Here’s today’s AdExchanger.com news round-up… Want it by email? Sign up here.
Pyrrhic VCs
Hunter Walk, co-founder of the VC fund Homebrew, elaborates in a blog post on the theory of “Winner Take None” growth categories, which are fueled by massive venture capital investments that lead to fierce competition but no sustainable businesses.
The timeliest example is rapid delivery services, which raised billions of dollars with no real winner to speak of. But the coworking office management sector (looking at you, WeWork) was also a Winner Take None bubble, as were public scooter transport startups, which exploded in popularity one summer and then left investors holding the bag.
All of these categories spend massively on advertising to scale their user base but never reach a profitable customer acquisition rate, even when rivals disappear.
From Walk’s point of view, these are simply bad bets and lost stakes.
Jen Hyman, co-founder and CEO of Rent the Runway, had a more cynical frame when she discussed the same trend on a recent VC podcast.
She noted that the same investors pumping tens or hundreds of millions into go-nowhere startups prodded those same startups to spend massively on Google and Facebook ads, where the VCs were even more heavily invested.
So even when the VCs lost, they won.
Not Ad-ing Up
Ad revenue is a shrinking slice of income for news publishers.
The New York Times and Fox Corporation, both of which reported earnings on Tuesday, are making exponentially more money from non-advertising revenue.
The Times reported $73.8 million in Q2 ad revenue, up 6.5% YOY. That’s a turnaround from last quarter’s 8.5% decrease.
But NYT’s Q2 digital subscription revenue is now nearly quadruple its ad revenue. Its digital subscription revenue has grown by double-digit percentages for the past five quarters. But over the same period, its ad revenue has been flat or down.
Meanwhile, Fox’s cable news business has long relied on affiliate fees for the bulk of its revenue.
In Q2, Fox’s cable division reported a 10.6% YOY decrease in ad revenue, from $358 million to $320 million. Affiliate revenue dropped by 1.5%, but still accounted for $1.03 billion, which was more than triple its total ad revenue.
Why SMBs Can’t Win
A Kellogg School of Management study finds that the loss of offsite data has increased customer acquisition costs by 35%, disproportionately affecting smaller advertisers.
This isn’t shocking news. Apple’s privacy changes aren’t about adherence to individual privacy preferences. They’re about privacy-based business scenarios.
For instance, Apple still continuously tracks iPhone locations, even when customers explicitly opt out of location tracking. In Apple’s view, the privacy violation would be to share, sell or expose that data to a third party.
Which is why the privacy revolution is really a first-party data revolution. And big companies with sophisticated first-party data practices and methods for collecting and activating data for marketing have a huge leg up.
“A lot of the discussion around privacy regulation has been focused on the consumer side, and for good reason,” writes researcher and marketing professor Anna Tuchman. “But we found that removing offsite data makes it harder for smaller advertisers to acquire new customers and compete with incumbent firms.”
But the Kellogg report also underscores why an apparent injustice to small business hasn’t resonated with the public: Two of the four authors are Meta execs, and the data comes from Meta.
But Wait, There’s More!
ESPN signs gambling deal with Penn, which sells Barstool back to its founder, Dave Portnoy. [Axios]
The Privacy Sandbox conundrum: Ad tech vendors remain cautious about Google’s vision. [Digiday]
The Atlantic’s ad business takes a short-term hit as it tries to achieve profitability. [Axios]
IAS unveils an exclusive partnership with Twitter (fine, X) to provide pre-bid brand safety and suitability. [release]
The local-news crisis is weirdly easy to solve. [The Atlantic]
You’re Hired!
Yext appoints Tzi-Kei Wong as chief product officer. [release]
