Big Picture - China BAT & GAFA
With Singles Day tomorrow it is a good time to think about how BAT (Baidu Alibaba & Tencent) might change our view of the world. In case you have forgotten Singles Day - a marketing initiative dreamed up by Alibaba - drove $18bn of online sales in one day last year. With fierce rival JD.com doing lots of smart data pooling deals in an attempt to reduce Alibaba dominance it should do even better this year.
Despite the fact Hairy Crabs promises to be one of the biggest sellers, there is lots to learn from China here. And with Tencent increasing its stake in Snap we see BATs growing ambition outside China.
We’ve always presumed that GAFA would learn from BAT and ‘import’ the product and business model innovation from China (developed Galapagos style in their absence) and certainly that goes on. And GAFA looks for ways through the great firewall to build their business in China with Google now pushing their AI capabilities.
But considering Snap, a Google acquisition would likely incur the wrath of regulators in the EU. A Tencent acquisition would not be an issue. With the scrutiny around Privacy and Russia, market share and Tax shenanigans, GAFA are going to be spending more and more time dealing with Regulatory issues. And as their recent Washington experience showed they are not as polished as they probably should be - sending Lawyers rather than CEOs. And as we have covered there is increasing noise around the need to reign in GAFA. The new story that Trump will only permit the AT&T deal with TimeWarner if they sell CNN, shows that Governments are willing to use their powers in this sector. As does the UKs slow movement on the Sky acquisition by Fox. (Could the stories about Murdoch selling Fox to Disney - to focus more on news - be a way to find the cash to ensure they win the battle to buy CNN?)
Whilst the FT speculate that the focus on online shopping in China may upset the regime, essentially BAT have their government's approval to expand abroad and it will be quite some time before the rest of the world move their focus from GAFA to the East. So, as a very smart VC told us ( one of the few choosing to eschew the VC obsession with the West Coast and look East for investment and opportunity) it may be that the first $trillion company is Alibaba rather than one of GAFA.
When they don’t meet expectations the sceptics have a field day. There was growth in revenues and users but nowhere near expectations and dwarfed by the duopoly. One of the key issues was a switch to more automated advertising but that drove prices down dramatically. The rumours of Snap acquiring Metamarkets to get a better handle on this area makes sense.
Whilst they now have to play the Wall Street game, one has to wonder whether they were over priced at IPO - Chamath thinks so - and maybe they are now around their true value. They have a lot of passionate users (70% of 13-34 year olds in the US, UK France and Australia) and now recognise they need to better nurture their Disciples - the creative talent that has been slipping away to platforms that are easier to monetise.
In terms of quantity they can’t compete for ad dollars with the duopoly but when you want quality they offer some great creative opportunities. Our friends at Photospire, Adludio and Wirewax are all active on Snap and seeing good success for brands. And a US retailer handled by our TMK colleagues in New York sees great results from the pioneering work they do with Snapchat.
It seems suited for bigger spenders as much of the benefit is being faster and more efficient to set up campaigns - but improved results are there too. We once looked at the industry in two groups; the majority using tech to spend the money more efficiently - using less people and less time - and a smaller smarter group using the tech to make the spend more effective.
As the market has matured there is less of a distinction but much of the problems have come from the obsession with efficiency - leading to buys of cheap inventory across thousands of so so sites.Not everyone is so positive about the AppNexus play and one makes the sensible point the real advantage comes from access to the best data
We are seeing increasing co-operation around data with new cookie pools and groups working together. Some are more open than others. With the changes to browser tracking on Safari and the looming threat of GDPR it's going to get harder and harder to understand consumer behaviours so sharing what is available makes sense. The Germans have been looking at this for a while and many of their big publishers are working together. (How Bild manages its relationships with GAFA and other tech firms is interesting.)
Our project on context is coming together and it’s reassuring that the market seems to be warming to quality rather than worshipping quantity. This is a good look at how ads and where they are placed is effective signalling about a brand. It opens with the Walt Mossberg story we have used lots; how agencies run ads on a site to identify an audience then find them elsewhere cheaper. We have long valued the association with a media owner that ads with them give you. All the brands in the new edition of Vogue benefit from that positioning and the Valentino basketball ads on their site ‘fit’ perfectly. Sure you may find some Vogue readers elsewhere, but you lose the context and the cachet. And miss the point.
The stats showing people spend 2 hours more a day with major media than they did 5 years ago is a pretty clear indication that people are increasingly stacking media. Which means attention is - at best - divided. New research from emarketer shows this, with 163m people in the US second streaming. TV is still valuable but it needs to be repriced.
And rethought. Building on last week when we shared that 55m Chromecasts have been sold, a new Nielsen study shows Smart TVs are in a third of US homes and streaming devices in over a quarter. As the study puts it;
Music used to be something you listened to. Now it’s something you hear - whilst you do something else.
TV is something you watch. But does the average show become something you see whilst you read Facebook etc?
It’s not about TV or Mobile. It’s about both. How a Facebook video campaign compliments a TV one. How we make TV and mobile work together? Dave Trott just wrote about a smart piece of meda thinking from Mike Yershon - an old boss and Fix reader - who transformed the TV industry.
We need that level of thinking now. How do we harvest the attention and elevate mobile as a storytelling medium? Imagine using Shazma to connect your epic TV ad with a magical mobile experience. And what’s the business case for eradicating the cockroach of advertising; mobile banners?
With all the big Christmas TV ads imminent, hopefully we shall see some smart modern media thinking.
The Media Kitchen — What’s Cooking
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