September 24, 2019

Creating an Alliance for Ads

The Wall Street Journal reported on Monday that BuzzFeed Inc., Group Nine Media Inc. and Insider Inc. were joining together to “create an ad sales alliance to sell video advertising across all three companies’ websites, app and YouTube channels.”

The group is also in conversations with Discovery Inc., a major investor in Group Nine, as well as other media companies about joining the group, according to executives at BuzzFeed and Group Nine Media. A Discovery representative confirmed the talks.

The alliance, which doesn’t have a name yet, will sell ads as an independent body, the companies said. Participating publishers will share ad revenue based on the amount of ads they deliver.

No one should be surprised here.

Media buyers are in a quagmire. On one hand, they are desperate for scale because it easier to work with. The only way to get scale is to go to YouTube. On the other hand, YouTube continues to struggle with downright awful content on the platform that brands really don’t want to be around. (If brands can’t even stomach basic news content, how are they going to stomach some of the crap on YouTube?)

So, they’re in a tough position. And publishers on their own won’t ever be able to reach even a fraction of the scale that YouTube has.

But if they team up, reaching that scale theoretically becomes a lot easier. This is the same concept that the Washington Post is trying to do with their ad network (though there are some differences). On their own, publishers don’t have the scale. But if multiple publishers get together, it streamlines the operation for media buyers. And anytime you can make someone’s job easier, they’re hopefully going to give you more money.

There are two ways this deal can go.

The first is everything works out just fine. Because of the extra scale, this independent team of sellers will be able to sell larger deals and generate far more revenue for the respective companies than they would make otherwise.

The second is that this doesn’t work at all. You’re now going to have two teams that are trying to sell the same inventory. Will that not create more confusion to brands? I can imagine BuzzFeed, for example, trying to pitch an advertiser and then this alliance pitching the next day and the brand going, “but wait, am I getting BuzzFeed?” If BuzzFeed starts to lose deals because the alliance is winning them, how long before they get fed up? Are sellers going to get more protective of their strategic accounts, not letting the bigger alliance talk to them?

These sorts of deals sound interesting, but as time goes on, the reality becomes clear: it’s much easier to be a competitor than to cooperate.

Even if they can work together, scale won’t be enough.

Advertising executives said they don’t expect this alliance to pull marketers’ ad budgets away from YouTube, but they like the idea of simplifying buying across publishers.

Some advertisers also said the publishers will need to offer something beyond mass reach and brand-safe environments. “There has to be something more proprietary of them coming together—what else are they offering that’s unique?” said Christine Peterson, managing director and digital investment lead at Mindshare USA.

If you’re not pulling budgets away from YouTube, then you’re pulling budgets away from the individual publishers. It’s true that the revenue will be shared based on the number of ads delivered, but cannibalization seems likely.

That second paragraph in that quote is even more important. Part of what made the Washington Post’s offer compelling, at least in my eyes, is that it gives strong contextual targeting with premium ad formats. I’ll be curious to see what types of products this alliance is allowed to sell that entices brands to spend.

Although the article says this isn’t a precursor to mergers or acquisitions, I imagine that’s still being discussed. Step one, learn to sell with each other. Step two, merge together and have the scale without the added complexity of an ad alliance.

Though, to be fair, step two is a really hard step. At the end of this piece, we talked a bit about why mergers are going to be so hard. As a reminder:

It’s a question of who gets paid first, what the valuations are, and how the acquirer pays.

Guess we’ll wait to see how the alliance goes.

Onto Facebook News Tab

I’ve gone through a bit of an evolution on this newsletter vis-à-vis the Facebook News tab. When I first launched, I was against it. Then more details came out that revealed it was a headline feed and I was for it.

According to The Wall Street Journal, Facebook might actually be looking to pay money to local news brands rather than just the largest media companies, which would be a great step:

The social-media platform has been offering some smaller, regional publishers fees in the range of $500,000 annually, a person familiar with the matter said.

All of this to say that now I feel like I need to defend it just a little…

Over on Marketing Land, Adam Berkowitz, chief of staff at LiveIntent, wrote a quick piece discussing how media companies are starting up the same “tired debate about Facebook’s trustworthiness.”

He goes on to ask the important question: “Are publishers really going to fall for it again?”

There is no denying that Facebook has little care for publishers. But let’s get to the harsh truth. It doesn’t need to care for publishers. It needs to care about keeping people on its platform. That’s a fact.

But we should also be clear about what this News Tab is and isn’t based on all the information provided. It’s not a fully hosted article that “promises” fast experiences and revenue someday. Instead, it’s a simple headline and article preview feed with a link back to the publisher. It’s quite probably a traffic generator for publishers.

And it’s also a revenue generator…

Even better, it’s revenue that shouldn’t really require much change in how the company operates its business. Jon Steinberg at Cheddar said it best at The Information’s Media Bootcamp:

Always take the check. But you are never getting another check, so you either take the check and staff it in a way that you can do it and shut it down without hurting your people, or you figure out a way to make it self-sustainable.

If Facebook is going to offer you $3 million, take the damn check. But don’t suddenly hire another 50 journalists with that money because you think in another few years, you’re going to get another $3 million—you’re not.

Based on all the reported information, I have not been able to come up with one negative point about this deal. It’s true, Facebook probably hopes people will just read the headlines on the platform and never click over. And it’s true that depending on Facebook for traffic has made publishers complacent in the past.

But getting cash and hopefully traffic is a win-win for the publisher so long as they don’t expect that cash to ever come again. If publishers can use that cash to invest in the core business, voila, you’re in a much stronger place.

Jessica Lessin, founder of The Information, said (and I am paraphrasing) that she views this sort of cash as war chest money. Have it in the bank just in case for strategic opportunities, but don’t change your operating budgets too much because of it.

The money will come once but it will never come again.

Okay, that’s it. I’m stepping off my Facebook defense soapbox. 99% of the time, the company won’t have a publisher’s best interest in heart. But this time, I can’t think of a reason not to do one of these deals.