Global TV media costs surge almost a third post-pandemic

Media inflation is driving up the cost of advertising across channels, with TV most affected, according to an analysis by WARC Media. 

TV costs are rising fast

The latest Global Ad Trends* report, The rising cost of incremental reach, finds that, globally, TV CPMs (cost per thousand) have increased 31.2% since 2019 – the steepest incline in more than two decades – and are up 9.9% year-on-year in 2022. 

The trend is especially pronounced in the US, where TV CPMs are forecast to reach $73.14 in 2022, an increase of 40.0% on pre-COVID costs. 

For some categories the impact is heightened. According to WARC Media data, advertisers in the food category spent on average 79.8% of their budgets on TV in 2019, and in the automotive category, 67.7%. If they were to have maintained that same level of investment, by 2021 the volume of impressions would have decreased by 18 percentage points. 

Digital media costs are increasing too 

This twin trend of declining linear television viewership and rising TV media costs is encouraging advertisers to look elsewhere for incremental reach, but price pressure is being felt across the online media landscape. 

Paid social CPMs increased by 33% between 2019 and 2021 (source: Skai) and the growing popularity of retail media formats is pushing up the cost of advertising on platforms like Amazon. 

Channels such as broadcaster video on-demand (BVOD) provide an alternative source of incremental reach. However, over-the-top (OTT or streamed video) ad costs are rising too: inflation in advanced TV formats in the US is forecast to reach 9.9% in 2022, as per World Federation of Advertisers (WFA) figures.

Relative bargains can still be found in channels like radio

The pursuit of incremental reach has generally focused on digital audio-visual channels, as they offer a more straightforward transition from television. In comparison, offline channels are often under-utilised, despite not having witnessed the same levels of price inflation since 2019.

In Australia, the cost of radio media in 2022 remains 1.1% below pre-pandemic levels, while prices in the US are largely unchanged three years on. 

A similar picture emerges in out-of-home (OOH), incorporating both static and digital panels: in the UK, outdoor ad prices are 3.1% lower than before COVID-19, while, in the US, OOH remains 5.8% cheaper than it was in 2019.

Key quote

“As the global economy teeters on the brink of an inflationary recession, media costs may experience further volatility. Nonetheless, non-video channels are worth consideration if they are right for the audience” – Alex Brownsell, Head of Content, WARC Media.

*Global Ad Trends is a bi-monthly report which draws on WARC’s dataset of advertising and media intelligence to take a holistic view on current industry developments. A complimentary sample report of WARC Global Ad Trends: The rising cost of incremental reach is available here.

Sourced from WARC Media

Disney+ sees benefits in lower ad load

Disney+, the streaming platform owned by The Walt Disney Company, believes that a lower hourly ad load can enhance the viewer experience while helping boost the price of inventory.

The background

• Disney+ boasted 152.1 million subscribers at the end of the last quarter, up by 14.4 million compared with the previous three-month trading period.
• The new ad-supported layer for this platform will be called Disney+ Basic, and launch in the US on December 8th, with plans for an international roll out next year.
• On that same date, the monthly price of Disney+ Premium, its ad-free version will rise from $7.99 to $10.99.

A deliberately conservative strategy

• Bob Chapek, CEO of the Walt Disney Co., said it will be cautious in terms of initial ad load, based on the logic it would be easier to increase, rather than decrease, ad loads.
• “We are walking before we run in terms of seeing what the market will bear in terms of an ad load. So we’re going in very conservative upfront,” he said on an earnings call.
  
• It was reported earlier this year that Disney+ would limit its ad load to four minutes per hour, but Chapek told investors it was in a test-and-learn phase.
• “We believe that there’s probably going to be some more ultimate elasticity in that as well as we go forward,” he said.
  

Lower ad loads, stronger CPMs

• Advertiser demand for Disney+ inventory has been strong, according to Chapek, reflecting the fact this platform houses many “premium brands in content and streaming”.
• Lower ad frequency will provide a “great experience for viewers”, he said. It also helped Disney+ secure an impressive cost-per-thousand (CPMs) at its parent company’s recent upfront.
• “This approach coupled with strong advertiser demand translated into Disney+ earning industry-leading CPM rates at the most recent upfront,” said Chapek.
• When Disney+ started selling ad space, agency executives reported that CPMs were in the $50 to $60 range, which were at the higher end of the industry spectrum.

A different offer than Hulu

• Disney is a majority owner of streaming platform Hulu, but Disney+ will operate on a different tech platform than its sister service.
• Chapek said that Hulu can provide some valuable lessons when it comes to tactics like addressable advertising, but added that Disney+ will have a distinct proposition.
• Christine McCarthy, the Walt Disney Company’s chief financial officer, reported that about two-thirds of Hulu’s 46.2 million subscribers use its ad-supported version.
• “We can’t anticipate that we’d have exactly the same behavior because it’s a different demo that has Disney+ versus Hulu, but that’s the best indication that we have,” she said. “We expect the ad tier to be popular and we also expect some people to want to stay with ad-free.”
  

Sourced from SeekingAlpha, TechCrunch, DigiDay

E-commerce slows in Japan

E-commerce in Japan saw a surge between 2019 and 2021 but growth has since tailed off, partly as the necessity to shop online has receded, partly because the sector is experiencing delivery problems.

Context 

Even before the pandemic, Japanese consumers shopped online much less than those in other nations, and, even with that lockdown surge, they still lag; for example, they shop online for daily essentials about 40% less than the average according to research by Statista.

Why it matters

Now, as consumers tire of shopping on smartphones and sales through brick and mortar stores pick up post-pandemic, there is an opportunity to reignite growth by expanding the role of physical stores in e-commerce. The Financial Times reports examples of clothes retailers seeing increased sales from adding new outlets just to allow consumers to see and try on items they’ve seen online.

Takeaways 

• Depending on the source, from 2019 to 2021 e-commerce grew between 20% (Nowcast & JCB) and 30% (Ministry of Internal Affairs and Communications).
• From January 2020 to April 2022, purchase prices rose in 70% of categories on online platforms Amazon, Rakuten and Yahoo, according to research company Nint. 
• A shortage of delivery workers has prompted some groups to trial the use of self-driving robots to deliver fresh food and boxed meals.

Sourced from Financial Times 

Mental availability uplift from OOH creative with distinctive brand codes: study

Out-of-home (OOH) creative incorporating distinctive brand codes – including logo, colour, shape, tone of voice and style of imagery – averaged a 13% uplift in category mental availability versus weakly coded ads, according to research by media company JCDecaux New Zealand.

Why it matters

Using distinctive brand codes in OOH creative influences mental availability, which predicts the propensity for a brand to come to mind in a buying situation versus simply being known.

Key insights

• Mental availability is an important brand metric and is often undermeasured compared with awareness or consideration.
• Ads with strong brand codes are liked 31% more than weakly coded ads.
• Liked ads drive uplifts by 18% as strongly coded ads are easier to cognitively process, which leads to perceived preference.

Quote

“At JCDecaux, we subscribe to the view that advertising ‘works’ through building memory structures that consumers call on in a buying situation. This study puts specific numbers around our knowledge that strongly coded out-of-home advertising can influence decision making and drive a sales effect” – Victoria Parsons, Senior Insights and Strategy Specialist, JCDecaux New Zealand.

Background

The study was conducted in partnership with behavioural insights company NeuroSpot and involved 1,600 participants, who were shown real campaign creative across five categories: automotive, banking, FMCG, energy and alcoholic beverages (beer).

iHeartMedia believes wide customer base can help in soft ad market

iHeartMedia, a leading player in the US audio space, believes its wide customer base and diversified operations will be sources of strength if the ad market enters a challenging period.

The background

• Bob Pittman, iHeartMedia’s CEO, noted on an earrings call that it was originally hoped that 2022 would be a “robust advertising year” for the industry.
• However, the Russian invasion of Ukraine, and “secondary effects” like burgeoning inflation, have caused significant macroeconomic uncertainty.
• In response, many industry-watchers have expressed concerns that advertisers may soon cut back their outlay.

Mapping expenditure trends

• Looking at current expenditure patterns, iHeartMedia has noted a particular rhythm in activity on the part of advertisers.
• “We have seen a trend that we see more softness for the first month of the quarter than we do the other two months of the quarter,” Pittman said.
• “Our thesis is that in times of uncertainty, [in the] first month of the quarter, everybody takes a beat and waits and looks and then continues to spend in the other months.”

Strength in diversity

• Pittman reminded investors that iHeartMedia currently has “tens of thousands of advertisers”.
• Such a diverse slate of ad clients means there are likely to always be pockets of robust ad expenditure even if other parts of the market are “softer” in challenging times.
• “We've got no advertising category that's over 5% of our revenue [and] no single advertiser over 2%. So we have a remarkable diversity here,” Pittman said.

The advantages of audio

• Radio, Pittman continued, is “the least expensive medium with the largest reach”, meaning it has a compelling value proposition for advertisers.
• Diversification is also a source of strength for iHeartMedia, with digital more important in the mix, today delivering 26% of revenue, versus 12% in the first quarter of 2020.
• Even in the “major advertising downturn” of 2020, iHeartMedia’s digital revenues climbed by 26%, including a 91% lift for podcasts.
• “We feel the increased relative size of our digital and podcasting businesses … puts us in a stronger and more resilient position than we’ve ever been in to weather any advertising downturns,” Pittman said.
  

Final thought

“Advertisers who’ve lived through challenging economic times like these know that materially cutting back their marketing today will result in them losing sales over the long term. Instead of pulling back entirely during times of uncertainty, these marketers often look for more efficient means of engaging with their customer base” – Bob Pittman, CEO, iHeartMedia.

Roblox results reflect tough environment and a need for advertising

Roblox, the gaming and creation platform, has had another tricky quarter as overall revenue and user increases couldn’t make up for a dip in the critical “bookings” metric.

Why it matters

Roblox is the closest platform to a functioning metaverse (despite not being interoperable with other platforms) in which users can move between virtual experiences with an economic layer that binds it.

This is where bookings come in, as they cover what users have spent on Roblox’s virtual currency, Robux. As such, in previous earnings seasons WARC has explored the firm’s results from the perspective of consumer will to spend money on virtual items at a time of heightened interest in the metaverse.

Roblox has also been interesting from a brand perspective, as the company continues to entice investors with details of a self-service brand offer.

By the numbers

While the markets have reacted badly to a dip in bookings, it’s part of a wider slowdown in video gaming, which had naturally seen a huge boost during lockdowns when lots of gamers had nothing else to do. More recently, a more general dip in discretionary spending in the face of inflation has also affected the company.

Ahead of its earnings call, the company told the markets the following highlights for Q2 (all year-on-year):

• Revenue up 30% to $591.2m
• Bookings down 4% to $639.9m
• DAUs (daily active users) up 21% to 52.2m
• Hours engaged were up 16%.
• Bookings per DAU were down 21% to $12.25

While there is still a serious business in the economy of virtual currency and goods that the bookings signify, the many engaged users who are playing but not necessarily spending suggest a serious opportunity in advertising.

How advertising is going

Following the company’s explanation of validated brand accounts and boosted experiences in May (full details here) David Baszucki, Roblox chief executive outlined the investment going into the project:

“The product direction for this advertising system will also be self-service, but it will be complemented by our amazing brands. We have a great team. It's scaling. We have amazing people who are working with the Gucci and the Tommy Hilfiger […]  in this new form of advertising to the platform,” he told investors.

“We expect to continue building this amazing brand team. It will not be a sales team, it will be a consultative team to help people who are doing self-service and exploring our platform.”

He added that Roblox will be “testing our immersive advertising system sometime this year, we believe.”

A development flywheel

Part of the self-service ideal would mean brands seeking out experienced developers without even necessarily going through Roblox by using its talent hub – “that's the dynamic that we want to see, and as that demand comes from brands that will spur on more developers,” explained CFO Mike Guthrie, adding: “I wouldn't be surprised to see agencies off of it as well.”

Sourced from BusinessWire, Motley Fool, WARC

The regionalisation of Indian brands

“The brand and company will be relevant if your products and brands are contemporary and serve the consumers,” according to RS Sodhi, managing director, GCMMF (Amul) – and for the dairy giant that means getting increasingly local.

Context 

Thirty or forty years ago there was far less trust for Indian food brands, with imported brands carrying a perception of both quality and hygiene. Those attitudes are long gone, with Indian brands more than holding their own against the multinational giants. What’s happening now, though, is that consumers are increasingly looking even more locally for brands – and that puts new demands on marketing strategies as both national and international brands look to create the impression of being a regional brand.

What’s happening 

That’s an interesting development for a brand like Amul that has spent years promoting itself nationally and now finds itself moving to a more regional approach.

That has meant explaining how, for example, the milk it sells in a particular state is purchased from local villages and farmers.

“We are going more regional in our messaging,” RS Sodhi told Campaign Asia. “Whether it’s press, social media or TV, we are looking at creating brand opportunities via local languages.”

This could be a particularly effective play for Amul since it doesn’t have any pan-India rivals. “Our competition is from regional players, whether you take milk, butter, ghee, or even our ice creams,” Sodhi said. 

Sourced from Campaign Asia 

Sustainability: Prepare for new Green Guidelines

The Federal Trade Commission’s new guide to environmental marketing claims is due out this year and will be critical to brands pushing their sustainable credentials without greenwashing – but examples from around the world offer useful hints of how to prepare.

Why it matters

Last revised in 2012, the Wall Street Journal reports, the current guidance is vague in some areas that are now key, while also omitting terms that are now well-used but also quite easily abused – like ‘net zero.’ Consumers are sceptical of many such claims, and stricter regulations can help build trust across the board.

What to know

• Expect updated guidance on broad terms like ‘sustainable’.
• Expect a greater emphasis on life-cycle assessments of environmental claims. This takes in the impact of raw materials, the recyclability of products, and the use of carbon offsetting, which is not nearly as environmentally effective as reducing carbon impact within the supply chain.
• US marketers would do well to look at existing guidelines in markets that have already regulated such claims such as in Europe. In many cases, independent auditing and certification have been a useful tool for some brands.

In context

It follows efforts from other regulators, like the UK’s advertising and competition watchdogs whose strengthened rules have raised the burden of proof on green claims. The FTC has also acted against some major firms, but usually for misleading claims rather than thinly evidenced claims. This could yet change.

These new guidelines will determine what brands will be able to say in their marketing communications and what could draw scrutiny. At their best, these regulations could help truly green brands stand out from those who merely talk about it.

Sourced from the WSJ, WARC

Domino’s pizza innovations fail to wow Italians

Domino’s, the pizza chain, has more than 19,000 stores across 90 markets around the world, but Italy is no longer one of them. 

Why it matters

The pizza is a simple dish where execution is arguably more important than content; the sort of crossover cuisine that has seen Domino’s add cheeseburgers and BBQ chicken to the dish is clearly anathema to many Italians. There may also be an element of hubris in thinking a brand that, 12 years ago, was apologising to its own customers for the quality of the product, was well placed to compete in the home of the pizza.

Takeaways 

• Earlier this year the franchise “sought protection from creditors”; Bloomberg reports that, after seven years of operation, all 29 Italian branches of Domino’s have now closed.
• Apart from the menu, the pandemic was a major factor as Domino’s delivery model was hard hit by independent pizza restaurants quickly gravitating to food delivery platforms. 
• A recent study by the Associazione Verace Pizza Napoletana, cited by the New York Times, found that Neapolitan pizza evokes concepts of “quality, well being and family” – notions that large pizza chains “with their standardized products” struggle to match – and that consumers prefer “artisanal products”.
  

The big question 

Why would you put pineapple on a pizza? 

Sourced from New York Times, Bloomberg, WARC

Gifting surge expected during India’s festive season

The upcoming festive season in India is expected to see significantly increased spending on discretionary items, consumer electronics and gifts as people return to stores following two years of COVID-related restrictions.

Context 

Brands and retailers are anticipating growth of up to 25% on the same period in pre-COVID 2019: consumer sentiment is positive, in both rural and urban areas, and there’s a lot of pent-up demand.

Additionally, “Large family gatherings are expected during the festivals after a gap, and this will be the first wedding season without COVID protocols in two years”, notes the director of a large mall operator in Delhi-NCR. “We expect to see these occasions boost gifting and discretionary consumer spending,” he tells the Economic Times.

Takeaways 

• The festive season starts with Raksha Bandhan next week, followed by Janmashtami and Ganesh Chaturthi, and goes on to Dussehra, Durga Puja, Diwali and Christmas. The wedding season starts in November.
• “We are already at 30% higher growth rates compared to last year,” says Manish Saini, chief operating officer at gifting company Ferns N Petals. “We expect growth to settle at 60% over last year as orders per day are in the range of 18,000-20,000 for Raksha Bandhan.”
• Consumers could pick up smartphone bargains as brands look to clear current high levels of unsold inventory. 

Sourced from Economic Times

Inflation poses challenge to plant-based meat growth

Beyond Meat, a leader in the plant-based meat sector, believes that achieving lower pricepoints will be vital to ensuring the industry’s long-term growth, as well as helping in times of inflation.

Why it matters

Beyond Meat secured its second-largest ever quarterly net revenues in the last three-month trading period. A surge in the cost of living, however, is expected to take a toll on the industry by slowing down growth as consumers switch to lower-cost sources of protein to save money.

The background

• Plant-based food is an emerging category, with a growing number of brands from the packaged food to quick-service restaurant industries entering this space.
• Ethan Brown, CEO of Beyond Meat, said on an earnings call that the COVID-19 pandemic, followed by “highest inflation in 40 years”, made for a tough environment.
• “For a sector that’s still gathering its feet and is still in sort of the first set of downs, that’s a very difficult set of conditions to navigate,” he said.
  

The fundamentals still matter

• These challenges, Brown noted, are “in a kind of unfortunate way … reinforcing our strategy” for building Beyond Meat’s business.
• One unchanging part of its approach is “about getting the taste right so that we are indistinguishable from animal protein,” he said.
• A second objective is “making sure consumers understand that our products have health benefits relative to animal protein”, which is another long-term endeavor.

The pricing problem

• The third component of Beyond Meat’s strategy, and the one that is “most relevant” at a time of inflation, involves pricing.
• “We’ve always known that we need to drive our cost structure down and offer the consumer a pricepoint that is the same as animal protein,” said Brown.
  
• Many consumers are currently opting to buy affordable meat options like SPAM, he continued. On a 12-week average, ground beef was also priced at $4.90 per pound, versus $8.35 per pound for Beyond Meat.
• “You see consumers trading down to lower cuts of meat, so we have to get through this period to see a resumption of growth,” Brown said.

The cost-reduction imperative

• In pursuit of bringing prices down, Beyond Meat is using its production expertise to understand how to “strip cost, from a design perspective, out of our products,” he noted.
• Reducing operational expenditure will also be important, such as by introducing “bracket pricing” that encourages business customers to order in quantities that are most efficient from a logistical perspective.
• Another strategic consideration is finding ways to bring a “portfolio strategy into the market so that we can get more broadly and more quickly to a profitable lower pricepoint.”

Sourced from SeekingAlpha

TikTok owner steps forcefully into healthcare

ByteDance, the Chinese social media giant behind the short video platform TikTok, has made a significant $1.5bn acquisition of hospital company Amcare – another step in big tech’s global efforts to enter and disrupt healthcare.

Why it matters

ByteDance’s acquisition of the chain, which specialises in obstetrics, gynaecology, and paediatric medicine, will strengthen an existing health app business, Xiaohe, in what is becoming a seriously competitive landscape alongside apps from Alibaba and Baidu. But the firm has found a critical niche.

The global digitalisation of health

Online healthcare in China is growing fast, the number of private hospitals is growing ahead of public hospitals. As the South China Morning Post, notes, Amcare’s target market is usually high-income patients including expats.

In part, it reflects the pandemic-induced behaviour shift toward online consultations, which animated the platform’s debut in 2020, as a way to communicate with doctors at major hospitals for consultation and to search for medical information and explainers.

These ideas also formed some of the rationale behind Amazon’s recent acquisition of One Medical last month, which saw the e-commerce firm bring a large employer-healthcare provider on board.

Ideas to think about

Profitability: unlike social media whose marginal costs don’t increase that much with scale, healthcare is really expensive to provide. You need buildings, you need doctors and nurses, and you need to comply with a huge amount of regulation. To what extent will ByteDance’s innovation be able to find margins here?

Deeper currents: the more cynical side of this deal is perhaps the focus on maternal health, paediatrics, and the rich – these might help to answer that question. General healthcare is one thing – China provides most citizens with basic medical coverage – but maternity and pediatrics is another thing. Amcare is licensed to provide IVF treatment.

With greater educational and employment opportunities, the age of those who have children tends to increase, but so does the likelihood of complications. Later – the dealmakers will be aware – there are some sacrifices that people will make for their own health, but nothing makes parents move heaven and earth like the health of their child. 

 Sourced from Bloomberg, SCMP, WARC, KR-Asia. Image: ByteDance