July 29, 2014

“Programmatic Buying Killed Us”

NEW YORK – July 5, 2020. “Programmatic buying killed us,” said CEO Jill Jack in an interview the week after she closed down National Spot Sales Representative, Inc. (NSSR), the last remaining independent television and radio national sales representative company.

ABC, CBS, FOX and NBC’s TV station representative divisions and Clear Channel’s Katz Media Group all shut down their operations a year earlier, leaving NSSR struggling with only 5% of all TV and radio inventory sold on a direct, guaranteed basis.

“With so little inventory sold non-programmatically, we couldn’t survive,” Jack said. “There weren’t any buyers left because all the agencies used their own or independent trading desks, so we had to call direct on small- and medium-sized businesses that typically made us call on their Purchasing Departments.”

“Selling used to be fun – calling on buyers, taking them to lunch, plying them with drinks, sneakers, jeans and all sorts of swag.  Purchasing Departments don’t take swag. All they want is Big Data and insights. What do my salespeople know about that? It’s no fun,” Jack said wistfully.

I asked Ms. Jack if there was any single event or watershed moment that might have foreshadowed the end of direct media selling. “Sure,” she said, “On June 4, 2014, Ad Age reported that the world’s largest advertiser, Procter & Gamble announced that 70-75% of its digital media wold be bought programmatically. I remember Ad Age’s sub-head on the story: ‘Other Marketers Likely to Follow P&G’s Example.’

“It was like the bottom fell out of direct selling. Up to that point, most digital ad dollars went for direct marketing, not for branding. P&G’s decision opened the floodgates for digital branding dollars. Everybody followed P&G like lemmings, as they always do.”

I asked if agencies weren’t reluctant to fire all of their media buyers. “Hell no,” Jack replied, “they couldn’t wait to automate the digital buying process and turn over buying to software at their trading desks. Media departments are cost centers; trading desks are profit centers. Automating their media buying process saved the agency’s bacon. Made them profitable again.”

I asked Ms. Jack what happened in the upfront market. “The upfront market went programmatic in 2017,” she said. “The big advertisers and their agencies still made deals under the table to allocate prime time and sports inventory and to shut out smaller brands, but the final buying was done on an automated basis. Actually, it was handled by Google.”

I asked if Google still handled the automated buying process even after it bought CBS in 2016. “Yes,” Jack said, “but killing salespeople wasn’t Google’s fault.  Google has added a lot of salespeople, who they, like Facebook, call evangelists. Google didn’t kill media salespeople, P&G did. They never liked us calling on them anyway.”

USA World Cup Team Survives, Aereo Doesn’t

On Thursday, June 26, the USA men’s football team moved on to the knock-out round of 16 in the World Cup, but the day before, startup Aereo lost its battle for survival in the Supreme Court.

What does USA FIFA football team advancing have to do with Aereo losing? ESPN and sports on television.

The Supreme Court case was titled American Broadcasting, Co. (ABC) vs. Aereo. ABC and ESPN are owned by the Walt Disney Co., which was joined in the case by CBS, NBC Universal (owned by cable TV giant Comcast), FOX and all the large cable TV companies and cable networks. The broadcast networks and their owned TV stations all claimed that it wasn’t fair for Aereo to retransmit their programming without paying them.

The details of copyright law are too complicated for me to fathom, so I can’t comment on that aspect of the case. Many bloggers and other news sources commented intelligently by focusing on the legal issues in the case, as Jerry Markon, Robert Barnes and Cecilia Kang did in the Washington Post. Some, like Farhad Manjoo in the NY Times Bits blog, commented on the technology issues involved, especially the implications that the Court’s decision might have on cloud storage companies.

But I think it’s interesting to see how the Supreme Court members divided in the 6-3 split. The Court’s three most conservative members (Alito, Scalia and Thomas) were on the dissenting team. Did they not understand the technology involved or interpret the copyright laws differently than the majority (Breyer, Ginsburg, Kagan, Kennedy, Roberts and Sotomayor)?

Could it be the conservatives were voting in favor of a free-market solution and the majority was voting for a more liberal-oriented regulatory solution? Or could it be that the conservatives were sick and tired of their cable TV bills ballooning and wanted to cut the cord, or maybe they just weren’t interested in World Cup football? Free, over-the-air NFL, yes; cable-and-ESPN-delivered FIFA, no.

Or could it be that the conservative trio were looking ahead to 2018, when Fox and Telemundo will be carrying the World Cup, for which they paid $1.2 billion for the two-year package, outbidding ESPN and Univision, which paid $425 for the current FIFA package. Maybe they thought it was a fair, free-market solution for Aereo or other retransmission delivery systems not to pay anything to sports rights holders such as ESPN and FOX.

If you were a Supreme Court justice and liked the World Cup, loved ESPN and other cable network programming (MTV, CNN, MSNBC, FOX News, CNBC, Bloomberg News, etc.) and couldn’t bear the thought of cutting the cord, you would vote in favor of the broadcasters and cable networks and believe it was not fair for Aereo to pay nothing to broadcast networks for programming, especially not to pay for expensive sports programming.

The majority might have seen the chaos that would have ensued if they voted for Aereo. FOX and Telemundo would more than likely demand that FIFA re-negotiate the $1.2 billion deal. FOX, CBS, NBC and ESPN would more than likely demand that the NFL re-negotiate the multi-billion rights deals.  FOX and ESPN would want to re-do their deals with Major League Baseball. All too much to contemplate — too much money involved.

Thus, the decision against Aereo was the easiest way out – give the money to the broadcast and cable networks, the TV stations and the sports leagues, not to upstart Aereo and its backer, Barry Diller. The decision also put off the eventual demise of broadcast and cable TV a little longer, just like the USA World Cup football team’s advancement put off its eventual defeat a little longer.

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Media Curmudgeon Moves to Forbes.com

My Media Curmudgeon blog will be published initially on Forbes.com.  So I would love it if all of my loyal followers would go to Forbes.com and follow my blog posts there.

I was honored to be asked to blog on Forbes.com, which ranks fourth among Web business sites, with 34.5 million unique visitors a month, ahead of the Wall Street Journal with 32 million uniques.

Please follow the new media curmudgeon on Forbes.com.

Turkish Delight – A Confection, Not a Strategy

My wife and I returned to New York in July from a three-week trip to Jordan and Turkey.

So much about the trip was memorable: Petra, Istanbul, the boat traffic on the Bosphorus, a sunrise balloon ride in Cappadocia, dondurma (Turkish ice cream), and, of course, Turkish Delight – a chewy confection.

But because I’m a media salesaholic (and it is an addiction), I paid particular attention to the way people tried to sell me stuff, especially in Istanbul.

Turkey has between 30 and 32 million tourists a year, most of whom wind up in Istanbul and most of whom are buyers of stuff – rugs, trinkets, clothes, or meals. With 32 million potential buyers wandering around, you’d expect a lot of sellers.

And a lot of sellers there are, and their focus is entirely on meeting their own needs – parting you from your money. It’s me-first selling. The concept of delighting customers by anticipating their every want and need hasn’t yet migrated to Turkey or the Middle East. In America, we even have apps, such as Google Now, that delight customers by anticipating their wants and needs.

Apple for a while became the most valuable company in the world by delighting customers with gorgeous design and gee-whiz functionality. Amazon became the biggest online retailer in the world by delighting customers with relevant recommendations and ease of use.

The strategy of many leading-edge corporations has shifted from maximizing shareholder value, which management icon Jack Welsh called the “dumbest idea in the world,” (See Steve Denning’s column on Forbes.com) to delighting customers first, then worrying about profits.

Selling, too, has been transformed in this era in which the knowledgeable customer is in charge. Such books as Daniel Pink’s To Sell Is Human: The Surprising Truth About Moving Others and Lisa Earle McLeod’s Selling With Noble Purpose: Drive Revenue and Do Work That Makes You Proud emphasize that selling is serving others, helping others get what they want.

Turkish Delight may be a delicious confection, but it isn’t a sales strategy in Turkey or in too many U.S. media sales organizations, especially TV networks when they sell in the upfront market. Gouging buyers and allocating inventory based on increasing share of budgets is a greedy, me-first, street-hawker strategy that’s guaranteed not only not to delight customers but also to drive them to programmatic buying, which will eliminate me-first salespeople.

Media sales organizations had better start thinking about delighting customers not as a nice add on – a confection – but as a strategy.

Beancounters, Not Creatives, Now Run Don Draper’s Ad Business

Don Draper must be spinning in his grave, or he would be if he had read Business Insider’s May 13 post by Jim Edwards titled “The 37 Richest People in Advertising, Ranked By Income.”

Of the 37 people on the list, only one was on the creative side of the advertising agency business. The rest were white male finance, legal, and management types – suits – with one exception: Mercedes Erra, board member of Havas and founder of BETC Euro RSCG, was the only woman on the list. She was #17 at $2.2 million.

The list was dominated by CEOs (11 of the 37) and CFOs, treasurers, chief accounting officers, and controllers – beancounters (ten of the 37) – and the list had only one Don-Draper-type chief creative officer, Jacques Séguéla, of Havas. He was #28 at $1.2 million.

If there were any agency conglomerate sDon Draper would want to work for, it wouldn’t be, WPP, Publicis, or Omnicom, because the big three in terms of total billing were tied for sixth in terms of the number of executives on the list of the 37 richest people in advertising. Draper would have wanted to be employed by little old conglomerate Havas; it had 11 of the 37 (27%).

In Don Draper’s Sterling Cooper Draper Pryce (SCDP) the creative people are the stars, as they were in real-life Madison Avenue of 1970: Bill Bernbach, David Ogilvy, Rosser Reeves, Leo Burnett, and George Lois were all creative superstars who founded (or co-founded), ran, and skyrocketed their agencies to fame, glory, and riches.

However, in the 1980s and 90s, the agency business founders got a little greedy and their agencies started to go public in order for them to get big paydays. Then, large agency holding companies, mostly from Britain and Europe, started gobbling up the stock or just outright bought most of the creative-driven agencies. Finance types like Martin Sorrell and the Saatchi brothers took over and started making decisions based on making money, not on making great advertising.

The beancounters began controlling the ad agency business and started price wars — cutting commissions to earn business – and this trend plus cost-conscious advertisers led by procurement-officer mentalities have driven profits steadily downhill ever since. Instead of delighting customers with great ads, agencies began to delight top executives and board members with big bonuses. The agency business began taking on the greed, ethics, and inequitable compensation of Wall Street and left behind the creativity focus of Draper’s Madison Avenue.

So, instead of paying creative people to make great ads, WPP pays its CEO, Martin Sorrell, $27 million a year, its Finance Director, Paul Richardson, $12.4 million, and its CEO of WPP Digital, Mark Read, $3.4 million – the only three WPP execs on the list of 37. WPP pays Sorrell so much it’s no wonder it can’t afford to pay creative people a lot, and that really would set Draper off on another rage-filled binge.

TV Upfronts: Fingers in the Digital Dyke

The broadcast and cable TV networks have wrapped up their spring narcissistic extravaganzas that try to seduce TV buyers to invest their ad dollars in programming that will appear next fall.

The upfronts are a buggy-whip-technology-like annual ritual that each year are variously predicted: 1) To be the last upfront we’ll ever see, 2) to be more over the top next year, 3) to have lower CPMs, 4) to have higher CPMs, 5) to include online media, and 6) to feature mud wrestling. But when William Goldman wrote about Hollywood that “no one knows anything,” he could have been writing about the critics and pundits who write about the TV upfronts.

Logical, rational thinking based on current industry trends would clearly indicate that the upfront buying season can’t last much longer, because CPMs can’t continue to increase as broadcast and cable TV network audiences continue to decline – it’s an impossible situation that defies the economic laws of supply and demand.

Furthermore, as digital trading and real-time bidding (RTB) increases, it surely will be just a matter of several years until all broadcast (radio and TV) and cable TV inventory will be digitally traded. It’s logical to believe that advertisers will demand a digital trading model in order to bring the CPMs of TV down to the level of online and mobile CPMs. Certainly the digital flood of algorithmic trading is coming.

But not so fast, the TV networks are successfully keeping a finger in the digital dyke with the unspoken, shadowy, tacit support of the big agency conglomerates and massive advertisers who all want to keep TV network CPMs and prices high.

Here how the conspiracy works:

  1. The TV networks require that the big agency buyers submit their advertisers’ budgets before the upfront season starts.
  2. The TV networks then allocate how much inventory each advertiser will get and how much they will pay based on last year’s expenditures.
  3. The agencies want to spend more because their compensation depends, in part, on how much they spend, not necessarily how well they spend it, and agencies want to spend as much as they can so they can gain bragging rights (“WPP spends 33% of all network TV dollars, so we have more clout than anyone,” e.g.).
  4. The huge advertisers like ATT, P&G, Ford, etc. want to keep prices high and the upfront allocations of desirable inventory in tact because it blocks out poorer competitors. It’s the American Way – the rich get richer by keeping the poor in their place.

So, with these three powerful players in the media advertising cabal serving all of their self-interests, don’t expect the TV networks to pull their fingers out of the dyke and allow their inventory to be traded digitally at an auctioned CPM. That would be too democratic, too reasonable, and too catastrophic.

We’ll see how long the networks can keep their fingers in the digital dyke and keep their inventory away from algorithmic trading and RTB. But you have to look at how long it took other industries to address disruptive innovations – storage discs, newspapers, steel mills, auto companies (or ask Clayton Christensen) — even to have an opaque, cloudy look at the answer.

“Stop Koch” – How Dumb Can You Be?

The liberal advocacy organization Free Press is promoting a “Stop the Koch Brothers” campaign that pleads for its members to sign the following online petition:

Dear Tribune Company:

We need journalism that serves communities, not existing agendas. We need media owners who will encourage their reporters to expose corporate and government wrongdoing. Charles and David Koch are more interested in serving their own interests than in providing the news and reporting that people need.

Don’t sell your papers to the Koch brothers.

Really? Then why didn’t Free Press put on its battle armor and try to stop Warren Buffett from buying 88 newspapers, including The Eagle of Bryan/College Station, Texas, or all of Media General’s newspapers, or the Omaha World-Herald, or the Buffalo News?

The answer is probably that the Free Press and other liberals prefer Buffett’s raise-taxes-on-the-rich politics to the avowed right-wing, lower-taxes-on-the-rich and small-government politics of the Koch brothers. Also, liberals assume that the Koch brothers would buy the Tribune Company newspapers (Los Angels Times, Chicago Tribune, and the Baltimore Sun, among others) for ideological reasons in order to promote their conservative agenda.

The conviction that the Kochs are up to their right-wing tricks also seems to be held by reporters in the target papers’ newsrooms, as reported on Harvard’s Nieman Journalism Lab This Week In Review:

The Washington Post’s Harold Meyerson said a straw poll of L.A. Times journalists revealed many of them planned to leave if the Kochs took over. (The Post’s Steve Pearlstein urged them to do just that.) Meyerson cautioned the Tribune Co.’s board not to see a sale to the Kochs as a purely financial move, but as a political move with potentially disastrous implications.

The Tribune Company has just come out of bankruptcy, and the final decision on a sale will undoubtedly be made on the basis of fiduciary responsibility by the current owners of stock, as it should be in a free-market economy, and not decided by whom the employees think is the most politically correct buyer.

For the reporters to quit if the Kochs buy the LA Times is like curators at the Metropolitan Museum of Art quitting in protest because the Kochs have been huge contributors to the great museum, or nurses quitting in protest because the Kochs gave a new wing to their hospital. Do upset journalists believe the Kochs told curators at the Met what paintings to buy or doctors at hospitals they funded how to treat patients?

And in the case of drowning newspapers such as the LA Times, employees shouldn’t care if whoever rescues them is liberal or conservative, just as long as it’s not Sam Zell, who bought the Tribune Company just to waterboard it. It’s virtually inconceivable that the Kochs could be worse than Sam Zell and Randy Michaels.

Furthermore, as pointed out in the Nieman Lab’s This Week In Review:

Forbes’ Tim Worstall argued that the potential political influence of Koch-owned newspapers was being overstated, however, because newspapers’ political views are inevitably determined by those of their audience. “Proprietors do not mould the views of the readers. They chase them instead,” he wrote. The Atlantic’s Garance Franke-Ruta made a similar point, saying that big cities make their papers liberal, not the other way around. Meanwhile, Slate’s Matthew Yglesias (a liberal himself) saw Koch-owned major papers as a possible boon for the country, as a way to improve the anemic state of conservative journalism.

Also, changing ownership of a newspaper won’t necessarily turn around its decline in readership and revenue. As Clay Shirky brilliantly points out in this interview with The European about post-industrial journalism:

The easiest way to get people in institutions to do interesting new things is for that institution to go bankrupt and for those people to change jobs. It’s often more trouble to try and modify existing institutions than it is to start new ones.

In addition, Shirky makes the point that what must change is the culture of the newspaper business, not just the ownership, business model, or procedures. Shirky implies that combining digital and traditional newsrooms is also a bad idea. I think combined newsrooms tend not to work because digital and print are two entirely different mediums with different languages, cultures, ethics, standards, ways of thinking, ways of writing, and ways of organizing.

Not only can you not combine newsrooms, but also you can’t combine sales forces. You can’t teach old-dog print salespeople to sell digital advertising – those dogs won’t hunt. I’ve seen newspaper companies make this mistake over and over because combining sales forces is a decision made by beancounters – it’s cheaper to have one ineffective sales force than to have two effective ones.

Most newspaper companies, though not all, have made one dumb decision after another for the last 15 years, and the Tribune Company is now being encouraged by liberal ideologues to make another dumb decision by not selling to the Kochs.