Tagged: Internet Big Five Toggle Comment Threads | Keyboard Shortcuts

  • feedwordpress 18:53:51 on 2020/11/30 Permalink
    Tags: , , , , , , Internet Big Five, , , , the press   

    Media and Marketing Leaders: It’s Time to Stand Up For Truth 


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    Why “information equity” matters.

     

    An idea has been tugging at me for months now, one I’ve spent countless hours discussing and debating with leaders in marketing, media, and journalism. And as I often do, I’m turning to writing to see if I can push it into more concrete form. I’m literally thinking out loud here, but I won’t bury the lede: I believe it’s time for all major corporations – not just the companies that pushed for the #StopHateForProfit boycott – to call for a broader, more universal movement related to their marketing practices and their “Corporate Social Responsibility” efforts.This isn’t about punishing platforms, rather it’s about reimagining our relationship to them, and shifting our focus to the externalities our collective dependance upon them has created. For now, I’m calling the movement “Information Equity” – a rather dry and academic moniker, to be sure. Toward the end of this post, I’ll ask for your help in pushing the idea forward. But for now, let me explain what I’m on about.

    ***

    Some years back I helped start a company called NewCo, an effort to identify and promote companies that view business as a force for good. The idea sprang from an observation that the most successful companies often had purpose at their core, they were animated by a desire to make the world better in some measurable way. Lately the idea of business as a force for good has found broader appeal, to the point where the Business Roundtable recently revised its definition of purpose in business. No longer would the true north of business be the maximization of profit for shareholders. In its place would now sit a new lodestar: “Creating an economy that serves all.”

    It’s easy enough to dismiss such declaratives as lipstick on the soulless pig of capitalism, but these kind of statements shift societal expectations over time, and eventually they change outcomes as well. Large corporations are increasingly being held to account by employees, customers, and the communities they impact. It’s demonstrably true that business practices have changed in recent years. And the last nine months – replete with a global pandemic and a deadly serious racial reckoning – have deeply accelerated those changes. Driven by COVID, the Black Lives Matter movement, and an impending climate disaster, “Corporate Social Responsibility” has now taken center stage in American business.

    Now that the klieg lights are on, the question rightly becomes: What will corporations do with the microphone?

    It’d be tempting to claim victory, and point to the change that’s already here. Less than a generation ago, it would have been corporate suicide to take a stance on charged issues like race, gender, or the environment. But today, the world’s largest advertiser – Proctor & Gamble – employs its marketing budgets to create and promote powerful films decrying systemic racial and gender inequality. The world’s largest money manager – BlackRock – has put climate change at the center of its investment and governance decisions. For each of these formerly third-rail issues – race, gender, climate – hundreds of major corporates have declared similar intentions.

    But while  race, gender, and environmental equity have become rallying cries for mainstream corporate America – and rightly so – there’s another fundamental human right I’d like to see taken up by our newly woke business leaders. This particular right – or its absence – drives society’s comprehension, education, discussion, debate and ultimately, society’s actions related to resolving historically intractable issues of human rights.

    In short, if we are going to solve our largest problems, we must first solve society’s problem with the truth.

    ***

    Over the past ten or so years, American society has lost its faith in a shared truth. We simply don’t believe the same things anymore. And in the battle to defend our particular versions of truth, we have badly weakened journalism – our historical institution of truth-telling.  We’ve not simply undermined journalism’s economic models, but more importantly, we’ve marginalized its impact and primacy in helping us determine the facts upon which society determines progress. We have questioned journalism’s motives, its  business models, and the social compact granting journalism the right to determine fact, establish reason, and debate course of action.

    I am not arguing these questions should not be raised – journalism is imperfect at best. But in abandoning journalism, we might have forgotten a larger question: If a free and fair press is not the answer to finding our common truth then … what exactly is? Think for a moment on what might replace journalism in our society. You’ll likely find yourself in a rather dark mood.

    Over centuries, we have built journalism as an institution of truth telling – in concert, in opposition, and even in cahoots with institutions of power in government, religion, and business. This truth-telling organ is commonly referred to as the Fourth Estate, and its record is both speckled and glorious. But it’s also the only private institution empowered by a Constitutional name check – and in the First Amendment, at that. So as far as I’m concerned, if ever there was a purpose-driven business, it’s one built around a newsroom. The mission of a news business is to fulfill the right of the people to be informed by truth. To deliver as full and transparent an account of truth as is possible. To hold truth as a mirror to power. And to demand an accounting if, once put to power, those truths do not square with the powerful’s actions.

    Without standard-bearers capable of this endless and grinding work, democracy is lost.  Without access to high-quality news reporting, the citizens of this nation will make decisions based on rumor, bias, self-interest, and fear.

    I’m all for Benkler’s concept of a “networked Fourth Estate” – that the rise of the Internet has added a multitude of actors – bloggers, non-profits, citizen journalists – to the category we might call “the press.” And the rise of social media has, indeed, given everyone with a voice an opportunity to speak. But we’ve failed to place guardrails around the institutional mechanisms which determine how these new voices are distributed in our society. At present, the inscrutable algorithms and powerful business models of our largest technology platforms determine the information diets of a growing majority of Americans. And I think it’s inescapably true that as things stand, these platforms have no incentive to change how they do business. That’s where corporations – and their advertising budgets – must come into play with a more long-term solution.

    ***

    Quality journalism at scale is under extreme duress. Yes, the Times, the Post, the Atlantic, the Wall Street Journal have all experienced a renaissance in the past few years. But all you readers of long form journalism, you devourers of words by the thousand, you are not the citizens of whom I speak. Your information equities are not in peril, your privilege is intact.

    What matters here is scale. Read Charlie Warzel or listen to Kevin Roose, and ponder the citizen who can’t afford (or simply doesn’t wish) to take their news from high-quality print outlets. When more than a hundred million Americans struggle to cover a $400 medical bill, society needs an advertising-supported model that brings quality information to the masses (this of course is Zuckerberg’s favorite defense for why Facebook is ad-driven, which is one of many examples of how the company has subverted the clothing of journalism without accepting its responsibilities). When the most convenient free service for news is Facebook, then Facebook will become America’s answer to news. As a result, tens of millions of our fellow citizens are caught in the jaws of systemic information bias, of institutionally-driven information pollution. One-quarter of Americans believe the recent election was possibly stolen, and a full third of us believe that the new administration may well enslave children for sexual favors. We’re in the grip of an information-driven disease – an information pandemic –  the cancerous externality of a society which has deemed the growth of our most profitable companies more important that the dissemination of fact-based information and truth.

    ***

    So what is business going to do about it?

    Boycotts are fine, but business must make combatting the lack of quality information in our society a primary and ongoing goal. Surely if corporate America can get comfortable with activism on behalf of racial, gender, and environmental equality, it can throw its support behind every citizen’s right to quality information.

    But how? How might business lead when it comes to addressing this fundamental issue?

    There are scores of ideas yet to be imagined, and plenty of think tanks, non-profits, and other organizations already working on important parts of this problem. But for all its skill at communication, the media industry has been far too silent in advancing solutions. It was just last month – last month!! – that the Global Alliance for Responsible Media, a working group comprised of leading platforms, media agencies, and brand advertisers, added “Misinformation” to its long list of “harmful content.”

    That’s progress, but democracy can’t wait for a committee report sometime next year. The most important step we can take now is to declare information equity an issue worthy of support by the business community. Marketers must dedicate a small but substantial portion of their budgets – which in aggregate equate to hundreds of billions of dollars each year – to a stated commitment supporting the creation and distribution of quality journalism at every level of society. I’ve written extensively elsewhere about how this is possible without abandoning the benefits of scale, targeting, and efficiency that platforms unquestionably bring to our industry. Not only is it possible, it’s also good for business results – and society at large.

    The media industry helped to create this problem of misinformation – by funding the rise of platforms, by ignoring the externalities these platforms foisted onto society, and by growing addicted to the results the platforms delivered to our bottom lines. If we don’t renegotiate the relationships between marketers, platforms, media companies and the audiences we all serve, how can we expect anything to change?

    Just as the planet can no longer tolerate the externalities of an economy driven by carbon, and just as our society can no longer tolerate the externalities of a culture driven by institutional race- and gender-based injustice, we can no longer whistle past the graveyard of truth.

    If you agree, please join me in an ongoing conversation. My email is jbat @ therecount dot com – hit me up, and I’ll add you to an engaged community of agency leaders, marketing executives, media entrepreneurs, and others who are interested in finding a path forward. I look forward to the dialog, and as always, thanks for reading.

     
  • feedwordpress 01:20:40 on 2020/10/14 Permalink
    Tags: , , Internet Big Five, , , , , speech   

    Facebook Is Finally Admitting It’s A Publisher 


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    The video above is from a conversation at The Recount’s SHIFT event last month, between Nick Clegg, Facebook VP, Global Affairs and Communications, and myself. If you can’t bear to watch 30 or seconds of video, the gist is this: Clegg says “Thank God Mark Zuckerberg isn’t editing what people can or can’t say on Facebook, that’s not his or our role.”

    One month later, with Trump down in the polls and the political winds shifting, well, let’s just say the company has changed its tune. Dramatically. Not only has it banned Holocaust denial, it’s also banned anti-vax advertising and taken steps to pro actively manage the disinformation shitshow that will be the Trump campaign post election.

    Witness this quote, from Zuckerberg himself, in his recent post framing why Facebook will now ban Holocaust denial from the platform: “Drawing the right lines between what is and isn’t acceptable speech isn’t straightforward, but with the current state of the world, I believe this is the right balance.”

    Excuse me while I point out the most fucking obvious thing in the world when it comes to what an editor actually does: We draw lines about what is is and isn’t acceptable, either as fact, as truth, as hypocrisy, or what is in the public interest. That’s the damn job of journalists: To call bullshit. And regardless of Facebook’s longstanding claims to not be a publisher or a journalistic entity, the truth is, these actions prove the company understands it is an arbiter of facts, truth, and the public interest. The  simple reality is this: The company has tried to have it both ways for Too. Fucking. Long. It’s time we treat Facebook for what it is: A media company, subject to the norms, responsibilities, and behaviors we all expect and demand from our media providers.

     

     
  • feedwordpress 16:12:31 on 2020/06/29 Permalink
    Tags: Internet Big Five, , ,   

    Marketers: Your Role In Social Discourse Is Critical 


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    How Brands Can Fix the Relationship Between Platforms, Audiences, and Media Companies (Hint: It’s Not a Boycott)

    (Second of a series. The first post reviews the media and platform ecosystem, and laments the role brand marketers have played in its demise.) 

    ***

    In my first post of this series, I laid out a fundamental problem with how digital media works today. Large digital platforms like Facebook and Google have cornered the market on audience attention, often with devastating impact on our national dialog. Along the way these platforms have developed sophisticated prediction and targeting engines which give marketers the ability to buy audiences with precision and scale. While this has been a boon for marketers’ businesses and the platforms’ profits, it’s also drained resources from independent, high-quality editorial outlets and stripped our national dialog of much-needed context.

    The loss of that context is at the core of an ever-growing #StopHateForProfit  social media boycott, which now includes huge brands like Unilever, Coca Cola, Verizon, and Honda. I’ll be writing about that next, but today I want to focus on how we got here, and what we can do about it.

    Over the past ten years, media companies have responded to their loss of audience by creating “viral” editorial that performs well inside the platform’s engagement-at-all-costs ecosystem.  Predictably, however, quality editorial – the context  journalists create for a living – rarely qualifies as viral. Besides flooding the platforms with videos of slippers which double as mops and two-second beer bongs, media companies have embraced Facebook and Google in other ways – selling them programming that never seems to gain audience or get renewed, building expensive and often unprofitable versions of themselves on each platform, or becoming platform advertisers themselves, a practice I call arbitrage in which media companies buy audience impressions wholesale and then mark them up to their marketer customers. In that first post, I spent a fair bit of time on arbitrage – mainly because I believe it’s a particularly despicable and self-defeating business practice.

    If we’re being honest with ourselves as media companies, none of our strategies of engagement with platforms have proven to be long-term business model winners. However, platforms own audience, and no amount of wishing it was otherwise will change that fact. If we want independent and quality editorial to maintain a vital place in our democracy, we have to imagine a new set of relationships between platforms, editorial, marketers and audiences. A promising innovation is already in place at one platform: Twitter.

    Twitter’s Unique Path

    Twitter has always been the underdog of the social networks – smaller, messier, less hell bent on conquering the world. But the service’s fast-twitch nature meant it quickly became an indispensable place for people to discover What’s Happening Right Now. Anything live and worth discussing – sports, news, gossip/culture – thrives there. News breaks on Twitter, but the rise of digital video ten years ago presented a significant barrier to growth. Given Twitter’s roots as a text-based service, the company needed to convince major media companies to view Twitter as a home for video content. Facebook and Google had YouTube and Instagram, and Twitter was playing from behind.

    In response, Twitter adopted a media-company friendly solution they called Twitter Amplify. Amplify has a unique model that fundamentally changes the power relationships between players in the media ecosystem. Most who use it give those fundamental changes little thought – they just see Amplify as a partnership tool, pure and simple. But once you grok Amplify’s unique approach, you realize its potential is wildly overlooked.

    In traditional media business models – which I call Packaged Goods Media – media companies create editorial, which attracts audience, which then attracts marketers, who pay media companies for access to the audience’s attention. Simplified, the ecosystem looked like this:

    In this simple model, marketers place their advertising messages inside the media companies owned and operated product, which the media company distributed itself. The advertising message was delivered in the context of quality editorial – editorial that the marketer had chosen proactively (within limits of church and state, of course) as part of a media planning process.  A critical assumption of this early model was this: Pairing relevant advertising messaging with quality editorial was vastly more successful for marketers – particular brand marketers – than advertising messaging delivered devoid of context. Before platforms, in fact, there were really only two channels for context-less advertising: Billboards and direct mail. Neither were particularly effective for building brands, though both had their place in the media ecosystem.

    But the rise of platforms created a new gatekeeper in this once-stable environment. Platforms quickly gained enviable audiences, but advertising models were slower to adapt.  Early in their development, Facebook and YouTube realized that to win even larger audiences, they needed to accommodate media companies’ editorial product on their platforms. To do so, they adopted a Packaged Goods Media model that looked an awful lot like the picture above.

    The bargain was simple: If you were a media company, you set up shop on the platform, acquired your own organic audience there, and once you got to a certain scale, you sold ads there – either on your own or in partnership with the platforms. Media companies early to these platforms – major TV networks, large newspapers, digital pioneers like Buzzfeed and Vox  – quickly built large audiences. But after a while, media companies realized that maintaining those audiences would prove difficult and expensive. Facebook and YouTube now controlled distribution. The media companies had built on the platform’s land, and if there’s one truth in capitalism, it’s this: landlords will always demand their rent.

    Media companies found themselves increasingly subject to the whims of the platforms’ algorithms and business models. They replicated a Packaged Goods Media model on top of the platforms, and discovered – shocker! – that they no longer owned the audiences they were trying to sell to marketers. Instead, they had to buy audience from the platforms, and resell it to marketers – again, on the platform. That deal wasn’t very good for anyone (save the platforms), and as marketers realized they could go direct to platforms to get their audiences more efficiently, the decline of traditional media was accelerated.

    How Amplify Works, And Why It (Really, Really) Matters

    Twitter’s Amplify points to a powerful new narrative. It works like this:

    1. Media company partners with Twitter to become an editorial partner, stands up editorial on platform (Twitter).
    2. Media company partners with marketer to support editorial on platform.
    3. Marketer and editorial use platform tools to identify both editorial and audience the marketer wishes to reach.
    4. Marketer uses its dollars to distribute both editorial and marketing messaging to audience.
    5. The platform and the editorial company split the revenue. All parties are aware of and read into the terms of the deal, no arbitrage is possible.

    In some ways, this feels similar to Packaged Goods Models of old. The marketer is wrapping its advertising message around editorial, just like in the pages of a magazine or a website before platforms dis-intermediated editorial from audience. And the results speak volumes: Campaigns that are contextually paired with good editorial tend to perform far better than campaigns without an editorial pairing.*

    But what gets missed is the revolution inside step #4 above. Amplify allows the marketer to use Twitter’s massive investment in advertising technology and audience development to define what audience it wants to reach, and then use a media company’s editorial as a lure to draw that audience through its marketing messaging. Let that sink in: The marketer – not the media company, not the platform, but the marketer – is responsible for putting the audience together with editorial. 

    The result is that on Twitter, a marketing partnership like the one The Recount has with Bank of America is a four-way win for every participant in the media ecosystem. The marketer gets scale, precision targeting, its choice of editorial (which allows for brand safety), and the resultant lift on the performance of its campaign. The editorial gets a direct revenue and business relationship with the marketer, and is exposed to audience members it otherwise would have to pay the platform to reach. The audience gets contextual advertising wrapped in content the audience finds interesting. And the platform, in this case Twitter, has a happy marketing partner, quality content distributed across its platform, and a revenue split with editorial.  Win, win, win, win.

    Amplify’s model puts the power of connecting audience and editorial in the hands of marketers – highlighting the crucial role marketers have always played in determining which editorial thrives in the media ecosystem. As I argued in my last post, far too many marketers have abdicated their responsibility as arbiters of which editorial deserves their financial support, opting instead to let Facebook and Google’s algorithms choose their audiences and their business results. Those algorithms will always favor a platform’s bottom line over the context and healthy dialog that quality editorial can provide. Programs like Amplify finally combine the power of a platform’s scale, data, and precision with the marketers’ responsibility to support editorial’s crucial role in social discourse.

    Finally, and importantly, the best Amplify partnerships deepen what have become attenuated relationships between large brands and the media companies that depend on them. If companies really are serious about  “multi-stakeholder capitalism” and becoming a “force for good,” they have to start engaging with – and supporting – the story at a deeper level. It’s time for marketers to lead again.

    As I write this, the media world is embroiled in a multi-layered narrative involving hate speech, platform boycotts, health crises, and economic catastrophes. But the way forward is not to pull back spending indiscriminately and walk away. Instead, marketers must do the work of understanding the problems at hand, then actively lean into solutions that can address them. Memo to all you marketers out there: Don’t sleep on Twitter Amplify.

    The third post in this series will explore the current “social media boycott” in light of the first two posts. 

    * Far, far better. If you are marketer, please be in touch and we’d be happy to share just how much better – jbat at therecount dot com. 

     
  • feedwordpress 15:31:31 on 2020/06/17 Permalink
    Tags: , , Internet Big Five, , , Recount Media, , The Recount, , ,   

    Marketers Have Given Up on Context, And Our National Discourse Is Suffering 


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    It’s getting complicated out there.

    Marketers – especially brand marketers: Too many of you have lost the script regarding the critical role you play in society. And while well-intentioned TV spots about “getting through this together” are nice, they aren’t a structural solution. It’s time to rethink the relationship between marketers, media companies (not “content creators,” ick), and the audience.

    So let’s talk about it. Grab your favorite beverage and read along. I’m heading into a bit of media theory for the next couple thousand words – I hope this will start an interesting conversation.

    For those of you who want a TL:DR summary, here it is: It’s time to get back to the work marketers used to be really good at: Deciding on the appropriate context in which to engage your audience. And it’s time to pull back from a habit most of you have fallen into: Letting the machines choose your audience for you. Thanks to new approaches which fuse at-scale ad targeting with high-quality editorial product, you can step into this renewed role without sacrificing the reach, precision, and targeting afforded by the likes of Facebook, Google, Twitter, and their kin. To understand how, let’s review some history.

    The Old Media Model

    If you read this site back when I wrote regularly on media (roughly 2003-2015), you’ll recall I laid out several basic tenets about how the media business works. It’s comprised of three core components: Editorial (the media company’s content), Audience (people who give their attention to the content), and Marketer (commercial actors who desire the Audience’s attention in the context of the Editorial). Of course, in the past ten years, a fourth component has eclipsed all three: The Internet Platform.

    Before the major Internet platforms deconstructed the media business, the three original components came together in what we’ll call a media product (I’m still partial to “publication,” but many think only of print when they hear that word). Print, television shows, and early web sites all served as vessels for a commercial relationship between  Editorial, Audience, and Marketer. The media company took the financial risk of creating and distributing the media product, and if successful, the marketer paid to run advertising inside the media product. In some cases, the audience also paid a subscription fee for the editorial. But for most media companies, advertising support was crucial to chin the bar of profitability and make a go of it as a business.

    A critical element of the media-product-as-vessel model for commercial transactions was that context matters. The media product created context for audience engagement, and if the marketer offered messaging that aligned with that context, it stood to reason that the audience would be more receptive to the advertiser’s message. Suffice to say that with the rise of audience buying on massive platforms, context has been lost, with nearly incalculable downsides across the media ecosystem (and society at large). More on that later on.

    Meanwhile, back in those pre-platform days, distribution was important, but it was also a constant. Most media companies consolidated distribution by acquiring broadcast licenses or cable networks (for television) or print distribution networks (if you were a magazine or newspaper company). And if you were a media startup, you could leverage those distribution networks for a relatively predictable rent – often without spending any capital up front. When we started Wired, for example, we secured newsstand distribution by agreeing to split the revenue earned by our nascent magazine with our distribution agent.

    I call this old-school model “Packaged Goods Media.” Fifteen years ago I noted that “PGM” was giving way to a new model, which I termed “Conversational Media,” or CM. CM, of course, was the precursor to “social media” – Twitter, Facebook, YouTube – and as I thought out loud about this new phenomenon, I noted several crucial distinctions between it and Packaged Goods Media. I predicted that the economics of Editorial, Audience, and Marketing were all going to change dramatically. In many ways I was spot on. But in several others, I was dead wrong. Here’s a summary of a few key points:

    • Editorial models would evolve from “dictation” to “conversational,” where the audience – and knowledge of the audience through data – became a central driver of editorial creation.
    • Distribution would become nearly free, obviating the rent-seeking monopolies held by major media companies. In fact, I wrote: “economic differentiation based on the control of distribution – the very heart of PGM-based business models – is irrelevant in CM-based services.”
    • Online, publications become more like a service, rather than a product. I noted that software, which was still largely a packaged product, was also heading in this direction. That means media will have different economics and different advertising models over time (I called them “native advertising” at the time).

    I’d argue that over the next ten years I got the first and third predictions relatively right, but I entirely whiffed on how distribution would play out. I simply failed to imagine how Facebook, Google, and others would leverage their newfound control of audience attention. In one piece from 2006, I wrote:

    “…finding massively scaled Conversational Media companies [besides Google] is a rather difficult search … it’s unclear whether CM companies will mature into massive conglomerates like Time Warner.”

    Well, it’s certainly clear now. Facebook, Google, and their peers are among the most powerful and well-capitalized companies in the world, and they got that way by doing one thing very well: Capturing the attention of billions of us. That gives them a near monopoly on digital distribution, which they’ve leveraged into a near monopoly on digital advertising. In the process, these tech platforms have eliminated the traditional role of publishers as a proxy for audience interest and engagement. I used to believe this trend spelled the end of high-quality independent media brands – indeed, it’s why I didn’t start a media brand after selling Federated back in 2013. But media models are always evolving, and I now see a new way forward. To understand that, we must first review where we stand today. And to do that, we must examine arbitrage.

    The Arbitrage 

    If I were writing a sequel to “The Search” focused solely on how digital media models have shifted in the past 15 years,  I’d probably title it “The Arb.”

    It would not be a pretty story. In the past ten years, audience arbitrage has become a dominant model of the digital media business. It’s an awful business practice that erodes trust, devalues media brands, and dilutes the importance of marketing. What follows is a bit of a rant, but hell, you’re still reading at this point, so refill your glass, and let’s get to it.

    The dictionary definition of arbitrage is “the simultaneous buying and selling of securities, currency, or commodities in different markets or in derivative forms in order to take advantage of differing prices for the same asset.”

    In media, the asset being arbitraged is audience attention. The arbitrageurs are publishers. Their enablers are the major tech platforms, fueled by dollars from advertisers.

    Here’s how it works. A big publisher like Buzzfeed or Cheddar sells a million-dollar advertising deal to a marketing brand. The media company guarantees the marketer’s message will collect a certain number of audience impressions or views, charging the marketer a “cost per thousand” for those impressions. (Known as “CPM,” cost per thousand pricing ranges widely, from a few pennies to $25-40 for “premium” placements). Utilizing a Packaged Goods media model, the publisher might fulfill those impressions on its “owned and operated” properties, but over the past ten years, doing so  has accrued significant drawbacks. The top three:

    • It’s expensive. Acquiring and retaining audiences on a media company’s own property is often far more costly than finding those same audiences on an at-scale platform like Facebook or Google.
    • It lacks sophisticated targeting. In the past decade, marketers have grown accustomed to the data-rich precision of large platforms. They don’t want to pay for just any old Buzzfeed or Cheddar audience member. They want their messaging to reach exactly the target they specify, and most publishers don’t have either the technology or the audience scale to fulfill the data-driven demands of modern marketers.
    • It forces extra work on the marketer. I am not the first, nor will I be the last to note that marketers and agencies don’t like to do extra work. While plenty of larger publishers have built high-quality advertising solutions on their owned and operated channels, marketers view these point solutions as  just one more channel they have to manage, analyze, and report on. It’s just So Much Easier to buy Facebook, after all.

    Because of all this and more, publishers have become audience buyers on Facebook, Google, and other networks. Enterprising publishers began packaging their own content with marketing messages from their sponsors, then they got busy promoting that bundle to audiences on Twitter, Facebook, and Youtube, among others.

    This is where “the arb” comes in: The publisher will charge the marketer, say, a $15 CPM, but acquire their audiences on Facebook for $7, clearing an $8 profit on every thousand impressions.

    You might ask why the platforms or the marketers don’t put a stop to this practice, and you’d be right to ask. But consider the economic incentives, and things get a bit more clear. The platforms are getting paid for what they do all day long: the delivery of precise audience impressions at scale. As far as platforms are concerned, the media brands are just advertisers in different dress.  Over the years, Facebook and Google have even accommodated the arbitrage by connecting all parties directly through their advertising technology systems.

    OK, so the platforms get paid to deliver audiences to marketers on behalf of media companies, but why on earth do the marketers put up with being arb’d? Couldn’t they just pay the same $7 CPM directly to Facebook, eliminate the middle man, and save the $8 spread?

    Well, indeed they can, and in most cases when it comes to buying audience on Facebook or Google, that’s exactly what they do. But remember my comments about context way up toward the top of this article? Some marketers still believe that the context of a media brand can help their messaging perform better, and they’re not wrong in that belief.  So they’ll pay a bit more to have their messaging associated with what they believe is quality editorial. And if that media brand does the work of acquiring that audience for them, so much the better – that’s less work for the marketer to do.

    But let me be clear: arbitrage sucks. Arbitrage is only lucrative in markets with imperfect information. It’s usually a great strategy in the early stages of a new ecosystem, when media buyers are less familiar with how advertising technology works. As those buyers get smarter, they start to squeeze the media company’s margins, devaluing content and context, and pressing ever closer to the price they could get directly from the platform. A good example is Demand Media – a company that, a decade ago, managed to insert itself between Google’s search algorithms and an advertiser’s desire to be associated with content around a particular topic. Demand pulled off a billion-dollar IPO based on creating advertiser-friendly “content farms” around popular Google searches. But advertisers figured out the arb, and Demand’s once billion-dollar valuation fell more than twenty fold in the past five years.  A similar fate has befallen the once high-flying arbitrageurs  of social media. Cheddar, Vice, BuzzFeed, and many others all played the game, but over time, markets will root out an arb. (Cheddar was smart enough to sell before its arb was uncovered – but it sold at a fraction of the sky-high valuations its peers once held).

    But wait, one might ask – aren’t the media companies adding true value? What about that context, which makes a marketer’s message more relevant and engaging? Isn’t that worth something?

    It certainly is, but this is where the lack of transparency around ad buying on platforms comes into play. Audience buying is cloaked in opacity – the major platforms are deeply invested in making sure no one truly understands how attention is priced. That means a media company buying audience on Facebook or Google will always be at an informational disadvantage – exposing them to a new kind of arbitrage, one executed by the platform’s own algorithms and benefiting the platform’s bottom line. Again, arbitrage works best in markets with asymmetric information features – and informational asymmetry is built into how Platforms operate. Over the past five or so years, most major media companies have come to realize they’re the ones being gamed.

    Audience arbitrage on platforms has even more destructive attributes. Because media buyers have outsourced their audience acquisition to either the media company or the platform itself, the marketer becomes disconnected from the context of its audience. Millions of impressions are scattered across millions of tiny content bundles, all of which are lost in a sea of endless posts on nearly every imaginable topic. The context and meaning that holds all brands together is lost.  Media companies, pressed by ever-thinning margins, will cut corners, buying “junk traffic” or worse, creating junk content that titillates or tricks audiences into false engagement. On the surface, boxes get checked, audiences get served, impressions get logged. But over time, editorial content deteriorates, deep relationships between brands and audiences attenuate, and the media ecosystem begins to fail.

    So what can be done about it?

    Well, at The Recount we’re exploring a way forward, through a brand new partnership we’re launching on Twitter this month. We’re calling it “Real-Time Recount,” and in the next installment of this post (I’m pushing 2500 words here, after all), I’ll explain more about the theory of the case behind it. For now, you can read more about what we’re doing in this Ad Age piece (paywalled, alas), or over on Fred’s blog. Thanks for coming along, and I look forward to the conversation I hope this will spark.

    Image: http://shop.drywellart.com/product/bourbon-empty-glass-print
     
  • feedwordpress 03:10:56 on 2020/04/30 Permalink
    Tags: , , , , Internet Big Five, , , saas, , ,   

    Zoom Is YouTube, Instagram, and WhatsApp – All in Two Months. 


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    If you’ve read Shoshana Zuboff’s Surveillance Capitalism, you likely agree that the most important asset for a data-driven advertising platform is consumer engagement. That engagement throws off data, that data drives prediction models, those models inform algorithms, those algorithms drive advertising engines, and those engines drive revenue, which drives profit. And profit, of course, drives stock price, the highest and holiest metric of our capitalistic economy.

    So when an upstart company exhibits exponential growth in consumer engagement – say, oh, 3,000-percent growth in a matter of two months – well, that’s going to get the attention of the world’s leading purveyors of surveillance capitalism.

    And in the past week, Facebook and Google have certainly been paying attention to a formerly obscure video conferencing company called Zoom.

    As I’ve already pointed out, Zoom has become a verb faster than any company in history, including Google. The COVID-19 pandemic shifted nearly all of us into a new mode of video-based communication – and Zoom just happened to be at the right place, at the right time, with … a better product than anyone else. As of this writing, the company’s user base has grown from 10 million users a day to 300 million users a day – that’s two times bigger than Twitter, and nearly 20 percent of Facebook’s entire daily user base.

    That, my friends, is an existential threat if you’re in the business of consumer engagement. Which is exactly why we saw news on the videoconferencing front from both Facebook and Google this week.

    Item #1: This past Friday, Facebook announced Messenger Rooms, a video conferencing app that allows up to 50 people to have Zoom like experiences for free.

    Item #2: Not to be outdone, Google today announced that its Meet videoconferencing tool, which formerly came with its paid G Suite service, is now free and will support 100 simultaneous users.

    Item #3: Zoom’s high flying stock has lost 13% of its value since those two events.

    Both companies are attacking Zoom’s core business model: paid software as a service. As I’ve explained in earlier posts, Zoom offers a limited free service, and is in the business of convincing folks to pay for more premium features. This SaaS model works well in the world of enterprise (business to business) but when it comes to us consumers, well, the only place we’re willing to pony up at scale is entertainment (think Spotify, Netflix, etc.). Anything else, we’re fine with ads, even if they’re annoying.

    All of this forces Zoom’s hand. It’s now squarely in the crosshairs of the two most valuable advertising companies ever created. Will it pivot to an advertising model, as I speculated earlier? Will it succumb to an acquisition offer, as engagement traps Instagram, YouTube, and WhatsApp did before it? Or will it find a third way, and build an entirely new consumer behavior based on a paid service, free of the surveillance capitalism model that has dominated consumer apps for the past ten years?

    Pass the popcorn, folks. This is going to be a great show.

     
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