Editor’s note: Adweek worked with Matthew Scott Goldstein, a consultant with a deep knowledge of the media industry, to craft his quarterly newsletter into an Adweek article. Through his findings on various industry earnings calls, he’s bringing you insights about how your favorite brands, agencies, media companies, publishers and tech companies are performing on a quarterly basis. His goal was to go past what the trades were focusing on, which mostly revolved around revenue, and tap into the nitty-gritty data shared on these calls.
This iteration focuses on media companies in the 2020 first quarter.
Q1 2020 earnings analysis and outlook
Insight into the new normal/abnormal, covering a wide range of companies and categories, not just media. Focused entirely on the Q2 outlook, as January through March 11 is meaningless. Strong evidence that the media landscape has changed forever, especially the TV upfront. Focus is now on the recovery and opening of businesses with advertising as the fuel that drives demand. The broad reassessment by marketers on all spending is occurring. Cautiously optimistic that the worst is behind us, though still a tremendous amount of macro uncertainty. We have all learned to live with things we never thought we could live without, as consumer habits are changing forever. The future is being accelerated to a more digital economy.
Q2 media outlook
Q2 advertising for publishers is down 25-30% year over year, some even down 50-55% year over year; companies that did not use figures used terms like “materially weaker” and “significantly down.” Though a handful like Facebook, Roku, Snap, Dotdash and J2 are seeing Q2 revenue flat or up slightly year over year.
For Google, in March, revenues began to decline and entered the month at a mid-teens (15%) percentage decline in year-over-year revenues; although search activity increased, their interest shifted to less commercial topics. In addition, there was also reduced spending by our advertisers. International TV ad sales are down 30-50% yer over year. DR [direct response]/performance ads are strong, and advertising for purely brand/awareness building is decreasing. On a relative basis, broadcast is strongest followed by cable, then digital. Local is weakest driven by decreased spending of small- and medium-sized businesses. Declines in demand from industries like movie studios, restaurants, travel, tourism, retail, auto and luxury. Some advertisers are opportunistically increasing their spend like financial services/insurance, technology, telecom, streaming services, CPG, ecommerce, and APP downloads, especially games. Gaming and streaming seem to be the two categories that are most poised to permanently take more share of our time and wallets. New marketing budgets moving to streaming from traditional TV given cancellation of high-profile, live sports and entertainment events. Impressions/ratings up across the board, especially for the Triopoly. Programmatic revenue seems to be down 40-50% year over year so far in Q2, though CTV is up year over year. Revenue has stabilized in the second half of April for most companies; the worst was the five-week period from March 11 to April 15. Many companies expect to benefit from political advertising later in 2020. The last marketing dollar cut is usually the best-performing dollar. Many businesses are simply pausing campaigns, not canceling them to refresh the messaging. Triopoly may not need publishers’ inventory as much, since they are seeing significant traffic increase on their owned and operated properties. CPMs may be down 50%+ year over year (yes, 50%+), so all advertisers are getting huge bargains. New and existing advertisers are trying to acquire customers at a reduced lifetime value. With no commuting, many consumers have shifted their days one hour.
The TV upfront will be postponed until September/October, helping CTV thrive. Audiences want their entertainment on demand and their news, sports and events live. Holding companies/agencies are in a world of hurt, especially in Q2. They say they are down 15-20%—I don’t buy it; I think it will be much worse. The large agencies will be most hurt by the shift away from the TV upfront. Attribution from marketers is now easier since most sales are online and not in store. Easier for marketers to deal with/pause digital vs. linear. Programmatic is flexible and agile. Animation should be robust in Q3 and Q4. Cable subscribers will go down because live sports are paused.
Most media companies seem to be operating with 90-95% of employees working at home—what does that mean long term for the office? Can work at home continue as we hit the fall? Is this pace sustainable? Starting a new job with all new people will be very hard as the personal interaction is removed from the process. CMOs more than ever have to defend their spending to CFOs, that’s best done in data-driven advertising with trackable ROAS. Land grab and white space out there; companies just need to take the risk, especially as we emerge from this.
Advertisers historically try new advertising approaches, post-recessions
- Gulf War recession (July 1990-March 1991): Ad-supported cable TV networks start to grow.
- Dot-com recession (March 2001-November 2001): Google emerges and the portals start to lose power.
- The Great Recession (December 2007-June 2009): Facebook emerges and print advertising decline accelerates.
- The coronavirus recession (March 2019): Broadcast TV advertising decreases and maybe Google search revenue also decreases, so other advertising mediums grow such as connected TV; advertisers bypassing agencies; private deals/PMPs replacing the open exchange needs to be reinvented—maybe we call it the Publisher Dow 30 or the Publisher S&P 500; ads in video games; ads in video conferencing.