The Rundown: Instagram’s buy option highlights its hold over DTC brands
Instagram in the middle
Instagram is now the most powerful platform middleman for brands after its addition of in-app purchasing, and brands will now have to decide whether to embrace their new internet overlord or try to keep a safe distance.
It’s a rich conundrum for direct-to-consumer brands, many of which have relied on Instagram in recent years to drive traffic to their e-commerce sites. Being direct-to-consumer meant cutting out the middlemen wholesale retailers which, in a typical brand relationship, dictate purchase schedules and own customer data. But platforms are middlemen too, and Instagram’s morph into a social media marketplace was inevitable after brands built customer bases audiences on the platform’s back. If Instagram’s going to inspire purchases, it might as well take a cut.
Already, as direct-to-consumer brands grow up, they’ve started exploring retail partnerships with the likes of Target and Instagram, diluting the direct customer connection they were built on. But retail partnerships are made knowing that some customers will still shop the brand directly. The convenience of checkout on Instagram doesn’t have the same assurance, and it would sever brand access to valuable customer data.
It’s a lesson in reducing reliance. Jacquelyn DeJesu, the founder of DTC bathing cap brand Shhhowercap told retail reporter Anna Hensel that “a good rule of thumb for any founder is to make sure your company can survive if Instagram or Facebook shut down tomorrow.”
If a bulk of customer revenue is being driven by Instagram, that’s looking less possible for a growing number of companies. — Hilary Milnes
Snap’s turnaround among publishers
Snap opening Snapchat Discover up to non-exclusive content has helped the company shift the narrative of its platform among publishers.
Last year, Snap started hosting non-exclusive video shows, as well as content from a larger number of media sources including publishers and influencers. This came as the company made an effort to separate media and other public content from posts made by your friends — a decision that incurred a heavy backlash from users, including Kylie Jenner.
For publishers, the decision was a gift. Instead of funding 10-person Snapchat teams making content exclusively for Snapchat Discover, they can now simply recut and adapt existing videos for the platform — and collect revenue from the ads that run during the content. Insider, for instance, has been able to use Snapchat Discover to monetize its library of news-feed videos, some of which are too short to hit length requirements for ad breaks on Facebook. For many publishers on Snapchat, there’s no longer a question about whether the platform can be profitable for them — it often is, because costs are cheaper and it’s easier to project ad revenue there.
But there are still challenges. By opening up Snapchat Discover to more media sources, there is increased competition and greater pressure for publishers and content to stick out. Instead of a dozen Snapchat Discover publishers, there are now more than 100 media outlets on the platform. That creates a discovery problem for Snap to solve, and a growing challenge for publishers. — Sahil Patel
Facebook and Google lay low at Ad Week
Advertising Week Europe kicked off this week, but online ad giants Facebook and Google have kept a notably muted profile at the event compared with previous years.
It’s easy to understand why: Last year the Cambridge Analytica scandal dominated the event, with Facebook execs pummeled for answers at every opportunity. The year prior, YouTube’s brand safety scandal quickly became the impromptu theme of the entire event. Again, right on cue, the day before Ad Week began, Facebook was forced to issue statements after it failed to stop the spread of the Christchurch Mosque attack video.
But rather than the more open outrage seen at previous Ad Weeks, behind the scenes, agency and advertising executives were more resigned. Many of them admitted a more ugly truth, that’s become more obvious over the last six months: While they’re cynical about how genuine the duopoly are at addressing the issues, they’re under too much financial pressure themselves to pull budgets from the platforms in any meaningful way. — Jess Davies
Simplicity could be killing agency business models
What’s the ideal holding company structure? These days it feels a little bit like a free-for-all. Over the past year, consolidation and simplicity has been the name of the game. Now Martin Sorrell, fresh off a successful year for S4 Capital (by all accounts), is out wondering if “simplicity” is actually bad for business.
“Organizational neatness, I don’t agree with,” he told Sky News during one of a round of interviews following the results, which saw S4 posting a pro-forma pre-tax profit of $10.04 million (down from $11 million in 2017.) “There are four major holding companies. Why are the US companies doing well? Why are the European ones doing worse? Europe may have consolidated too far. It’s made it too simple. Simplicity in and of itself may not be the solution. It’s better to be a little messy.”
This is confusing because it goes against the entire narrative the industry has been telling itself for the past year. The marketing industry and its various structures and entities are massively complicated, and different types of agencies, thanks to a “big bang” in the industry 20-some years ago that resulted in the separation of media and creative, run the gamut. Recognizing that a CMO has to deal with an expanding universe nearly every day, and that for many, it looks like bloat, holding companies have rushed to clean things up. Over the past year, J. Walter Thompson was killed and merged with Wunderman, VML joined Y&R, and Ogilvy was whittled down to a more barebones org structure. This against a backdrop of clients asking for fewer partners to help them with strategy. And attempting to handle execution themselves via a new breed of in-house agency that sits closer to the CMO’s office.
While one could write off Sorrell’s comments as a swipe at his former employer WPP, they do raise interesting questions about the model of S4 Capital, and others like David Jones’ venture, You & Mr. Jones, which are attempting to strike a sweet halfway point: Help clients “regain control” without getting too far into the messy business of traditional agency life. If that’s what ends up being the future of the industry, these mergers and consolidations could be simply re-arranging deck chairs on the Titanic. — Shareen Pathak
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