SPOTIFY LEARNS THE HARD WAY:  There are two opposing adages in business strategy.  Either pick one thing and do it well or try to be all things to all people.  In the audio streaming-scape the comparison accurately sums up the difference between Pandora and Spotify.  Pandora is about music, period.  Which is why every strategic initiative begins around the concept of serving listeners that next great song and/or helping them discover their new favorite artist.  By contrast Spotify has tried to be all things in streaming entertainment, even if that means straying from their musical roots.  The best example of this was Spotify’s launch of a new platform for original video content in late 2015.  Yes, Spotify is still in the video production space, but you would hardly know that because it hasn’t worked.  In the attached Digiday link, Spotify’s foray into video, and the resulting missteps, are laid out in excruciating detail.  On one level this example tells you a little bit about Spotify’s disjointed internal decision making process.  Then on a deeper level it proves the point that its sometimes better to pick a hill and own it, the way Pandora does.

SHOULD TIM COOK BE LOOKING OVER HIS SHOULDER?:  Earlier this week Apple made headlines with the launch of its iPhone X model.  But that’s not what interests me about the attached Inc.com article.  What’s more intriguing is the idea of Google finally going all in as a smartphone manufacturer with the potential purchase of HTC.  This could represent a major power shift in the hardware side of the tech industry, because Apple at its core (sorry), is a device company.  So if Google, whose Android operating system already runs 86% of the smartphones worldwide , was able to compete on the device side Apple could have a major problem on their hands.  In all fairness, being a preeminent smartphone manufacturer is easier said than done.  Google has already tried and failed twice.  The first attempt was the disastrous acquisition of Motorola – have you flipped open your new Razr lately?  And more recently Google gave it a go with their own Pixel phone – I think my wife may have been the only person to actually buy a Pixel in Chicago.  But Google acquiring a proven smartphone manufacturer like HTC would be an entirely different ballgame.  It should be interesting to watch this one play out.

THE IMPORTANCE OF WORKING FOR A CAUSE:  Finally, I thought I’d leave you with a deep yet inspiring weekend read.  It’s the story of the 19^th century inventor Nikola Tesla, as told by a blogger named Cory Galbraith in the attached link.  No, Nikola Tesla was not Elon Musk’s great grandfather.  But he is the genius who invented the alternating electrical current theory which now runs our entire planet’s electrical system.  Tesla’s work was used by early 20^th century inventors like Edison and Marconi, therefore he is widely considered the original “techie”.  Yet Nikola Tesla was as much of an enigma as he was a genius.  He wasn’t concerned with money, is considered the greatest math mind to ever live, was a germaphobe, slept only two hours per night, and only had one romantic attachment in his life which was to a pigeon (reread that – I can’t make this up).  But as the saying goes, the line between genius and madness is very thin.  The reason I’m featuring the story of Nikola Tesla is because he devoted his life’s work only to helping mankind, and not for his own personal welfare.  Tesla believed that “working for a cause, not just money, provides us with a purpose.”  Makes you wonder what our world might be like today if a few more Tesla’s were running around.  (And BTW – even if you don’t read this article at least appreciate the image below.  It’s a real picture of Tesla sitting under one of his electrical arc simulators.  This would be hard to photoshop, much less invent the real thing.)  Inspirational stuff from an amazing mind!

Have a great Friday (and weekend) guys!

STREAMING . . . INSIDE THE NUMBERS:  Yesterday the research company Fluent released a comprehensive study on the state of streaming in the US.  What makes this report so interesting is that they combined all forms of audio streaming, like YouTube and GooglePlay Music, instead of just focusing on the pureplay streaming pubs.  They also went in depth on the breakout of free vs. subscription streaming, and even delved in to why listeners choose to subscribe or not.  It’s a lengthy report, so I’ll give you some of the highlights.  The younger demos are heavy streamers with 92% of Gen-Zs and 91% of Millennials listening to some form of “all in” streaming daily.  Fluent also estimates 25% of streaming listeners have a paid subscription, and provides a ranker of what percentage of the population listens to each streaming platform – image below.  This research definitely speaks to the popularity of audio streaming and helps validate the Triton and Edison numbers we regularly see.

TWITTER GETS “SIR MARTIN SLAMMED”:  There were some on-stage fireworks yesterday at the Dmexco media conference.  The source of the scrum was WPP CEO Sir Martin Sorrell’s live interview with Twitter CEO Jack Dorsey, as described in the following AdExchanger link.  Mr. Sorrell pressed Mr. Dorsey on the monetization aspect of Twitter’s business model, and he did it in a parental sort of way.  The basic line of questioning was why Twitter can’t be stronger in its ad business to compete with Google and Facebook.  WPP, like all agency holding companies, are wary of the power the Goo-FBoo duopoly now commands, and is hopeful that another publisher with global scale can become the third horse in the race.  For his part Mr. Dorsey stuck to the script by concentrating on Twitter’s positioning in the digital zeitgeist, but really didn’t address the ad platform criticism.  To me this feels more like Sir Martin’s overall challenge to the digital industry to disrupt the duopoly, and less about Twitter’s plan to turn its ad monetization around.  Regardless, it must of have been a fun show to watch unfold live in Cologne.

WHY TUESDAY WAS LIKE A HOLIDAY FOR ECOMMERCE:  You’ve probably never actually thought about this, but there’s an important difference in the way you can purchase products on Amazon vs. every other ECommerce site out there – the One Click shopping experience.  As described in the attached Digiday link, Amazon has held a patent on One Click technology since 1999, and on Tuesday that patent expired.  Besides just a convenience for shoppers One Click is an important business advantage, because to solves the “shopping cart abandonment” issue of consumers beginning to shop but then never actually completing the purchase.  And just like patent expirations in other industries, the nanosecond the patent window ends the invention is fair game for other competitors.  So what can we anticipate?  I’d expect a bum rush towards new One Click interfaces from every savvy ECommerce site out there.

Have a great Thursday guys!

EVERYTHING YOU DIDN’T KNOW ABOUT LUMASCAPES:  If you’re like me you’ve encountered and appreciated Lumascapes in your career, but never really understood who created them and why they exist at all.  It’s almost like the Lumascape Fairy came to our industry one night and left us a map to sort out our AdTech mess.  As with most things, there’s a much more ordinary story behind the Lumascape, which is superbly told in the attached Digiday link.  For starters, it didn’t come about all at once by just filliping a light switch.  Instead today’s Lumascapes began as a single powerpoint slide in a 2010 digital media presentation and iterated from there.  The inflection point for the Lumascape was the decision to replace company names with their logos.  This suddenly made getting into a Lumascape more important – kind of like a relevancy statement for your brand.  Today’s Lumascapes (image below) are a migraine-in-the-making, with so many micro-logos jammed on to one page.  But just like a Seurat painting, if you step back from the individual dots the big picture will reveal itself and tell an amazing story.  Pretty cool stuff, if you’re in to knowing where our digital media industry came from.

THE AUDIO ROAD MAP, PER PANDORA:  Yesterday Pandora CFO Naveen Chopra presented a near-term vision of the company’s strategic road map at Goldman Sachs’ annual Communicopia Conference.  Some of Mr. Chopra’s most relevant comments are highlighted in the attached RadioI Ink link.  The biggest takeaway by far is the growing importance of voice-enabled digital assistants like Amazon Echo, Google Home, and the soon-to-be Apple Homepod.  This segment is the highest user growth area of Pandora’s business today, and is being compared to the mobile explosion we all saw 4-5 years ago.  Because these products are “by definition audio devices”, there’s a huge opportunity for an audio-only play in a screenless world where display and video advertising becomes obsolete.  Mr. Chopra also touched in the connected car, which is still a dominant platform for audio consumption.  While progress is being made and in-car user growth continues to climb, the adoption curve is much slower due to the simple fact that drivers are keeping their older cars longer than ever.  Over time the connected car will heat up, but for now all eyes are on the power and potential of the connected home.

THE WINNERS AND LOSERS OF M&A-MANIA:  Finally today, I LOVE the attached TechCrunch article on the most monocle-dropping (their words) tech acquisitions over the past five years.  The most fascinating thing about these M&A bets is how brilliantly some played out (FB acquiring Instagram for $1B), while others totally flopped (Yahoo’s purchase of Tumblr for $1.1B).  As you go deeper into the slides you’ll see some amazingly big deals in the $25-75B range.  Taken as a timeline, it sort of lays out the growing value of the entire digital ecosystem, which began as a series of VC bets and turned into the primary driver of the US economy.  Fascinating stuff!

Have a great Wednesday guys!

PANDORA SPREADS THE PREMIUM LOVE THROUGH BRANDS:  Up to now streaming audio listening has been bifurcated into two experiences – either get it for free and hear ads, or buy a subscription for an ad-free experience.  But what if brands could be inserted somewhere in the middle of the landscape by offering trial subscriptions at no cost to listeners?  That’s the gist of two new partnerships being rolled out this week by Pandora.  In the first example listeners can get a free 90 day Pandora Premium gift code when they sign up for Dunkin’ Donuts’ new DD Perks loyalty program.  And not to be outdone, starting today T-Mobile will be featuring the same 90 day gift codes to Pandora Premium as part of their T-Mobile Tuesday initiative.  In both cases these brands are harnessing the power of Pandora to surprise and delight their customers with the gift of music.  Sounds like a win-win scenario to me!

APPLE GETS INTO LABEL DIRECT LICENSING:  Now that Spotify has completed licensing deals with the three major Labels it’s Apple turn to get its royalties house in order.  Bloomberg is reporting that Apple and Warner have signed a licensing contract to cover all WMG played on Apple Music.  While the terms of the deal aren’t public, it’s rumored to pay artists less per song than Spotify’s deal, but then add a rev share component for music purchased through iTunes.  This is most likely a positive deal for both sides, which should be duplicated with the other Majors – it’s rumored that the Apple/Sony negotiations have already begun.  Remember this example of a legitimate royalty framework as you read the next article . . . .

RADIO’S “THANK YOU” CAT FIGHT:  Last week Neil Portnow, the CEO of the music industry’s Recording Academy, heaved a grenade at Radio in the form of an op-ed article.  In the article Portnow remarked that not a single artist thanked Radio on stage during their acceptance speeches at this year’s Grammy awards.  He went on to deride Radio’s slipping connection with younger listeners by saying “20-somethings barely knew where the FM button was.”  So why is he blasting the broadcasters?  The real motive behind Mr. Portnow’s comments are to draw attention to the fact that AM/FM Radio (still) doesn’t pay royalties to performers and songwriters.  He correctly noted that every other form of music distribution pays their fair share, so Radio’s free ride should end.  In response  NAB Executive VP Dennis Wharton claims the spirit of Portnow’s observations are untrue since several artists thanked Radio at last week’s NAB Radio Show.  This is a pretty lame counter argument, since the Radio Show is for broadcasters only – big difference when you thank somebody privately compared to making a public announcement at something like the Grammys.  The point of this back and forth is there’s a growing rift between Radio and those who make music.  This is happening because the artists no longer see Radio as an essential promotional vehicle, and are tired of giving them free access to their songs.  Add this one to the growing list of problems for Radio.

Have a great Tuesday guys!

PROGRAMMATIC AUDIO – EASIER SAID THAN DONE:  It’s pretty much a given that 2018 will go down as “the Year of Programmatic Audio”, when automated transacting of audio units becomes more standardized.  While some publishers and broadcasters have already dipped their toes in the prog pool, there are still challenges to be worked out in the area of standardized measurement.  The attached MediaPost article does a nice job of laying out two of the primary issues.  Right now digital audio streamers are generally using VAST (Video Ad Serving Template), instead of the sister DAAST (Digital Audio Ad Serving Template) – will the switch over to DAAST eventually happen making for an audio-specific ad serving solution?  And how will the myriad of different connected devices which play audio run a standardized protocol in order to provide brands with true cross-device tracking in a cookie-less environment?  The industry will need to solve these issues in order to truly fulfill the potential of programmatic audio.

THROWING THE PENALTY FLAG ON STREAM CONVERTER SITES:  The Music Industry already has a beef with YouTube, who uses a safe-harbor loophole to avoid paying music royalties on a per-spin basis.  Now a secondary scourge is cropping up, in the form of 3^rd party websites which allow listeners to convert streamed YouTube songs into downloadable and shareable files.  This is akin to music ripping on Napster, which almost killed the entire music industry fifteen years ago.  The industry, and their licensing clearinghouse orgs like the RIAA and BPI, are organizing against this threat.  In a first action they filed a lawsuit against a British stream converter site which was seeing up to 60M unique users per month – the attached Musically link has the details.  Examples like this prove the point that where there’s technology there will also be bad actors who try to game the music industry.

COULD “GDPR” HAPPEN IN THE US?  So right now you’re asking “What is a GDPR?”  It stands for General Data Protection Regulation, which is a new package of regulatory guidelines in the European Union which will go into effect during May’18.  The key provision in GDPR is that brands and publishers won’t be able to use a person’s personal data to serve ads unless they have explicit permission to do so.  Translation . . . if you don’t have first party registered users who have given you their data when they signed up, you won’t be able to target specific users with digital ads.  So what will this mean for the digital media industry in the EU?  Digiday has a solid analysis in the attached link.  One opinion is that GDPR will be a tremendous benefit to site-served premium publishers who have their own data sets, because brands will have to buy media from them instead of 3^rd party networks.  On the other hand, those same publishers would not be able to target their own users by matching to 2^nd or 3^rd party data sources, which could pretty much kill programmatic advertising in the EU.  It’s a startling idea to think about, but one we’ll see play out live next May.  And to my question in the title about the chances of GDPR regulations happening in the US?  I highly doubt it could ever happen.  Europe is fierce about privacy rights of individuals because of their history dating back to WWII.  Other cultures, like the US and especially Asia, are much more liberal about accessing and using one’s personal data for business purposes.

Have a great Monday guys!

STREAMERS HAVE THEIR EYES ON THE REAL PRIZE:  There’s usually a ton of chatter in the pubs about competition amongst the pureplay audio streamers.  What’s Spotify doing to compete with Pandora?  What new streaming tier is Amazon or Apple launching?  Etc., etc..  But as most of the sector knows, streaming isn’t a zero sum game in which one new listener to streamer A necessarily comes from streamer B.  Instead audio streaming is flourishing because of a steady migration away from Radio.  The attached Hackernoon article describes what’s happening.  As time spent listening to AM/FM drops streaming’s time spent and revenue goes up.  The chart below shows the direct (and stunning) correlation.  And the craziest part is that this trend is just beginning. Industry experts estimate all the streaming listening in the US is about 15-20% of what’s consumed on AM/FM, yet streaming is only taking in about 5-6% of the available audio dollars.  Feels like there’s a lot more gold left in those hills for the streamers to mine!

FACEBOOK’S BIGGEST MEASUREMENT MISCALCULATION TO DATE:  You might recall the half dozen measurement miscalculations FB has admitted to over the past year.  Most of these have to do with minuscule formula errors which were probably unintended.  But this latest miscalculation seems like a little more of a whopper.  In the attached AdWeek link an analyst at Pivotal Research points out that FB is self-reporting more users within a demo than are actually in the US according to the latest census.  To be specific, FB is saying it has 1.7M more active users in the 16-39 demo than the census says are in the US.  Granted, not all young people are picked up in the census count so there’s probably some wiggle room with the number.  But still – every single census-counted young adult is using FB plus another 1.7M mystery users?!?  This doesn’t seem possible.  C’mon Zuck . . . get your data guys to clean up their act!

IS RADIO STILL NEEDED TO BREAK NEW MUSIC?:  At this week’s NAB Radio Show attendees are seeing the usual set of self-promoting sessions which try to reinforce Radio’s strengths to a room full of radio execs (which btw, seems like a total waste of time to me).  During one of these breakfast sessions a mid-level country artist named Jack Ingram praised Radio for being essential to get exposure and break his music, which was all gleefully reported as a Radio triumph in the attached Radio Ink article.   But there’s another less publicized narrative brewing which isn’t as positive for Radio.  Recently a song (which I can’t name to protect my source) on the Country Music charts went to #1 without any AM/FM promotion.  Typically labels will spend $250-500K on promotional efforts through radio stations to get their priority songs charted.  But in this example the label worked only with the streamers, yet the song still rose up the charts.  Then Radio was compelled to start playing the song, because it was already popular, which pushed it to #1.  The lesson learned can best be summed up by an exec at the label behind this example who said in an internal memo “we are done with Radio”.  My guess is that Radio’s day as the one and only hit maker for the music industry are just about over.

Have a great Friday (and weekend) guys!

DIGITAL IS EATING RADIO’S LUNCH:  During this week’s NAB “Radio Show” (think national convention for the Radio industry), sector analysts at Wells Fargo presented an update on the overall state of ad spending in the US.  While the focus of the presentation was on Radio’s slice of the pie, which is 7% and on a slightly declining trajectory, it’s fascinating to see the big picture in the graphic below.  You really get a sense of how much Digital’s growth is impacting the traditional media types. And the shift doesn’t seem to be slowing down at all.  Thanks to continued growth in mobile advertising, Digital is expected to reap approximately 50% of all ad dollars by 2021 – that’s just 4 years from now, people!  By that time Radio’s share will have eroded to a measly 5%.  Is the Titanic’s band warming up yet?

WTF IS BLOCKCHAIN?:  If you’ve been reading the digital media trades lately you’ve probably seen the term blockchain being used more and more.  So what is blockchain, and how could it impact our industry?  As described in the attached AdExchanger link, blockchain was originally created as a ledger system to track cryptocurrency transactions.  It’s an unbreachable and completely transparent way to know who bought and sold non-physical units like bitcoins.  (So right now you’re saying that’s great, but what does this have to do with digital media?)  Well imagine if the non-physical unit being tracked via blockchain technology was an ad impression.  You could eliminate using half a dozen 3^rd party tracking pixels on a deal with one blockchain ledger.  Or think about data as that non-physical unit.  With blockchain tracking of who’s using publishers’ data, you might not ever need to sign another data rights agreement again.  Blockchain for media is in its infancy right now, so don’t throw away your DAR tracking tags just yet.  But maybe someday blockchain will simplify all of our lives with a more transparent system for transacting.

COULD FACEBOOK START PAYING MUSIC ROYALTIES?:  Finally today, there’s an interesting negotiation happening between Facebook and the music industry (the artists, record labels and publishing orgs), around the idea of royalty arrangements for music used in FB users’ video posts.  As user generated video content ramps up on FB there’s a growing demand to include known songs in these videos.  But right now there’s no way to track usage of songs or much less pay out royalties.  So as a workaround FB is considering signing umbrella “one fee” deals with music rights holders, which could total hundreds of millions annually.  It’s a creative solve for FB who wants to legally provide music overlays to enhance its video platform.  And for the music industry it’s an accretive way to monetize their existing product through a new digital outlet.  With both sides showing motivation, it’s a good bet these deals will start getting signed.

Have a great Thursday everyone!

“WHERE ARE THEY NOW” . . . DIGITAL MEDIA TRANSPARENCY EDITION:  Remember P&G CMO Marc Pritchard’s now-famous challenge to the digital media community during his IAB speech in January?  It was a watershed moment in which Mr. Pritchard claimed that 20-30% of digital media is wasted or even fraudulent, and then challenged the industry to clean up its act by the beginning of Q4’17.  Well now we’re one month out from that deadline . . . so where do things stand?  The attached AdWeek article provides a good summary of how the industry has reacted.  In a nutshell, progress is being made.  According to industry experts the major site-served publishers are 50-60% of the way towards compliancy, and the larger agency partners are 80% of the way there.  These strides have been achieved through the willingness of publishers allow standardized 3^rd party measurement (so long, walled gardens), and by agencies agreeing to transparent invoicing to eliminate mysterious “business service” upcharges.  I guess the final word on how this is going will come from Marc Pritchard himself, who is widely expected to readdress the issue during his speech at next week’s Dmexco conference in Cologne, Germany.  Put that one on your must watch list.

RADIO’S IN-CAR CONUNDRUM:  The NAB’s annual Radio Show kicked off in Austin yesterday.  I thought it was notable that the opening session focused on the In-Car listening experience, which has long been monopolized by broadcasters.  As noted in the attached Inside Radio link, the traditional car radio is about to undergo a significant transformation.  The early indicators are already out there – with rental companies like Avis noting the demand for Sirius and smart phone integrations.  The long term challenge for broadcasters is even more daunting, as automakers begin the orient their “center stack” consoles around platforms like Apple CarPlay and Android Auto, instead of the traditional AM/FM dial.  The session ended with a call to arms for broadcasters to unite their efforts to stay relevant with the OEMs.  But it feels like more of a wakeup call to the fact that Radio’s In-Car domination is coming to an end.

UNDERSTANDING AMAZON’S DIGITAL MEDIA SALES PITCH:  So this is interesting.  As part of Digiday’s semi-regular Pitch Deck series, they’re featuring Amazon Media Group’s core narrative in the attached link.  There’s nothing in here that’s too proprietary (of course!), but it does provide a peek behind the curtain at how AMG brings to market Amazon’s on-platform ad products.  If you go to the bottom of the article you can see the entire deck.  For me the most interesting slide is #5, because it illustrates AMG’s targeting progression.  While most publishers start with their own 1^st party data and then match to 2^nd/3^rd party data, user behavior, device proximity, etc., AMG does the opposite.  Instead Amazon takes behavioral data from their customers, which they mountains of, and then reverse engineers audience segs via modeling from the core group of purchasers.  While probabilistic (modeled) targeting is never as strong as deterministic (1-1) targeting, this process allows Amazon to solve the classic PBT targeting dilemma of how to serve ads to future buyers instead of to someone who just made a purchase.  Pretty advanced stuff from a digital ad platform that’s just five years old.

Have a great Wednesday guys!

(Editor’s Note:  No, it’s not your imagination.  Today’s DG is being completely devoted to articles related to Pandora and Spotify.  There’s quite a bit going on in Audio Streaming space right now, so I thought it would be a good time for a check in.)

PANDORA’S DATA ON DEMAND:  First up today is the announcement of a partnership between Pandora and Neustar that allows advertisers to tap into audience segmentation data on demand.  The new arrangement sets up a self-service API which provides access to Pandora’s 2,000+ existing audience segments, and allows brands to create new custom segments by matching their own CRM data.  Because of the real time nature of the API, brands can model out segments they’re interested in to check scale, match rate, etc., right as they’re ready to transact.  This takes the guess work out of the usual 3^rd party data arrangements (which usually provide reporting on a look back basis), and not require cumbersome DRAs (data rights agreements) between Pandora and a given brand.  All in it’s a win-win for advertisers and Pandora who are looking to leverage data to streamline and optimize their media buying.

SPOTIFY’S ROYALTIES U-TURN:  Who’s ready to rumble over the issue of streaming royalties?  Apparently Spotify is.  According to the attached Digital Music News article Spotify is now challenging the very definition of mechanical reproduction and distribution of music, because they claim streaming isn’t a mechanical process.  Last week this argument was made by Spotify in a court filed response to a $365M lawsuit from Bluewater Music Services for the unauthorized streaming of Bluewater’s artists’ songs.  The term mechanical is key here since the original copyright regulations were set up to cover the reproduction of songs onto a physical medium (like a vinyl record).  Spotify’s argument is that streaming is a completely different format based on access, and it isn’t ‘reproducing’ anything.  What’s weird about this line of thinking is that Spotify does concede that downloading (a la Napster) is mechanical in nature, and thus subject to royalty payments.  And what’s hypocritical about this argument is that in May Spotify settled a $75M lawsuit with the National Music Publishers Association for this very same type of mechanical reproduction and distribution of songs they didn’t have royalty rights to.  So why the U-turn in legal strategy?  My guess is that Spotify knows they can’t afford to keep paying out on one-off royalties lawsuits, so they’re trying to draw a line in the sand with this new mechanical minutia.  Unfortunately, this doesn’t seem like a very strong argument at all.

PANDORA VS. SPOTIFY – A TALE OF THE TAPE:  And finally today, the attached Barrron’s article (Pandora vs. Spotify) provides an objective and unfettered comparison of Pandora’s and Spotify’s audience strengths through the ad sales lens.  The main takeaways – Spotify is still in high growth mode but significantly trails Pandora in ad supported scale (Barron estimates Pandora has ~75% more addressable scale in the US than Spotify).  This gives Pandora an operational advantage to leverage national and local ad spending.  On the other hand, Spotify’s commands a lead in terms of ad product technology – especially with its Programmatic offerings.  On balance both streamers have the ability to succeed in the ever-growing streaming marketplace.  For Spotify it will take a commitment to the free ad-supported side in order to grow it’s addressable scale.  For Pandora it means advancing how it transacts inventory from the significant audience advantage it already has.  It’s a fascinating analysis, to say the least.

Have a great Tuesday guys!