Amazon’s media businesses are worth far more than investors think – approximately $500 billion, or 38% of the company's market cap, according to investment bank Needham & Company. This week on AdExchanger Talks, Needham Managing Director Laura Martin talks about why.
In a June 16 research note, Needham estimates that the lion’s share of Amazon’s media value comes from subscriptions. The note cites a survey which found that 20% of Prime subscribers say they joined the loyalty program primarily for access to the associated media and entertainment offerings (Prime Video, Prime Music, Twitch, etc.).
The other 80% are in it for the free shipping. Given the immense number of Prime subscribers (175 million), that 20% adds up to some $20 billion in 2020 revenue directly linked to media subscriptions.
That said, it’s the acceleration of Amazon’s advertising revenue – $12 billion in 2019 and $18 billion expected in 2020 – that serves as the main reason for Needham’s overall bullishness, according to Martin.
“If you’re growing 50% a year, you’re getting to be a meaningful advertising alternative for brands really quickly,” she says. “Amazon is the only one that can really close that loop for any meaningful portion of your ad buys. Television or search or even Facebook – without a shopping cart almost no one else has that ability. That feedback loop is much less direct for any other company.”
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The past week has seen a reckoning begin over the content policies – or lack thereof – governing the big media platforms.
Major marketers, including Coca-Cola, Unilever and Diageo, are halting spend on social media at least through July.
But there’s always the danger than these efforts end up being an exercise in virtue signaling once they’re out of the headlines.
To keep the pressure on after this initial period of backlash, IPG Mediabrands has released media responsibility principles to help clients hold their media partners accountable for the content on their platforms.
Now is “the moment to seize on the opportunity to get this to resonate across the industry,” said Joshua Lowcock, chief digital officer at UM and global brand safety officer for IPG Mediabrands.
Unlike brand safety, media responsibility is about more than protecting a brand and its reputation – it’s about protecting the communities a brand serves and acknowledging the impact that media has on society.
The principles encourage clients to seek out suppliers that promote respectful discourse and represent diverse voices, and to divert spend from properties that create hostile environments, marginalize groups of people and/or peddle misinformation.
“Even a ‘brand safe environment’ has other implications to consider, like what is your content funding and does it result in harm to society?” Lowcock said.
Mediabrands is also encouraging clients to consider whether media partners use data for targeting in a nondiscriminatory way, how they protect the privacy of children and how well they enforce their own policies related to media quality.
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Cadillac was teed up for an exciting 2020. The company has a fleet of new vehicles, including a new Sedan line and a new Escalade, which debuted in February as part of a campaign with the Oscars.
A few weeks later and, well, you know the story.
But Cadillac isn’t doom and gloom about its prospects.
The company has seen “pent up demand” for transportation, said Cadillac CMO Melissa Grady. The coronavirus crisis has also opened up new opportunities to engage with car owners, she said, such as people using onboard WiFi for work when they don’t have access to an office.
Automotive advertising hasn’t returned to normal, though, of course – and it maybe never will, Grady said. The role of CMOs is to study the new consumer landscape and understand where their brand fits in now.
AdExchanger caught up with Grady.
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"On TV And Video" is a column exploring opportunities and challenges in advanced TV and video.
Today’s column is written by Allen Klosowski, senior vice president of advanced solutions at SpotX.
The rise of cord cutting, new streaming services and advanced digital delivery have changed the face of TV advertising’s future. While traditional TV represents most television ad spend, advertisers have diverse options for their media plans these days. TV advertisers can target audiences with precision in ways that are not possible exclusively on traditional.
As more environments shift to supporting VAST compatibility, advertisers can serve ads into linear programming, targeted to the household, using digital strategies to create seamless, open interconnectivity across the TV ecosystem.
The definition of addressable TV has expanded from early proprietary systems that were difficult to scale to new distribution platforms that allow buyers to insert personalized ads to the television. As a result, we face a future of frictionless buying across multiple television delivery methods, but the results will be the same: a better experience for advertisers and viewers, and more revenue opportunities for programmers and distributors.
However, confusion about addressable TV advertising abounds. There is a persistent myth that there's not enough OTT addressable TV inventory to efficiently scale and support an effective video campaign.
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"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Julian Baring, general manager, North America, at Adform.
The COVID-19 pandemic and its economic implications are catapulting the tech-driven marketing world into a new phase of maturity: a long-overdue period of reflection and refinement, during which the lessons of the past 12 years will be distilled and applied to marketing organizations.
As brands across industries feel the pinch of the recession, they shouldn’t race to downsize their human capital. They must first look to correct the inefficiencies and leakages that have emerged within their expanding tech stacks.
Since the Great Recession, the marketing technology world has followed a predictable pattern of growth and innovation – the kind required for nascent opportunities to reach maturity. A large part of this innovation and growth has materialized within the media supply chain in the form of new, often automated tools for media planning and buying, creative development, performance monitoring, campaign optimization and other functions. These tools have elevated the discipline of marketing over the past decade, but the speed of innovation and race to keep pace often meant sacrificing efficiencies for the sake of rapid adoption.
As companies steel themselves for the coming economic challenges following COVID-19, business practices and systems must shift. We can’t assume we’re going to witness a V-shaped economic recovery. Marketers must adapt and usher in a new era of efficiency.
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Here’s today’s AdExchanger.com news round-up… Want it by email? Sign up here.
Ducks In A Row
The US Justice Department’s antitrust investigation of Google is coming to a close. By the end of July, the DOJ seeks to have final documents and data from competitors that have allegedly been hurt by Google’s dominance in online advertising, Reuters reports. State attorneys general are still investigating Google, but many will likely join the federal suit. Some AGs reportedly held a virtual meeting with the DOJ on Friday. “They’re not joined at the hip but there is a lot more coordination,” an anonymous source tells Reuters. While the DOJ is looking into Google’s advertising clout, state AGs are considering going after the company for privacy violations under state statutes that bar deceptive practices.
Screens Within Screens
The video game Fortnite is flexing its muscles with new marketing partnerships. As with Amazon’s Twitch, Fortnite is emerging as a go-to spot for music promotions and movie trailers, a major advertising category for platforms such as Twitter, Snapchat and YouTube. This past weekend, Fortnite, which is owned by Epic Games, aired three Warner Bros. Christopher Nolan films. A month before, the trailer for the upcoming Nolan movie “Tenet” premiered on Fortnite. The movies played in “Party Royale” (Fortnite gaming takes place in “Battle Royale”). Diplo also headlined a promotional “Party Royale” concert last week with Young Thug and Noah Cyrus, guest singers on Diplo’s new record. Fortnite has slow-rolled its push into marketing deals, focusing on blue-chip partners including the NFL and Disney’s Star Wars and Marvel’s Avengers franchises.
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Gaming And Esports Make Their Pitch For Brand Bucks
The gaming stats that get slung around are always eye-popping.
And those cited Friday during the final day of this year’s NewFronts – a content block dedicated to esports and gaming – were no exception.
In April, for example, time spent with games soared 75% year over year. And people spent nearly $11 billion in video games during the first quarter alone, up 9% from the year prior.
Gaming was one of the few beneficiaries of the COVID-19 health crisis, although engagement and revenue have been trending in this direction for years.
But how do brands take advantage of all that engagement and spending, according to the esports and gaming companies that presented at Friday’s event?
They’ve gotta be, wait for it: authentic.
In this case, it’s really true, though. The gaming audience – which is actually quite diverse – will reward brands that genuinely care about supporting gaming content and the communities around it.
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The holding company MDC Partners was already struggling before COVID-19 decimated the US economy.
But a proposed merger by Stagwell Group, first reported by AdAge late Thursday, demonstrates how the pandemic likely accelerated the end of MDC’s run as an independent public company.
MDC Partners and Stagwell Group did not respond to requests for comment.
MDC’s troubles started long before coronavirus, after a 2015 accounting scandal involving former CEO Miles Nadal turned off investors. Since then, its share price has cratered from a high of $28 to a low of $1.01 in April, and its market cap shrank from $1.5 billion to less than $90 million.
Even before the Nadar scandal, however, MDC, was saddled with a heavy debt load which it has been slow to pay off. The company took on a $300 million debt investment in 2009, a $775 million investment in 2013 and another $95 million round from Goldman Sachs in 2017. MDC cut five executives from its leadership team in mid-2018 due to financial troubles.
By the time Stagwell founder and CEO Mark Penn infused $100 million into MDC in March 2019 and took over the company, it was trading below half its stock value. In its most recent Q1 earnings report, MDC’s organic revenue declined 2% to $328 million.
“The amount of debt they were carrying was a challenge for them from an M&A, profitability and operational standpoint,” said Forrester analyst Jay Pattisall. “The economic fallout of COVID-19 has amplified a situation that was already well underway.”
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More big names are joining the Facebook ad boycott, including Unilever, Verizon and Honda, and Mark Zuckerberg is doing damage control.
On Friday, Zuck went live on his Facebook page to outline how Facebook is preparing for the 2020 presidential election, cracking down on voter suppression and trying to regulate hate speech on its platform.
Facebook has been getting hammered over the last few weeks (months, years … ) for repeated failures to effectively moderate toxic content in organic posts and paid ads.
Amid the protests following the killing of George Floyd in May, a small but growing number of advertisers are now using the only lever they have to effect change on Facebook: their wallets.
In addition to Unilever, which says will stop advertising on Facebook, Instagram and Twitter for the rest of the year, Honda, Verizon, REI, Ben & Jerry’s, The North Face, Patagonia and Eddie Bauer have all pledged to suspend their ad spend on Facebook for the month of July as part of a “Stop Hate for Profit” campaign launched by Color of Change, the Anti-Defamation League, the NAACP and other civil rights groups.
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Programmatic agency veteran Adam Heimlich has a new venture whose goal is to be a thorn in the side of the mega ad platforms.
Chalice is a new marketing and data science consultancy that helps brands create custom algorithms to use with their demand-side platforms, rather than relying on the one-size-fits-all AI provided by Google and Facebook. It will charge clients on a simple CPM basis.
“We want to bust the myth that Google and Facebook have the best predictive models for any given client,” Heimlich said.
Not to mention, he said, that all of the data a brand shares with Facebook and Google serves to make the platforms’ algorithms smarter – algorithms that the brand’s competitors also use.
Heimlich will serve as CEO of Chalice, which he founded with his wife, Ali Manning, a former Google and Snapchat executive who’s crafting Chalice’s go-to-market strategy. IgnitionOne’s former chief data scientist, Ken Rona, is taking on the same role here.
A big part of the pitch is that algorithms aren’t magic. Rather, it’s the data and inputs you feed into them and the KPIs you set that makes the difference.
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