It’s a ‘dogfight’: Publishers’ Q2 revenue was flat and they’re wary of remainder of the year
Looking at the second quarter of 2023, it seems that flat is about as good as it’s going to get for many publishers regarding year-over-year revenue trends. This is according to conversations with seven media executives.
“We’re literally at 100% exactly where we were last year,” said a media exec who spoke on the condition of anonymity, and who added that their company is also exactly on track with the goals they set from last year through Q2. “We just don’t know where we’re going to end up in Q3 [and] Q4,” they said.
The seven publishers Digiday spoke to for this story seem to be breathing a slight sigh of relief due to the fact that Q2 is generally on track to not bring in less revenue than a year ago. But the fact that the crystal ball remains cloudy halfway through the year is causing publishers to rethink everything from their sales strategies to how they weigh profit margins when assessing new ad deals.
“Where we landed for Q2 is basically neck and neck with where we were at last year at this time,” said Riva Syrop, president of Apartment Therapy Media. “My hope had been for us to go above that, to be honest with you. I thought that things were going to sort of loosen up sooner than they did. However, we’re not unhappy with where we’re landing.”
A second executive who requested anonymity said that May 2023 was the best month of May ever for their company in terms of ad sales, but achieving that goal was harder than at this time last year. They did not disclose their projected year-over-year Q2 revenue comparisons. “Every deal is more competitive, every advertiser is being more selective and often dealing with smaller budgets. And so I don’t really have a great feel for what the second half will look like,” the exec continued. “I assume it’s going to look a lot like the first half.”
A third executive who spoke anonymously for this story told Digiday that while their team has been able to sell three seven-figure deals between $1 million and $3 million against its tentpole event franchises, the “daily, evergreen, utility-driven type RFPs” have been “a dogfight.” For context, they said in a “frothy marketplace” they’d try to sell 10 seven-figure deals in the quarter.
“If it’s us versus 40 other publishers, it’s going to be tough,” the third exec said. And unfortunately those smaller- to mid-tier ad deals are the ones that carry a media business throughout the year, they added. The exec wouldn’t disclose direct year-over-year comparisons for total revenue in Q2, but said that the quarter has been pacing behind past years’ targets and the clouds wouldn’t likely lift until 2024.
Will the broken crystal ball ever be fixed?
Nearly all of the executives that spoke with Digiday for this story echoed the sentiment that the ability to forecast ad revenue in the second half of 2023 is going to be just as difficult as it was in the first two quarters — and the last two quarters of 2022 — largely due to the shared habit among marketers of buying most of their ads in-quarter versus planning months or even weeks in advance of a campaign going live.
“This year continues to be highly transactional and booking in-quarter, and we still have a tremendous amount of conversations to be had for [the] second half, primarily Q4,” said Lindsey Abramo, CEO of newly-formed media company World of Good Brands, which formed out of the Leaf Group portfolio.
But this isn’t a new tick among advertisers or even a sign of the most recent economic downturn. There has been a steady trend of sales cycles shortening over the past couple of years, and it begs the question: Is this the new normal for how ad deals will be conducted?
“I do think this is ephemeral. No business wants to do month-by-month planning. You only do that when times are really tough. So my assumption is that as the economy returns and bounces back, you’ll see old buying habits return and bounce back,” said Jim VandeHei, CEO and co-founder of Axios, who added that this has been the “weirdest market” he’s experienced in the last 15 years.
Other publishers say that this is how the business is going to carry forward, as it has been for many years.
“People are definitely buying closer to the market [but] that was a trend happening before the market got wiggly and weird,” said Neil Vogel, CEO of Dotdash Meredith. “Obviously, we would love it if every dollar was planned way in advance. It’s just not how it works. But we’re also fairly agnostic,” he continued, adding that sellers and their selling tools have been equipped to work against shortened sales cycles.
To mitigate the uncertainty and instability, some publishers have changed up their sales strategies in a number of ways in an effort to increase their profits, even if more ad dollars are not coming in through the door.
While the second anonymous exec said their company has put pressure on its sales team to get out in the field and prioritize in-person meetings with clients over Zoom meetings, the first anonymous exec said their team is trying to trim the fat in post-sale operations.
“Our goal is to maximize profit, not revenue. It’s a much harder number to measure, but essentially the goal is to keep revenue the same while costs decrease,” said the first media exec. And so far, they said their company is on track to accomplish just that.
Cost-cutting for this particular publisher hasn’t come in the form of reducing staff headcount or getting rid of a large real estate asset. Instead, the media exec said the company has started measuring each ad offering by its profit margin, weighing how much the overhead cost of creating the campaign eats into the revenue earned from the deal. It’s not a perfect science yet, but by prioritizing high-profit-margin campaigns like programmatic ads and cutting down on some of the overhead costs that go into creating complex sponsorships like branded content or events, the publisher has been able to increase the overall profit of the company this year, despite not being able to control how much and how many advertisers are spending on ad campaigns holistically.
“Even when revenue is flat, it can still be a very successful year if you’ve been more efficient in what you sell,” said the media exec.
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