Advertising remains one of the media industry’s biggest revenue sources but, like everything else, it has been thoroughly disrupted by Covid-19.
During two sessions at the FIPP World Media Congress 2020, the role of advertising as it stands and opportunities for diversifying revenue were discussed in relation to two large legacy brands: Hearst UK and Vikatan Group, India’s largest Tamil publishing ecosystem and one that has been in operation for 94 years.
India: a mobile-first, data hungry nation
For both publishers, the pandemic has exacerbated already-existing shifts in the media landscape and world at large, such as digital offerings, more video content, and more flexible working arrangements. Yet one way in which the two differ is in the medium through which their audiences access their content. Srini Srinivasan, Managing Director at Vikatan Group, stressed first of all that it is only possible to understand publishing in India by taking account of its mobile device usage. There are about 1.16bn mobile subscribers in India, a mobile density of close to 96 per cent. Additionally, smartphones now have more than 60 per cent penetration.
“This figure has to be the starting point of any discussion in India,” explained Srinivasan. “Every new internet connection is only happening through mobile.” This is fuelled by very cheap data, he added. A three-month data plan with 2GB per day costs just USD$6-$7 on average. “We are a data-rich country, and therefore hungry for content,” he said.
The omnipresence and omnipotence of mobile devices, combined with Covid-19, have had a negative impact on newspapers and magazines, whose sales evidently suffered during the first few weeks of lockdowns. With India now the country with the second-highest number of Covid-19 cases in the world, more people have turned to reading on mobile over print, and television has seen huge growth.
Advertising takes a hit
The pandemic’s impact on advertising and degrowth has been enormous. “In India, it’s not a pretty picture,” said Srinivasan. “We’ve been set back almost four years – India is now a USD $7.5bn advertising market compared to an initially-projected USD $10bn.”
But perhaps because of India being a mobile-first country, “the irony is that digital has seen the smallest degrowth: seven per cent to print’s 25 per cent and TV’s 15-20 per cent.” Plus, although ad revenue has fallen significantly, digital subscription revenue has gone up by 50 per cent. “This has really changed how subs work for us.”
Print still vital for Hearst UK
For Hearst UK, the landscape looks quite different, as CEO James Wildman explained. While digital acceleration and revenue diversification are two of Hearst’s “pillars”, print and circulation revenue are still incredibly important, despite the pandemic. “We sell five million magazines per month in the UK,” he said. “We still rely a lot on cover-price and print advertising revenue.”
Nonetheless, Wildman acknowledged, print has come under more and more pressure as the world has evolved. “It’s all part of this concertinaing of long-term trends,” he explained. “And this has been most pronounced in print ad revenue.”
Given this, the priority for Hearst UK is to build marketing services for businesses on top of its strong foundation of traditional publishing – whether that’s experiential, licensing, content creation, or digital advertising. The desired revenue ratio, said Wildman, would be about one-third print, one-third digital, and one-third diverse revenue.
Trust is a premium product
On a resoundingly positive note, both Wildman and Srinivasan have noted the benefits of a bounceback in media trust as a result of Covid-19. At a time in the UK and elsewhere when expertise has been publicly eroded for a while, improved trust in the media and science seems to be a boon for publishers producing high-quality, verifiable content.
“Publishers offer trust and brand safety, which – dare I say it – has slightly gone out of fashion in recent years,” said Wildman. “But the pendulum seems to be swinging back in our direction; integrity matters again.”
In India, social media platforms and apps like WhatsApp are bearers of unverified news, and are thus something that Vikatan is constantly fighting with, said Srinivasan. “But we have seen that during troubled times, people want to come back to known media plans from trusted sources,” he added. This had also led to an uptick in the amount of people seeking out trusted print publications, after the initial lockdowns began to subside in the country.
Furthermore, given India’s immense linguistic and regional diversity, there is a real opportunity to serve different markets as people seek information about local lockdowns and their effects, added Srinivasan. For example, about 90 per cent of all new internet consumption is happening in Indic languages like Tamil and Hindi. “Being candid, the English market is one which has been saturated for many years,” he said. “All the growth in the media space is only happening at the local level.”
Advertisers want brands they can trust, too
At Hearst UK, they have worked hard to ensure that advertisers want to work with them. Ad fraud presents issues that they are addressing – according to a recent ISBA/PwC report, 15 per cent of ad impressions are simply untraceable.
“That’s an extraordinary finding, though not that surprising for many of us,” said James. “It’s acted as a bit of a wake-up call in the programmatic ad space, since even a small percentage of this GBP £6bn ($7.4bn) UK market going missing is worrying. With programmatic systems, we do have challenges with fraudulent impressions, copycat acts trying to copy premium sites, and bot traffic – which we monitor very carefully.”
Nonetheless, he believes that the industry will get better and better to solve the problems together. Trust therefore matters more than anything. “We all have a vested interest in fixing this. With GDPR, we can categorically state that at Hearst UK we offer the most safe haven for brand money that’s available online.”
Revenue leakage represents another problem. Only 51 per cent of revenue finds its way into publishers’ businesses; the rest goes in fees to either demand or supply-side platforms, according to the same report. On this, Wildman said: “Clearly we would prefer more money to find its way into the content producers’ businesses, but I have to believe that this is going to happen. Advertisers are going to gravitate ever more towards those trusted brands, with an increased premium placed upon them as a result.”
Brand-building during a pandemic
Srinivasan emphasised other opportunities that have bloomed under Covid-19. “The new kids on the block are educational tech, healthcare apps, gaming, fintech – so many transactions are taking place on the internet – and food tech, like food delivery platforms,” he said.
While many of these services are fairly straightforwardly transational in how they interact with the customer, there are opportunities for the regular advertiser to connect with the consumer, said Srinivasan. This is what he is currently thinking about.
Another priority is ensuring that customers feel in safe hands during this anxious time. “The kind of brand-building we want to do is that which reassures consumers that they can still get our brands to their door, touch-free and safely,” he said. He used the examples of Nike, which has pivoted to the slogan “play inside, play for the world”, and KFC, whose catchphrase “finger lickin’ good” now sounds rather unsanitary, so it instead emphasises its touch-free delivery service. “We need to do a similar shift and position our brands appropriately for the pandemic,” said Srinivasan.
There’s a real risk of reputational damage, so brands need to feel secure in their actions, too: “Brands at this point are still a bit concerned about advertising too much. They’re worried about bad press if people throng to their physical stores and they are accused of not upholding social distancing.”
Diverse revenue streams of the future
For now, Srinivasan said, Vikatan Group is focusing on what it knows it can deliver for clients, such as shooting socially-distanced commercials. “I think the future is all about these kinds of partnerships,” he said.
In addition, they are focusing on recycling past content. “We have dived back into our archives. There has been no entertainment news for six months, so we have used the stuff from the past. And we believe this is poising us for even better growth, actually. Old is gold.”
At Hearst UK, the future of brand-building may lie in live events, video content, and podcasts. Like many publishers pre-crisis, Hearst UK had built a fantastic live events business, and made its first big shift to virtual with Women’s Health Live in May 2020. “We got 10m video views, and the registrations led to a lot of data capture,” said Wildman. Other events such as the Country Living Fair have since moved online, too.
Yet Wildman hopes live events can return at some point: “Our brands really lend themselves to experiential, so we’re hoping to move back to real-life events soon.”
As for content, the company is Investing a lot in video as more and more of the web becomes video-based and advertisers shift into that space. Podcasts represent a trickier medium, summed up by Wildman as “a long walk for a small drink, commercially speaking”. “There’s a lot of excitement about podcasts, but monetisation is challenging,” he said. “They are, of course, an important way for brands to stay relevant to their consumers, and they’re fabulously engaging, but the commercial model is unproven.” For Hearst UK, every innovation represents an opportunity for advertisers, but they always take into consideration the cost:return ratio.