The Most Important Role in Media
What you make is paramount, but how you pay for it is the unlock.
Welcome to People vs Algorithms #30.
I look for patterns in media, business and culture. My POV is informed by 30 years of leadership in media and advertising businesses, most recently as global President of Hearst Magazines, one of the largest publishers in the world.
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Media a little like raising cattle. For those that dislike the meat analogy, other types of farming will do. The audience is the cow. Maintaining their attention requires proper care and feeding. Turning them into a business means optimizing the value of the cuts, supported by good decisions up and down the value chain — investment in space and nutrients, optimal times to breed and harvest, who to partner with and the best way to package. Surely the exercise is both deeply rational and highly intuitive — balancing inputs to maximize long term value, surviving unpredictable adversity, understanding which cows are sacred. At least that’s my understanding. I am from Saskatchewan.
All of which is to say the complexity of the system has dramatically increased in a fully digital ecosystem driven by a empowered consumer with an abundance of choice. The optimization of the media equation is subject to endless tradeoffs inside the internet meat grinder. It’s a challenge we have struggled mightily with since the first banner was placed on the website Hotwired by my friends Andrew Anker and Jonathan Nelson over 25 years ago. I have spent far too much time thinking about it in the interim. If you have ever had to run a media company, you will know that advertising impacts everything you do — from the content you create, to how you package and distribute it to the culture inside of the company. At the center of the maelstrom, the person charged with getting the mix just right, is the most important and perhaps most overlooked job in the media enterprise, the head of ad product. Let’s give them some love and attention for a moment. They deserve it more than you know.
By now the content / advertising tradeoff is well understood by consumers — you give and you get. Understanding how to make these tradeoffs intelligently is at the heart of any media company. While the recent prioritization to subscription models across all media types has shifted focus off of advertising, more sobering economic realities are pushing the pendulum back to dual revenue, ad supported models. A tectonic shift from cable to on-demand, driven by low cost capital and a disruptive and ad free Netflix, has created an OTT parade and drained the market of its most precious video ad inventory. Facing more sobering economic realities, both Disney and Netflix will introduce ad tiers, while new AVOD players like Roku, Pluto and Tubi trickle in additional ad funded inventory. The challenge of getting the ad / content balance right is more important today than ever as consumers have more choice and are certainly more sensitized to the virtues of an ad free or ad light experience, particularly in linear consumption environments like video. The quid pro quo has evolved.
Digital media has always had an ad problem
Outside of video, an optimized ad logic has always been challenging for digital media. Pulled from a linear consumption experience, banner advertising has had to sit alongside content in a website, competing in an unfair battle for attention. Human attention is virtually impossible to bifurcate. Rebalancing the equation meant bigger, more interruptive units, pop-ups and surrounds, slowing page loads and advantaging more efficient delivery environments, platforms driven by fast feeds and native ad experiences. Scale and data superiority enabled them to invest in self-serve interfaces and create a deeper, broader and more effective marketplace for attention, particularly as the market shifted to performance. Apportioning attention between the thing consumers are there for and the thing we need to sell them, in a world that materially advantages the audience, amounts to a game of media chicken.
For ad product leaders, new challenges emerge. How might an ad strategy preserve premiums historically driven by premium brand association and media scarcity when the nature of premium is undermined by social creation and consumption behaviors, a leveling of the playing field across all media types and a long, inevitable journey to performance compensation models? Or how do you wrap ad products around an increasingly fragmented world of media creators and distributed endpoints. Outside of the 30 second spot, will we ever land on a scalable new standard for brand advertising (and soft endorsement), still important to brand advertisers who long to differentiate their offerings with storytelling. How do make a brand engagement proposition less arduous to sell and deliver?
The best media companies realize this is not the role of one person or one department. It is the coordinated mission of the entire media business that is engaged in the business of dividing the media product between the consumer and the advertiser. When you look inside of an advertising driven business, pay careful attention to the ad product team and cardiovascular system that supports the function. This is how you will understand the health of the patient.
In legacy magazine publishing orgs, this health was measured by the right balance, and tension, between publishing and editorial organizations. In harmony they pushed one another forward — sales demanded more to sell, editorial responded while shaping the product for the audience. Admittedly, things were simpler when the canonical ad product was a constant, be it the magazine ad or 30 second spot. Innovation moved to sponsorships, editorial integration, events — a range of activities that surrounded the core media vehicle, pulled advertisers closer to the content product, offering a degree of endorsement and the setting for dance party that played between sales orgs, media buying companies and clients for decades.
As media has shape shifted, crafting the right ad experience to complement the audience’s mode of consumption, the distribution environment and data availability is a hugely complex optimization exercise, one that can massively limit asset value, as in the case of Twitter, or one that can unlock huge potential, as the case with Youtube, Instagram and Facebook.
The skills of ad leadership
Which leads us back to the pivotal role of ad product. To understand why, let's look at the delicate balance at its heart, and the many considerations that need to be factored in to optimizing the function:
1) Consumer experience: How to manage tradeoffs in ad delivery so as to not compromise the utility of the core media experience. At best, how to make them reinforce one another.
2) Yield: How much money do you make per unit of consumer attention: user, page, view, impression etc. How do you manage trade offs between internal goals like subscription promotion vs more immediate ad revenue optimization. How do you move to yield optimization at audience and traffic source level? The broader goal, of course, is to maximize yield without compromising consumer experience.
3) Ad performance: Do ad products accomplish advertiser objectives, be it performance or brand. How do you validate performance?
4) Sales enablement: How do you support in-market sales activity through tight working relationships with the sales and marketing organization to deliver on market positioning, and the necessary and hungry cycle of customer feedback to product innovation.
5) Operational efficiency: How difficult are the ad products to create and support by operational teams? How easy are they for clients?
The individual / team leading the function must embody a diverse set of skills. First, an ad product leader must bring empathy for the audience and a keen sense for why and how they consume media. Only with this can they manage the tradeoffs above. Technical knowledge is a must, as is a deep understanding of the byzantine ad tech world — DSPs, SSPs, CDPs, exchanges, creative optimizers, consent and verification vendors, paywall providers, data suppliers, tag managers. As important is a interpersonal savviness, particularly as it relates to managing the critical relationship with the the sales and marketing organization. Media organizations survive on a diet of perpetual innovation, real or superficial. They are always hungry for new things to evangelise from the ad product kitchen. Organizational and interpersonal complexity will test the mettle of the less experienced in the role. Broadly success requires a real appreciation of the short and long term goals of the organization. Inevitable decisions made will trade short term revenue for long term loyalty, both for the audience and advertiser.
Great ad product in history
To understand the problem better, let’s revisit some of the greatest hits in ad product, environments where the blend of content and advertising is seamless and satisfying to the user, where the combination of advertising and content create a synergy bigger than the parts. Consider where, across the wide expanse of media history, have these two come together in a perfect coffee and donut moment?
I will give you my top three. Before we do this, please do not say the Superbowl, because that is a once a year moment and it doesn't count… though an honorable mention in great synthesis of media product and advertising will be reserved for American football broadly, a game which has maintained wild, singular popularity despite the fact that it is drenched in advertising. The lesson here, of course, is that the architecture of the content is fundamental to its success. Football is a game of perpetual interruption, a perfect design for constant linear ad interruption.
Winners, to my mind, share the following aspirational qualities. The advertising at a minimum does not detract from the media consumption experience, at best it enhances it. Secondly, and vitally, it works as a carrier of brand messaging or a step towards a purchase action. A very important and pragmatic third quality would have to be standardization and repeatability. The ad solution has to be something that advertisers and agencies can engage in with little friction, week in week out, with little bespoke planning and limited asset preparation.
My first choice for ad product of the century would have to be magazine print advertising, the kind you find in successful vertical publications, ones that function as a marketplace for aligned, passionate interests. The canonical example here, true today, but much more in the heyday of print would have to be fashion magazines. Advertising is content, its density serves to enhance the overall experience of the product. Fashion is the obvious example because advertising demand is robust, the resulting media product is dense and satisfying. The same was true across vertical publications from home decor to any variety of enthusiast publication, b2c or b2b.
The key beyond vertical alignment is user control, simplicity and standardization. The pace of consumption is up to the reader. The role of advertising is clear and understandable. Its format is repeatable and simple to buy and sell. This world has mostly evaporated, though with cookie deprecation, context is having a moment. Digital vertical publications can be effective and profitable media vehicles. But the media / ad connection is surely inferior to a popular vertical publication in the era of peak print.
The second entry for the hall of fame would have to be search advertising, the kind popularized by Google. This is obviously the best example of advertising aligning with user intent, usually offering high levels of utility, in a format that is entirely native to the consumption experience. Better performing ads are incented with lower cost, demand is regulated through an efficient auction mechanism. User intent data, the modern analogy of deep enthusiast context driving the magazine model above, is perfectly aligned with user search activity and with ad performance. It goes without saying that the perfection of the model and monopolistic scale has created for Google the greatest ATM ever seen in media. Google is Google because of shrewd decisions that were made early on in ad product. So is YouTube.
The downside of course, is Google excels in support of a very specific type of self-directed customer behavior. It doesn’t work well for say, donuts.
As an aside, dominance in search has enable Google to assemble a death star like capability on both buy and sell sides across the digital ad marketplace becoming a single dominate ad network for the open web, a hegemonic position that a bi-partisian group of legislators would like to see broken up. A bill was introduced yesterday that would force Google to sell off parts of the it’s ad business.
My final example would not be TV, NFL or otherwise. Just based on economic value, it’s hard to dismiss the importance of the 30 second spot. Setting aside an ad load issue that has only become more insufferable with the rise of ad free streaming, traditional TV advertising’s one size fits all structure, lack of addressability, low level of automation means barriers to entry are high. Few advertisers participate and frequency overload persists as the most annoying feature of TV media experience. I love Progressive’s “un-becoming your parents” ads but you can only see them so many times.
But… video needs to be in the hall of fame. I would offer two contemporary stand out examples.
Feeds are delicate places to insert advertising. Their virtue is a return to a linear consumption experience — content, content, ad, content. But some work better than others. Twitter, has struggled to find a synergistic home for contextual ad insertion, the nuances of which we can dig into more deeply at a later time.
TikTok offers a few things that make it more effective, starting with the fact that it’s video based and an entertaining consumption environment for an ad. It offer enormous scale, contextual variety and user data. Ads mimic content precisely. Importantly, like the magazine example, it’s a user-driven environment. While historically, the richest video ad environments force ad consumption in a 30 second interruptive exchange, TikTok offers a consumption environment and UGC media economics where targeted user-driven ad experience can effortlessly and profitably sit alongside content.
YouTube absolutely deserves a place on the list of best ever for an ad offering that has evolved to expertly thread the needle between full interruption and user control. Rich user consumption data combined with Google’s deep ad technology and UX expertise has driven a solution which seeks to balance consumption and ad load. The 5 second skippable format forces healthy tension between attention economics of interruption, creative incentives for advertisers, targeting accuracy and user control. Plus their ability to manage ad load across authenticated sessions is a luxury most open web publishers do not have. Snap has taken a page from the same book, with skippable video formats mixed with video units that force the user to wait a few seconds, given advertisers a short window to make the pitch, and Snap the time to register a unit of billable ad time.
Perhaps the most obvious testament to YouTube’s success is this year’s inaugural appearance at the Upfronts, a departure from previous years participation is the New Fronts, video’s ad selling farm league. It’s appeal as the new media mainstream is seen in pretty staggering numbers:
YouTube reached 96% of the US population aged 25-54 across devices (Nielsen).
YouTube has 50% of ad-supported watch time on TV screens among streaming services (Nielsen)
Creators have serious media power. MrBeast has 95M subscribers. While a flimsy but nonetheless interesting comparison, if MrBeast’s YouTube channel were its own streaming service, it would have more subscribers than each of the next most popular ad-supported services: Disney’s Hulu, HBO Max and Paramount+.
Importantly, YouTube’s pitch to advertisers was a new ad-frequency capping solution, a reflection of the depth of the buyer marketplace and important shift from TV’s perennial frequency overload.
“We’re finally bringing sophisticated frequency controls to the CTV market,” Thygesen said. “It’s been a consumer pain point and massively inefficient for advertisers… This is not a marginal thing.” On average, he said, advertisers can expect to see a 5% reach per dollar increase when managing connected-TV ad frequency across YouTube and other CTV apps (like Hulu, ESPN+ and Peacock) rather than separately..
The next generation targets creators
These two examples point to the real next frontier of innovation for the industry, harnessing the undeniable media power of a fragmented and influential creator economy. Naturally Youtube is advancing research that shows it’s not perceived “content quality” that attracts the new consumer. According to the just released “Think with Google” study, it’s “authentic, aesthetically imperfect content that resonates, that gets to the heart of matters, is what’s winning right now and what will be winning in the future.” This is the existential creator threat eating around the edges of institutional media.
Related, this week TikTok released a new ad product to make it easier for brands to tap creators in their ecosystem. “Branded Missions” offer creators with a minimum of 1000 followers to play for brand dollars.
Branded Missions will see brands share a brief with the creator community as a way to attract user-generated content. Creators with at least 1,000 followers will be eligible to participate, a potential boon for micro-influencers and casual creators. TikTok creators, who must be 18 years old, will see the potential base payout before choosing to participate in the Branded Mission. They will receive a cash payment if their video is chosen, and possibly a performance-based payout. Creators can submit up to three videos per brief, before the brands choose which videos to amplify as ads.
This innovation reflects the core challenge inside of any successful media company. Winners find better ways to funnel money from brands to the makers of content. Now it’s happening outside of organizing construct of the media brand. And when money flows, incentives improve and platforms become more attractive to a diverse set of creators. Ad product innovation inside of YouTube created a more enticing environment for content without compromising its appeal to a new generation of video hungry viewers.
In contrast, digital media pioneer Buzzfeed had a pretty somber week with YOY losses growing in Q1, the stock stuck below $4 and a market cap less than 1x revenue. While the company cleverly positions revenue to appear diversified, the business is almost entirely ad dependent. Commerce revenue is mostly affiliate, a dressed up performance ad solution to be sure. Much of the “content revenue” amounts to making content for advertisers to run on social feeds and beyond. Again, ad revenue by another name. The company’s history maps the trials and tribulations of a digital media ad business. First they were all in on native, imitating much larger platform competitors. When they proved too much work for advertisers and failed to drive yield goals they opened up to programmatic and banners. The economics of news eluded their ad dependent business. Material investments in video were hard to pencil with an unreliable Facebook and steep rev shares on Youtube. To their credit, they've amassed over $500m in revenue, but the sad stock price reflects the market's skepticism of the model’s growth potential. All of this, one might argue, is a reflection of how difficult it’s been to find ad product that elegantly scales in non-video or pure performance based digital media environments.
I used to say that ad innovation could never keep up with media innovation on the internet. The way we make and consume media always runs out ahead of the mechanisms to effectively incorporate and sell the attention to a third party. Much has been done to close the gap from automated buying marketplaces to flexible feed based formats. Given complexity of modern media distribution, an empowered consumer and the importance of ad revenue as the economic environment worsens, the role of ad product has never been more important. Making all of it work inside of a media organization rests on the sturdy shoulders of an interdisciplinary leader. Their success is the success of the entire business. I propose we make this “Ad Product Appreciation Day” to show them the love.
Have a great weekend… Troy
1. Top apps in Q1, Meta still has 4 in top ten but TikTok is most downloaded.
2. The TikTok famous Liver King has supplements for sale. “In the Court of the Liver King” from GQ.
3. What happens when the experience of celebrity becomes universal? A more than worthwhile read from last year on how media is changing us. “On the Internet We are Always Famous” from the New Yorker:
There’s no reason, really, for anyone to care about the inner turmoil of the famous. But I’ve come to believe that, in the Internet age, the psychologically destabilizing experience of fame is coming for everyone. Everyone is losing their minds online because the combination of mass fame and mass surveillance increasingly channels our most basic impulses—toward loving and being loved, caring for and being cared for, getting the people we know to laugh at our jokes—into the project of impressing strangers, a project that cannot, by definition, sate our desires but feels close enough to real human connection that we cannot but pursue it in ever more compulsive ways.
4. Related, our attention spans are shrinking as media consumption absorbs more of our time. “A neuroscientist on the shifts in our media use and the effect on our brains” from Fast Company:
As consumers, we can now choose what we watch, where we watch, when we watch, and how we watch in ways unimaginable even a few years ago. And the result of all these choices is a huge increase in time devoted to media. Consider statistics from Nielsen Company, the world’s oldest and largest provider of media viewing and purchasing—where I served as global chief neuroscientist and executive vice president. In Nielsen’s quarterly Total Audience Report, we see that in less than two decades, there has been a massive shift in media consumption time and the types of devices used.
5. Web3 is much better for creators and other observations at a difficult time for crypto from A16. “The 2022 State of Crypto Report.”
6. How to think like a contrarian. “How Contrarians Think: The Early Days of Square, Yelp & PayPal with Keith Rabois.” From Nfx.
7. Facebook is slowly dying. Will the Metaverse come fast enough to replace it. The biggest pivot of Zuck’s lifetime. Meta’s President of Global Affairs, Nick Clegg makes the Meta pitch for the internet. “Making the metaverse: What it is, how it will be built, and why it matters”
The metaverse is coming, one way or another. The future of the internet will be more human than the way we experience it today — more physical, interactive, and speech-based than flat screens filled with text and images.
8. Fast fashion retailer Shien’s app downloads outpace Amazon. From Insider.
The company's manufacturers scan all corners of the internet for new clothing trends, and once they spot a piece with viral potential, they produce it in small batches. Depending on how that piece sells, they either expedite its production or stop entirely, Their supply chain management software allows them to monitor customer search data and share it with manufactures in real time, Insider's Mary Hanbury reported last year.
9. Google is beginning to stitch together a vast ecosystem of hardware, software and services in deliver a ambient computing future. A good read to understand where they are headed. “Pixel by Pixel: How Google is Trying to Focus and Ship the Future” from the Verge:
That’s another way of saying the only way Google can get to its ambient computing dreams is to make sure Google is everywhere. Like, literally everywhere. That’s why Google continues to invest in products in seemingly every square inch of your life, from your TV to your thermostat to your car to your wrist to your ears. The ambient-computing future may be one computer to rule them all, but that computer needs a near-infinite set of user interfaces.
10. The journey to a pure mind / machine interface. “The Man Who Controls Computers With His Mind” from the New York Times
There is no technology yet that can communicate human thoughts as fast as they occur. Fingers and thumbs will never move quickly enough. And there are many forms of information processing better suited to a computer than to a human brain. Oxley speculated about the possibility of using neural interfaces to enhance human memory, bolster innate navigational skills with a direct link to GPS, sharply increase the human brain’s computational abilities and create a new form of communication in which emotions are wordlessly “thrown” from one mind to another. “It’s just the beginning of the dawn of this space,” Oxley said. “It’s really going to change the way we interact with one another as a species.”
11. When the fakes get so good, they satisfy the discriminating but pragmatic wealthy shopper. “The Rich New York Women Who Love Their Fake Birkins” from the Cut:
Lisa, a 38-year-old Manhattan woman, has this superrich friend. She has a massive Birkin collection, a $10 million dollar house in the Hamptons, and flies everywhere in private jets. “I just assumed everything was real,” says Lisa. Then one day, the friend lets her in on a secret. Those Birkins? They’re fake. She gets them at “Tupperware parties” for replica designer bags.
12. Deconstructing a Dutch still life. Another great NYT art exploration, “A Messy Table, a Map of the World”
Say you will…