Media Briefing: Publishers are feeling the economy’s impact on their Q1 sales cycles
This week’s Media Briefing takes a look at how publishers’ sales timelines are changing as later fourth quarter ad spending pulls focus from 2023 campaigns.
- Publishers already feel the Q1 pressure
- IAC/Dotdash Meredith’s Q3 2022 earnings report
- The Recount pursues a fire sale, Jessica Sibley leaves Forbes for Time and more
- Publishers’ sales teams would normally be focused on selling 2023 campaigns by now, but many advertisers are stuck trying to offload their remaining 2022 budgets on quick and easy campaigns.
- As a result, revenue chiefs are divided on how much time their sales teams should dedicate to trying to capture more Q4 advertising revenue versus going after longer-term and higher-cost campaigns that kick off in Q1.
- Given 2022 appears poised to be a lower performing year for some publishers than expected, any additional revenue could help.
- Dotdash Meredith’s Q3 2022 revenue was $467.1 million, up 617% from Q3 2021.
- Adjusted EBITDA was $31 million in Q3 2022, up 280% year over year.
- Digital revenue was $220.7 million, up 239% year over year.
- However, pro forma revenue (the measurement used to compare the businesses’ performance pre- and post-acquisition) decreased 19% from Q3 2021, from $467.1 million to $579.1 million, due to a 13% decline in digital revenue and a 24% decline in print revenue.
- Dotdash Meredith suffered an operating loss of $95 million, due in large part to the acquisition of Meredith.
- IAC is cutting Dotdash Meredith’s full year adjusted EBITDA guidance for 2022 by about $50 million.
- While publishers are pessimistic in that they agree a recession is going to happen, they are fairly optimistic that it won’t be a bad one.
- Digiday’s survey found that the number of publishers who think a recession is coming has shot up since the summer.
- Condé Nast’s third quarter was seemingly better than what other media companies have reported, at least according to Craig Kostelic, the company’s global chief business officer.
- This growth is primarily credited to the company’s ongoing globalization process, which includes a reorganization of the sales team. This restructure has not been immune to challenges, however.
- Publishers’ employee bases continue to be largely white. That assertion should surprise precisely no one, but a roundup of publishers’ diversity profiles reveals that nearly all of the companies included are mostly white.
- This list of publishers’ diversity profiles was last updated on Nov. 4.
- After a New York City salary transparency law went into effect on Nov. 1, requiring employers to include salary ranges in their job postings, some media companies updated their listings to comply with the new law.
- Insider, on the other hand, started adding salary ranges in its job postings when it became a law to do so in Colorado last year.
- Total revenue hit $717.9 million, a 10.3% decrease from Q3 2021.
- “We believe that peak decline … from a year-over-year perspective, is now behind us,” said Michael Reed, CEO and chairman of Gannett during the company’s third quarter earnings call on Thursday.
Publishers already feel the Q1 pressure
The key hits:
Advertisers are still figuring out how to spend their remaining advertising dollars for 2022 — an unusual occurrence by at this point in the year — and publishers are very aware that there is still money on the table for this quarter.
But given the fact that most sales teams would typically have turned their attention to selling Q1 campaigns by now, media executives are grappling with whether to try to make up the digital ad revenue deficit they’re facing this year or take a moderate loss in 2022 and get a head start for the coming year, which promises to be just as tough from an advertising perspective.
“It used to be with planning cycles that you would be talking about next year at this time, and now because we just are so comfortable with not knowing [what next year holds], we’re just focusing on right now,” said a media executive who spoke anonymously to Digiday for this story.
The fourth quarter is not known for being a particularly easy time for sales teams, but after a year made chaotic thanks to shortened turnaround times between the selling and execution of campaigns, all of the stress has been compounded into the last few months of 2022.
“It’s always this very hard time in Q4, where you’re racing to the finish line, trying to get in every last dollar you can before the ball drops in Time Square. But you’re also setting up your entire year with your top 30 or 40 clients, doing upfronts and negotiations around rate cards,” said another anonymous media executive. They added that they’re going to be prioritizing selling Q1 campaigns versus Q4 after receiving a promising influx of requests for proposals already for the new year.
Advertising budgets may still be available ahead of the holiday season, but the remnants of those dollars might not be as appealing as what next year could offer.
The campaigns being bought right now are more turnkey, quick to produce and generally shorter in length compared to campaigns that usually run this time of year.
Part of that is because deals are still being signed for next month, giving little turnaround time and resulting in more display ads or branded social media posts versus branded content and custom videos.
At Insider, a lot of the branded content campaigns running in this quarter were sold over the summer, before the economic downturn really set in, and typically take more than six weeks to create, according to Maggie Milnamow, the company’s chief revenue officer.
The other reason is that “a lot of clients want to finish out the year with these budgets spent [because] that’s more valuable than letting it run into the first quarter,” Milnamow said. “By this point, you’re pretty set for fourth quarter; you’re pretty much locked in. Instead, there’s a lot of planning that’s happening much later,” she added.
The financial benefits of looking ahead
For publishers who have already achieved year-over-year revenue growth this quarter, it makes more sense to abandon the scraps of 2022 budgets and pursue the larger opportunities that haven’t yet been claimed for next year.
“There’s this perfect storm of macro events [and it’s] making it one of the most challenging Q4s I’ve ever experienced,” said another media executive who spoke anonymously for this story. While the exec’s Q4 revenue is on pace to be up 25% year over year, that figure is still short of the year-end goal set at the beginning of the year, they added.
With revenue still up year over year, however, 2023 is a much larger focus right now than trying to juice the fourth quarter’s total revenue.
“We are still getting requests for Q4, albeit much less than we were a month or two ago, and we’re still focused on hitting our Q4 [goals] and making sure it sticks … [but] we are absolutely 100% in Q1 in 2023 mode,” they said.
Betches Media is also in a position of growth this year — overall revenue is up 40% year over year — enabling its sales team to be less focused on squeezing out every dime possible in Q4, according to CRO David Spiegel.
“It creates an interesting balance on our end of how much time I want my salespeople and my marketing folks thinking about in-quarter versus the future. And my general philosophy is always don’t sacrifice long-term strategy for short-term gains,” said Spiegel. “Normally you want people to be almost 80-20 at this point of the year [of looking ahead versus selling in-quarter campaigns]. Maybe it’s more like 60-40 [or] 70-30 depending on the category,” he added.
There is also financial incentive to nurture the longer-term campaign opportunities in 2023 that are no longer possible to execute in Q4. Clients who spend over $250,000 have double the renewal rate on average compared with partnerships that come in under that rate, Spiegel added.
The future looks brighter than expected
While the exact split between focusing on Q4 and Q1 isn’t entirely clear for some publishers, there is optimism that advertising revenue will continue to flow next year in the form of larger and longer-term partnerships.
“You have to play both the short-term game and the long-term game, and most of it, to be honest, is dictated by the customers and where their heads are at in terms of planning,” said Ryan Pauley, CRO of Vox Media. “What I will say is we are having an uptick from previous years in our 2023 big partnership, upfront conversations,” he said, though he declined to share specifics of how many more conversations that equates to.
“The light at the end of the tunnel is the volume of activity and interest from our advertisers for 2023. So hopefully we get a nice little reset in January,” said an anonymous media executive. “And regardless of the macro factors, we’re sort of starting from scratch.”
What we’ve heard
“When you’re going from brand-based to category-based [selling strategy], you spend a lot of time calling on [client] accounts. A lot of people have those relationships, right, so there is sensitivity internally, and then there is sensitivity externally, because everybody has their favorite people. At some point, you just have to provide clarity — the hardest part is the in-between period.”— Craig Kostelic, Condé Nast’s global chief business officer, on the latest episode of the Digiday Podcast.
Dotdash Meredith’s Q3 2022 earnings report
Dotdash Meredith’s digital business has suffered from three straight quarters of pro forma revenue declines. In its third quarter earnings report, the publisher’s parent company IAC claimed the latest decline was due to delays in moving Meredith’s sites to Dotdash’s tech platform and the softening ad market.
In a letter to shareholders published on Tuesday, IAC CEO Joey Levin said Dotdash’s acquisition of Meredith in December 2021 was, in hindsight, timed “poorly.”
“Both Dotdash and Meredith have experienced headwinds throughout the year, with soft traffic compared to extraordinary pandemic audiences and an unexpectedly weak digital advertising market,” Levin wrote.
The key details:
The migration improves the site speeds of the Meredith brands, primarily by reducing ad inventory and old content hosted on the sites, Christopher Halpin, IAC’s CFO, said on the Q3 earnings call Wednesday morning. However, he said the company was “overly aggressive” when it expected the migration to be completed by early July.
While the process was about 90% done as of October, it ultimately “took longer than expected and produced unexpected ad-serving and e-commerce challenges that hurt revenue in August and September,” Levin wrote in the shareholder letter. In addition to the migration delays, Dotdash Meredith’s commerce revenue suffered from less consumer demand, the company’s earnings report stated.
Lower ad rates
Advertising makes up roughly 65% of Dotdash Meredith’s digital revenue. The company saw lower ad rates and a “rapid decline in ad demand” from the retail, CPG, home, beauty and tech categories, Halpin said.
The delay of the migration of Meredith’s larger sites and lifestyle sites to Dotdash’s platform meant “constantly updating the ad serving performance,” Halpin said. This led to a drag on Q3 ad performance.
The company lowered its guidance for 2022 from $300 million adjusted EBITDA to $240 million-$250 million (excluding the one-time costs associated with the integration and restructuring).
The company is “accepting a choppy [ad market] through the rest of the year,” Halpin said. But leadership believes it can get to flat growth in digital revenue in the first half of 2023 and grow the business for full-year 2023, “provided the economy and market do not substantially soften,” Levin wrote in the shareholder letter. — Sara Guaglione
Numbers to know
20%: The percentage of staff, or 52 roles, that The Independent earmarked as at risk of redundancy as the digital ad market declines.
11,000: The number of employees that Meta, parent company of Facebook and Instagram, laid off this week, representing 13% of its total staff.
80%: The decrease in net profit that News Corp, parent company of The Wall Street Journal, saw in its latest quarter, year over year, from $196 million to $40 million.
What we’ve covered
Digiday+ Research check-in — Publishers are optimistically pessimistic about a recession:
Learn more about publishers’ outlook for 2023 here.
Condé Nast’s Craig Kostelic credits 2022 revenue growth to global ad sales, despite operational hiccups:
Hear from Kostelic about the company’s new advertising sales strategy here.
Digiday’s updated breakdown of publishers’ diversity statistics:
Learn more about the state of diversity in the media industry here.
Insider’s chief people officer on why new salary transparency law makes hiring process easier:
Learn more about why CPO Jessica Liebman believes public salary ranges can both help and hinder the hiring process here.
Gannett’s Q3 earnings were bleak, but CEO Mike Reed expects the worst is behind the publisher:
Read more about the publishers’ third quarter results here.
What we’re reading
The Recount is down to a dwindled staff as it pursues fire sale:
Only about a dozen staffers are left at 4-year-old video news startup The Recount after the company’s latest round of cuts last month. Founders John Battelle and John Heilemann are trying to sell the company for a nominal sum, reported Axios, after losing $10 million in 2021 on $1 million in revenue.
Time taps Forbes’ Jessica Sibley as new CEO:
Sibley is leaving her role as the chief operating officer of Forbes to become Time’s new chief executive, succeeding Edward Felsenthal, who will remain on as the editor-in-chief of the publication, according to Time.
Condé Nast sues Drake and 21 Savage after using fake Vogue covers to promote new album:
Drake and 21 Savage have been sued by Condé Nast, the publisher of Vogue magazine, who alleged the rappers used the Vogue trademark without permission to promote “Her Loss,” their new album, according to The Guardian. The publisher is seeking at least $4 million in damages.
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