Facebook & Ads
At their last couple of quarterly reports Facebook have mentioned that they were anticipating running out of ad load – ie places to run ads. They are now going to start showing ads in the middle of videos. Whilst this makes good sense for Facebook and for brands, we are going to see a testing of the value exchange within Facebook. One of key factors in Facebook success has been that the ads fit well with the flow of your content. As you scroll down your feed the ads are interspersed with all the content and they doesn't seem at all intrusive. Mid rolls are going to feel quite intrusive and it will be interesting to see how consumers react to that.
One key challenge is that the content where you expect to be interrupted by midrolls – TV shows – are designed anticipating these ads. If you watch any TV show it will have natural breaks around 7, 14 and 21 minutes. Until content creators rethink their content to anticipate these breaks there's every chance that the ads are coming at the wrong time. We saw this demonstrated just this week when watching some rare archive footage of Sly Stone in a1969 concert on Dailymotion. Sly is just getting into the first song when it cuts to an ad. This could be a particular issue for Live video where the ads are being tested too. As ITV learnt with the 2010 World Cup sometimes these inadvertent interruptions have big consequences. You can watch – or miss – the goal here.
Facebook is exceptionally good at balancing the needs of both users and customers (brands) with the desire for revenue, so we expect this to settle down. But whilst we can see why they would accept 15 second ads – the standard for US TV spots – everything we have seen says running TV ads on Facebook (or anywhere digitally) is a mistake. The YouTube approach of 6 second ads seems a better solution and we were told they are working well in Australia.
Fake News & Business Models
Why? Because the broken ad model rewards people for the eyeballs that gravitate to clickbait. In a note on Medium the Monday Note people suggest this is solvable if the ad industry were to revert to valuing the quality of content over quantity of eyeballs.
With The Economist predicting press display ads will have disappeared within a decade, something needs to be done or there will be nothing but fake news. VC Fred Wilson has a new take on the old idea of micro payments. But for all ithe problems ads are still a pretty good business model for good content creators.
Interestingly the music business could be good learning. Having struggled through the evolution from direct purchases to subscriptions in the form of streaming, music is now seeing the opportunity for ad revenues. We previously shared the WME thinking on how ads will lead to more revenue than ever for the music business and a new study from GroupM and Spotify quantifies this new ad opportunity.
GAFA & Content
New rumours around Apples ambitions for content. Holiday reading included the excellent new book on talent agency CAA and reading how they persuaded Sony and other Japanese hardware firms to buy Hollywood studios reinforces the logic we find compelling. GAFA has to invest in content to crate anchors to keep people in their orbits. Facebook are in talks to buy talk shows – content that they can shape around their new mid rolls.
And, finally, a legitimate reason to mention Leeds. They are playing a friendly against Derby in the next international break in an attempt to show games are being undervalued by the current Sky deal. Both owners have been critical of the Sky deal and Leeds is now half owned by an Italian who made his money running a sports rights agency – which he sold to the Chinese for $1bn
Hard to believe that the rights for that game won’t be offered to GAFA. With the Champions League final having been shown on YouTube and NFL games on Yahoo, the momentum is building.
What I did on my holidays
During my visit to Sydney I met with a few former colleagues old clients and friends in the business. And I did a talk at Google.
It's interesting to see just how progressive the market in Australia is. With around 23 million people, a growing economy and Western style media and business environments, it’s a pretty good surrogate for the West. And that it is such a long way from everywhere means these people tend to get on with things and try new stuff. Programmatic is particularly strong. Retail is very progressive. And the TV content business remains influential. It's perhaps surprising more agencies don't use Australia as an opportunity to do more testing and learning.
Speaking with a former client now working in a bank over there, he tells me his bank has 900 digital people and 45 sprint teams. This conversation really highlighted the challenge for fintech startups as big banks now understand all the opportunities, although many do struggle with legacy systems and prioritization. This backs up a conversation I had in London recently with the head of digital for a big UK bank who said it’s not like they don't know about the opportunities today; it's just a case of balancing resources and making it happen. When they do, they have the huge advantage of access to a customer base, which differentiates them from the fintech startups.
I also learned the banks in Australia are working together to negotiate with Apple for access to the NFC chip within the iPhone –i.e. they want to bypass Apple Pay. Unsurprisingly Apple have said no but the conversation continues. Compare that with how just about every UK bank spent millions advertising the fact they were compatible with Apple Pay – giving Apple lots of free promotion and confirming the commonly held belief there isn’t much to differentiate any of the UK banks
Chatting with a friend who runs an agency in Sydney he confirm that this bank soaks up much of the UX talent in the area. Looking at agencies in Sydney I was struck out how the smart ones are much more integrated than most in the UK and US. Even small shops do everything from digital to Brand TVCs. They've seen there's little point in sticking to one discipline in a relatively small market. Clients want solutions to their problems – and favour those who can produce whatever is the right solution. In fact the market leader M&C Saatchi, ran by a friend who was a digital suit in London, is having great success delivering truly integrated work. How long before we see people with real digital chops running the big shops over here?
With all these businesses it’s about unit economics and the inevitability of these rules cannot be escaped. But you can get the math wrong and really understanding how your business works is what separated the winners from the losers.
It seems lots is happening at Apple around VR and we expect it to be a major part of iPhone 8 later this year. Now it seems they are developing smart glasses. With the watch and the wireless headphones – and glasses – they could do some really interesting stuff.
Lots of predictions around – we think these are three of the best;
Finally It’s 2017; millions of people have smartphones and the opportunity has never been as great. New technologies enable new ways of engaging people and business models are evolving.
We are open for business, helping brands publishers and start-ups seize that opportunity. We do consultancy projects, develop and speak at events and workshops and act as Board advisor
Lets talk about how we might help you make the most of the new year
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