The latest results from Sky show customer numbers rising even though their football offer is a little depleted without the Champions League and those Premiership games that BT now has. (They do show Leeds just about every other week so football fans missing Barcelona, Milan etc have some consolation)
At a recent BSAC event Gavin Patterson the CEO of BT talked about their success with content, and the need to balance that with their core connectivity business – soon to go quadplay with their acquisition of EE. Sky will also soon offer quadplay with their mobile partnership with O2 from next year.
This desire to own both the platform/channel and the content is a key factor in lots of M&A but nowhere more so that around video and newTV. Through the burgeoning TV Sticks like Chromecast, Amazon FireStick and the imminent Apple TV, Sky and BT compete with OTT players as well as the traditional ITVs and ABCs. A major use of these OTT services is probably YouTube
YouTube have a huge audience through the fact millions of people have uploaded millions of pieces of content. Their partnerships with media brands and creators have been around advertising until now but they are moving to a subscription model YouTubeRed. Priced at $9.99 a month – the same as Netflix - they have added new content with original series from YouTube stars like PewDie Pie. They have been quick to rubbish the comparisons with Netflix and it’s clear from the content that their demographic is quite different from that of Netflix. And some of the service features of Red will be valuable – the ability to play YouTube videos in the background on a mobile means this competes with Spotify and Apple Music too – especially as Google Play Music is packaged in too.
But that price point seems high – especially for that young demo. However the existing relationships with the media companies means YouTube can quickly add more ‘traditional’ content and move to compete with Netflix. If you are HBO this could be an interesting potential partnership – a video Instant Articles. Sky carries all the other TV channels and (almost) everyone happily coexists – can YouTube emulate that? At what point does someone like Disney – launching their own streaming service early next year - decide to seek carriage with YouTube and Apple TV rather than rely on getting traffic to it’s own site?
If you want to dig deeper it’s worth reading The Sky results presentation – it is interesting to note that the proportion of their content owned or acquired by Sky - in contrast to coming from partner channels like Fox - grew from 24% in 2010 to 45% this year. But getting content right is hard – Yahoo wrote off $41m on their content plays.
Video and Brands
The interest in video is because it’s a proven money maker – both through subscriptions and through advertising. Whilst the online video market is marred by the murky practice of ad fraud and questions over viewability, we are seeing progress. Unruly have wasted no time in developing a new format for their new parent company that guarantees viewability and brands only pay when it is watched in full. No doubt this will look expensive but as one of the speakers at our event said, cheap media only looks cheap because you are usually ignoring the waste.
It’s the digital natives like Buzzfeed and Business Insider that are making best use of Facebook video. Brands are looking to these companies to create digital content for them and Ikea have worked with Dreamworks to create content to support their new Toys.
One argument employed by the old guard in TV is that the metrics of online are suspect and this piece by Michael Wolff looks at the battle between Nielsen and Comscore for supremacy in video. If you want to look deeper at the US market for digital video a new AOL report is worth reading.
For months (years?) there has been a degree of simmering discontent amongst some brands over how their media agencies make their money. It was seen as a factor in the huge number of global media pitches conducted this year and hasn’t helped when Wall Street have been downgrading the holding companies amidst doubts over the sustainability of their media businesses. There are other factors – witness this quote from the AOL report we mentioned earlier
“Every marketer is headed [toward in-house buying] because of the first-party data. We have our own exchange and private marketplace, and in that marketplace we have every channel represented.” - Kristi Argyilan, SVP of Marketing, Target
So the news that the US trade body for brands has hired two firms to investigate the media supply chain isn’t too much of a surprise
Having worked at one of the biggest I have some sympathy with both sides. Clients do deserve better transparency especially as new services proliferate around Programmatic and keeping services in the agency or holding company can look like double dipping. On the other side Procurement has driven agency revenues in only one direction; with the value agencies provide outside of buying being hugely undervalued. My former boss Irwin Gottlieb describes well here how the agency model needs to evolve and get closer to real value – the sale. And Rob Norman very eloquently describes what a media agency does to earn its crust
Of course in a world of programmatic and a handful of global platforms with huge reach, does having pins on maps matter so much anymore? And is the Mad Men business model still relevant? – here the PepsiCo CMO voices what many brands think when he says
"I am really worried that this model is not going to bend -- it's going to break if we don't really think about how to innovate,"
A new paper from the New York Times outlining their new digital strategy has got lots of attention. This is a good analysis of it and whilst there aren’t too many answers here, there is some direction.
We are seeing publishers start to block the adblockers – Bild in Germany, CityAm in the UK – and more seem inevitable. A Googler is calling for sustainable ads – smaller file sizes and less interruptive formats. Back in the day, we have won awards and driven great results with banners with a 12k file size. The idea can overcome limitations and bloated adtech is no good for anyone.
But smart use of adtech can be in publishers interests. This paper from Boston Consulting from the summer is worth reading as it charts a sensible path for publishers to approach programmatic strategically
We tend to worry about people getting over excited about the next big thing as it often causes them to overlook the very real opportunities still to be exploited in mobile and social right now. Over this year we have seen so many Creative Technologists wasting their own time and that of their clients focusing on wearables and the Internet of Things when the brands didn’t even have a mobile optimised site.
But the hype over Virtual Reality does seem based in fact. This video of Magic Leap – a very secretive company that Google have invested $500m in – is quite amazing. Their new website is pretty cool too. Ted Schilowitz, who is the futurist at 20th Century Fox said of Magic Leap It’s Google s first trillion dollar idea.
Some retailers are starting to use AR too – Tommy Hilfiger is using it in stores to show their latest fashion show using a Samsung headset. And the New York Times is to give away 1 million Google Cardboards so readers can see the series of VR films they are making.
Yahoo – Next 11 or Chapter 11
We see a number of firms as satellites of GAFA and like to term them the Next11. It’s the Chinese BAT, Snapchat, Uber, AOL, eBay, Twitter, Microsoft, Yahoo and probably Softbank or Ratuken.
But the place of Yahoo seems in some doubt. Even though their latest results disappointed, we don’t see bankruptcy as a realistic option but they do seem to be in play. We have speculated before that Softbanks Nikesh Arora could relish the chance to run that business and take the fight to his former colleagues at Google. Or a Private Equity firms could buy them to break the business up. They need some direction from someone. And some key execs are leaving with one joining Square.
Yahoo has ‘evolved’ it’s search strategy yet again – with Google now getting a now getting a significant chunk of Yahoo traffic across desktop and Mobile. But Yahoo will continue to send 51% of its search traffic to Microsoft Bing. So that’s all clear then.
The one thing we can take from this is that Google continue to be better at monetizing search than anyone else, otherwise they wouldn’t have been able to strike this deal.
In the detail of the results we see that the cost of traffic acquisition rose from $53m to $223m for the same quarter last year. Given the one clear asset Yahoo seemed to have was traffic - and lots of it – that has to be worrying.
The other asset is the Alibaba stake and Yahoo are pressing ahead with the deal to spin off this – even though the tax benefits seem fragile.
This weekend is a crucial for Yahoo too – they bought the rights to stream Sundays NFL game from London and they have sold all the ad slots but had to slash the price. If this works for Yahoo we believe it will bring GAFA into the global sports market. And Gavin Patterson from BT may find himself priced out as Champions League and Premiership football is the best sport to drive global audiences.
Apple now warn people when they click ads that they are about to leave that Apple News. This can be quite good as it prevents the fat fingers clicks that dumb media buyers measure as response –but it’s more friction for brands. We think it supports our theory Peeking and Popping are coming soon to ads. This look at how the new UI is working highlights some issues but we think this will become core to the Apple experience and be copied by everyone else too.
Snapchat continues to fascinate and this indepth article is a good look at what they are doing. As we always say, you have to really understand how a platform works to create content that will thrive within it. Snapchat is an enigma but if you can crack it the potential is huge
And this report from High Street giant turned Omnichannel giant John Lewis is a must read too. Around 60pc of internet traffic to their website is now mobile and sales on mobile phones soared by 68pc in the past year. Two thirds of John Lewis’ customers use both online and stores to inform their shopping trip.
Finally – our salon took place on Monday and went pretty well. We only had a handful of people who couldn’t make it so we had a full room at Google. Feedback has been rather good – and very helpful, as we didn’t get everything right. It ran a little long and we had to drop my presentation on how we see Creative in Programmatic, (Happy to talk this through with anyone interested in that space)
With a range of knowledge and experience in the room we couldn’t pitch it at the right level for everyone - so some thought it was a little low tech and other wanted more explanation of the basics. And it’s hard to get real discussion going with nearly 70 people in the room. We are thinking though how best to follow up and welcome any thoughts on potential speakers and partners for our next events. But with this level of advocacy we’re confident we will do more.
It’s half term next week so we’re taking time off in Cornwall. The next Fix will be November 6
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