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Roku’s advertising business continues to grow, and so does its control over the ads running on its connected TV platform. In the fourth quarter of 2018, Roku’s platform revenue — which includes advertising revenue — continued to exceed revenue from the sale of devices running Roku’s connected TV platform, which Roku categorizes as “player revenue.” And in 2018 the number of video ads that Roku was responsible for selling was more than double the number it sold in 2017, according to a letter to shareholders that the company published on Feb. 21.

The key numbers

  • $275.7 million in total revenue, up 46 percent year over year
  • $151.4 million in platform revenue, up 77 percent year over year
  • $124.3 million in player revenue, up 21 percent year over year
  • 27.1 million active accounts, up 40 percent year over year
  • 7.3 billion hours’ worth of video streamed through Roku, up 69 percent year over year
  • Average revenue per user of $17.95, up 30 percent year over year

More streaming hours = more ad inventory (probably)
“In just the last 18 months Roku users streamed more than they did in the prior nine years of the company’s history,” according to the company’s letter to shareholders. Given that Roku typically controls 30 percent of the ad impressions in ad-supported apps on its platform, the increase in streaming hours likely corresponds to an increase in ad inventory available to Roku, but it’s unclear how much of an increase. Roku didn’t share how much time people spent streaming ad-supported videos, let alone videos that Roku can sell ads against. Netflix is likely to be among the most popular apps on Roku but doesn’t carry ads. And Hulu is also probably pretty popular, but the ad-supported streaming service does not allow Roku to sell ads in its app.

Channeling more control
The Roku Channel has been part of Roku’s push to control ad sales on its platform. The ad-supported channel’s launch in September 2017 marked the beginning of “a fundamental transition to increase video advertising inventory under our control,” the company said in its shareholder letter. The Roku Channel features roughly 10,000 movies and TV episodes that people can watch for free and live programming from ABC News, Cheddar and others, and in January 2019, Roku began to sell a la carte subscriptions to Showtime, Starz and Epix to watch those channels’ content through the Roku Channel, which can be accessed through Roku’s connected TV platform as well its mobile apps. In a pitch deck that Roku shared with ad buyers last year, the company said Roku Channel was the third-biggest ad-supported app on its platform.

The Roku Channel is “not just a major source of ad inventory for us, but it’s a highly strategic one,” Scott Rosenberg, svp and gm of platform business at Roku, said during the company’s earnings call on Feb. 21. Since Roku owns the channel’s ad inventory outright, it is better able to target ads on the channel than in third-party apps, he said.

A billion-dollar business
Roku expects its total revenue to top $1 billion in 2019, with two-thirds of that revenue coming from its platform business, Roku CEO Anthony Wood said during the earnings call. Both figures would mark sizable increases, especially considering that Wood expects the company’s player revenue growth to flatten in 2019. In 2018, total revenue was $742.5 million, and platform revenue accounted for 56 percent of that overall amount. Roku appears to be banking on its ad business continuing to grow at an equal or stronger pace in 2019. Wood said he expects the amount of video ads that Roku sells to double in 2019 as it did in 2018.

The post Cheatsheet: Roku expects to make $1 billion in ad revenue this year appeared first on Digiday.

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Google navigation app Waze is ramping up its ads business with a new deal with WPP, home of ad-buying giant GroupM.

WPP said its partnership with Waze will grant them unique access to its software so the agency can easily onboard and monitor clients. The agency also will help Waze develop new ad formats and further improve the ads’ functionalities, said Sanja Partalo, svp, corporate strategy and digital development at WPP.

“We’re working together to think through and create best practices, from both creative and tech perspective, for how to leverage Waze’s ad formats and their platform as a whole. The goal is to deliver a better experience for drivers and a better experience for brands – more contextual, better targeted – than what is available today through traditional mediums such as radio and billboards,” Partalo said.

Waze has pitched its product as a billboard for phones, which can be “measurable and actionable” to its 115 million monthly active users. In December 2017, Suzie Reider a longtime YouTube marketing exec,  moved to Waze to serve as its head of national ad sales and help grow its business with agencies. Over the last nine months, Waze claims to have doubled its advertising business, growing from 15,000 small and medium-sized business in May 2018 to more than 30,000 today.

WPP plans to expand that clientele. Partalo said Waze’s ad product has “obvious opportunities” in quick service restaurants, gas stations and retail stores. She’s interested in growing the business for other brands that traditionally thrive as impulse buys when going in-store, given the decline of foot traffic to stores along with the rise of curbside pickups.

“The impulse-buy moments are disappearing. Everyone intuitively understands that if you go to Target you’re going to end up buying items you didn’t want to, or even think to buy, because you’re going to discover something. Many product categories live and die by these moments. But, when people go on Amazon, they’re largely executing their list. The interesting piece for us is how do we take that somewhat passive mindset that people have in their car and deliver an impulse nudge?” Partalo said.

Waze ads have proven to be effective and cheap. Ads start at $2 per day for a business advertising one location, according to a pitch deck obtained by Digiday last May. That pricing is still the same, a Waze spokesperson said. The pricing model for local ads and for larger brands is cost-per-impression. Waze also touted in that pitch deck that advertisers see a 33 percent increase in navigations to their stores via Waze ads.

Though, the ads aren’t always welcomed by users. One Waze user told Digiday they frequently get ads for McDonald’s coffee over their morning commute in Los Angeles, despite their lack of desire for McDonald’s. Another user also griped about receiving unwanted Taco Bell ads. A third user said they received ads for gas stations that aren’t the closest or least expensive one to them and therefore is ineffective.

“We don’t want to heavy-handed because a car is a sacred ground to many. It’s an intimate environment. We know what the in-car canvas is but we are just beginning to explore what is appropriate, what is helpful and what would be well received. It’s very important to get it right,” Partalo said.

The advertising could be improved through more personalization. Despite being owned by Google, Google and Waze are separate on the backend. Advertisers cannot target Waze users based on their Google data. Instead, they are limited to the time of day, destination, traffic and weather-based targeting. Of course, that could change as Waze continues to grow its ad business.

The post Google’s Waze partners with WPP to grow its advertising platform appeared first on Digiday.

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Two-year-old sports video publisher Overtime has made a name for itself by paying people to record viral high school sports highlights from across the country, which it then shares through its own social channels. Now, armed with fresh capital, the company says it plans to invest more in its own production capabilities.

Last week, Overtime raised $23 million in a Series B round of funding that included investors such as Spark Capital, MSG Networks and NBA players Victor Oladipo and Carmelo Anthony. Some of that money will go toward building out Overtime’s video team, which has grown to 25 people, and its original programming slate. Over the past year, Overtime has premiered more than 20 video series across its social channels, including “Hype School” on Snapchat, “Kevin Durant Film School” (Durant is an investor in the company) and “Overtime Challenge.” Overtime’s goal is to double its number of original series by the end of 2019.

And these video shows are different from the short highlight clips Overtime initially became famous for: There is a higher production value, and episodes typically run for at least a few minutes, instead of a handful of seconds.

“You can’t build a next-generation sports network off of 15-second clips,” said Zack Weiner, president of Overtime. “You can build a community and a brand, and capture proprietary content in a cheap way — which will still be a big part of the business — but we knew we had to get into longer-form content.”

Overtime has built strong followings off of clips like Zion Williamson dunking to hundreds of thousands of views on Instagram and Mac McClung dunking to 3 million views on Twitter. That’s helped the company grow to more than 500 million video views and 145 million minutes of watch time per month across platforms, according to Overtime. The idea now is to use that established audience on platforms to distribute original programming, as well as on the Overtime site.

To support the production plans, Overtime hired former Bleacher Report executive Marc Kohn as its chief content officer and opened a production office in LA.

Currently, 55-person Overtime is focused on original programming that it produces and distributes on its own, but the company’s co-founders did not rule out the possibility of producing and selling projects to third-party buyers. That said, Overtime won’t do production deals where its name and branding are not featured, said Dan Porter, CEO of Overtime. (Porter was previously an executive at the Hollywood agency WME; and Overtime is represented by WME.)

“I don’t think you could build a billion-dollar business just being a production company for hire,” Porter said.

Even with an expanded production slate, efficiency will remain a key part of Overtime’s owned video strategy. Today, the cost for videos produced by Overtime is $500 per minute, said Porter. “I’m not interested in that being higher,” Porter said. “I’m interested in managing that and figuring out how to make a ton of content, at scale, in a cost-efficient basis.”

Overtime is able to be efficient by hiring video staffers that can produce, shoot and edit on their own, Porter said. The company also does “social cuts” of every piece of longer-form video, which is then distributed across Instagram, Twitter and other platforms. Of course, it also helps that a big piece of Overtime’s content strategy centers on videos shot by amateurs, which are recorded through a homegrown mobile app, and edited and shared across Overtime’s social channels.

That growth is also helping Overtime build a business. The company, which did “seven figures” in revenue last year, primarily makes money from advertising and commerce. Advertising clients have included McDonald’s and Converse, which sponsored and integrated a sneaker within an episode of “Overtime Challenge,” a show in which famous young athletes like LaMelo Ball compete in a series of challenges against the show’s host, Overtime Larry. Commerce efforts have included a pop-up store last year, where it sold Overtime-branded merch and other apparel created in partnership with sneaker artists and streetwear brands.

“I want to build a nine-figure apparel business in the next five years,” said Porter.

Overtime, which has raised more than $35 million to date, is not yet profitable. Money from its last funding round of $9.5 million last January went toward more than quadrupling its headcount.

The new money will be marked for even more growth as Overtime expands internationally and covers more sports beyond basketball. The company expects to get to around 90 people in the next 12 months. This includes doubling Overtime’s six-person ad sales team.

“A year ago, we literally had zero salespeople — that part was non-existent,” said Weiner. “Now, it’s a real business and we have clients coming back for repeat business.”

The post With $23m in fresh funding, Overtime wants to move beyond viral dunk clips to build a ‘next-generation sports network’ appeared first on Digiday.

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Maintaining a good user experience while offering high ad viewability remains a complex juggling act for publishers.

To some publishers, the overall push to attain high ad viewability has come at the expense of, and a detriment to, the user experience. After all, ad viewability was introduced as a metric to appease ad buyers that they weren’t squandering budgets on ads that weren’t seen because they weren’t visible on the page. It was never about enhancing the user experience.

This article is behind the Digiday+ paywall.

The post Publishers fear ad viewability drive has compromised user experience appeared first on Digiday.

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With growing confidence in their own subscriber acquisition strategies, European publishers are making retention a higher priority this year while satisfaction with platform support has declined, according to a report from German media house Axel Springer.

The Guardian, Financial Times, Le Figaro, Schibsted, Axel Springer’s Bild and Business Insider, along with U.S. titles including The Wall Street Journal, The Washington Post and The New York Times, were among the 34 publishers taking part in the survey about their paid content strategies. The findings were taken during Axel Springer’s sixth annual Paid Content Summit in Germany this month, so naturally, the attendees were publishers with paid content offerings.

“With the paid subscription business becoming more mature and advanced over the last year, retention is a key strategic element for all publishers in the market,” said Stefan Betzold, managing director Axel Springer News Media National Digital. Both Bild Plus and Welt Plus operate freemium models, last October together they reached the 500,000 digital subscribers, with over 400,000 coming from Bild.

Betzold was unwilling to share Bild’s retention rate partly because publishers measure it in different ways, a complaint made by others, but he did say Bild has a subscriber lifetime of about 12 months if they come from its desktop or mobile site, this increases when people subscribe via its app.

Last year, publishers scored churn prevention the fourth most important factor for the year ahead, this year the second most important.

Source: Axel Springer.

The mood around asking readers to pay for premium content is more buoyant: The report found that 79 percent believe the willingness to pay for digital content is increasing, up from 70 percent last year. Over half of respondents said that subscriber revenue will be their most important revenue line in 2019, ahead of native and display advertising.

The highest conversion rates happen on owned-and-operated platforms where readers have sought out the publisher or are already familiar with the title, readers visiting platforms are often there for multiple reasons. French news publisher Le Figaro and Norwegian publisher Amedia reiterate this point, the latter saying that 90 percent of conversions are done on its own digital editions.

Le Figaro has over 110,000 digital subscribers with a homepage conversion of less than 1 percent: Le Figaro had 23 million unique users in December, according to Bertrand Gié, deputy director of the Le Figaro news division. Publishers are less satisfied with support from platforms compared to last year, according to the report.

“Unfortunately, there’s not much recruitment through platforms; it’s a very small percentage,” said Gié. He noted the caveate that the publisher doesn’t use either Subscribe with Google (although it is in ongoing conversations with the platform) or Facebook’s subscription product through Instant Articles. “That may be our fault, maybe don’t have the right data or the right subscription offer, but we have to admit it’s not really working.”

Publishers scored Google, Facebook, Apple, YouTube and Amazon on how supportive and important they each were to publishers paid content strategy. Mostly, platforms score lower on both counts than last year (publishers weren’t asked about YouTube in 2018, and Apple scored marginally higher in importance for 2019).

Source: Axel Springer.

In addition to its own properties, Le Figaro is generating new subscribers through Apple App Store (Apple News isn’t yet available in France). Other publishers have also claimed this, although Apple still holds the data.

“I’ve heard of no example of a publisher who is happy with Instant Articles for subscription,” said Gié, who has been a hold-out on the Facebook faster-loading feature. He added that one publisher has generated less fewer than 10,000 subscribers through Instant Articles since the product launched in late 2017.

When asked to comment on this piece, Facebook points to data form April 2018 showing that Facebook’s alpha test yielded a 17 percent average lift in subscriptions. Publishers have previously had mixed results from the subscription products Facebook and Google launched, the two platforms who have gone the furthest in working with publishers on subscriptions.

Although Betzold countered it’s appreciative of initiatives from Google and Facebook, but they need to go further than offering a sign-up product feature.

“The key lever for freemium subscriptions via the U.S. platforms is not only an optimized conversion funnel but even more improved visibility for paid content in search or the news feed,” he said. “Currently, paid content, especially for freemium models, are pretty discriminated against other free content in their visibility.”

Publishers have learned the hard way not to rely on platforms to drive their business goals, whether they ever should have is questionable. But they’re getting more realistic about how platforms can play a part in driving their subscriptions business, which usually comes from marketing spend. For Norwegian publisher Amedia, which publishes roughly 2,000 articles daily, Facebook’s community element is useful for speaking with readers and for surfacing relevant pieces readers might have missed.

“The key element for us is utilizing Facebook for retention purposes, which doesn’t undermine our brands and the value our readers perceive from their subscriptions,” said Pål Nedregotten, evp at Amedia. “That perceived value is key. If we lose that, then we would have every reason to worry about our future prospects.”

The post ‘Retention is a key strategic element for all publishers’: European publishers focus on churn appeared first on Digiday.

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One of Medium’s first big bets was paying to build magazines that lived on its platform. Last week, the venture-backed publishing platform sent a signal that it will try that again.

On Feb. 14, Medium began posting job listings for four new magazines it intends to host on its platforms. The publications, which will cover science and technology, business, health and general interest, will be comprised of “original features, columns, and essays by known and unknown writers and experts,” according to the listings. Qualified candidates will be expected to have deep networks of possible contributors and staff writers, plus comfort with the idea of being “the face of a brand,” the listings read.

Those four will be “just the beginning,” according to Medium’s vp of editorial, Siobhan O’Connor. Medium wants not only to develop publications internally, but to partner with third parties on publications as well. It is taking suggestions from existing staffers and meeting with editors at publications currently using the platform. Access to new titles will be included in a regular Medium subscription, which costs $5 per month or $50 per year, O’Connor said.

Medium’s first stab at building a stable of editorial brands ended with sales and spin-offs. What’s different this time, O’Connor said, is that this new crop will be powered by a “sustainable, subscription business model,” which has already paid out millions of dollars to writers since Medium abandoned advertising as a revenue source back in 2017. It will also rely on a mixture of original content, written by staff writers and on commission, and on content surfaced from Medium’s platform. Each publication will have a dedicated platform editor, whose job it is to surface content that can fit into that title, a key difference from Medium’s previous stab at this, O’Connor said.

“We are dramatically increasing our spend on original content this year,” O’Connor said, who noted that Medium’s total payouts for partner program content will be 168 percent higher in February 2019 than they were six months ago. “We think doing so under distinct publication brands is a good way to make this investment. There are already thousands of publications with their own brands on Medium, so this is a structure that our readers understand.”

The move toward vertical brands comes after a year of substantial investment in original content on Medium. The startup, which has raised $132 million in venture capital since its launch, spent nearly $5 million on content in 2018, according to Medium’s vp of editorial, Siobhan O’Connor. This was money paid to a mixture of exclusive columnists; people participating in Medium’s Partner Program, which pays writers for content read and endorsed by subscribers; professional writers and columnists who wrote commissioned work; and content that was syndicated from other publications including The New York Times.

That investment in original content was meant to serve several functions: To fuel its partner program, and to empower O’Connor to create more content that people would consider paying for. Last year, O’Connor said its subscription growth was exceeding expectations, but declined to share a specific number of subscribers.

Last year, Medium experimented with combining commissioned work and platform content into thematic packages, which it described as magazines. In July, Medium began publishing the magazines on a monthly basis, covering topics such as self-doubt, youth culture and what life will be like in 2069. It also assembled collections of stories, on themes ranging from brand-building to our relationship to the internet.

Those packages, O’Connor said, were instructive, showing that Medium’s readers developed affinity for those things quickly. They also helped Medium’s editorial team figure out which topic areas Medium readers liked most. We saw that certain subject areas we covered gained a lot of traction—so we’re spinning off new publications to go deeper there.”

Medium also spent a good deal of time in 2018 optimizing its relationship with its contributors, who number in the tens of thousands. The vast majority do not use it as a primary source of income. According to Medium’s website, 8 percent of its partner program participants earned over $100 from the program in January, though top-earning stories earned thousands of dollars.

Those that get their work featured in a space like Medium’s human-curated homepage or in one of those magazines are still paid what writers see as decent sums: Two membership partner program participants who shared their income statements with Digiday showed that stories featured on the homepage earned upwards of $500 per piece that month.

Medium has tacked in a few different directions since Williams founded it in 2012. In 2013, Medium purchased the crowd-funded magazine Matter for an undisclosed price, and the following year, launched a few other titles, including the tech-focused Backchannel and the music magazine Cuepoint. But within a few years, it had backed away from that strategy in favor of pitching itself as a publishing platform for already-running sites, ranging from Pacific Standard to ThinkProgress to the Ringer.

These moves made it hard to tell whether Medium saw itself as a consumer product, a creator- or business-focused platform, or both. It sees itself as both, despite the challenges that causes. “It’d be much easier to do one or the other, that’s for sure,” Medium founder Ev Williams told Digiday last July.

Medium’s monetization strategy has evolved as well. After a few years of trying to monetize the site through branded content and native advertising, it abandoned that strategy in 2017, in favor of subscription revenue. It now keeps subscriber content behind a metered paywall, which costs $5 per month or $50 per year.

For a time, it permitted platform contributors and third-party publications to have paywalls of their own. It ultimately abandoned that effort in 2018, telling the Columbia Journalism Review that the different options were confusing site visitors.

It’s also not clear what the new titles mean for publishers that don’t believe in the idea of limiting access to content. “If paywalled content is the primary focus, then non-paywalled content is, inherently, not a focus,” said Ian Faison, the chief content officer of Mission.org, a publisher with over 500,000 followers on Medium but does not participate in its partner program. “A lot of publications that have done a lot of great work on there are trying to figure it out.”

Note: An earlier version of this story did not specify that the 168 percent increase in payouts Medium made went to participants in its partner program.

The post Medium is launching four of its own subscription publications — with more to come appeared first on Digiday.

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Seven media companies, including ESPN and iHeartMedia, took turns on Feb. 20 pitching their podcasts to a screening room of advertisers and agency execs. Hosted at Hollywood talent agency UTA’s Beverly Hills office, the Winter Podcast Upfronts were a somewhat standard event, the speed dating version of a traditional sales pitch. Over the course of four hours, the media companies presented slates of shows and paraded out celebrity hosts such as actors Justin Long and Paul Scheer, sports commentator Stephen A. Smith and comedian Bert Kreischer, who immediately tore off his shirt upon taking the stage and carried on topless talking about his “Burtcast” show “where we just bullshit,” he said. On that note, here is what else you missed.

Ad buyers struggle to identify podcasts to advertise against
Everyone has a podcast now. Trying to navigate all of the available podcasts is one of the biggest challenges ad buyers face, said Lindsay Mendoza, associate director for promotions and activations at Horizon Media. “A lot of the time I’m sitting and Googling ‘top 10 podcast shows.’” For Mendoza, events like the Winter Podcast Upfronts help her to pick out which podcasts to consider for her clients. “Right now I feel like I’m having to put so many feelers out to find one or two podcasts I like.”

Podcasts are a growing sliver of how people spend their time
Between 2014 and 2018, podcasting’s share of the time people spend listening to audio more than doubled, according to Tom Webster, svp of Edison Research. Using a panel of 4,000 people in the U.S. aged 13 years old and older, the research firm measured podcast’s share of listeners’ time spent increasing from 1.7 percent in 2014 to 3.1 percent in 2018. That’s still low compared to traditional radio’s dominant 45 percent share. Podcasting’s share also trailed streaming audio services like Spotify and Pandora (15 percent), the CDs and mp3s that people apparently still listen to (12 percent) and satellite radio (7 percent). But Webster argued that podcasting’s share still accounts for “tens of millions of hours” of listening time.

New shows to suss out
The media companies presented slates upon slates of new shows for ad buyers like Mendoza to sift through. But there were a few highlights. Podcast Media Marketing is working with the producers behind “Serial” to premiere a new show in the fourth quarter of 2019 that looks at the public education system. ESPN will debut sometime this year a “30 for 30 Podcast” documenting the backstory behind Los Angeles Clippers owner Donald Sterling being forced to sell the team…by his wife. And in May, Wondery and Bloomberg Media will bow a podcast exploring how a psychiatrist seized control of a successful business exec’s life.

Podcast episodes have a long lifespan
People are not always rushing to listen to the latest episode of their favorite podcasts. For ESPN’s documentary series “30 for 30 Podcasts,” 65 percent of episode downloads happened more than a week after the episode was released, according to ESPN senior writer Ramona Shelburne. That can make things tricky for time-sensitive advertisers like movie studios trying to push people into theaters this weekend, and that’s why Mendoza, who primarily works with entertainment clients, prefers ads that can be dynamically inserted into a podcast at the time of the download to the more traditional format of having a podcast host reading the ad as part of the episode recording. “Dynamically inserted is always going to be our preference because we don’t necessarily want to continue to run after opening weekend,” she said.

Trying to measure up
Podcast companies appear to recognize that advertisers will spend more if there’s evidence of what they’re getting in return for their money. That was a theme of the IAB Podcast Upfront in September 2018, and it was a topic that came up in some presentations at the Winter Podcast Upfronts (which is not associated with the IAB or its similarly named event). Stitcher CRO Korri Kolesa said the company (formerly known as Midroll Media) started working with Nielsen in 2018 to measure brand lift for ads and completed 24 brand lift studies last year, including one for Heineken that calculated a 123 percent lift in brand awareness. Wondery similarly works with Nielsen to conduct brand lift studies for advertisers, but the company’s founder Hernan Lopez also talked up its proprietary “direct attribution” technology that combines data from an unspecified service provider and a tracking pixel on advertisers’ sites to measure when someone visited a brand’s site after listening to a podcast carrying the brand’s ad, he said.

The post 5 things we learned at the Winter Podcast Upfronts appeared first on Digiday.

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While customers might expect price consistency when shopping at the same store online or in person, prices are actually varying across channels: A customer shopping on the Target app could arrive in the store just to see the same item selling at a different price. An online Target shopper, meanwhile, could be getting access to a promotional discount specifically for e-commerce shoppers.

The notion of “everyday low prices,” trumpeted by retailers like Walmart and Target, is being turned on its head. In its place, pricing algorithms spit out different figures based on factors that could include time of day, demand, location, competition, and customer buying patterns, are becoming commonplace. 

Dynamic pricing is a symptom of the physical retail era being squeezed by online competition. To stay competitive, retailers like Target, Walmart and Kohl’s are tweaking costs of products on a regular basis, mainly online and in mobile apps.

Amazon, of course, has blazed the trail, with its algorithms that reportedly change prices million of times per day depending on demand. According to Amazon’s website, prices for items can change — even after the customer has clicked “add to cart” — and Amazon can lower prices as part of promotions. Amazon can lower these prices even further to match any price at another retailer that undercuts an Amazon price for the same product. According to some reports, factors that influence prices on Amazon, according to recent reports, include demand, customer intent and pricing patterns from other retailers. According to Amazon, its retail prices change based on the company meeting or beating the lowest competitive price from other retailers, and fluctuate throughout the day. The company also said sellers set their own prices according to Amazon policies, and that it doesn’t use surge pricing, or pricing based on region or delivery location.

Vendors who work with retail brands on pricing strategies, including Engage3, Profectus, and Revtrax, say the industry’s major players are experimenting with dynamic pricing in response. (A half-dozen retailers, contacted by Digiday, did not respond to requests for comment.)

The driving force: Keeping prices consistent across all channels means a retailer could fall behind e-commerce competitors, which can adeptly target prospective customers through pricing based on their intent and behavior. Retailers are experimenting with dynamic pricing based on a range of objectives: acquisition, retention, and winning business away from competitors.

“In the 1970s, most retailers had national pricing,” said Ken Ouimet, CEO of Engage3, a software company that works with retailers on pricing strategies. “Today, pricing is much more localized; dynamic pricing lets you segment with time, and it’s not only about dynamic pricing but personalized pricing — the price will be different for every buyer, and the discounts will be different.”

A “race to the bottom”
Ouimet said brands are at different stages of implementation. A recent report found that Target offered different prices on its app depending on if customers were located inside or outside of the retailer’s physical locations; Walmart-owned Jet.com’s “real-time savings engine” drops prices as customers buy more goods.

“Retailers are competing with Amazon with eyes wide open; they realize it’s a different game — in 15 minutes a price can be old and it’s usually based on competition,” said Ouimet. “You can’t fight that pricing is becoming more localized, more dynamic and personalized — in five to 10 years, everything you buy will be based on personalized offers.”

Walmart had to “change its religion” of everyday low prices for dynamic pricing to compete with Amazon, he added. While retailers recognize that dynamic pricing is necessary to stay competitive, it comes with the risk of undermining customer trust due to perceptions of price gouging or price discrimination. Target recently faced a backlash because the prices of products in stores were higher than they showed in the app. As a result, it decided to specify within the app which prices were online versus in-store. On top of customer criticism, altering prices frequently can lead to a “race to the bottom” price war, eroding margins.

In response, retailers are trying to find ways to implement dynamic pricing while minimizing the erosion of customer trust that might result from it. A strategy to drop prices based on Amazon’s pricing patterns is a losing proposition, given Amazon’s ability to undercut traditional retailers on price, said Aloke Mondkar, CEO of Chicago-based pricing solutions firm Profectus and a former pricing analyst for Sears, Best Buy and Winn-Dixie supermarkets. He said one retailer he worked with experimented with lowering online prices several times a day, but it was a futile effort because Amazon was consistently undercutting the company on price.

“We took about 1,000 important SKUs and we moved the price up and down,” he said. “Amazon was still 3 percent cheaper — the fact is, we were waging a price war that we were losing.” A way around this, he said, was to institute a price-matching guarantee with competitors, thereby protecting the retailer from margin pressure of a price war.

Smarter strategy
For a dynamic pricing strategy to be effective, Mondkar said retailers ought to think of it as a means to an objective. For example, they could lower in-store prices if they want to drive in-store traffic, or they may offer discounts to customers they’re targeting who are likely to purchase an item.

“Retailers should look at this more strategically — what are my customers telling me? Is this aligned with what my customers are willing to accept? Is it relevant to the business I’m in?” he said.

By contrast, Mondkar said, Target’s recent moves to raise in-app prices inside stores seemed to run counter to that approach. “Why would you raise prices for customers in the stores?” he said.  “If you would want them to convert, you would want to lower the prices in-store.”

Retailers, in implementing dynamic pricing, are walking a tightrope between the need to protect margins, compete with others, and retain customer trust. They also face legal action from customers if they perceive to be victims of price discrimination since many states have enacted laws prohibiting differential pricing between localities. The laws represent a “grey area,”  but damage to the brand among consumers is a greater risk, said Neil Suanders, managing director of GlobalData Retail.

“If it’s technologically feasible, that doesn’t mean it’s socially desirable,” he said. “It works well if no one knows you’re doing it. Once someone finds out, it creates a storm.”

Beyond legal action, what’s likely worse is the loss of confidence in the retailer’s ability to protect the best interests of customers; a price-match guarantee with competitors can give customers additional comfort. But initiating a price-match guarantee against online-offline price discrepancies within the same brand, as Target has done, puts undue pressure on the consumer, he said.

Another way retailers can get around perception is allowing for dynamic discounting, which offers personalized discounts depending on what the brand knows about the consumer.

“The psychology is very different — we’re still all getting a deal,” said Jonathan Treiber, CEO of pricing analytics firm Revtrax, which has retail clients. “There can be a bigger discount for people who haven’t purchased [an item before] — marketers want to offer the least amount of discounts to as many people as possible.”

The post Pressured by Amazon, retailers are experimenting with dynamic pricing appeared first on Digiday.

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It’s no secret that the General Data Protection Regulation has opened a can of worms when it comes to how the digital ad industry uses personal data within real-time bidding.

The law’s core premise — that users must be informed of how and when their personal data is used, by whom and for what purpose — is on paper both a simple and reasonable expectation. But the messy state of today’s sprawling digital ad tech ecosystem has made the reality of executing this in a real-time bidding environment, far harder.

Johnny Ryan of private browser Brave; Jim Killock, director of the Open Rights Group; and Michael Veale, a data and policy researcher at University College London, have so far been among those leading the offensive. In January, the group made an official complaint to European regulators, against Google and other ad tech firms for their use or personally sensitive data such as political interests within bid requests made for behavioral ad targeting.

On Feb. 20, they submitted new evidence to their existing complaints to U.K. and Irish data protection authorities. These documents were obtained from the European Commission under Freedom of Information requests. The complainants attested that the Interactive Advertising Bureau Europe has previously acknowledged there is no way to control who receives what data within the digital ad ecosystem due to its scale and volume of companies within it, or what those companies do with the data once received under GDPR. (Read the full complaint here.)

The new complaint also included a set of annotated sample bid requests from the IAB and Google’s own documentation for users of their systems. The bid request samples included information such as people’s browsing history, pseudonymous identification codes, interests, and GPS locations — data the privacy activists claim are a big GDPR no-no.

IAB Europe has dismissed the allegation that it knew it was impossible for users to be informed about how their data is used in an RTB environment, and said this was addressed in the creation of its Transparency and Consent framework. “It is possible to not just inform users about participants in real-time bidding ahead of time but also to signal the disclosure and/or consent status of a specific vendor participating in real-time bidding,” said Matthias Matthiesen, director of privacy and public policy at IAB Europe.

He also reiterated IAB Europe’s argument that addressed previous complaints from the same privacy activists: that the technology itself (in this case Open RTB) cannot be subject to GDPR, only a business’s use of the technology can be. But the privacy activists believe that argument dodges the real issue: that IAB Europe and Google, which they describe as the two “rule setters” of the industry, are encouraging the ad industry to violate GDPR.

Ad tech will continue to be in the firing range, and should regulators agree with the complaints, ad exchanges will be forced to make changes. “In the short term, exchanges might be forced to remove key targeting fields from bid requests; otherwise, publishers could be exposed to fines,” said Vidakovic. “That personalized ad targeting would come under threat was the original fear around GDPR.”

French regulator CNIL has so far been the only regulator to come down hard on ad tech businesses such as mobile ad tech vendor Vecatuary and Google. The fact no one had ever heard of Vectaury before it was fined for violating GDPR is indicative of just how impossible it is to enforce GDPR across the open auction due to the volume of businesses and the subsequent extent of the data leakage, according to Ryan.

IAB Europe’s Transparency and Consent framework — the body’s attempt to create an industry standard for GDPR compliance — has been criticized for facilitating ad tech’s use of personal data within the open exchanges. However, many in the industry, including publishers, are keen for an industry standard to prevail that isn’t owned by a singular business (meaning Google.)

“The industry is working together to ensure the Consent Framework does what is expected and required — as it still remains the closest thing to a solution that is governed by the industry and not a single proprietor,” said Richard Reeves, managing director of U.K. online publisher trade body AOP. “I am confident that when they release the TCF version 2 in July, many of these concerns will have been addressed.”

In response to the latest complaints, a Google spokesperson said, “Publishers who decide to fund their operations using real-time bidding via Google’s systems must also abide by our policies — including by obtaining consent from end users in Europe for personalized ads, not targeting overly narrow or specific audiences, and not collecting users’ sensitive information, including health conditions and pregnancy status.”

Although the complainants appear to be baying for blood, the group is not pushing for the death of RTB, according to Ryan. But they do want this type of sensitive data within bid requests wiped out.

“The solution to all of this is simple,” said Ryan. “The IAB RTB system allows 595 different kinds of data to be included in a bid request: 4 percent of these should be disallowed or truncated. The same applies to the Google system. It is an easy fix, long overdue, and will prevent the system from leaking the personal data, including location and interests, of every single person on the web.”

The post Privacy activists target the IAB Europe’s GDPR approach appeared first on Digiday.

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The pivot to video might be over, but publishers are still prioritizing short-form video.

Earlier this month, Digiday polled 200 publishers and found that 86 percent of publishers increasing their video production budgets said they will produce more short-form video content compared to just 48 percent of publishers who said they would make more long-form videos and 39 percent who said they would make more videos to license out to OTT and TV platforms.

This article is behind the Digiday+ paywall.

The post Digiday Research: 62 percent of publishers plan to spend more on video production appeared first on Digiday.

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