Welcome to 2019: The Faangs are biting chunks out of traditional media

The ad market is set to grow for a 10th consecutive year, but it's tough as the Faangs (Facebook, Apple, Amazon, Netflix, Google) are biting huge chunks out of traditional media business models. So the old world must change and forge new alliances.

Brexit is the biggest shadow hanging over UK business in 2019, even though forecasters remain surprisingly confident that the advertising market should keep growing, thanks to digital innovation. Group M, Zenith and Magna all estimate that UK advertising spend will increase by between 4.4% and 4.8% this year, just a touch slower than in 2018. Importantly, it would mark the 10th consecutive year of growth for the UK ad market. Marketers, agencies and media owners will be crossing their fingers that the forecasts are not overly optimistic given that corporates hate economic uncertainty.

The triopoly

Global trends in media consumption and the power of the Faangs – Facebook, Apple, Amazon, Netflix and Google – are still likely to be more important than Brexit in reshaping the UK media landscape in 2019.

The Google-Facebook duopoly is turning into a triopoly, as Amazon becomes a growing force as a media owner. All three of the platforms generate a significant proportion of their revenues from tech start-ups, SMEs and local advertisers, rather than big brands. That could help to sustain Facebook’s growth, in particular, after an annus horribilis for its corporate reputation in 2018.

The fact that Google and Facebook have self-serve technology and large client-facing teams is important because this has encouraged advertisers to take some marketing services in-house and to buy direct – "a threat" to agencies, as Group M acknowledged in its forecast for the year ahead.

Jockeying for position outside the 'top five' media owners

Google, ITV, Facebook, Sky and Channel 4 are the top five media owners, with £1bn in annual UK ad sales or higher.

Radio group Global’s stunning entry into out-of-home, by buying Exterion Media, Primesight and Outdoor Plus, has roughly doubled its annual UK ad sales from about £300m to £600m and catapulted it into sixth place.

Global’s triple M&A deal is symbolically important because it is a bet on advertising at a time when many other media owners have been diversifying and reducing their dependence on ad revenue.

The Competition and Markets Authority has been scrutinising the Exterion acquisition because of its size. Whatever the outcome of that inquiry, other media owners are already thinking about how they can compete with an enlarged Global.

The next four by ad sales – JCDecaux, News UK, DMG Media and Reach – each bring in about £250m-£350m a year in ad sales. They suddenly lack scale in the UK, at least relative to Global, and observers expect new alliances, if not mergers.

It’s not media M&A alone that is driving change in the ad market. Subscription streaming services such as Netflix and Apple Music are changing users’ expectations about ad-free experiences. Spotify’s hybrid, freemium model is becoming a significant force and should bring in more than £500m a year in annual UK revenue, about 10% of which comes from ad sales and 90% from subscriptions.

TV broadcasters can’t afford to be complacent

The three big TV sales houses, ITV, Channel 4 and Sky, have been resilient in recent years as advertisers valued reach and brand safety at a time when print was in structural decline and online was suffering a trust deficit.

The status quo has been in place since 2015 when Channel 5 shut its sales house and moved to Sky, but things could change as UKTV, which has 10% of all commercial impacts, is facing a possible break-up.

If UKTV’s joint owners, BBC Worldwide and Discovery, split the portfolio of channels, it could trigger a renegotiation of its existing sales deal with Channel 4. Sky, under a new owner, Comcast, will be watching closely, given it already handles Discovery’s ad sales.

Three public-service broadcasters, ITV, Channel 4 and the BBC, spent much of 2018 making noises about launching a joint video-on-demand platform, aka "a British Netflix", but collaboration is notoriously difficult, and competition concerns could still put the kibosh on the idea.

ITV chief executive Dame Carolyn McCall is set to unveil a paid, direct-to-consumer VoD offering from the broadcaster in February. Channel 4’s chief executive, Alex Mahon, who has less freedom because of the state-owned broadcaster’s remit, can look forward to spending more time in its new, second national HQ in Leeds.

TV ad revenues held up despite Brexit uncertainty in 2018 but on-demand does pose a challenge. Group M has warned that Sky Q, which now includes Netflix, could be encouraging ad-skipping.

Still tough for publishers 

News and magazine brands must find new ways to drive growth through diversification, collaboration and consolidation as print ad sales keep sliding.

News UK, Telegraph Media Group, Guardian Media Group and Reach have set up The Ozone Project, a joint digital display ad sales and data platform, but it has yet to prove that it can make a material difference. Similarly, news and magazine brands broke ground last year by launching PAMCo, joint industry data that combines online and print readership figures. Turning PAMCo data into the industry standard for media planners and traders will be the next challenge.

The Guardian’s ongoing bet on reader donations and the Daily Telegraph’s online reader registration push are signs that ad reach alone is not enough to sustain quality, editorial content in the age of the tech giants, while last year’s closure of free, ad-funded print titles such as ShortList and NME told its own story.

Media agencies need to redefine their role

Media agencies from the big six holding companies may have had a tough time dealing with questions about trading transparency and the threat of in-housing and the tech giants.

Dentsu Aegis Network, Wavemaker, Essence, Starcom, Zenith, Carat and UM all changed their UK leadership in some form last year and 2019 is expected to bring more upheaval.

Publicis Media’s relocation of all its agencies, which are moving to one site in London’s White City in the spring, could be a significant moment as ad groups weigh up the relative importance of the parent company against its agency brands.

Advertisers and media agencies know they need to rebuild relations but progress has been slow. An ISBA-IPA working group to foster "sustainable relationships" is due to report in the spring.

Regulation can force change 

Advertisers are on alert for crackdowns on promoting food high in fat, salt and sugar (HFSS) and gambling. London Mayor Sadiq Khan has ordered an HFSS ban across the Transport for London estate, including the Tube and buses, from the end of February. A pre-9pm watershed for HFSS TV advertising remains a threat but MPs at Westminster have been distracted by the Brexit saga.

The government promised last October to introduce a digital-services tax on technology companies, including Google, Facebook and Amazon, to make sure they "pay their fair share" in the UK in 2020.

However, given the political limbo in the UK, regulatory action on privacy and tax is more likely to come from the US or the European Commission.

Cinema attendances are booming

Luke Randall

Senior AV executive, UM

2018 was the biggest year in cinema for 40 years (with 176 million admissions), so could 2019 be even bigger – and offer more for brands? All the signs point towards a resounding yes.

Cinemas have traditionally been social hubs and that currency hasn’t lost its lustre. Curzon and Picturehouse usually have a café or bar on site and the social element is particularly important to community cinemas.

And while national chains and Imax screens offer spectacle and blockbuster brand association, independent cinemas offer more nuance to advertisers grappling with one of the most elusive brand qualities – authenticity.

This year presents a huge opportunity for brands demanding smarter buying, with options such as wraparound 270-degree ScreenX screens allowing for even more immersive ads. Then there are Secret Cinema-type experiences, plus Backyard Cinema’s Christmas Labyrinth, which allow brands to be part of the story. 

With more traditional advertising, improvements to planning tools prove that cinema really does provide cultural moments for young people, with Wagamama posting a 12% jump in UK sales, thanks largely to cinema ads, and d.fferento/ogy research showing that 74% of 16- to 34-year-olds think cinema brings them closer to their friends.

Compound the ad opportunities with an outstanding movie slate – blockbusters, mixed with returning sleeper hits like It part two, Glass and The Lego Movie 2, as well as adaptations of properties with big fan bases such as the Elton John biopic Rocketman, Downton Abbey and The Goldfinch, not to mention Disney’s latest Marvel films, live-action remakes and animations, plus the small matter of a new Star Wars episode at the end of the year – and footfall is virtually guaranteed.

Netflix and Amazon Prime Video will be on the counter-attack, but we’ll also see a move towards the symbiotic model of Alfonso Cuarón’s movie Roma, for which Netflix offered a limited release in cinema, making it eligible for awards, before distributing it widely on its own platform.

Overall, then, 2019 could be the best time yet for us as an industry to go to the movies.

News brands are resurgent

Emma Dibben

Head of print brands and partner engagement, Wavemaker UK

Clarity in a chaotic world will be required more than ever this year. Clarity is what news brands will bring to political and economic uncertainty, along with increased engagement. Predicting the commercial trajectory is tough for all but there is a very solid foundation for news brands to work on.

Last year featured some decisive moments in delivering the critical evidence required for potential success: the launch of audience measurement platform PAMCo and several Newsworks’ studies, including "Planning for profit" and "The value of quality research", with Group M.

News brands have established that they are synonymous with high-quality and viewable inventory at scale. The groundwork and collaboration of the past two years is in place, and this year the stakeholders will continue to realise the opportunity.

Stemming decline has long been the objective, and the revenue picture for 2018 was heartening. Total revenue decline in 2018 versus 2017 was 3.9%. The base of spend is lower but it’s a rosier picture than the double-digit decline of previous years.

In 2019 it is likely that we will see similar levels of revenue decline, and the increased competition driven by consolidation will help to keep cost per thousands sharp.

Genuine collaboration is now in place in the form of The Ozone Project, reaching more than 42 million adults across News UK, The Guardian, Reach and the Telegraph.  

While limited to digital display at the time of writing, Ozone will bring new formats and partners on board this year. There is great opportunity here. The initial outcome is likely to be yield-improvement for publishers, rather than exponential growth in digital. Common audience profiles across the market will bring consistency to data at scale and will be immensely valuable to clients.  

However, there is a potential caveat. A separate Ozone team and separate P&Ls could mean that the four news brand stakeholders and Ozone may be fighting over the same lunch.

Further collaboration is already well under way with PAMCo, which combines online and print audience data. This joint industry currency will create further inroads given that PAMCo data is recently available via TGI, which will drive its use in the planning communities.

Context will become increasingly important to clients as well as quality. The agency role will be to encourage clients in devising more nuanced keyword strategies in programmatic. Too much quality and viewable inventory is passed over, and we need to work harder to overcome this while we wait for better tech to enhance contextual buying.

The consumer appetite to pay for quality journalism continues to grow, and campaigning journalism held powerful organisations and individuals to account yet again in 2018.  

It was a resurgent year for news brands and, despite the economic challenges, there is much to be optimistic about in 2019.

Short-form video is driving online ads

Robin O’Neill

Managing director of digital trading, Group M UK

The future for digital remains bright, accounting for all net UK advertising growth and 60% of all advertising investment, according to Group M’s 2019 forecast. It continues to grow organically, predominantly from SME investment, with some signs that larger advertisers are becoming more circumspect about incremental digital investment, with concerns around transparency, reporting metrics and brand safety. Pure-play internet increased 11% in 2018 and is expected to continue growing by 9% in 2019.

Making sure that the message suits the environment still has a long way to go but more "snackable" content – stories, short-form video and chatbots, for example – gives advertisers ways to authentically connect with consumers while offering more tailored, bite-size experiences. Instagram Stories, a great arena for influencer marketing, was used by more than 400 million people every day in June 2018, according to eMarketer, up from 300 million just seven months prior.

At Group M, Xaxis launched six-second, short-form video in September 2018, with a selection of premium partners, including Twitter, Snap, Spotify and Global, and has driven increased digital video advertising reach and engagement. Strong, early results demonstrate that 70% of video ads were viewed through to completion, which is far higher than any other platform that we have used.

Ecommerce will be a huge topic for digital advertisers, particularly via Amazon, which is leading the way, with revenues expected to double this year. It also offers greater opportunities for marketers, with a fountain of consumer data available including purchase data. We would expect this to drive significant growth into the platform. Snapchat and Instagram both offer growing options for advertisers keen to drive ecommerce from their stories, with more features expected.

Facebook and Google will remain dominant, PwC estimates. Facebook and Google together grew £2.62bn in 2017, the last year for which figures are available. That is 180% of the total market growth of £1.44bn as other media owners have seen their share shrink. PwC also estimates that Facebook UK has billed £1.6bn, representing 14% digital market share and 47% growth. In the same vein, Google UK billed £6bn, representing 52% digital market share and 16% growth.

Collaboration will also be key in 2019, with more media owners coming together to be able to deliver a viable alternative to the tech platforms, at scale, in a higher-quality environment and with true thirdparty measurement. At Group M, we are piloting a "Newspaper Data Alliance", using pooled newspaper data to deliver audiences at scale in professionally produced content.

We have started the path to proving that there is a positive correlation between the quality of the environment in which our clients ads are delivered and shifts in brand metrics, by teaming up with Newsworks to run an extensive piece of research. We showed that cost-effectiveness, audience engagement and increases in brand metrics were all positively affected, with a premium exposure 58% more likely to be 100% in-view (Group M’s global viewability standard) for at least five seconds.

Premium placements also produced stronger response rates across the board, with double-digit percentage increases for brand awareness, ad recall, perception and recommendation intent.

Streaming services want to be like live radio

Catie Dear

Media planner/buyer, the7stars

The audio market is in rude health, with overall growth predicted to continue strongly into this year.

However, it is an increasingly fragmented market, with younger listening shifting more rapidly from the traditional radio model to podcasting and streaming as they seek immediate, on-demand listening in the form of spoken-word stories or tailored music experiences.

Fragmentation has brought a borrowing of tactics by both sides. The streaming giants have taken a radio approach by poaching high-profile presenters, for instance, Apple Music, with Zane Lowe and Julie Adenuga for its radio station Beats 1.

They have also moved from singular artist or track approaches to harnessing the power of the playlist: curated lists that cater to the busy, lean-back listener.

Where data is the battleground, the streaming services are winners. The real-time feedback loop enables brands such as Spotify to react immediately to consumer preferences and curate highly personalised music at scale.

In turn, the radio stations are making moves of their own to capitalise on (or even expedite) the consumer shift to digital radio listening; 25.8 million people in the UK are now tuning in, up 14% on 2017. They are doing this through consumer-friendly apps, or by creating standalone podcast extensions of their radio brands. The richer data opportunities these provide allow more tailored experiences for their audiences, offer radio brands a visual presence and facilitate the kind of targeting opportunities that are appealing to agencies and advertisers alike.

This kind of thinking has been exemplified by an extensive BBC campaign pushing its Sounds app and website, which offer audiences a one-stop-shop for all things audio. It is a move as much about adapting to the changing consumption habits of the younger generations, as it is a defensive one to combat the increasing power of the music-streaming services and an older-audience skew for its flagship station Radio 1.

The biggest shake-up to the sector is likely to come from new players in the radio/audio market. Netflix, for example, is launching a high-profile "marketing experiment", in the shape of a comedy radio station called Netflix is a Joke, while Amazon’s smart speakers are becoming more widely adopted. For the latter, despite all the other functions available, radio dominates listening, accounting for 72% of all Echo time spent with audio entertainment, as consumers seek the safety of the well-known radio brands.

However, up until now, Amazon hasn’t been able to claim revenue here in the way it can from music listening via its Prime service. It doesn’t seem a coincidence that Amazon has also launched the most comprehensive and consumer-facing "how to" marketing campaign concisely communicating how to find, "follow" and play your favourite artists and tracks. This strategy addresses one of the main barriers to streaming-service uptake for the older audience and traditional radio heartland.

Investors want to do more outdoor

Glen Wilson

Managing director, Posterscope

It would be fair to say that out of home starts the new year defined by one thing: consolidation. 

Global’s definitive trifecta of Primesight, Outdoor Plus and Exterion Media took it from zero to a JCDecaux-rivalling market share in the space of a few weeks last autumn.

The radio group’s entry into the OOH market is exciting and has to be seen as a ringing endorsement of the underlying strengths of a medium that attracted all that private-equity investment in the first place.

But what will it actually mean, for the medium and for advertisers when mergers complete and Global Outdoor is formed at some point in 2019? Well, more acquisition activity. Clear Channel is the last real date at the prom and is likely to have many suitors as it emerges from parent company iHeart Media. Some suitors will be predictable, others might struggle to catch its eye and some might be the geeky one in the corner that you would never have thought of. Either way, it’s going to be fascinating to see how the night unfolds.

Ultimately, though, it will raise the bar yet further. It will mean more investment on inventory and infrastructure, and, in turn, this will drive a faster pace of innovation. 

Digital OOH will grow to reach about 65% of the UK population and its share of OOH revenue will not be far behind. Sales-side platforms, that will allow more automated connection with our own planning and buying platforms, and therefore better leverage the agility and flexibility of digital OOH, will evolve and proliferate. 

Global already has an ad-serving platform for digital audio. Dax OOH, anyone? There must be short odds on that.

Furthermore, the user experience, whether more free Wi-Fi in public spaces or full-motion content screens, will get better and better. In turn, this will drive greater effectiveness for advertisers. The notion of "the campaign" will start to become the exception, rather than the rule. OOH comms will be always-ready, dynamically triggered, personally relevant, but still delivered at scale and optimised on the fly, and will achieve even better business results.  

In other words, the enduring proposition of national scale but with local precision – brand-building and driving business performance, enabled by technology. Sound good? And I didn’t even mention programmatic OOH once!

Broadcasters want to be more VOD

Jonathan Waite

Head of product, Amplifi

TV works and everyone knows it… right? Yet despite lingering concerns over transparency and brand safety in digital, TV’s relative growth remains painfully slow.

Perhaps it is no longer talked about enough at the top table. In a perverse way, online media has elevated itself in conversations between clients, agencies and partners: like the teacher that has to indulge the naughty kid above those that diligently work away. So how do we drum up excitement in the quiet kid again?

This year the major players – ITV, Channel 4 and Sky – will unite again to extol the virtues of TV’s brand-building potential as a reliable, long-term investment, through events such as The Big TV Festival, now in its second year. But in a digital-hungry marketplace, product development remains a crucial frontier.

It’s time to get addressable

TV is one of the most digital media around, but its potential to create powerful brand stories remains underused. The lines that separate video-on-demand, over-the-top and linear have never been so blurred, especially in the eyes of viewers. But with ad-funded models for streaming services on the horizon, things need to move quicker.

Initially, ITV’s partnership with Sorenson Media and subsequent conversations with Channel 4 to create a competitor to Sky’s AdSmart promised much. But Sorenson’s Chapter 11 bankruptcy protection filing seems to have killed that one.

The intention remains clear though. The data collected through smart TVs remains hugely untapped and will inevitably make manufacturers and tech providers valuable partners.

In uncertainly lies opportunity

A broadcasting shake-up is in the offing. Comcast’s buyout of Sky, and the BBC’s approval for the carve-up of UKTV promises some interesting new dynamics. Comcast brings experience of the US addressable scene to the UK, alongside the potential for a streamlined VOD offering on the horizon.

ITV and Channel 4 have skirted discussions regarding UKTV’s future, while the BBC and Discovery hash out terms over VOD rights.

A larger, combined VOD service would offer advertisers greater scale and, crucially, bring the kind of data-targeting enjoyed through their digital partners to TV. The combination of excellent environments, content and unseen levels of targeting could attract new brands to the medium.

With stunning content, mass reach, proven results for brands and plenty of innovation, there’s plenty to be excited about. It’s time TV found its voice again. Let’s talk about it more, and maybe 2019 will be the year in which TV fully embraces the digital economy.

Magazines are the most undervalued channel

Andrew McLean

Joint head of planning, PHD UK

You’re probably aware of the concept of Schrödinger’s cat: a thought experiment that explored the question of when uncertainty becomes certainty.

Media commentators’ perspectives of magazines are very much like Schrödinger’s cat: depending on whom you speak to, magazines are both alive and dead at the same time.

One of the main challenges for magazine brands is one of perception within the marketing community. Last year, Radiocentre’s "Re-evaluating media" study found that industry professionals rated magazines as the least effective media channel.

However, a meta-analysis of existing effectiveness research placed it fourth out of 10 media channels behind TV, radio and news brands.

This disparity makes magazines the most undervalued channel in media. The study revealed this to be down to a lack of clarity about the role of magazines within the media mix. 

If the lack of a defined role is the problem, what is the solution?

The answer may well lie in attention. There already exists a body of research proving the value of attention, with a recent Admap issue revealing that advertising that attracts attention delivers a 30% higher impact on sales.

To complement this, Magnetic partnered PHD to assess the quality of audience attention across media channels. The research found that magazines offer the second-strongest attention to ads and the highest ad relevance scores of the eight media channels measured.  

Couple the low cost of entry with attention gained and there is a compelling argument for magazines as a solution to brands seeking greater attention and relevance in a world where reach has become king.

PAMCo, the joint industry measurement tool, which was launched in spring 2018, offers a genuine opportunity for magazine brands to reposition their role in the marketing mix by cementing channel expectations. It can help premium publishers to win back revenues that have been moving into the pure-play digital arena.

In 1935, Schrödinger’s cat experiment was a paradox that had no practical solution, but in 2019 there is a practical solution for magazines.

With Magnetic’s new "Attention" research and PAMCo making it easier to plan across all print media, magazine brands now have the tools to drive re-evaluation from an industry, which has been taking the medium for granted.

Trusted, curated brands such as Vogue, Good Housekeeping, Radio Times and Stylist are growing in importance in this era of media fragmentation.

If media agencies open the box in 2019, they’ll discover that magazines are far from dead.

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