Mobile Fix — May 4
Ads — beyond the Duopoly
Within their rather spectacular results last week it emerged that the Amazon ad business was really gaining momentum — up 139% to $2billion in the first quarter.
AdAge have a good look at the offering and future plans — which include selling video ads as we have predicted;
One analyst suggests their ad revenue will be $20bn in two years time. You can see a good interview with Jeff Bezos here — or read the transcript. It’s more about him than the business but a good read.
It’s not been such a good week for Snap. Any idea that they could become the third force in digital advertising has clearly been torpedoed by Amazon. Although they did grow revenues by 54% year on year in quarter 1, they were just $231m — around 10% of the Amazon figure. But more seriously their results showed that user numbers are flatlining as people just don’t like the redesign. A new design — closer to the original — is being tested but the share price is down by 20%. And over at F8 many of the new product features announced for Instagram seems designed to lure users away from Snap
The team at Pinterest have been more quietly growing their ad business. This interview with the founder is a good summary of where they are and we liked their aim of getting their users to put the phone down and do something.
One dark horse in this space is Unruly. Started by friends, it is now run by another friend who makes the good point that trust in the space has never been lower. So can someone who combines a clean record with scale take on the duopoly? With Murdoch behind them they could exploit the desire for conext, with their publisher heritage and smart access to quality news environments.
newTV
It’s always good when I can get a Leeds United story in Fix. Our new owner has beaten Sky for the UK rights to Spanish football. He may also be a buyer for the last remaining packages of Premier League rights
With his firm Eleven run by the former head of BT Sports it seems unlikely that a traditional TV channel is the preferred route to market. Surely an OTT service is more likely, but building the audience needed to monetise these rights is not easy — so he needs a partner. Could Amazon or Facebook get involved? The new Sports guy at Facebook used to work with Radrizzani at the Sports Rights firm he sold to the Chinese for $1bn. Small world.
Now he just needs to sort the team out at Leeds
As we still favour the old Second Division with our presence, the news the EFL have a new TV partner is interesting but the accompanying Facebook show could be really interesting.
YouTube make the point that video is growing and stake their claim for the TV set — with 150m hours of YouTube watched on TV every day. A Fix friend shares the stat that the TV screen now accounts for around 15% of total YouTube viewing
And TV content is a focus for old and new school media firms — with New York Times, Buzzfeed and others announcing new projects.
An IAB video shows the dramatic growth in ad spend on video and if you are as interested in this area as we are this long read from Redef on what comes after TV is a must read
DNVB
The Nestle investment in Tailsl.com is more evidence of the investability of Direct to Consumer brands. As the model proves itself with more and more brands, VC money is going into the best businesses. With a quick path to profitability and the chance a legacy incumbent will see an acquisition as a quick way to build a customer base, it’s possible to make good returns. Consider this beauty brand spending £60k a day on Facebook ads
But how can a VC tell if one brand has potential or is just a me too? This Medium post from a VC gets into this — it is essentially smart content marketing designed to improve their deal flow.
And if you want more, this is a good commentary on the definitive Inc article we shared last week about the Wharton influence on so many of these brands.
Retail
The idea that Customer Acquisition Cost is the equivalent to rent for online brands makes so much sense. And provides the logic for the move to pop up shops or Brand Cathedrals. This FT article goes into this subject — well summed up with this quote from Warby Parker;
We find that about 75 percent of our customers that shop in our stores have been to our website first.
The impact of online in retail is wider than you may think. US malls normally charge rent based on sales per square foot, but when online returns are deducted the economics change. One benefit of a return can be that it drives an additional store visit. And that is valuable as tt might drive another sale.
UK Department store House of Fraser saw this a while ago and tested small stores where anything could be seen and tried, but buying was done through an instore screen for delivery the next day. Unfortunately their innovative thinking has not prevented financial problems and despite new Chinese investment, they will have to close many stores.
A US equivalent Macys has bought one of the best New York concept stores Story and plans to take their experiental approach into Macys stores. This is what we mean by Brand Cathedrals — places you go to worship the brand. You may not buy anything, but you crave the experience.
It is Dover Street Market for some and it’s Primark for many more. Nike and Adidas do it well as does the New York Samsung store in the Meatpacking district we mentioned the other week. One of our core beliefs is that everything is Media and a Brand Cathedral can be a very smart marketing strategy — even if it’s only open for a few weeks.
GDPR
One of the canaries in the coal mine for GDPR is Criteo. A business that is hugely successful using data to drive purchases as scale their latest numbers are up slightly and they forecast the next quarter to be flat as GDPR rolls out.
Some are sceptical that the Criteo model is sustainable under GDPR, as the end consumer hasn’t consented. Criteo think otherwise and they cite their close relationship with the data regulators in their native France.
Obama chief of staff Rahm Emanuel was famous for staying one should never let a good crisis go to waste. Some publishers think Google has taken a similar approach with GDPR and as part of their compliance and seeking to get advantage from them. Their letter of complaint to Google is worth reading
The Monday note makes a good point on the paradox of privacy; FB and Google are likely to do well following GDPR as consumers accept the value exchange for their privacy
Content
Despite a drop in sales — as the market for smartphones slows — Apple stock did well. Their virtual.monopoly of the most affluent customers means they will keep making good money
But when you have a pile of cash that big people, continue to speculate they will spend some. Bolstering their service revenue by going deeper into content seems logical and the Guardian makes this case and thinks Conde Nast could be a target
Quick Reads
Lots happening in China with video; Alibaba, Tencent and Baidu turn sights on short video
Bloomberg are moving from an ad supported free service to a $35 a month paywall.
The gaming industry generates more money than Music and Movies combined. The biggest game right now is Fortnite which generated $223m in March alone.
Spotify didn’t meet revenue expectations in its first public quarter but user numbers grew to 175m — of which paying users were up to 75m. But it seems 4m people pay for Spotify but don’t listen. Sony sold half their shares in Spotify for around $760m.
China has leapfrogged the US in Fintech. Some interesting business models here and further evidence the QR code is back.
Foursquare will now help brands by building location driven advertising. Their offer seems designed to fill the gaps many agencies have over how to really use data to inform and amplify creative.
The new Ofcom report has a wealth of data on how the UK uses digital media. Well worth digging around in.
Finally…. GroupM have published their State of Digital Report. Lots of data on the key markets and a good commentary.
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