MACY’S MOVING DOWNTOWN:  Last month I posted an article using McDonald’s menu offerings as an anecdote for the polarization of our society – where the middle is collapsing as consumers gravitate toward either Premium or Value camps.  Nowhere is this trend being felt more than in Retail.  For a prime example of what I’m talking about check out the attached Business Insider link, which explains the strategic pivot Macy’s is making.  A few decades ago Macy’s was known for superior service and making an experience out of shopping.  But things have changed as Macy’s customers’ tastes evolve.  Now Macy’s is going headlong into Value with the opening of more Backstage sub-stores which carry off-rack discount merchandise.  Macy’s is even doing away with its associates in the shoe department by rolling out self-serve shoe kiosks.  These moves are being made to help Macy’s stay competitive, since more of its customers just want it fast and cheap.  Consider this change on a macro level – if a storied retail brand like Macy’s has to resort to the Value play how many other less established players will have to go even lower on price to stay alive?

IS THE DOJ BARKING UP THE WRONG TREE?:  To understand this next article you first need to know the current consolidation that’s happening in TV’s content and distribution ecosystem.  In a post a few weeks ago I explained how larger entities like AT&T and Disney are starting to gobble up smaller players to create end-to-end operations which create and distribute their own content.  This has caught the attention of the DOJ (aka Trump Administration) who is challenging mega-acquisitions such as AT&T buying Time Warner, which could lead to the possible divestiture of CNN.  (Confused yet?)  With that as the backdrop check out CNN President Jeff Zucker’s comments from a Mobile World Congress interview in the attached AdWeek link.  According to Mr. Zucker the DOJ is looking at the wrong players for a potential TV monopoly.  Instead of the traditional networks Zucker points to Google and Facebook, with their domination of OLV, as the real gorillas in the video room.  Per Mr. Zucker, “The fact is nobody for some reason is looking at the monopolies that are Google and Facebook, and that’s where the government should be looking and helping to make sure that everyone else survives.”  Obviously this is an attempt to shift attention from CNN to other players in the space.  But it’s also a legitimate question about why the Duopoly seems to be immune to antitrust questions while the traditional networks get all the scrutiny.  Fair point, I think.

TWITTER SINGING THE SOUNDCLOUD BLUES:  Did you even know Twitter had an investment stake in SoundCloud?  If you didn’t you’re not alone.  In 2016 Twitter’s Ventures unit invested $70M in the German Streamer, but only as a passive investor – so there was never a real business strategy with this.  According to the attached RAIN link, even that stake is now just dust in the wind, with Twitter choosing to write off the entire $70M as a loss.  In Twitter’s most recent financial report they justified the write down by saying the investment is “not expected to be recoverable within a reasonable period of time.”  This move is bad for both parties.  First, what was Twitter even thinking?  To invest $70M in anything without a plan or reasonable hope of getting a return on the investment seems blindly naive.  And then there’s SoundCloud, who’s been at death’s doorstep for the better part of a year.  While their more recent $170M round of funding from The Raine Group/Temasek was a lifeline, they’re still not generating enough revenue to survive long-term.  Hence the decision by Twitter to pull the rip cord.  Seems like a bad situation all around.

Have a great Wednesday guys!

LIBERTY THROWS A PITCH IN THE DIRT FOR IHEART:  By far the biggest news in radio yesterday was the disclosure that Liberty Media and it’s Sirius XM subsidiary has made an offer to buy 40% of iHeart for $1.16B in cash.  The one catch to the deal is that it requires iHeart to go through bankruptcy first to shed itself from $22B of debt.  That will be easier said than done, since a post-bankruptcy iHeart most likely won’t remain intact because many of its assets will be sold to pay creditors.  Another concern is valuation – $1.16B for 40% of iHeart prices their market cap at $2.9B, which is just over 10% of their $27B value when they went through their original leveraged buyout in 2008.  The third issue would be an antitrust concern.  Liberty owns (wholly or partially) a spider web of media companies including Charter Communications, Sirius XM, Pandora, Live Nation, Ticketmaster, etc..  Will regulators allow them to pick up a chunk of the nation’s largest radio broadcaster or would that be considered monopolistic?  I’ve attached two articles on this for different perspectives.  The first Inside Radio link (which is owned by iHeart) has a gleeful “someone likes me” feel like they were just asked to prom.  For a more adult perspective check out this WSJ link.  All in I think there’s very little chance of this happening. It feels like a cheap pitch in the dirt attempt to buy a stake in iHeart at a huge discount.  iHeart must decide what they’re going to do with this offer, or any other option, by this Friday’s debt default deadline.  Get ready for some fireworks.

VOICE-ACTIVATED AI IS COMING TO YOUR PASSENGER SEAT:  You knew it was just a matter of time before voice activated digital assistants came to your car.  According to the attached TechCrunch link, Ford is about to introduce the first “voice controlled co-driver”.  The technology is being enabled by a third party company called Sygic which will embed it’s driving AI in Ford’s next gen SYNC 3 platform.  Envision being able to have a live conversation with your car about traffic conditions, directions, parking options, gas prices and even where to find that one clean highway restroom.  That’s what you could be doing when you buy certain 2019 Ford vehicles (available this Fall) which are enabled with Sygic’s tech.  Right now the landscape for voice-controlled AI in connected cars is pretty sparse.  Siri works on your Apple device as normal when you’re connected through CarPlay, but it’s driving-related content is pretty weak.  And Alexa is currently just for home-bound Amazon devices unless you buy a piece of Garmin hardware to connect in-car to your Amazon account.  This leaves a gaping hole for Ford, and I’m guessing several other OEMs, to drive through over the next few years.

SOLVING THE FINAL MOMENT OF TRUTH:  In marketing the final moment of truth is the instant a shopper stares at a shelf and decides to pick up a particular brand and put it in their cart.  Can you imagine how much marketers would pay to influence the purchase decision in that nanosecond?  Over the last few years the field of Beacon technology has been developing to meet this demand.  Beacons are electronic sensors placed in stores (or even on shelves) which can ping customers’ mobile devices with an ad, coupon, etc., as they get near the shelf.  The concept seemed pretty solid, which led national retailers like Walgreen’s to set up chain-wide beacon systems that can feature selected brands in a location-triggered mobile coop program.  But according to the attached AdWeek link, over the last year growth of beaconing seems to have stalled.  The biggest concern about beacons is an oversaturation which can lead to customers being shouted at by several different brands as they walk the aisles.  Retailers have started to get negative feedback from shoppers on this point, which has led them to rethink beacons and look for alternatives.  The leading contender to replace the beacon is something called Scannable Shelf Tags (SSTs).  These devices fit on shelves and emit a brand’s message/offer, but are only activated when a customer enables the Near Field Communication (NFC) receiver on their smartphones.  By using SSTs brands can create shelf-level communication that’s optional and individualized.  This solves for beacons’ intrusiveness problem, while still giving marketers a chance to influence the final moment of truth.

Have a great Tuesday guys!

IS FACEBOOK GETTING INTO MUSIC STREAMING?:  In December Facebook reached label direct performance royalty agreements with Universal and Sony.  Those deals sparked speculation that FB was gearing up to launch a new music streaming service.  Then last week there was another clue.  According to the attached Investor Place link, FB has inked a deal with a European entity called ICE which covers performance and publishing royalties for thousands of artists in several international markets.  ICE in Europe is equivalent to SoundExchange in the US – both act as a clearinghouse to track streaming plays, collect royalties from streamers, and distribute collected money to artists, labels, and songwriters.  The fact that FB has entered into a multi-year deal with ICE tells you they’re gearing up for some sort of music play.  One possible use of this agreement would be to allow FB users to embed published songs in social posts, messaging, etc..  The other scenario is FB launching a full-scale audio streaming service to compete with Pandora, Apple and Spotify.  Anyone have a guess?

ADDING INSULT TO INJURY FOR SNAPCHAT:  Nothing like kicking a publisher when it’s down.  As a follow up to last week’s PR double whammy, Snapchat is now facing a much more tangible advertiser problem.  Last week L’Oreal’s Maybelline brand tweeted a question in the image below.  To give you some perspective on this, I’ve been in media sales for a quarter of a century and I can’t remember an instance when a brand publicly announced that their marketing metrics had dropped on a particular platform and asked users if they should stay on that platform.  AdAge has the details of how this played out in the in the attached link.  After the original post (and 6,000+ votes!), L’Oreal tried to walk back the comments later in the day when it posted that “the tweet from an individual within our Maybelline brand in no way reflects the views of the company, nor the Maybelline brand. We have a strong partnership with Snap Inc. and are happy with the results we are seeing with the platform.”  Even though this appears to be a rogue comment and not the client’s official position, where there’s smoke there’s usually fire.  I doubt anyone at Maybelline would have thought to post the question unless it’s Snapchat engagements had significantly dropped.  If other advertisers start to see a material drop in their usage metrics this could be Snapchat’s biggest problem of all.  So now I’m wondering how many of those 6,000 votes were from Snapchat employees stuffing the ballot box to save the Maybelline account?!?

APPLE’S DOING IT FOR THE ARTISTS, NOT THE MONEY:  Here’s rule #1 in business – when the CEO of a large public company says “we’re not in it for the money”, DO NOT believe them.  That’s exactly what Tim Cook tried to spin during a Fast Company interview, as reported in the attached Musically article.  To put that quote in context Mr. Cook was trying to justify the premium price for Apple’s new HomePod speaker because of its superior acoustic quality compared to the competition’s “little squeaky speakers”.  This is the same Apple which single-handedly broke the back of the global music industry when it started selling individual songs via iTunes downloads for 99 cents as an alternative to consumers buying whole albums for $12-15.  This is also the same Apple whose new HomePod speakers only link to Apple Music ‎unless you buy another piece of Apple hardware to connect to other streamers.  Does this sound like a company which doesn’t care about money and only has the artists’ best interest in mind?  With friends like this I don’t think the music industry needs any more enemies.

Have a great Monday guys!

FAKE ACCOUNTS + FAKE LISTENING = REAL ROYALTIES:  Holy crap – you’ll want to buckle your seat belts for this one.  Remember back to last July when I reported on Spotify’s use of fake artists ‎to source music content without having to pay performance royalties?  Well it turns out some enterprising crooks in Bulgaria may have flipped the script on the streamer with a different royalty fraud.  Stay with me on this one since it’s a little complicated.  According to an in-depth Music Business Worldwide investigation, Spotify paid out about $1M in royalties for music which was played on two unusual playlists.  What made these playlists, called Soulful Music and Music From The Heart, so weird is that they were filled with hundreds of short songs (like :30-40 seconds long) that nobody has ever heard of.  Yet these playlists were being played non-stop on a couple thousand Spotify accounts.  All the songs on these playlists were tied to the same ISRC (royalty code) which was owned by an unknown entity in Bulgaria.  Per their normal operating procedure Spotify paid royalties on these plays, and the money eventually made its way to the Bulgarian scammers.   So what does this mean?  First of all Spotify overpaid on royalties by about $1M – and that’s just for the two fake playlists we know of.  And second, this situation proves how easy it can be to manipulate the system by creating fake accounts and even fake listening, which puts Spotify’s entire audience metrics in question.  I guess when it comes to royalties shadiness what goes around comes around.

SMARTPHONES HIT THE SATURATION WALL:  Since 2007 smartphones have been the single most important tech accessory in all our lives.  As a result global handset sales have gone up and up . . . until now.  According to a Gartner Research report in the attached TechCrunch link, global handset sales dropped 5.6% in Q4’17 compared to 2016.  The biggest cause for the decline is the slowing of smartphone tech innovation which gives consumers less of a reason to upgrade to the latest model.  (Was that higher def two way camera in the iPhone X really worth spending $1,000 on?  Of course not.)  The other contributing factor is the increased quality of lower end handsets.  Smartphones are just made better these days, so less breaking of current phones means less buying of new ones.  Obviously the handset manufacturers and Telcos have seen this coming for a while, which is why they’ve begun diversifying their businesses into other hardware products and content distribution.  With the exception of some underdeveloped parts of the world smartphone ownership hit a saturation point around 2016.  And now we’re holding on to our phones longer, which is the first step in the eventual sales decline.

THE PEOPLE (AND KYLIE JENNER) vs. SNAPCHAT:  Just when you thought Snapchat was starting to stabilize its business comes some new storm clouds.  The first problem is a completely self-inflicted wound.  At the beginning of January Snapchat redesigned its interface and users are not having it.  According to the attached Verge link an astounding 1.2M Snapchat users have signed a Change.org petition asking Snap to go back to the old design.  So far Evan Spiegel and team are staying with the redesign, but insiders are worried that the blowback will decrease overall usage.  And speaking of decreasing usage, Snapchat super-influencer Kylie Jenner casually tweeted that she hasn’t gone on Snapchat since becoming a new mom, which sent the Social-sphere and even Wall Street into a frenzy.  According to the attached Bloomberg link Snap, Inc. lost $1.2B in market value due to what’s now being called the “Kylie Effect” (I can’t make this stuff up.)  And no, it’s not that Kylie Jenner was using Snapchat so much that her absence is hurting Snapchat’s overall usage metrics.  It’s more the symbol of a heavy user growing up, getting busy with a new child, and suddenly having more important things to do than posting completely useless videos on Snapchat.  Hopefully they have some hard stuff in Snap’s corporate kitchen to get through this one!

Have a great Friday (and weekend) guys!

PLAYING DIRTY POOL WITH MOBILE CLICKS:  As if the digital media industry didn’t have enough of a black eye from fake bots and ad fraud, there’s a new problem to worry about.  Intentionally misleading mobile ads which get you to click thru or download an app even though you had no intention of doing so.  For an example of what I’m talking about check out the image below.  Do you see that fuzz looking blotch pointed out by my blue arrow?  That’s actually a pixel meant for you to click on as you try to wipe the lint from your screen.  The ad’s creators went so far as to place the fuzz image on a pink backdrop so it really stands out.  Think that’s bad?  Check out the other examples in the attached AdWeek link – I especially love the pixel that looks like a hair on your screen.  I know click bait schemes have been around for years, but those links try to lure users to actively click with the promise of some amazing story or picture.  Putting a fake image on the screen in hopes of getting an unintentional click takes things to a whole new level of digital sleaze.

AND YOU THOUGHT SNAPCHAT LENSES WAS A BAD IDEA:  Remember the marketing adage to “pick a hill and own it”?   Snapchat learned the consequences of ignoring that advice with its short-live (and expensive) attempt at AR lenses.  Just when you thought no other digital publisher would be dumb enough to recreate Snapchat’s hardware fiasco comes this ad from Spotify.  It’s a recruitment link to hire an “Operations Manager – Hardware Product” to help set up and run an operational supply chain.  This is another clue about Spotify’s potential foray into building its own hardware, as reported in the attached Musically link.  The best guess for Spotify’s hardware ambitions would be smart speakers or ear buds, but there are only about 10,000 other products like that on the market today.  There’s no way to know for sure what they’re thinking unless you’re in Daniel Ek’s inner circle.  But if they’re planning on starting to produce their own audio hardware I’m predicting it won’t end well.

TRITON WEBCAST METRICS RATINGS:  Late Tuesday Triton released their Dec’17 Webcast Metrics Ratings for US audio streaming.  As noted in the attached RAIN link and in the image below, all streamers received the normal December kiss thanks to holiday listening, and Pandora continues to hold a slim lead over Spotify.  Keep in mind Triton doesn’t differentiate between Addressable and Subscription listening, so you have to cut Spotify’s number roughly in half to get their ad-supported AAS (Average Active Sessions).  If you step back from the individual monthly changes and look at the overall trend you can something interesting.  Pandora and Spotify continue to grow over time, while all the other broadcast radio streamers (those bunched up lines at the bottom) stay relatively flat.  So over time the amount of listening on Pandora and Spotify as a percentage of Triton’s total AAS keeps going up.  In December 79% of stream listening occurred between the two pureplays, which leaves all the other broadcasters to fight over the remaining 21%.  This is clear proof that the broadcasters’ attempt at streaming just can’t compete with the pureplays.

Have a great Thursday guys!

PROGRAMMATIC AUDIO ARRIVES:  Early yesterday morning Pandora announced the formation of a new private marketplace for programmatic audio, which sent the trades into a frenzy.  While prog audio has been around for a few years nobody has been able to scale it and bring as much data to the game as Pandora will. The attached RAIN link summed it up nicely by saying, “One of Pandora’s key selling points is the epochal mountain of first-party data it can use to get the ads into receptive ears.”  Right now The Trade Desk is the only active DSP, but others like AdsWhiz, MediaMath, etc. will be certified in the coming weeks.  When you think about how many clients those DSPs represent and how many audio impressions that can be matched to 75M+ monthly users listening for 20+ hours per month, you really get a sense of how quickly this can scale.  For years Pandora has stayed on mission by saying they would do audio programmatic when they could do it right.  Apparently the “right” day was yesterday!

ALEXA, SHIP MY PURCHASE:  Last week rumors started to circulate about Amazon’s plan to create a self-owned shipping system similar to UPS and Fedex.  This could easily disrupt the entire US shipping industry given the volume Amazon currently delivers.  To give you an idea of the capacity we’re talking, in 2017 Amazon accounted 10% of UPS’s entire shipping total.  According to the attached USA Today link, over the next few months Amazon will begin truck shipping individual orders from their existing distribution centers in higher volume markets like LA.  Assuming that goes well expect them to spider-web shipping capabilities out across the country.  If Amazon gets this right they could achieve the ultimate example of Industry Verticalization by self-owning other links in their own supply chain.  If you’ve seen Fedex/UPS’s financials lately you’ll understand how lucrative this business can be.  And it feels like Mr. Bezos and team are looking to take a bite out of this low hanging fruit.

CHALLENGE EVERYTHING . . . LITERALLY:  Have you ever been ready to give up on something because you thought you’ve tried everything possible but still can’t achieve what you set out to do?  Instead of giving up what if you stayed at the problem no matter what and kept on challenging?  To give you an example of what I’m talking about let me take you back ten years ago to the infamous Blocked Free Throw Attempt executed by Kentucky during an SEC tournament basketball game.  Kentucky was down by one with 1.2 seconds on the clock, and Georgia was at the line to shoot a final free throw.  If Georgia makes the shot they’re up by two.  Even if Georgia misses by clanking the ball off the rim UK will run out of time before they can collect the ball and heave a full court shot.  So the game is effectively over and just about everyone has already given up.  Everyone, that is, except for an eccentric Kentucky coach named Billie Gillespie, who told his center to block the second free throw.  This resulted in a technical foul against UK which gave Georgia one more point (so they’re up by two now), and two more uncontested free throws.  Coach Gillespie was counting on Georgia missing both technical foul shots, which they did.  This gave Kentucky the ball out of bounds with the same 1.2 seconds left.  That was enough time to get the ball inbounded and launch a hail Mary shot.  Spoiler alert – Kentucky missed the shot and still lost the game.  But that’s not what makes this story important.  Regardless of the game’s outcome this is an example pushing harder to keep challenging when others would have surrendered.  Here’s to hoping we all have a little Coach Gillespie in us!  (If you’re interested here’s the video link of the blocked foul shot.  I just love the “You want me to do what?” look on the center’s face after the block.)

Have a great Wednesday guys!

PANDORA BY THE NUMBERS:  It’s been a while since I featured a full overview on the state of Pandora, so I thought the attached WSJ article would be a good catch up.  It’s an interview piece with Pandora CEO Roger Lynch, and it covers a wide array of topics from balancing free and subscription tiers, utilizing data to deliver individualized creative, non-music content like podcasts, and what the future holds for connected cars and homes.  It’s especially interesting to see how the confluence of business factors come together in the graphic below.  Yes, free usage is down slightly.  But the subscription growth is more than making up for the difference, which has stabilized Pandora’s overall listening hours.  There’s no doubt that Wall Street is eagerly awaiting tomorrow’s Q4 earnings call when Pandora will lay out its strategic vision for 2018, including the launch of a new audio programmatic marketplace (I’ll cover that one tomorrow), and other product initiatives.  Get ready for an exciting ride!

LOSS LEADER:  Did you know Hulu lost $1B in 2017 and is expected to lose even more in 2018?  That would be a bone crusher for most other public companies, but it’s not effecting Hulu’s outlook according to the attached Motley Fool article.  To understand why that is you first need to know how they’re spending their money.  In 2017 Hulu spent $2.5B on content, which is about 30% of what Netflix spends, but they have about 100M fewer subscribers than Netflix to help offset the cost.  Most of the $2.5B is going to content providers like Disney, Fox, Comcast, and Time Warner.  These companies also happen to own the majority of Hulu, so any money exiting the back door as expense is coming in the front doors of Hulu’s true landlords.  Nice setup if you can get it, eh?    Even the largest content costs are pretty much revenue neutral, so the losses don’t matter.  In the meantime Hulu’s subscriber base and market value continue to grow, making it a more valuable acquisition target.  And I’ll give you one guess as to who will cash in when (not if) Hulu is eventually acquired.

DOES TOO MUCH TECH MAKE FOR BAD PARENTING?:  Finally today, the attached Business Insider link caught my attention over the weekend due to its irony.  Here’s the setup – a pair of Silicon Valley execs are raising their children to be so low-tech that they’re almost no-tech.  Their 10 and 12 year olds don’t own cell phones yet, only get to use their parents’ phones for 10 minutes each week, and are supervised when they use the family iPad.  So why would a mom who works at Apple and a former Googler dad be so anti-tech?  The answer is simple – they’ve both seen how much time and effort goes into making digital technology irresistible, and want to keep their children from being inundated for as long as possible.  These parents are also aware of something called “malaise of scrolling”, which can shorten attention spans in developing brains and lead to depression, anxiety, and even suicide in extreme cases.  And the craziest part of this story is that these parents aren’t alone.  More and more tech-employed parents are keeping their children away from connected devices, and especially social networks, for as long as possible.  Is this disturbing for any of you parents out there?

Have a great Tuesday guys!

*** Editor’s Note:  The Daily Gabe staff of one will be out of the office on Thurs-Fri.  Since Monday is the President’s Day holiday we’ll resume the blogging on Tuesday, Feb 20^th. ***

TRITON + AUDIOBOOM = TROUBLE FOR NIELSEN:  Yesterday the UK tech firm Audioboom announced it was acquiring Triton in a reverse takeover – meaning that Triton’s leadership will run the combined entity even though they’re the ones being purchased.  For a refresh Audioboom is best known as a podcasting network, while Triton specializes in digital audio ratings (with its core Webcast Metrics Ratings product), and also runs a network of third party streamers.  On the surface these two companies aren’t a direct match, but that’s what makes the merger so interesting.  As reported in the attached Inside Radio link, the new company can run a full spectrum digital audio services play, which will give them greater leverage with both streamers and advertisers.  This also represents an increased threat to Nielsen, who has yet to solve for digital audio measurement after years of half starts and hiccups.  A better funded Triton will be able to improve its digital measurement platform which could relegate Nielsen to the elephant graveyard of terrestrial-only radio measurement.  It’ll be interesting to see how this battle plays out.

AT&T’s MEDIA SALES PLAYBOOK:  Did you ever think you’d be competing against a traditional telco like AT&T for media dollars?  Well according to the attached Digiday link as part of their Pitch Deck series, that day is here.  In the deck you can see how AT&T is positioning it’s OTT video inventory in original content as 100% viewable with no ad fraud and no ad blockers.  All of this would sound pretty compelling to brands looking for clean solutions in OLV, but there’s just one problem.  Right now AT&T has very little OTT content.  However that would dramatically change if/when the proposed merger with Time Warner goes through (assuming they can solve the DOJ/CNN conflict).  Once that deal happens AT&T will be able to combine Time Warner’s network content with AT&T’s customer data to create a formidable Addressable TV offering.  With that in mind it’s probably a good idea to get versed in AT&T’s sell now, and no better place to start then their own pitch deck.

HOW 2017’s DEMANDS BECAME 2018’s RECKONING:  Do you remember a short twelve months ago when P&G’s Marc Pritchard threw down the gauntlet at the IAB Leadership Conference by demanding digital media clean up its act in regards to fraud, measurement, and billing transparency?  That began what was supposed to be a mini-revolution of publishers and agencies making needed improvements or risk being kicked from buys.  In the past year some progress has been made.  Ad Fraud is down about 10% as an industry, but still exceeds 20% of all global impression.  More agencies have committed to line-item invoicing which doesn’t allow them to hide add-on service upcharges within their bills.  So that’s progress, right?  But according to the attached Digiday link, one 2017 demand really hasn’t gone anywhere – standardized measurement (preferably by the MRC) of the major walled gardens.  In short, clients are slowly easing off their demands for Google, Facebook and even Amazon to open up their data to standardized measurement, while spending even more with the same platforms they swore to pull off of.  So why the capitulation?  It comes down to sales.  The Duopoloy (or Triopoly if you include Amazon) just has too many users and too much data, making them essential for most national brands’ marketing mixes.  So clients who draw the line in the sand and pull off these guys eventually see their sales drop and slowly do the walk of shame back to the same walled gardens they railed against.  This revolving door gives the walled gardens even less of an incentive to open themselves up to third party measurement.  Not a healthy situation to say the least, which is why “reckoning” may end up being the word of the year in 2018 for digital media.

Have a great Valentine’s Day guys.  Be back next Tuesday!

APPLE RUNS THE ECOSYSTEM PLAY IN THE CONNECTED HOME:  Last week Apple debuted its long-awaited HopePod connected smartspeaker.  While the techaratzi was fixated on features like its higher cost and better sound quality, there was one product aspect that flew below the radar screen.  As reported in the attached Inside Radio link HomePods, like many other Apple devices, have a closed architecture which only allows users to hear music streamed from an Apple platform.  So if you plan on using your HomePod to listen to music, which almost all owners will, you’ll need an account on Apple Music, iTunes, etc..  This is part of Apple’s signature strategy to recycle users within its proprietary ecosystem by forcing them to use all Apple products and nothing else.  There is one work around if you want to break out of Tim Cook jail – you can buy an Apple AirPlay (surprise!), which allows you to stream non-Apple content into your HomePod speaker.  Either way, if you plan on buying a HomePod get ready to be an Apple customer for life.

SNAPCHAT . . . THE ZOMBIE PUBLISHER THAT JUST WON’T DIE:  In the afterglow of last week’s positive earnings call there seems to be renewed life in the once moribund Snapchat.  Besides just revenue growth there’s been an uptick in user growth which had stalled for most of 2017.  According to the attached AdAge link, Snap’s starting to regain the coveted Gen-Z-to-Millennial age group (12-24 yo) at the expense of Facebook and Instagram.  You may recall that FB cloned Snap’s Stories functionality on Instagram in 2016, which diverted user growth back to their platform.  Now a year later FB’s North American usage is down, especially with the younger demos, and Snap is growing again.  To be fair this is only a trend.  Snap’s DAU count of 187M is dwarfed by Instagram’s 500M users and a drop in the ocean compared to FB’s 1.4B DAUs.  Regardless of the scale growth is still a good thing.  Especially in you can achieve that growth against the full court press of the Zuckerberg Machina.

NO MEDAL FOR McDs THIS YEAR:  Since 1976 McDonald’s Olympics ads have been a ubiquitous part of the biannual viewing experience.  But not this year.  As reported in the attached CNN link McDs ended its partnership with the International Olympic committee and is sitting out of the Pyeongchang games, which is two years earlier than their original announcement to pull out by 2020.  So no feel good Team USA ads and no McDs pop-up locations in the Olympic Village (which always seemed counter intuitive to me).  McDonald’s public statement about the split was the usually polite “we’ve decided to focus on other priorities” corporate speak.  But there’s probably an underlying trend to consider.  McDs, like many other well-known brands, are more focused on proving ROAS (Return On Ad Spend) than ever before.  So if they spend a dollar advertising they want to sell two dollars’ worth of burgers and fries, and also want to know which ad platform drove the purchase.  This is challenging but possible for digital publishers to accomplish.  But it’s nearly impossible to know how many extra Filet-O-Fishes were sold by running that TV ad during Sunday’s Curling Mixed Pairs Semifinals broadcast.  Probably a smart move for McDs in the long run.  So does this mean we’re less likely to see Coke or Toyota ads during the 2020 Summer Games in Tokyo?

Have a great Tuesday guys!

TOP DIGITAL TRENDS:  AdWeek is out with another one of their semi-regular Top Digital Trends lists in the attached link.  It’s sort of a hodge podge of Olympic drones (#1), net neutrality spoofs (#4), bot housecleaning (#5), and post-Super Bowl searches (#7).  One item that caught my eye is the growing market for cannabis advertising (#6), and how publishers are handling the new category.  Some sites like Twitter are taking marijuana trade group ads, but Facebook and Instagram are not.  It’ll be interesting to see if the industry starts to adopt new standards around this as more states go marijuana legal.  I guess it’s all green, right?  (sorry)

STREAMING vs. RADIO – A GENERATIONAL BATTLE:  If you work in the audio space you know streaming has transformed how we listen to music.  What used to be a CD purchase became a 99 cent download, which gave way to the streaming subscription.  And that’s just on the purchased music side of the house.  An equally significant disruption is happening on the free music side with streaming displacing radio.  Since addressable (free ad-supported) streaming is about 3x the subscription market you’d think radio’s audience would be in a free fall right now.  But it’s not . . . yet.  According to this Midia research blog post streaming has almost completely replaced radio for listeners 25 and under, yet radio is staying stubbornly strong with the 25+ crowd.  You can really see how age determines the way you listen to music in the graph below.  Of course over time the streaming audience will age up enough to relegate radio to retirement homes, but that’ll probably take about 20 years.  It’s also worth noting 25+ adults are more likely to listen to free streaming instead of buying a sub, which leaves plenty of runway for addressable streaming to keep growing.  (Special thanks for Pandora’s VP of Sales Development Karina Montgomery for digging this one up – great stuff!)

RETHINKING THE AGENCY STRUCTURE:  Over the weekend I stumbled across this AdWeek article about the need for agencies to rethink their org structures.  It was written by guest author Rei Inamoto, who used to be the Chief Creative Officer at AKQA before opening his own firm.  Although it’s written with agencies in mind, some of his lessons could be applied to any client-facing organization.  Mr. Inamoto’s main point is that over time agency hierarchies morph into the needs of the employees and not necessarily what’s best to serve their clients.  This can create inefficient and overly-expensive bureaucracies.  It can result in examples like 19 different job title levels in one agency or 9 VPs coming to the same brand meeting.  Put yourself in the client’s shoes for that one– if your agency sends in 9 VPs to the same meeting does that mean A) they don’t have strong enough people to handle more than one job function, and/or B) are they overbilling you for a redundant staff?  Either way the optics, and most likely the inefficiencies, aren’t good.  More than ever before leaner and meaner is better for any type of sales org.  This principle will help dictate what tomorrow’s agencies will look like.

Have a great Monday guys!