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Mobile Fix - February 9

Long Tail of ads

A couple of interesting pieces on advertising have been widely shared this week - both quite gloomy. Umar Hague lays the problems with advertising firmly at the door of Agencies;

He talks about what we used to call branded utility and it is hard to argue with his key points. But that game isn’t over. We can and should be focused on making digital better - though the clock is ticking and we don’t have that much time.

Rishad Tobaccowala is really smart but I find it hard to agree with his assertion that ad spend is going to fall dramatically - he talks of 30% over 5 years

If you take a narrow view of advertising - as that what agencies do - he may have a point. Zero based budgeting and a view that money has been wasted in the past, may cap spend. But as brands realize their ability to control prices is diminished they could revert to the industry playbook and invest in more brand advertising

But while Tide taught everyone how to win the Super Bowl, with a brilliant creative idea and great comms planning thinking, we expect the focus for CPG to continue to switch to digital. As well as the P&G commitment to Precision Media Buying fueled by Data and Digital Tech that we mentioned last week, Unilever announced more spend and is “stepping up” its investment in digital media and digital capabilities, particularly around programmatic trading

I believe that any shortfall from ‘traditional’ spenders will be more than compensated for by new spenders. On Facebook around 60 million businesses have pages, which makes their 6 million advertisers seem modest. As they aggressively look to grow their advertiser base amongst SMEs, Google - who started the democratisation of advertising with adwords - have similar initiatives. Snap in their new results talk of the long tail of advertisers, as they now have a better user interface. And of course Amazon will continue to encourage their merchant base to invest in promotion within their platform - which is advertising.

As well as the longtail we can expect new categories to become more important. We saw that the top mobile games are making a quarter of a million dollars each hour. Retention is therefore hugely valuable and expanding efforts to get another game played from notifications and CRM to advertising, targeted on 1st party data, will almost certainly make economic sense.

In a way then Rishad may be correct. Rather than adspend, we will see the smartest brands treating digital ads as a cost of sale. And rather than the archaic practise of budgets and campaigns we will see always on programmes that have an unlimited budget - as long as the return is positive. The best ecommerce brands already do this and as Carolyn Everson of Facebook said, they never talk about viewability etc - they have better metrics to monitor and a clear idea of what works.

Amazon

So as Amazon shape up to be the Third Force in digital advertising and the key contender to dent the duopoly, this roundup of their ad business is worth a read.

So the price increase for monthly Prime membership is interesting - encouraging customers to make the annual commitment rather than a monthly one. If a monthly customer drops out the consequence for Amazon is small - a little less revenue but the customer loses out of free delivery and access to the content.

One weakness we see in Amazon is that, despite first mover advantage, Alexa is probably only in less than 20% of homes - the last data has them at 13% - so significantly less than half of Prime homes. With Google and Apple now active on this space could Amazon elevate the battle?

Someone in Seattle must have a spreadsheet on what it would cost to give the Dot to very Prime member. It retails for $40 and can be delivered for nothing (with your next purchase). The new monthly cost raises $24 extra towards insurance if someone leaves after the Dot is given to them. The data suggests a third of people who have an Alexa either add to their shopping list or make purchases.

As a gateway drug to the rest of Alexa, the Dot is ideal. And it would probably decimate sales of Google Home. Amazon have good experience of looking at new business models - although they don’t always work; the lock screen ads on the Prime smartphone have been dropped. Their rising success in product search - 49% now start on Amazon - could probably be helped by encouraging voice searches too.

Watch this space.

GDPR

Another week closer to GDPR and still little guidance from the regulators. So speculation abounds.

Deutsche Bank think GDPR could take 2% off Google revenues and Criteo is thought likely to suffer too - their value has halved since Apple limited tracking on Safari

Our Client paper carves the world into Pessimists and Optimists - with pessimism dominating. But the disruption of GDPR is likely to strengthen the belief the context matters and the smart publishers welcome that. This piece by a DMGT exec is a good summary of an argument we have been making for a while.

Data as an Anchor?

For a bunch of people who have long complained about the walled gardens of GAFA, the rush into Agency data platforms looks a little like walled gardens of their own. I can’t see this info being shared outside the holding companies. And next time the business is up for review could these data platforms be an anchor - where changing Agency means losing access to valuable data? We heard a good story of an agency being obliged to share data with the newly appointed Agency. So they sent a truck over full of printed out spreadsheets as the contract didn’t stipulate format.

Content

The FT has a good piece on the way media companies are now seeing scale as essential - driving deal making. It does not cover what I think is the really interesting question - what does Rupert Murdoch plan to do with the billions Disney is to pay him? His focus on news and sports defines the space but what does he buy? As a newspaper man does he want to roll up all the US papers like the New York Times and Chicago Tribune etc? The LA Times has just been sold to a billionaire doctor. Does he plan to flip it to Rupert?

And in sports what is there to buy? ESPN is probably the best bet but is owned by Disney and a swap has never been mentioned?

A long Recode article floats the idea that Amazon should buy CBS - partly as that would give them reach for a sports deal. This good infographic paints an interesting picture of companies that have reach and others with content. I imagine that’s going to look quite different in the next couple of years - especially if the AT&T Time Warner deal gets approval. GAFA look poised to reshape this and have the deep pockets needed.

Quick reads

GAFA results last week were pretty much as expected - all the graphs point up to the top right hand corner. It is worth considering that the size of the growth is still phenomenal. How much longer can that continue? More surprising was the news that Snap is growing and making more money. And that Twitter is making a profit. And daily users grew by 12%. It’s not all about GAFA.

We used the term Young Davids to group the new ecommerce start ups that are proliferating. Now they seem to be called DNVBs (Digital Native Vertical Brands) Can’t see that catching on.But the argument they can survive without Amazon is compelling. Amazon won’t really care as the plethora of new brands makes it easier for them to launch private labels and get traction for them

We are convinced product placement is a huge opportunity in a world where there is more good content than ever before. But a challenge in selling it in is measurement. Nielsen has stepped up with a new approach which looks promising.

Looking for idea for a new start up? Steal this - rental electric scooters. Another Nathan Barley concept made real.

The Big Tobacco view of GAFA is gaining traction - now a bunch of insiders are leading the charge against their former bosses

A new report from Marin shows that ad rates are rising in social and the Facebook results showed that revenue in the US is being driven by higher prices rather than more volume - with adload nearing its maximum. We think Facebook is probably still underpriced now and most brands, using it properly, can afford to pay more. Mobile prices still lag slightly but the gap is closing fast

Finally - a big theme at the excellent Pubtelligence event I spoke at this week in Google New York offices, was how to make your mobile site perform well. Most businesses have an average mobile sites at best so a good one is a real competitive advantage. This PDF from Google on 25 principle of good mobile site design is therefore a really useful asset. Check how well you do.

What's cooking at the Media Kitchen?

The Media Kitchen runs an annual VC conference where we invite VCs to talk about their take on the world and introduce interesting companies from their portfolio. It’s been running for 11 years and has had some stellar speakers. Understanding how the money guys see our world and how it is evolving is really helpful as we advise our clients on how to profit from digital marketing. This years event is focused on newTV (the coming together of broadcast TV, Facebook video and everything in between). At the conference, we’re looking to explore our thesis, which is that consumers see few distinctions as their viewing habits have evolved and increasingly brands will follow - changing the ad landscape as the volume-based approach is less relevant than attribution driven smart targeting. As a result, digital agencies, like The Media Kitchen, will be well suited to buy the $70b currently allocated to old TV.

We want to learn how this NewTV market is evolving and the implications for the various players. With deals like Disney / Fox and AT&T / Time Warner redefining the content and distribution of TV, what's the outlook for niche ad tech firms and global agencies? Who will prosper and who is likely to struggle? And who will be the big movers in M&A?

We have a really good set of speakers confirmed but if wanted to see if there is anyone reading Fix who might add value as a speaker - whether you are a VC or a start up active in this space. And whilst the audience is TMK clients and people, along with our friends from MDC, we may be able to squeeze a few more people in so if you are at a Brand and in New York on April 12 let me know and i will see what i can do

Fix is my thinking rather than that of MediaKitchen. We now have over 5600 subscribers across Google, Facebook, Snap, Yahoo etc as well as many VCs, Brands and Agencies.

 

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