Brian Wieser, GroupM’s Global President of Business Intelligence, talks to WARC’s Alex Brownsell about the rise of Netflix, the fall of Quibi and the prospect of Facebook or Google being broken up.
The forecasts are in, and the assessment is predictably calamitous. WARC Data’s own ‘State of the Industry’ advertising expenditure report suggests that 2020 has been “the most hostile year for the advertising economy ever” since the World Advertising Research Center first started crunching the numbers four decades ago.
Yet renowned ad industry analyst Brian Wieser, now with WPP’s GroupM, is more phlegmatic.
“This year will, in some ways, be remembered as more of a mild setback than an industry-changing economic catastrophe for the media business,” he wrote by means of an introduction to GroupM’s recently-published global end-of-year forecast.
In conversation with WARC, the former Pivotal Research man argues that the impact of COVID-19 has been overstated as a driver of media business performance. Rather, he said, the pandemic has only served to accelerate existing trends – from the rise of e-commerce, to the struggles of public service broadcasters (PSBs).
While the industry agonises over the future viability of traditional media channels, Wieser suggests that marketers should embrace the effects of technological and corporate Darwinism, and focus solely on finding the best strategy for their brand.
“It’s so funny when I hear the terms ‘optimism’ or ‘pessimism’. If I think that a medium is going into terminal decline, am I being pessimistic? Not necessarily from the vantage point of the marketer,” he said.
“Is ad-free content rising as a percentage of time spent with a TV screen? Probably. But is that necessarily a bad thing? It's a bad thing if you’re a media owner and you're counting on advertising spend continuing to show up. Can the marketer adapt and evolve, and figure out different ways to constantly goals? Sure.
“It's not necessarily in marketers’ interests that any one media owner or media type is thriving. The optimism from where I sit is whether or not the marketer is able to accomplish their goals.”
WARC asked Wieser to share his predictions for 2021, including:
- Whether TV media can recover its pre-pandemic share of spend
- Why Quibi failed, and what it means for the SVOD market
- The possibility of Google and Facebook being broken up
- The impact of tightening data privacy regulation
‘Disinvestment in traditional ad-supported TV is the problem’
GroupM forecasts that TV advertising will decline by 15.1% in 2020, before rebounding to grow 7.8% next year – assisted by a 23.2% increase in ad spending on AVOD and BVOD services in 2021. Yet Wieser is sceptical that the medium can claw its way back to pre-COVID-19 investment levels.
“The biggest issue driving the health of a given medium is the health of the underlying advertiser-base, and the degree to which they're allocating resources to the medium,” he said.
TV’s most dependable advertisers are bigger brands with decades of heritage, which have matured and have less need for awareness-driving media, Wieser claims. Furthermore, today’s digital economy – dominated by more nimble DTC brands – is becoming less likely to establish the kind of large-scale entities that require TV’s brand-building attributes, he said.
While many have pursued online video ad dollars with the development of on-demand and OTT services, Wieser believes they must rapidly scale their spending on content or continue to lose audiences to cash-rich SVOD rivals like Netflix and Amazon Prime.
“Media owners’ relative disinvestment in traditional ad-supported television is the problem. Netflix and Amazon have been emboldened to sustain their spending levels – they would be increasing their spending on content, were it not for production shutdowns,” he said.
“When you look at a budget for a [BBC and ITV joint venture] Britbox or [Groupe TF1, France Télévisions and Groupe M6 initiative] Salto, they talk in terms of £100m or €100m. With Netflix, it’s closer to a €1bn or £1bn in a given market. I think we know how this ends.
“If media owners want to sustain the appeal of their medium to advertisers, they need to either increase their investment in content and sacrifice margins, or risk ongoing declines.”
‘Quibi was a disaster from the start’
Netflix aside, questions remain over the ability of SVOD providers to retain audiences – especially as services like Disney+ look to hike prices up in 2021. Amazon is also a special case, Wieser suggests, with content investments designed to reduce churn in its all-important Prime business (“[SVOD rivals] are playing checkers while Amazon plays chess”).
Though not closed to new entrants, any new player in the SVOD market must be sufficiently ambitious in its content investment plan to stand any chance of establishing a foothold. This, he believes, was a key contributing factor in the swift demise of high-profile mobile video app Quibi – and may dissuade further competitors joining the fray.
“Quibi was a disaster from the start. That was a very, very different situation – never lump Quibi in with the other [SVOD players]. Quibi was fixated on a concept that is pretty-well disproven in having any legs, and they launched the product without proof of concept. That's really unheard of,” said Wieser.
“Here's the problem: a billion-dollar investment in content? That's a down-payment on a content-related business at this point in time. If someone is willing to or able to invest in enough in original content, they'll be okay. But the problem is, how appealing is it to spend $10bn and create a business that might produce a low single digit margin, if you are a new entrant?”
‘Companies may choose to break themselves up’
With the first shots fired in the battle to force Facebook to be broken up, the coming year is likely to be dominated with debate over the future make-up of Silicon Valley. Yet Wieser believes such regulatory efforts are misplaced, and may only serve to expand the share of market occupied by the constituent parts of the Duopoly.
“I think companies may choose to break themselves up, in some cases, rather than go through a protracted legal battle. We know where this probably ends – there will be more players among the largest groups, which will subdivide in some form. What shape it takes specifically, it's hard to hard to know,” said Wieser.
“As we saw when AT&T was broken up, individually the ‘Baby Bells’ became bigger. You could argue that market power stayed within the descendants of those entities and it potentially crowded out the possibility of new players evolving.”
Nevertheless, the idea of Facebook being forced to spin off Instagram, or Google opting to divest YouTube, may not be so bad for marketers, he adds. While it is hard for a $100bn corporate gorilla to devote time and managerial resource to a venture which will only generate tens of millions of dollars, smaller entities are more likely to pursue innovation.
“Capital allocation is generally superior in a business that is large enough in scale to have access to capital and yet close enough to the ground that they can see the opportunity and not have it bogged down in bureaucracy,” he said.
‘All advertising is the least-bad-alternative business’
Wieser believes that attempts to tighten privacy legislation will only serve to entrench the position of digital platform incumbents. This is partly because regulators over-estimate the influence of advertising and the sophistication of current data-driven digital marketing practices, and forget that most brands simply wish to gain a miniscule advantage over their rivals.
“All advertising is the least-bad-alternative business. It's not that it was any good to begin with, when you look at how we use data. Too many people out there actually think that marketers know what they're doing with the data they have,” he commented.
“[Brands] might tell themselves that they know all this amazing stuff about individual consumers, and then consumers fear, ‘Oh my god, this marketer knows this about me.’ No, they don't actually know that much. The goal is to know more than they did before, and – better yet – to know more than their competitor does. That relativism is the most important thing.”
The spirit of legislation like GDPR, argues Wieser, can be boiled down as essentially being, “Dear brands, if you can persuade a consumer to part with their personal information, you probably don't deserve it.” The challenge for marketers and media owners in 2021, he adds, is to find the right pathway to earning that right.
Click here to read GroupM’s ‘This Year Next Year: Global end-of-year forecast’ report.