Tag Archives: media

Tolls

As you might have guessed from the name of my company (Keith Ritter Media), I’ve spent a great deal of time in the media business, both as a marketer and as a publisher. The business model used to be pretty simple. Create something about which people care, make them aware that you’re offering it, get them to read, listen, or watch it, and aggregate those people into a saleable audience. You hired salespeople to meet with the representatives of your real customer – the advertiser. Usually, these representatives were media buyers from an ad agency. You with me so far?

In TV, we’d offer a unit of time at a “gross” price and asked the agency to remit a “net” price, which was usually the gross minus 15%. That commission was the toll we paid to get the revenue. Obviously, how much of that the agency kept was between them and their client but it wasn’t really our concern. We did our budgeting on the expected net revenues we’d get which was pretty much a straight line derivative of the gross monies sold. Other media had similar models but in every case, the dollars received by the publisher were directly and clearly tied to the size and desirability (to marketers) of their audience.

That statement in no longer true for digital publishing and the fact that it isn’t has serious negative implications for other media as they shift to a more programmatic sales model. I have no idea how digital publishers are able to do financial plans since they can’t project revenue from audience size. That’s because they’ve allowed themselves to generate billions of dollars in ad revenue while only capturing somewhere around a third of what is spent. The 15% that used to be paid in tolls is now more like 67% although some estimates are even higher. More importantly, it’s usually impossible to predict the net revenues received from the gross revenues sold. Digital audiences are growing while publisher revenue is declining.

Where is the money going? A sponsor pays $1 for an ad impression. The agency still takes their commission, but added to the toll-takers are trading desks, DSP providers, data providers, supply side platforms, ad serving platforms, verification services (viewability, etc.) and who knows who else. In some cases, it’s the agency double-dipping, but most of the time these are third parties. Most of these ad services have no interest in either the publisher’s or the marketing client’s success. They aren’t about a quality ad environment. They facilitate a transaction. In some cases, a platform that connects both buyers and sellers charges each side a separate fee without disclosing that they’re doing so. In short, publishers, agencies, and marketers have created a system that works for no one but the VC’s that fund these ad tech companies. What happens when programmatic spreads to other media such as TV?

Publishers have many other challenges. Facebook, for example, makes more money off of some publishers’ content than do the publishers themselves without paying the publishers a dime. But the real threat to a healthy media environment is the toll-takers. When you create great content and grow your audiences, you should be the entity that benefits and not some opaque service provider. More eyeballs used to mean more money to the bottom line. Can we make that equation true again?

Leave a comment

Filed under digital media, Huh?

Death By 1,000 Cuts

When I was in the TV business, the most sought-after demographic was always young adults. While they often weren’t the key to the heaviest volume of product sales, it’s when we’re young that we build consumption habits and establish brand loyalty. Let’s keep that in mind as we look at some recent trends in media.

You’re probably not surprised to hear that cord-cutting – consumers ditching their cable or satellite TV subscription in favor of streaming and.or over the air services – has continued to accelerate. As the Techdirt blog reported:

MoffettNathanson analyst Craig Moffett has noted that 2016’s 1.7% decline in traditional cable TV viewers was the biggest cord cutting acceleration on record. SNL Kagan agrees, noting that traditional pay-TV providers lost around 1.9 million traditional cable subscribers. That was notably worse than the 1.1 million net subscriber loss seen last year.

They also noted that those numbers don’t tell the entire – and much worse – story. Those numbers report those who canceled an existing subscription. When you take into account the youngsters moving out of their parents’ houses or graduating from college and forming their own household for the first time, there are around another million “cord nevers” who are missed sales by the traditional cable and satellite providers. It really doesn’t matter what business you’re in. When you stop attracting younger consumers, you have a problem.

Why is this happening and how can we learn from it in any business? Techcrunch, reporting on a TiVo study, said that:

The majority of consumers in the U.S. and Canada are no longer interested in hefty pay TV packages filled with channels they don’t watch. According to a new study from TiVo out this morning, 77.3 percent now want “a la carte” TV service – meaning, they want to only pay for the channels they actually watch. And they’re not willing to pay too much for this so-called “skinny bundle,” TiVo found. The average price a U.S. consumer will pay for access to the top 20 channels is $28.31 – a figure that’s dropped by 14 percent over the past two quarters.

There is also the matter of convenience and personalization. Netflix, Amazon, and other streaming services do a great job in making recommendations and offering you programming based on your viewing habits. Has your cable operator done that for you lately?

We can learn from this. Cable operators who focus on broadband and “throw in” the TV offerings aren’t doing much better than those who don’t, since the overall out of pocket is sullied by broadband caps and other, often hidden, price increases that help the bottom line but only prolong the inevitable. It also just makes it easier for a lower-priced competitor to enter the market. I know enough about how the TV business works to recognize the issues with skinny bundles (it’s hard to offer channels on an ala carte basis due to contractual restrictions). We’re seeing more and more offerings that bundle channels outside of the traditional providers and that’s going to exacerbate the aforementioned trends as well.

What’s needed is a rethinking of the business model. Getting local governments to preclude more broadband competition isn’t a long-term solution (look at the wireless business!) nor it is the “free and open market” to which most businesspeople pay homage. Listen to your consumers and give them what they want, especially the young ones. Cord cutting isn’t some far off fantasy that naysayers have dreamt up. It’s here, and it’s killing you by 1,000 cuts. The rest of us can learn from this and, hopefully, not make some of the same mistakes. You agree?

Leave a comment

Filed under digital media, Reality checks

New Isn’t Synonymous With Good

A decade or more ago (2003, actually), there was an early attempt at a VR world called “Second Life.” It’s still in existence although in my mind it reached its PR peak way back when. Many sports and entertainment properties rushed to set up virtual home bases in the virtual world. If memory serves, MLB built a stadium and the NBA built an arena.

I was running the NHL’s digital stuff at the time and as you might expect, the Second Life folks came to us to participate. You should also know that sports leagues keep an eye on one another (duh) and so the fact that the other leagues were there had some folks internally asking why we weren’t. I had a pretty simple answer for them: we weren’t because it made absolutely no business sense. Back then, Second Life’s business was almost a real estate play. We would have had to have bought “land” on which to construct our presence as well as to build and maintain whatever we build. The audience numbers weren’t all that great when compared with other options. When we put all the numbers together the cost was well into six figures and the potential return was pretty nebulous at best. I explained all this to my management and said that if they wanted to be involved from a marketing perspective (and pay for it out of that budget) we’d proceed but if they were asking if it was a smart business deal the answer was no.

The Second Life folks were way ahead of their time (VR is just starting to take off) but the lesson from that is just as relevant today. Look at the rush of sponsors to new platforms, whether they’re the latest hot app or a new type of programmatic buying. There is no vetting. Many of these things lack any form of third-party verification or transparency. Frankly, my guess is that many of the folks involved don’t even know what questions to ask since ad tech has become incredibly complex. Add in the controversy about rebates driving placements and investment in much of this new stuff might make a visible splash but bellyflop as a business decision.

Good strategy is timeless. Yes, we need to push forward with respect to how we display our messages and engage with our consumers. No, we don’t need to rush off a technological cliff as we try to do that in the name of being cutting edge. Newness for newness’ sake is not synonymous with good. You agree?

Leave a comment

Filed under digital media, Helpful Hints

The Margin Of Error

One bit of my old life as a broadcaster that I seem unable to leave behind is the ratings. TV ratings – and specifically those from Nielsen – are the currency of the TV ad business and billions of dollars of media are bought and sold based on these numbers. What caught my eye this morning was the reporting of last week’s late night ratings and the analysis connected to the report. The writer did a good job dissecting the numbers except that they conveniently failed to mention one thing that should be instructive to any of us in business: the margin of error.

English: Graph showing weekly Nielsen Ratings ...

(Photo credit: Wikipedia)

What the author failed to mention is that there was no statistical significance between the reported audiences in any of the numbers that Nielsen was reporting. Since the numbers discussed in the piece were Adult 18-49 numbers, the reporting is based on a subsample of Nielsen’s panel, meaning that the margin of error is wider than on all the ratings as a whole. While I don’t have a rating book in front of me, I know there always used to be a disclaimer in every book explaining that the numbers it contains are only accurate up to a point. They’re estimates. When we’re looking at number this small (and the late-night numbers are in tenths of a point), it’s just as possible that the network reported in third place could, in fact, have more viewers than the network reported as in first place.

The point here isn’t to denigrate the ratings system (I’ll save that for another screed). The point is to remind each of us that almost every piece of data that we look at needs to be taken in context and with appropriate disclaimers. What I find helpful is to pay attention to trends and not to absolutes. The only numbers without a margin of error are those pertaining to actual money received and actual money spent, and even those are generally only snapshots of a moment in time.

The next time someone comes to you with a data point, ask about the margin of error or about any factors that could affect that data. New visitors to your website are up? What percentage of people routinely delete cookies and, therefore, seem to be new when they’re not. App installs are up? How many people deleted the app last week, was that an increase, and could the new installs, in fact, be reinstalls? See what I mean?

Leave a comment

Filed under Consulting, Helpful Hints

How To Cure A Headache

My introduction to the business side of media came when I was a teenager. My dad was a television rep who sold time to ad agencies. Broadcasting Magazine showed up every week and once in a while, he’d have a Nielsen book in his briefcase for me to peruse. From my perspective, the business seemed pretty simple. The seller and buyer agreed on a price based on how many people they thought might be watching and how narrowly defined the parameters were with respect to when the ad could run. In other words, they negotiated and measured based on ratings, rate, and rotation.

Drawing "THE CLUSTER HEADACHE" Subti...

(Photo credit: Wikipedia)

When I actually followed my father into the media business, not much had changed. Sure, the numbers were more demographically-based instead of on household counts, but the business was pretty much the 3 R’s. Not anymore. In fact, a recent study by ID Comms found that most advertisers see media as a complex headache. It is pretty overwhelming now, both from the perspective of available media options as well as the addition of digital channels such as social media. The fact that a huge percentage of media is now bought programmatically through systems that are often rife with fraud and lacking in transparency adds to the headache.

I don’t think it’s the complexity of the media world that’s causing the headache. I think it’s a misplaced emphasis on buying efficiency at the expense of both strategic thinking and measuring results on things other than easily-manipulated metrics such as CPM. If a campaign makes the cash register ring, it’s effective. If it doesn’t, what good is it to have delivered something useless in a highly-efficient manner?

I’ve spoken with friends on both the sales and buying side of the equation. There seems to be universal frustration but not much in the way of solutions. It really needs to come from the people who control the purses – the clients. They need to stop thinking about CPM’s as a measure of efficiency (at least when it comes to digital, anyway) and place a lot more emphasis on strategy. Is the register ringing? Is the phone? Are there more interactions on social even if the number of “likes” isn’t rising? Is there a buzz about your brand? Those are the modern metrics that are relevant in the long-term and that kind of thinking can cure a media headache many folks are now experiencing. You agree?

Leave a comment

Filed under Consulting, digital media, Thinking Aloud

Smoke And Mirrors

I wrote last week about magic and distractions. Another magically-themed post today about the smoke and mirrors magicians use in their acts. That expression has come to mean something that’s deceptive or fraudulent, and a couple of pieces about the marketing business got me thinking about that term today. Even if you’re not a marketer (but who isn’t!), there’s something to take away.

One piece on Digiday dealt with ad-buying technology. You’re probably aware that the majority of digital ad buying (which will soon cover TV as well!) is done programmatically. No humans are involved other than to create the platforms on the vending end and choosing the ones to use on the buying end. The Digiday piece contains the following statements from an ad tech software developer:

I can say from first-hand experience that a lot of it is taped together stuff and nowhere near the sophistication that’s talked about…It is really easy to put up a website and mention “algorithms,” “machine learning” and a bunch of buzzwords. Nobody knows how that works. You can’t actually look into it, it is all just black boxes. But underneath, there is no real special sauce for a lot of these companies.

In other words, smoke and mirrors. Billions of dollars are spent this way and marketers are (finally) demanding to know how their money is really being spent. They’re turning on the lights and blowing away the smoke. Which leads to the second piece from MediaPost. It mentions “the terrible murky waters of rebates and contracts” and the same lack of transparency to which the other piece alludes. P&G is demanding more transparency, insisting that media agencies show that they are using providers that apply industry standards in measuring viewability and fraud. Ogilvy and Mather is reorganizing under a single P&L accounting structures for clients and thereby boosting transparency. Both of these moves are sending the magicians home.

We all need to ask ourselves about smoke and mirrors in our businesses. We need to challenge sources behind reports and assure ourselves that what we’re reading or hearing is rooted in fact and not someone’s fiction. A good practice outside of business too, don’t you think?

Leave a comment

Filed under Huh?, What's Going On

Why Can’t You Yell Fire?

I think we all know that you can’t yell “fire” in a crowded movie theater. It will cause a panic and someone will get hurt. At a minimum, the odds are that someone will also call in a false alarm that distracts the fire department. That is a common-sense limit to free speech. Almost 100 years ago the Supreme Court said that the First Amendment, though it protects freedom of expression, does not protect dangerous speech.

I thought of that the other day when Google and Facebook announced that they would take what I think is a great first step in purging themselves of fake news by cutting off the access those sites have to revenue-generating or promotional ads. As Reuters reported:

Google said it is working on a policy change to prevent websites that misrepresent content from using its AdSense advertising network, while Facebook updated its advertising policies to spell out that its ban on deceptive and misleading content applies to fake news.

As someone who is devoted to the First Amendment, you might wonder why I’m OK with what seem to be limits on free speech. Fake news – or outright lies – are a big source of the divisive atmosphere most of us recognize exists in our country. They’re not hate speech, which I’m actually OK with because it’s so obviously slanted. They’re worse because they wrap themselves in a cloak of truth. As we’ve discussed here many times before, many people – both in business and out – don’t bother to do the research to find out if what’s being presented to them in factual. The presence of these sites and their fabricated BS makes a very difficult search even more so. No, the Pope didn’t endorse Donald Trump and yet 100,000 people shared that story as if His Holiness did.

By removing the financial incentive to create and promulgate this crap, Facebook and Google are taking a positive step in helping those of us who want to make decisions based on factual material. It’s not censorship; it’s arresting the idiot who’s yelling “fire” for a profit. Hopefully, the next step is some method to annotate and fact check the sites that remain. I also see that Twitter is suspending the accounts of some alt-right leaders.:

In a statement, Twitter said: “The Twitter Rules prohibit targeted abuse and harassment, and we will suspend accounts that violate this policy.”

There is no question that Twitter has become a bit of a cesspool and they certainly need to take some actions that clean up the rampant trolling and harassment that goes on. This, however, doesn’t sit as well with me since it starts down the slippery slope of censorship. The difference is my mind is that the fake news folks are making stuff up for profit while the hate groups are expressing (in theory) their own beliefs, however misguided.

Interesting times, aren’t they?

Leave a comment

Filed under Huh?, Reality checks