August 1, 2023

Some Life in the Ad Markets

I am starting to futz around with the newsletter and want to start adding a little more structure. At Morning Brew, we call this the “Top Blurb.” It’s an opportunity to inject personality, ground the newsletter, and also call attention to an important thing we are trying to promote. 

And so, that’s what we’ve got here. I’m digging into two things in today’s issue: the returning ad markets and The Daily Upside’s fork in the road. 

Also, tickets are still available for the AMO Summit. More on that below. 

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Are Ad Markets Starting to Wake Up?

Meta and Snapchat reported their earnings last week. But it was certainly A Tale of Two Cities when looking at the results of the two companies. 

CNBC reported on Meta’s results:

Revenue increased 11% from a year earlier, the first time the company has reported double-digit growth since the end of 2021. Prior to the first quarter, revenue had declined in three straight periods as the company reckoned with a sputtering economy and Apple’s iOS privacy change, which limited ad targeting capabilities.

The Facebook parent company forecast third-quarter revenue of $32 billion to $34.5 billion. Analysts polled before the report were expecting guidance of $31.3 billion, according to Refinitiv. That suggests growth of at least 15% from a year earlier.

Compare that to CNBC’s reporting on Snapchat’s results:

The company’s overall sales in the second quarter declined 4% from the $1.11 billion it logged in the previous year during the same period. It’s the second straight period of declining year-over-year revenue. 

Snap also issued financial guidance for the third quarter that it says is “built on the assumption” that the company’s daily active users will reach between 405 million and 406 million. As part of its guidance, Snap expects between $1.07 billion and $1.13 billion in total sales for the third quarter, which it said implies “negative 5% to flat year-over-year growth.”

Meta saw double digit revenue growth year-over-year. Snapchat saw another quarter where its ad revenue dropped. Proving there is a stark difference between where the two companies are, Meta is anticipating double digit growth year-over-year again versus Snapchat hoping to have revenue stay flat year-over-year. 

Growing revenue by 11% year-over-year when ad markets are supposedly not in a great place is a little abnormal. And so, the question is whether the markets are warming up or if marketers are just getting smarter about how they buy.

It’s a bit of both. 

The financial markets aren’t nearly as bad as we originally thought. Inflation has come down dramatically. People are still buying houses like interest rates don’t exist. Unemployment is incredibly low. And so, what could have been a potential recession—and for some of us, it legitimately felt like one—has maybe turned into a soft landing.  

According to a Digiday story on a similar topic:

“Marketers mostly budget for advertising as a percentage of revenue,” said Brian Wieser, media analyst and author of the Madison and Wall newsletter. “If they think they’re going to make a billion dollars in revenue during a quarter, and they historically budgeted 4.2% for advertising then that may fluctuate but it’s the percentage of revenue that drives the [ad spending] number.”

As those dollars grow, agencies get more opportunities to work on exciting campaigns and support their clients’ marketing endeavors, creating a positive ripple effect throughout the industry. In fact, agencies were feeling those reverberations last year when the amount of media dollars spent by the six largest media buying groups on behalf of advertisers rose to $401 billion, up 6.4% on the $377 billion in 2021, according to COMvergence.

And so, if the economy is not struggling as much as finance teams expected, they might be increasing the available percentage. 

The second reason—and why I think Meta is doing better than Snapchat—is because of the ability to target the right person and prove results. I can’t tell you how many times in the first half of the year I’ve heard the word “programmatic” and I work at a company known for newsletters. But the reality is, when the economy is rough, marketers are going to default to what they believe works best and that’s the partners that offer better targeting. 

This is where publishers can shine. We are able to provide targeting across two paths. 

The first is what the audience has told us about themselves. In B2B, this is a lot of the declarative data, including who they, are what they do, where they work, etc. In consumer, it’s often much harder, but there is still some data. For example, a local publication asking for zip code would give you something to work with. 

The second is by targeting based on what people are consuming. If we use Dotdash Meredith as an example, the team used to say that if you are reading an article about BBQ Ribs, you’ll likely be in the market for BBQ sauce. This is contextual targeting. But Dotdash Meredith recently rolled out its D/Cipher product which argues that it can understand a user’s intent for products across multiple articles. I wrote about it back in May:

But if we look at DDM’s site, there are a couple of examples that demonstrate a deeper understood intent. Here’s one. The client is looking to target “Retirement Savers.” The basic contextual targeting are the first two article suggestions:

  • What’s the best retirement savings account for me?
  • Should I invest in mutual funds?

Those make sense. But the third one demonstrates a deeper intent that might not make sense at first glance:

  • How much does Alzheimer care cost?

Of course this would relate to retirement savers. Perhaps someone who is actively saving for retirement has a parent who was diagnosed with Alzheimer’s disease and they are now worried about themselves. Or maybe they are already preparing to retire and just want to cover their bases.

In both cases, having the right retirement accounts is important. And so, these savers are likely to react more positively to a targeted advertisement.

And then the Holy Grail is when publishers can compare both the contextual with the declarative. By mixing those together, publishers can tell an incredible story to advertisers. And the best part is that none of it depends on a 3rd-party’s cookie. In many respects, that is reducing the reliance on other platforms, which is important for long-term health. 

The ad markets are waking up. But more than that, we are seeing platforms adjust to a world where 3rd-party cookies are going away. And if publishers do the same, we’ll continue to have a business that works. 

I’ve long believed that there is an opportunity for B2B publishers to build high-quality, down funnel SaaS-like products. Building a product where you are providing proprietary data, in-depth research, or highly exclusive and real time news can unlock a higher price point in a way a general content subscription can’t.

I’ll be digging into this more at the AMO Summit here in NYC on October 26th in a panel that I call the SaaSification of Media. Joining me on stage are two unbelievably talented professionals:

  • Rachel Loeffler, EVP & GM, Politico Professional
  • Jason Yanowitz, Founder, Blockworks

If you’re thinking about this as a path for your business, you won’t want to miss it. Buy your ticket today before they’re totally sold out

The Daily Upside’s Fork in the Road

There’s a great piece on Business Insider about the growth of The Daily Upside, one of the many newsletters that popped up to follow in the footsteps of the great success Morning Brew and The Hustle had. The piece digs into its business—1 million subscribers and $2.3 million in 2022 revenue with 50% expected growth year-over-year. 

But there’s one part that I think is worth exploring. 

Next on Trousdale’s agenda: Figuring out a version of The Daily Upside’s newsletters that people will pay for, adding more newsletters, and getting into podcasts and short-form video. Meanwhile, he sees newsletter subscriptions reaching 2 or 3 million over the long term.

He’s right that there is likely a path to grow his newsletter to two or three million, but I believe that it would be a colossal mistake to try and chase paying subscribers and/or podcasts and short-form video. The mistake that media companies make—and I speak from experience—is we assume that just because we’re good at one type of content, we’re going to be great at every type of content.

Here’s what I would do it if I were running The Daily Upside. I would spend the next 3-6 months digging into exactly who my audience is. I’m like a broken record, but in 2023, there’s zero excuse for a newsletter operator to not be capturing 1st-party data. I’d be looking to capture their job level and the area of finance they work in since I suspect a disproportionate percentage of his audience come from that world based on the content.

From there, I would start launching newsletters targeting sectors of finance. He could build newsletters like:

  • Banking Upside
  • Hedge Fund Upside
  • Private Equity Upside
  • Wealth Management Upside

And the list goes on. In many respects, the team should look at what Source Media (now called Arizent) has done. It runs Accounting Today, American Banker, Asset Securitization Report, The Bond Buyer, Digital Insurance, Financial Planning, National Mortgage News, and Employee Benefit News. I suspect The Daily Upside could target those industries too. With the right 1st-party data, it can determine where it has the bulkiest chunks of audience to launch these.

This fits The Daily Upside’s core competency a lot better than trying to spin up multimedia efforts. Could they get it right? Of course. But the revenue is going to be much stronger by targeting sub-sectors in the finance space. And there is a lot less platform risk as well since multimedia is so dependent on the major social media platforms and YouTube.

Thanks for reading today’s AMO. If you have thoughts, hit reply. A couple of closing points:

  1. Become an AMO Pro member to begin receiving the second edition of AMO which comes out on Fridays. You’ll also receive an invite to the AMO Slack and early bird access to future events, both in person and online. Sign up here.
  2. Tickets are still available for the AMO Summit on October 26th here in NYC. Buy now before they’re totally sold out.

Have a great rest of your week and see you on Tuesday!