Batten down the hatches, because it’s going to be a bumpy second half of the year for the marketing and media landscape overall.
No one sector will escape some brush with depressed numbers or client loss — and that includes the broader agency landscape. In fact, some are already feeling the pinch, both within the somewhat secure domains of holding company environments, but also across the swath of independent agencies serving up media, digital, experiential, performance and creative work.
In at least one case, an independent media agency lost clients who could no longer afford to market because of supply-chain issues. The head of strategy and planning, who declined to speak for attribution, confirmed client losses. “We’ve had clients who said, we literally can’t sell anything, we don’t have any more product to sell, we have to shut off advertising,” said the exec.
Meanwhile, other agencies have experienced client pullbacks on spending, or had clients award RFPs, only to pause any work that was supposed to be started. Said the head of investment for one major holding company: “The economic uncertainty and continued supply-chain issues and now new spikes in COVID have major categories pulling back,” including automotive and telecom advertisers.
The CEO of an independent mini-holding company said about half of all independent agencies just don’t take the time to read the tea leaves of economic uncertainty, and those are the ones who may struggle to survive. “Inevitably clients are going to peel back 10, 20, 30 percent of brand advertising and peel back some social,” said the CEO. “What they’ll peel back last, of course, is the acquisition media because that’s the bread and butter. But especially for the independents, who might be working on a 10% margin, if their clients simultaneously are 45 days late on cash flow, while their employees have gotten raises and budgets roll back 30 percent, It doesn’t take a whole lot to create a lot of uncomfortability very fast.”
Digiday spoke with a number of independent agency leaders to get a handle on just what kind of damage could hit the media agency world, and how bad it will be. A few common factors stand out:
Specialization is endangered
Specialty shops that align with a single or narrow avenue of clients may well be in trouble, and should think about either diversifying their client base beyond one or two verticals, or expanding their services into other areas to reduce risk.
“Typically, you see, you know, experiential advertising and some of the more upper funnel brand building take some of those initial hits,” said Jared Belsky, CEO of digital agency Acadia. “It’s not always gradual — usually those cuts go deeper. So sometimes they’re caught flat-footed.”
Seth Hargrave, CEO of independent Media Two Interactive, said he’s been able to avoid a serious downturn despite being a digital specialist shop. “We’re a specialized agency in terms of media buying and technology, but the flip side of that is we want as diverse of a client base as we can possibly get,” said Hargrave. “Because that insulates us to a certain degree, and gives us opportunities when times are tough.”
DTC falling out of favor
Agencies are pulling away from direct-to-consumer advertisers, especially startups, which often sell luxury products (that don’t sell well in a recession) or aren’t strategic in their approach. Several agency execs said they’ve deprioritized DTC as a category, after it was red hot for the last two years.
“There was this big flourishing of small brands, DTC brands and independent performance marketing companies, that was driving a lot of performance marketing, independent agency growth. That side is shaking out,” said Michael Stich, CEO of Court Avenue.
“We aren’t as interested in DTC opportunities anymore,” said an executive at a digital agency who spoke on condition of anonymity. “We’ve had some before. While we love their entrepreneurial spirit, the rigor isn’t there and sometimes the expectations aren’t there. Sure, you can have 1,000 percent sales increases in year one, but guess what that meant? You sold 1,000 units — that doesn’t mean you really have a sustainable business.”
Pressure on the client leads to pressure on the agency
Agencies need to be ready for clients to exert greater scrutiny on planning and execution because CMOs and marketing departments are getting that same extent of scrutiny from their CFOs and procurement people.
“The CFOs are running the show,” said the strategy/planning head that lost clients. “They’re like, ‘We need to conserve cash.’ And this is one of the easiest place for them to pull from.”
“CMOs and marketers are going to be backed into a corner to show proof of return,” agreed Hargrave. “They always are, but that constriction is going to be significantly higher over the course of the second half of this year” because of the financial pressures of the recession.
It’s even happening with RFPs, said Dan Eisenberg, CMO of Blue Chip, an independent brand, media and shopper agency. “We’ve seen some RFPs around where there is a lot more scrutiny from client side financial leadership back on the marketers to make sure that everything is is bullet proof in that business plan,” including market analysis, supply-chain concerns, distribution and sales forecasts, he said. “It’s forcing the marketers who are ready to get in the market to have to circle back and be involved in a lot more internal reviews, additional layers of scrutiny. Sometimes they might even need to go back and rework that business plan, because of what they’re being asked.”
Places to cut back
Agencies, particularly publicly traded firms that have to worry about Wall Street punishing them, have a few things at their disposal to minimize risk if incoming revenue drops: freeze hiring, cut back on travel & expense budgets before you get to layoffs.
“Focus on your people, protect your people, ensure that if we have a recession and come out of this recession, that you are well positioned with your clients and your teams to be able to support,” said John Harris, CEO of independent agency network group Worldwide Partners. “ That’s versus, ‘We’ve cut 10% of our staff — Oh my God, now we’re back into trying to hire people again’,” which is harder than it’s ever been.
Color by numbers
We all know that streaming services carrying advertising can sometimes flood us with too many ads —particularly when the ads repeat over and over again. Ad platform Infillion, with the help of researcher Ipsos, surveyed 2,500 people to better understand consumer preferences and what gets their attention. Findings include:
- 73% of consumers say the ads they see are repetitive.
- 61% of consumers say they multitask during ad breaks in streaming content.
- 67% of consumers prefer ad-supported streaming options to ad-free ones.
- 50% of consumers see tailored ads as good or helpful if they’re in sync with their interests.
- Over 70% would likely offer more detailed personal information in exchange for more personalization in streaming ads.
- The top five pieces of data consumers prefer to divulge are:
- gender (69%)
- age (65%)
- interest and hobbies (63%)
- ethnicity (60%)
- household size and detailed data about purchases (56%)
Takeoff & landing
- Independent media agency PMG came out the biggest winner in Nike’s review of its $1 billion media business. The Texas-based shop will handle North American integrated media duties, as well as global digital work. IPG’s Initiative also came out a winner in the review, handling integrated global media. WPP’s Mindshare, Stagwell’s Assembly and Wieden + Kennedy all lost some of Nike’s business in the review.
- Internationally, Publicis Media won consolidated media, creative and digital duties for PepsiCo India, following a multi-agency pitch. Losing agencies include WPP’s Mindshare and WundermanThomson, which had lost the remit back in the spring.
- The Association of National Advertisers released a report on procurement that found, somewhat unsurprisingly, clients find it a healthy and improving process while agencies don’t to anywhere near the same degree. Among other stats, the most telling in the report is that, almost half (49 percent) of procurement respondents agree completely that they are “knowledgeable” regarding advertising/marketing, not a single agency respondent agreed.
“It’s clear with Google’s announcement [that] the industry is struggling with implementing and testing alternative strategies to third-party cookies, but marketers cannot continue to wait until cookies are gone to seek out alternatives. Cookies were always an imperfect mechanism for making ads more relevant and personal. What’s more, is that many of the proposed alternatives are premised on companies knowing even more about consumers’ identities.”
— Ken Weiner, chief technology officer, GumGum, reacting to Google’s latest delay in replacing third-party cookies until 2024.
- Digiday intern Carly Weihe, with the support of senior news editor Seb Joseph and senior tech reporter Ronan Shields, crafted a thorough analysis of the tech platforms’ recent economic stumbles, and the effect that will have on the global economy.
- You must give a listen to senior marketing reporter Kimeko McCoy’s first installment of a new podcast series called The Return, which addresses work/life balance as agencies open up offices again. Episode 1 points the mic at Atlanta agency Fitzco.
- I took a look at how the out-of-home industry-backed organization Geopath is working to update and advance the state of OOH measurement at a time when the medium is kind of hot.
- Finally, I’m happy to welcome Antoinette Siu to Digiday as media agency reporter. She will be helping me to cover the media agency world and all the industries and business lines around it. She can be reached at [email protected]
Web3 and the transition toward true digital ownership
Image Credit: ArtemisDiana/Getty
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How do you think you would answer if I asked you the following question: “What do you own online?”
In real life, you own your home, the car you drive, the watch you wear, and anything else you have purchased. But do you own your email address or your business’s website? How about the pictures that populate your Instagram account? Or the in-game purchases on Fortnite or FIFA video games or whatever else you are playing?
My best guess is, after casting your mind through the things you use the internet for (which for everybody is pretty much everything, social and professional), you would struggle to find a solid answer.
Maybe you would ask me to explain what I mean by “ownership.” But it doesn’t really matter. And while I don’t mean this to be a trick question, it kind of is. Because in the current version of the internet, we don’t have ownership rights online.
MetaBeat will bring together thought leaders to give guidance on how metaverse technology will transform the way all industries communicate and do business on October 4 in San Francisco, CA.
Digital ownership: Participants and products
To understand why we don’t own anything online, we must first understand the evolution of the internet and how it gave rise to the business model that has dominated its current iteration.
In the 1990s — the decade of desktop computers and dial-up connections — the internet was predominantly a content delivery network consisting of simple static websites showcasing information. What we refer to today as Web1 was slow, siloed, and disorganized.
Next came the platforms, such as Facebook (now Meta) and Google, driven by wireless connectivity and the development of handheld devices like laptops, smartphones, and tablets, which gave us free-to-use services that enabled us to edit, interact with and generate content. These platforms centralized the web, putting in place a top-down structure that saw users reliant on their systems and services.
This evolution of the internet took place in the mid-2000s and is the version we know today. We call it Web2. It is a model based on connectivity and user-generated content, made in the image and interests of companies like Facebook, Twitter, Instagram, and YouTube.
In this environment, netizens are both participants and products. We sign up for services in exchange for our data, which is sold to advertisers, and we create content that generates value and fuels engagement for these platforms. We do all this while having no rights to anything online.
Our social media profiles can be taken down and our access to email accounts or messenger apps suspended. We don’t own any of the digital assets we purchase and have no autonomy over our data. Businesses we build online are often reliant on platforms and are therefore vulnerable to algorithms, data breaches and shadow bans.
The deck is stacked against us. Because the option not to be involved, when so much of the commerce and communication in the world takes place online, is not really an option at all. And yet there is nothing that we can point to and call ours. Nothing we have any actual authority over.
And, it is this dynamic that Web3 is determined to change.
Web3 and the “internet of value”
Right now, when most people hear the term “Web3” they probably think “metaverse”. But a better way to think about Web3 is as the evolution of the internet.
Today, the digital experience is very corporate and very centralized. Web3 will offer the dynamic, app-driven user experience of the current mobile web in a decentralized model, shifting the power from big tech back to the users. It will do this by spreading the data outward — putting it back in the hands of netizens who are then free to use, share and monetize it as they see fit — and expanding the scale and scope of interactions between users and the internet.
Underpinning that expansion will be guaranteed access, which means anyone can use any service without permissions and no one can block, restrict or remove any user’s access.
The idea then is that Web3 will not only be more egalitarian but that it will create an “Internet of Value” because the value generated by the web will be shared much more equitably between users, companies, and services, with much better interoperability. Users will have full ownership, authority, and control over both the content they create and their data. But how will this help us transition toward true digital ownership?
NFTs hold the key to digital ownership
The truth is that digital ownership is not too hard a problem to solve. And we already have the solution: NFTs.
In the public consciousness, NFTs are known for the projects that have garnered the most media attention, such as CryptoPunks and Bored Ape Yacht Club. While projects such as these have catapulted the term into the zeitgeist, the usefulness of the underlying technology has been much less discussed.
Simply put, NFTs act as proof of ownership. The details of the NFT’s holder are recorded on the blockchain, all transactions and transfers are tracked and transparent and available to the public, and everything is managed by the token’s unique ID and metadata.
So, how does this work in practice? Let’s say I create an NFT. As soon as I upload it, a “smart contract” is created that tracks its creation, the current owner, and the royalties I will receive. If someone decides to purchase it, they own that NFT and any additional perks that come with ownership. Their details are registered on the blockchain and nobody can edit or remove them.
Now, let’s say that the market for my NFTs starts to heat up, demand grows and the value of my collection begins to rise. If the owner decides to sell, they make a profit and I earn a small royalty from the resale. The change in ownership is tracked on-chain in real-time and the smart contract ensures my royalty fee is deposited directly in my wallet. This is the key value proposition of NFTs: Verifiable ownership and the option to liquidate digital assets.
What’s next for Web3?
This is what ownership looks like in Web3. It is the promise that netizens will be able to own their digital assets in the same way that they own their home, car and watch. NFTs will usher in a more equitable digital economy and will play a central role in the future of digital commerce.
The fact is that as of right now, we are still writing the Web3 rulebook. This is still a very new, very young space. And while few things are certain, what we can say for sure is that the internet is only moving in one direction: ownership.
The guiding principle in Web3 is to accelerate the transition towards a more equitable digital environment. It is very much opt-in, an internet built by the people for the people. It is one in which ownership is the foundation upon which new products, networks, and experiences are being built. And it is fundamental to establishing the internet of value.
Over the next few years, as Web3 develops it will operate alongside Web2. The infrastructure supporting Web2 is very strong and I don’t see us completely shifting away from that any time soon. However, in the medium-to long-term, Web3 will completely reshape our relationship with the internet.
Filip Martinsson is cofounder and chief operating officer of Moralis.
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Apple blocked the latest Telegram update over a new animated emoji set
Ever since Apple launched the App Store, developers big and small have gotten caught up in the company’s approval process and had their apps delayed or removed altogether. The popular messaging app Telegram is just the latest, according to the company’s CEO Pavel Durov. On August 10th, Durov posted a message to his Telegram channel saying the app’s latest update had been stuck in Apple’s review process for two weeks without any real word from the company about why it was held up.
As noted by The Verge, the update was finally released yesterday, and Durov again took to Telegram to discuss what happened. The CEO says that Apple told Telegram that it would have to remove a new feature called Telemoji, which Durov described as “higher quality vector-animated versions of the standard emoji.” He included a preview of what they would look like in his post — they’re similar to the basic emoji set Apple uses, but with some pretty delightful animations that certainly could help make messaging a little more expressive.
“This is a puzzling move on Apple’s behalf, because Telemoji would have brought an entire new dimension to its static low-resolution emoji and would have significantly enriched their ecosystem,” Durov wrote in his post. It’s not entirely clear how this feature would enrich Apple’s overall ecosystem, but it still seems like quite the puzzling thing for Apple to get caught up over, especially since Telegram already has a host of emoji and sticker options that go far beyond the default set found in iOS. Indeed, Durov noted that there are more than 10 new emoji packs in the latest Telegram update, and said the company will take the time to make Telemoji “even more unique and recognizable.”
There are still a lot of emoji-related improvements in the latest Telegram update, though. The company says it is launching an “open emoji platform” where anyone can upload their own set of emoji that people who pay for Telegram’s premium service can use. If you’re not a premium user, you’ll still be able to see the customized emoji and test using them in “saved messages” like reminders and notes in the app. The custom emoji can be interactive as well — if you tap on them, you’ll get a full-screen animated reaction.
To make it easier to access all this, the sticker, GIF and emoji panel has been redesigned, with tabs for each of those reaction categories. This makes the iOS keyboard match up with the Android app as well as the web version of Telegram. There are also new privacy settings that let you control who can send you video and voice messages: everyone, contacts or no one. Telegram notes that, like its other privacy settings, you can set “exceptions” so that specific groups or people can “always” or “never” send you voice or video messages. The new update — sans Telemoji — is available now.
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