The Newfronts 2019

The NewFronts have just wrapped, and the Upfronts are right around the corner, as the advertising industry sprints to position itself to line up deals before executives descend upon Cannes in June. The conversations are different this year as the industry faces a confluence of crucial trends. Linear TV and publishing as we know them have changed. Consumer media habits continue to fragment and shift toward new digital platforms, from CBS All Access to TikTok. And all of the biggest traditional companies in media are launching new streaming initiatives while also reevaluating advertising’s role in their businesses. Indeed, many consumers are largely rejecting interruptive advertising- and doing whatever they can to avoid it.

WE’RE COMPETING FOR SCREEN TIME...ON OUR OWN CHANNELS, NOT JUST COMPETING WITH OUR COMPETITORS, BUT ACTUALLY COMPETING FOR MINDSHARE. KRISTIN LEMKAU Chief Marketing Officer, JPMorgan Chase

Meanwhile, a new breed of data-driven, direct-to-consumer brands are putting pressure on the marketing ecosystem and how success is measured. They aren’t satisfied with the status quo, and every dollar they put in market must drive their business forward. All of this provides a slew of opportunities for media companies and marketers–along with a spate of challenges. Last week, top ad executives talked about the inherent challenges in reaching ad-avoidant consumers, the ongoing battle to measure digital media effectively, and even mulled advertising’s very reason for being. NEWFRONTS AND UPFRONTS 2

“We’re competing for screen time...on our own channels, not just competing with our competitors, but actually competing for mindshare,” said Kristin Lemkau, Chief Marketing Officer, JPMorgan Chase during a panel at MediaLink’s NewFronts kick-off breakfast, hosted in partnership with YouTube. Lemkau noted that digital media has suffered in part from trying to port over too many interruptive ad formats from traditional media, alienating consumers. Case in point: an emphasis at Hulu’s presentation was the company’s plans for a more restrained ad approach. The company’s ad sales chief, Peter Naylor, said his goal is for half of Hulu’s ad revenue to come from “non-interruptive” ads such as commercials that appear when someone pauses a show. The hope is that more innovative formats like that keep consumers from putting a pause on ads entirely. Amid these important shifts, here are key trends for marketers to grapple with as the NewFront and Upfront season unfolds.

Takeaway #1: The players are changing. Early on, the NewFronts were dominated by the classic web portals–Yahoo, AOL, MSN. Then, a few years ago, the YouTube-centric MCNs like Maker Studios and Machinima emerged. ANYBODY WHO’S GOT ANYTHING TO SELL KNOWS THAT THE BEST INDICATOR OF FUTURE PURCHASES IS PAST PURCHASES. BEN SIMON Vudu’s head of video ad sales Today, the roster is dominated by both traditional media companies and emerging digital players. New platforms require far different programming strategies versus what was originally established. Platforms such as Snap, TikTok, IGTV and Facebook Watch have emerged as crucial distribution outlets for what we’ve traditionally referred to as “shows.” Even Walmart and Target were among the NewFront presenters last week, with Walmart promoting new shoppable ads through its Vudu streaming service. Their presence is indicative of just how different the marker is for media companies, who, instead of just battling each other are now competing with data-rich retailers and e-commerce giants like Amazon. “Anybody who’s got anything to sell knows that the best indicator of future purchases is past purchases,” said Ben Simon, Vudu’s head of video ad sales, to Ad Age. 3 This constantly shifting playing field is another signal that the market is more fragmented than ever. Even as giant tech platforms promise scale and reach, consumer attention is fleeting. The question ad buyers have to ask is, “Do brands have to buy ‘more’ or just buy ‘smarter?’” Takeaway #2: Marketers are looking for the old TV they used to love. The US TV ad market has held above $70 billion, despite secular viewership declines. Many brands have kept budgets in television, because they lack scaled alternatives they trust. When it comes to the NewFronts, brands continue to seek assurance that web video series can draw the same sized audiences as TV or reach the audiences they garnered with a precision they’ve been promised, but never delivered. Therefore, it’s paramount for web video players to prove they can not only deliver large audiences in short periods of time, like linear TV has done for decades, but also do so in an efficient manner. That’s been YouTube’s message of late. It spent NewFronts week emphasizing how many people are accessing its content via smart TVs, while making the argument that YouTube can reach prime-time-sized audiences in short bursts of time. At the company’s Brandcast event, YouTube’s Chief Business Officer Robert Kyncl cited a Nielsen study which revealed that more people between the ages of 18 and 49 watch YouTube in a given week than all of the ad-supported cable networks combined. He also noted that people are consuming 250 million hours per day of YouTube content on smart TVs. In other words, YouTube is not so subtly telling marketers: we’re your TV replacement. AD-FREE ENVIRONMENTS ARE AN EXISTENTIAL THREAT. JOSHUA LOWCOCK Chief Digital Officer, UM Worldwide

Takeaway #3: Interruptive advertising may be in some trouble. JMPC’s Lemkau theorized that because digital technology has put so much control into the hands of consumers, their tolerance for the interruptive advertising common to TV is minimal. “People aren’t going to have the patience for the tax on their time,” she mused. To be effective, advertising has to be “discoverable,” she said. In other words, people are in control and want to invite digital advertising in on their own terms. That’s a tall order for many brands.

Takeaway #4: As a result, some ad spending could just simply go away. Lemkau also noted that as more marketers see traditional means of reaching consumers choked off, they won’t simply just move budgets around, say, from linear TV to digital media. They may just pull money out of marketing entirely and put it towards promotions or premiums for consumers. “It is an emerging trend,” she said. “How do you repoint that money to create value?” 4 That potential shift away from advertising to the masses only promises to become exacerbated by the growth of ad-free streaming services like Netflix and the soon-to-launch Disney+. “Ad-free environments are an existential threat,” said Joshua Lowcock, Chief Digital Officer, UM Worldwide. The burden on proving advertising’s impact on business outcomes only grows more acute.

Takeaway #5: Measurement is still the topic du jour–and something no one has cracked the code on yet. As linear TV sees headwinds, digital brands need to prove they can deliver light TV viewers. There is lingering frustration at the pace of innovation on this front. As MediaLink Chairman & CEO Michael Kassan noted, many of the biggest trade organizations pledged to work together on digital media to form the Make Measurement Make Sense Initiative, “and that was seven years ago,” he said. Currently, cross-media measurement is “a nightmare,” said Lemkau. “Everyone’s hacking everything together.” During its NewFront presentation, Vice implied that publishers have spent too much time in recent years trying to boost big traffic numbers, whether those numbers were truly valuable to brands or not. Indeed, marketers need to be smart about what they are trying to accomplish with a media buy. It’s not enough to measure such a buy with whatever data or TV context you have--you need to have line of sight into the metrics that matter to your business. Whether you are moving cars off a lot, or cans off a shelf, the metrics must clearly quantify value.

Takeaway #6: Everyone needs a DTC strategy. It came up in nearly every NewFront session last week, and every related story, and it will surely permeate the TV Upfronts as well: “What’s your plan to get DTC spending?” If data-rich, direct-to-consumer brands like Glossier, Dollar Shave Club and Casper are the future of advertising, every web video or TV player is looking to win them over. That’s not easy to do for media vehicles that have been about lean-back storytelling historically. The good news for traditional TV companies is that because of improving data and lower production costs, more DTC brands are experimenting in TV advertising, which could represent a lucrative new opportunity for the medium. “You can run TV at much lower scales than people have pitched historically, and sharper brands are adopting that to enter,” Hubble Contacts CEO and co-founder Jesse Horwitz told Adexchanger.

EVERYONE’S HACKING EVERYTHING TOGETHER. KRISTIN LEMKAU Chief Marketing Officer, JPMorgan Chase 5

But underneath the DTC love is a broader, cross-industry push toward proving that advertising pushes sales. When asked about what future trend they are watching closing, nearly every panelist at MediaLink’s event said some version of the same thing: “Focusing on business outcomes is [where we are spending our time],” said Tara Walpert Levy, VP of Agency and Media Solutions for Google and YouTube. That was clearly a point of emphasis at YouTube’s Brandcast event, during which the company touted data from Nielsen showing that Google Preferred–YouTube’s premium/vetted ad offering–delivers greater sales per impression than TV does. Alison Lewis, Global CMO, Johnson & Johnson, told the Brandcast crowd that her team pushed YouTube for insights into the brand’s customer preferences and the impact of various ad initiatives. That allowed J&J to tweak its YouTube ads mid-campaign and get more for its money.

Takeaway #7: Branded content web series are a tougher sell as KPIs are changing. It’s a fair question to ask: do brands want to underwrite web series anymore? Are we moving to a place where advertisers need to produce branded series in conjunction with content studios, not media brands? Every year, marketers are faced with the question of whether to “create, buy or lease” various content offerings. Going forward, is the curation of premium content enough or does it need to be unique or exclusive too? Conversely, attribution will a hot topic for web video production firms. Take Hulu for example. The streaming giant is building attribution models into its ad buys. Moves like this will put pressure on other players. In addition, as more direct-to-consumer brands hit the market, their expectations when it comes to proving advertising’s efficacy are high. Thus, the very reason why NewFront contenders need a DTC strategy. Takeaway #8: Do consumers want another subscription service? That’s up for debate. Viacom recently acquired PlutoTV, a free, ad-supported video service that is getting a huge promotional push. Meanwhile, Walmart’s Vudu hosted its first NewFront. TubiTV, Amazon’s FreeDive and Sony’s Crackle are all vying for an audience that is seeking free alternatives to the streaming giants like Netflix and HBO Go. There’s seemingly a big market opportunity for these properties to prove their value and grab budgets, as so many media giants are focused on launching subscription offerings. Does “subscription exhaustion” signal a push back towards the ad-supported model that got us here in the first place? Has the “skinny bundle” gotten too big? So, what happens next? If we’ve learned anything from the past few weeks (and months and years), it’s that nothing is static. At one point in time, Amazon was operating quietly in the ad shadows, while the next moment the company emerged as a triopoly contender. Previously, AT&T was just the distributor of content–now, it also is the content, while family-friendly Disney is selling ads in “American Horror Story.” Meanwhile, consumers jump from griping about their cable bills to their streaming budgets. Advertisers have no choice but to adjust while flying the plane at 30,000 feet, so to speak. 6 There seems little doubt that the Upfronts, Newfronts and every other part of the macro advertising machine is ripe for change. It’s only getting harder for brands to break through–and more crucial for them to track the impact of every dollar. This represents a massive challenge but also an opening for anyone savvy enough to reinvent the way ads are presented and packaged to brands and consumers. Simply put, media companies need to prove their value today--and, establish a new value proposition in the near future. Advertising has always been an industry that demands creativity–whether that’s the ads people view, the way they are delivered, or the way the businesses that surround them operate.