TWITTER TURNAROUND:  It looks like there might be some hope for the tier of major digital publishers just below the Duopoly after all.  Following up on Tuesday’s positive earnings call from Snap, Twitter had some good news of its own to share during their Q4 call.  The headline is that they finally turned a quarterly profit for the first time . . . ever.  According to the attached WSJ link, revenue was up 2% YoY and DAUs grew by 12%.  While these stats are decent the key to Twitter’s $91M net profit in Q4 was massive cost slashing – compared to Q4’16 they cut expenses by 28%.  Wall Street rewarded Twitter with a 17% jump in stock price which actually put Twitter’s market valuation of $25B back over Snap’s $24B.  Besides just the bottom line improvement Twitter seems to have survived the pivot from being a dated display ad platform to a video-first publisher, which helped them command much higher CPMs.  While Twitter appears to be on a more stable financial footing, the devil’s advocate might point out that cutting expenses like this is a one-time way to goose earnings and that they won’t be able to keep cutting their way to profitability in the future.  Fair point to be sure, but it just feels better to be in the black – finally.

PUBLICIS GEARING UP FOR MEDIAPALOOZA TWO?  Speaking of rebounds one of the more beleaguered Holding Companies of the past few years, Publicis, also had a turnaround year in 2017.  According to the attached AdExchanger link, Publicis grew it’s revenue by just under 1% for the full year with $12B in billings. I know that doesn’t sound like much growth, but when you look at the quarterly performance you can see a clear upswing mid-year – they started Q1 at -1.2% and then sequentially improved each quarter up to +2.2% in Q4.  Given how rough the last few years have been on the four HoldCos, Publicis and its investors should be happy with this rebound.  There was one other note about this article that really caught my eye.  Steve King, the head of Publicis.Sapient in the UK, is predicting a “Mediapalooza Two event this year with an unprecedented number of clients putting their accounts up for review.”  I can feel the collective cringe from those of you with fresh memories of disruption the first Mediapalooza caused in 2015-2016.  Fingers crossed he’s wrong and cheers to Publicis in the meantime.

THE PODCAST BOOM DISSECTED:  Earlier this week a work colleague sent me an interesting Visual Capitalist research piece on the state of podcasting.  It’s a really thorough dissection of who’s listening to podcasting, when they’re listening, and what they’re listening to.  Given that 24% of Americans now listen to podcasts, which has doubled since 2013, it’s becoming an important audio platform to be versed in.  As it turns out Millennials are the most voracious consumers of podcasts, comedy is the most widely consumed podcast content, and we listen in the car more than anywhere else.  One of the keys to podcasting’s growth has been the transition from downloaded podcasts (think MP3s you save to a device and listen to later), to streamed podcasts (just like streamed music).  Not only is streaming easier for listeners who can just pull up a podcast on demand whenever they have an internet connection, it’s also easier to monetize since ads can be inserted in real time.  All of this adds up to a high-growth sector of the audio landscape which (and this is just my guess), could eventually replace AM radio as the way we consume spoken word content.  Hmmm . . . something for you to chew on over the weekend . . .

Have a great Friday (and weekend) guys!

THE DIGITAL AUDIO TAIL IS ABOUT TO WAG THE BROADCAST DOG:  Two weeks ago I posted an article ‎on the MRC’s attempt to standardize Digital Audio Measurement (DAM).  While there’s still work to be done before this new standard is implemented across the industry one thing is already very clear – once DAM gets integrated in the buy side there will be considerable pressure on broadcast radio to meet these same standards.  In the attached AdExchanger article, guest author and Pandora’s Director of Product Management Jonathan Eccles lays out two ways broadcast radio measurement will be impacted.  The first is a quirky Nielsen ratings anomaly in which radio stations get credited for a quarter hour of listening time if a person listens for at least five consecutive minutes in that window.  Pretty sweet deal for radio – someone tunes in for five minutes and they get to sell that as 15 minutes of listening time to advertisers.  Once DAM mainstreams buyers will be able to see exactly who’s listening down to the second and not just a quarter hour estimate.  The other change DAM will bring to radio is the idea of Audibility.  Just like OLV buys, which are often transacted on viewability guarantees, digital audio will eventually be purchased using audibility.  While this will be challenging for the streamers, it will be nearly impossible for broadcasters who can’t prove if individual listeners hear an ad.  Between closing the loophole on the 5/15 minute discrepancy and introducing audibility, broadcasters better figure out how to get on board now before the DAM train leaves the station.

SNAP BACK:  On Tuesday Snap, Inc. announced stronger than expected revenue and user growth during its Q4 earning call.  Snapchat added 6M DAUs in Q4 and grew it’s ad revenue by 38% compared to Q3’17.  This is the first positive earnings report since Snap went public in March’17, which bounced the stock up +23% in intra-day trading.  What’s most interesting to me are the details inside these numbers.  As reported in the attached AdExchanger link, an astounding 90% of Snap’s ads were sold programmatically, with most transactions occurring through their self-service API portal.  The only downside to this trend is pricing – by commoditizing and automating their ad units Snap’s average CPM dropped 25% YoY.  Regardless of the price erosion, Snap seems to have found their monetization footing through automation.  And since money is lifeblood in digital media I’d expect them to run the same play for the foreseeable future.

REAL GROWTH OR MOVING PEAS AROUND THE PLATE?:  The Radio Advertising Bureau (RAB) and Borrell Associates are out with some fresh brag stats on the growth of digital revenue for broadcast radio.  As you can see in the attached Inside Radio link and image below, there’s a nice trend line developing.  In 2017 total digital billing for broadcasters topped $700M, which was +13% YoY and an $83M increase in raw dollars over 2016.  While that’s a great headline it belies the reality that radio still isn’t growing.  Because for every dollar of digital growth there’s almost one dollar lost in spot billing – Local/National Spot rev decreased by over $60M in 2017.  There are two ways of looking at this shift.  It’s either radio being resourceful by using digital to make up over-the-air revenue attrition, or stations having to add on layers of digital deliverables to dress up their stale core product just to save existing buys.  Either way this isn’t the resounding success the RAB would have you believe.

Have a great Thursday guys!

JUST WHEN YOU THOUGHT FACEBOOK COULDN’T GET ANY CREEPIER:  Since the beginning of 2018 Facebook has been trying to pivot from growing its user base and making money to doing what’s right for humanity.  That’s a noble enough idea, but it doesn’t really comport with how FB is still operating.  For a latest example of using technology to push the envelope of societal norms check out the attached CB Insights article.  On February 1^st FB received patent approval for an algorithm that allows it to identify users’ socioeconomic status based on the data it collects.  You can see an oversimplified flowchart of how it works in the image below.  Basically FB is tying together variables like age, home ownership, number of internet connections used, etc., to determine if you’re “middle class”.  Of course, if they can label a certain group of individuals middle class, then they can also bucket us in upper and lower classes too.  But rest easy, FB isn’t going to do anything with this data themselves (insert sarcastic phew here.)  According to the article, “Facebook notes that the patent is aimed at third parties to increase awareness about products or services to online users.”   So basically they’re bucketing us by economic class and selling the data to third parties as audience segments.  I know other publishers sell high/low income segments too, but that delineation is usually derived from real purchase data and not just what sites like FB know about us.  Is #creepyzuck too aggressive a hashtag to get started?

HOW DID IHEART GET TO THE VERGE OF BANKRUPTCY?  Last week I posted an article about iHeart missing a $106M interest payment which put the company on the path to a potential default on March 1^st.  So how did the largest broadcaster in the US get to this precarious point?  The WJS has a fascinating answer to that question in the attached analysis.  WSJ’s conclusion is that iHeart consolidated at the market peak (for both radio station valuations and Wall Street) in 2007.  So iHeart overpaid for stations it acquired and in the process took on $13.5B in leveraged debt – which has now ballooned to ~$21B.  At the time this seemed like a justifiable plan because radio revenue was expected to keep growing.  But then came the Great Recession of 2008 and innumerable digital competitors taking audience share and advertisers from the broadcasters.  You can see the net effect on radio’s revenue in the graphic below.  This combination of using debt to buy high and having revenue drop has become a deadly 1-2 punch for radio.  It’s already claimed Cumulus which entered bankruptcy protection in November, and is about to do the same thing to iHeart.  Sad story to be sure, but they should have known better.

THE BEGINNIG OF THE END FOR CDs:  The day is finally here for us old timer music aficionados.  As reported in the attached Business Insider link, on Monday Best Buy announced it would stop selling CDs in its stores by July 1^st, and other retailers have signaled plans to do the same.  This is means the CD era is officially coming to an end like vinyl records, 8-tracks, and cassettes did before them.  This shouldn’t really be a surprise to anyone since streaming has officially become THE way to listen to music.  But for those of us of a certain age there’s some nostalgic longing for wandering the CD aisle at your neighborhood store to discover new music.  Personal admission . . . the first time I ever heard about Nirvana was at the campus bookstore in Oxford, OH during September, 1991.  So I guess that makes me really old, because campus bookstores are disappearing as books go online, and now CDs are too.

Have a great Wednesday guys!

APPLE PASSING SPOTIFY IN THE US . . . SORT OF:  I bet you didn’t expect to see that headline, but Apple Music’s underwhelming streaming subscription offering is sort of about to pass Spotify’s subs in the US.  I say “sort of” because both companies’ subscription stats are a little fuzzy.  Apple claims roughly 36M subs, mostly in the US, but count 90 day free trials in there total even though those listeners have yet to pay for anything.  On the other hand Spotify most recently claimed 70M worldwide subs, but doesn’t breakout the US portion.  Industry estimates are that about half of Spotify’s subs are in the US – so call it 35M.  Based on that calculus Apple is right near Spotify.  What’s more clear is the overall trajectory of the two streamers, as reported in the attached RAIN link.  Spotify’s sub growth has slowed to about 2% in the US, while Apple has maintained a 5% annualized growth rate thanks to Apple Music being the default setting on Apple’s device platform.  This might not be the best timed disclosure for Spotify who is still trying to thread the needle with a direct list IPO in the next month or two.

LABELS PIGGING OUT AT THE STREAMING TROUGH:  Last week I posted an article ‎about the Copyright Royalty Board’s decision to raise publisher (songwriter/composer) royalties on interactive streamed music by 44% over the next four years.  In fairness to the publishers, even with this increase their royalties as a percentage of what the streamers pay for content is still a fraction of what the performers and artists receive.  For an idea of what one of the major label’s rev picture looks like check out Warner Music Group’s Q1 earnings results in the attached Billboard link.  WMG is thriving again thanks to streaming, with revenue up 14% YoY.  While most people would agree that a healthy industry is great for everyone who loves music, it still feels like there’s an imbalance here.  Labels and their artists are making money again, the publishers are set to cash in, but the streamers are still in the red.  I wonder what WMG’s balance sheet would look like if Pandora, Spotify, etc. ever went out of business.  Hopefully we’ll never have to find out.

FEWER ADS IN OUR FUTURE:  Here’s a thought provoking idea.  In five years marketers’ ability to reach consumers through advertising will decrease by 20-30%.  That’s the doomsday prediction from (ironically) Publicis’s Chief Growth Officer Rishad Tobaccowala, according to the attached Media Post link.  There are two factors driving this forecast.  First, consumers will continue gravitating towards ad free subscriptions for media content (aka Netlfix), as a way to avoid commercials.  And second, marketers will shift from traditional advertising to direct outreach by using purchase-based and behavioral retargeting.  Envision P&G knowing individual customers so well that they could ping parents through a connected device when they’re ready to buy more Pampers.  One could argue that the latter use case it still marketing, but the direct path is very different from today’s ad model of embedding commercials in content.  Not the rosiest prediction for industry, but worth considering.

Have a great Tuesday guys!

SUPER BOWL AD ROUNDUP:  Is anyone else exhausted from last night’s epic Super Bowl?  For the second year in a row the game itself upstaged the halftime show and the commercials.  Speaking of the latter, this morning the trades are out with their usual analysis of the hits and misses from the brands featured during the Super Bowl.  Let’s start with AdWeek’s list of the Top 5 ads.  Winners include Tide’s Mr. Clean revisit, Amazon’s Alexa replacement, Dorrito’s Tyrion Lannister speed rap, Australia Tourism Board’s Crocodile Dundee spoof, and the NFL’s own uncomfortably funny Dirty Dancing redux.  Digiday went a little deeper in their analysis by highlighting branding wins by Janet Jackson and the app HQ, who both scored social points without even running ads.  It was also interesting to see how many come together/stand united-themed ads there were, while no brands touched on the #MeToo movement.  Makes you wonder if brands are being more cautious about going too far out on a limb for social causes after Pepsi’s 2017 Kendall Jenner fiasco. All in I’ll give the Super Bowl commercials a B+ this year, with sparks of great creative but no real touchdowns (sorry) to speak of.

KEEPING ALEXA QUIET:  I’m guessing you saw Amazon’s 90-second ad during the fourth quarter of last night’s game, when ten “Alexa . . . do so-and-so” commands were given.  So how was Amazon able to suppress viewers’ Echo devices from performing an action which were within earshot during the commercial?  As Bloomberg is reporting in the attached link, this acoustic slight of hand was made possible thanks to a patented technology called Audio Command Filtering (ACF).  Here’s how it works.  During the ad Alexa was also playing a signal that was inaudible to the human ear (between 3,000-6,000 megahertz), which told the Echo devices not to act on each command.  This suppressed the devices’ response to the commercial’s commands in the moment.  The real trick to this technology is that ACF didn’t disable anything else the Echo may have been hearing in the moment.  This was good news to viewers who may have simultaneously been asking Alexa what the Over line was for the game.  Pretty crafty!

FUNNY, BUT TRUE:  And finally, you know I’m a sucker for advertising-related cartoons.  Yes that makes me weird.  If you share my appreciation you’ll get a kick out of this cartoon which was featured in AdExchanger this morning.  Enjoy!

Have a great Monday guys!

NOW IT’S iHEART’S TURN TO SKIP AN INTEREST PAYMENT:  If you’ve been following Cumulus’s bankruptcy proceedings this will sound familiar.  On Wednesday iHeart formally missed a $106M interest payment which was due, according to the attached Radio Ink link.  The missed deadline triggered a 30 day “grace period” in which iHeart can make the payment without formally going into default.  But if that date passes without payment they’ll be in default of their loan, which will initiate bankruptcy proceedings.  Keep in mind there could be some gamesmanship in this stall.  For months iHeart has been wrestling with its creditors to give them a more generous debt restructuring as a way to keep the company solvent.  Bobby Pittman might be betting that the threat of bankruptcy will bring the creditors back to the bargaining table.  Or iHeart might have come to the realization that bankruptcy is inevitable and are hording their cash as they head into the liquidation process.  I guess will find out either way on or around March 1^st.

AMAZON’S AD BUSINESS GETS REAL:  Well, we knew it was coming and now it’s here.  Yesterday during Amazon’s Q4 earnings call they announced that “Other” revenue (aka ad sales) grew by 60% to $1.7B.  For a comparison Google reported $27.3B in ad sales for Q4 and Facebook tallied $13B.  So Amazon’s ad biz is still small relative to the Duopoly, but as reported in the attached Digiday link, it’s only a matter of time before they catch up with the big boys.  Amazon’s secret sauce is an on-platform search offering collectively called Amazon Marketing Services, which allows brands to embed search ads as Amazon users are very close to making a purchase.  Whatever they’re doing it’s obviously working, because 60% YoY growth doesn’t just happen by itself.

RADIO JUST WENT THERE:  Leave it to radio to bring sexual misconduct, one of the world’s biggest pop stars, and a Confederate Army general together into one sad topic.  It’s the story of former KYGO-FM morning show host David Mueller who was found guilty of groping Taylor Swift during a station meet and greet in 2013.  You probably remember this case as one of the sparks which started the #metoo movement in 2017.  Fast forward to 2018 and the unemployed Mr. Mueller was looking for a job.  According to the attached NY Daily News link gainful employment was found as the morning show host of a small Greenwood, MS station.  To get a fresh start (or hide his identity) Mueller took the stage name “Stonewall Jackson” after the famed Confederate general.  It took about five minutes for word to get out that Stonewall was in fact Mueller, and then the complaints (up to and including station bomb threats) started coming in.  In the article some of the quotes from the station’s owner hint at the idea of using Mueller’s infamy as a way to get publicity for the small station.  To me this seems more like a case of poor taste and not a stroke of PR genius.

Have a great Friday (and weekend) guys!

GETTING SNEAKY DOWN UNDER:  As reported in the attached Engadget link, Spotify is launching a new standalone app called Stations which provides a free, radio-style online listening experience.  This may sound just like Pandora’s core product, because well, it is.  In an attempt to compete for the non-subscriber streaming listener Spotify is testing the copycat service in Australia right now.  Ironically Stations’ own description says . . . “finding the right thing to play can feel like a challenge. With Stations, you can listen immediately, and switching stations is simple and seamless — no searching or typing needed.”  That seems like some ironic double-speak from the streamer whose primary business model is on-demand playlists.  So why go through the trouble to create a whole new app instead of making it a product option the way Pandora does?  For the answer just follow the money.  Right now all of Spotify’s sub listening is covered under more expense label-direct licensing agreements.  But online radio listening, without on-demand or playlisting, can be covered under certain countries’ compulsory royalty decrees.  And the per song compulsory royalties average less than half the label direct rates.  Right now only three countries have the compulsory setup – the United States, New Zealand, and . . . wait for it . . . Australia.  So while this may be billed a cool new app in the test phase, it might actually be a way for Spotify to game the royalties system and pay less for content.  Sneaky move, mate!

SATELLITE OVER THE INTERNET? Over the last several years SiriusXM has been like the slow and steady tortoise in the audio race.  You don’t hear as much about them while the broadcasters, streamers, and labels battle it out, but they quietly grow their subscription base and revenue every quarter.  Now that may change.  On yesterday’s earnings call CEO Jim Meyer offered a glimpse into the future of Sirius, as summarized in the attached Inside Radio link.  The headline is that Sirius intends to expand into the connected home via the internet.  That’s right – internet delivery of satellite content into the growing connected home market via a Sirius app.  It’s an unusual move, but it could be a brilliant one.  Over 90% of Sirius listening happens in the car, so the connected home is a huge untapped opportunity for them.  And as we know, music listening on in-home IoT connected devices is the hottest thing in audio right now.  Worth keeping an eye on.

YOU DON’T KNOW DILLY DILLY:  Finally today, I want to give you a funny albeit surprising example of the power of sonic symbols.  It’s the story behind the term-of-the-moment “Dilly Dilly!”, which you’ve undoubtedly seen in Bud Light’s current TV ads.  How the phrase came to be is explained in the attached Seattle Times link.  The power of the phrase, and its surprising viral amplification, has caught even the creators at Wieden + Kennedy off guard.  That’s because the term was thrown in by chance at the end of the creative process, and literally means nothing more than “hear, hear”.  So why has it become so popular that you’re starting to see Starbucks baristas donning Dilly Dilly tees?  Because it’s crossed over from being a phrase and is now a sonic symbol.  It’s sort of like the que for a joke you’re in on, even though there isn’t really a joke or a punch line.  By breaking through the cultural zeitgeist with a sonic symbol Bud Light has captured marketing lightening in a bottle.  It reminds me of their Frogs “Bud-Weis-Er” creative from Super Bowl XXIX in 1995.  Fortunately for us, goofy medieval Dilly Dilly scenes are funnier than three CGI frogs making weird noises.

Have a Dilly Dilly Thursday guys!