Monday AM Briefing: This Week's Upfronts vs. The Trade Desk's Vision for Connected TV
If you’re trying to figure out whether the streaming marketplace will figure out ad-supported models, The Trade Desk’s Q1 2022 earnings call is a great place to start. I wrote about it in writing Friday’s essay Marketplace Disconnects Between Disney+ With Ads & Advertiser Demand.
Read the opening monologue from CEO Jeff Green on how Q1 2022 saw “more positive changes in a short period of time” in the TV landscape than he can remember. It’s also about how the death of cookies and app tracking have resulted in “a very unique opportunity to upgrade the Internet”.
It’s not a right or a wrong take: it’s ultimately a sales pitch for The Trade Desk’s story of gaining market share and long-term vision to become “the de facto DSP of the open Internet, led by CTV [Connected TV].”
But, as I have highlighted in past mailings, the linear ad marketplace continues to resist evolution. As this week’s upfronts will highlight, Green’s bullish vision has some real structural obstacles to it.
Co-dependence
The most important point to remember here is in this terrific quote from Rob Norman (ex Group M) from this must-read opinion piece from last year:
It would be ignorant to express relief that digital looks to be moving away from third-party cookies because, let's not forget, the tech giants are staying exactly where they are in terms of first-party data. That means premium publishers, and many advertisers who have a co-dependent relationship with premium publishers, need to focus on the intersection of context and data. They also need to think about what data matters most.
Green argues that the economics of addressability will drive advertisers to focus more on the intersection of data and context:
As more CTV leaders embrace advertising, they want to ensure that they create as much addressability as possible because that's the only way that they can maintain high CPMs. And an advertiser will pay, say, a $12 CPM if they know the viewers are watching the latest hot reality show, but they will pay three times that if there's a reasonable chance those viewers are interested in their product.
In other words, there may be a shift happening away from cookies and towards first-party data. But, as Norman argued, we are still in the early days of premium publishers figuring out which data will convince advertisers there is “a reasonable chance those viewers are interested in their product."
This was reflected in AT&T CEO John Stankey telling investors back in March: “maybe in some cases, it's a bit more accretive” if customers opt for HBO Max with ads, but otherwise AT&T and WarnerMedia management were “indifferent to as to what the customer chooses”.
We are still in the early days of data making the difference in streaming ad sales. They sometimes make a difference but not always, and may not ever.
Upfronts aren’t going anywhere
Green mentioned having spoken to content partners in the United States and in Europe and how “messaging from Netflix, Disney+ and HBO Max is requiring everyone to embrace biddable environments and move away from legacy models, like upfronts and even programmatic-guaranteed, where advertiser choice is limited”. He is implying that upfronts are being phased out.
Except, as I highlighted last Monday in Everything Old is New Again in Upfronts & Newfronts:
Companies like A+E, Univision, Fox and AMC Networks are betting that, even as the pay TV bundle keeps slowly and steadily declining, embracing the linear side of the business can still be lucrative — and help them bridge the gap between the uncertain present and a more sure-footed future.
Linear still reaches over 70MM households in the U.S., and in the worst case scenario may reach over 50MM households. As streaming growth slows in the U.S. for streaming services, linear is positioned to end up being a better and more proven solution for advertisers than OTT streaming.
That makes it hard to imagine the upfronts-less future that Green envisions. Linear inventory remains a reality for advertisers now and for the foreseeable future.
Netflix & The Value of Simplicity
I argued in Netflix’s Best Advertising Bet Won’t Require Software that “Netflix won’t pivot to a Hulu- or YouTube-like ad-supported model. That is to say, it will find additional revenue in ads, but not with the type of highly sophisticated, precision-targeting software that Hulu and YouTube have.”
Green zigs where I zagged:
As Netflix explores advertising options, they will be unburdened by legacy processes that some of their competitors are working through. For example, they will be able to structure their advertising operations so they don't have sales channel conflict. They can be data-driven from the start in everything that they do, using data to ensure that they maximize yield on every ad impression.
Maybe Green is more in tune with what Netflix plans to build than me - and that seems likely as they may be partners now or in the foreseeable future. But, I argued that Netflix does not want to be in the business of make-goods, and it didn’t sound like on last month’s earnings call that Co-CEO Reed Hastings wants to be, either.
Conclusion
Sales pitches in earnings calls are sales pitches, nothing more, and therefore should be taken at face value. I always prefer to focus on the business logic behind the sales pitches, because they’re effectively the outline of the pieces a management team has in place, the objectives they seek to accomplish with those pieces, and their strategy for doing so. The sales is the confidence game around their ability to accomplish those goals.
I think The Trade Desk CEO Jeff Green did an unusually good job of outlining why this moment is so important for The Trade Desk. But I’m less sold that it’s an important moment for the broader streaming and CTV marketplace.
As I highlighted on Friday, the pivot to CTV is a sacrifice of the relative operational simplicity and premium economics of linear. The incentives not to solve for those continued advantages of linear over streaming and CTV addressable advertising are not going away anytime soon.
Must-Read Monday AM Articles
* Sara Guaglione of Digiday covered the NewFronts: Day 1, Day 2, Day 3 and Day 4.
*Many of the biggest media outlets out to craft new alliances with rivals who want to vie with Nielsen, and “the current hodgepodge of options” is likely to create confusion with advertisers.
* AdWeek’s Molly Cahillane reported on How Nielsen, Comscore, Samba TV and Innovid Measured Up at NewFronts
The Vibe Shift
* Data company Antenna observed in Q1 2022 that the number of streaming cancellations grew “even faster”.
* Disney may have a storytelling problem with its streaming numbers after projecting softer growth in the second half of 2022.
Emerging "Metaverse"-type convergence strategies
* Josh Rivers, head of UX research at gaming research company Solsten, offered some interesting, contrarian insights into the challenges facing the mobile gaming marketplace
Aggregator 2.0
* Music-centric media company WMX, the editorial arm of Warner Music Group first launched in November, unveiled WMX Connect, its first-party data platform, which will enable media buyers to more seamlessly transact against WMX audiences.
* A new study from the IAB and PricewaterhouseCoopers (PWC) predicts U.S.-bsaed ad sales on podcasts will “exceed” $2 billion by the end of 2022, will hit $3 billion next year, and will cross $4 billion by 2024.
Sports & Streaming
* The Wall Street Journal’s Joshua Robinson wrote on F1: “If the old-world charm of Monaco was the embodiment of what F1 used to be, Miami already represents everything it has become since a Netflix show called “Drive to Survive” rejuvenated the sport’s image and turbocharged the sport’s U.S. popularity.”
* Months of negotiations between the video-game maker Electronic Arts and FIFA, soccer’s global governing body, ended without an agreement to extend a partnership that had created not so much a wildly popular game as a cultural phenomenon
* Parks Associates found 43% of US internet households have livestreamed online content in the past three months, with sporting events by far the most popular type of content
Creator Economy, Platforms & Transparency
* TikTok has become “an indispensable tool” for Hollywood to reach Gen Z.
* YouTube is launching Green Screen, which lets creators use clips from the billions of videos on YouTube as the background for their Shorts. It also announced it is continuing to bulk up its slate of kids and family originals.
* Mike Shields interviewed Debbie Weinstein, VP, YouTube & Video Global Solutions, Google, about YouTube’s Connected TV strategy
Original Content & “Genre Wars”
* nScreenMedia’s Colin Dixon argued that “HBO Max-Discovery+ should not combine, separate distribution, and cooperate on sports”
* What’s On Netflix asks, “Does Netflix Have a Quantity vs Quality Problem?”, and a good Reddit thread ensued
* Jared Newman of TechHive argued why “now is the time” to switch from Netflix to HBO Max.
* Discovery exec Kathleen Finch revealed her revamped leadership team, and it included the departures of Tom Ascheim, President Of Warner Bros. Global Kids, Young Adults and Classic, and Brett Weitz, General Manager of TNT, TBS and TruTV.
AVOD & Connected TV Marketplace
* Insider reported Apple's Eddy Cue is discussing restructuring its $76 billion services business to make a bigger push into lucrative areas like streaming and advertising, and has already elevated executives to that end. ($ - paywalled)
* Nielsen reported that Netflix drew more TV viewing time than any other outlet during the 2021-22 TV season, nearly matching the combined total of the two most watched broadcast networks
* Television News Daily interviewed Kevin McGurn, president of sales and distribution for Vevo after it declared itself at Newfronts to be “the largest free ad-supported streaming TV (FAST) network in the world.”
* Warner Bros. Discovery has been talking to big media-buying agencies about an enhanced package of commercial inventory in top programs that encompass lifestyle shows from Discovery outlets like Food Network and TLC,sports properties from Turner Sports; movies that might turn up on TNT and TBS; and tentpole events at CNN
* UK’s Channel 4 struck a deal to air 1,000 hours of hit shows for free on YouTube
* Apple is rumored to be launching a new Apple TV “that improves cost structure” in the second half of 2022
* Variety VIP’s Gavin Bridge argued Why Netflix needs to embrace a FAST model
Other
* Netflix is publishing an update to its corporate culture memo for the first time in nearly five years, and is looking for “big, broad stories that can be told on a budget.” It was also reported to be exploring the launch of live streaming for comedy and reality TV.
* The Verge reported on Netflix’s failures with its Tudum marketing initiative.
* The Wall Street Journal reported on the collapse of CNN+, and Warner Bros. Discovery was upgraded by Cowen analysts to outperform from market performance in part because of CEO David Zaslav’s pledge to “invest at scale smartly”.
* Sky CEO Dana Strong told a conference that Sky will continue to expand its original content spending and is betting on “the iPhone mode” with its recently launched broadband-powered TV set and monthly fees for device ownership.
* A good argument why personalisation in marketing “doesn’t make any sense”, and why “the case against personalisation is significantly stronger than the case for it.”