May 10, 2022

Don’t Throw Baby Out With the Advertising Bathwater

There are two media markets, and their opinions are fundamentally different. On the one hand, you have those who spend too much time on Twitter. On the other, you have those that are healthy (ignore that hell hole that is Twitter, my addiction). And if you talk to them about advertising, it’s different.

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Now let’s jump in…


As I said above, I spend far too much time on Twitter. And it seems all anyone can talk about is the “fact” that we’re in a recession. Brian Morrissey has a good piece on it, lamenting the good times. Adam Ryan also has an article about the recession topic (I’d like to link to it, but I can’t because it’s not on the site).

It seems that recession is all anyone can talk about all of a sudden. I’m not smart enough to know whether we’re in a recession. But it has people spooked. And to some extent, it’s not surprising. Marketing is one of the first budgets cut when businesses need to start hoarding cash.

But it’s not so black and white. Take, for example, GovExec. I interviewed GovExec’s Tim Hartman last week at the Omeda conference. Recessions don’t affect his ad business as much because the government tends to step in when things turn sour. The government stepping in is another way of saying that it spends more, with that money needing to go somewhere. And his advertisers are trying to get a cut of that government pie.

And even with the big tech companies experiencing some tough times in the market today, it’s not so black and white. Look, for example, at what Uber’s CEO, Dara Khosrowshahi, said in an email to staff on Sunday. CNBC has the full email:

Meeting the moment means making trade-offs. The hurdle rate for our investments has gotten higher, and that means that some initiatives that require substantial capital will be slowed. We have to make sure our unit economics work before we go big. The least efficient marketing and incentive spend will be pulled back. We will treat hiring as a privilege and be deliberate about when and where we add headcount. We will be even more hardcore about costs across the board.

There is only a single sentence about marketing in the entire memo, and, even then, he refers to it as “least efficient marketing.”

And that’s pertinent because I think it points to the reality of advertising and recessions. The Great Recession lasted from December 2007 until June 2009. And spending declined. According to eMarketer, in 2008, total ad spending in the United States was $176.46 billion. It dropped 17.5% in 2009. But it was not as harsh if we look at digital ad spending. Here, eMarketer has an interesting thesis:

Digital ad spending declined in 2009 as well, but only by single digits—and that was after eking out an increase in spending in 2008. At the time, digital was a relatively small share of total ad budgets, and digital advertising was still playing catch-up in terms of its share of ad spending vs. consumer attention. Digital’s measurability made it attractive to frugal marketers looking to drive performance.

Emphasis mine. Read this and then look at what Khosrowshahi says. The reason digital held up alright is that marketers could track performance. And that’s basically what Khosrowshahi is saying when he refers to cutting the least efficient marketing.

Now, let’s look at what the public media companies are saying about their Q1 advertising revenue. First, we have The New York Times:

First-quarter 2022 digital advertising revenue increased 12.6 percent and print advertising revenue increased 30.9 percent. Digital advertising revenue was $67.0 million, or 57.6 percent of total Company advertising revenues, compared with $59.5 million, or 61.3 percent, in the first quarter of 2021. Digital advertising revenue increased primarily as a result of higher direct-sold advertising, including traditional display and podcasts, as well as the inclusion of advertising revenue from The Athletic. Print advertising revenue increased primarily in the entertainment and luxury categories, which were more severely impacted by the Covid-19 pandemic in the first quarter of 2021.

And then there’s News Corp:

Advertising revenues increased $17 million, or 20%, primarily due to 21% growth in digital advertising revenues, driven by improvement in the financial services and technology categories and benefiting from higher average yield, as well as 18% growth in print advertising revenues, which continued to recover strongly from the COVID-19 related weakness in the prior year. Digital advertising accounted for 62% of total advertising revenues in the quarter, compared to 61% in the prior year.

Both saw significant growth in advertising revenue in Q1. We could say, “yeah, but that’s Q1. We’re already into May.” And maybe that’s fair. But I think there’s something else at play here.

If a recession hits, we will see a flight to safety. And in marketing, that means a flight to what works. And when it comes to audience quality, The Wall Street Journal (a big part of News Corp) and The New York Times are both quality.

This is why I mentioned the two different media markets up top. For many Twitter-first media folk, this possible recession is the end of the world, and, in their opinions, advertising is done for. However, for many of those that are just hunkered down on their business, it’s not causing them much agita.

At that Omeda conference, I mentioned the possible recession to one operator. And he said, “it does me no good to spend too much time thinking about something I have no control over. So long as I provide a valuable audience to my partners and have enough cash in the bank, we’ll be okay.”

Is this operator naive? I don’t think so. While I anticipate ad spending slowing down if we hit a recession, we have to be careful not to throw the baby out with the bathwater. Last year’s exuberance was intense. It was arguably the most fantastic ad market we’ve ever seen. But a lot of dumb money was being thrown around. Companies with sky-high market caps were spending on everything.

Now, though, we will see the least efficient marketing get cut. The ad spending that doesn’t get cut will be directly tied to performance. So, if there’s anything you can do to prepare for a recession, focus on quality. Ensure that you’re providing the highest quality data to your partners, focus on ads that really perform, and remain competitive.

The last thing you should do is panic and make harsh decisions. Even during recessions, businesses need customers. And advertising is how they get said customer. Budgets may get trimmed. But you can’t control that. So, focus on what you can control. And make sure you have cash in the bank.

Endeavor completes two acquisitions

In separate releases published over the past week, Endeavor Business Media announced two acquisitions. First, it announced that it had acquired Putnam Media on May 2nd:

Endeavor Business Media announces the acquisition of Putman Media, a privately held B2B company specializing in key manufacturing markets including chemicals, food and pharmaceuticals, asset reliability, industrial automation and smart, connected manufacturing.

Then on May 5, it announced that it had acquired Microgrid Knowledge:

Endeavor Business Media announces the acquisition of Microgrid Knowledge, including an online news and information site designed to advance microgrid adoption and the Microgrid Conference series.

Terms of these deals were not disclosed. Endeavor has been incredibly busy this year. This year alone, it has also acquired Construction Business Media, Data Center Frontier, Interior+sources and BUILDINGS magazines, and ISE Magazine and ISE Expo. Like I said, a busy year.

The reality is that the b2b world is unbelievably fragmented. But what Endeavor is doing here is smart. It brings together related publications to help it expand its audience profile across multiple niches. And its a playbook that can work across any industry. Right now, Endeavor isn’t in the retail space, for example, but you could easily imagine it expanding into that by acquiring any number of niche, retail publications.

I would be shocked if this is Endeavor’s last deal of the year. In a world of fragmentation, Endeavor is looking to centralize as best as it can.

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