The attention around GAFA and content tends to be focused on deals. But the actual content is really interesting too, as it is evolving to make the most of the possibilities of new platforms.
The development in tech, consumer behaviour and business models mean it’s naive to expect content not to evolve - but knowing where we end up is a challenge. Binge watching changes how showrunners tell stories and the lack of ads means stories don’t need to work in 7 minute arcs.
But the ad free model is tough - with the need for constant customer acquisition activity to balance churn is expensive - Netflix now pay double what they did to acquire a US customer compared to 4 years ago. There are rumours that Amazon are planning ads in their Prime Video but we don’t agree with speculation they will use ad revenue to drop Prime membership fees.
For Amazon ads are really valuable - someone pays them to increase sales through their platform; it’s a sort of double dipping. And for brands the holy grail is to be able to see who watched your ad and whether they bought your product. Amazon is well positioned to offer this.
Adding ad revenue to subscriber income will help fund the inflating cost of content. With GAFA and more looking to buy content and sports rights, the prices are only going one way.
Incentivising content creators to make content for your platform (ideally exclusively) by giving a share of revenue is emerging as a favoured business model. GAFA have used it and now Tencent is trying a similar model - investing $3billion in YouTube style content in a drive to bring more talent - and therefore influencers - onto their platform. Lots of potential synergy here with Snap through their investment.
The content business isn’t as easy as it sounds though. Over recent years ITV has invested heavily in content production to reduce their exposure to hiccups in the ad market. But with their ad revenue down by 7% so far this year, their content business has disappointed too.
Content is still a Hits business and like VCs funding startups, a wall of money arriving has two effects; the price of the good stuff is inflated and lots of average stuff gets funding. And this is driving lots of deal talk - Fox and Disney, ATT and Time Warner etc - and this FT piece has some good analysis. One deal is always being talked about; a sale of Netflix; this argues that Apple should do the buy.
Finally I was surprised to see the smart people at Enders come out so emphatically against GAFA buying sports rights - or at least against Facebook buying the Premier League rights. Their argument is that it doesn’t drive that much viewing;
But that 8% has all the attention and commands premium ad rates. I do agree with the view that GAFA want international rights and maybe the Champions League would be easier to swallow. And some form of partnership with the BBC?
Singles Day in China smashed the previous year and over $25billion was spent with Alibaba across the day. 90% on Mobile. The rival Chinese retailer JD.com shared their figures and their $19bn - across 12 days rather the one for Alibaba - was impressive too.
One really significant thing missed by many is that this years Singles Day was all about O2O - Online 2 Offline - and Alibaba had hundreds of thousands of high street stores connected and powered by algorithms to give customers a seamless shopping experience. Lots more about how they approach New Retail here;
The mix of online and offline has huge potential. Walmart did really well in the past quarter with online sales up 50% - lots of potential for high street retailers if they Uberfy their business. This is a big focus for us, working with EagleEye amongst others - so let me know if you are interested in learning more.
One brake on buying sports rights could be that GAFA probably doesn’t want to be seen to limit access to sports. They are getting more and more bad press.
The EU is lining up another anti trust fine on Google. One wonders if the imminent closure of the IAT flights information service might cause some issues.When Google acquired the service in 2010 it had to agree to keep it available to everyone for at least 5 years and it will stop next April. The Enterprise service continues so none of the big players are affected but some of the smaller users may make a fuss.
The latest results for Chinese giant Tencent emphasis how important their investment in Snap could be. Tencent was up 57% and a huge proportion of that is games - with Honour of Kings the biggest contributor. Wechat and Weixin have almost 1bn Monthly active users. Their comment on the Snap investment was that it was a pretty attractive price and to see if they could do something more strategic together.
TechCrunch give Snap a bit of a kicking here pointing out the problems and the changes that Spiegel has agreed to. To me these seem like smart moves - Snap has a very loyal audience and a great history of product development. With a new attitude - and the input from China - they should be well positioned.
We have often looked at smart innovations in WeChat etc and Snap could be the vehicle to bring some of those to Western markets
A NYTImes article worries that moving to be more Facebook like could alienate their users but we think they can dismantle some of the more impenetrable UX - which is probably more due to accident than design as the platform has evolved so fast - without losing the soul of the platform.
Advertisers - or at least their agencies - want an alternative to Google and Facebook so Snap can do well financially if they sort these issues.
But the pace of change in Apps means they don’t have long. We are seeing new apps get great traction quickly. TBH took just 9 weeks to go from launch to a $100m acquisition by Facebook. HQ from the inventors of Vine is getting lots of attention and its blend of TV show and app will be really influential. And, huge among preteens, Musically was just bought by another Chinese firm for around $1bn.
Teen expectations change quickly. Snap can leverage smart thinking from China and their own product team who have done so well until now - or they can slip off the radar of this ADD demographic.
Interest in GDPR is growing. I talked with a US investment bank this week who are trying to understand the possible impact. But until the next guidance in December many publishers are playing a waiting game. Digiday call out the (probable) winners and losers and the FT calls out how hard it is to keep up with the various privacy initiatives around the world
GroupM publish their video report - and show that younger audiences are turning their back on trad TV - and debunk the myth that as they get older they will start watching more. A must read. Download it here.
A good Accenture report looks at how small brands are disrupting the Packaged Goods market. All the growth is coming from the new small brands and Accenture see the adoption of digital as a key factor. This seems to contradict some of the claims in the recent paper from Byron Sharp on Are Big Brands Dying
At a fascinating event organised by MDC - the holding company we are part of - I saw Cambridge Analytics present. Inevitably people are obsessed with their work for Trump, but the really interesting thing for me was how effective they are at driving sales for brands. This is a good piece on how they are extending their learnings to TV
The Media Kitchen - Whats Cooking
The radical media pitch by Deutsche Telekom that we mentioned last week has been awarded. And it validates much of our thinking about modern media. The pitch has separated Thinking from Buying and divides buying into GAFA and Traditional.
I am convinced that what most brands need now is smart Media Thinking.
Whether your buying is being done by one of the big conglomerates or you have taken it in house, you need good comms planning that is informed by a comprehensive digital strategy.
Plus the ability to optimise customer journeys and advise on Tech stacks. And the expertise to adapt Creative to suit each platform and context and hence radically improve results.
That’s what we offer - and we can do the Digital buying too, through our 100 strong team in New York. Let's talk about how we could add real value
As evidence of our capabilities, we just heard that we have been awarded Social Agency of the Year by MediaPost. After being Mobile Agency of the year in both 2015 and 2016. And Programmatic Agency of the Year in 2014.
And we are still looking for smart Planners and Buyers to join our team here in London.
Fix is my thinking rather than that of MediaKitchen. We now have over 5500 subscribers across Google, Facebook, Snap, Yahoo etc as well as many VCs, Brands and Agencies.
We just sent you an email. Please click the link in the email to confirm your subscription!