AI-Driven Agency Spending Cuts Analyzed, Top 20 Global Ad Sellers’ 1Q24 Growth Trends and Ad Sales Efficiency Ratios at Disney, NBCU, WBD, Paramount and Fox
Madison and Wall: Saturday Summary for June 1, 2024
Before starting this week’s Saturday Summary, a reminder to anyone who will be in France around the time of the Cannes Lions that on Sunday June 23 between 11am and 7pm I will be leading an informal tour of chocolateries in Paris in what I call a “Chocolate Marathon” (yes, it’s nearly 26 miles of walking). Note that it’s not necessary to participate in the entire tour if you have time or other constraints. If you’d like to join for any of this event please reach out to let me know and I’ll share with you the intended itinerary and timing to meet up.
This past week I published a few analyses focused on important topics to the advertising industry. First, with news from Klarna, a participant in the BNPL (“Buy Now, Pay Later”) space, indicating that the company dramatically reduced spending on its agency fees and related activities through the use of AI-based tools, I provided some context around the data Klarna provided (and noted that any claims around revenue growth that followed from these changes may have been concurrently supported by cuts to marketing spend their competitors made at the same time). More generally I provided some criteria that may help to think about why and when buyers of services (such as those provided by agencies) will expect to pay less for the same vs. expecting more for the same overall budget.
Separately, I produced an updated analysis of growth trends for the world’s 20 largest sellers of advertising outside of China. As has been the case for many years, it’s likely that these companies outperformed the overall industry, growing by approximately 15% during the first quarter of 2024. It’s important to note that growth is much broader than just two or three companies – the median growth rate for these 20 companies is 11%. It’s particularly important for media companies around the world who only operate in a single market to be aware of these trends. Too many lazily assume that two or three companies are taking share of the ad market primarily because they are large. Instead, I argue that there are significant opportunities for companies of all sizes to take a growing share of the advertising industry through technology-enabled consumer and advertising platforms. The only challenge is that it can be difficult for companies to incur additional risk and deploy additional capital into these opportunities.
Lastly, I also published a new analysis of data from Nielsen and Antenna quantifying the share of ad inventory each major US-based seller possesses across linear and streaming platforms and juxtaposed it against my estimates for each company’s ad revenue in order to identify who maximizes the value of the audience they generate. On this basis, Disney and Paramount appear to be the most efficient at pricing while Warner Bros. Discovery the least efficient, with Fox and NBCU in the middle. At the same time, as I wrote a couple of weeks ago, Warner Bros. Discovery spends significant less than NBCU or Disney (only slightly more than half as much on an allocated basis in the United States) so it’s also the case that they are producing their relatively-low value audience volumes relatively efficiently.