September 17, 2021
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Supply Chain Issues Could Hit Publishers in Multiple Ways

When we think about running our media businesses, the things that come to my mind are content creation, ad sales, finding subscribers, and various other talking points. They’re the ones I write about from week-to-week.

But there are fundamental disruptions taking place in our supply chain that are going to have direct and indirect effects on publishers. In many respects, we needed to start planning for this anytime before today.

So, what’s the problem?

At the core of it, the economy is unbelievably strong. According to this article published on The White House’s website:

While a fast pivot to growth is good news for businesses and workers, it also creates challenges. Entire industries that shrank dramatically during the pandemic, such as the hotel and restaurant sectors, are now trying to reopen. Some businesses report that they have been unable to hire quickly enough to keep pace with their rising need for workers, leading to an all-time record 8.3 million job openings in April. Others do not have enough of their products in inventory to avoid running out of stock. The situation has been especially difficult for businesses with complex supply chains, as their production is vulnerable to disruption due to shortages of inputs from other businesses.

What that quote effectively says is that so many businesses are trying to do things all at the same time that the supply chain—that system that that helps get goods and services to consumers—is overwhelmed. There’s simply not enough throughput to handle it all.

And it doesn’t appear to be getting better anytime soon. I reached out to Craig Fuller from FreightWaves, a B2B publication that covers the transportation space, for his assessment. He told me:

Supply chains are not going to feel normal until the economy slows down. As long as the physical economy is strong, you should expect delays and disruptions. There simply isn’t enough ships, trains, or trucks to pick up the slack. And trucks are the easiest of the three to build, but they require drivers and fewer and fewer people want to drive trucks, when they can find alternative work in warehouses, construction, food service, or on-demand delivery that pays as much, if not more.

It’s interesting to think about, but the only way to see supply chains recover from this is to see the economy weaken. But wanting the economy to weaken runs contradictory to what anyone should want. That said, a weak supply chain could contribute to a weakening economy. All I’ll say is that it’s much easier to write about media than be a supply chain operator.

But let’s bring this back to publishers. Why does this actually matter to us? We’re talking about content, ads, subscribers—a lot of digital stuff, right? The physical supply chain shouldn’t matter, right?

Unfortunately, that’s just not true.

Publishers are not just selling advertising and subscriptions anymore. Now publishers are earning a decent percentage of their revenue from commerce. In other words, they’re generating increasing amounts of revenue by selling things; the exact things that are now being held up because of slow transportation.

Consider BuzzFeed’s recent quarterly results. According to the press release, commerce and other revenue increased 82% to $17.1 million in Q2, driven “primarily by an increase in the number of online transactions generated compared to last year.” In other words, BuzzFeed drove the sale of more goods—likely owned and affiliate-driven—which means they got paid more.

But as we move into Q4, with things so backlogged, will there be as much to sell?

Web Smith, the founder of 2PM, tweeted on September 2nd: “Black Friday started yesterday. Nothing is on sale, it’s just that anything that is for sale is going to be purchased. No late fall gimmicks necessary.” On August 26, he tweeted, “buy your holiday gifts by the end of September.”

That’s the supply chain breaking. It can’t keep up, so retailers that were expecting to have strong Q4s—but did not plan accordingly—are going to be in for a rude awakening when they can’t sell anything in time for the holidays.

The other day, I was talking with one publisher that sells branded and “in the moment” merchandise. He told me that they were buying bulk quantities of blank shirts, hats, pants, etc. because he wanted to ensure that they were able to print around the holidays. This still necessitated him having a printer here in the States rather than depending on drop shipping.

If we look at what Smith is saying, it’s too late for most brands. By the time publishers that are building a commerce business get their things in order, the next expected delivery will be in January. That’s too late for the holidays. To be clear, publishers are just one part of this. I heard from one operator that DTC brands are in denial about these issues.

That’s the direct problem that some publishers might be dealing with and I’ll be very curious to see what BuzzFeed reports over the coming quarters.

There are also indirect problems that could affect publishers. The big one that I am thinking about is advertising. If retailers are struggling to get stock in, why do they need to advertise? The same might be the case for affiliate sources. If there are no products available, can publishers actually expect their affiliate partners to pay high commissions?

In a story for Digiday, Tim Peterson dug into how the fourth quarter was looking for publishers. The hesitation seems to be linked more to uncertainty about what society will be dealing with in December:

Meredith evp of digital sales Marla Newman said she has seen a bifurcation for the fourth quarter between advertisers that are doing deals ahead of time and those adopting a real-time approach and planning to pick up inventory throughout the period.

“We’re waiting for Q4 to happen as it’s happening,” said the unnamed publishing executive.

None of this is to say that this is tied to supply chain issues, but I can’t help but wonder if companies are looking at their stock and determining that spending as aggressively in Q4 may not be necessary.

Unfortunately, this is highly speculative and it could certainly play out that brands continue to throw money into advertising irrespective of supply chain issues. But if DTC brands and less-advanced retailers don’t have stock, they may not spend as much, which could depress process all around—especially on the programmatic side.

And for those that think this might be a short-term problem, think again. In a tweet, TRX Training President, John Hutchison, said: And then there’s those of us who thought we had robust supply chains only to see our container costs go up 10x and delivery dates quoted +/-3 weeks. So painful. You’re absolutely right about the upcoming BFCM [Black Friday, Cyber Monday] fiasco that is just around the corner. Won’t get better until mid’22.”

All things considered, the diversification away from advertising and subscriptions has been a big win for publishers. There are many brands that have built rather large businesses on commerce; however, with supply chains so royally screwed up right now, publishers might be in for some pain this holiday season.

Thanks for reading today’s AMO. If you have thoughts, please don’t hesitate to hit reply or join the AMO Slack channel. Thanks and have a great weekend.

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