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YOU CAN’T GET THE TOOTHPASTE BACK IN THE TUBE:  Given this week’s uproar about Facebook’s data leakage (the Cambridge Analytica story), many are asking how a third party accessing FB’s API could gather so much data on so many users.  The answer, according to Digiday, is amazingly simple.  It all ties back to FB’s April, 2010 launch of a new tool called Graph API, which allowed publishers to select data they wanted to glean from FB when a user signed in to their app for the first time using a Facebook ID.  Signing in with your FB credentials is something we’ve all done several times.  It turns out this was all the permission needed for third parties to harvest your data based on the pre-selected fields they were interested in.  The image below is an actual screen shot of the kind of data choices third parties could select from.  Scary, I know.  As Digiday explains, this is akin to someone showing their driver’s license to get into a bar and that bar receiving a list of names and genders for every one of that person’s friends. The bar could ask for more information, like when each friend was born, where they work, their political views and their hometown. A person could decline to share that information, but then they wouldn’t be allowed in the bar.  The worst part about this situation is that there’s no way for FB to undo this problem.  So the toothpaste is officially out of the tube, and Mark Zuckerberg just keeps slipping in it.

TV UPFRONTS, COME HITHER:  For the upcoming TV upfront season Omnicom is bucking the trend of sending it’s media buyers on a mass migration to New York to see the networks’ presentations, and are instead demanding delivery service.  According to WSJ Omnicom has asked (demanded) the major networks bring their Upfront presentations to them for a customized experience.  Omnicom can successfully drive vendors to them based on the estimated $25B they’ll spend in TV during the upcoming cycle.  As a result 20ish networks have answered the call and will be presenting to Omnicom over the next several weeks.  I would expect the other three HoCos to do the same within a year or two, which will turn one consolidated upfront season into four identical versions of the same play.

WAS IT WORTH IT?:  It’s official, Jimmy Iovine is leaving Apple Music in August.  Mr. Iovine’s departure marks the end of the Beats merger era, since all the other senior Beats execs have already left Apple.  So was Apple’s $3B investment in Beats worth the money?  It’s sort of a mixed bag answer.  With the proliferation of connected devices you can get music streamed everywhere these days, so the oversized Beats headphones are past their prime.  On the other hand, Apple did use Beats as a way to reinvent their flagging music strategy with the relaunch of Apple Music.  As you can see in the graph below Apple is slowly, steadily growing its worldwide subscription base, and is actually on pace to overtake Spotify in US subs by the end of this year.  In my opinion the Beats acquisition was probably good for their long-term music pillar, but I think they overpaid for the cool factor of a product that was peaking a few years back.

Have a great Friday (and weekend) guys!

THE GOOGLE OF AUDIO:  By far the biggest programmatic news yesterday was the announcement that Pandora had reached an agreement to buy AdsWizz for $145M.  This is a watershed moment for the nascent programmatic audio industry because it combines two leaders from opposite ends of the space – AdsWizz with its audio ad delivery tech stack, and Pandora’s audio sales infrastructure, first party data set, and immense inventory pool.  The on-platform leverage of combining these two companies is significant, but that’s just the beginning on the story.  AdsWizz’s ability to act as a third party DSP for other publishers who have digital audio inventory to sell is the real juice in the squeeze here.  With Pandora’s scale and AdWizz’s tech they’ll quickly be able to create a programmatic audio marketplace, which other publishers and broadcasters can seamlessly integrate into.  The sub header in this Business Insider link, about Pandora making a move to become the Google of audio advertising, pretty much sums it up.  Great day all around for both companies and anyone who works in the audio space.

WHERE ARE ALL THE YOUNG LISTENERS GOING?:  Yesterday I featured an article on broadcast radio’s generational problem, with the eye popping stat that 50% of Gen-Zers don’t listen to AM/FM radio.  The assumption is these younger listeners have migrated to streaming, but a few of you asked me for details on exactly where they’re going.  So the DG Research Department went into overdrive to find some fresh data from a research firm called Morning Consult.  According to their study 30% of US consumers listen to Pandora, 21% listen to Spotify, and 15% listen to Apple Music.  (Note these percentages are a combination of addressable free listening and subscriptions.)  Then things got really interesting when we dug deeper into the data.  Check out the image below, and in particular that 18-29 yo column which is a decent proxy for Gen Z.  According to Morning Consult 28% of this group gets their music from Pandora, 23% use Spotify, and a paltry 14% listen to broadcast radio.  You can also see the numbers start to reverse as you go up through the age stratas.  So yes, younger listeners are consuming more streamed music than any generation before then.  And yes, broadcast radio is in serious trouble about 10-20 years from now.

SMARTPHONES HIT THE PRICE CEILING:  I think we’ve officially found the ceiling for what American consumers are willing to pay for their next smartphone – and its somewhere under $1,000.  That’s the emerging industry consensus based on Apple’s less than spectacular iPhone X sales.  During the first six months since its release Apple has sold 20M Xs worldwide, which is half of the forecasted 40M.  When you consider the majority of the initial purchases were made by the most diehard Apple-heads, who will buy anything Apple puts out at any price, the 20M total looks even worse.  Apple has effectively priced themselves out of the smartphone marketplace and has created a disincentive for any new customers to come to their platform.  This is happening at the same time lower-cost Android handsets are proliferating, which puts Apple even further away from where the market is going.  Maybe their next phone should be the Apple $499?!?

Have a great Thursday guys!

POLITICAL NIGHTMARE FOR FB:  Yesterday the ongoing Facebook/Cambridge Analytica controversy absolutely exploded on multiple fronts. First there was the release of secret videos of CA executives boasting about the work they did for the Republican side in the 2016 election.  The darkest comment of all came from the now-suspended CEO of CA Alexander Nix, who said “We just put information into the bloodstream of the internet and then watch it grow, give it a little push every now and again over time to watch it take shape. . . and so this stuff infiltrates the online community, but with no branding, so it’s unattributable, untrackable.”  The idea that identifiable campaigns no longer need to advertise facts and instead can gently put out (and nudge) disinformation on the internet should put a shiver down every candidate, consultant and digital media professionals’ spines.  These developments have left Facebook scrambling.  Yesterday they hastily called an all-hands meeting to address the controversy, but then at the last minute both Mark Zuckerberg and Sheryl Sandberg were no shows for the gathering.  This story keeps developing by the hour.  MSN has a more in depth summary of the situation, including some of the secret videos.  I’ll keep an eye on this one for you.

RADIO’S GENERATION GAP:  Everyone except the broadcasters themselves knows Radio is in trouble over the long term.  But what will kill the radio star?  For a clue look to Gen Z.  In an NYU study reported by Axios “Teens listening to terrestrial radio has fallen about 50% over a 10-year period”, according to Larry Miller, director of NYU Steinhardt’s music business program.  “Generation Z, which is projected to account for 40% of all consumers in the U.S. by 2020, shows little interest in traditional media, including radio, having grown up in an on-demand digital environment.”  So by 2020 40% of consumers in the US will be listening to half as much radio as previous generations did.  I’d say that’s a problem.  To make matters worse, Gen Z is actually consuming more music than ever.  But they’re doing it via streaming instead of the FM dial.  So radio’s challenge isn’t just to get younger listeners to consume more music – they need to convince Gen Z to come back to radio stations to get the same music they’re already listening to on their streaming service of choice.  I’d say that’s pretty much mission impossible.

DRIVERLESS REALITY:  Two days ago there was a tragedy in Arizona when a pedestrian was run over and killed by an autonomously driven car, which is now considered a first-of-its-kind fatality.  The vehicle was a test car owned by Uber (who immediately pulled it’s autonomous fleet off the roads), and had a human sitting in the driver’s seat to monitor the car’s actions.  The immediate reaction to this accident was a “you can’t let robots drive – autonomous vehicles are dead” sentiment.  Admittedly, this feels like a science gone bad moment.  But then reports started to come out about what actually happened.  According to accident reports the car was traveling at 38 mph when a women walking with her bike unexpectedly came from the center median lane into the path of the car.  Based on eyewitness accounts and the video taken from the car, it doesn’t look like there was any way for the vehicle to stop in time to avoid the pedestrian.  So if a human driver were to have struck the victim too, what does that say about the driverless car?  According to NHTSA about 15 walkers/bikers are killed by cars each day in the US.  Autonomous driving should reduce this number with the elimination of driver errors.  But they won’t ever be able to account for every pedestrian action.

Have a great Wednesday guys!

THE BREAKUP BEGINS:  Now that the “fanfare” around iHeart’s bankruptcy announcement has subsided we’re starting to see the details of the bankruptcy agreement. Included in the restructure is the plan to sell ClearChannel Outdoor as a way to pay down the existing debt.  This was expected since almost all bankruptcies begin with liquidation, and CC Outdoor is a legitimate freestanding asset which should fetch a good price.  We’re also seeing other more surprising details, including the ability for iHeart to secure another $5B in new debt.  (Not totally sure what they’d need the cash for since they’ve been beating their chest about running a cash-flow positive company for the past week.)  There are also details about how iHeart’s new Board of Directors will be constituted, which leads me to wonder if the Bob Pittman/Richard Bressler dance team will still be in charge once the dust settles.  More details to come . . .

HAS THE DUOPOLY HAVE PEAKED?  So this is interesting.  According to eMarketer the share of digital media spending the Google-Facebook duopoly commands may have peaked in 2017, and could actually go down in 2018.  As you can see in the graph below the duopoly hauled in a combined 58.5% of US digital spending last year and is forecasted to slip slightly to 56.8% in 2018.  Don’t get me wrong – two vendors commanding over 50% of the market is still utter dominance.  But as with any product lifecycle curve what starts as a plateauing, fades into a slight decline, and then becomes a full-scale drop.  Could we be seeing the beginnings of that shift now?  Granted the duopoly’s total revenue is still expected to grow at a robust 17% YoY.  However that’s slightly lower than the overall digital marketplace which is forecasted to increase 19%-20% in 2018.  Are we seeing the “Amazon effect” start to take more new digital dollars off the table?  Are next tier publishers like Twitter, Pandora and Snapchat taking enough nibbles to make a difference?  The cause is probably an all-of-the-above set of factors.  Regardless, a more balanced digital marketplace is better for the entire industry.

COULD NASCAR RUN OUT OF GAS?:  I know it’s unusual for me to write about something like NASCAR, but keep in mind they have a huge sponsorship sales underbelly which literally keeps the sport afloat.  And right now that sponsorship revenue pipeline looks to be vulnerable.  Fortune 500 brands, the bread and butter NASCAR sponsors, are saying goodbye to the league.  This is partly due to a drop in TV ratings and race attendance which means fewer eyeballs for marketers to reach.  There’s also an oversaturation of team sponsors who end blurring together (literally) because they’re so tightly packed on the cars and uniforms that they can’t stand out from one another.  Even top drivers like Jimmie Johnson and decades-long sponsors like Lowe’s are parting ways because there’s just not enough branding value in the deal any more.  What makes the decline of sponsorship revenue a life or death situation for NASCAR is that the teams need this money to operate.  Building the cars and paying the drivers is expensive.  Then think about all the support staff, equipment, and trailers needed to take this traveling automotive circus from city to city each week.  If sponsorship revenue dries up the teams won’t be able to pay their bills.  This could cause whole teams to shut down leaving fewer cars to race on Sundays.  Does anyone besides me feel a crash coming in Turn 3?

Have a great day guys!

AMAZON’S TV STRATEGY IS SMARTER THAN YOU THINK:  At the end of last week Reuters published a fascinating analysis of Amazon’s video monetization strategy.  Just about everyone else in TV runs the same business model – produce the best content you can to build an audience, and then sell enough ads to cover your production costs and still clear a profit.  But Amazon isn’t using its original video content to make money through ad sales.  Instead their shows are used as an Amazon Prime subscription engine.  Over the last two years Amazon TV’s original series have generated 5M Prime membership subscriptions.  Amazon knows Prime members buy significantly more products on platform than non-subscribers, so it’s TV shows generate revenue indirectly by driving subs.  What’s even more interesting is the internal Amazon graphic below showing each series’ performance on a metric they call “Cost Per First Stream”.  CPFS is calculated by dividing the series’ production cost by the number of new subscribers it attracts.  The lower the CPFS they better, because it means the show is efficiently bringing in new customers to Amazon Prime.  Yes this is a complicated business model, but it’s also proving to be a highly effective one.  Which goes to show you how far ahead of the traditional TV networks Amazon really is.

YOUTUBE JUMPING IN THE MUSIC SUBSCRIPTION GAME:  Speaking of online video platforms running an alternate play, there’s a new strategy in the works at YouTube.  During an interview at the very end of SXSW last week YouTube’s Global Head of Music Lyor Cohen discussed the publisher’s plan to launch a music subscription service.  Keep in mind YouTube already has a not-very-successful video subscription service called YouTube Red, which allows viewers to watch on-demand videos in an ad free environment.  According to Mr. Cohen their new music sub service would be focused on playlists and social sharing.  At first glance this feels more like a “me too” play for YouTube who is trying to jump on the music streaming bandwagon very late.  But I’m not sure there’s enough of a differentiation between their plans and existing streamers like Pandora, Spotify, and Apple to make this a compelling offer.  Then again since they’re owned by Google, YouTube can pretty much try whatever they want without worrying about cost or profit.

FACEBOOK UNCOVERS MORE THIRD PARTY AD FRAUD:  Late Friday Facebook disclosed more deceptive ad practices from the 2016 election.  The latest problem involves a third party called Cambridge Analytica, who illegally obtained data from 50M FB users and distributed it to Russian organizations.  Cambridge Analytica got this data from a FB-approved third party project involving a researcher named Aleksandr Kogan.  Mr. Kogan gained access to FB’s app publisher API under the cover story of a “research game app” called thisisyourdigitallife, which was downloaded 270,000 times since 2015.  It looks like the app was just a rouse to allow Kogan and Cambridge Analytica into the treasure trove of FB’s data they were really after.  Upon discovering the scam FB immediately suspended Kogan’s access to the platform.  After hearing FB’s announcement other digital publishers have also severed ties with Kogan/CA, although it’s not known if they were able to manipulate the same fraud on any other sights.  AdWeek does a good job of breaking down this complicated scheme in the attached link.  This example shows us just how vulnerable our data infrastructure is to bad actors who intentionally carry out fraud.

Have a great Monday guys!

POLISHING THE BANKRUPTCY TURD:  My DG spies were roaming the back alleys of the media world yesterday to see how iHeart would handle the bankruptcy topic with clients and agencies.  We found multiple examples of this passage in emails sent from iHeart sellers to their customers. (iHeart Doc)  At some level I’m sympathetic for these reps.  The company has put them in a challenging situation and they assuredly care about keeping their jobs.  Anyone in that moment would try hard to salvage their business.  But the way iHeart is positioning its situation is practically gleeful.  They make Chapter 11 bankruptcy sound like a great new business strategy all companies should aspire to.  Have you ever heard a company begin explaining their bankruptcy with “pleased to announce” before?  I’m sure their stockholders weren’t too pleased about losing all their investment value yesterday.  Spin overkill like this actually hurts the situation more than it helps, because it turns into a credibility buster for the messenger.  In fact the only winner I can see here is the person who wrote this piece – with spin skills like that they might be a good candidate for Trump’s next Press Secretary (sorry, I couldn’t resist).  Back to the tap dancing . . .

AMAZON IS GETTING SERIOUS:  Meanwhile on the other end of the media universe Amazon is starting gear up its ad sales machine.  According to Digiday they’re testing a new self-serve API which can pull inventory from its Amazon Advertising Platform (AAP), and self-track attribution for both online purchases on their site and off-line purchases in Whole Foods.  Given Amazon’s significant scale and logged in user data this new platform could be a formidable player in the digital media space.  Interestingly, Amazon still seems hesitant to invest in a direct sales team to facilitate higher level managed service relationships.  Instead their strategy appears to be focused on building the API infrastructure and training agencies and clients to use it for themselves.  One thing is for sure about this approach – if Amazon gets it right they’ll be able to scale transaction volume into the Facebook tier within a few years.  By then we’ll have officially retired the word Duopoly and be learning how to spell Triopoly.

POOR TASTE OR POOR MANAGEMENT?:  This morning Snapchat is waking up to a new celebrity headache.  Fresh off the Kylie Jenner “does anyone use Snapchat anymore?” debacle, the social platform is dealing with another self-inflicted wound.  The current problem is a gamer ad running on the platform featuring “Would you rather” creative.  The choices in the ad are to click on either “Slap Rihanna” or “Punch Chris Brown”, which is a blatant reference to the pair’s 2009 domestic violence incident.  The backlash has been immediate.  As reported by Bloomberg, Rihanna called out Snapchat directly on her social platforms and investors started selling off stock (again).  For their part Snapchat gave the perfunctory apology, vowing to never let something like this happen again.  In fairness to Snap this was a piece of 3^rd party creative and not its own promotion.  I think we can all give them the benefit of the doubt that they wouldn’t have intentionally run this ad.   But then you have to wonder about their process for monitoring creative to make sure inappropriate content is screened out.  Snapchat’s creative policy bans “shocking, sensational or disrespectful” content.  So who’s responsible for missing this one, and how do they make sure it never happens again?

Have a great Friday (and weekend) guys!

IHEART FILES FOR BANKRUPTCY:  Early this morning iHeart and group of creditors who hold about $10B of its debt announced an agreement to send the company into Chapter 11 bankruptcy.  According to Radio Ink iHeart will formally file for bankruptcy this afternoon.  So what does this mean?  First and foremost they will continue to operate as normal, with their stations staying on the air and their employees continuing to work.  As we’ve seen with the Cumulus bankruptcy, decisions will be made over the upcoming months which could result in selling off business units and/or station clusters in certain markets and possible layoffs.  It’s likely that the iHeart brand will emerge from bankruptcy as a smaller debt-free company with one important distinction.  Instead of being owned by today’s stockholders (whose investments in the company will be zeroed out today), any new version of iHeart will be owned by its creditors.  So Bobby P and team should get ready for a little more fiscal discipline moving forward.  Sad day for the radio industry and thousands of good iHeart employees to be sure, but we’ve all seen this coming for years.

QUALITY CONTENT NEEDS A HUMAN TOUCH:  Bad content hurts every aspect of digital media.  Whether it be sketchy user uploads or computer algorithms pushing out bad material, the system is rife with inappropriate content.  This causes brands to shy away from advertising on certain publishers and dampens the revenue potential of the entire industry.  But there is a solution to this problem in the form of human curation.  In an AdExchanger guest column Pandora’s SVP of Strategic Solutions Susan Panico explains the role human curators can play in creating compelling content which is also brand safe.  The industry is already starting to see the green sprouts of change with publishers investing in humans to organize what should be featured on their sites and content checkers to make sure nothing objectionable slips through.  These measures might not create a 100% clean digital environment, but it would be a marked improvement over the anything goes Wild West content delivery system we’ve all been suffering with for years.

SELLING IS A TEAM SPORT:  Yesterday I featured an article about the challenges facing media buyers at agencies.  So today I thought it would be helpful to jump across the desk and look at things from the seller’s perspective.  The best media sellers used to be more like Top Gun fighter pilots who could single-handedly swagger into a negotiation and walk out with an IO.  But that worked in the simpler “spots and dots” era of traditional media.  Today’s digital media marketplace is infinitely more complex, requiring functional knowledge of ad products, the marketplace, audience data, measurement, ad quality metrics, programmatic, etc..  Having deep knowledge of all these topics is more than any single human brain can handle.  So today’s reps need to be more like quarterbacks of a team of experts working in coordination to meet each of these challenges.  Digiday dives in to this new paradigm with examples of successful team sell setups.  It’s important for sales organizations to recognize this change and invest in subject matter experts who can help their sellers. It’s equally important for sellers to get out of the go it alone mindset and embrace the team approach.

Have a great Thursday guys!

CUE DISHES ON APPLE MUSIC:  Yesterday at SXSW Apple SVP Eddy Cue gave another peek behind the curtain at Apple Music’s listener metrics.  According to Mr. Cue Apple is adding 2M paid subscribers per month worldwide, but gave no specific numbers for the US.  For the first time Apple also broke down the amount of free trial subs within the total at 8M – so about 20% of their audience.  It’s apparent that Apple seems completely focused on the ad-free subscription side of the biz.  Eddy Cue even postulated that the industry could eventually see 2B (with a B) subscribers of music worldwide, which would be a pretty rosy scenario for the entire music industry.  Apple also appears to be completely disinterested in ad sales when it comes to music given that it has no addressable listeners.  This is probably the result of the colossal failure known as iTunes Radio which closed up shop in early 2016.  This sub-only strategy puts Apple Music in direct competition with Spotify and continues to let Pandora swim in its own differentiated lane of the streaming pool.  Thanks for the intel, Eddy!

CATCHING A RIDE WITH SEDRIC:  It’s official!  The first totally autonomous car is heading into mass production.  As reported by TechCrunch, VW will begin production of Sedric, it’s autonomous EV “pod car” later this year.  Before you get too excited about buying your own Sedric you need to understand what this car is intended for.  It’s more like a people mover than a personal automobile, designed for public transportation and fleet use.  So you could be picked up in a Sedric the next time you hail a cab or rideshare service, or even join fellow commuters on larger Sedrics like you would on today’s buses.  The two most important things to know about Sedric are that it’s all EV and no driver – so having these babies on the road will mark the true beginning of the driverless transportation era and the beginning of the end for ICE (internal combustion engines).  For those of us at a certain age it’s really cool to see this type of Jetsons-era technology finally coming to the real world in our lifetimes.

MEDIA ON THE CHEAP:  Buying media has never been harder than it is now.  Sadly agencies earn pennies for their Investment services and programmatic transacting is beginning to make the job of media buying obsolete.  Yet agencies are still loaded with people-heavy Investment teams which must keep up a steady stream of work in order to maintain their staffing levels.  To justify their existence buyers must deliver savings which puts downward price pressure on media, especially on the traditional side of the house.  This creates a commoditization effect where all impressions from different vendors are viewed as equal – so the buyers always choose the cheapest option.  The industry has already learned the hard way via programmatic that buying “just cheap” ends up backfiring on marketers.  Yet agency investment teams have to keep promising greater and greater savings in order to keep their jobs.  For a first-hand account of how bad things are check out this installment of Digiday’s “Confessions” series, featuring anonymous comments from a media buyer.

Have a great Wednesday guys!