The Rundown: Tensions escalate between Amazon and major brands
In media buying circles, the big buzz is Energizer. It started with a desktop search for Energizer batteries on Amazon.com that resulted in an ad for Amazon’s own Basics brand batteries so massive that people had to scroll to get to the Energizer product they’d searched for. Then, the battle shifted to mobile: Amazon is putting in a small lightbox ad that literally overshadowed the Energizer battery brand.
For brand purists, this is akin to a store replacing big name brands on shelves with their own private-label brands. The tactic was something that was teased late last year, with a few tests in which Amazon’s private-label products appeared within listings of competitive brands. Now, it’s everywhere: A listing for Bounty paper towels has an ad for Amazon’s in-house paper brand, Presto. A search for anti-allergy name-brand medications includes giant ads for Amazon Basics’ Care brand medications.
It’s fueling an escalation in tensions between big brands and Amazon, and more scrutiny from giant companies over whether to buy Amazon ads. One media buyer whose client had her products affected by a private label listing within the platform said she’s considered pulling advertising from Amazon entirely. For others that have never dabbled in Amazon media, it’s just one more reason to not even think about it: Giving Amazon money for advertising means helping them eventually compete with you for retail.
Private-label is a huge growth opportunity for Amazon — analysts at SunTrust expect the business to make the company $25 billion by 2022. But now, it’s starting to look like it may actually be at odds with its ad business. “This is bad business on Amazon’s part, and it’s using money it’s making from advertisers to screw those advertisers themselves,” said one buyer. “It can’t last.” — Shareen Pathak
CAC-ophony at the IAB’s Annual Leadership Meeting
There was an alarming noise that echoed throughout the Interactive Advertising Bureau’s Annual Leadership Meeting in Phoenix, Arizona, this week. In sessions on stage, in the halls during networking breaks, over plates of chicken parm at lunch, and even mid-sentence. Attendees would make a sound as if they were “hacking up a hairball,” as one attendee described it. It was the ad industry’s latest key buzzword: CAC.
Short for “customer acquisition cost,” CAC has emerged as the primary metric of concern for direct to consumer companies built from the ground up on the back of digital ad platforms such as Facebook and Google. But increasingly it’s working its way into the broader industry as the love affair with all things DTC continues.
Alongside LTV (or lifetime value) the importance of CAC continues to grow for DTC marketers as they become more sophisticated with how they spend their marketing dollars. Many are pulling back on Facebook, for example, as the social networks’ rising ad prices send their CACs skyrocketing and in some instances their business models untenable as a result. CAC is also a reason some DTC marketers are wary of spending on TV – the CAC is too hard to triangulate. If you’re a publisher or platform struggling to win over performance-minded marketers, CAC is the likely culprit.
CAC’s popularity is also the latest sign of thriftiness and more data-driven decision making among marketers. From DTC companies with small budgets to major CPG brands with investor pressure, marketers today are more focused than ever on making sure their marketing dollars are not going to waste. “CAC to LTV is the new purchase funnel,” IAB CEO Randall Rothenberg said on stage on February 11. God help us all. — Tim Peterson
Apple’s publisher pitch
Major publishers are reportedly balking at the terms of the new “Netflix for news” service Apple is out pitching, with which it would offer access to content from a selection of news and magazine publishers for a monthly fee of around $10. But not everyone will feel the same. The proposed service (and resulting revenue) will prove more compelling to some publishers more than others.
It’s understandable that major news brands would be turned off by the offer. At a high level, the proposed 50 percent revenue share isn’t meaningful enough for them to risk cannibalizing their existing revenue streams, and the product risks completely undermining their existing direct-to-consumer relationships and strategies by inserting Apple in between.
Apple is encouraging publishers not to get hung up on the size of its cut, urging them instead to think about the revenue that might be generated by the large-scale distribution it brings to the table. But publishers have seen this movie before, with many leaning far too heavily into platforms such as Facebook only to have the rug pulled from under their feet. Established, big-brand publishers will be wary of giving up control, regardless of any short-term revenue bump they might be promised.
But others will be interested. Digital publishers have flocked to subscriptions in recent years as an attempt to lessen their reliance on advertising, while legacy magazine companies and others are looking for ways to offset dwindling circulation numbers and print ad budgets. Even if the big-brand news publishers don’t bite, others surely will. The promise of a short-term revenue bump will outweigh longer-term considerations, perhaps through lack of choice more than anything else.
The question then becomes whether Apple can create a compelling consumer product without the participation of the major brands consumers will expect to see when handing over their $10 per month. If Apple expects people to pay en masse for a subscription news bundle, it’ll need to nail the content. And that’ll most likely mean lowering its cut and sharing some data if it wants the big guys on board. — Jack Marshall
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