Madison & Wall: Saturday Summary

Below is a summary of some of key data points and ideas from my regular publications during the past week along with quick-takes on additional news:

• Nominal GDP in the US and EU grew by high single digits in the first quarter of 2023 on a year-over-year basis (+7% in the US and around +10% in the EU). In such an environment, it was unsurprising that many of the largest marketers grew ad spending in organic terms, with Pepsico, Mondelez, P&G and Unilever all non-specifically positive, Coca-Cola ~+15%, Hershey +9% and Colgate ~+17%. Consequently, industry-wide ad revenues trends were net positive during the first quarter as I wrote here, here and here

• Digital advertising - ~70% of all advertising - likely grew 6-7% in the quarter despite difficult comparables. Among companies who reported first quarter earnings this past week, in organic terms ad revenue at Alphabet was +3%, Meta +7%, Amazon +23%, Microsoft probably around +4%, Snap around -9%, Pinterest +6% , Ebay +31% and Z Holdings (the former Yahoo! Japan, including Line) down -2%. Among all of the results, I thought Meta finally calling out the importance of revenue from China was most noteworthy given the prominence of e-commerce platforms (presumably including Pinduoduo’s Temu) as key drivers of the quarter’s results given China’s role as Meta’s second largest market for advertising revenue

• For TV network owners - ~20% of all advertising - most posted declines. Comcast was -6% for NBCU ex-Super Bowl and Olympics (probably more like -5% ex-political advertising). Comcast’s local cable and Sky business combined to fall -13% in constant currency terms. However, if local cable were down by slightly less than Charter’s -2% ex-political ad revenue decline (or -7% including political), implicitly Sky ad revenues fell -16%. Similar trends were evident most other places with Roku indicating its ad revenue was down without providing specifics as per usual. Spain’s Atresmedia’s TV advertising revenue was down -5% while France’s TF1 saw company-wide ad revenue (mostly television) fall -7%. TF1’s direct competitor’s M6 saw ad revenue fall -2%, just as Sweden’s Viaplay was -2% organically in its home Nordic markets. By contrast, Canada’s Rogers indicated all of its (primarily TV) ad revenue was non-specifically positive in the quarter.

• Audio platforms were mixed. Spotify’s global ad revenue was up +17% in constant currency terms, US radio station group Cumulus was down -11% (or -7% excluding political advertising and activity from WynnBet for sports betting advertising) and SiriusXM (including Pandora) ad revenue was down -2%

• Global agency groups - including those who reported last week - grew organically by approximately 4% during the first quarter with media generally driving growth (aided by principal trading activities) and creative agencies weaker by comparison

• Finally, I discussed trends related to the upcoming US TV upfront market (and the fate of Jennifer Aniston’s sweater) in a conversation with Roku’s Dan Robbins

In other news of the week I didn’t get a chance to write about:

• Fox News fired Tucker Carlson this week. I think ad revenues at Fox could be positively impacted if the cable network picks a successor who is not as toxic or incendiary as Carlson was.   There are many advertisers who stayed away because the Fox News brand was too closely associated with the views Carlson espoused. Of course, there’s also every chance they will pick someone who is similarly problematic. 

• The firing of Jeff Shell’s at Comcast’s NBC Universal was arguably bigger business news, if only because the choices he would have led and the choices someone else will now lead could impact the strategic direction of a much larger business.

• The UK’s competition regulator (the CMA) is blocking Microsoft’s acquisition of Activision. I think that there is a lot of understandable concern among regulators about concentration of industries, especially when its leaders are based outside of the country assessing the impact of concentration. I think what should be important to consider is whether or not one player dominating today necessarily prevents someone else from achieving scale in the future.  Gaming seems to be a medium where smaller companies can become very large so I don’t think Microsoft’s dominance would ultimately limit competition. More importantly, if Microsoft fails to win an appeal here, I suspect it would reinforce a view that today’s large digital media giants will generally be unable to make meaningful acquisitions, and instead will need to focus on organic growth or break themselves up in order to add scale in different sectors. In a world where most of the world’s largest media/tech companies are going to find it difficult to grow organically by much more than single digits, self-imposed break-ups may look increasingly appealing.

• There was lots of news on the Nielsen and TV measurement front in the United States this past week. The critical take-away is this: as it has been for many decades Nielsen isn’t going anywhere any time soon, as they will continue to be the primary currency that most buyers and sellers of national TV rely on in their upfront negotiations. For all of the genuine interest that advertisers and media owners have in reducing costs of measurement and incorporating new data sets into their media buys, the willingness of market participants to actually walk away from Nielsen is mostly non-existent. It’s usually for good reason: for whatever flaws Nielsen has, others’ flaws are often greater, and staggered contracts between Nielsen and its partners make it difficult for one industry participant to actually walk away from Nielsen as they would otherwise be alone in negotiating in the dark vs. competitors. Moreover, advertisers want comparability vs. prior year data, and everyone wants comparability across media owners and competitors wherever possible. “Alt-measurement” services will absolutely have a growing role in the industry, and may find some niches (such as local TV for Comscore) where it’s easier to more meaningfully change measurement paradigms, but I continue to believe these will be secondary tools rather than primary ones. Of course, individual advertisers could choose to walk away from using Nielsen although it generally remains unlikely that this will occur, as has been the case for many years.