was previously invested in TikTok. Investing in a diverse range of channels that align with a brand’s marketing goals helps build resilience. This is especially true given that Gen Z is as diverse as any other generation and not 100% obsessed with TikTok and short-form video. It is also worth taking the opportunity to build up first-party data, with the death of the cookie approaching quickly and regulators closing in on Big Tech. This isn’t straightforward, but the long-term gain would be significant.

   An uncertain future for TikTok and the advertisers who love it

   No one knows whether TikTok will be banned outright in the US. It’s working hard to highlight its contribution to the US economy, to culture and to the success of US businesses. It’s also created a $1.5 billion initiative called Project Texas, which will ensure that American data is stored on ‘American soil by an American company overseen by American personnel’. The idea is to give the US government confidence that their Chinese counterparts cannot access US user data.

   There’s also likely some reluctance among the Biden administration and the wider Democratic party to ban TikTok. After all, Gen Z is a key demographic for them in the upcoming Presidential election. Banning TikTok would ostracize them and remove an excellent means to engage with them.

   If TikTok is banned, however, there are plenty of competitors who will happily absorb any ‘spare’ ad dollars. In any case, whether it is banned or not, it would be wise to diversify – into other social platforms, yes, but also into strategies that build first-party data and make brands less reliant on the Big Tech walled gardens. The scrutiny that TikTok is under could be a sign that how all the Big Tech firms collect and use data could come under the cosh. Being less dependent on them can only be a good thing.

   value@ecimm.com

3. The future is retail – but buy carefully

   March 23, 2023 17:39 Comments Off on The future is retail – but buy carefully

   For much of the last decade, Google and Meta have shared a duopoly of the online advertising sector, controlling the market with a share of more than 50%. But that changed in 2022, with the two tech giants grabbing 48.4% of the US digital ad market. That’s compared to $54.7% at their 2017 peak. Their share is expected to drop further, to 44.9%, in 2023. That is of course still a lot – especially considering the vast size of the sector. However, the fall illustrates how crowded the market is becoming and a shake-up of the companies that have long dominated online advertising. The same story is playing out across the world. Google and Meta are projected to accrue about a 40% share of the worldwide total in 2023.

   The challengers are diverse. They include TikTok (which arguably gets the most attention and is sucking ad dollars away from Meta), Microsoft and Apple. But possibly the biggest threat – and the one that Meta and Google are likely most worried about – comes from the Retail Media Networks (RMNs). Investment in US retail media advertising is expected to reach $28.9 billion in 2023, up from $17.4 billion in 2021.

   What’s behind the meteoric growth of retail media networks?

   With initiatives such as data protection legislation and Apple’s app tracking transparency, online advertising has posed more of a headache to advertisers, while simultaneously becoming more important than ever. Limits to behavioral targeting and measurement have ‘kneecapped’ the likes of Google and particularly Meta. This means that advertisers have been looking for places to invest their budgets where they have more certainty about return. They’ve woken up to the treasure trove of customer purchase data and behavior that retailers – particularly online retailers – have access to, especially now that data is more difficult to obtain. Customers are normally logged in using personal credentials when they shop online. That makes it easy to collect details about shopping habits, interests and behaviors without running up against data regulation restrictions. What’s more, the ability to reach shoppers near the point of purchase allows marketers to track the effectiveness of a particular ad more easily. That’s the ‘holy grail’ of advertising. These capabilities are even more appealing in inflationary times, when advertisers want more certainty around ROI.

   The appeal of advertising on the RMNs goes even further. Consumers frequently view online advertising as annoying or even creepy. However, customers on retail websites are more likely than not in a shopping frame of mind, so ads are less likely to be seen as a distraction or nuisance. They could even be perceived as helpful.

   The key retail media players

   Any retailer that has a website or digital loyalty card has the potential to become a retail media network. Indeed, the loyalty cards that became popular during the 1990s are a gold mine of customer purchasing insights. But there are two players in this sector who dominate.

   It will surprise no one that Amazon is by far the largest of the retail media networks. It is a distant third behind Google and Meta in the online advertising sector, but its share of the market is growing. In 2024, it is expected to account for 12.7% of all US digital ad dollars, compared to 17.9% for Meta. The fact that its ad revenues soared by 23% in Q4 of last year (vs Q4 2021) – and that this happened in an ad slowdown that is battering its rivals – demonstrates Amazon’s strength and the appeal of its product. The e-commerce giant now refers to its ad business as one of the company’s three ‘engines’, alongside retail and cloud computing. Indeed, its ad revenue is bigger than its Prime, audiobooks and digital music revenues combined. And it’s twice as high as that of its physical shops, including Whole Foods.

   Walmart, the world’s largest retailer, is another key player in the retail media sector. Its retail advertising revenue is significantly smaller than Amazon’s as it was relatively late to the e-commerce party. The size of its e-commerce marketplace is significantly smaller than Amazon’s – the latter’s Q4 e-commerce sales were more than Walmart’s for the entire year in 2022. 61.8% of Americans say that Amazon is the site they use most often for online shopping, versus just 8.6% for Walmart. However, the cost of advertising on Walmart is attractive. The average CPC was $0.38 in Q4 2022, compared to $0.85 for Amazon. This is largely down to the fact that Walmart has far fewer sellers than Amazon, so there is less competition for ad space. Walmart’s increased focus on its ad business created a bright spot in its otherwise gloomy Q4 results. Its ad revenue saw growth of 30% year on year, increasing to $2.7 billion in 2022.

   How should advertisers approach retail advertising?

   In straitened times, the appeal of the easily trackable nature of retail advertising is easy to understand. McKinsey found that around 70% of advertisers see somewhat or significantly better performance on RMNs than on other digital channels. However, it’s important to proceed carefully, and not get swept up in the hype that currently surrounds retail advertising. Because, inevitably, there are still factors that need addressing. The sector lacks a set of standards and measurement protocols. This makes it difficult for advertisers to assess the effectiveness of ads on one network versus another. Large brands such as Unilever have called for the RMNs to unite and create a framework for increased transparency. Until that happens, brands need to exercise caution, and invest only if they are looking to target consumers on their shopper journey. WARC warns that retail media is a potential ‘performance plughole’ for advertisers. It cautions against the temptation of allocating an increasing proportion of branding budgets to bottom-of-funnel channels such as retail media.

   The future is retail, but buy carefully

   The RMNs and other smaller online ad players like Apple don’t pose any immediate threat to Google and Meta in terms of the size of their ad revenue and the sheer quantity of ad dollars they attract in the US and globally. However, they have upended the long-standing duopoly, and that can only be a good thing. Increased competition drives innovation and decreases prices. Futhermore, the measurability of retail media will shine a light on channels that don’t deliver similar levels of sales results or business outcomes for brands.

   These networks are undoubtedly a great opportunity for brands, allowing them to reach customers at the point of purchase, when they’re in a buying mindset and likely to find ads less annoying. And of course, there’s the fact that they don’t come up against the data regulation restrictions that so beset Meta. But caution is crucial. With such a challenging economic context, it’s tempting for marketers to invest more of their budgets in bottom-of-the-funnel activities, at the expense of branding campaigns that build longer-term resilience and aid post-downturn recovery. Transparency, careful planning, precision and optimization are the keys to enduring success. RMNs certainly play an important role, but they aren’t the whole story.

   value@ecimm.com

   Header image: 13_Phunkod/Shutterstock

4. What’s happening in the metaverse?

   February 14, 2023 11:39 Comments Off on What’s happening in the metaverse?

   Reading the press at the end of 2021, you would have been forgiven for thinking that, by early 2023, we’d all exist mainly as avatars in the metaverse. Facebook had rebranded its parent company to Meta, and we were all breathlessly evaluating the possibilities.

   Clearly, the buzz has died down, and the metaverse is still very much a work in progress. Consumers are relishing real-life experiences after virtual ones dominated the pandemic, so appetite to strap on a heavy VR headset is not as high as anticipated. But that doesn’t mean that the metaverse is dead in the water; indeed, experts are still busy developing and exploring the various opportunities that the new platform has to offer. Mark Zuckerberg announced that he is planning to spend billions of dollars on improving metaverse accessibility – so what are the opportunities and how could brands harness them?

   Travelling from home

   The pandemic hit the tourism industry hard and, although traveler numbers are recovering, the industry feels a little more vulnerable, particularly in the face of climate change. Some destinations are using the metaverse to build their virtual worlds, thereby opening themselves up to people who are reluctant or unable to travel. Tuvalu, for example, is severely affected by climate change: its very existence is threatened by temperature increases, rising sea levels and droughts. The Pacific island’s 12,000 residents are keen to become a digital nation in the metaverse in order to ’preserve’ their country and to ‘remind our children and grandchildren what our home once was’.

   Meanwhile, Seoul’s main motivation is to ‘create a metaverse ecosystem for all areas of its municipal administration’. The platform will also host virtual sessions of cultural events and tourist attractions, opening up access to the global audience. VR tourism has been backed by some of the biggest players in the travel sector such as Delta Air Lines, Hilton Worldwide Holdings and Qatar Airways, with Disneyland providing VR experiences for families. Development of tourist attractions in the metaverse offers up the opportunity for big profits, with minimal cost to the individual. A virtual island called ‘VR City’, which will feature some of the most famous landmarks across the world, could soon be welcoming visitors for just €2 ($2.20).

   Transforming the workplace

   Streamlining the workplace while maintaining efficiency, and making workers feel welcome and comfortable is a priority for businesses. With additional challenges since the pandemic, finding the balance is something everyone is still trying to grasp. An AI CEO could be the answer. That is the route that Chinese company NetDragon has taken: they say it ‘is a move to pioneer the use of AI to transform cooperate management and leapfrog operational efficiency to a new level’. Not only does this mean the quality and speed of work tasks will improve, but the person or people currently doing the job of CEO will be able to move into other segments of the business and facilitate growth. A metaverse workplace would bring a new meaning to collaboration, with employees from any geographical location able to work in the same ‘room’, as if face-to-face. The main benefits expected are improved collaboration, faster training, less office space needed, the simulation of co-presence and fostering company culture.

   A report commissioned by US software company Ciena found that, of 15,000 business professionals across the globe, more than 78% would be open to participating in more immersive experiences within the metaverse, rather than standard video calls. However, there are risks. Workers would need to be trained to ensure that they do not become technologically unemployable, and bosses would need to be aware of loneliness and feelings of isolation among their workforce – virtual collaboration will never be the same as face-to-face contact. Meta’s Angie Gifford highlights that the metaverse is not a substitute for face-to-face interactions but that for ‘the time we spend online, we want to bring up the quality and we also want to bring people together that cannot be together’. A shift to a metaverse workplace also creates some practical problems such as security threats and privacy, and connectivity. It is important, however, to remember that this shift is still a work in progress and there are a lot of developments yet to be made. It is not going to be an overnight change, with Zuckerburg expecting an ‘embodied’ metaverse to become mainstream only in the next five to ten years.

   What does this mean for the world of business?

   All kinds of sectors have opportunities in the metaverse, just as they would in the real world, and first-mover advantage is likely to apply. One example is real estate, whose value is affected by location and proximity, just like in the real world. The Creative Director of the Decentraland Foundation (Decentraland is an area in the metaverse), shared some sales history: ‘when we first sold land it was all sold at $20 a pop, and we sold it all. Now, I think the cheapest you can buy is $3,500. So you can see the speculator already made a lot of money’. Another sector that has been thriving in the metaverse is the fashion industry; users can style their avatars as they please, and clothing brands are only too happy to oblige. Balenciaga, for example, teamed up with Fortnite to create a $10 hoodie, which was also sold in real life for almost $800.

   Exploration is key for companies at this stage, and there are myriad ways for companies to dip their toe into the metaverse. JP Morgan, for example, has a tiger walking through the lobby of their metaverse site, but was a low-risk way to start making a name for themselves in the metaverse.

   And what about advertising?

   It is clear that the metaverse is an exciting new world ready to be explored. Some of the areas we have touched on above are ripe with opportunities for the adventurous advertiser, from fashion and automotive to travel and real estate. The gaming industry is another place to start: wildly popular games such as Fortnite and Roblox are virtual worlds that have been built in the metaverse. These games have youthful audiences of which a high proportion (46%) are women, making the games an attractive prospect for advertisers and a great way to start exploring this sphere. With opportunities such as billboards, live events and downloadable content, there is a lot to learn. Associated products such as measurement tools that will make the metaverse a more viable option for advertisers are being developed – for example, a system that has been patented in the US will be able to measure the complexities of viewability in a 3D format, to allow for more accurate media buying.

   Now is the time to identify approach, not focus on sales

   After the hype around the metaverse when Facebook rebranded to Meta, it feels like the buzz surrounding it has subsided somewhat. But that doesn’t mean that the metaverse won’t ever be big – it will just take a little longer to get there. That makes now an ideal time to experiment quietly, ahead of the rush when it does eventually take off. The focus shouldn’t be on sales – that will come later – but on identifying the right approach, so that when the crowds do come, sales will increase too.

   value@ecimm.com

   Header image by UK Black Tech on Unsplash

5. TikTok: the time is now

   January 18, 2023 10:10 Comments Off on TikTok: the time is now

   For nearly a decade, the Google-Meta duopoly raked in more than half the money invested into digital advertising in the US. And while they still dominate, 2022 was the first year since 2014 that that wasn’t the case. Their joint market share was 48.4% last year, and is expected to drop to around 44.9% in 2023. They’re still growing, just more slowly than the rest of the digital ad market. This slowed growth is likely down to the increasing number of formats available, the fact that people are spending less time online than they did during the pandemic and, of course, Apple’s infamous privacy update which requires apps to ask users if they want to be tracked.

   So who’s receiving the other half of US advertisers’ digital ad dollars? There’s Amazon, of course, whose ad business is powered by its ability to target users based on their purchase and browsing history. It commanded 11.7% of digital ad spend in the US in 2022, and that’s expected to rise to 12.4% in 2023. The streaming services are also getting a bigger share, with advertisers shifting spend from linear to connected and streaming TV. Roku, Hulu, Pluto, Paramount+, Tubi and Peacock combined made up 3.6% of the digital ad market in the US in 2022 – that percentage will rise significantly now that Netflix and Disney+ have launched ad-supported tiers.

   And then, of course, there’s TikTok. While the Chinese-owned short video app is still a relatively small player, with just 2% of the digital ad market in 2022, it’s the one that everyone is watching and packs a far bigger punch than its market share suggests.

   TikTok has a highly engaged, younger audience

   TikTok is taking up more space in marketers’ minds and media budgets thanks to its audience and how effectively it engages them. Insider Intelligence estimates that 61.3% of Gen Z in the US uses TikTok at least once a month, and adults in the country spend an average of 46 minutes on the platform – significantly more than the 28 minutes they spend on Instagram. These audiences are highly engaged – one study showed that the standard engagement rate of ads on TikTok is 6% – 10 times higher than Instagram’s 0.6%. Much of TikTok’s success in engaging its audience comes down to how it has shifted how social media is used, from finding things you like to discovering new things. It also allows its audience the opportunity for self-expression and to be authentically themselves. And the clincher? TikTok users are 1.7 times more likely to buy products they discover on TikTok compared to other platforms; TikTok’s commerce-focused hashtag, #TikTokmademebuyit, has been viewed more than 30 billion times.

   Lowering CPMs to attract investment

   TikTok is riding a wave just as advertisers are looking for ways to rein in their spending. It has responded to the economic downturn by reducing the cost of its ads in a concerted effort to appeal to marketers. The result is extremely attractively priced advertising, with CPMs half that of Instagram Reels, a third cheaper than Twitter’s and 62% less than Snap’s.

   How are advertisers responding to TikTok?

   In a word: enthusiastically. While a year ago, many would have viewed TikTok as an experimental platform, its popularity amongst young audiences and very high levels of engagement mean that it is now considered to be at least close to mature – but perhaps without the scrutiny that more established channels are put under. Some brands are prioritizing TikTok as much as Meta’s platforms on their media plans: the top 1000 advertisers in the US increased their spend by 66% to $467m from September to October of last year. Although TikTok has not been immune to the downturn in online spending – it slashed its revenue targets for 2022 by 20% – it is estimated to have made more than $10bn in ad revenue in 2022. Not bad for an app that launched worldwide less than six years ago…

   Fortune favors the cautious

   It’s very easy to get excited about TikTok, with its impressive reach and engagement – but there are reasons to be careful when advertising on the platform. As it grows it attracts, along with the other tech giants, increased scrutiny from national and international bodies. Washington DC is sufficiently alarmed about national security to ban government employees from using the Chinese-owned app on government-owned devices. India has banned the use of TikTok permanently, while several other countries, including Indonesia, have placed temporary bans on its use. Towards the end of 2022, an internal risk assessment conducted by TikTok’s parent company, ByteDance, found systemic issues with fraud and inappropriate data management. One employee familiar with such issues apparently said that it is impossible to keep sensitive data from being stored improperly on Chinese servers.

   These privacy and security concerns have the US government worrying about whether they should take the Indian route and restrict access to the app altogether. The Democrats are very reluctant to do so as it could alienate young people – an important part of their voting demographic – but are also aware that the platform could be used to spread disinformation in the presidential election next year.

   As things stand, there is no inherent risk of reputational damage for advertisers investing in TikTok ads. However, it would be wise to monitor the situation. While it is currently difficult to imagine tearing young people away from their favorite app, consumers are becoming increasingly aware of privacy and security. Things can turn quickly (just look at Twitter) and – teamed with the imminent and final demise of the cookie – brands should certainly be seeking to build robust audiences and communities and first-party data practices away from third-party platforms, for future-proof online marketing.

   value@ecimm.com

   Image: Shutterstock/Kaspars Grinvalds

6. Is Big Tech in big trouble?

   December 2, 2022 14:58 Comments Off on Is Big Tech in big trouble?

   The news has been full in recent weeks of stories about layoffs from the Big Tech firms. It started with Twitter: when Elon Musk took over and seemingly unleashed chaos, half of the social network’s workforce – 3,700 people – was told that they no longer had a job. Just a few days later, Meta announced that it would be letting 11,000 employees go, equating to an eighth of its workforce. Amazon is said to be planning to lay off around 10,000 people, largely in corporate and technology jobs, while Google is also rumored to have plans to reduce its workforce by around 6% (10,000 people) in early 2023.

   Do these redundancies tell a story of trouble brewing amongst the Big Tech companies, or are they simply a sign of challenging economic times?

   What’s behind the Big Tech layoffs?

   For years, Big Tech has benefitted from low interest rates, easy access to cheap money and an environment that encouraged expansion financed by debt. These conditions were exacerbated during the pandemic, when tech companies were some of the only businesses to grow thanks to home-bound captive audiences. The combined revenue of the five largest tech companies – Alphabet, Amazon, Apple, Meta and Microsoft – jumped by 19% in 2020 and 28% in 2021. The feeling of invincibility that these conditions fueled led to huge expansion: Twitter’s headcount doubled in five years, while Meta’s tripled.

   However, many of the Big Tech firms made a significant error: they assumed that the changes in behavior that drove their growth during the pandemic would continue in the post-pandemic world. That has not come to pass. Consumers have by and large returned to their pre-pandemic lifestyles, and Big Tech growth has followed suit – growth for the big five is expected to decrease to 9% in 2022, the same as it was in 2019, the year before the pandemic.

   But the tech hiring spree continued well into this year, for roles including working on new projects that wouldn’t necessarily come into profitability for many years (hello metaverse). There was also a desire to scoop up scarce engineering talent. Now that the proverbial has hit the fan in the wider economy, investors are demanding that efficiencies are made. The obvious first place to look has been the bulging workforces – and it’s likely that the leaders knew that some severe cuts would eventually need to be made, even as they were hiring left, right and center.

   What’s the situation with Big Tech and advertising?

   Advertising has of course been the rocket fuel that has launched many of the tech companies into the stratosphere. But that business model has become somewhat wobbly of late, with increased scrutiny on privacy laws and increasing competition from the likes of TikTok. Meta has been particularly affected by these two factors: in its Q3 earnings report at the end of October, it reported $27.2bn in ad revenue – a 4% drop year on year. The company is projecting another drop in revenue in Q4. Meta was hit to the tune of $10 billion when Apple announced it was allowing users to opt out of in-app tracking, and the effects of this move are undoubtedly still being felt. The impact of the recession and global tightening of belts will also be a factor – as is the growth of TikTok. Despite these issues with its core revenue-driver, Mark Zuckerberg still seems to be investing much of the company’s time and effort into the metaverse.

   Amazon, on the other hand, is enjoying increasing ad revenue. In its Q3 earnings report, the company disclosed that its ads business generated $9.5 billion in revenue, a 25% increase year on year and a clear demonstration of its increasing prominence in the sector. Amazon has been steadily investing in its tech offerings and attracting advertisers with targeting based on purchase history and other demographics which potentially leads directly to sales – and that’s especially appealing to advertisers looking to covert customers during a downturn.

   Ever-increasing scrutiny

   It’s not just economic trouble that the Big Tech firms are facing. Across the world, regulatory bodies in the US, Europe and globally are scrutinising the activities of the likes of Meta, Alphabet, Amazon, Apple and Microsoft, particularly when it comes to competition. Meta was recently fined €265 million by the Irish watchdog over privacy concerns, and the US, the UK and the EU have all recently launched reviews into Microsoft’s acquisition of Activision Blizzard. The deal, which would be the largest consumer tech deal since AOL bought Time Warner, needs the approval of 16 governments in order to go through, but currently has the go-ahead from just three – Brazil, Saudi Arabia and Serbia. Whether Microsoft succeeds or not will give a clear message about Big Tech’s ability to continue its meteoric growth in the face of fears that they wield too much power. Microsoft has for the past decade been seen as the ‘nice guy’ of Big Tech – if they can’t get the deal through, it seems unlikely that others would be able to.

   What does the future hold for Big Tech?

   Let’s start off by clarifying that despite the trouble we are seeing, Big Tech is going nowhere. These are still the most powerful companies in the world, and the death of the cookie will only reinforce that power – Meta and Alphabet in particular will become more powerful as the owners of increasingly valuable walled gardens with higher walls. But they may find that the next few years look different to the last decade or so.

   It’s likely that, given the fact that so many companies are laying off employees right now, that money will not be as free-flowing as it has been. With investors breathing down the necks of CEOs, cuts will need to be made – and the most obvious place to start (after workforce cuts) will be with long-term ‘blue sky’ projects. Pulling the plug on these will open the door to competitors, making Big Tech more vulnerable to future competition.

   Another effect of less investment in long-term projects focused on innovation will be a less entrepreneurial workforce: employees who aren’t profitable right now are likely to be let go, possibly to be snapped up by competitors and start-ups. Recruitment will also be more difficult as other industries become more ‘techy’ and require skilled workers – but are less bogged down by the controversies and scrutiny that mire Big Tech.

   Perhaps the most interesting consequence of the changes that are afoot will be the impact on Big Tech’s leadership, some of whom are among the richest and most famous CEOs in the world. Many of them act more akin to start-up CEOs who ‘move fast and break things’, as Zuckerberg famously said. They thrive on innovation and may find that they are not suited to leading in more constrained, sober times.

   A new era in online advertising

   Change is inevitably coming down the line for the tech industry, and by extension the advertising industry. And while any change to the status quo can seem alarming, in this case it could help usher in a better, more grown-up era in online advertising. Constant innovation in the online space has created huge opportunities to reach audiences in new and exciting ways, but it has also created huge complexity and risk to brand safety. Perhaps as these companies move from adolescence into adulthood, they will create a more measured, more easily navigable online advertising space. And that can only be a good thing.

   value@ecimm.com

   Image: Shutterstock/LookerStudio

7. Creating a sustainable media industry

   November 18, 2022 11:01 Comments Off on Creating a sustainable media industry

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   Over the last two weeks, the UN’s climate conference, COP27, has shone a spotlight on the urgent need for decisive action against climate change. Without immediate action, we are unable to maintain the Earth’s ecosystems. Change is happening, and there is more awareness of the problems facing the planet and what we can do about them. Many consumers are making a conscious effort to reduce their carbon footprint: more than eight in ten indicated that sustainability is important for them. This presents an opportunity for advertisers to demonstrate how they are meaningfully contributing to a more sustainable future, which will have a positive impact on both the planet and the bottom line. The obvious way to do this is to look at the business and transform supply chains and product packaging, for example. But it is possible to optimize for more sustainable media activity.

   Is the movement online enough to make media sustainable?

   On the face of it, the shift towards online and TV media seems to be a step in the right direction when it comes to the environmental impact of media. With fewer newspapers, posters and billboards being printed, this surely means a reduction in trees felled for printing. While this is true, it is important to consider the energy required to power the new digital age of media. The impact this energy consumption has on our planet means that more traditional media types might actually be more sustainable than online.

   The Shift Project’s 2019 report stated that digital technology was responsible for 3.7% of global emissions, which is around the same as the aviation industry. The explosion of video is partially responsible for this growth. Given that The Shift Project’s report was written prior to the pandemic, it can be assumed that these levels have since risen as a result of the worldwide reliance on the internet and video services during various lockdowns. The report notes that spending ten minutes streaming a high-definition video on a smartphone (which is the time taken to view approximately 20 adverts) is equivalent to using a 2,000W electric oven at full power for five minutes.

   Calculating carbon emissions

   Estimating digital carbon emissions currently requires complex calculations using shifting variables passing through numerous owners and so is not easily accessible. Even where it can be calculated, there is not currently a broadly accepted framework and so it is not reliably comparable. Moving forward, sustainability experts Carnstone are collaborating with other organizations to create an online carbon calculator called DIMPACT, which will be available to any company offering digital products and services.

   DIMPACT will help the industry gain further understanding of the carbon impact of digital media, giving companies transparency right through to the end-user. With this information available, it will facilitate more informed decision-making around sustainability and carbon footprints from both companies and consumers. It will also help prevent greenwashing. 84% of respondents in a Microsoft study said it is difficult to know whether brands are truly green or if they are greenwashing; 42% think brands should provide clear and comparable information on their products. This lack of clarity could be eradicated with the introduction of DIMPACT.

   Reducing carbon footprint for more sustainable media practice

   Many ways of reducing carbon emissions also positively impact the business as a whole. One key step that advertisers can take is to reduce their tech stack and potentially reduce the number of tech partners they work with. Reducing the number of layers between steps decreases the amount of indirect emissions and makes processes more transparent and easier to manage.

   Another suggestion is to reduce the data load of digital ads. This is beneficial for user experience, driving a faster ad load and higher CTR, and has a positive impact on carbon emissions. Some ad formats and compression rates have lighter data loads, and shorter ads are of course lighter than longer ads. Exploring the different avenues of data load reduction is an opportunity for both improved ad performance and environmental impact.

   Finally, a shift towards attention and away from viewability will improve both advertising outcomes and the carbon footprint of a campaign. Producing higher quality, better-targeted campaigns with ‘attention-grabbing’ creative drive higher user engagement and view times, and significant impact on brand lift metrics. And cutting out the ineffective online impressions that focus solely on viewability reduces energy waste, allowing the advertiser to deliver more sustainable media campaigns at a time when the health of the planet is at the forefront of the consumer’s mind.

   The major steps that the ad industry can take towards a more sustainable future are largely based on reducing the amount of energy used in the creation of ad campaigns. Perhaps another avenue to consider is how the energy that is used is produced. Could the industry start investing in green energy?

   Working towards a brighter future

   The ad industry is aware of the leading role it can play in driving positive change for the future of the planet. Major initiatives include Ad Net Zero, the industry’s drive to reduce the carbon impact of developing, producing and running advertising to real net zero; and the Cannes Lions new requirement that all entries include information about CO2 emissions from the work’s production process – using tools provided by Ad Net Zero. These efforts demonstrate the industry’s commitment to a greener future.

   value@ecimm.com

8. Advertisers boycott Twitter as Musk unleashes chaos

   November 17, 2022 09:59 Comments Off on Advertisers boycott Twitter as Musk unleashes chaos

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   We have written at length on ECI Thinks about Big Tech, especially Meta, Amazon and Google. What goes on at these companies often has a huge impact on the advertising industry, and it is therefore important to understand and reflect on their actions.

   While the likes of Meta, Amazon and Google sometimes seem a bit dysfunctional because they are ‘moving fast and breaking things’, to paraphrase Meta CEO Mark Zuckerberg, Twitter seems to have operated more under the radar. Although there have been issues with trolling and links to major events such as the insurrection on January 6^th, there were rarely any scandals to do with the company itself and it was a solid, safe option for advertisers.

   And then Elon Musk came along, moving very fast and breaking lots of things.

   What happened when Musk bought Twitter?

   As suggested above, Twitter always used to be a relatively safe social network. The focus was on famous people, brands and institutions connecting with their fans and supporters, and political figures with the public and media. While it never attracted the same kind of advertising investment as rivals Meta, it was a great way for brands to capitalize on cultural moments and create meaningful connections with consumers. However, it was never on stable ground financially – 2019 was its last profitable year, and one of only a few in its history.

   It was against this background that the world’s richest man, Elon Musk, announced in April 2022 that he had launched a hostile bid for Twitter. Over the following months, there was a lot of seesawing, with Musk withdrawing from the purchase several times, only to then forge ahead again. The takeover was confirmed on October 28^th of this year.

   As the New York Times put it, ‘If you thought Elon Musk’s will-he-or-won’t-he approach to buying Twitter was chaotic, the two weeks since Musk took the helm of the social media company have been downright anarchic, with his plans for Twitter flipping and flopping as furiously as a fish on a hook.’ Musk’s escapades have been covered in depth across the press, but involved laying off half of the workforce, scrapping the ‘blue tick’ verification feature and rolling out an alternative, before scrapping the new version very shortly afterwards.

   How are advertisers reacting?

   Musk assured advertisers early on that he valued their business and was worried about social media spreading partisan hate – indeed, he promised that Twitter would not become a ‘free-for-all hellscape’. However, his pledges to restore free speech have worried some that this will be a difficult line for the social network to tread and that it will indeed descend into a hellscape.

   Unsurprisingly, the threat to brand safety and the fact that investment in the platform is unlikely to be a major feature in their budget plans anyway means that many advertisers have chosen to boycott Twitter, at least for now. These brands taking a safety-first approach include major players such as General Motors, Pfizer, United and VW. Automotive advertisers are especially nervous about the fact that Elon Musk owns Tesla, and whether this means that their data will be less safe, or whether they will be at a disadvantage.

   Back in May, Twitter had 3,900 users, which decreased to 2,300 in August – before rising again in September when it temporarily seemed that the Musk deal was off. Musk reacted to news that advertisers were electing to boycott Twitter by threatening to ‘thermonuclear name and shame’ them, presumably not making a return to Twitter any more alluring.

   Perhaps attempting to smooth things over, Musk hosted a Twitter Spaces live audio discussion last week to address advertiser concerns and explain his vision for the future. Many left the session no clearer about what that vision is. Indeed, some even question whether Musk himself is certain. What does seem clear is that Twitter will move towards a subscription model – he has said that he wants half of Twitter’s future revenue to be from subscriptions. Many advertisers will be wondering whether this model will dilute the size and quality of audiences available to advertisers on the free tier.

   What’s next for advertising on Twitter?

   If advertisers are to return to Twitter with confidence, Musk will need to prioritize demonstrating to them that the platform is a safe place in which they can be sure of their brand safety. Advertisers will want to be confident that Twitter has clarified new policies for content moderation, that those policies will be consistently enforced, and that they align with industry standards. Lou Paskalis, the CEO of MMA Global, recommended in a thread on Twitter that Musk steps back from the day-to-day running of the company and hires a CEO with an understanding of how advertising works. He also said that Musk should publicly apologise for the damage he has done to the social platform. Musk has since said that he expects to reduce his time at Twitter and eventually find someone else to run the company – presumably in the hopes that this will have an impact on advertisers’ boycott of Twitter.

   The chaos at Twitter couldn’t have come at a worse time for the digital advertising industry, which is going through a period of unusual volatility. With a recession looming, advertisers are looking for certainty, and Twitter – with all its self-inflicted instability – just can’t offer that right now. With an upcoming recession that will likely lead to significant budget cuts, advertisers want to find easy places to pull spend from. If there is any uncertainty in a particular channel, that makes the decision easy. Other players in the online marketing sphere will be happy to step in.

   value@ecimm.com

9. Clear history: Google confirms its plans to kill the cookie

   March 22, 2021 11:17 Comments Off on Clear history: Google confirms its plans to kill the cookie

   In a blog post released on March 3^rd, David Temkin, Google’s Director of Product Management, Ads Privacy and Trust, confirmed that Google would be killing off the cookie, as early as January 2022. He also clarified the tech giant’s plans for targeted advertising and a ‘privacy-first web’. The tech, media and advertising industries have all known this is coming – Google first announced that it would be stopping support for cookies on Chrome back in early 2020, and it is not the first browser to do so. However, the blog post has got everyone talking about Google’s search for alternative solutions to targeted advertising, as well as proposals from other players. So what does it mean? And where will it leave advertisers?

   Why is Google stopping support for cookies?

   Google, like the other tech giants, has come under increasing scrutiny and regulation around the world, with regulators and lawmakers looking very carefully at the company’s privacy and antitrust record. Indeed, two hires that the Biden administration recently made would appear to confirm that the US will continue to robustly enforce antitrust laws and other regulations. What’s more, there is a prevailing and increasing sentiment amongst internet users that they are worried about their privacy: in research conducted by Pew Research Center in 2019, 79% of American adults reported being somewhat or very concerned about the way their data is used by companies. It’s also as simple as a change in consumer habits: in the third quarter of 2020, mobile devices (excluding tablets) generated 50.81% of global website traffic – a share that has consistently hovered above the 50% mark since the start of 2017. Mobile browsers and apps don’t accommodate web-based cookie tracking as effectively as desktops, so there is a hole in advertisers’ ability to target their users.

   What is Google proposing as an alternative?

   Google’s statement earlier this month and the ensuing debate makes it clear that the industry is still only in the early stages of redefining how the online media market will work when the cookie becomes defunct. There is still a lot of uncertainty, and the industry is in a period of frantic experimentation, urgently seeking the best way to effectively target consumers with advertising.

   In his blog, Temkin promised that Google would not implement new ways to track individual users around the internet, and vowed that the company would only use privacy-preserving technology that relies on methods such as anonymisation and aggregation of data. Google’s Privacy Sandbox initiative, which is seeking ways to protect privacy whilst allowing content to remain freely available on the open web, has plans to start testing one proposal with a group of advertisers in Q2 of this year. This proposal would group internet users based on similar browsing behaviours; only cohort IDs, rather than individual user IDs, would be used to target them. This approach is based on the same principle as Facebook’s, which offers advertisers the opportunity to target ads to certain categories of users based on their data. Google will be keen that this proposal is workable and appeals to brands, as marketers are already diversifying their ad spend up and down the funnel.

   Other players are exploring targeting alternatives as well

   It’s not just Google with skin in this game: other collectives and ad tech players are also seeking ways to balance privacy with personalised, targeted advertising. A major collective formed last summer, called the Partnership for Responsible Addressable Media (PRAM), has brought together the IAB Tech Lab, the WFA, major advertisers like Ford, Unilever and IBM, media agencies, tech vendors and publishers. PRAM is proposing relacing cookie-based tracking with tracking tied to individual email addresses, whereby a user would log into a participating site with their email address or phone number, which would then be scrambled and used to keep tabs on them as they navigate other participating sites. Google has called this email-based approach impractical, and claims that it wouldn’t meet ‘rising consumer expectations for privacy’, or ‘stand up to rapidly evolving regulatory restrictions’ – and therefore wouldn’t be a sustainable investment in the long term.

   Even taking into consideration Google’s motives for casting doubt on whether cross-site individual tracking will meet consumers’ and legislators’ expectations and therefore the wisdom of investing in such a targeting methodology, the tech giant isn’t wrong in its conclusions. Many view this as a bold act by Google – they are soberly letting go of bad habits while others are just trying to cut back on the worst parts and hoping it will be enough. Perhaps Google’s statement was in fact the most helpful thing that they could do for the industry as it approaches this crossroads, pointing out that what they are trying to do won’t work, and they need to start over.

   Industry experts aren’t yet sold

   While some industry experts and commentators believe that Google’s Privacy Sandbox proposal would be an improvement on the current, cookie-supported situation, others are yet to be convinced. They claim that Google is just swapping one form of invasive tracking for another and could, for example, work out who a user is by cross-referencing their information with an email address from one of Google’s owned sites.

   They are equally sceptical about the email address approach, pointing out that it would be easy to ‘reverse-engineer’ a user’s identity by combining scrambled information with other information available in the public domain.

   What are the implications?

   The implications of Google’s announcement are still unclear, and the situation will continue to unfold over the coming months. It’s safe to say, however, that we will never see anything close to the breadth and width of tracking coverage that cookies have given marketers over the last 25 years. It is thought that the demise of the cookie will affect 85% of online advertising as we know it. New solutions will come from a wide range of different sources and approaches, so will be fragmented. What’s more, a large share of online traffic may not be identified at all; outside walled gardens, contextual targeting is likely to become the main tool. That isn’t necessarily a bad thing – it offers marketers the ability to deliver ads to consumers when they’re in a specific situation or frame of mind, which can only be a positive as consumer behaviour becomes more fragmented and unpredictable. It’s also an antidote to many of the issues around brand risk and safety.

   It’s worth bearing in mind that, just because the ways in which we manage reach, frequency and targeting are being fundamentally redesigned, it does not mean that people will radically alter their media consumption patterns, or that there won’t be any ways to target people online. Large sites with good user experience and consumer trust will retain their traffic and they will still be open for ads, even if impressions are anonymous. Ad impact on brand metrics and sales will remain, even when conversions can no longer be tracked. As Google said in their statement, ‘advertisers don’t need to track individual consumers across the web to get the performance benefits of digital advertising.’

   How should advertisers prepare and adapt for the post-cookie era?

   For now, advertisers need to understand which tools will be lost, which will remain uncertain and which will not change. They should also keep their ad tech flexible and rely on their media agencies for guidance and updates. This is probably not the best time to be investing in ad tech or in-housing.

   Looking ahead, even when data outside of Facebook and Google’s walled gardens is scarcer, advertisers should not resort to increasing their spend with these two platforms beyond what is proportional to media consumption patterns. They should also refrain from resorting to last-click attribution as view-through conversions tracking and MTA fail. Survey-based data and insights on brand metrics will undoubtedly surge.

   Many advertisers are, rightly, focusing on their valuable first-party data, exploring ways to leverage it in order to make better-informed advertising decisions. Many will seek to work with partners to establish a data-exchange from different sources, including with the walled gardens. Marketers will also be able to integrate their consumer research with their first-party data, giving a clearer picture of what consumers do, and why they do it. This will in turn allow them more effectively target audiences with the best messaging in the best context.

   The key takeaway? Hold tight – there’s no need to panic or do anything rash. Alternatives are being worked on and anyway, a world without the ability to track your consumers across the web might not be such a bad place.

   If you would like to discuss how you can prepare for the post-cookie era, please feel free to contact us: value@ecimm.com

   Header image: atk work / Shutterstock