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Babelfish Articles #12 Jan-June 2015

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Articles / knowledge that I collected over the last 6 months that I thought worthy of sharing. First 20 a must read.

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Babelfish Articles #12 Jan-June 2015

  1. 1. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 1 Articles Jan-June 2015 Brian Crotty Babelfish.Brazil@gmail.com
  2. 2. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 2 Summary Programmatic buying: just a buzzword or the future of media buying? ........ 7 Pandora Exec Says 8 Seconds Could Be the Sweet Spot for Mobile Video ....... 9 Video Advertising: How Facebook, Twitter, Instagram, Tumblr and Snapchat are Changing the Rules....................................................... 11 How 'phygital' products connect offline and online........................ 15 Facebook: Redefining Video Advertising ................................... 18 The future of agency trading desks: Evolve or die......................... 27 7 Deadly Sins: Where Hollywood is Wrong about the Future of TV ............ 29 Welcome to the ‘walled garden’ era of ad tech............................. 38 Inside AdWords........................................................... 40 Forget Ad Avoidance, Growth of Digital -- TV Holding Its Own.............. 43 Procter & Gamble CMO Pritchard: Programmatic Delivers Business Lift ....... 45 How Starcom trained 1,200 employees to speak programmatic................. 49 Agencies Scramble to Keep Young Talent ................................... 50 New Facebook Study Reveals Psychological Motivation Behind Status Updates . 52 Publicis moves programmatic ad buying from VivaKi into media agencies ..... 54 Media groups form digital advertising alliance............................ 55 BORGES' MAP Navigating a World of Digital Disruption...................... 55 How cars really get bought ............................................... 67 How programmatic and 'always on' strategies can improve performance ....... 72 Broadcasters, Cable Companies and MVPDs Unite to Form the New Video Advertising Bureau................................................................... 79 DSPs Showcases Key Ad Tech Companies ..................................... 80 Marketing Tech Stack Illustrations Highlight Wide Range of Approaches ..... 82 Uncommon sense: the appification of tv ................................... 83 Mobile Payment System Rumble: Apple Pay Vs. Samsung Pay Vs. Android Pay ... 85 Programmatic, changing consumers and viewability: Future challenges for media planners and media agencies .............................................. 87 Data Breaches and Brand Management: How to Preserve Your Brand Value ...... 92 Programmatic 'still needs planners' ...................................... 94 Mondelez Makes New Call to Startups for Retail Tech....................... 95 Pernod targets 'consumption moments' ..................................... 96 Google entra na briga para substituir cartões por celular................. 97 There Is No More Social Media -- Just Advertising......................... 98 The One Slide From Mary Meeker That (Still) Makes No Sense At All ......... 99 We Overlook Humans And Creative When Talking Programmatic, Says InSkin Media’s GM...................................................................... 100 Programmatic TV to hit $10bn ............................................ 101 Digital markets mature .................................................. 102 For Video Ad Viewability, Size Matters .................................. 103
  3. 3. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 3 Why Your Agency Needs Fewer Project Managers and More Producers .......... 103 TV strategy: The optimal TV ad length ................................... 105 4G Development in Latin America Is Slow, Uneven.......................... 110 Wearables: The Next Employee Accessory? ................................. 112 Brand journalism to go mainstream ....................................... 114 The connected car report: Forecasts, competing technologies, and leading manufacturers........................................................... 115 It's Not Just Cyclical: Industry Change Is Driving Marketing Giants to Review Media Agencies.......................................................... 118 Media environment trumps media quality .................................. 119 10 Steps to Make Each Day Exceptionally Productive....................... 120 The Rise Of The SSP For Programmatic TV ................................. 122 Corporate Storytelling: Coming To Your Emotional Rescue.................. 123 How People Will Use the Apple Watch ..................................... 124 From F8: What’s New with Facebook Video ................................. 126 Facebook video challenges YouTube ....................................... 127 Copy for faster ad strategy ............................................. 128 Você quer mesmo deixar o Brasil? Tem certeza?............................ 130 Havas Worldwide CEO Andrew Benett on the Reality of Digital TV ........... 132 The problem with media agencies... ...................................... 133 Young people see more than 20 hours of online video versus only 8 TV ..... 135 Video viewers demand choice ............................................. 136 Google vai vender propagandas de TV. E isso é uma péssima notícia para as emissoras............................................................... 137 Google Fiber May Have Created a Game-Changer: Real Measurement of TV Ad Views138 WPP and dunnhumby - Strategic Positive At Right Price.................... 139 L'Oreal USA Moves to Make All Types of Ads -- Online and Off -- 'Shoppable'141 Moradores das favelas brasileiras movimentam R$ 68,6 bilhões por ano ..... 141 SXSW Interactive Panel Picks for CMOs and Big Data Futurists ............. 143 O melhor palestrante do mundo: desconstrução da apresentação campeã ...... 145 Canais de TV também adotam modelo de mídia programática.................. 147 Creativity is key to programmatic ....................................... 148 MediaCom tightens procedures ............................................ 149 Data Will De-Commoditize TV Advertising ................................. 149 Audience Insights: Why Marketers Need To Put Analytics First ............. 152 Uncommon sense: how to increase your digital advertising effectiveness through 'reach efficiency'...................................................... 154 Connected Cars Digital Media Apps ....................................... 156 Big Brands Find Data Is As Much A People Challenge As A Technology Challenge159 Meerkat for iOS Lets You Live Stream Video to Your Twitter Followers ..... 161 Tim Cook Says the Upcoming Apple Watch Will Replace Your Car Keys ........ 161
  4. 4. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 4 Strategy Corner’s Digital Trends of the Week: March 2nd.................. 162 Programmatic Fact vs. Fiction ........................................... 164 Social Media Week: Digital Marketers Must Predict the Future to Succeed .. 166 Online behaviour moves in-store ......................................... 167 Shoppers Bringing Online Competition Inside Bricks-and-mortar Stores ..... 167 A new tool aims to discover what the subconscious mind is really thinking when people post on Twitter .................................................. 170 Facebook Launches Dynamic Product Ads for Data-Minded Retailers.......... 171 Target and Shutterfly are among the first merchants testing Facebook product ads..................................................................... 173 IPG Will Remain Out Of The Inventory Resale Business..................... 176 WPP and comScore Partner for Cross-Platform Measurement.................. 177 Heineken joins list of brands demanding independent ad tech solutions .... 178 Google’s impending data platform restrictions raise concerns ............. 180 SMG Strikes Deal To Integrate 'Granular' Set-Top Data Into TV Planning/Buying System.................................................................. 183 New marketing models emerge ............................................. 183 Rising angst over airbnb operations ..................................... 184 6 Things They Don't Tell You When You Leave the Big Corporate World for Your Own Business................................................................ 187 Two Big Questions About Video in Social Media (and Some Answers) ......... 189 Big Data Has Big Effect When Shared Companywide.......................... 195 Innovid Releases The First Interactive Video Benchmarks Report ........... 196 Online Video Has a Completion Rate of Almost 50%......................... 200 Marketers shift retargeting focus ....................................... 200 The shopper of the future: How today's young shoppers see tomorrow's shopping experience.............................................................. 201 Clear QR Code........................................................... 209 AB InBev takes digital into stores ...................................... 214 How CPG Advertisers Stack Up for Digital Video........................... 215 Twitter And The Venture-to-Public Company Transition Challenge ........... 217 AAPL Ad-Blocking Concerns - Too Early Too Worry.......................... 218 ANA to Launch Fact-Finding Probe Into Media-Buying Kickback Claims ....... 219 P&G "hacks" the laundry category with Swash ............................. 220 Virtual Reality’s Future Relies on Improved Storytelling – Interview with Aaron Koblin.................................................................. 223 Digital's Third Wave Is Coming: Don't Miss the Ride...................... 226 Even Small Businesses Are Ready for Marketing Automation................. 227 ADBE Summit Comments, WPP Panel and GOOG Threat?......................... 227 Twitter embraces livestreaming, confirms periscope purchase.............. 229 Digital Banking in Brazil Reaches Milestone ............................. 231 Blippar app visual overhaul aims to identify everything around you ....... 232
  5. 5. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 5 Media agency role must change ........................................... 236 With $25 Billion Up for Grabs, Media Agencies Need to Change ............. 237 Marketing Research Industry and NLSN Outpaced Advertising In 2014 ........ 239 Starcom and Zenith bring programmatic in-house........................... 240 Marketing Tech Stack Illustrations Highlight Wide Range of Approaches .... 242 SMG Unveils New Global Operating Structure .............................. 243 Publicis' Programmatic Arm Sends Traders to Individual Agencies .......... 244 SMG launches real-time content marketing solution across EMEA ............ 245 Tudo que você precisa saber sobre os lançamentos do Google............... 246 Why Pre-Roll Video Ads Need to Be Interactive............................ 247 The Future Is Personalized .............................................. 249 Can Marketing Tech Adoption Catch Up to Data Adoption?................... 251 No Brasil, 68 milhões de pessoas acessam internet pelo smartphone ........ 253 68 milhões usam a internet pelo smartphone no Brasil..................... 254 Content marketing should be layered ..................................... 256 The New Media Buying Formula: Upfront + Programmatic..................... 257 Programmatic TV: Why Agencies Should Start Watching & Investing .......... 258 Can't Marketing and IT Just Get Along? .................................. 259 The world’s first atm with facial recognition technology is unveiled to the public in china......................................................... 261 Coca-Cola's Javier Sanchez Lamelas: tech can't save average creative campaigns ........................................................................ 261 Kellogg Has Stopped Buying YouTube Ads Over Viewability Verification Issue 263 The meeker report....................................................... 266 Data, Data Everywhere in the Upfront: An Overview -- Part 1 (Updated) .... 270 Data, Data Everywhere in the Upfront: An Overview -- Part 2.............. 272 How Automation Will Change Content and Native Ads........................ 274 Retailers focus on bridging digital-physical divide...................... 276 Do Marketers Need Agencies to Get 'Ahead of the Curve'?.................. 278 VP to agencies: understand consumers' digital behaviour and deliver KPIs . 279 Disruption and woulda, coulda, shoulda .................................. 281 For Video Ad Viewability, Size Matters .................................. 285 Assembly's Jeff Brooks Talks Data-Planning Engines and the Infrastructure Age286 New Media Agency Reviews Highlight Sector Risk........................... 287 Agencies and Barter - Great Businesses, But Perception Problems Remain ... 289 The Next Frontier in Customization: Lay's Potato Chip Bags............... 291 YouTube “How To” Video Searches Up 70%, With Over 100 Million Hours Watched In 2015.................................................................... 293 Red Bull redefines role of data in videos to enrich viewing experience ... 295 IPG’s Cadreon Developing TV Buying Software With Video Ad Tech Firm TubeMogul298 Reddit Builds Out Video Capability ...................................... 299
  6. 6. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 6 “Why Play A Game, When You Can Live It?” ................................ 300 Introducing Facebook’s Instant Articles ................................. 301 Programmatic Creative: Look to Existing Processes for Guidance ........... 301 O Brasileirão 2015 já começou no Twitter ................................ 303 Com 'empurrão' da classe C, smartphones dominam mais de 90% do mercado no Brasil ........................................................................ 304 UK lags when it comes to video ad completion rates....................... 307 Long Road Ahead for Programmatic in Latin America........................ 308 The important things that came out of the NewFronts...................... 309 Expedia Adds Emoji To Its Title Tags To Increase Click Through Rates In Google ........................................................................ 311 Marketers Share Data Externally, Whether or Not They Want To ............. 312 Context is about more than ad placement ................................. 314 TrueView coming to DoubleClick: User choice meets programmatic ........... 315 Spotify’s Announces Impressive New Features, Including Video Integration & Ultra-Personalized Playlists ............................................ 317 Pinterest Advertising Strategy Blossoms with Unveiling of ‘Cinematic Pins’ 318 Google-Twitter Partnership Develops, Tweets Will Now Appear in Google Search319 How PepsiCo sweetens up consumer insights ............................... 319 25 maneiras de como perguntar aos seus filhos 'Como foi a escola hoje?' sem perguntar 'como foi a escola hoje' ...................................... 321 Did Google just nail the Age of Context at I/O?.......................... 322 'Mobile is Increasingly THE First Screen for Video in Brazil' ............ 325 IAB Takes Over Open Video View Initiative, The ‘Standard Before The MRC Standard’............................................................... 328 Businesses no longer have to choose between mass market reach and niche market richness................................................................ 329 Preparation, Preparation: Be prepared for any kind of interview .......... 331 The media plan of the future ............................................ 333 ‘Ghost Malls’ Haunt Brazil .............................................. 336 HOW BIG DATA AFFECTS MARKETING .......................................... 339 Tim lança serviço de set-top-box ........................................ 342 TV Remains Most Effective Ad Medium ..................................... 343 Is there really a “more effective medium”? .............................. 344
  7. 7. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 7 Programmatic buying:just a buzzword or the future of media buying? Posted 26 May 2015 9:30 AM by Jessy Davis Programmatic is a word we’ve heard a lot lately. And when it comes up in conversation, other terms quickly follow: DSP, SSP, DMP, PMP, reserved, guaranteed and non-guaranteed. So what does all this chatter mean? Is programmatic buying just a new concept or the new reality? As the subject and the practice continues to gain momentum, most agencies and publishers are starting to train and develop dedicated experts to be their “go-to personnel” for programmatic questions. Yet as programmatic spending increases and more premium inventory (e.g., home page takeovers, custom executions, etc.) becomes available, all — yes, all — media buyers and sellers should have at least a basic understanding of programmatic buying. And that’s the goal of this blog. By the time you finish reading it, you should have a general sense of what programmatic buying is. You’ll also know why it will become increasingly more important as the media landscape evolves. What is Programmatic Buying? According to the Interactive Advertising Bureau (IAB), programmatic buying is “the buying and selling of advertising, real-time bidding, automation, and the buying and selling of digital media.” In simple terms, programmatic media is a marketplace for buyers and sellers, with digital media being the product. By leveraging data and real-time bidding (similar to paid search), advertisers are able to stretch media dollars further than ever to hit the right customer at the right time on the right site. Except with programmatic, the buying is now happening faster than it takes to load a web page. Breaking Down Programmatic In a marketplace, a buyer (media agencies or advertisers) is looking to purchase digital media ads/impressions (inventory) from media sellers (publishers), while publishers are looking to sell their inventory to advertisers and media buyers. In summary, someone’s looking to buy, and someone’s looking to sell. How does the buying and selling occur and where does it take place? Open exchanges and private marketplaces (PMPs) are accessed by demand-side platforms (DSPs) via integrations with supply- side platforms (SSPs) and exchanges. That’s a bit of an alphabet soup, so here’s a more detailed explanation of each: DSPs are the platforms where buyers manage their digital media purchases and try to obtain the most efficient CPMs for their digital ad spend. SSPs are the platforms where sellers sell their products to maximize their profits on their inventory. Like an ad server, there are two sides with similar technology that connect digital media buyers and sellers. Now that we’ve covered the buyer and seller platforms, next up are the several ways to purchase this inventory. The programmatic buying structure is like a funnel: Inventory starts at the top (higher value) and travels down to the bottom (lower value). Along the way, buyers are bidding to win the impression. If it sells, it’s gone. If it doesn’t sell, it continues to move down the funnel until (ideally) someone purchases it. The flow of inventory between the funnel levels is fast — only seconds long, if that. As such, it’s usually advised to use a mix of the buying structures to purchase the most effective rate and win relevant impressions. Two main tiers of programmatic buying are PMPs and exchanges. PMPs allow a scalable solution for advertisers to utilize established relationships to buy more select inventory and secure efficient rates,
  8. 8. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 8 while exchanges embrace real-time bidding in an auction-based environment that grants mass scale and inventory. 5 Common Programmatic Buying Structures (Reserved and Unreserved) 1. Automated Guaranteed (Private Marketplace) • Direct Sales – buyers and sellers agree to a fixed rate on inventory that delivers guaranteed impressions 2. Programmatic Reserved (Private Marketplace) • Reserved Inventory – publishers negotiate deals on a fixed rate that reserves inventory that delivers guaranteed impressions 3. Unreserved First Look • Unreserved Inventory – publishers present inventory that is not sold in the reserved tiers to a select advertiser before opening it up to any other advertisers 4. Invitation-Only Auction (Exchange) • Unreserved Inventory – publishers invite selected advertisers to an auction to bid for the impression 5. Open Exchange (Exchange)
  9. 9. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 9 • Unreserved Inventory – auction for unsold inventory without guaranteed impressions Why Buy Programmatic? The simplest answer: It’s an easier and more efficient way to buy media. Automating the buying process allows advertisers to maximize their media spend by (1) utilizing existing consumer data across all buys, (2) enabling the negotiation of more effective rates, (3) creating more flexibility in purchase decisions and (4) providing access to premium inventory on premium sites without having to manage multiple publisher contracts, which saves time for both parties. Publishers also benefit tremendously by having a place to sell their entire inventory. DSPs, SSPs and buying structures are just the tip of the programmatic iceberg. There are many more complex details, but that is where the programmatically trained really become valuable to agencies and publishers. As Laura Desmond, CEO of Starcom MediaVest, stated in Ad Age, “If you're a marketer, do you want your programmatic decisions siloed and balkanized from everything else that you're doing? No. You want it integrated." Understanding the foundation of what programmatic buying is, popular buying structures and the advantages of purchasing programmatically differentiates media professionals as adaptable and invested in the ever-changing, integrated advertising ecosystem. As a forerunner in the digital media arena, Moxie is taking programmatic by the reins. In addition to implementing and leveraging our own internal resources, proprietary technology platforms and centralized data warehouse, we recently developed and launched a 10-week agency course in programmatic buying for our media team. If you want to find out how programmatic can drive your business forward, contact Moxie today. Jessy Davis is an Assistant Media Planner at Moxie. She is currently preparing to represent Moxie at the 2015 Cannes Lions International Festival of Creativity in the Young Media Academy. Follow Jessy on Twitter, @_JessyDavis, through her journey at Cannes beginning June 19. Pandora Exec Says 8 SecondsCould Be the Sweet Spotfor Mobile Video But do brands want to create for yet another format? ByLauren Johnson June 10, 2015,
  10. 10. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 10 Pandora's sponsored videos could be getting shorter. Instagram locks advertisers in to the 15-second social video ad, while Vine requires them to build six- second clips. As just about every platform and publisher pushes brands to run shorter videos that grab consumers' attention, Pandora's chief revenue officer John Trimble said he thinks eight-second promos could be mobile video's silver bullet. Late last year, Pandora rolled out Sponsored Listening, an ad format that lets consumers listen to one hour of ad-free music in exchange for watching a short video promo. Bud Light, Fox and Sony PlayStation have all tested the format since then. Currently, those pre-roll videos are at least 15 seconds and can run up to two-and-a-half minutes. But it's no surprise that getting people to pay attention for even 15 seconds is tough, causing Trimble to make the case for eight-second preroll. The idea is that an eight-second ad is a nice balance between the length of a six-second Vine and a 10-second video. "As the competition for consumers' attention heats up, we're focused on developing ad products that are good for both advertisers and listeners—Sponsored Listening is a great example of that," Trimble said. "Our video advertising product has performed well thus far, and we are exploring various video formats on an ongoing basis. Looking ahead, I could envision video and audio ads as short as eight seconds being something advertisers and listeners will be interested in." Pandora said it doesn't have any immediate plans to start selling eight-second video or audio ads, but is considering it as a way to better target millennials and younger consumers. Greg Manago, creative development and production lead for Mindshare's content and entertainment division, said he liked the idea of eight-second video as an alternative to Vine's six seconds. "It gives us another two seconds to work with," he said. "The trick with mobile is to be engaging quickly without being annoying. You need to be very creative at this length, but we love a good challenge." Getting brands on board
  11. 11. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 11 Steve Carbone, managing director and head of digital and analytics at Mediacom agreed that snackable clips are needed on mobile, since some video ads are still sold as 30-second spots. He said that when consumers have a choice, they skip 50 percent of those longer ads halfway through. That said, an eight-second cap could be a tough sell for brands that have already struggled to turn traditional 60- and 30-second ads—which they spent decades perfecting for TV—into shorter digital promos. Plus, the growing fragmentation in how media companies sell video ads could make the eight-second video just one more headache for media buyers. Just last week, eMarketer cited more video options as a challenge that may hold back mobile spending. The research firm expects mobile video advertising to hit $2.6 billion this year. "Most brands will struggle to tell a story in eight seconds, as they still think in a TV world," Carbone explained. "Eight seconds requires a different level of creativity and a huge shift in how you need to get your message out." Video Advertising:How Facebook,Twitter,Instagram,Tumblr and Snapchatare Changingthe Rules Debra Aho Williamson | December 22, 2014 Executive Summary It’s primetime for video in social media. 2015 will see a rapid increase in video advertising on Facebook and other social platforms. Facebook in particular is coming on strong and has the potential to put pressure on YouTube, which captures nearly 20% of US video advertising spending right now, according to eMarketer estimates. Facebook isn’t the only one angling for a slice of the video advertising pie. Twitter is beta testing Promoted Videos; Instagram is rolling out video advertising; and Tumblr and Snapchat have new video ad products. This report details the growth of video on social properties and assesses the benefits and drawbacks of placing video ads on Facebook, Twitter, Instagram, Tumblr and Snapchat. In addition, the report looks at two important issues: whether these new video ad offerings are causing TV budgets to shift, and how the social platforms are complicating the viewability issue.
  12. 12. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 12 This is one of two linked reports about video advertising in social media. See our related report, “Video Advertising in Social Media: 11 Insights to Help You Make the Most of It,” for advice and insights drawn from in-depth interviews with executives and thought leaders at agencies, marketers and publishers. Key Questions • How much video is consumed on social platforms? • How is Facebook redefining video advertising, and how much of a threat will it be to YouTube? • Will Twitter’s strong ties with the TV business lead to success in video ads? • What role will Instagram, Tumblr and Snapchat play? • Will TV ad budgets shift, and how are the social platforms complicating the viewability debate? Social Properties Are Becoming Major Video Platforms Cisco predicted in a June 2014 report that video will account for 80% to 90% of global consumer internet traffic by 2018. If Facebook, Twitter and others have their way, they will be the conduits through which a significant portion of that video moves. Facebook already ranks as the second biggest online video property in the US, according to comScore data from October 2014. The ranking only includes desktop viewers, not mobile.
  13. 13. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 13 While platforms such as YouTube and streaming video players still attract many internet users, a greater percentage use social networks for video than use other types of video platforms, such as news sites. According to a 2014 survey by Google and TNS, 73% of internet users in the US and in Canada used a video site or app to watch digital video. Social networks ranked second, at 30% of respondents in Canada and 29% of US respondents. A study like the one above might be perceived as biased, considering that Google owns YouTube, but a study from Frank N. Magid Associates, conducted in June 2014, had a similar finding. Here, Facebook was used by 33% of digital video viewers, trailing YouTube’s 75% but a greater percentage than other well-known video services like Netflix and Hulu.
  14. 14. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 14 “We are seeing a little bit of a shift in how consumers are consuming video,” said Steve Carbone, managing director and head of digital and analytics at MediaCom USA. “It used to be YouTube was the first place that they go to search and see video, but a lot of those initial video impressions are happening on [Facebook’s] newsfeed. And then the second and third views are happening after they are being searched for on YouTube.” Social properties provide a different viewing experience than YouTube or a TV network’s streaming player. A key differentiating element is the ease with which users can share and comment. The ALS Ice Bucket Challenge typifies this difference. It showed that Facebook users were not only willing to upload video of themselves being doused with ice water, but also that they would use Facebook’s sharing and tagging features to encourage others to view and participate. Between June 1 and September 1, 2014, 17 million videos related to the ALS challenge were uploaded to Facebook; they were viewed more than 10 billion times by 440 million Facebook users. All of these developments are causing marketers to change how they think about the role of video in social media. • “We are looking at social platforms at large as a new video distribution opportunity. This is a whole new space for us to be able to distribute our video assets.”—Natalie Bokenham, vice president and managing director of digital, UM Worldwide • “It’s not just YouTube anymore. It’s figuring out how to incorporate snackable video content on channels like Instagram, Vine, animated GIFs, etc. Your content has to have a lot of legs that can span multiple channels.”—Kellee Montgomery, social and emerging digital marketing manager, Ford Motor Co.
  15. 15. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 15 • “Where it used to be every marketer just looked at YouTube, now we see that shifting to Facebook and Twitter.”—David Vogt, associate director of digital strategy, Vizeum With the groundwork laid for social media to become a common place where consumers view and share video and where marketers distribute video, video advertising is poised to grow as well. The next sections detail the video ad opportunities on Facebook, Twitter, Instagram, Tumblr and Snapchat. How 'phygital' productsconnectoffline and online This Trend Snapshot includes • Trend overview: what it is and why it's important • Brands ahead of the curve: examples from Heineken, Coca-Cola and Philips, among others • What it means for brands: expert practitioner insight • What can we expect: where this trend might lead • Further reading: where to find more on this subject Trend overview Connecting physical products to the internet is a trend many marketers are exploring. These are known as 'phygital' products, and examples vary from bottles of whisky to T-shirts. They are being used by companies to extend their brands, stand out in a crowded market, provide new services, stimulate online buzz and generate valuable consumer insights. This shift relates to the surge in popularity of 'wearable tech', such as the Nike+ FuelBand, and the availability (and greater affordability) of technologies such as facial-recognition software, near-field communication and RFID tags. It has also been encouraged by consumer uptake of tools such as smartphones, which can serve as a bridge between online and offline, and social media platforms, which allow consumers to share 'phygital' experiences. More broadly, these developments can be linked to the emergence of the 'internet of things', the name given to the advent of an ever-growing range of devices and appliances which are connected to the web. Cisco, the information technology group, has forecast that the profits attributable to the data, processes, people and 'things' in this ecosystem will reach $613 billion in 2013. Brands ahead of the curve Members of the alcoholic drinks sector have been among the early-movers in the phygital space. Heineken, the Dutch brewer, is one example, having introduced the first 'interactive beer bottle'. Powered by a battery the size of a coin, the Heineken Ignite bottle houses LED lights that flash when drinkers touch them together during a toast, spin if a consumer takes a swig of beer, and go to 'sleep' if the container is placed on a flat surface. Using wireless sensors, Heineken can even sync the LEDs with the beat of music in a nightclub. Staying in the drinks category, Diageo partnered with EVRYTHNG, the specialist software provider, on ascheme enabling Brazilian shoppers buying bottles of Johnnie Walker, Buchanan's or Old Parr
  16. 16. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 16 whisky as a gift for Father's Day to attach personalised films to every purchase. Each bottle was identified with a specific code, and the film was accessed through a mobile website. Ballantine's, another whisky brand, has allied with fashion and technology specialist CuteCircuit, agency Work Club and digital production firm MediaMonks to make aprototype connected t-shirt. This garment boasts a 1024 pixel 'screen' controlled by an iPhone app, and displays images or messages – including Twitter posts – of the wearer's choosing. Additional features incorporate a built-in headphone jack so consumers are able to listen to songs from Apple's iTunes music service and a camera that uploads pictures straight to Instagram. In the apparel industry, Asics formed a tie-up with agency Ogilvy Brasil on the Pacecolor Experiment. It utilised GPS technology embedded inside its sport shoes to identify a runner's speed over a given distance, and thus determine which precise colour the footwear should assume. A viral video starring Lelo Apovian, who twice competed in the marathon at the Olympics, demonstrates how the shoes look when they are in motion. Coca-Cola Amatil, a bottler for the soft drinks giant in Australia, turned to one of its primary assets to attract the attention of consumers, in the form of thousands of refrigerators spread across the country. A transparent LED screen door allowed customers to interact with bottle designs and view offers and price-points, while mounted cameras let shoppers snap pictures of themselves next to a selection of augmented reality props, and send the photo to a digital destination of their choosing. The fridges were fitted out with intelligent measurement software, too. In a more low-interest category, Philips, the electronics manufacturer, tapped this trend with hue, a web-connected lightbulb which is controlled by smart devices. Owners can programme when their lights go on and off, switch between colours, use photos to create bespoke combinations of light, and activate settings to help them concentrate, wake up, fall asleep, read, relax, and so on. In its first two days on the market, hue hit 200% of its monthly sales target. What it means for brands In assessing the opportunities for marketers, Niall Murphy, founder/chief executive of EVRYTHNG in London, argued that brands will be required to embrace "product relationship management" as product digitisation becomes more widespread. Product personalisation, the creation of value-added services and collecting valuable data will all form part of this process. "Conventionally, a lot of marketing money gets spent to tell people about a product, to tell people about the opportunity of purchase, and all the rest, but the actual product itself is a passive entity," he said. "And so the key value opportunity is to activate that engagement point and actually figure out who the consumer is and establish a communication channel with them." But Murphy warned that it is vital to consider just what kind of digital extension to a product – such as offering access to exclusive content, providing customer service or enhancing loyalty schemes – is likely to be the most beneficial. "It's important to spend time working on the logical value proposition for the consumer; the technology obviously has to make that work. But if these things are technology- driven, they will fail," he said. This year, Murphy reported, some 3.3 trillion products will be sold worldwide. Of these, half a trillion are candidates for digital enablement. And brands in the FMCG category, which are high-volume but "data poor", make up the majority of this group. For them, finding low-cost solutions will be crucial given the need to limit manufacturing expenses. But the rapid adoption of mobile and social media leaves considerable room for optimism about the future of connected products overall.
  17. 17. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 17 "I think it's going to become an extremely mainstream phenomenon. I guess I'd put a five-year timeframe on most consumer products in the world having a de facto digital service experience and engagement associated with them. The reason for that timeframe is more to do with how long it takes to roll out these capabilities themselves," Murphy concluded. In providing a more general view from the agency-side, Spiro Mifsud, head of technology at Tribal Worldwide in New York, argued that 'phygital' products should be seen within a "a holistic strategic plan for truly integrating the new technology that is being released." That is a difficult task, given the scale of the changes reshaping the market. "It is difficult for brands to develop a holistic digital strategy when the playing field changes so quickly – choosing which technologies to buy in to and 'own' can be overwhelming and discouraging to brands," Mifsud said. Although many of the examples of 'phygital' development to date have been experimental and limited in scale, Mifsud believes brands brands must keep a longer-term strategy in mind when building these products, rather than serving short-term tactical needs. "Brands need to understand that digital technology requires commitment. Brands not only need to know the technology, but also need to understand the implications of releasing something digital out in the wild," he said. Too often, for example, mobile apps are neglected once a specific marketing programme ends, even though they continue to "live" on a user's phone. An additional concern with the digitisation of almost all aspects of the marketing cycle relates to privacy, an issue which has to be addressed if firms are to build lasting relationships with consumers. "With greater awareness of big data and data security, brands will also need to become adept at using their data to provide more relevant digital experiences while still keeping the trust of the customer," Mifsud said. What can we expect? Many marketers will hope to use 'phygital' innovation as another means of creating differentiated goods that appeal to shoppers and fuel word of mouth, both online and offline. But the benefits could become much wider as the 'internet of things' expands. Ultimately, the 'phygital' trend will encourage brand owners not only to rethink their products and services, but also open up new sources of data that can lead to competitive advantage. For example, there is potential to use highly-granular data regarding where an item was purchased and when it was used. Geo-location software is able to show the whereabouts of a consumer, while connectivity to social media supplies a rich seam of qualitative insights surrounding the attitude of the user towards a product, and the context in which they are using it. Expanding on this, companies now have the chance to launch a range of paid-for services. Automakers might build tailored music playlists or pull up information related to nearby hotels and restaurants on in-vehicle communication and entertainment systems. The manufacturers of ovens and fridges might begin to deliver recipes and cooking tips. The services sector will also find opportunities in this trend. Some motor insurers, for example, are exploiting data from in-car systems (as pioneered by State Farm, thanks to a tie-up with Ford) to track the driving habits of their customers and decide their premiums as a consequence. Health insurers may find similar benefits as consumers embrace 'wearable tech' that can, for example, track the amount of exercise they do. Greater personalisation, behaviour-based rewards and rising loyalty are just a few of the possible payoffs, as long as brands can tackle the issues around privacy.
  18. 18. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 18 Facebook: RedefiningVideo Advertising Facebook is on a global push to make video its next big ad format. In marketing presentations from New York to Abu Dhabi this fall, Facebook has been touting its video capabilities. Facebook’s CEO, Mark Zuckerberg, indicated during the company’s Q3 2014 earnings conference call that video could be as important a content type on Facebook as photos have become. “If you go back five years, most of the content was text. Now, a lot of it is photos,” he said. “If you look in the future, as networks get better and the ability to capture good video and share it in a good way improves, then I think that going forward a lot of the content that people share will be video.” On the same call, chief operating officer Sheryl Sandberg tried to temper expectations, saying, “We think there is good opportunity with both video and Instagram ads, but we’re going to remain deliberate and slow in our approach to scaling those businesses.” But Facebook’s recent moves show a major push into video advertising. In the past six months Facebook has: • Introduced autoplay ads, which start to play as a user scrolls through the feed • Acquired LiveRail, one of the leading platforms for programmatic video advertising • Launched a set of video metrics, including the video-view count, enabling comparisons with performance on YouTube and other platforms eMarketer’s interviews confirm there is strong interest in testing Facebook’s video advertising. • “Facebook’s targeting and mass reach is just so dominant right now. Having the opportunity to do Facebook video [advertising] almost seems like a no-brainer.”—Kevin Hung, senior vice president and digital innovations director, Havas Media Chicago • “I would expect to see the share of budget going to Facebook video to increase pretty substantially over 2015.”—Noah Mallin, head of social, North America, MEC Global • “There may not be any more powerful video distribution medium than Facebook at the moment.”— Maikel O’Hanlon, vice president of social media strategy, Horizon Media Just how much digital video ad revenue Facebook will generate will be a closely watched subject. Investment bank JMP Securities in October 2014 called video “a multi-billion dollar opportunity for Facebook.” Facebook won’t get there next year, however. RBC in August 2014 estimated that it could see $700 million in worldwide revenue from autoplay video ads in 2015. eMarketer forecasts that marketers will spend $7.77 billion on digital video in the US in 2015, up 30.4% from 2014.
  19. 19. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 19 At this point, eMarketer does not forecast video ad revenue for Facebook. There are a number of factors. First, the company has not broken out any data for the video revenue, and, per Sandberg’s comment, it is attempting to mute expectations for now. Second, the few third-party estimates of possible revenue levels vary widely. Taken together, eMarketer does not feel there is sufficient data to make an estimate. Facebook vs. YouTube: By the Numbers Just how big a challenge will Facebook be to YouTube? eMarketer believes that while Facebook has grown quickly as a video platform, there are many reasons to think YouTube will continue to be a favored video advertising destination for marketers, and that Facebook’s entry could help grow the overall video market, rather than take away from YouTube. eMarketer expects YouTube’s video ad revenues will rise in 2015. We forecast that it will have $1.55 billion in net US video ad revenue next year, amounting to a 20.0% share. That would be up from 18.8% in 2014. In recent months, media reports have declared YouTube in trouble—or even dead—as a result of Facebook’s moves. But an in-depth analysis of the data behind some of these reports reveals a different picture. One set of data that got a great deal of publicity was a comScore finding that Facebook had more desktop video views than Google did in August 2014.
  20. 20. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 20 While the data shows that Facebook has been successful at incorporating more video in the newsfeed, the change isn’t as shocking as the chart makes it seem. • In June 2013, there was far less video on Facebook than in August 2014, and users had to click to launch a player to view it. August 2014 was the height of the ALS Ice Bucket Challenge and by then, autoplay was a standard feature. These two things led to a bump in video views • A view on Facebook isn’t the same as a view on Google/YouTube. Facebook videos autoplay, while on YouTube, a user must initiate the view by clicking to play the video. This implies a different level of engagement on the part of the user. • The data only compares desktop views. Facebook still trails Google in total video views, including mobile, according to Beet.tv. In another study, Socialbakers reported in October 2014 that “social media marketers have done more than just walked away from using YouTube for video content—they have sprinted.” To support that conclusion, it cited its analysis of 180,000 video posts on 20,000 Facebook pages owned by businesses, brands or organizations. The company found that between January and September 2014, Facebook pages increased their use of native Facebook videos by 64%. Moreover, Socialbakers said that in September 2014 more than 70% of the interactions with videos that pages posted were with Facebook videos (as opposed to videos from YouTube or other companies). The fact that pages increased their use of native Facebook video over the past few months isn’t surprising given Facebook’s heavy push to encourage them to try it. And while it sounds impressive that 70% of interactions were with Facebook native videos, Socialbakers’ blog post indicates that in January, Facebook’s share was already at around 60%. A third analysis compared the performance of #MontyThePenguin, a holiday-themed video that UK retailer John Lewis uploaded on November 6 to Facebook and YouTube. In the first 24 hours, according to data from marketing technology company Unruly cited by The Telegraph, the video was shared 202,953 times, with 156,000 shares on Facebook and 47,000 on YouTube.
  21. 21. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 21 However, sharing is easier on Facebook than on YouTube, and is only one measure of success. As of December 16, the video had 20.5 million views on YouTube vs. 6.2 million on Facebook. What this data, along with eMarketer’s interviews with marketers and agencies, indicate is that while there is no question Facebook is growing as a video platform, its impact on YouTube may not be what it seems. As Carbone of MediaCom USA put it: “I love Facebook video. I have no issue with it all. But that doesn’t mean I’m going to stop using YouTube. I want to use as many platforms as I can to push my message out.” For more on YouTube’s advertising business, please see the report “YouTube Advertising: Ins and Outs of Making It Work.” Benefits and Drawbacks Facebook’s efforts to redefine video advertising are creating several benefits for marketers, but also some risks to be aware of. Among the benefits are the ease with which ads can be shared, Facebook’s strong mobile presence, and its native video player. However, Facebook’s search capabilities are limited, the feed is ephemeral and it isn’t a destination for video so much as it is a sharing tool. Benefits Sharing: Marketers that have experimented with video ads on Facebook say they can get a great deal of organic distribution on top of paid distribution. The viral potential is appealing, said O’Hanlon, of Horizon Media. “I see Facebook becoming an enormous player in the video distribution space, and that is the byproduct of the level of targeting and the size of the audience and the way Facebook has found to present the video experience.” Mobile: As mobile video grows, Facebook is well positioned. In Q3 2014, 83% of its worldwide users accessed Facebook on mobile. Google doesn’t release comparable figures about YouTube, but according to GlobalWebIndex, in Q3 2014 39% of worldwide internet users had visited YouTube on a mobile device. “The native player on Facebook … offers a better mobile experience. That’s going to be critically important given the numbers in mobile video usage and the value of mobile video viewers,” said Kevin Lange, senior vice president and social media director at Starcom MediaVest. Targeting: Facebook’s targeting capabilities are a key reason why its ad business has grown rapidly. That same targeting will be available to video advertisers, enabling them to target the people most likely to respond. “You definitely get more targeting capability inside a platform like Facebook than you would get anywhere else,” said Mark Aikman, department manager for digital marketing and customer relationship management at Mercedes-Benz. Native video player: Facebook is wooing publishers and marketers to upload their videos directly to Facebook, rather than link to a third-party site such as YouTube. There are several benefits to using native video on Facebook, including the fact that the video appears larger in the feed and that it autoplays. In addition, Facebook provides more analytics and the ability to retarget based on video viewing.
  22. 22. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 22 “If you’re looking to retarget consumers off of video consumption, that is a benefit of a native player vs. embedding a link,” said Vogt, of Vizeum. Autoplay: Autoplay is a benefit because it gives users a taste of what a video is like. An ad that must be clicked to be played is judged based only on the static image. “The autoplay feature lets someone get a little snippet of what you’re offering, and it really brings people in. We love it as a brand,” said Katie Fischer, US media manager for Beam Suntory. Drawbacks Limited search capabilities: Although Facebook has improved its search functionality, nothing can beat the fact that YouTube is the second largest search engine after Google, according to comScore. Finding a video that you saw in your newsfeed a couple days ago got easier only recently, with the launch of improved search functionality. But finding videos is still much easier to do on YouTube. This means that for now, Facebook will not be somewhere people go to look for videos. “I don’t see Facebook becoming a video destination, the way that people know to go to YouTube or Hulu or Vimeo to search for video,” said O’Hanlon. It also means marketers must consider people’s mindset when they view videos on Facebook vs. other platforms. “Google and YouTube are the two largest search engines in the world right now. Facebook is a social utility platform,” said Hung. “The consumers’ frame of mind when they’re in either of those spaces has a lot to do with how receptive they are to advertising.” Not a library: One of YouTube’s strengths is the fact that marketers can use it as a library for their video assets. Many have gotten used to pointing their video advertising there. Although Facebook is making a strong pitch to convince marketers to upload videos directly, it’s not the same experience as they get by uploading videos to YouTube. “Where does your video live before it gets distributed? At the moment it makes sense for it to be on YouTube because that’s where all your videos can be together and then you can fish them out as needed,” said Bokenham. Facebook promises improvements. “We understand that marketers want this repository of videos, but when we look at user consumption patterns, it’s mostly in feed, so that’s why we’ve focused there,” said Fidji Simo, product director for ads-newsfeed and video at Facebook. “We recognize that having a central place would help, especially if you’ve seen it in the feed and you want to find it later on. So we’re going to make that experience better.” CPM pricing: Autoplay isn’t automatic for all advertisers. Video ads won’t autoplay if advertisers use cost-per-click bidding to buy them. Facebook recommends advertisers use either CPM or reach-and- frequency buying optimized for video views. This can be a drawback for advertisers that want to pay for ads based on a deeper action than an impression. It is also a different model than YouTube or Twitter uses. “They’re going to have to start charging in a way that’s competitive to YouTube. When you have a YouTube player where you’re only paying for a completed view, and then you have a Facebook that’s charging with CPMs, that’s more of a TV model,” said Renee Whittingstall, partner and digital media director at MediaCom USA. Twitter: Beyond TV Partnerships
  23. 23. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 23 Twitter’s foray into video advertising involves two ad products that may eventually become one. Last year, Twitter unveiled Amplify, which places pre-roll ads on short video clips that TV networks and other video providers upload to Twitter. Amplify now has over 100 partners, many of whom use it to distribute real-time video such as exciting moments in a sporting event, clips from live awards shows and breaking news. More recently, Twitter began a beta test for Promoted Video. These are essentially Promoted Tweets that include a video. While Amplify ads are limited to 6 seconds, Promoted Video ads can be several minutes long and don’t need to be associated with other content. Among the advertisers that have tested the newer format is Budweiser, which promoted a followup to its highly regarded puppy spot that aired during the 2014 Super Bowl. The new ad, #FriendsAreWaiting, got more than 2.5 million views in the first week after its release on Twitter during the fall. Twitter said the ad had a 6:1 earned to paid ratio, meaning that for every paid view, the ad had 6 unpaid, or earned, views from people retweeting and sharing it. The company does not break out its video ad revenue, but the figure is likely only in the tens of millions of dollars. In November 2014, Twitter said that four new ad formats (website cards, mobile app install ads, video ads and off-network ads) combined to generate $93 million in revenue in Q3 2014. Video “is one of our fastest-growing lines of business; we’re seeing tremendous demand for it,” said Baljeet Singh, product director for TV, video and music at Twitter. One difference between Twitter’s video ads and Facebook’s video ads is that the Twitter ads do not autoplay. A user must click to start the ad. However, media reports that surfaced as this report was being published indicated that Twitter was considering using autoplay. Benefits TV relationships: Twitter’s partnerships with TV make it appealing to advertisers who want to extend their message. “We’ve taken assets like our video brochures and [created an ad that said,] ‘You just saw the C-Class commercial; explore the C-Class for yourself,’” said Aikman of Mercedes-Benz. “We’ve found that those not only break some of Twitter’s advertising benchmarks, but they’ve been phenomenal traffic drivers.” Real-time: Twitter has long been associated with discussions surrounding real-time news and events, and its Amplify product is designed to take advantage of that. Promoted Video also has a real-time component. “Twitter’s key selling point is real-time conversation targeting. If you have content that’s specific to a certain topic, be it fashion or cultural events or cold and flu conversations, since we’re in that season now, it makes the video content that much more relevant,” Vogt said. Vine: Marketers appreciate the creative opportunities provided by Vine as well as its close ties with parent company Twitter. Although there are no plans to monetize Vine yet, some companies have used Vines as ads on Twitter and even on TV. HP, for example, turned a series of Vine videos into a TV spot that showed off the capabilities of a notebook computer that can turn into a tablet. Drawbacks Scale: Twitter’s smaller size is still baggage for some advertisers. “With Twitter, there are concerns around the scale when you stack it up against what Facebook brings to the table,” said O’Hanlon.
  24. 24. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 24 Format: Twitter’s roots as a service for mobile phones is evident in the fact that it is still very text- heavy, even as it has tried to incorporate more images and graphics into the timeline. Video, to some marketers, seems out of place. Ease of use (for Amplify): Although Amplify has more than 100 partners, the process of selling these ads can be cumbersome, a fact that Singh acknowledged, saying, “What we want to do is try to figure out ways to automate some of the process and take some of the friction out of the process for the brands and for the publishers.” In a typical Amplify execution, the publisher sells the 6-second pre-roll ad, and then the advertiser buys a Promoted Tweet to advertise the video. That two-step process has led to a situation where “today, there’s been a broader advertiser adoption of Promoted Video, because the creative canvas is open and it’s a standalone unit which means it doesn’t have to be associated with content,” Singh said. Off-Twitter strategy: While Facebook owns LiveRail, one of the largest providers of programmatic video advertising, Twitter is less far along in its own plans to deliver video advertising outside of its walls. It owns MoPub, a mobile ad network and technology provider, but Singh characterized MoPub’s video capabilities as “early days.” Instagram: Bid for Exclusivity Exclusivity is a key benefit of video advertising on Instagram. Because Instagram is selective about the types of marketers that can advertise there, the prospect of being among the chosen ones is appealing. Video ads went live on Instagram in October. The first advertisers included Banana Republic, The Walt Disney Co., Lancôme and Activision. “Any advertiser waving a checkbook can’t advertise on Instagram,” said Jonathan Anastas, vice president of digital marketing at Activision. “They’re looking at your current organic community and what kind of engagement you’re getting. Does it seem like a brand is a fit with the platform’s users? What is the quality of all of the assets you’re putting out there? To some degree, you have to be invited into advertising on Instagram.” The price of admission is the willingness to live by Instagram’s rules, however. “Instagram has a distinct aesthetic. There is a distinct community and way that people use the platform,” said Jim Squires, director of market operations at Instagram. “Then there is the format itself. It is a square format, and [the ads are] 15 seconds. Repurposing video content is typically not going to do as well and is not as encouraged.” Benefits Engagement: Instagram’s message to advertisers is that it is a welcoming place for beautiful brand imagery. For example, Banana Republic’s ad showed a time-lapse of a designer sketching an outfit, which fit with the creative bent of many of Instagram’s users. However, Activision’s ad for the game Call of Duty was more similar to a 15-second TV commercial. Still, the results were positive. “Since the campaign launched, while it’s still early, we’re seeing engagement metrics much higher than our overall social media averages,” said Anastas.
  25. 25. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 25 Relationship with Facebook: Although Instagram operates as a separate company within Facebook, Facebook’s ad sales team can sell Instagram ads if the client is a customer of both (the buys are done separately, however). Advertisers also anticipate more opportunities to cross-promote on both services. Creative opportunities: Instagram provides an opportunity to try out new forms of video marketing, such as its Hyperlapse time-lapse video app. Mercedes did two such videos, for the CLA model and the ML63 AMG sport-utility vehicle. Likewise, Lancôme saw a chance to think past the typical TV spot when it ran ads for a fragrance and a mascara. “We want to challenge ourselves in thinking beyond traditional TV creative and be able to customize the video experience,” said Brian Chang, assistant vice president of media at L’Oréal Lancôme USA. Drawbacks Targeting: So far, the targeting capabilities are limited, particularly in comparison to Facebook. Advertisers can only target by age, gender and country. “The Instagram platform should be smarter with the way that they’re targeting their ads. They have so much targeting capability, but they are rolling out really broad,” said Whittingstall. Restrictions: Instagram’s guidelines for advertising won’t be a hit with some marketers. In addition to the fact that the video must be square and no longer than 15 seconds, Instagram doesn’t allow advertisers to overlay ad imagery with text, Squires said. There are additional internal guidelines that aren’t published or shared publicly, a spokesman added. “The guidelines we have in place are to guide marketers to understand the platform and to put together creative that will fit well and ultimately achieve their objectives,” Squires said. Tumblr: Reaching Passionate Fans Tumblr this fall launched a native video player with advertising partners including The CW Network, Lexus, Ford Motor Co. and JCPenney. The ads autoplay in a user’s stream, as Facebook’s do, but have a novel twist; on the desktop, users can pop out the video player and continue watching video content while they scroll through their feed. However, Tumblr isn’t expected to be a major player in video advertising. It will have just $100 million in revenue in 2015, including video and other forms of advertising, and most executives interviewed by eMarketer are intrigued but consider it a lower priority. Tumblr prices its video ads on a cost-per-view basis. The ads loop silently unless a user clicks to play. Benefits Immersive rather than interruptive experience: Unlike Twitter, which has been text-heavy and is now trying to work in more images and video, Tumblr has always been multimedia-heavy. Video fits more naturally. “From the user perspective there is really no difference between an animated gif and an autoplay muted video,” said Lee Brown, global head of brand partnerships at Tumblr.
  26. 26. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 26 Relationship with Yahoo: In June, Yahoo began displaying some Tumblr ads on its sites, including Yahoo News and Yahoo Beauty. The ads appear as sponsored content or in-stream native ads. Although Tumblr’s video ads aren’t yet a part of this, it’s a possibility for the future. The prospect of displaying Tumblr ads across Yahoo’s network “is very intriguing,” said Mallin of MEC Global. “When you add video to that, I think it starts to bring some of the scale that we look for.” Time spent: Tumblr users tend to be very active, logging more time on the service than on other social platforms. According to November 2014 data from Cowen & Co., US users spend an average of 34.2 minutes per day on the service, second only to Facebook, at 42.1 minutes. People ages 18 to 29 reported the highest usage, 50.6 minutes per day, almost the same amount of time people in the same age group used Facebook (51.0 minutes). Drawbacks Size: Tumblr’s audience is smaller than other social properties; in a July 2014 survey, A.T. Kearney found that 11% of US internet users have an account, compared with 81% who were on Facebook, 37% on Twitter and 23% on Instagram. Analytics: With the new video player, Tumblr offers many of the same video analytics as its competitors do, such as paid views, earned views, number of times the video is played and average completion rate. It also provides unique metrics, such as pop-outs and loops. But some marketers say that they want more. “Even with the new player, it doesn’t seem to have the same level of analytics that the other platforms have,” Anastas said. Targeting: Ads can only be targeted based on location, gender and interest on Tumblr. That has caused it to fall lower on the list for some advertisers. “We’ve got some concerns around Tumblr’s targeting capabilities. It’s not in our top tier of consideration at the moment,” O’Hanlon said. Too much of a good thing: Tumblr’s youthful users upload a great deal of content and tend to be very active. While that’s generally a good thing, it can also be overwhelming for brands. “It’s a community that shares quite a bit. We wouldn’t be able to properly monitor or respond or maintain the level of community management inside a platform like Tumblr that we are able to on our other platforms,” Aikman said in explaining why Mercedes-Benz doesn’t yet have a presence on Tumblr. Snapchat: Bringing Video to Real-Time Marketing Snapchat’s ability to curate video around live events is intriguing to marketers, but its smaller user base as well as the newness of its ad products makes it a lower priority for most. Snapchat launched Our Story in June; the feature allows multiple users to upload pictures and videos from the same location or event. The result is a package that represents users’ own experience of the event. So far, Snapchat has curated Our Story packages for events such as college football games, music festivals as well as the Indian holiday Diwali. In November, Samsung became the first advertiser to sponsor an Our Story. It included images and videos that were labeled “sponsored” in an Our Story for the American Music Awards. The possibilities intrigue marketers, who see similarities to live TV sponsorships and also to the way YouTube organizes content into ad-supported channels.
  27. 27. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 27 YouTube’s channels “monetize user-generated content video in a way that is safe for advertisers. That’s exactly what Snapchat is doing with Our Story— curating user-generated video around live events,” said Starcom’s Lange. The Our Story ads follow Snapchat’s first foray into advertising. In October 2014 it began including occasional ads in a user’s Recent Updates list. Users can choose whether or not they want to view the ad, and it disappears after 24 hours. Benefits A fresh take on curated user-generated video: The collection of images and videos gives an intimate perspective on an event, one that other services may not be able to duplicate. During some college football games, for example, Our Story included footage inside the locker room before and after the game, which fans don’t normally get to see, Sporting News reported in October 2014. “I think [Our Story] has potential to be game-changing in terms of how user-generated video is both consumed and monetized by marketers,” said Lange. Real-time marketing: This can be both a benefit and a drawback. On the positive side, for marketers that routinely use Twitter to share real-time posts tied to news and events, Our Story provides another way to be relevant. A smart integration of a football-themed video ad in an Our Story about a big game would make the advertiser seem like it is paying attention. Disappearing creative: This is also both a benefit and a drawback; the benefit for marketers is if their creative, or their product, in some way aligns with Snapchat’s user experience, in which Snaps disappear after they are viewed. “There’s a huge opportunity to do some really interesting things that marry media and creative because there’s a feature that disappears,” said Catherine Davis, US president for Vizeum. “When you think about the number of products and services where the ability to disappear is important, I think there are some incredibly creative solutions.” Drawbacks Disappearing creative: For some marketers, the fact that ads on Snapchat don’t last long will be a drawback. There’s no archive of past Our Story collections. And in keeping with Snapchat’s mission to not make ads intrusive, users can easily skip over them if they appear in an Our Story. “They require brands to take a step outside of the comfort zone of the way that impressions have always been measured,” said O’Hanlon. Real-time content is risky: Snapchat curates the content in Our Story, but there is still a risk that something a user uploads will not be appropriate or positive regarding a brand. Marketers that buy Our Story ads will need to accept this. Targeting: Snapchat is purposely avoiding ads that it calls “creepy and targeted.” However, the lack of targeting will give some advertisers reason to delay using Snapchat. “I think we’ll have to see how video ads and Snapchat evolve to see if there are targeting capabilities or if we’re just talking about reaching broad-based enthusiasts,” said Aikman. The future of agency tradingdesks: Evolveor die Emily Siegel | March 3, 2015
  28. 28. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 28 Digiday first reported about “trouble on the horizon” for agency trading desks in 2012. Now, it seems, that horizon has been reached: Clients have increasingly moved media buying in-house, seeking lower costs, transparency and control. Media goliaths like Google have also threatened the model with a wider offering of products and analytics. Like successful search companies of the past, trading desks must evolve or face extinction. When ad tech tides start to turn, young companies are often faced with one of two options: consolidation or a disappearing act. Whether this is the categorical direction of the industry, we cannot say — but things are certainly changing. Digiday checked in with the industry’s largest holding companies — Publicis Groupe, WPP and Omnicom — to gauge their opinions on the future of agency trading desks. VivaKi, Publicis Groupe The first to buck the traditional trading desk model was Publicis Groupe, which announced in January it would be merging VivaKi into the company’s agencies. The client-service portion of its programmatic business — including account management and analytics — has ceased to exist independently, while the data and technology pieces have been spun into the VivaKi Operating System. “It was a natural step for us,” explained Marco Bertozzi, president of global clients at VivaKi. “But we didn’t want our agencies to start from scratch in terms of the infrastructure for programmatic. That’s why those [data and tech] teams remain aggregated: so that VivaKi can continue to serve as a centralized point of expertise on that topic.” For example, without specifying which one, Bertozzi referenced a piece of ad tech that was introduced to the marketplace this year. While initially agencies had a positive reaction, the programmatic experts at VivaKi were able to spot red flags. Their experience with programmatic platforms enabled them to ask the right questions — and saved the Groupe from months of headaches. And since many Publicis agencies have their own technology ventures, Bertozzi argues that the company has found a perfect balance: consolidate programmatic client services, but keep VivaKi as the company’s epicenter for technology relating to the topic. “This is a marketplace that has changed at such a rapid pace over the last three years — and what business doesn’t have to change and evolve according to the industry around them?” said Bertozzi. “Clients don’t trust the concept of a trading desk anymore. And although it’s early days, we’ve had two or three clients — whose names I won’t mention — that have already given us good feedback. The general sentiment is that this was definitely the right move. It’s going to be quite a tough argument for another agency to go up against in this current climate.” Xaxis, WPP Unlike Publicis Groupe, WPP chose not to consolidate its programmatic arm — Xaxis — the primary reason being that it doesn’t consider Xaxis a trading desk. “We are absolutely not a trading desk,” said Brian Gleason, CEO of Xaxis Americas. “We’re a programmatic media company. And we’re unique because we can be accessed three different ways:
  29. 29. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 29 through an exchange, our direct business channel or our managed service offering — which is the closest thing we have to a trading desk.” Direct business at Xaxis means working with clients outside of GroupM. Whereas VivaKi has only worked with existing Publicis clients, Xaxis is allowed roam free. “We started our direct business two and a half years ago,” Gleason explained. “And it is now our fastest growing line of revenue: 25 percent of our direct business actually comes from outside of GroupM.” Another important indicator of Xaxis’ sheer independence is that they have no financial commitments with GroupM agencies. So when asked whether he ever envisioned a scenario in which Xaxis would be consolidated, Gleason was emphatic. “We have a completely different model than the other holding companies,” he said. “We always have been and always will be a distinct entity.” Accuen, Omnicom Media Group Although the Accuen model is akin to a trading desk, Omnicom does not consider it to be one as it has set up its structure uniquely and chosen to keep its programmatic unit independent. Although it is an independent company, the “teams already sit alongside our media agency teams across our office locations,” explained Steve Katelman, evp global partnerships for Omnicom Media Group. “Because many clients want their programmatic resources to be connected to their holistic media strategy.” But don’t expect Accuen employees to be moved onto the agencies’ payroll. “Some clients prefer to have their programmatic effort operate more independently with a different set of KPIs,” Katelman explained. “And there are still some programmatic customers who aren’t clients of our media agencies. The point is we need to provide programmatic services in whatever structure meets the needs of our clients.” 7 Deadly Sins: Where Hollywood is Wrong aboutthe Future of TV May 25, 2015 At REDEF, we consume all types of content – from indie films to long form points of view, executive perspectives and the passionate blog posts of industry insiders and outsiders. Our curators sift through the infinite so that our members can be better informed about their business and its future. In some instances, we share our thinking on ideas and areas we believe are overlooked or underappreciated. This was the inspiration behind our REDEF Originals. Over the past few years, the television landscape has been as dramatic and character-filled as the best of Game of Thrones episodes. To that end, it should come as no surprise that there have been threats that have gone unseen or under-addressed by the major and minor television networks. After a few lively conversations above the monitors at REDEF HQ, we came up with “7 Deadly Sins: Where Hollywood is Wrong about the Future of TV”, written by our Head of Original Content, Liam Boluk. Not every threat applies to every network – nor are they equally menacing – but as a whole, we believe they’re critical to both understanding and planning for the future of television. We hope you enjoy it and be sure to subscribe to REDEF newsletters here.
  30. 30. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 30 1. By the Time You’re Ready for OTT, You’ve Already Been Supplanted For years, executives at the major television networks have repeated the same refrain: “We’re aware of the over-the-top and direct-to-consumer opportunities... When it makes [economic] sense, we’ll do it.” And to point, nearly every network has a team of analysts obsessing over statistics such as the number of US broadband homes or annual authenticated video streams – all in the hope of discovering when, exactly, is the “right time” to disrupt their current Pay TV model. What makes this strategy so dangerous is its tunnel vision: Every network assumes that when the OTT economics finally "make sense", they’ll be as relevant to their audiences as they are today (or, more accurately, as they were yesterday). While Big TV waits, the major digital video providers and platforms will continue developing deep, routine and lucrative audience relationships. By the end of the decade, many traditional networks will be shocked to find they’ve been supplanted in the minds of many Millennials and Generation Zs. But this should come as no surprise: • The largest YouTube Multi-Channel networks (Maker, Fullscreen and Machinima) are already delivering enough minutes to US audiences to challenge major TV networks such as CNBC, FXX and Fox Sports 1. And while traditional television ratings erode, the three MCNs (and many others) are doubling year over year • In the first quarter of 2015, Netflix’s 41M US accounts averaged nearly 2 hours of video on the service each day – making the “network” bigger than two of the four major US broadcasters and twice as large as the largest cable network. At its current pace, the OTT giant will become the most popular video provider in the US by the end of 2015. Not to be forgotten, Amazon Instant Video and Hulu are roughly 75th and 100th largest respectively, and continue to grow quarter over quarter • Amazon’s Twitch would be another Top 75 network, with its 13M US monthly viewers watching an average of 14 hours a month. Furthermore, the service has grown US minutes delivered by an
  31. 31. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 31 astounding 7% each month for the past three years. By this time next year, it could be contesting Top 25 networks such as AMC and FX In the coming years (if not months), many more services will begin chipping away at TV’s video dominance. YouNow, which enables users to broadcast their everyday lives (minutiae and all), now counts more than 50M monthly streams in the United States. SnapChat’s Discover feature includes original series (which are created by Snapchat and/or digital-first production companies) that are amassing tens of millions of views – even though they disappear only 24 hours after release. Several major television networks, such as ESPN, CNN and Comedy Central, do have a presence on Discover, but they’ve yet to treat the service as much more than a dumping ground for previously aired television clips. BuzzFeed, which counts nearly 110M unique visitors in the US each month, is also pursuing short, long and feature length video content – and Reddit announced its original video initiative less than a month ago. Vice, which began its digital video efforts in 2006, has become so successful that it now supplies branded content to cable giant HBO and will soon take over and rebrand a cable network owned by one of its minority shareholders, A+E Networks (which is also the 7th largest cable group). It’s important to recognize that these content forms and services threaten Big TV in more ways than by simply cannibalizing time or ad spend. They are now beating the industry across numerous key metrics: audience engagement, authenticity and “trust”, ratings growth and cost efficiency (by orders of magnitude). No matter how well one’s traditional assets are adapting to the digital era – or how bizarre, unpolished and “low value” digital-first content may appear – no major media company can afford to ignore the likes of eSports, ultra-short form video and “user generated content”. 2. The Future of Millennials and Pay TV What makes the rise of non-traditional video content particularly threatening is that many in Hollywood continue to believe that when millennials make enough money, buy a home or start a family, they’ll finally see the value in Pay TV services and subscribe. Vine, YouTube, Twitch, Netflix and other “low quality” or “late window” entertainment is just a stopgap until that epiphanic point. The problem with this hypothesis is that it’s rooted in the fact that every modern generation eventually adopted Pay TV (during the 2000s, the service penetrated nearly 90% of US households). However, Millennials and Gen-Z’s are first generations to have these non-traditional substitutes available – and they show levels of engagement with this content that far exceeds that of traditional TV. As a result, we truly cannot know what the future holds. What we do know is that young audiences love these substitutes today. A lot. With age and added income, many may feel the pull of traditional Pay TV subscriptions (via cable or OTT). But to belittle their affinity and affection for non-traditional content is dangerous; to assume that they’ll eventually want to pay for yours could be lethal. 3. Outdated Organization Model and Priorities Since its creation, the linear TV business has been defined by the medium’s constraints. As each channel can air only one video feed at a time, linear networks typically have typically focused on specific demographics and/or taste profiles – a choice that affects everything from greenlights, branding and scheduling, to advertising and even potential viewership. However, no major media company is ever satisfied with only a portion of the total TV audience. As a result, the Pay TV industry eventually experienced an unprecedented surge in the number of available, 24-hour channels – each targeting a smaller niche or genre, be it music videos, game shows, or Oprah fans. Though this channel proliferation was much ridiculed at the time, it’s directly responsible for today’s “Golden Age of Television”, as well as the industry’s record profits.
  32. 32. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 32 In recent years, however, this model has begun to both undermine the traditional Pay TV ecosystem and impede its evolution. Since 2005 alone, the average Pay TV household has more than doubled the number of channels it receives (to ~200), while the number of channels they actually watch has increased by only one (from ~16.5 to 17.5). This, combined with the price increases needed to pay for this content, has not only antagonized tens of millions of households – it has driven nearly 10M to abandon Pay TV entirely. Similarly, the addiction to channel empires has resulted in a disastrous online user experience (and one that hasn't changed in years): Rather than rethink the structure of their linear television business, the major network groups have chosen to simply recreate it online. As a result, users end up with a handful of different network apps and websites, each with its own UI/X, settings, content windows and capabilities. The shift to direct- to-consumer OTT distribution, which creates the additional complexity of managing multiple log-in credentials and billing relationships, will only make this worse. In a digital environment, "TV networks" face none of the limits of the linear television model. There’s no limit to the amount of programming a network can offer, no cap to the number of genres and demographics it can serve, “no one size fits all” lead in show and no single performance metric. Netflix, for example, is targeting TV and film viewers of all kinds – even kids – under a single brand. This not only creates a simpler consumer offering, but provides Netflix with numerous strategic benefits,such as the ability to program for the individual, rather than a specific channel or genre. Though this approach defies years of industry beliefs around building audiences and launching series, the results speak for themselves. In the first quarter of 2015, Netflix delivered more minutes of video in the United States than two of the four broadcast networks, twice as many as the industry’s largest cable network (The Disney Channel) and more than the bottom 117 (of some 200) cable networks combined. What’s more, this figure is up an estimated 45% (or 38 billion minutes) year over year. While the traditional network strategy still makes sense (it does optimize short-term affiliate fees and advertising revenue), it also prevents these groups from leveraging their entire portfolio in order to
  33. 33. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 33 create better consumer experience or offering. Furthermore, it is this very tunnel vision that allows Netflix to rebundle this same network content to create such a cross-network service. To make matters worse, Netflix is pursuing a much more powerful end goal than channel empires: owning the full extent of a consumer’s premium video experience. And for many subscribers, it already does. But it doesn’t need to be this way. Netflix may be twice the size of largest “cable channel”, but it ranks 7th among cable television groups. It may be that no single channel has the breadth of content and scale to be a serious Netflix competitor, but their parents certainly do. The future of television is not a la carte networks, but a la carte network groups (i.e. a rebundled cable package). To that end, many viewers may balk at paying $6 to $9 a month for an individual network such as CBS All Access – but at $15 to $20 for an entire network group, the value equation becomes far more favorable. This isn’t just about competing with or defending territory from Netflix. As cable unbundles, access moves online and on-demand consumption proliferates, every aspect of the TV business is being challenged (#1, #4, #7). Individual channel empires, however sensible in a linear delivery environment, will undermine the user experience, profitability and differentiation. And only a consolidated view to programming will allow networks to resolve the original series crunch (#7). 4. “Winner Takes Most” Competition One of the more under-recognized perks of the traditional Pay TV model is the fact that no network group can “own” the entirety of a household’s video time or spend. No subscriber, after all, can order only Viacom networks or just Time Warner channels – no matter the package, tier, or price. As a result, each of the major network groups profits from every Pay TV subscriber (via affiliate fees) and
  34. 34. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 34 benefits from the fact their channels can be discovered and watched without that subscriber needing to call their cable company or enter their credit card information. Online, however, this communitarian utopia will be replaced by a whole new competitive dynamic – one that challenges the idea of “shared subscribers” and makes it harder than ever to acquire new ones. Though the future of television depends on the major network groups collapsing their channel portfolios into a single consolidated offering (#3), the consequences of this shift are far more destabilizing than simply offering networks a la carte. The average Pay TV household today watches roughly 210 unique hours of television each month[1], spread across only 17.5 of the roughly 200 channels it receives. Given the surplus of content available and the breadth of content offered by each of the major network groups (which count 13 to 25 24-hour channels apiece), many households will likely find they need only 2-3 consolidated offerings to meet their video needs. What’s more, the friction involved in paying for and managing multiple apps will give subscribers an incentive to watch more of the content they’ve already paid for instead of adding a third or fourth network for another $10 or $20 each. True media lovers may still pick up five or six different consolidated services, but how many will include the smaller network groups? And how will these companies price their services given their relatively limited offerings? How is this price affected by any one hit show? Is one stellar show enough? Are three? How do you incent new subscribers? How does this model affect the minimum amount of original programming needed? How do you ensure ongoing subscriptions, rather than single-month content binges? What’s the consequence of licensing prior seasons of content to the major SVOD services such as Netflix? The top 100 networks today are available in 8 of 10 Pay TV homes; how will reduced access penetration affect a Tier 2 network group’s ability to compete for content?
  35. 35. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 35 The current Pay TV model is effectively a safety net for the network programming industry. Though ad revenue ebbs and flows based on audience demographics and ratings, networks can always rely on multi-year affiliate agreements during the inevitable slumps and find relief in the fact that audiences are but a channel change away. As a result, the shift from linear cable bundles to digital a la carte distribution (whether on a per network or a per network group basis) will not only bring about the death of weaker Tier 2 and Tier 3 cable channels, it will fundamentally destabilize the industry playing field. 5. The New TV Bundle As the cable bundle erodes, “TV” content is beginning to be rebundled with other forms of media. Sony’s PlayStation Network and Amazon’s Prime program now offer free, high-quality TV content as part of their broader subscription services (though Microsoft’s Xbox Live abandoned the same strategy last year). Yahoo, BuzzFeed, SnapChat and Vox Media have all begun efforts to bundle short and longform original scripted series into their expansive multimedia offerings. Not all of these endeavors will succeed, but they will nevertheless have a strong effect on the role of TV content in the media ecosystem. Historically, the TV business has been an end in and of itself, but as Disney’s Marvel Cinematic Universe has demonstrated, video can also play a far more lucrative role: establishing or supporting a broader storytelling platform. In fact, many digital-first content companies already depend on brand extensions (e.g. events and apparel) to make video ends meet. As the TV bundle is reconstituted and diversified, what role will pureplay TV networks (as opposed to production companies) play? How much value will they be able to capture? How many can survive? 6. Loss of the “Middle” One of the most transformative shifts in the television landscape stems from the way digital audiences choose content. Even as we moved into the era of appointment TV in the late 2000s, most television consumption was passive. Viewers would either hire a particular channel/network to entertain them for a few hours or channel surf until they found something that would. In an online environment (or where free TVOD is available) content is "on-demand" – and thus actively selected by the user. As Amazon Studios head Roy Price told The Hollywood Reporter last year, this fundamentally rewrites the programming playbook: “Let’s say you had a show where 80 percent of the people you show it to think it’s pretty good. They might watch it, but none of those people think it’s a great show nor is it their favorite show. But then you have another show where only 30 percent of people like it. For every single one of them, they’re going to watch every single episode and they love it. Well, in an on-demand world, show No. 2 is more valuable.” This shift has profound consequences for content monetization – and not just because it challenges decades of network television performance metrics (i.e. ratings). First, true hits will be more valuable than ever before (and thanks to OTT distribution, they’ll be bigger, too). Second, content that connects with a passionate but niche audience becomes an asset – not a missed opportunity or failure that needs to “broaden its base” to be renewed. However, the remaining content (shows people watch “if it’s on”, but never specifically look for or plan around; broadly targeted but “well- rated” series) will be severely squeezed. Not only does this “middle” content represent the majority of programming today, it dominates the industry’s most lucrative revenue stream: syndication. Similarly, the shift to on-demand consumption means that middling content can no longer rely on a strong lead- in program to boost or incubate its ratings. Finally, this tightening will also make select genres particularly hard to program. Much has been said about the death of the sitcom, but comedy tends to
  36. 36. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 36 be the most particular of tastes. In the on-demand era, comedy lovers no longer need to settle for “I guess that’s funny” – making sitcom audiences inevitably small in size. These changes will (continue to) distort programming economics and require afundamentally different set of metrics and business models (#3). Television networks today aren’t ready. And the problem isn’t just Nielsen measurements. 7. The Original Series Crash In 2014, there were roughly 400 original scripted series on television, up from only 125 at the turn of the century. Though this growth is often attributed to the proliferation of television networks, the majority has stemmed from what might be called the "AMC Effect". For nearly 25 years, AMC was existed as stable, if unambitious Tier 2 cable network. Ratings were reliable, but unexciting; content was strong, but also old; profits reliable, but far from lucrative. With the start of its original series (Mad Men in July 2007, Breaking Bad in January 2008), the network began a rapid turnaround that transformed it into one of the strongest, most prestigious brands in cable. With this newfound fame came increased ratings and added MVPD negotiating power that helped the network grow ad revenue by nearly 200% and affiliate fees by more than 75% over the next seven years. What's more, AMC now has the most-watched scripted series across broadcast, basic cable and premium cable, The Walking Dead. As one might expect, this success has prompted all networks – new and old, linear and digital – to view originals as essential to driving awareness, building a brand, retaining users and generating profits. Yet this growth has not come without consequences. As a perfect illustration of microeconomic theory, the heightened competition in original series has increased both the risk and the costs involved with the content form. When Mad Men debuted, only 20% of original series were cancelled
  37. 37. Babelfish Articles Jan 2015-June 2015 7-6-15 Page 37 each year. Seven years later, that figure has climbed to more than 50%. To combat such stark odds, networks are now pursuing whatever means possible to differentiate and bolster their original series: casting Hollywood stars (and hiring celebrity directors and producers) has rapidly moved from “game- changer” to necessity; production quality has surged to nearly feature-film levels; and marketing/promotional expenses have skyrocketed. To secure the best series, networks have also been forced to significantly increase their bids and commitments: Put pilots, straight-to-series orders and full season commitments are simply the new cost of doing business. Furthermore, rising cancellation rates have prompted many viewers to avoid new shows until they’ve hit their second or third season. As a result, it’s not uncommon for networks to renew shows before their pilot has even aired – thereby increasing downside risk considerably. Over the past decade and a half, the TV industry has seen not just escalating failure rates, but also increased costs of failure. To make matters worse, ongoing audience fragmentation and oversupply of “quality TV” eliminated much of the upside of a hit original. As individual players stumble, economics continue to compress and the cable bundled is slimmed, many networks (OTT or linear) will be forced out of the original series space. Still, the number of active original series is likely to keep rising. In an era where hundreds of video providers are available at a moment’s notice, original content is essential to driving awareness, ensuring consumption and retaining viewers. Solving the original series crunch will therefore require a profound change to the television business model, as well as its key performance metrics (not that this isn’t already overdue #3). Consider the programming model today. For most of the major networks, programming efforts and spend focus on the “primetime” window, during which the US television audience typically peaks. Though the duration and type (scripted v. unscripted) of content varies, it’s the timeslot that defines the number of original series. For digital video providers such as Netflix or Amazon, however, there is no “right” or “required” amount of programming. Are 12 series enough? 13? 20? 40? This may be of little solace to linear networks, but with such a surplus of content available today (and on demand), audiences will always be in short supply. As a result, the classic television model – where a show’s “value” is how many people watch it – provides only a rudimentary view to its ROI. Instead, networks need to investigate more meaningful metrics. For example: How did an individual show affect a subscriber’s likelihood to watch other programming on the network? How much more likely are they to remain a subscriber? Or to share the show? If Netflix "needs" only 15 shows, then a 16th – no matter how good the ratings are – may actually destroy value. Is it "better" for top 50 network to have two shows with 1.0 ratings, or one with a 2.5? Two shows with the same audience – or two shows with different ones? The answer isn’t a singular value for all networks, nor is it a rating point. Many of today’s original series are being cancelled not because they aren’t good enough or because there’s too much out there, but because the industry’s business models and metrics haven’t been updated to the on-demand, non-linear era. Until that changes, cancellation rates will only get worse. REDEF creates interest remixes for curious minds. Subscribe to our daily mixes in Media, Tech, Music, Sports and Fashion here. Liam Boluk heads up Originals at REDEF and can found at @LiamBoluk or emailed at liamboluk@gmail.com. NOTES: [1] For example, three members of the same household watching the same live airing of Criminal Minds for an hour is one unique hour. Three people watching different episodes would be three

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