TikTok, Google and Their Substitutes; Agency Real Estate Margin Impact and RTO Likelihood; Streaming Video Ad Inventory Update
Madison and Wall: Saturday Summary for September 21, 2024
The third episode of our podcast is out! Check out the new M&W Podcast at Spotify or most everywhere you get your podcasts. Each episode the M&W podcast provides a review of economic data relevant to the advertising industry, Madison & Wall’s work-of-the-week, the work-we-didn’t get to, advertising accounting & finance and history with this week’s discussion focused on advertising bans.
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This past week saw two of the advertising industry’s most significant companies inside of courtrooms, with the continuation of Google’s ad tech antitrust trial in Alexandria, Virgina running throughout the week and an Appeals court hearing in Washington, DC focused on the US government’s efforts to force Bytedance to divest TikTok’s US operations or otherwise exit the market.
There were some interesting commonalities that struck us about the cases this week. A departure of TikTok from the market will lead to marketers shifting budgets to their next-best alternative spending choices - including Snap, Meta and Google’s YouTube - while legal arguments in Google’s case relate in part to the notion that markets can be defined by the degree to which a company’s customers have alternatives to choose from in the first place. As we explored in our note, both cases highlighted to us the issue of substitutability of media and how fluid budgets can actually be (or at least, how fluid they probably should be).
Next we published two pieces related to the agency industry, first exploring whether or not Amazon’s announcement to generally return employees to offices five days per week might play out in the agency space. As we illustrated numerically, benchmark real estate costs for holding companies have come down significantly and are responsible for a significant share of profit growth in recent years, which means it’s unlikely that agencies will fully return to the office any time soon. Later in the week we also looked at new financial results from S4, M&C Saatchi and Next 15 for incremental read-throughs on current trends for companies in the industry.
Finally, we published an update to our recurring analysis of streaming video ad inventory in the United States using a combination of data from Nielsen, Antenna and our own estimates. With these data we points, we calculated the volume of ad inventory in streaming vs. linear TV and the relative share of individual sellers of CTV ad inventory. As we quantified it, collectively Streaming ads now = 10% of GRPs, though 30% of ad revenue