LinkedIn “was bought on domination of a sector, good revenue, and good margins,” said Mike Vorhaus, head of Vorhaus Advisors. “TikTok is going to be valued based on its incredible user growth and mobile advertising revenue opportunities.”
The deeper and deeper we get into the economic and societal impacts of the Covid-19 pandemic, the more clear it is that the advertising industry, and the many different types of companies that advertise, are being hit hard.
Zenith, a respected media planning firm, released a new report today regarding the future of advertising expenditures worldwide. They project that total global advertising expenditures will decline just over 9% for all of 2020. In the U.S. they see the 2020 decline as being down 7%. In comparison they reported that the U.S. “great recession” impact on U.S. advertising was a negative 9.5% in 2009.
Zenith is forecasting a 5.8% gain in global advertising spend in 2021 partly because of the Summer Olympics in Tokyo which have been moved to 2021.
Earlier in the pandemic I wrote about the future for advertising expenditures, including coverage of a study of U.S. advertising executives. As I quoted Rob Norman, long-time digital advertising executive, using a long-standing sailors’ analogy, “It’s an ill wind that blows no one any good.”
Digital advertising continues to be a somewhat, though dim, bright spot, in the advertising eco-system currently. The growth of digital advertising is being affected by the pandemic, but overall digital advertising continues its march forward. Zenith said in their release of the report “that digital advertising will account for 51.0% of global ad spend this year.”
This is the first time that digital ad spend has been a majority of total ad spend worldwide. And it is going to continue to grow. “The coronavirus forced brands to embrace digital advertising even faster than expected and made digital transformation of businesses more urgent than ever,” said Jonathan Barnard, Zenith’s head of forecasting.
Zenith pointed out that the traditional media outlets like TV and radio have suffered less than other traditional advertising platforms like print and magazine advertising, both of which are predicted to be down 20% or more this year.
“In past downturns, ad revenue is quick to fall and slow to recover relative to GDP. And since in this case, the economy follows the uncertain trajectory of the pandemic, no one has good visibility into the timing and depth of this recession. What is clear from the past is that brands that maintain or increase their share of voice during the tough times earn lasting market share gains in the recovery – gains that often persist for 5 years or more beyond the crisis,” said Scott McDonald, President and CEO of the Advertising Research Foundation based in New York, and a well-known research expert who has worked at a number of prominent media companies over the years.
Another well-known advertising expert and long-time advertising technology executive, Dave Morgan, CEO of Simulmedia, looked into his crystal ball and saw a continued decline in traditional U.S. television advertising in the years ahead, with growth coming from the Connected TV space, “I think that U.S. TV ad spend this year will be down in the 15% range from last year. I think that 2021 will be down just slightly to 2019, and then decline 5% per year over the subsequent couple of years. Advanced TV ad spend – data driven linear, addressable and CTV – will grow 30% this year and 30-50% per year after that for the next five years,” Morgan concluded.
Verizon VZ+0.3% announced earlier today in their Q. 2 earnings call with analysts and shareholders, that second-quarter revenue fell 5 percent to $30.4 billion. According to Verizon, this was largely because of “declines in wireless equipment revenue in the consumer and business segments, primarily due to limited in-store engagement and the impact of COVID-19 on customer behavior.” Earnings were up in Q.2 from $3.9 billion last year to $4.7 billion for Q. 2 this year.
Verizon said that they had net cancellations of 81,000 pay TV subscribers in the second quarter, which was an accelerating loss in comparison to the same quarter a year ago. In the first quarter of this year Verizon reported a loss of 84,000 pay TV consumers, almost exactly the same amount as this current quarter. Verizon, like other cable and satellite TV providers, have experienced cord-cutting substantially over the last few years and the cord-cutting behavior is still growing.
I conducted a national online study on cord-cutting in June of this year and the data shows even more households intending to cut their pay TV offerings. Many of the cord-cutters have, or will soon buy, Subscription Video On Demand (SVOD) services, like Netflix NFLX+0.6% and Disney Plus, but the traditional full-package cable and satellite providers are suffering from continuing consumer cancellations. Most recently, I saw 8% of pay TV subscribers indicate that they were “very likely” to cut the cord in the U.S. in the next 12 months. In the coveted demographic of 18 to 34 year old consumers, 17% percent said they were very likely to cut the cord which is twice the rate of the U.S. general population. It is not surprising that the 55 and older population are the least likely to say they will cut the cord.
Verizon, and their competitors in the cable and satellite content delivery service business, have suffered for many quarters with consumer cancellations and reductions in their pay TV service. Much of this has been driven by the attractive offerings from the SVOD services, as well as the Free Advertising-supported VOD services, like Pluto and Tubi.
According to a recent report from Goldman Sachs’ lead media analyst Brett Feldman, “Cord-cutting is not new, but it is materially accelerating.At an industry level, pay-TV subscribers have declined on a year over year basis every quarter for the last eight years from a peak of 101 million in 1Q12 to 89 million in 1Q20. This represents an aggregate decline of 11% in household penetration (from 88% to 75%) during this period. While this implies modest annual subscriber declines of only 1-2%, we note that over 50% of these subscriber losses have occurred during the last 12 months, with 1Q20 being the worst-ever quarter of cord-cutting. We believe these pressures on the overall pay-TV market are intensifying.”
Verizon reported that 10,000 new net customers were acquired for their internet access service in Q. 2, which was a smaller growth rate than the 59,000 new internet subscribers signed-up in Q. 1. To a large extent the future success of cable/satellite providers rests with their internet access offerings and related services, as well as “skinny bundles,” which are a smaller selection of channels than the traditional pay TV packages.
Podcasts have been another source of fun, information, and something to do during our extensive time at home due to the Covid-19 pandemic. Recent data from a national online survey I conducted in June reported that 20% of American adults were listening to podcasts at least once a week or more, including those who listened every day (7%).
The Interactive Advertising Bureau (IAB), the leading organization for promoting digital advertising, and Price Waterhouse Coopers (PwC), the international consulting firm, recently released their annual study, U.S. Podcast Advertising Revenue Study, for 2020. The study predicts that podcast advertising revenue will increase by almost 15%, “nearing $1 billion in 2020,” according to the IAB and PwC.
In many cases advertising has been hard hit by the economic impacts of the pandemic and stay-at-home orders. For many industries—such as travel, hospitality, retail and others—the result of the current economic upheaval has been huge. The recent study on podcast advertising revenue documents an example of where advertising has been more robust. In general, digital advertising is being less negatively impacted than other forms of advertising during the pandemic.
The same partners in this study issued a similar study in 2019 and past years. In 2019 they estimated that podcast-related advertising revenue was $708 million and that in 2018 it was $479 million. The rates of increase are coming down as the total advertising revenue scales up. Nonetheless, it is clear that podcasts have become an important platform for advertising.
It is often said in the media world that advertising revenue follows eyeballs. In this case it is more that the advertising dollars are following the ears of consumers.
Some of the advertising categories that were strong on podcasting, according to the PwC and IAB report, include consumer brands, financial services, health, wellness, and home appliances. The top type of content on podcasts was news at 22%, comedy at 17%, and society/culture at 13%. It is interesting to note the breadth of podcast content on the top grossing podcasts, such as sports content and commentary from The Joe Rogan Experience or the Bill Simmons Podcast, to true crime podcasts like My Favorite Murder.
There are also other revenue streams growing in the podcasting world, including content licensing and consumer payments. Hernan Lopez, founder and CEO of Wondery, a major podcast company, said looking at the future, “Podcast ad revenues will grow faster than pretty much any other form of media in 2020; and ad revenue is only part of the story. For Wondery, licensing and consumer revenue will represent well over 20% of the total this year.”
In fact, 72% of podcast consumers over the age of 55+ believe in the mixed-business model of paid podcasts and free podcasts supported by advertising. Only 56% of podcast consumers in the 18-to-34 range believed in the mixed model, and 34% of the younger age group felt all podcasts should be free.
The podcast world is growing with major acquisitions, expanded marketing efforts, more distribution outlets, and a number of venture backed companies competing alongside huge companies like Apple and Spotify. For a thoughtful analysis of the larger ecosystem around podcasting I recommendthis article from fellow Forbes.com contributor Jay Kapoor. And if you are trying to find something new in the podcasting realm to listen to, Spotify has launched a series of charts in various countries showing the most popular podcasts, as well as the rising, up-and-coming podcasts.
Despite the massive economic and safety challenges for movie makers and for film attenders, Screen Engine/ASI, a growing movie, TV, digital and entertainment research and strategy company based in Los Angeles, has announced the launch of a new digital, Internet-based product providing a promotional marketing tool for film, TV and video production companies in the era of a stay-at-home society.
Traditionally, movie companies have used “test” screenings and “buzz” screenings to assure the quality of the movies and to create excitement around the upcoming launch of the movies, particularly in key markets. Now, of course, the studios have lost their access to the movie theatres where traditionally hundreds of thousands of consumers have gathered annually to watch movies free for testing or marketing purposes.
Screen Engine/ASI has released the “Virtual Screening Room” so movie and TV studios can still host “word-of-mouth screenings” and create buzz for upcoming movies, but safely and remotely in movie fans’ homes.
Running these promotional screenings online, vs. inside the confines of a theatre, however, raises worries about security, particularly the pirating or copying of films before they are released. The Virtual Screening Room has been designed to provide security safeguards against such problems, according to Screen Engine/ASI.
Andrew Ly, founder of ticktBox, which was bought by Screen Engine/ASI last year said in an interview with The Hollywood Reporter, “We’ve built a one of a kind cross promotional and marketing platform for studios to run their promotional screenings all within one suite in response to the social changes resulting from the virus outbreak, while eliminating the health concerns of attendees being physically present.” Ly said the new product from Screen Engine/ASI will be used by a number of studios to aid their film marketing, including a premium video-on-demand title coming out later this summer.
TicktBox’s parent company Screen Engine, is one of Hollywood’s leading research and data firms, and is backed by the prominent NYC-based private equity firm, The Wicks Group. Screen Engine has been hiring numerous big names from the TV and movie industries to drive their expansion, including the hiring of Bruce Friend, as Chief Product and Innovation Officerlast year, who has lead numerous research companies, as well as being the executive in charge of research at a number of big studios. Screen Engine also quietly hired the former head of TV station research and consulting at Magid Associates, Steve Ridge, to expand Screen Engine’s work with TV stations. A source who asked to remain anonymous, said that the appointment will be formally announced in the weeks ahead, along with key new clients.
Kevin Goetz, Founder and CEO, Screen Engine/ASI, in an exclusive interview with me, said that he has been building a firm “with the best minds and connections in the industry.” He went to say. “I am thrilled to lead the launch of our groundbreaking virtual, word-of-mouth geographic targeting for entertainment marketing. Our goal is to work with clients and their agencies to optimize their marketing spend by ensuring they are targeting and reaching audiences that are most likely to drive positive word-of-mouth, and in turn, realize full market potential for entertainment IP. In the next few months, our new market targeting solution will expand to allow clients to build customized targets for specific genres and franchises.”
William Shatner, one of the great icon pop culture figures of our time, from Star Trek to pitching Internet company, Priceline, once said, “I love to go to a movie, get a Diet Coke and a barrel of popcorn.” We will be waiting to see if the movie industry can send us all popcorn (buttered or not as you please) alongside our digital content.
As the second half of the calendar year begins, many on Wall Street and Madison Avenue are wondering where advertising revenues will net out for the first half of the year and what the second half of 2020 will be like for the advertising market.
EMarketer recently predicted that in 2020 Google’s US advertising revenue will decline by just over 5% by end of the year. This is the first time, according to eMarketer, since 2008, that Google’s US digital ad revenue will decline. EMarketer had estimated that US ad revenues would grow about 13% before the Covid advertising recession hit. Google’s US market share for search advertising is projected to go down from 61.3% to 58.5% in 2020. Google makes up a huge portion of the total revenue of Alphabet, its parent company. Emarketer predicts that total advertising revenue in the US for 2020 will be $134.7 billion – an increase just under 2%.
These Covid-related headwinds for Google come along at the same time as Facebook is dealing with a boycott of Facebook advertising by numerous companies. Nonetheless, eMarketer still forecasts a small increase for Facebook’s advertising revenue in 2020. Amazon, who has been on a tear in selling advertising, is projected to have in 2020, an increase of 23.5% over their US advertising revenue last year, despite the Covid pandemic.
All of these media companies will have to deal with the constant shifting of the sands in the Internet
advertising landscape. Will Snapchat become a bigger player in the advertising arena? Will TikTok’s US advertising revenue grow at scale enough so that they too
become a bigger player in the advertising marketplace? Will the AVOD (Advertiser-supported, free, video on demand) digital video services eat into TV advertising marketing dollars? Who knows what the next “new thing” will be that will attract consumers’ and their eyeballs? Overtime, it is clear that ad dollars follow consumers’ eyeballs. We will know the actual revenue results for Alphabet and Google when Alphabet reports its second quarter earnings on July 23.
As Mike Kelly, former CEO of The Weather Channel and a long-time executive in the advertising and media world, said to me in an interview, “It is almost inevitable, that as competition increases from all comers, that Google will revert back to something closer to their ‘fair share’ of the ad market. After all these years, search is still their dominant product. As consumer intent and discovery (and attention) shifts to other platforms, so will the advertising dollars.”
On the other hand, another major business model of the Internet – ecommerce – is likely to have a very strong year of growth. Ecommerce is poised to grow 18.0% following a 14.9% gain in 2019 according to eMarketer.
Tencent, the huge Chinese-based, worldwide gaming (Riot, Supercell) and messenger/social media (WeChat) digital company has undertaken new initiatives in the important, growing area of digital video.
Tencent recently announced their purchase of a Malaysian video streaming platform, iflix’s content, technology, and resources. It was also revealed very recently by Bloomberg that Tencent has launched trovo.live in the U.S. the beta “testing” stage, which is very common with digital products. When you checkout trovo it is very similar to Twitch, the livestreaming video, esports and multiplayer games-oriented, video streaming service bought by Amazon in 2014 for reportedly just short of $1 billion.
Tencent also recently paid $263M for a controlling stake in Huya, the Twitch of China. Further demonstrating Tencent’s commitment to digital video, Tencent owns a video subscription service, Tencent Video, with over 110 million subscribers in China.
In regard to the Malaysian video streaming acquisition, James Mitchell, the Senior Executive Vice President and Chief Strategy Officer of Tencent said in an email interview with me, “Tencent has purchased iflix’s content, technology and resources. This is in line with our strategy to expand our international streaming platform, WeTV, across Southeast Asia and to provide our users with international, local and original high-quality content in a wide range of genres and languages.”
Mitchell went on to say, “We are committed to invest in the growth of the OTT industry in the
Southeast Asia region. The growing adoption of mobile devices has resulted in increased internet users and their access to OTT content. SEA’s OTT market shows a robust trend where the region is experiencing an explosion of viewership. The purchase comprises a strong local network across emerging markets in Southeast Asia (not only Malaysia) with a wide and compelling selection of video content such as TV shows, movies and local originals, to stream or download, on any Internet-connected device. Through the purchase, WeTV, will further extend our presence in the video streaming industry across Southeast Asia, to reach a broader audience base within the region and to better serve our users with better viewing experience.”
It should be noted that both China’s huge video streaming service, iQIYI IQ-2.1%and Netflix operate in Southeast Asia. Even more interesting are the rumors that Tencent was very recently looking to buy a large piece of iQIYI, which was originally spun out of Baidu BIDU-2.4% (the giant search engine of China) Baidu still owns a majority of iQIYI’s stock.
Malaysia is an important country, particularly in Southeast Asia. Malaysia is the 45th largest country in the world and has the 25th highest GDP. Overall population across Southeast Asia exceeds 650 million people. The countries in Southeast Asia are growing in Internet and smartphone penetration rapidly which is providing many business opportunities in the media and technology areas in that region.
Disneyland Resort in Anaheim, CA, the original Disney theme park, opened in 1955. It has been closed four times in its lifetime, – after the assassination of President John F. Kennedy in 1963, in 1994 Disneyland closed because of the big Northridge quake, after the 9/11 terrorist attacks, and most recently due to the Covid-19 pandemic.
Disneyland initially closed the park in Southern California on March 14 and had indicated that it would stay closed indefinitely at that time. Later Disney announced that the Disneyland Resort in Anaheim would reopen July 17.
Today The Walt Disney Company released a statement saying that it would delay announcing its reopening until sometime after July 4. The Disney statement said, in part, “The State of California has now indicated that it will not issue theme park reopening guidelines until sometime after July 4. Given the time required for us to bring thousands of cast members back to work and restart our business, we have no choice but to delay the reopening of our theme parks and resort hotels until we receive approval from government officials. Once we have a clearer understanding of when guidelines will be released, we expect to be able to communicate a reopening date.”
The Disneyland Resort theme parks will be the last Disney theme parks worldwide to reopen during this crisis, if Disney’s plans continue as stated. Tokyo Disney has announced its reopening for July 1, then the Walt Disney World DIS-1.9%‘s theme parks will open on July 11 and July 15. The Disneyland Paris parks are scheduled to reopen on July 15. The Shanghai Disney park reopened on May 11 to limited attendance.
The other Southern California theme parks – Universal Studios Hollywood, Six Flags Magic Mountain, Legoland California and SeaWorld San Diego – had requested to reopen at the beginning of July. Now everyone in the theme park industry, and the consumers who might be eager to see Mickey Mouse again, will have to wait for guidance to be issued by the relevant local and State governments.
Disney sought to assure future visitors to the Disney parks that they have, “developed enhanced health and safety protocolsfor both cast and guests at Shanghai Disney Resort, Hong Kong Disneyland Resort and Walt Disney World Resort that have been approved, allowing us to reopen in a responsible manner and bring our cast members back to work.”
Disney must complete negotiations with the various unions that represent Disney’s workers to reopen. As Disney said, “In order to reopen our theme parks we need to negotiate agreements with our unions to return employees to work. We have had positive discussions and are very pleased to have signed agreements from 20 union affiliates, including the Master Services Council, which represents more than 11,000 of our cast members. The signed agreement details plans that include enhanced safety protocols that will allow us to responsibly reopen, and get thousands of our cast members back to work.”
In these days of pandemic, protests, economic recession and angst among the world’s population a recently issued report shows that consumers continue to shift away from traditional media sources for their news and are moving more towards social media and messaging services to find the news.
Long gone are the days of people getting most of their news from a local TV station, their local newspaper or the national newscast from one of the networks. Over 15 years ago, we already saw the substantial decay of Americans using traditional news sources and instead the Internet becoming a major source of news, particularly for the 18 to 34 year old demographic. This data comes from a study done for Carnegie Corporation in 2005. A research group I led at the time was responsible for the study. Carnegie Corporation is a major U.S. charitable foundation with a significant interest in journalism and news.
One of the very notable facts coming out from the study is the heavy use of Instagram for news which could soon possibly overtake Twitter. Instagram news consumers were 11% of the social media population. Twitter was statistically tied at 12%. Just as we found in 2005 for Carnegie Corporation, the shift away from traditional news media sources is being led by the younger generation, in this case people under 25 years old. Two-thirds of that age cohort said they use Instagram for gathering news information. The same age group reported that they were two times more likely to look at news on social media apps.
Facebook leads with 36% of social media consumers using the social media giant for consuming news. YouTube had 21% of social media users looking at news on the popular video site. WhatsApp had 16% of consumers in that group and 12% used Twitter. Facebook owns both Instagram and WhatsApp.
In this time of political and social upheavals, it is interesting to note that the Reuters study (conducted by YouGov, a research agency) only found 14% of people in the US trusted news on social media compared to 22% in regard to news gathered from search engines. Also, as further evidence of the power of social media in driving news to consumers, social media as a news source, saw ongoing growth with news consumers, unlike platforms such as all online sources combined, TV, and print.
When thinking about what we know about the news and where we get our news, I reflect back on Will Rogers’ famous quote: “All I know is just what I read in the papers, and that’s an alibi for my ignorance.”
As soon as people were ordered to stay home in response to the Covid-19 pandemic, consumers have had a number of ways to spend their added time at home—including play games. As the chart below shows, the increases in gaming revenue has been huge, month to month, since March. In March of this year, gaming, over March of 2019, is up 34% in spending. In April of this year, gaming was up 73% over last year, same month. And this past month, May, was up 53% over May of 2019.
“Video game engagement and revenue across all platforms, including console, PC, mobile, and VR, grew globally during the Covid-19 lockdown. Video gaming is considered an affordable and accessible form of entertainment, and existing and new gamers across all demographic groups found emotional and social support in these virtual worlds. The digital transition that began a decade ago through digital downloads, games-as-services, and mobile app stores has paid off for the industry,” said Michael Cai, president of Interpret, a global video game insights agency.
Stan Kwon, CEO of Beta Hat, a market and consumer insights agency specializing in gaming, media, and emerging technologies, confirmed the rise in gaming over the last few months. “Based on a recent survey we conducted among adult gamers in the U.S., almost 60% say that they’re spending more time playing games now than they were prior to stay-at-home orders going into effect.” Kwon also reported that he sees Americans “choosing to play a wider variety of games rather than sticking to the same games they were playing before” the stay-at-home order.
Further evidence of the rise in consumer engagement with gaming during this pandemic is that Unity Technologies, the real-time 3D software development platform company, has reported that mobile game ad revenue grew 59% during April 2020 compared to April the year earlier. Unity has also reported that in-app purchases in games rose 24% in March and April of this year.
There are many different types of games available to consumers on consoles, computers, and their smartphones. About 70% of the U.S. population at least occasionally plays some sort of video or mobile game. The breadth of games available to consumers are shown in this chart that looks at the most popular game titles over the years.
Rob Dyer, chief operating officer of Capcom in the U.S., spoke to the increase in gaming seen worldwide. “While we believe there has been an increase in the frequency of people playing games given the current restrictions on going outdoors, it is possible that less leisure time will be available in the future due to factors such as reduced summer vacation time.” Dyer went on to say, “We hope our games will continue to be a source of enjoyment for people everywhere facing these challenging times.”
While it is clear that consumer engagement with gaming has increased as people have had more time at home, but what will happen when the world goes “back to normal” and time at home goes down? Michael Pachter, research analyst at Wedbush Securities and a well-known expert in the field of gaming, points out, “It’s incumbent on the gaming companies to retain the new and lapsed players” down the road.