2019.07.26 Last Week in Digital Media
Bumper Issue: Facebook FTC Analysis, Tech Industry Q2 Results, General News
|Joshua Lowcock||Jul 28, 2019|
Welcome to Last Week in Digital Media. It's quarterly reporting season for Facebook, Amazon, Google, and Snap Inc. making for a lot of news (and an extra-long newsletter). But what dominated the headlines during the week was Facebook's settlement with the FTC, so I will be deep-diving on that first.
Facebook's settlement with the FTC is now official. Facebook was issued with a US$5B fine, as well as requirements for Facebook to overhaul its approach to privacy and data security. The fine is accompanied by a 20-year settlement order (PDF link). The FTC "seeks to drive greater accountability at the board of directors level. It also establishes an independent privacy committee of Facebook’s board of directors and removes unfettered control by Facebook’s CEO Mark Zuckerberg over decisions affecting user privacy".
The FTC requirements do not have any immediate obvious impact on advertisers or users of the platform (there are no updated Terms of Service, etc). There are some call-outs in the FTC release that indirectly may impact brands on the platform and the industry as a whole, such as greater oversight over third-party apps, tighter rules around the use of facial recognition, establishing and managing a data-security program, password encryption, and prohibition of using data collected for security purposes for advertising. All of which could apply to any organization, not just Facebook.
The Facebook FTC penalty is not without critics (mostly suggesting it doesn't go far enough). Facebook publicly responded it hopes the ruling will become a model for the industry. Facebook made an infographic that attempts to summarize everything from their perspective. There's no question that there will be changes to the way Facebook does business, but until the company puts in place the various people, boards, etc. as required by the FTC (and Facebook has 180 days to do everything) it's too early to speculate on how things will play out for advertisers and the industry as a whole.
Outside of Facebook's FTC news, the company reported 2019 Q2 results (PDF link), which were better than expected given all the challenges. Daily Active Users (DAUs) were up in all markets, although slower growth in the US and Europe. Average Revenue Per User (ARPU) was up 18%. Facebook called out Stories as the priority for monetization (PDF link).
Alphabet (Google) reported strong Q2 2019 results with revenue, specifically ad revenue up to US$32.6B (PDF link) although growth is slower than analyst forecasts. YouTube revenue was strong (PDF link), suggesting brand safety concerns are no longer impacting advertising spend, although to what extent is unknown as Alphabet doesn't break out YouTube revenue.
Amazon's 2019 Q2 performance fell short of expectations (PDF link) and warned that Q3 would fall short of analyst projections. The real growth for the business from Amazons Web Services (AWS) as opposed to retail. Amazon's advertising business (grouped under Other in the financials) came in at US$3B.
twitter Q2 2019 results were upbeat (PDF link) and continued the turnaround story for the company. Ad revenue was up, as were monetizable users (twitter now only reports Monetizabe Daily Activer Users mDAUs). Twitter called out video ads as being one of their most important offerings to advertisers. An interesting highlight and evidence of how seriously the company is treating "platform health" the opening paragraph called out "an 18% drop in reports of spammy or suspicious behavior".
Snap Inc had the best quarter in a long while. DAUs were up 8% to 203MM, Revenue was up 48% to US$388MM, and EBITDA reported a US$79MM loss. The users watching content on Snap Discover was up 35%. It's worth your time to go through the Snap investor presentation (PDF link), as across all markets Snap saw growth in users and Average Revenue Per User (ARPU) and they expect a positive Q3. All of which indicates that there is a growing audience and advertiser demand for Snap's offerings.
In other Snapchat news, Snap is building out a dynamic ad retargeting capability. The offering would enable retailers/brands to not only use product feeds to generate creative but also retarget website visitors within Snapchat based on what customers have interacted with on the retailer website (assuming the retailer uses the Snap Pixel).
Facebook may be facing push back from their cryptocurrency plans, but that hasn't stopped their move into payments, with plans to launch WhatsApp payments in India by the end of the year. It is still subject to meeting regulatory requirements but shows payments is a priority for Facebook no-matter-what.
next time someone points to Amazon's success, it's worth noting that during Prime Day it's reported Amazon spent US$40MM in advertising according to industry reports. The bulk of which was on TV in the 2-week lead-up to Prime Day.
there's a rumor doing the rounds that Vice Media is in talks to acquire Refinery 29, according to the WSJ "Talks are still ongoing and it is possible an offer may not be made".
amongst all of the negative news about various platforms, here's some positive, proactive socially-responsible feelgood news from Pinterest. They have launched a product called "Compassionate Search" which is a collection of wellbeing activities that are promoted when users search for "stress quotes" or "work anxiety". The product has been developed in partnership with the Stanford Lab for Mental Health Innovation with advice from the National Suicide Prevention Lifeline. Other platforms could look to learn from Pinterest in this area.
VIDEO, OTT, and STREAMING
details are coming out about NBC's standalone ad-supported streaming service (PDF link), the service will be priced at US$12 per month but free if you have an existing cable subscription with a planned April 2020 launch.
with so many streaming services in the market, just how much will consumers pay? According to research by the Hollywood Reporter, the sweet spot is $21 a month total across all streaming services (although respondents pay on average $37 a month now). The survey was across 2200 US adults, and also examined awareness of NBCU, HBO, Apple and Disney's planned streaming services (full report here - PDF link).
Amazon is opening up access to Fire TV streaming inventory via the Trade Desk and DataXu (in addition to via Amazon directly).
the DOJ as just launched an investigation into anti-competitive behavior in the markets for online search, social media, and e-commerce. The DOJ press release is light on any other detail but does indicate that it will be "seeking information from the public including industry participants".
in Australia, the competition regulator (ACCC) has published a "Digital Platforms Inquiry" report that looks at market power and proposes regulation of Google and Facebook. The 600+ page ACCC Digital Platforms page report (summary here - PDF link) covers everything from consumer impact to media and journalism to the advertiser supply chain and agencies. The report proposes a new branch within the ACCC to oversee the regulation of the sector including reviewing the algorithms used by the major platforms.
PRIVACY, TRUST, and SAFETY
outside of Facebook, the FTC has started legal action against Cambridge Analytica (PDF link) (although Cambridge Analytica is bankrupt) quoting the "This Is Your Digital Life" app harvested details of "250,000–270,000 Facebook users who directly interacted with the app, as well as 50–65 million of the “friends” in those users". It will be interesting to see how this plays out, as Cambridge Analytica is bankrupt and the FTC has settled with the former CEO Alexander Nix and the Aleksandr Kogan the researcher behind the app but they are listed as related parties in the DOJ filing.
New York City is considering legislation that would ban the sale of mobile location data. The bill is currently in committee, but it seems the intent (note: I am not a lawyer) of the bill would make it illegal to collect and sell location data (even among companies) in New York City and would apply both across mobile carriers and apps.
Have a great week and a huge THANK YOU to everyone who sent me a note last week to say you were happy to be receiving these emails again. It takes several hours each weekend to craft these updates, so the feedback is always appreciated. Never hesitate to drop me a line.