Media Buying Briefing: Digital-only video players will struggle to get price increases in Q4

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This Media Buying Briefing covers the latest in agency news and media buying for Digiday+ members and is distributed over email every Monday at 10 a.m. ET. More from the series →

The news that Netflix lured away the two top ad-sales executives from Snap — Jeremi Gorman and Peter Naylor — dominated connected TV headlines last week. And Digiday covered it as well.

But there’s a bigger story about softness in the scatter video market the rest of third quarter and fourth — and how that could affect Netflix’s new offering, as well as the rest of the linear and CTV/streaming inventory, according to conversations with several media buyers, who declined to speak on the record.

In a word, ad pricing in the video marketplace is quite soft, for a few reasons. For one, some clients, according to buyers, are canceling the “holds” on some of their upfront orders — meaning time they booked to purchase they are now giving back to sellers. For another, there’s simply too much ad inventory available in the marketplace, with more becoming available in the next few months between Netflix’s ad-supported tier launch on Nov. 1 and Disney+’s ad-supported tier coming online in December.

“Most of the hit right now is in fourth quarter,” said one major media buyer. 

Meanwhile, buyers said clients are still relying on somewhat outdated models that guide them toward spending more ad dollars in linear TV (broadcast and cable networks), which has the least amount of inventory available.

“We’ve got all of this connected TV and streaming supply, and that’s coupled with a loss of linear supply,” said one major buyer. “But clients aren’t moving fast enough away from the linear supply, as they should. We keep beating on our clients to do that and to follow the consumer. We continue to spend a disproportionate amount of linear cable than we should be just because of market mix models say that cable works. So it’s a little bit messed up right now.”

The buyer said the streaming services are looking to cut ad-volume deals, and offer better pricing to secure the volume. Most of the deals are “hovering around flat, maybe a percent or two down [from upfront pricing levels],” the buyer added.

Another buyer noted that the hybrid players, which have both linear and streaming assets in which to sell advertising, are in a better position than digital-only streamers because there’s a give-and-take on how to use one platform to offset the other. Whereas digital-only players have less wiggle room for negotiating.

“If you’re a digital-first company, and you only have basically digital products to offer, you’re having a tougher time getting the volume right now. And the only way to get that volume is to offer price incentives,” said the buyer. “A company like YouTube, for instance — they’ve been used to 30 and 40% growth every single year. Well, that’s not happening.”

(YouTube did experience a dramatic slowing of its growth in Q2 of this year, a relatively anemic 4.8%, which fell short of analysts’ expectations. At the time, parent Alphabet CFO Ruth Porat said the streaming giant was experiencing a “pullback in spend by some advertisers.”)

So this is the market that Netflix, a digital-only player, is entering. And Netflix, whose initial approach by ad-sales partner Microsoft/Xandr to the media-buying community has been perceived as disorderly, has made its own challenges even worse by offering a paucity of detail about what content it will make available on the ad-supported tier. 

“They’re just a mess,” explained one buyer. “They did have some sexy words to give us about how they were going to have [a] second-by-second categorization of the content. I asked when are they going to send us the category list? Because since it’s Netflix, I’m anticipating a list explaining the presence of guns, presence of drugs, presence of nudity, foul language… the biggest hits are the most violent — Ozark and Peaky Blinders. They’re basically just offering us [the] top 10 and genre targeting. But they can’t even do age and gender, or any demo targeting.”

All that said, the demand to buy Netflix and Disney+ will be there, given the appeal of their content — and the reality that audiences now spend more time watching streaming than linear cable. Buyers just say they need to lay out the positives and negatives for clients, and let them decide. 

Which, at an asked-for $65 CPM in this soft market, will surely drop in this soft market. News of the cost generated a slew of memes poking fun at Netflix. 

“What we’re doing is we’re creating, for lack of a better term, a comparison placemat so that we are presenting the facts,” said one buyer, “and then if the clients want to engage, they can and we will negotiate the best possible price.”

Color by numbers

Concerns over a coming recession have not slowed down ad spending on Meta-owned Instagram. In H1 2022, MediaRadar reported combined spending of more than $4.7 billion across both small advertisers and larger companies.

  • 87% of small advertisers spent less than $50,000, adding up to a combined total of more than $114 million.
  • Large advertisers spending more than $500,000 on the platform spent $4.3 billion.
  • The media and entertainment category is the largest spender, accounting for 24% of total H1 ad spend, or about $1.1 billion invested on the social app in that time frame. Retail and apparel ranked second and third, amassing $983 million and $483 million respectively. — Antoinette Siu

Takeoff & landing

  • Multiple reports said Dentsu International global CEO Wendy Clark will step down from her post sometime in the near future, as the parent company restructures to form a single leadership unit rather than Clark’s remit, which did not include Dentsu’s Japan-based operations. 
  • WPP last week acquired 15-year-old e-commerce consultancy Newcraft, which is based in the Netherlands. The 150-person team will be integrated into WPP’s Wunderman Thompson unit. 
  • Personnel moves: TV measurement firm iSpot hired research veteran Will Waldron as vp of research, charged with overseeing the MRC accreditation process and statistical standards. He most recently was a lead scientist with the U.S. Census Bureau … Search intelligence platform Captify promoted Amelia Waddington from vp of product to senior vp, where she is leading the charge on a cookieless targeting solution.

Direct quote

“[Agency holding companies] will always be competitors. But there’s an aspect of this where, without shared knowledge, we’re not going to get to the common goal that we want to get to. The common goal that we want to get to is reduction — ideally, net zero carbon emissions. And if we turn this into a deeply competitive thing, it’s going to be a lot harder to get there.”

— Alison Pepper, executive vp of government & sustainability, 4A’s, on the prospect of agencies working together to decarbonize the buying and selling of advertising.

Speed reading

  • Digiday senior ad tech reporter Marty Swant went behind the headlines of Snap’s loss of two major ad sales executives and layoffs of 20% of its workforce to find out where the digital platform is headed. 
  • Media agency reporter Antoinette Siu looked into the latest steps the ANA is taking to combat online hate speech, this time launching an educational program and website with the Better Business Bureau.   
  • Gaming and esports reporter Alexander Lee tackled the task of putting together an oral history of the world of esports, dating back as far as 1972.

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