• msg

msg Publicly Traded Company Analysis -- Q2 2019


Overall Insights

  • Most companies are constantly looking to add more attribution to their respective platforms -- Driving ROI is the best advertiser retention tool

  • The big platforms are always inventing new ad formats, not the IAB

  • All the TV and Cable TV companies reinforce they are a BRAND safe environment for advertisers -- take that Google and Facebook

  • Advertisers still recognize that television is one of the most effective mediums to sell products

  • FAANG and the new DTC advertisers, like Peloton and Chewy, are driving growth in the upfronts

  • With TV ratings declining and viewers moving to non ad supported services like Netflix and HBO where do advertisers go in the future to reach mass audiences?

  • The best upfront many TV companies have seen in years, Connected TV was the number one point of discussion during the recent upfront season

  • Programmatic is perfect for TV pushing CPM’s up with auction dynamics

  • Once again, direct response advertising is driving revenue growth

  • Small businesses now have free tools from the self-serve platforms, that previously only the largest companies could access

  • Every TV and cable network claims to be #1 -- where is Nielsen with the truth

  • Small/mid-size businesses and DTC companies are driving marketing across the agencies

  • As TV companies move to DTC they will need a whole set of muscles inside the organization from customer acquisition/retention to developing ad products to billing

  • Very expensive to acquire customers for subscription services -- will be fascinating to watch Disney + as they start marketing the service

  • Desktop is dead, mobile is still strong and CTV continues to rise

  • Augmented reality being mentioned by the big tech companies as they plan for future growth

  • The big tech players are using machine learning to make their respective platforms better for users and advertisers

  • Gaming mentioned often as a big growth engine for many of the companies -- I assume more acquisitions and investments will be made in gaming by the media and tech platforms

  • Self-serve platforms continue to win - recurring theme since I started these analysis

  • The large platforms have abundant supply, they still have room for more advertisers

  • Podcast/audio revenue is growing across many companies and becoming a focus

  • Intent based content performs very well for advertisers

  • Live sports work for advertisers and it always will

  • All product focused companies start primarily with a great user experience and do everything from there

  • When will a TV company go 100% scatter and go after huge CPM increases by avoiding the upfront

  • Some analyst posed questions on the economic cycle in the US, been strong for a very long time, needs to eventually come to an end

  • Nielsen and emarketer mentioned often, the IAB rarely

  • Agencies are telling better stories, Publicis actually mentioned Google, Facebook and Amazon several times

  • Hardly any questions about regulation-- again the analysts don't ask the hard questions

  • Again, not impressed with the analysts questions for the most part, they seem very superficial and they don't dig deep enough. Though I have noticed improvements on some of the calls.



Company Specific Insights

  • Amazon and Netflix continue to not be judged on profit; they continue to pull this off quarter after quarter -- when will a traditional company try this controversial approach

  • Apple is morphing into a services company with services margin of over 60%; Apple also big in the Wearables, Watch and AirPods. Additionally, Apple made no real mention of Apple's News/Apple News + -- guess it is not doing that well

  • Netflix denies they will ever be ad supported -- I agree 100%, no ads means a better user experience

  • Disney+ platform is forcing others to step up their programming efforts

  • Amazon working with The Trade Desk on connected TV -- nice to see a walled garden actually being opened up

  • Google and Facebook continue to move deeper into e-commerce as the try to take on Amazon

  • Facebook and Google are still 15 to 30 times larger than Twitter and Snapchat from a revenue perspective

  • Spotify really focused on podcasts, ambition is to reinvent the podcasting ad experience by building a new tech stack to enable targeting, measurement, and reporting capabilities

  • Viacom appears to have the best CTV platform and strategy of all the cable and TV companies -- though they need a self-serve platform to play with the big tech companies

  • Roku has over 30 million active accounts, reached 1 in 5 U.S. households and domestic scale rivals the biggest MVPD/Cable companies.

  • Roku has over 40 DSPs that are connected into the Roku ecosystem -- that seems to many

  • The Trade Desk signed 55 new MSAs, representing some of the largest brands on the planet. This is the highest number of new MSAs signed in one quarter since the end of 2016. Through the first half of the year, 60% of the Fortune 500 companies are now buying advertising through TTD

  • More than 75% of the 13 to 34-year-old population in the United States is active on Snapchat, making Snapchat larger than services like Facebook and Instagram among this audience and demonstrating the broad-based appeal of the SNAP service

  • Comcast overall Upfront portfolio volume was close to $7B, an increase of 10% Y/Y, and average price (CPM) was similarly strong

  • Twitter needs a business leader on the call like Facebook has Cheryl Sandberg and Snapchat now has Jeremi Gorman

  • YouTube brand advertising is still the largest part of the business. It's growing at a strong pace. Though YouTube continues to see substantial growth in direct response.

  • The Office was important to NBC because, according to Nielsen, The Office is the number one show on Netflix and has about 5% of all of Netflix's volume -- though that seems high to me

  • NYT does not expect the second half of 2019 to be as strong in digital advertising as the first half



Industry Trends

  • In many industries, the companies that are operating at scale, have brand awareness, own their customer, have proprietary content, and own the data, will be able to disproportionately take advantage of those opportunities for the benefit of their customers and their shareholders

  • 100% of the digital growth in the U.S. is actually captured by Facebook and Google -- though I think it is probably closer to 90-95%

  • Likely never see a channel larger and more full of opportunity than we have right now with CTV

  • In 2019, according to IDC, global advertising spend will be about $725B, up over 4% from 2018. At current growth rates, global advertising will be a trillion dollar industry in about seven years, one of the only handful of industries with a TAM (total addressable market) over that mark.

  • Programmatic is still a relatively small part of total global advertising. It is estimated at around $34 billion in 2019. But it is growing five times faster than total advertising at around 20% year-over-year according to Magna Global.

  • The digitization of advertising, particularly TV, is massive. The shift to data-driven decisioning versus guessing or intuition is game changing.

  • TV is effective, but it's also expensive, and its reach has been declining as has its viewership. In fact, TV's reach has declined to 86% of the US adult population from 95% and a reach of just 74% with millennials. On top of that, as Nielsen pointed out, 40% of TV viewers are light TV viewers and therefore hard to reach with any amount of TV advertising.

  • Due to cord-cutting 30% of U.S. households are no longer reachable through a traditional TV. Expect that number to increase to 41% in 2022, making CTV an increasingly essential way for brands to reach video consumers in a brand-safe environment at scale.

  • Drive towards $1 Trillion total advertising market by 2027, about half of that market will be in some form of video. And most of that will be on premium TVs. At the very beginning of the digitization of TV advertising.

  • More and more consumers watch TV content through connected devices

  • The significant proportion of ad spend growth now being driven by small and medium-sized businesses and DTC businesses. These are the kind of businesses that not using ad agencies

  • Internet works best seeing ads you'd rather see vs. ads that are just visual pollution

  • Audio is probably the best value in programmatic today

  • Before long all advertising will be digital and most of the programmatic

  • None of the big holding companies are looking to give Google more money

  • Retailers still don’t invest in their own Apps to fully capture the growing smartphone usage and purchasing power

  • Having first-party customer relationships at scale is a fundamental advantage

  • Most of dollars flowing into OTT advertising today are coming out of TV budgets

  • There is clearly a fundamental shift under way in the content landscape, one consequence, other than intensifying regulatory scrutiny of big digital, is a gradual transference of value to content creators

  • The Pharma category continues to be pretty strong. The pipeline of the FDA has never been stronger and so the volume of drugs that are getting approved or have been approved and therefore have marketing budgets attached to them are pretty substantial.

  • Intermediaries who don’t have that direct consumer relationship and who are going to be more challenged to articulate and justify the uses of data

  • With respect to 5G, in the extremely early innings of it in the US and even more so on a global basis. 5G will change how the home works in the future when it comes to media

  • To sustain that great content, advertising must keep up and keep innovating. In the near term, as CTV advertising grows rapidly, that means fewer ads with greater relevance.

  • The data that will fuel more relevant advertising won't come from TV viewing data alone. It will come from where you click on your many devices, what other content you interact with, and an understanding of what else you are interested in

  • Most people believe that the U.S. economy continues to perform well. At the same time, they recognize that the U.S. economy has never performed this well for this long at any point in the past, and so at some point you can expect some dips or some changes

  • The innovation of streaming services is also drawing consumers to shift more and more from linear television to streaming entertainment



Questions the Analysts need to Ask

  • What is your POV on regulating the US big tech companies, in particular, Google, Apple, Facebook and Amazon, how do you think the US government should act, if at all, and what does potential regulation mean for your company?

  • As TV ratings continue to decline, and more users switch to ad free services like Netflix and HBO, how will marketers reach a mass audience? Additionally, how will marketers reach wealthy households who can easily now avoid commercials?

  • Can you please provide more insight into CPM’s on your platform, what are CPM’s in the previous quarter and the current quarter and are they going up or down Y/Y and why?

  • Tell me more about your advertising self-serve platform and if you don't have one why and when will it be available to marketers?

  • Who/What is your biggest competitor?

  • How do you really help your advertisers reach not just people, but the precise people they actually want to reach and then measure the results?


Summary of Each Company


Netflix -- US paid membership was essentially flat in Q2, expect it to return to more typical growth in Q3, and are seeing that in these early weeks of Q3. Like HBO, Netflix is advertising free and remains a deep part of the brand proposition; when you read speculation that Netflix is moving into selling advertising, be confident that this is false. Netflix believes they will have a more valuable business in the long term by staying out of advertising and instead entirely focusing on competing for viewer satisfaction. Over the next 12 months, Disney, Apple, WarnerMedia, NBCU and others are joining Hulu, Amazon, BBC, Hotstar, YouTube, Netflix, and many others in offering streaming entertainment. The competition for winning consumers’ relaxation time is fierce for all companies and great for consumers. The innovation of streaming services is also drawing consumers to shift more and more from linear television to streaming entertainment.


Facebook -- Q2 total ad revenue was $16.6 billion Ad revenue grew 28% Y/Y. More than 2.7 billion people using Facebook, Instagram, WhatsApp, or Messenger each month, and more than 2.1 billion people who use at least one of the services each day. Investing a significant amount of engineering resources in building tools to review products in the ways they use data, set a new standard for the industry and shipping new products will take longer. Mobile ad revenue was $15.6 billion, contributing approximately 94% of total ad revenue. Gave small businesses free tools that previously only the largest companies could access. Improved how quickly refresh the ads people see. In the past, these ads were pre-selected at the beginning of a feed session. Now, the ads are refreshed while people are scrolling through their feed. On shopping, building new ways for people to shop directly on the apps. Continuing closed beta with 23 partners on Instagram and launched a new feature this quarter that enables Creators to tag products in their posts. In Q2, the average price per ad decreased 4% and the number of ad impressions served across the services increased 33%. Similar to last quarter, impression growth was primarily driven by ads on Instagram Stories, Instagram Feed, and Facebook News Feed. Challenge training the market that you can’t just take your TV ads and put them on Facebook, because they don’t perform the same way. The best TV ad is 30 seconds, it builds slowly to a story, the product reveal is usually at the very end, the best mobile first ad or ad-on Facebook kind of gets to the main point or gets to the product in the first three seconds, captures your attention much more quickly. Seeing faster growth in impressions coming from Stories. Helped businesses make the shift to mobile and now we are helping them shift to Stories, video and eventually messaging. Not enough to make these new formats available, also need to make it easy for advertisers to create effective ads. Do this by launching new ad products and by improving our existing ones to deliver more value for people and advertisers. The Y/Y decline in average price per ad reflects an ongoing mix shift towards Stories ads


Amazon -- Net sales increased 20% to $63.4B. Other revenue of $3.0B, up 37% Y/Y, primarily includes sales of advertising services. Prime Day was once again the largest shopping event in Amazon history with more than one million deals exclusively for Prime members and more than $2 billion of products were bought from small and medium-sized businesses. Over the two days of Prime Day, on July 15 and 16, sales surpassed the previous Black Friday and Cyber Monday combined. Free one-day delivery is now available to Prime members on more than ten million items, and just getting started. Prime Video received 47 Emmy nominations. Excited to have acquired the Sizmek ad server and the Sizmek dynamic creative optimization or DCO. Customers are going to be able to continue to use those proven products and services. Invested in the long-term success of Sizmek. Amazon advertising and Sizmek has many mutual customers, know how valued these prudent solutions are to the customer base. Adding more and more advertising for the roll out devices and Prime Video -- new Prime Video content in particular internationally. Video advertising is one focus areas for expanding video and over the top offerings for brands. Taken some steps with live sports and then IMDb TV, but continue to do things like add more OTT video supply, etc.


Google -- Revenue of $38.9B up 19% Y/Y. Results were driven by ongoing strength in mobile search, in particular, as well as YouTube and Cloud. Big contributor was costs associated with content acquisition costs, primarily for YouTube, and mostly for advertising supported content. Google Sites revenue was $27.3B up 18% Y/Y. Network revenues were $5.3B, up 9% Y/Y, continuing to reflect the performance of the primary drivers of growth within network, namely Google Ad Manager followed by AdMob. Broader vision to build the more helpful Google for everyone and organize the world's information and make it universally accessible and useful, evolved from a company that helps people find answers to a company that helps you get things done. Redesigned mobile search page and brought popular full coverage feature to search to better organize news results. YouTube channels with more than 1 million subscribers grew by 75% Y/Y. Announced a unified shopping experience and universal shopping cart, all of which help to make Google more shoppable. applying machine learning to both the user and advertiser experience helped drive revenue growth. YouTube revenue growth was strong in the first quarter and again strong in the second quarter. For YouTube, brand advertising is still the largest part of the business. It's growing at a strong pace. Through continue to see substantial growth in direct response.


Microsoft -- $125B in revenue for the full year with double-digit top line and bottom line growth. Commercial Cloud business is the largest in the world surpassing $38B in revenue. LinkedIn has 645M members. Microsoft Teams now has more than 13M daily active users and 19M weekly active users. Investing to empower the world’s two billion gamers to play the games they want, with anyone, anywhere on any device with the new game streaming service, Project xCloud, which will enter public trials this fall. Xbox Live Monthly Active Users increased to a record 65M.


Verizon -- Verizon Media Group revenue is $1.8B, down 3.0% Y/Y, an improvement from the 7% Y/Y decline reported in the first quarter. Gains in native and mobile advertising continue to be offset by declines in desktop advertising though the business continues to build on positive momentum in key areas. Continuing to migrate customers to recently integrated advertising platforms, simplifying interactions with partners and driving synergies within the business. Remain focused on growing audience, engagement and monetization across super channels which includes sports, finance, news, entertainment, home and mail. During the quarter launched Yahoo! Finance Premium and HuffPost Plus which is a subscription services that enhance the experience of two of the most popular media assets. Want to partner with content players instead of investing on their own.


Twitter -- Revenue grew 18% Y/Y, driven by strength in the US Revenue. Total advertising revenue was $727M, up 21%Y/Y. Ongoing product improvements continued to drive growth in average monetizable DAU (mDAU), which reached 139 million in Q2, up 14% Y/Y. Made a number of product improvements in Q2, including better relevance in Home timelines and notifications. Video ad formats continued to show strength, notably from Video Website Card, In-Stream Video Ads, and First View ads. Data licensing and other revenue totaled $114 million. US advertising revenue totaled $379 million, an increase of 29%. Large to mid-tier customers continue to represent a sizable majority of the advertising revenue, while the self-serve channel continues to deliver growth off a smaller base. Total ad engagements increased 20%, resulting from increased usage and improved clickthrough rates across most ad formats. Focused on delivering better relevance, making it easier for advertisers to declare objectives, initiate campaigns, and measure success. Continue to add people to the team that works with advertising partners. Made decisions in Q2 to deprecate certain legacy ad formats in order to better serve customers and drive greater focus in revenue product. Those decisions likely have a negative near-term revenue impact. Much work on the ad server to make sure that it is positioned to move quickly to try new things, to attract great people to the company who want to work on the latest technology. Deliver better relevance, to help advertisers reach their objectives better, move faster and deliver stronger ROI for advertisers. Want to help advertisers launch new products and services, connect with what's happening, and move further down the funnel with ad formats, think there's a lot more opportunity for Twitter to help them deliver. Data licensing (including MoPub) and other revenue totaled $114 million, an increase of just 4% Y/Y. Highest priority is to improve the health of the public conversation on Twitter, and an important part of that is ensuring rules, and how they are enforced.


Snapchat -- $388M in revenue up 48%Y/Y. Daily active users now at 203 million. More than 75% of the 13 to 34-year-old population in the United States is active on Snapchat. Worked with partners to release 7 new premium games. Investing in premium content, seeing the quality of the platform improve. Augmented reality has become a daily behavior for the vast majority of the community. Number of active advertisers continues to grow. There were more ad accounts active on Snap this quarter than ever before, yet remain constrained by demand, not by supply. Focused on two fundamental priorities in the ad business. The first is to develop powerful ad formats that are both innovative and easy to creat and the second is to show consistent, predictable results for advertisers, driving measurable ROI and enabling them to optimize for the outcomes most relevant to them. Announced Snap Select for premium video ads, Snap Select combines things brand love: 6-second, full-screen, non-skippable video product running adjacent to a set of premium shows; bought by a simple one-click buy flow; at a predictable fixed price. Driving ROI is the best advertiser retention tool. Started testing new Instant Create onboarding flow, which generates ads for businesses in 3 simple steps from their existing assets. Believe that augmented reality is the future of experiential, immersive advertising. Sales team now fully vertical focused.


AT&T -- Merger synergies remain on track. Record year, 191 Primetime Emmy nominations for WarnerMedia and HBO alone scored 137 nominations. Turner had $3.4 B in revenue, up 1.9% Y/Y due to a 3.9% increase in subscription revenues and 33% growth in content and other revenues, partially offset by a 4.4% decline in advertising revenues. Benefited from higher domestic affiliate rates and growth at Turner’s international networks; revenues were impacted by unfavorable foreign exchange rates. Advertising decreased due to the shift of the NCAA Men's Final Four Championship game and lower audience delivery at Turner’s domestic entertainment networks; international advertising revenues declined and were impacted by unfavorable foreign exchange rates. HBO with $1.7B in revenue, up 2.9% Y/Y reflecting a 44.9% increase in content and other revenues, partially offset by a decline of 0.9% in subscription revenues. Subscription Revenues declined year over year due to lower domestic linear subscribers, partially offset by higher digital and international growth. Warner Brothers with $3.4B in revenue, up 2.5% Y/Y due to 13.4% growth in theatrical product revenues and 27.8% growth in games and other revenue, which offset a 14.3% decline in television product revenues. Theatrical product increased primarily due to higher home entertainment revenues. Television product decreased primarily due to lower licensing revenues. Games and other increased primarily due to the release of Mortal Kombat 11. XANDR with $485M, up 23.7% Y/Y; without AppNexus, revenues were up 4.1% year over year


Pinterest -- Q2 revenue of $261M up 62% Y/Y, more advertisers recognize the power of the platform to reach consumers. Total U.S. revenue was $238 million, an increase of 55% Y/Y. Monthly Active Users (MAUs) hit 300 million during Q2. Made progress on a number of fronts, including the internationalization of the ad business, simplifying the ad systems for small and medium businesses and improving advertisers ability to measure the effectiveness of their ad spend. Performance was driven by a combination of international and U.S. growth. Continue to grow revenue from both new and existing advertisers, and accelerated growth of active advertisers to the highest rate in over two years. Product innovation also drove Y/Y revenue growth, in particular the adoption of optimized conversion objectives and new video ad formats. More share of wallet with incumbent large advertisers. new and emerging verticals. Talked previously about auto and entertainment as some new verticals. Working to implement Pinterest first-party tag. Announced that a number of integrations with platforms that make implementing the tag just as simple as pushing a button. Announced integration to Google Tag Manager, PixelYourSite, TOEM, WooCommerce, and Square all in this quarter, and look to expand that coverage overall.


Spotify -- Revenue was €1,667 million in Q2, 31% Y/Y. For Ad-Supported business, strength in the US. Audio was the fastest growing product for the third consecutive quarter, up 38% Y/Y. Programmatic and Ad Studio revenue growth accelerated to 71% in Q2, and now account for approximately 30% of total Ad-Supported revenue. Programmatic growth in the US exceeded 50%, and the next 5 largest markets in aggregate increased triple digits Y/Y. Seeing increased demand for podcast advertising following the recent acquisitions and continued development of owned and exclusive non-music audio content. While still small, continue to expect fast revenue growth from podcasts through the remainder of 2019 and into 2020. Over time, ambition is to reinvent the podcasting ad experience by building a new tech stack to enable targeting, measurement, and reporting capabilities like we have for the core Ad-Supported offering. Users who are listening to podcasts are also listening to more music. Users listened to more than 17 billion hours of content on the platform, up 35% Y/Y. Total MAUs grew 29% Y/Y to 232 million. Finished Q2 with 108 million Premium Subscribers globally, up 31% Y/Y.


Apple -- $53.8 billion, up 1% Y/Y. Blowout quarter for Wearables, accelerating growth of well over 50% and a new high watermark for services, set an all time revenue record of $11.5 billion. Now have over 420 million paid subscriptions across the services on the platforms goal of surpassing the 500 million mark during 2020. Apple Pay is now completing nearly 1 billion transactions per month more than twice the volume of a year ago.Double-digit growth in the App Store search ad business. Benefiting from a broader secular move to over-the-top services. Enormous amount to look forward to over the next few months, including the launch of new services like Apple Arcade, Apple TV+, and Apple Card.


Roku -- Revenues rose 59% to $250.1M. Active accounts exceeded 30 million. Reached 1 in 5 U.S. households and domestic scale rivals the biggest MVPD. The Roku OS was built to create value for advertisers and content distributors. Ad business is thriving as from the superior solution providing precision targeting, access to premium inventory, unique sponsorships, and OTT reach that an individual publisher of third-party ad tech provider cannot match. Robust growth in advertising continued as Roku monetized video ad impressions once again more than double Y/Y and expect that trend to continue throughout 2019. Proving to advertisers and content providers that Roku delivers incremental substantial reach over traditional linear TV, and more effective at building ad products. Continue to command premium CPMs, it’s a function of having a great product that prudently performs better than the alternatives. There are over 40 DSPs that are connected into the Roku ecosystem. Diligently working on ad buffering, completion rates and also new formats, new sponsorship brand integration opportunities. Most of dollars flowing into OTT advertising today are coming out of TV budgets. Third-party entities, intermediaries who don’t have that direct consumer relationship and who are going to be more challenged to articulate and justify the uses of data.


Comcast -- 55 million valuable customers in many of the world's most attractive markets. At NBC, path to finish number one in the U.S. for the sixth straight year in the key demographic of adults 18 to 49. The popularity and scale of this premium content and advertiser's need for trusted brand safe environments drove NBCUniversal's upfront to record levels this year. Advertising is a core strength. And once again, led the market on both volume and price. The overall portfolio volume was close to $7 billion, an increase of 10% over last year, and average price was similarly strong. Helped shift the marketplace to embrace all video, unifying all screens, platforms and content, breaking down the historic barriers between linear and digital, which is particularly important as we prepare to launch the ad-supported streaming service next year. To that end, recorded digital video sales, an increase of 50% over the prior year.For the last seven years, been selling all of channels together at the upfront. NBC and primetime was up about 13.5%. Maybe the most interesting is that now the biggest category of advertising are upfront is from companies that are digital-native companies, the FAANG companies, Peloton, streaming businesses, businesses that basically exist on the Internet. Interestingly, those businesses find television advertising very, effective and because they're so data-oriented, they can measure the impact of television advertising. So well over $1B this year came from digital-native companies that literally didn't advertise 4 or 5 years ago and that's what happens when an advertising market is in good shape. You need a good economy and then you need some new advertisers. Fortunate enough to have both. The advertising market is very, healthy and that's part of the reason very optimistic about the future of broadcast and cable channels. Hard at work on the streaming plans. Goal is to launch the service next April. Have over 500 people working on the service at present. The Office was important to NBC because, according to Nielsen, The Office is the number one show on Netflix. It's about 5% of all of Netflix's volume.


CBS -- Revenue of $3.81B +10% Y/Y. Advertising was up 7%. CBS is producing 89 shows up from 70 shows Y/Y. CPM increases across the network schedule were substantial in the upfront. Robust scatter market in the second quarter. CBS remains an important investment for Pharma, Financial, Insurance companies in late-night retail QSR and auto were especially strong. Brands and emerging categories such as direct to consumer companies like Chewy, Peloton, Uber Eats and others are turning to television advertising more than ever using the unparalleled reach of broadcast to drive awareness and sales. The immediate and significant sales lift these brands have seen from their growing scatter investments for CBS has led to more robust planning and spending in the upfront. Companies like Amazon, Facebook, Google and Netflix are spending big, big dollars on Network Television. When they launch a new product, they advertise on Network Television. CBS is committed to providing brands and agencies with the most precise and insightful measurement, reflecting the impact of their advertising. Two-thirds of the All Access subs are taking the limited commercial option.


New York Times -- Revenue of $436M up 5.2% Added 131,000 net new subscriptions to the core news product. Digital advertising grew by 14% Y/Y with a strong performance in direct sales, including The Daily and creative services. Don't expect the second half of 2019 to be as strong in digital advertising as the first half. Digital advertising business is increasingly focused on large-scale, multi-month/multiyear partnerships with some of the world's leading brands. Demand for advertising partnerships with The New York Times is strong. Indeed, in recent months, we've concluded some of the largest deals in history, Deals from which we will see much of the benefit in 2020. These partnerships are distinctive and difficult to replicate and give real pricing power, pursuing them energetically and willing to accept the increased variability that comes with them. The Weekly, The Daily, Wirecutter and Cooking/Crossword products, it's evidence of the extensibility of The New York Times brand across verticals and across different media and of ability to delight and engage audiences. Unique advertiser proposition, which is grounded in brand safety and adjacency to IP that matters and is important and an ability to launch creative ideas in the world of scale. Confident in strategy of combination of media and partnerships and services, and each of those things drive the other. Launched a pretty substantial price increase test on a population of users who have been with NYT a few years, and very pleased with the results of that test. It exceeded expectations. So there is subscription pricing power at NYT. Added a second ad into The Daily at the end of June, expect it to have a positive impact. There is real demand for audio advertising in association with quality unique content that has big audiences. Partnership with Verizon around 5G, extends over many years. 150 million people engaging with NYT products at any moment and only, 4.7M who are paying. By the end of this year, have something like 1,750 people involved in journalism in The New York Times, by far the biggest in history. Over the past six years tripling marketing spend and gone from spending 100% on performance marketing nearly half to move sentiment or get people to think differently about The NY Times.


Viacom -- Revenues of $3.36B up 3.7%. Domestic advertising revenue rose 6%. Strongest upfront pricing in five years. Upfront CPM increases and effective upfront price increases into the high single-digit range heading into fiscal 2019. As a result, upfront pricing is in a significant better position versus where it was heading into 2018. Seeing high single-digit scatter to scatter premiums and scatter to upfront premiums approaching 30%. AMS continued to scale in the quarter, with revenue increasing 84% YOY, more than offsetting linear headwinds and fueling domestic ad sales growth. Viacom delivered strong Upfront results, with high-single to double-digit price increases – the highest rate of change in over a decade – and doubled agency commitments across its digital, social and advanced advertising portfolio. The strength of Viacom’s brands and demand for its AMS portfolio, especially Pluto TV, drove significant shifts to Viacom’s premium digital video inventory


IAC/Dotdash -- Dotdash revenue increased 23% to $37.7M Y/Y. 28% higher traffic resulting in strong advertising revenue growth, as well as growth in affiliate commerce commissions. Challenge anyone to find a digital publisher who is doing what Dotdash is doing right now, really growing, accelerating margin, building brands also investing for the future. The lowest ad density on the page relative to competition, but having more effective ads and we're seeing that play out with repeat rate among advertisers, spending more individually because of the ad performance. Unique thing among publishers for Dotdash, say to the advertisers, just come and try the DotDash product and if the product works, spend more money and if it doesn't, don't. DotDash works because the content has intent embedded into it. It's not just news. We don't really do news, its content with intent and therefore that that is going to end up performing for the advertiser. The more content the more growth of the business.


News Corp -- Revenue of $2.47B down 8% Y/Y. There is clearly a fundamental shift under way in the content landscape, one consequence, other than intensifying regulatory scrutiny of big digital, is a gradual transference of value to content creators. Still at a relatively early stage of this tectonic transformation, but there will surely be an ongoing transfer of value to creators in coming years. Begun partnering with companies such as Apple and Twitter, which recognize the value of the content. The Wall Street Journal recorded 14% growth in digital-only paid subscribers, who now account for over 69% of the total subscriber base of 2.6 million. Advertising trends improved for The Wall Street Journal and in July, both print and digital advertising revenue were higher than a year earlier. Advertising revenues at Dow Jones in the quarters was flat, a notable improvement from last quarter led by an improvement in digital advertising as we had anticipated. For the quarter, digital advertising accounted for 40% of total Dow Jones advertising compared to 39% last year.


Discovery -- Revenues at $2.89B up 1.4% Y/Y. Achieved 6% domestic advertising growth Y/Y. HDTV, Food, TLC, ID and OWN, the top networks in America for women. These networks have made Discovery the number one media company for women 25-54 across all of TV. Produce over 8,000 new hours of original real-life programming a year. Ambitions are to create strong multi-platform ecosystems, driving opportunities for multiple revenue streams from advertising, subscription revenue, sponsorships, as well as e-commerce retail, and a growing suite of direct-to-consumer platforms and regions. The television industry is far from dead, US or abroad. Contrary to what many believe, getting real meaningful growth from the core TV business around the world, and it feels sustainable. Had a robust and comprehensive upfront sales season, delivering record numbers behind healthy CPM increases, reinforced by the prominence and resonance of the brands, the value of brand-safe and mobile-first go apps. Advertisers are finding that television is the most effective platform to really sell product.


J2 -- Revenue of $322M Up 12.0% Y/Y. Digital Media, saw growth out of display advertising of nearly 4% with subscription revenues up over 30%. Long-held strategy to increase the amount of recurring revenues at J2. Continued improvement in the display advertising portion of the business and continuing strong growth in the media subscriptions. Expect to remain an active acquirer of businesses. For Digital media metrics, the sequential and Y/Y decline in visits and page views are substantially attributable to the Snapchat traffic which constitutes a small amount of digital media revenue. Pharma market continues to be pretty strong. The pipeline of the FDA has never been stronger and so the volume of drugs that are getting approved or have been approved and therefore have marketing budgets attached to them are pretty substantial.


The Trade Desk -- Revenue of $160M +42 Y/Y. In 2019, according to IDC, global advertising spend will be about $725B , up over 4% from 2018. At current growth rates, global advertising will be a trillion dollar industry in about seven years, one of the only handful of industries with a TAM over that mark. Programmatic is still a relatively small part of total global advertising. It is estimated at around $34B in 2019. But it is growing five times faster than total advertising at around 20% year-over-year according to Magna Global. Growth rate is 10 times the pace of overall advertising growth and in fact, growth is nearly four times the growth rate of digital. The digitization of advertising, particularly TV, is massive. The shift to data-driven decisioning versus guessing or intuition is game changing. These changes in the landscape significantly benefit TTD. The Trade Desk signed 55 new MSAs, representing some of the largest brands on the planet. This is the highest number of new MSAs signed in one quarter since the end of 2016. Through the first half of the year, 60% of the Fortune 500 companies are now running advertising through The Trade Desk. 47% percent of spend on the platform was in mobile, that's a new record. Mobile video spend growth was about 50%. Mobile in-app spend growth was 63%. Data spend again was up 80%, and cross-device spend was up over 250% for the third quarter in a row. Audio, probably the best value in programmatic today, grew almost three times in Q2 for the second quarter in a row. Connected TV spend growth was also amazing, growing nearly three times from a year ago. Likely never see a channel larger and more full of opportunity than we have right now in CTV. Much of what TTD has done over the last decade has simply been a dress rehearsal for the digital shift happening in TV right now. Drive towards $1 trillion total advertising market by 2027, about half of that market will be in some form of video. And most of that will be in premium TVs. At the very beginning of the digitization of TV advertising. More and more consumers watch TV content through connected devices. Amazon Publisher Services is working with The Trade Desk. This is a breakthrough deal in Connected TV. Amazon's third-party content providers, think Discovery, NBC, and ESPN apps on your Amazon Firestick. This is quality inventory on premium content. Hershey has consolidated much of its programmatic advertising on TTD. They have gone from several DSPs down to just one, which gives them simpler line-of-sight into the effectiveness of their programmatic campaigns. Developed, and then gave away TTD Unified ID solution. Major initiative on the supply side has been the partnership with White Ops to scrub all ad inventory for fraud. Now scrub all inventory before it ever came to the buy side. They reduced their rates and TTD significantly increased volume by insisting all TTD suppliers work with them. Focus is on advertisers and agencies, commitment to the open Internet and everything that means in terms of transparency.


Criteo -- Revenue of $528M up 1% Y/Y. Retargeting business saw a low single-digit decline. Added 360 new clients, reached highest level since Q2 2018. New products leverage the user graph of 2 billion Criteo IDs. The user graph links highly granular shopping data with robust, persistent IDs across multiple devices and user environments. Retail clients are looking for turnkey platform that combines both performance and branding. The market is demanding full transparency, both in terms of pricing and inventory. Retailers still don’t invest in their own apps to fully capture the growing smartphone usage. 3,800 publishers using Criteo Direct Bidder on web inventory. Now directly connected to 200 app publishers, about 50% more than in Q1. Working hard to implement self-service capabilities. Self-registration feature for new clients is now live. Self-registration is a must-have to further scale the addition of new small and medium clients. Completely new executive team, with the exception of the CFO. For Google Chrome, there is no material impact that Google has done in the previous few weeks, no impact on the business. Started with the exchanges now making progress buying directly from the mobile app publishers. Seeing a slight decrease in average CPM over the period, which is consistent with previous prior periods. Taking more consultative approach in the sales process and hiring app specialists. Still very early in the upper funnel, awareness and consideration product at Criteo. Privacy is a major trend in the market and a very good one, supportive about having an open Internet which is privacy-friendly, because ultimately if you want to do targeted advertising you need to do it in a transparent way, otherwise, the users lose trust. Internet works best seeing ads you'd rather see vs. ads that are just visual pollution. Pay for the inventory no matter what and get paid only when the users engage with the ad.


Rubicon -- $38M in revenue, up 32% Y/Y. Mobile revenue grew 42% and desktop revenue grew 21%. Increase came from stabilization in CPM trends, greater than expected strength in audio and video and favorable year-over-year take rate comps. Supply Path Optimization or SPO also continues to pick up momentum in the industry. Video inventory remains in extremely high demand. Prebid's video capabilities continue to expand, which will increasingly provide access to more inventory and drive additional video growth. Demand Manager is built on Prebid as opposed to publishers running Prebid alone. Most publishers prefer to share media revenue for Demand Manager also open to SAS fee for Demand Manager. CPM’s fluctuate as buyers and sellers adjust algorithms a big cat and mouse game. Google Unified auction will not see negative or positive impact at Rubicon. Previously said take rate the mid 13%. None of the big holding companies are looking to give Google more money. Traditional digital Video is still very complex -- desktop video, web, mobile app video and mobile web video. With CTV/Internet TV the new flavor of video which has a whole new set of complications like Pods, creative separation etc.


Telaria -- Revenue of $18.2 million, up 47% Y/Y. CTV was once again the biggest driver of revenue growth, continue to expand platform relationships with leading premium publishers. CTV revenue increased 133% Y/Y to $7.1 million and comprised 39% of revenue. This is up from 24% of total revenue just a year ago, helping increase platformeCPM to $15.41 compared to $11.60 in the prior year period. Working with OTT services such as Disney's Hulu with 58 million ad-supported dealers, Viacom's Pluto TV with 16 million active users, and independents like Tubi TV which recently announced 20 million active users. Notable new partners signed in the U.S. included MLB.tv, Fox News, ABC News and Sinclair’s NewsON, which includes 170 local TV stations covering 83% of the U.S. population. SpotX and FreeWheel are the companies run into the most.


Publicis -- Revenue up 1.6% Y/Y and US Revenue flat Y/Y. Bought Epsilon for $3.95B. 100% of the digital growth in the U.S. is actually captured by Facebook and Google. The need for transformation has never been so strong in the sector. Has a model allowing Publicis to address those challenges and invest in the talent and the expertise of the future. Combination of media and creative assets, uniquely positioned to help clients acquire market share at a lower cost. Believe that some clients will continue to reduce their spending in traditional areas. Uniquely positioned to help clients with the addressable market of $1.5T. The cut in advertising fees that experiencing mainly with CPG clients (and other categories) in the U.S. are leading to a conservative approach. The significant proportion of ad spend growth now being driven by small and medium-sized businesses and direct-to-consumer businesses. These are the kind of businesses that not using ad agencies. Forecasting the market is going to grow more in 2020 driven by the U.S. elections and the Olympics. Clients are obsessed today about how can I take back control of my customer. In a world that is being dominated by the platform, their ability to have a direct relationship with their customers is key.


Omnicom -- Worldwide revenue decreased 3.6% and the U.S. was up 3.2%. A key takeaway of Cannes was the return to celebrating creativity. Excited about that Annalect launched the people-based precision marketing and insights platform, called Omni. Prefer to rent the right data and technology that can improve agility and client integration at any point in time, rather that invest in legacy data assets and platforms that can easily become obsolete. IP, is ability to bring deep consumer insights to clients in lockstep with brilliant creative ideas driving business results. Investment in data and analytics has been made with the understanding that they are tools in the service of creativity and content. Said no to the recent data company acquisition, just not worth it, wants open and unbiased. Building and investing in the Annalect and Omni platform for the last 10 years. Most people believe that the U.S. economy continues to perform well. At the same time, they recognize that the U.S. economy has never performed this well for this long at any point in the past, and so at some point you can expect some dips or some changes. Remain cautious, optimistic but cautious.


IPG -- Organic growth of net revenue was 3.0% in the quarter. In the U.S., organic growth was 0.6%. Clients remain in an investment mode, when it comes to their engagements. Future of the industry rests on the ability to combine transformative data capabilities with creativity. Acxiom allows marketers get the best out of all their data assets, driving better and more efficient one-to-one connections with consumers at scale. Soft results in China and don't see a big recovery in China on the horizon. Attended a number of the top to tops. Remove Silos at IPG. The core competency of Acxiom is being able to target and cleanse the data that clients have within their own company. Open-architecture a key principle at

IPG, where agencies collaborate seamlessly on behalf of shared clients. confusion is good for agences because if clients are confused they need someone to figure it out and that's what IPG does. Business is going waves in terms of centralized versus local marketing.

======================================================================


Best Listens

SNAP -- Again very informative, lots of great data on the business

Apple -- Tim Cook’s opening remarks, the first 8 minutes

Criteo -- Opening remarks are very interesting on the minutiae of the retail app business .

Telaria -- Opening remarks provide a good overview of CTV

The Trade Desk -- Jeff was once again amazing with 23 minutes of opening remarks

Publicis -- Steve King overview at the 38:00 mark for 3 minutes and at the 72:00 mark


====================================================================


Disclosure

I have no positions in any stocks mentioned, and no plans to initiate any positions in the foreseeable future. I wrote this missive myself, and it expresses my own opinions. I am not receiving compensation for it.

400 views

Recent Posts

See All

msg Q2 2020 Earnings Analysis

More strong evidence that the media landscape has changed forever, especially the marketers need for flexibility and inclination for performance marketing. The continued growth of DTC with self serve

msg What I Saw Happen -- Q2 2020

Overview The Great Pause, The Great Reinvention, The Great Rethink, The Great Reset, The Great Reshape, literally everyone on planet Earth has been impacted Worst health crisis since 1918, worst econo

msg

-msg (Independent Analyst/Advisor/Consultant)

matthew.scott.goldstein@gmail.com  

917.359.5499

https://www.linkedin.com/in/msgmsg/

WhatISawHappen.com 

text msg to 246810 for my vCard