We’ve been doing this presentation since 2015, covering topics like voice, VR and blockchain. Let me say from the off that I’m not an expert in any of the things I’m about to share. This is stuff we found that is interesting and useful. You can have the charts and the script too, if you like
A lot of the stuff we have talked about before is either still happening or is in what the Gartner Hype Cycle calls the “trough of disillusionment”. This year we’ve decided to take a different tack and focus more on only 3 really key themes that affect publishers and the wider media market. I think we’re living through transformational change in our industry and that’s what unites the areas I want to talk about today.
Besides, if we mention voice again, we might start sounding like we’re getting a bit over-obsessed with it all, a bit like this guy (play video on next slide).
See comments on previous slide
We are going to start with audience data and privacy. We have talked about this before but it’s development is central to the future state of the ad market
Minority Report came out in 2002 and it has been referred to in our industry ever since, like a lodestar or anchor point, the moment when we decided that personalised advertising was going to be a thing.
Proud of this chart’s title :)
In reality, what that has meant is a pair of slippers chasing us around the web for a month and explanations to your parents of what you do for a living when you go home at Christmas. For consumers, that is the closest they have come to being Tom Cruise.
Collectively, we loved the idea of personalised marketing and the use of data to measure performance. As the Ad Contrarian has written, we’re a bit like the Brits when they discovered sugar in the 17th Century - they gorged on this wonderful new substance until their teeth fell out. We gorged on the certainty we could now offer clients. Like sugar, it’s not always been good for us.
It should be said, not everyone was so keen. In 2003, Google’s founders met with the president of US broadcast giant Viacom - a man called Mel Karmazim. After explaining the principles of their ad proposition to him, Karmazin’s response was “Guys, you’re fucking with the magic.”
But magic and doubts were swiftly swept aside and the age of data driven digital marketing was ushered in.
At the heart of this revolution was that little bit of code called the third party cookie. A genius invention really, knitting together the advertising on the internet, increasing our understanding of audience behaviour and allowing ad tech to flourish. Billions of dollars are attached to it.
For publishers like us, the cookie has brought revenue but also vastly increased competition. Ads were shown anywhere as long as they targeted a particular pair of eyeballs - site lists were thousands strong. We had an endless supply of inventory online, even if some of it was fraudulent, even if some of the ads were never seen. It was so cheap, the economics justified the waste. And it really hurt publishers, whose business model of quality content, expensively produced, came under real threat - about 20% of US newsbrands have closed since the turn of the century.
That’s not to say publishers are innocent bystanders. Too many of us reacted to this new world order by increasing the number of ads on the page, by creating a fairly horrible reader experience, by selling our inventory to ad networks and devaluing our own products. Someone once said that publisher sites became like Tokyo at night.
The Guardian didn’t. We introduced our “fewer, better” ad experience back in 2015 - less ads on the page, quickly delivered. This was not the common response. But ads will perform better when there are less of them - this has been proven by the IAB and Lumen. Lumen study attention, and they have shown that sites with lighter ad loads get higher attention. Problem is, algorithms created for industrial scale decisions, the essence of programmatic buying, don’t pick up on quality signals very well, and doesn’t reward good behaviour.
The other trick virtually all publishers missed was not using the trusted relationship we had with our audiences to develop first party data strategies - at the time, no-one thought anyone would sign in because news was considered to be generic - the BBC coverage was the same as ours, for example, and no-one wanted ANY friction between the reader and the content she came for.
Of course, the platforms had that sign in data from the off, baked into their business model. And with amazing resources, they effectively re-educated the marketing community to expect data and analytics as the new marketing norm.
So on we went, the giant programmatic machine knocking down everything in its path as we kick started this process of industrialising media - billions of ads can’t be bought via IO’s - and we stopped paying attention to where the ads were running. And then, in 2017, The Times ran front page headlines like “Brands fuel terror on You Tube”, and our world changed again. Since then, we have seen greater consideration of where ads are placed. Agencies cut their whitelists, fraud was cut through innovation, and advertising experts up and down the land claimed they cared about quality and context and attention. And we introduced the concept of brand safety, though that’s not for today
But even then, only 3 years ago, no-one was talking about privacy.
But like you slowly get a Dad bod, change happened. Over the past couple of years, the public’s awareness of the use of their data increased - there was Cambridge Analytica
Headline grabbing data breaches by household name companies
and regulation. FYI, about 120 countries have now passed privacy laws, most of which resemble GDPR. Europe leads the way (at least when it comes to regulation)
Last year, we showed you this poster from Apple, telling all the delegates at the 2019 CES conference in Las Vegas that they cared about privacy
Fast forward 12 months and Apple’s latest TV and cinema ad showcases only one feature: privacy. That’s a remarkable development. This push on audience privacy, started by a company who doesn’t collect ad revenue, has had huge a huge impact, with browsers like Mozilla and Firefox joining Safari and cracking down on the 3P cookie
This is having a commercial impact. Look at this chart, showing how auctions have been impacted by the lack of personal data. This analysis is of 23 billion auctions. With no 3P cookies supported by Safari, auctions that generate at least one bid have fallen to 8% - one in 12, versus other browsers seeing bids on nearly 40% of their inventory.
That’s compounded by the low price, as you can see in the line below. So by removing third party cookies, bids for ad slots have fallen and the ones that remain are at very low prices. A double whammy for publishers. But don’t think you are immune; if you consider that 50% of all mobile devices in the UK are Apple devices, and if you consider the profile of an Apple device owner to be more affluent than any other device owner, you should be worried too.
You suddenly can’t see half your audience on mobile, the more affluent half. Back at the Guardian, it’s been called, “One of our dinosaurs is missing”.
To be honest, we’ve all mostly ignored the issue - you could still get your campaigns away on Chrome and its vast store of inventory. Crack on. If we’re honest, most of us haven’t spent too much time thinking about how to get a consumer on a mobile device to start thinking about a new car if they can’t see your ad
But then on January 14 this year, Google said it would phase out third party cookies within two years. And now the clock is really ticking for all of us.
This changes your world, and mine. According to Ari Parparo, CEO of Beeswax, a DSP this is the deadpool:
Huge implications for all of us. In a Google study in Aug 2019 which looked at the impact of disabling access to third party cookies on programmatic ad revenue across 500 publishers, they saw average revenue drop by 52% overall and 62% to publishers in the news vertical. Gulp.
They also saw a 21% increase in dissatisfaction from users through non-personalised ads - an early warning indicator of what could be in store if the audience signals we currently use diminish.
So by Jan 2022 latest, what we have been used to for most of our working careers disappears, at least in its current guise.
If revenue goes down and dissatisfaction with ads goes up, why would Google do this? Here’s one theory doing the rounds, Have a look at where they make their money - the purple line - which is their owned and operated sites, then think about what their competitors like Apple have done, then also think about the regulatory pressure they are under - from the EU, the UK and across the world. Maybe they will offer up their flat lining ad network (the yellow line) as a sacrificial lamb, leaving their own first party cookie business to flourish alone. Let me stress, this is no more than a theory.
Where does this leave us? BTW, who can get this first?
I think we are faced with a collective conundrum; the audience continues to gather on digital devices and platforms. Advertisers always want to be where audiences are gathered, and audiences who are online demonstrate rich intent signals, which advertisers love. But without third party cookies, what audience signals will we need going forwards, or does all the money just got to Google, Facebook and Amazon, or indeed leave digital altogether? That would be odd, given how much time the audience spends on digital. This is what we now have to solve
We have 2 years to get our act together. In that time, we’re going to hear a lot more of phrases like these:
Project Rearc - the IAB’s attempt to collectively find a solution Edge computing - which I think means “on the device” Privacy sandbox - Google’s attempt to find a solution Federated learning - Google’s idea for audience segmentation based on interests (Google “Federated Learning” cartoon and you’ll get an explainer) Zero party data - the idea that people willingly volunteer their data in return for something Universal ID - a common ID across the industry
TURTLE DOVE - Two Uncorrelated requests, then locally executed decision on victory (something to do with remarketing)
Work has already started.
Data businesses like Permutive use edge computing (on the device, the cloud coming to you) to eliminate the need for third party cookies and they have been hoovering up publishers as customers. They can also deliver targeted advertising on Apple devices and in REAL TIME, so we can find that pesky dinosaur that went missing AND you can reach them in that very moment.
We’re working with Permutive to develop attention-based segments - because our site is attention rich - so you’ll be able to target people based on the depth of their engagement to a particular topic.
The publisher Immediate Media has talked about the use of the bunker (you may have heard it described as the clean room). This is the idea that one party’s data is kept in a place separate to the owner of that data, so that when two data sets come together, it doesn’t get shared by either and is therefore privacy compliant. Companies like Infosum are building around this concept.
Over in the US, the Washington Post, owned by Jeff Bezos, has been working on Project Zeus, one of whose products is their own first party data ad targeting tool that they are licensing out to other publishers.
The common belief is that first party data will likely command premium prices, hence the effort publishers are making in this area. There is optimism that because publishers have the relationship with readers, we can encourage responsible use of people’s data.
Elsewhere, other publishers are building contextual solutions - another good audience signal of intent and a rich store of data for publishers I’ll briefly come back to that later
So there’s a lot going on, because we have a lot to do
The history of online advertising is written in chapters:
The 1990’s were about the IO and the dusting down of the fax machine. The 2000’s were about ad networks, delivering efficiency and a lack of transparency. The 2010’s have been about real time bidding, fraud and the long tail. This coming decade will be about privacy first ad networks, data sharing deals and the resurrection of context.
And I’d add publisher coalitions to that. If a group like Ozone can crack some form of acceptable shared ID solution then premium publishers stand to gain more meaningfully for the contribution they make. As BuzzFeed have argued, publishers often provide the inspiration for something ( a destination or a dress for example), but gets little reward for it. We’d like to see that change
Ultimately, this I think, is where consumers are. And where we need to meet them in order for advertising to continue to flourish online. The cookie is a huge part of a $300 billion dollar market. But it’s going to go, and no-one yet knows how it will be replaced. This is transformational to our industry - some of you will only ever have worked in this environment - and we have 2 years.
This is a very personal title. I manage a kids’ football team at the weekend, and this is what I call out to the ref numerous times every Sunday.
Charles Dickens’ first novel, The Pickwick Papers, was written and published as a series of monthly chapters over 18 months. Imagine waiting a month for the next chapter. But as we get into this, you’ll find a 21st Century mobile content business is taking on the same principle. This section is all about subscriptions and we wanted to talk about it because like the 3P cookie, it is going to cause transformational change to our industry.
In previous years this presentation has always had a section about changing publisher business models. We looked at paywalls versus free access, how publishers were turning to events and other brand extensions, like Time Out’s markets - this one in Lisbon. All this is still happening - Country Living magazine sold over 4000 sofas last year - and the Daddy in this brand extension space is probably BuzzFeed via their Tasty food brand - the main factor behind BuzzFeed’s doubling of commerce revenue to about $60 million dollars in the last few years.
But the big move in our industry has been the shift to subscription models. So we’re going to start this section by looking at the biggest subscription business in our sector - video, and we’re going to start with a big number.
In 2019, there were 532 new scripted shows in America, 52% more than in 2013, the year of House of Cards.
I love this quote, it underlines the issue we all have as ordinary citizens, not media professionals
Simply, if a TV critic can’t cover it all, what chance have we got?
You’ll be familiar with the reasons behind this explosion in content. This is a Mindshare chart, showing just a selection of what you can subscribe to. We are content rich, time poor. It’s wonderful and terrible at the same time. I keep a list of TV shows on my phone, and it just keeps getting bigger. Please tell me this is not just my problem?
Reed Hastings, the CEO of Netflix, famously said that his biggest competitor was sleep. Indeed, it was reported in the autumn that Netflix were testing the ability to change the play speed of their shows on mobile devices, which Hollywood didn’t like. We can’t yet fix time, but we will want to. For now, the hack appears to be that people are using their commuter as a regular part of your entertainment window, which we believe will only accelerate with the download speeds of 5G. We didn’t think we would watch Game of Thrones on our mobiles, but we are.
What to watch becomes ever more challenging. I’ve argued before that publishers like The Guardian are a great short cut (our number 1 pick for 2091 was Succession) but tech solutions are also inevitable.
CES this year had at least 3 alternatives in this space, one of which is called Dabby:
They call it “the brain for your TV”, and it would be very welcome in my house.
This explosion of content is already having a big impact on consumer behaviour. As an example, Netflix is the UK’s biggest TV channel for 18-34’s in the UK.
And we’re nowhere near done, even more streaming channels are coming. In the US, Peacock enters the market in April. Peacock is owned by Comcast, who now own Sky. It has $2bn in investment and offers free or ad supported content depending on the price point. HBO Max is coming too
Then we have Disney+, launching in the UK in March. According to Bloomberg, Disney+ signed up 10m subscribers in the US on their first day and had 29m subs in the US by the start of February. Disney have done deals with the likes of Verizon, LG TV and even Kelloggs, where buyers of their products get a rolled up subscription. In the UK, Disney + just announced a tie up with Sky Q, who also have Netflix on their platform. In the city, the idea of “Universal Access”, the concept that you get all the streaming services on one platform, is the business idea they most like. We had bundles, then we unbundled, now we look to be bundling our content again.
The most differentiated product in this space is Quibi.
Quibi stands for Quick Bites and launches in the US this year. Quibi creates content that is 4-10 minutes long and is making content that is ONLY available on phones. They will produce 3 hours of new content per day.
They are selling ads as well as subscriptions and have apparently sold out of Year 1 pre-roll ad inventory, worth $150m, which suggests some market confidence in them. One of their offerings, a la Charles Dickens, is movies in chapters. 35 feature films will be produced this year alone, each of them will be sliced into 7–10-minute episodes with one release per day. The 19th century meetis the 21st.
Being mobile only, Quibi is a very obvious younger generation play. And although it launches in the US, it plays to the IPA Touchpoint research in February showing that 50% of All Adults media time was on digital media, versus a whopping 73% for 16-34 adults. That’s the biggest differential they have ever seen between age groups and is an obvious pointer to the future. Is there room? The short answer is no. Research from the Trade Desk tells us that 60% of UK consumers won’t pay more than £20 a month, so that probably caps things at about three subscriptions per person. Other research I’ve seen puts that figure at £30, which maybe means we’ll squeeze in a fourth. Quibi will be the 9th subscription video business in the US, so on those numbers something is going to have to give. As the Economist put it recently, “billions of dollars will get torched” as these mega businesses try to win this subscription battle. And billions is not an exaggeration. Those 532 shows I referenced earlier cost nearly $6m dollars per episode, on average. https://www.thedrum.com/news/2019/11/13/most-brits-wont-pay-more-20-month-tv-streaming-are-ads-the-solution
Video on demand is changing the broadcast industry. But as this report from ebiquity pointed out, simply transferring your TV investment over to other online channels that take ads isn’t that simple - not every ad impression is the same.
Complex, eh. Where does that video investment go, what the perfect mix? Time for a great media agency to unpick it all for their clients.
So what does video mean for publishers? We believe more people will consume their journalism by video over time. And, we don’t think we can win the living room - too crowded, too expensive. But with 5G, the commute is up for grabs. Which is why publishers like The Guardian are building out their audio and visual capabilities - producing quality podcasts and video series that can compete in that space and reinforce our journalism via methods other than just reading
When it comes to building subscription revenues right now, the NYT is the world leader, with 5m total subscribers and $1.8 billion in revenue. The NYT have been clever in offering their audience discreet parts of their overall package, like individual cookery and crossword apps (we’ve just launched our own stand alone crossword app too). You’ll see more of this flexibility elsewhere; BT have just announced greater control for viewers in their subscription packages, for example. You can have it all, but you don’t have to if you don’t want to
As you hopefully know, the Guardian’s model is a mixed economy of subs and donations, and we have well over 1m people who are either subscribers or have made donations. It’s a far cry from only a few years ago, when the fear was that no-one wanted to pay for news and that digital upstarts like Quartz and BuzzFeed and Gawker were going to become dominant. Turns out that didn’t happen. In fact, turns out that the news editors from those 3 companies now all write for...the New York Times.
Niche publishing verticals are also a subscription play now. For hard core football fans, The Athletic is an attractive proposition and is valued at $500 million dollars. In tech, it’s a business called The Information
As in video, the content has to be really high quality, so The Athletic spent the summer signing up many of the UK’s top football writers. They know that if the quality dips, you won’t last.
Subs aren’t for everyone. You still have many publishers reliant on a combination of ad revenue, cover price and brand extensions. Across both video and publishing though, the picture is becoming more clear. Subscription offers are putting real pressure on the ad market to change its behaviour, and that’s the subject of our third and final topic.
To start this section, have a look at this chart from Enders, which shows you ad minutage per hour across various broadcasters. We know that TV is great at building brands, but we also the traditional interruptive ad model is also under real and sustained pressure. That mobile subs business I mentioned, Quibi, is banking on only 2.5 mins per hour to be a light enough ad load for its younger audience.
But we wanted to get into what these changes mean so let’s start this section with a simple question: how do people feel about ads?
We know what the Advertising Association thinks about this: they say public trust towards advertising is in decline because people are being bombarded with intrusive and irrelevant ads that interrupt their enjoyment of the content they are consuming.
A New York research firm came up with this line: “We continue to believe consumers do not hate ads. They hate heavy ad loads of untargeted, repetitive ads”
I’d argue we’ve collectively done a bad job of listening to our customers. In 2005, Gcap, the forerunner of Global Radio, tried to cut its ad minutage on stations like Capital FM. It didn’t last - the ad market didn’t support the premium they were asking for.
Running less ads is still an option. The AA research said that bombardment is the single biggest issue. But if you are a legacy business, running with less ads is a really hard thing to do - we walked away from money back in 2015, when we started fewer, better.
We believe people don’t hate advertising. Nothing Beats a Londoner, Meet the Superhumans, Belly’s Gonna Get Ya. This is advertising that makes you crack a smile, shed a tear, share with your mates. People don’t hate advertising. They just hate crap advertising.
Love Island is a really good example of how advertising can change. It’s sponsored by Just Eat - a perfect example of contextual and audience relevance. In the show, you have subtle advertising like the VO5 product placement deal which sees the show’s contestants spend a large proportion of their time ‘getting ready’ or ‘doing their hair’, using Unilever brands’ products. I’m a big fan of that particular segment. It speaks to meThen you have online retailer “I Saw It First”, which offers the chance for people to follow their favourite contestant and buy their outfits online, and there’s more - playlists from Spotify, additional content for TikTok’s audience, for example. For ITV, what started as a classic headline sponsorship with Superdrug has morphed into something much more modern and relevant .
Netflix have consistently ruled out conventional spot advertising. But they do work with advertisers. There is something of an irony that an ad free platform is showing us how to do modern advertising
Take Stranger Things. Ever since the show premiered in July 2016, it’s been tied in with merch. The third season of Netflix’s Stranger Things premiered last year alongside a long-form Coca-Cola campaign. In the third series it’s 1985, which happens to be the year of the doomed “New Coke,” a reformulation of the classic Coca-Cola recipe that was so hated by customers it lasted only 79 days in stores. Coca-Cola worked with Netflix to help make this a core plot point of the new season and in doing so sold hundreds of thousands of limited-edition cans of New Coke, as well as a New Coke range of clothing. Product placement is growing. In Apple+’s Morning Show - the one with Jennifer Aniston - Apple products are visible in an average of 32 camera shots per episode. It helps if you own the platform and the content of course, but product placement is now worth an estimated $10bn a year in the US market.Of course the link between great ideas and effectiveness is nothing new, but some new light has been shed on why we’ve been getting it so wrong.
There’s a brilliant piece of work called Lemon, published by the IPA and written by Orlando Wood, claiming that advertising has lost its ability to entertain. It’s turned the brain sour. It’s worth watching his presentation at Eff Week on YouTube
His work suggests advertisers are ignoring the fact that the best advertising finds a balance between concepts that appeal to both sides of the human brain. As a society, he says we have moved towards being more left-brained and overlooked the right side of the brain, the more emotional side. Lemon proves in his book that more emotional and entertaining ads are better at amplifying share of voice.We agree, and we think branded content almost certainly has a role to play here.
As time passes, we expect to see greater flexibility in branded content, with media owners being more open to co-creation and editorial integration.
For example, we have Save Well, Spend Better with Lloyds Bank and Channel 4, a money advice series co-funded by Lloyds Bank and Channel 4
Or, take US condiment brand Sir Kensington's, who celebrate the humble sandwich by launching a magazine featuring iconic sandwiches like the BLT, possibly the greatest sandwich of all time (their words, not mine). https://www.sirkensingtons.com/market/products/sandwich-magazine
Or in audio - The Spin - our cricket podcast created for NatWest, the long-time supporters of english cricket
These are all examples of how to tackle the challenges that Orlando lays out in his book
Creativity will also benefit from the use of data and tech and there are loads of new ideas out there. Here’s a couple: Hulu is a subscription video business owned by Disney and has said that by 2021 it wants half of its ad money to be non-traditional. Last year they gave us pausevertising - the idea that you would get an ad when their technology noticed you had pressed pause in the middle of an epic boxset - I’m so old - marathon. This year, they have come up with Bingevertising. In this scenario, you watch 3 or more episodes of the same series consecutively and you get ads that offer humorous commentary, acknowledging that a binge session has begun. Publicis are testing this in the US. Here’s more tech. A company called Mirriad is using technology to find empty spaces in content and literally add in advertising where there is space available.
(There are better examples of Mirriad but they all seem to be hard to use - must be a licensing thing) And AR is making a comeback after spending some time in that trough of disillusionment. Hearst teamed up with the Covent Garden estate to showcase products recommended by hearst editors, to play a virtual hunt the reindeer game and other promotions. Interactive, fun, distinctive.
Online now, and we’ve been part of a project with Essence and Google called Pegasus. This is an example of advanced contextual targeting. Here, AI reads all the words in an article and amends existing creative so it is more relevant. In our test, the technology evaluated the context of almost 3000 Guardian articles and automated the production of thousands of ads, each one customised on the article.
And here’s innovation in audio. We were part of a project with VISA to get people to shop locally over Xmas. We joined up with tech start up A Million Ads, a company specialising in dynamic creative and personalisation in digital media, Here, ad slots in our podcasts served listeners with an advert for a retailer local to them, so people listening heard bespoke placements from their area.
There are loads of examples of how advertising is changing, how people and technology are coming together to create work that is part of the entertainment and actively enjoyed. That has to happen, because although there is still plenty of runway in display advertising and the thirty second spot, not least as the average age in the UK is well over 40, we have to learn to cater better for different audience expectations. That’s it for another year. My summary; we’re going to have to do things differently to tackle the changes we are seeing in consumer behaviour. Firstly, we’re going to have to learn to build brands online and develop better methods to show clients how we are doing that. As audiences continue to gather on digital devices and platforms, reducing the entire online ecosystem, from search to publishers, to a performance marketing channel won’t work, especially as the crucial element for measuring attribution, the 3P cookie, leaves the stage. We have to do that because the shortcut for building brands, TV, won’t do the job as easily as it once did as audiences move to subscription channels. And third, the quality of the creative and where it is placed will become more crucial. We’d like you to deliberately consider whether the Guardian should be on a media plan not just rely on an algorithm built for efficiency do that for you. Minority Report is 18 years old this year. Time for us to mature too.
The Guardian's Publishing Trends 2020
73% of 16-34 adults time was on a digital devicevs