Delegates wait in line at the Cannes Lions International Festival of Creativity, Cannes, France, June 2019
while media executives Meeting with advertising leaders this week Over a glass of roses at the annual Cannes Lions International Festival of Creativity, they can’t help but talk about the disconnect between cruising with celebrities on yachts and the feeling that a recession is just around the corner.
“It feels like a party here,” NBCUniversal CEO Jeff Schell told CNBC’s Julia Burstyn from Cannes on Wednesday. “I don’t know if it’s because most of you are out for the first time in a long time or because we’re in the south of France in June, but no, it doesn’t feel like a bottom market.”
But Shell acknowledged that there are warning signs, however complex. “The scatter market has weakened a bit,” he said, referring to the real-time cost of TV commercials, rather than the predetermined “upfront” market. “It’s very complicated because there are so many things going on.”
The macroeconomic slowdown has historically accelerated layoffs across the media industry. with The prospect of recession is rising And as executives prepare for an advertising revenue pullback in the second half of the year, media companies aren’t laying off people or employees — at least, not yet. Instead, industry leaders feel that their companies are lean and balanced enough to withstand the advertising slowdown without sacrificing profits or contracting their businesses.
“Our focus has been on building a truly resilient, adaptable digital media company,” buzzfeed Chief Executive Jonah Peretti said earlier this month, “We thrive amidst instability. We have built an agile, diversified business model.”
Jonah Peretti, founder and CEO of BuzzFeed; co-founder of Huffington Post
Ebru Yildiz / NPR. Courtesy of
Conde Nast CEO Roger Lynch said, “While an economic downturn could impact the media advertising market, we are on track to achieve our business growth goals after a milestone of profitability.” The company, which publishes The New Yorker and Vogue, Made profit last year after losing money for many years.
Part of why smaller digital media companies feel recession-ready They’ve Already Fired Hundreds of Employees Stems over the years, from a desire to reduce acquisitions and costs. Buzzfeed announced A few months ago and layoffs.
Still, many digital media companies make the bulk of their money from advertising – Conde Nast and Buzzfeed included. And not everyone is optimistic that media companies are out of the woods. Since becoming public, buzzfeed Shares have fallen more than 80 percent. BuzzFeed took in $48.7 million in advertising revenue during the first quarter, accounting for about 53% of total sales.
If companies want to save money on marketing, there is little they can do to avoid taking it on the chin, says Graydon Carter, founder Subscription based media company Air Mail And Condé Nast’s former editor of Vanity Fair said in an interview.
“If you’re in the business of programmatic advertising, which most digital media companies are, you’re going to suffer at some point when the economy changes. It’s out of your hands,” Carter said. “I feel [a downturn] will be brutal and possibly long.”
Last three recessions – 2020 COVID-19 The pullbacks, the financial crisis of 2007–09 and the dot-com bubble bust of 2001 – have all led to an increase in job losses among media companies, many of which have historically had to shore up balance sheets to offset a temporary slowdown in advertising. There is a shortage. while the media industry contracted over the past two decades2001, 2008 and 2020 were the three biggest years Job loss according to statistics of Challenger, Gray and Christmas,
It’s natural for executives to feel optimistic about their company’s prospects. But their sense of “this time will be different” is not without merit, said Alex Michael, co-head of Leontree Growth, which specializes in working with emerging media companies. This is especially true for smaller digital media companies, including newspaper and magazine owners, who have diversified into subscription, e-commerce, events, and other products to cut themselves off from advertising revenue.
“In the past, these businesses didn’t have their models perfect and weren’t fully mature,” Michael said. “Now they have gone through waves of consolidation. Fully streamlined and customizable. Many of the remaining companies now have a spatial audience that will open their wallets in different ways.”
There are mixed feelings among industry participants about how large pullback media companies can be in advertising revenue.
Blake Chandley, TikTok’s head of global business solutions, said that he’s heard about a 2% to 6% contraction in ad spend so far, though he noted that TikTok hasn’t seen it.
“I’ve talked to a few other people, and I think some others are feeling it too,” Chandli said in an interview. “We’re not seeing the headwinds that others are seeing.”
Still others are being cautious. snapchat owner snap, said last month “The macroeconomic environment has deteriorated faster than anticipated,” causing its shares to fall 40% in one day. meta and twitter Hiring is partially banned, digital media companies insider And Vice Media Recruitment is reportedly slowing down.
A digital media executive told CNBC, while a small slowdown has already occurred, there is no question of a 20% ad revenue cut by the end of the year.
Leontree Growth’s Michael said the key to tackling the downturn is finding a product that resonates with a specific audience. Digital media companies and magazines that have a very wide scope are not able to compete during economic downturn as brands do not have enthusiastic user base.
“Advertisers have asked, what do you stand for?” Michael said. “Who are they selling against?”
Former Bloomberg Media CEO Justin Smith said there has also been a “loosening” among ad buyers willing to extort money from Facebook and Google on ethical grounds.
Smith is in the process of setting up semaphore, A new media start-up for global news. While Google and Facebook have dominated the digital advertising space for more than a decade, there is a growing movement among some advertisers calling on tech giants to support the news industry in the face of Big Tech privacy breaches and propaganda. Away is diversifying ad spend.
Smith said, “It used to be that ad marketers really turned away from news media because of brand protection, especially with digital targeting. News was closely associated with negativity, war, and famine.” “Now you’re seeing the opposite – brand bravery. The only true antidote to misinformation is human intervention. It’s a multi-hundred billion dollar pool. Even a small slack from that group is big, big money.”
Smith is not concerned with launching the semaphore into a potential downturn. He said that while Semaphore aims to attract college graduates from around the world, a wider audience than typical sites with enthusiastic audiences, even general interest publications are a better place than they were 10 or 15 years ago. are on. He credits the widespread adoption of membership.
“If you look specifically at the last five years, whether it was the pandemic, or the fascination with Trump, or the rise of Spotify and Netflix, there has been a sea change with subscriptions,” Smith said. “There is example after example of cross-category consumer adoption for the subscription model for news.”
Smith implemented a consumer paywall for the Bloomberg News website three years ago. Today, more than 400,000 people pay for access. Semaphore, which will launch this fall, will start as a free, ad-supported service and will stay that way for “six, 12, maybe 18 months” before setting up a paywall. Some articles will always be free, Smith said, similar to many other digital news services.
Smith also noted that the industry has changed the way it engages audiences better with journalists, even during down times. Smith is fueling this enhanced bond by directly staffing talent agents who will be tasked with pairing journalists on products and events outside of Semaphore’s core business to broaden their reach.
“The media industry is in a better shape than it was a decade ago,” Smith said. “Strategies are more sensible. Digital adoption is more ubiquitous. Models are clearer. Revenue streams more diversified. Executives are more experienced. Even though we may be headed for a global recession, I think the media business is going to suffer some downside.” The pressure of a way stronger than in the past.”
Disclosure: NBCUniversal is the parent company of CNBC.
WATCH: TikTok’s advertising chief Blake Chandley speaks to Cannes