In the Roaring Twenties, advertising made a comeback
If you sounded smart at a media conference or wanted to sell your start-up in the past few years, you’d talk about the rise of digital subscriptions. Netflix and Spotify pioneered the idea of getting consumers to pay for their content every month, and The New York Times, The Washington Post, and many others followed suit. Until last week, everyone was fine-tuning their media subscriptions, from the owners of the SpongeBob SquarePants TV show ($ 5.99 a month) to the staid news network Reuters ($ 35) to my friend Isaac walking aimlessly through New York wanders ($ 7).
The amazing rise of subscription digital media is part of a wider onslaught of the dependable, direct-to-consumer economy that has intrigued investors. You can now subscribe to big hits like Disney + and Peloton, as well as niche companies like quality dog food and beans.
Digital media executives went out of their way last year to let their boards know about their new subscription products, but something strange happened: Their old, outdated advertising businesses exploded when consumers stayed at home and bought online. And now, travel companies, liquor companies, and basically everyone else hoping to capitalize on a wide-open summer and marketing dream of an economic boom in the post-roaring twenties, have started pouring money into advertising on virtually every platform, but most of all in digital media.
“Advertising spending is hot right now,” says Henry Blodget, co-founder of Insider (formerly Business Insider), which introduced a subscription level early in 2017. “The economy is in full swing, travel and leisure are coming back, and consumers are coming out of their pandemic cocoons.”
Several privately owned publishers said their advertising revenues rose noticeably in the first quarter compared to the same quarter of the previous year, which was the last to be largely spared from the pandemic: insiders by more than 30 percent; Bloomberg Media gained 29 percent; Vice, 25 percent; Bustle Digital Group, more than 25 percent; and Axios’ quarterly advertising revenue nearly doubled, executives at these companies told me.
Quarterly numbers for listed companies are not yet available, but a report by the GroupM agency last month showed that digital media advertising grew by more than 7 percent in 2020, despite television advertising declining during the pandemic and Print media have collapsed. (The Times lagged these other publishers in digital ad sales growth in 2020, even though its print advertising business declined sharply during the pandemic. But it made up for that ground with subscriptions.) “Advertisers followed consumers online” during the crisis, said Sarah Iooss, the sales manager for America at the gaming platform Twitch. The GroupM report predicts that digital advertising will grow 22 percent in 2021.
“The venture capital world has been betting against advertising for a decade and it’s about to explode,” predicted Bryan Goldberg, CEO of Bustle, which has bought brands like Mic and Nylon and plans to restart Gawker.
There are many reasons to be careful with this resuscitation. For one thing, despite political pressure, Google and Facebook remain the giants of the American advertising market. About 87 percent of last year’s growth went to these two companies, according to an estimate made for me by retail group Digital Content Next, based on figures from the Interactive Advertising Bureau. Facebook alone brought in more than $ 84 billion in advertising revenue last year.
There have been suggestions that upcoming Apple crackdown on how apps collect data from users, along with growing global regulatory pressures, could slow down juggernauts, but those moves could also damage the business of other media companies that collect user data. The most successful newcomer to the digital advertising market is Amazon, which now devours more than 10 percent of the country’s digital advertising business by charging retailers to advertise their own products on its marketplace.
One of the lawmakers who has urged curbing the power of tech giants, Rep. David Cicilline, a Rhode Island Democrat who heads the House Antitrust Subcommittee, said the improving advertising business would whet Washington’s appetite for a crackdown don’t dampen over “monopoly power” in big tech.
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“These are structural problems in the market and a few strong quarters won’t change that,” he said.
The digital advertising boom is getting online publishers going, but they’re not the biggest beneficiaries. Even if television has a smaller and smaller share of the advertising market, the most sought-after digital advertising channels are the new “Connected TV” platforms – places like Roku, Hulu and Viacoms Pluto TV. These platforms place old-fashioned TV ads alongside old-fashioned TV shows, but also provide advertisers with detailed data on who is watching.
At the same time, advertisers tend to be reluctant to news, using keywords to prevent display ads from appearing alongside stories about polarizing topics. Vice President for Global News and Entertainment Jesse Angelo said he denied a request last year from an entertainment company that, while celebrating the Black Lives Matter movement on its own website, asked Vice to stop its ads from being in Near the conditions appearing “Blacks”, “Blacks” and “Black Lives Matter” appear.
The bigger picture, however, is a kind of optimism that hasn’t been seen in the dismal digital publishing business for nearly half a decade.
“I don’t know if I could have predicted it at that level,” said Justin Smith, CEO of Bloomberg Media Group. “We haven’t seen high double-digit growth in digital advertising since maybe 2017.”
And it’s not just advertising. Media managers strive to catch up with demand for other elements of their business that have fallen out of favor with increasing subscriptions, especially events.
“There will simply be a rush of physical events in the second half of this year,” said Chris Weil, chairman and CEO of experience advertising agency Momentum.
That doesn’t mean, of course, that media companies will refrain from subscriptions. That’s partly because investors continue to value this company’s reliability against the advertising boom and bust. Advertisers sweat the idea of adding commercials to their favorite Netflix shows, but Netflix would never consider having stocks so high just from subscriptions.
And paradoxically, one of the driving forces behind the digital advertising boom is the shift towards subscriptions, which should replace advertising revenue. It turns out that subscription sales are quite expensive and streaming entertainment companies “have to spend a ton of money on marketing,” said Matthew Segal, co-founder of ATTN, a Los Angeles-based media company.
Not all newcomers to the subscription boom will make it, and the notoriously cyclical advertising business is likely to rise and fall again with economic cycles. For the time being, however, it has postponed the calculations of many media companies and lifted their mood.
“It won’t take forever,” said Mr. Blodget. “But we’ll enjoy it while it does.”