Over time - the advertising / customer ratio will self correct - the business model is evolving but Wall Street wants Quarterly results - this amongst other things is why innovation focus is slow - companies not rewarded for it in short term -
Markets are not perfect and Wall Street doesn’t value what it doesn’t understand. Bakish is correct. Ari has a good point on pipes, but I worry that no one is paying attention to the consumer yet again. We are facing an avalanche of comprehensive privacy laws exactly because ad tech companies raced to the bottom on targeting and tracking. The long term question is, will the industry wake up and re think ads and targeting? We have proven that brute force has made digital a crappy experience. Can we make long form video in a digital, interconnected world, on any device a good VIEWING and good MARKETING platform? I wonder what effect of adding a mid role :30 second spot on all the TV shows (which are created for interruptions) that Netflix runs would have on their revenue and valuation if they could demonstrate the “dual revenue” stream that cable had for years.
A couple of points: 1) It's not just Netflix that has ruined ad tolerance, but Amazon Prime, DVRs, and the basic supply and demand economics of having so much content that the relative value of the advertising subsidy to the consumer has far less value than it did in a 50 broadcast/cable network world where supply of content, both archive and new was constrained. 2) The comparison of CTV vs. Facebook/Google ads is a bit misguided. Not counting their video counterparts, there is a fundeamental difference (even if the currency is impressions) of buying a time-based medium, which video is, versus a pixel-impression based medium like Facebook Newsfeed. While the relative CPM/value fo the pixel based impression may be less than video, there is so much supply and ability advertise on every single page, that the overall out of pocket revenue generated is seen by Wall Street as having a bigger potential and more accessible to the long-tail than having to produce a video. Overtime, that will even out with DCOs and AI driven creative, but that's also partly to blame. 3) Lastly, there is still a TBD on what % and when consumers will transition to the ad supported Disney+ as for many, the ad-free version is currently being offered as a value-add to products like Verizon 5G or other telco services.
Looks like this article has brought some Media-Tech OG's out of hiding. Hey Scotty and Ritchie. This is a thoughtful post as are the responses. The challenges to marketplace certainly factor in the lack of enthusiasm. But the answer to Mike's question, in my opinion, is simply that Wall Street always has a lag time in recognizing this type of disruption. It took years for the market to even understand the impact AWS would have on AMZN's cash flows. It took a long time for the market to understand how TTD's different approach would generate superior cash flows. I just believe (and have seen in my own experience) that when companies have long term (easier to understand) cash flows the market and analysts tends to over-ignore anything that has potential. This "capping" of the upside is the price to pay for an avoidance of downside risk. So, I guess, it is time to but some Disney Stock. :).
Over time - the advertising / customer ratio will self correct - the business model is evolving but Wall Street wants Quarterly results - this amongst other things is why innovation focus is slow - companies not rewarded for it in short term -
Markets are not perfect and Wall Street doesn’t value what it doesn’t understand. Bakish is correct. Ari has a good point on pipes, but I worry that no one is paying attention to the consumer yet again. We are facing an avalanche of comprehensive privacy laws exactly because ad tech companies raced to the bottom on targeting and tracking. The long term question is, will the industry wake up and re think ads and targeting? We have proven that brute force has made digital a crappy experience. Can we make long form video in a digital, interconnected world, on any device a good VIEWING and good MARKETING platform? I wonder what effect of adding a mid role :30 second spot on all the TV shows (which are created for interruptions) that Netflix runs would have on their revenue and valuation if they could demonstrate the “dual revenue” stream that cable had for years.
Discuss amongst yourselves…
Nice article Mr. Shields!
A couple of points: 1) It's not just Netflix that has ruined ad tolerance, but Amazon Prime, DVRs, and the basic supply and demand economics of having so much content that the relative value of the advertising subsidy to the consumer has far less value than it did in a 50 broadcast/cable network world where supply of content, both archive and new was constrained. 2) The comparison of CTV vs. Facebook/Google ads is a bit misguided. Not counting their video counterparts, there is a fundeamental difference (even if the currency is impressions) of buying a time-based medium, which video is, versus a pixel-impression based medium like Facebook Newsfeed. While the relative CPM/value fo the pixel based impression may be less than video, there is so much supply and ability advertise on every single page, that the overall out of pocket revenue generated is seen by Wall Street as having a bigger potential and more accessible to the long-tail than having to produce a video. Overtime, that will even out with DCOs and AI driven creative, but that's also partly to blame. 3) Lastly, there is still a TBD on what % and when consumers will transition to the ad supported Disney+ as for many, the ad-free version is currently being offered as a value-add to products like Verizon 5G or other telco services.
Looks like this article has brought some Media-Tech OG's out of hiding. Hey Scotty and Ritchie. This is a thoughtful post as are the responses. The challenges to marketplace certainly factor in the lack of enthusiasm. But the answer to Mike's question, in my opinion, is simply that Wall Street always has a lag time in recognizing this type of disruption. It took years for the market to even understand the impact AWS would have on AMZN's cash flows. It took a long time for the market to understand how TTD's different approach would generate superior cash flows. I just believe (and have seen in my own experience) that when companies have long term (easier to understand) cash flows the market and analysts tends to over-ignore anything that has potential. This "capping" of the upside is the price to pay for an avoidance of downside risk. So, I guess, it is time to but some Disney Stock. :).