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The Digiday Podcast
Google’s antitrust ruling, Netflix’s latest earnings + Digiday Reporters on Tariff Ripple Effects on Market & Advertising
01:01:02
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- [00:00]
Unknown Speaker
Foreign.
- [00:10]
Kamiko McCoy
Hello. Hello and welcome to another episode of the Digiday Podcast, a show about the business of media and marketing. I'm Kamiko McCoy, senior marketing reporter here at Digiday.
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Tim Peterson
And I'm Tim Peterson, executive editor of video and Audio Digiday Media.
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Kamiko McCoy
Tim, as. As our editor of video, although you don't give video reviews, have you watched anything good lately?
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Tim Peterson
Yes, I've been watching Arcane on Netflix. I have one episode left and I've been really dragging on like watching that. I've loved the show. It's one of those situations because I know this is the last episode I have to watch. I don't want to lose it, which is just a dumb thing because like, then I'm not watching the show anyways. But that's, that's where my head's. How about you?
- [00:56]
Kamiko McCoy
I have actually been an HBO Max. Is it Max. Max Girl. Just, just Max. Now, my apologies to the HBO creative team, but I have been a Max Girly. Two shows, one the Pit. Oh my God. So good. It's a ER style show, which I see why people got stuck with the ER show back in the 90s because Max has now gotten me. It's so good. 15 episodes and it takes you through the ER. Also, the return of the last of us on Max. So your show that was on Netflix, right?
- [01:24]
Tim Peterson
It is on Netflix and Netflix is one of the companies that had a pretty good week this past week, which as we're going to talk about in the rest of the episode, there are a lot of companies that didn't have a good week. Google did not have a good week. Meta did not have a good week. OpenAI it's unclear what kind of week OpenAI had. We'll talk about that in our Juicy Scoop section. But then in our featured segment this week, we talk about all the companies in the ad market that are definitely not having a good time at the moment. So we brought on Sam Bradley, who's senior reporter, and Christina Manlos, who's our senior marketing editor, to talk about with these tariffs, even with like the 90 day postponement of some tariffs, but there are still a lot of tariffs in effect. Just what effect that's having on the ad market. There have been some ad market spending forecasts recently that have been revised down. Moffitt Nathanson put out a report saying if we go into a recession, this is how much money is going to be erased from the ad market. And so everyone seems to be in a bit of a scramble trying to assess what these economic conditions, what impact they're going to have on the ad market. And so we thought to bring on Sam and Christina to help us make sense of it and then hopefully by extension, the listener.
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Kamiko McCoy
But first, we've got some real good juicy scoops for you, including big tech on trial Google. We finally got our answer there with the latest ruling coming down. We've also got OpenAI, a social network plan that Sam Altman is quietly rolling out amongst his peers and Netflix earnings, a bright spot in all of this. So if that's what you want to.
- [03:15]
Tim Peterson
Call it, I mean, definitely Netflix earnings was a bright spot for that. OpenAI social platform is more of a question mark. The Google ruling though, I mean that's just like a big cloud that has descended on Mountain View. And so last year the trial started of the Justice Department and I think it's 17 states taking Google to court arguing that it had violated antitrust law for its ad tech business. They argued that basically the way Google put together this ad tech business, which spans the entire programmatic supply chain from advertisers and agencies to publishers, just eliminated competition or very much mitigated competition, was anti competitive. That trial happened last fall. Our executive editor of NewsSEB, Joseph, and our senior ad tech reporter Ronan Shields were all over this, have continued to be all over this. And then on Thursday, April 17, we finally got a ruling and the district judge ruled that Google did in fact violate antitrust law with its ad tech business with the caveat that like just on the publisher side of things. So with respect to Google's publisher, ad server and ad exchange, not with respect to its advertiser side of its ad tech business like its demand side platform display and video. 360.
- [04:44]
Kamiko McCoy
Yeah, while this does seem promising that the long kiss good night has finally ended, alas, it has not because the court has not yet imposed any specific remedies for this. But there are a couple of outcomes that could happen. Based on the reporting that we've done. Google could be forced as a result of Thursday's decision to dismantle much of its ad tech business. Some believe drastic measures like breaking up Google's ad tech empire would remain unlikely. Hence why we continue the long kiss, the never ending. Right. It's unlikely. And that the more realistic outcome would be stricter transparency requirements or partial divestitures.
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Tim Peterson
No, yeah, I mean that that seems like it's a very likely scenario of Google being forced to spin off its publisher ad server business, which is kind of the crux of the anti competitive claim and definitely where the justice department was clearest in terms of enumerating the impacts of Google's ad tech dominance and how that's put publishers and other ad tech companies that work with publishers at a pretty significant disadvantage.
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Kamiko McCoy
Yeah, it's unclear. I mean, there's going to be ripple effects here obviously. But I'm kind of curious, you know, Tim, what do you think are going to probably be the impacts of all this given again, you know, it. There hasn't been any specified measures that's been outlined yet, but kind of, you know, I would imagine this is still going to upend a lot of advertising.
- [06:12]
Tim Peterson
As we know it, potentially. Yeah. I mean, one of the questions is in addition to just what the remedies are, how long is it going to take for, for that? Because with a company like Google, its ad tech operation is very much intertwined into a lot of the rest of its ad business. So how long will it take to untangle that entirely and how much does that then figure into the actual decision in terms of like what the remedy should be? Is it just that Google's going to need to provide more transparency into how it's ad server operates in the decisions it's making, in which case like, well, who's going to be monitoring that transparency? What kind of audits are there going to be? How can that transparency be trusted? So as much as we've gotten a good amount of clarity in terms of this ruling that Google violated antitrust law, there's a lot of fogginess in terms of what the next remedy is going to be. But it seems like a divestiture of the publisher Ad server is most likely or is at least the thing that the folks that Seb and Ronan have been talking to and folks that I've heard from think is the best option. But even then there was like a Digit plus research survey that went out asking if Google divesting its ad tech assets would remedy the situation for other companies. And it was a close vote, but most of the people said no, it's not. So maybe this is all just a big to do, but the ultimate impacts are much less.
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Kamiko McCoy
Yeah, which would seem very on brand because if you go back to Google's third party cookie saga, which in the end they were like, just kidding, we're going to leave that to our users where it was a big to do in the very beginning, beginning and then kind of, you know, went out with a whisper as opposed of a bang.
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Tim Peterson
And that's something we're still waiting on. We're also still waiting on the search you know, Google, this isn't the first time in the past year that Google has been ruled to have violated antitrust law. Last year there was the ruling that went out that Google violated antitrust law on the search side of things, and we haven't yet gotten the remedies there. One of the things Justice Department has been pushing for there is divestiture, in that case the Chrome browser. So a lot of Google's portfolio, its product could unravel in light of these two rulings or not much could come of it.
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Kamiko McCoy
It does, if nothing else, set a precedent for how the current the FTC and the DOJ and the government is approaching antitrust. Because at the same time that Google ominous cloud sits above the industry now too does Metas, which as we talked about in our last podcast episode is, you know, the FTC is claiming that Meta has built an illegal social media social network, excuse me, monopoly, by acquiring its rivals. So they are also asking for spin offs to, to happen. So we're only in the beginning stages of that, but it really speaks to big tech's being on trial right now.
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Tim Peterson
Yeah, yeah, that cloud that's hanging over Google and Mountain View has extended to Menlo park where Meta is based. But that's not the only cloud hanging over matter right now because there was an Ad Week report this past week that Temu, fast fashion retailer based in China, who is very much going to get hit by these tariffs because of the de minimis exemption expiring on May 2, has already pulled back significant money. And the Wall Street Journal reported, you know, previously that in 2023, Temu is spending like $2 billion, close to $2 billion on Meta. So that's a big chunk of change that Meta stands to lose out on.
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Kamiko McCoy
Yeah, well, at the same time you had advertisers who were pissed because they felt that the, the prices, the CPMs were being driven up by Temu kind of flooding the marketplace. While in. Sam touches on this later in the episode. You would think that there'd be some ding dong, the witch's dead activity, but there's not, based on what Sam's reporting, because everybody is, as we'll talk about later in this episode, facing tariffs. So who's to say where the extra cash is to kind of fill in Temu's, you know, top spot in spending?
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Tim Peterson
Right? Yeah. And then I guess the third threat to Mattis business that has popped up in the past week is now OpenAI, which OpenAI, maker of ChatGPT, has already taken. Last year it took aim directly at Google. With the rollout of ChatGPT search, now it seems to be taking aim at Meta with plans reported by the Verge to create some sort of X like social platform.
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Kamiko McCoy
Yeah, there are a lot of unknowns about this, but essentially Sam Altman, as per the reporting from the Verge, has been kind of shopping these plans around to peers to kind of get a read on, you know, what this will look like ultimately. But personally, I have an investment because Elon Musk and some Sam Altman are now rivals. I did not forget that Elon Musk was supposed to fight in a cage with Mark Zuckerberg. I think now we've taken it to the digital arena, although I'm still waiting on that. But needless to say, this is not an altruistic thing where Altman wants to give the world a Coke and bring friends and family together on a social media network. The big thing here is it seems to be a play if it comes to fruition for Data. X and Meta both have users that are steadily feeding content into its platform. OpenAI needs that. There's been a lot of conversations about, you know, like scraping data, usage rights, IP and things like that when it comes to OpenAI. So I think this is probably something to feed the beast.
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Tim Peterson
Yeah. Although I wonder like, how much of this data would be valuable data from a training perspective, if it's. I mean, anyone looks at their X feed or threads feed or Blue sky or whatever, especially in the early days, you think of people being like, here's what I had for breakfast or riffing on whatever's going on in whatever game. But then also just the amount of AI slop that this seems like it would be a feeding ground. It seems as if the folks at OpenAI saw with the rollout of the, you know, latest image update in ChatGPT and everyone posting their Studio Ghibli images was just like, oh, what if we just had a platform for them to post to that we also operated. And then what if, you know, this could be our path to an ad business? Because Meta's done, you know, a lot of money by just throwing ads in a feedback. We just need a feed and we can throw ads in there.
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Kamiko McCoy
This is why I bring up Dead Internet Theory, one of my favorite topics, because now you start to introduce the idea of like AI bots talking to AI bots or AI agents talking to AI agents. Because to your point about like the AI slop being fed right then, like, and I've looked at my Twitter feed recently and it is just AI slop being posted all over the place. So, like, what's the likelihood that users use this in a way that we used to versus just AI bots talking to one another? And how usable is that data, to your point?
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Tim Peterson
Yeah. So obviously this one's still super early, but I'm not going to rule out OpenAI. Operating a social network could be an interesting product. Maybe there's a need for it. I just have a harder time seeing what need this fills. Or is it just, you know, because X Threads, Blue Sky, Mastodon, like no one has really emerged as kind of the dominant platform in that space, whether it's just another company throwing a hat in the ring.
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Kamiko McCoy
Yeah. You know, again, I'm. However this plays out, I'm still waiting on that cage fight. And maybe it can be hosted on Netflix, who has really gotten into the live sports arena here.
- [14:46]
Tim Peterson
Yeah, yeah, yeah. So Netflix reported earnings this week for the first quarter. It's the first quarter that they are not disclosing subscriber numbers, which is disappointing as someone who reports on the streaming industry, but they are still reporting revenue and their revenue grew 13% year over year in the first quarter, which is kind of to be expected. Netflix raised prices in the first quarter too. Generally, when you raise prices, there is going to be a revenue bump unless you raise them to the point where, like people just en masse cancel their subscriptions. But Netflix seems to be at a point where it's gone through enough price increases that the people who are still paying are largely going to be sticking around. Also, Netflix isn't disclosing subscriber numbers anymore anyway, so we have no idea how many people may have canceled. But the thing that stood out most to me, and it's probably the thing, and we talk about this in the conversation with Sam and Christina, is companies as they're reporting earnings over these next few weeks to month, what they say about their revenue forecasts. And in the case of Netflix, their they did not update the revenue forecast. They are still forecasting growth, which is notable because in this past week, again, as we talk about with Sam and Christina, Omnicom Media Group did revise its forecast down a bit, still forecasting growth, but did revise its forecast in light of the tariffs. Netflix didn't feel a need to, which seems to be a sign of strength for the company.
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Kamiko McCoy
Yeah, I was actually just about to ask when you mentioned that, like, does this point to maybe streaming services or Netflix in particular, being one of the few verticals that are maybe insulated from the effects of the Tariffs?
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Tim Peterson
Yeah. In the earnings call, Netflix executives said that generally in times of hardship.
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Kamiko McCoy
That's a good way to put it.
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Tim Peterson
Was the term that they use. People still gravitate towards entertainment and are willing to pay for entertainment. I. I don't imagine that's going to be across the board. I imagine people are going to be reevaluating all of their streaming subscriptions and just what that budget looks like. But Netflix is in such a position of strength these days because it has such a big library to the point where, like, people who don't know what to watch will just pull up Netflix as if it were traditional TV and, like, go to find something there. That. That seems to be where Netflix feels like why Netflix didn't feel a need to revise its revenue forecast, that if people stuck around through this price change, then they're probably going to stick around through the next few months at least.
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Kamiko McCoy
Yeah, that makes a lot of sense. Going back to the topic of the tariffs, we're really glad to have Christina and Sam join us to talk about again, some things that are insulated. Everything that's not insulated from the tariffs. Hardships is, know one way to put it, Economic upending or the dreaded R word is another way to put it, which are some other things that we get into and kind of the ripple effects that that means for the marketing and advertising industry.
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Tim Peterson
All right, so before we get into how tariffs are impacting the ad market, we should probably go over what's been happening with tariffs, because, good God, there's been so much happening with tariffs that it's been hard for me to stay on top of it. So let's go back. January 20th, Trump takes office. That, like same week threatens 25% tariffs on Canada and Mexico. Fast forward to February. Executive orders to impose those tariffs on Mexico and Canada as well as China. However, foreshadowing everything that's about to come. Two days later decides we're actually going to postpone the tariffs on Mexico and Canada. China, you still are getting tariffs. So that's all. February, March is when I started hearing from buyers and sellers a bit of concerns about how these tariffs are going to impact the ad market. Really, just like the uncertainty it was creating in the economy, which is never good for advertisers, especially heading into situations like upfronts, which is a futures market. The future of the economy isn't looking so bright. Hard to place those bets then. April Liberation Day, April 2, reciprocal tariffs on 86 different countries. These tariffs ranged from 11% all the way up to 84%.
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Kamiko McCoy
You get a tariff. You get a tariff.
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Tim Peterson
Exactly. It's like the anti Oprah moment. This is really what kicks everything then off for a time. A week later, Trump announces, actually we're going to pause these tariffs. People seem to not be taken so well to it. But not all the tariffs are paused entirely. There's still 10% reciprocal tariffs on those 86 countries. There's still auto tariffs in effect. And China still has 145% tariffs on most imports. I say most imports because then on April 11, the US Customs and Border Protection Agency announces a temporary exemption for consumer electronics imports from China. Two days later, April 13, Trump posts on Truth Social Zeik. Actually this is fake news. Like there is, you know, not this is not an exemption. It's hard to understand like what exactly he was quibbling with there, like what is or is not true. But called into question whether there is this temporary exemption that would have been very much to the benefit of companies like Apple which rely on China for a lot of the components that make up their consumer electronics. And so now let's timestamp this conversation. We are talking April 16th this morning there was a New York Times report that California is going to file a lawsuit against Trump to stop the tariffs. We'll see what happens there. We'll see what happens in general. But to help Kimiko and I make sense of everything that's going on, given how confusing all this has been, like to welcome in Sam Bradley, our senior reporter, and Christina Manlos, our senior marketing editor. To help Kimiko and I make sense of what all of this tariff turmoil, what impact is this having on the ad market? Christine and Sam, welcome to the show.
- [21:50]
Unknown Speaker
Thanks for having me.
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Christina Manlos
Thanks for having us.
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Tim Peterson
Sam, you reported, you've both been reporting on tariffs. Kamika, you've been, we've all been reporting on tariffs because what else is there to report on right now? Tick tock. Although we do report on TikTok as well. Sam, you did a story, I think it was two weeks ago now. It was sometime in April. That's kind of all I know in terms of calendars, there was April 2, then there was April 15 because that was tax day and everything else is just sometime in April. Sometime in April you wrote a story checking in on how the tariffs were seeming to start impacting advertisers. But that was before all of the upheaval of the past week or so with the tariff pause. What, if anything, have you not, have you heard of any changes in how advertisers Agencies are looking at the situation.
- [22:45]
Unknown Speaker
So far say this with a caveat that this could change tomorrow. So far, it still seems like most CMOs are in a kind of wait and see, holding pattern mode. In truth, you're right. I did see some coverage before Liberation Day when some of the impacts were perhaps more limited and some of the number of countries on the hook was probably more limited and therefore the supply chain issues were less huge. I spoke to, for example, Honda when they were launching a new model. I think it was their Acura brand they were launching and they were still going ahead with that brand launch into that kind of market. They were still launching their new vehicles. So they were still wait and see before we cut the thing or change anything. That still seems to have held. And I think we've seen that in comments from the bosses of Publicis and Omnicom this week during their earnings reports. Christina, I think, I mean, is that true for you as well?
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Christina Manlos
Yeah, I would say that's pretty true. I think hearing wait and see is annoying at times because it's like, it's almost like that is a phrase that we've constantly heard over the last five years. There's been different sorts of upheaval moments. And that's kind of the phrase that people like to go to when they don't know what to do. And I understand that, but I also think there's just an expectation of chaos. That's also the sense I've gotten from the folks that I've spoken to where even as they're waiting to see what's happening and replanning and reforecasting and spending time figuring out what could possibly happen, there's also this sense of, oh, we know it's going to be insane. I mean, Tim, you just went through that whole timeline and I would say.
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Tim Peterson
I felt insane going through this.
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Christina Manlos
Yeah, I would say that was pretty chaotic. So I think, I think that's the vibe is like, okay, we're trying to wait and see. We're trying not to have any knee jerk reactions. That was another phrase I've heard from people a couple of times where, you know, last week, after there was, there was the pause, I asked a bunch of people, okay, like you had all these plans in place, like, does everything change now? And everyone said, no one knee jerked. There was no knee jerked reaction. Because the assumption is, whatever the issue, whatever it is that they're having to figure out with their budget and how they're spending like this brief period of time, that there does seem to be a Little less pressure. They just think it's going to get bad.
- [25:42]
Kamiko McCoy
Christina, you actually bring up a really, really good point, like, expect chaos at this point, because we had this in 2020, right, with a co. With a literal pandemic. But also, like, there were tariffs that were introduced during the first presidency back in 2018. And you can even go all the way back to 2008, where I think some of this, where the notion originally started of like, oh, you know, expect chaos and like, economic downturn, things like that. So, I mean, there are some, some comparisons. And you hear about this in the briefing that came out this week about, like, a muscle that has to be built for this type of thing. What are you hearing about, like, I guess, a contingency or a game plan or a playbook that could be kind of, you know, rolled out here?
- [26:23]
Christina Manlos
Yeah, I think that the general sentiment from a lot of ad buyers is, okay, you know, if, if this had happened before COVID I would feel a lot more screwed. But we know how to deal with this need for flexibility, to build in the outs and our deals and to have continuous need for flexibility and contingency plans. And so there's almost this sense of like, oh, we're flexing this Covid muscle again. And then I would say any sense when there is a downturn. There's a lot of reference in the ad market, in the ad land, ad world, however you want to say it, of like, oh, well, do you remember in 2008 when everyone cut their ad spending and all those brands that did that, the ones that cut it to zero, they were the ones who didn't survive or didn't do well after 2008. So don't do that. Don't do that this time. And I think the thing when you're talking to people now is like, there is still that kind of, oh, we're going to make this comparison to 2008. But then there's also. It's not a perfect comparison to 2008, because I think, as we've talked about, as everyone in the advertising industry knows, how the ad world functions has changed dramatically since 2008. And so much of the, the way that people buy, the where people are buying, all of that has shifted to be a lot more. I don't know, you can turn it on and off a lot easier.
- [28:15]
Tim Peterson
So, yeah, yeah, Programmatic was still a baby at that point. Social media was still a baby at that point. But it does seem like that mentality is holding. Like, you know, on the modern retail podcast, Art Sibling Publications podcast. Gabby Marco and Anna Hensel were they had just come off the Modern Retail's Retail Marketing Summit, which happened helpfully two weeks ago at the time this episode went out. And so you have a lot of retail marketers in the room talking about what's going on. And I believe this was all before the pies was introduced there so very much taking the tariffs seriously. And one thing Gabby and Anna talked about is there was, I believe it was a COO at a retailer or brand in the retail space who said, I believe this was on stage, that she would rather trim inventory and kind of focus on that side of things than trim the marketing budget at the moment. So there is still at least obviously that's just one example. But people who don't want to cut their ad budgets just yet, which makes a lot of sense. But what's going to be interesting is the people who have to make a decision about their ad budgets coming up very soon or already like I'm already in pre upfront reporting. The upfront, you know, takes place mid May is when the presentations are and then the market kicks off. It'll probably even kick off shortly before that. But we're going to have this two to three month period in which a lot of money is going to need to be committed and falling right smack in the middle of all that is when these tariffs are supposed to take effect or could be paused again because who the hell knows what's going to happen? Kimiko, you've been reporting around the joint business plans that advertisers have in place on the retail media side with retailers. It seems like that's also a lot of money that needs to be spoken for and would be hard to have as much of a wait and see approach. Right.
- [30:28]
Kamiko McCoy
Yeah. I have been talking to media buyers and you know, head of investments and things like that that oversee the retail media negotiation process, otherwise known as the JBP process, joint business planning. Don't ask me why we call it that. But long story short, there is a fear of committing long term. To your point, Tim, of you know, I don't know economically how things are going to pan out, asking me Walmart for $10 million when we just spent 8 million with you last year. Right. That's a heavy, heavy lift. And the thing that makes it most interesting about retail Media Network specifically is that they're still trying to figure out if we're seeing incremental sales lift from it. So in addition to me spending a ton of money in this, I don't have the confidence then to know that I'm getting a return on that investment in terms of sales. So there's a hesitant to, to, you know, sign your name in blood with these things when there's economic uncertainty and headwinds a foot. So, you know, pressure has been building in that space, as our executive news editor Sep Joseph reported with me the other day, to make those deals even more fluid than they, than they have been. So that's what's happening on that side.
- [31:42]
Tim Peterson
Of the tracks, which is a super interesting dynamic is like on the retail media side. I mean, basically that's performance marketing. Like there are other reasons to be running in retail media. If you're an advertiser, but you advertise with retailers because they're going to get you closer to the point of purchase and push people over. Upfronts, meanwhile, is the complete opposite end of the spectrum. It's buying out super bowl and live sports inventory to reach as many people as possible to make sure the brand is out there. And these are, it's not a zero sum game, but they're very much the two ends of the spectrum. Sam, as you're talking with folks, especially like within the past week or so, are you hearing any sort of gravitation towards either the brand awareness side of the funnel or the more performance side of the funnel?
- [32:36]
Unknown Speaker
At this point, I don't know if I'm seeing movement either way. In truth, I mean, I had a conversation with this. I'm so sorry. Yeah, I'm so sorry to be so disappointing with my answer. I spoke to an automotive CMO just earlier today who's putting out a new campaign. It's been prepped in like a week. They're using stock footage to get out faster. It's got this like big made in America message behind it and they're putting it on every channel they have simultaneously. Like there's not really favoring. They're not cutting the tv, for example, to cutting their sales. They're not drifting away from search because they think it's not been any use at the moment. They're just hitting all the buttons like a child going up an elevator.
- [33:18]
Tim Peterson
Christina, how about you? Are you hearing roughly the same thing or any differences?
- [33:23]
Christina Manlos
So I think the performance versus brand conversation has been one that we've been talking about for the last couple of years because for a while there it was brands were spending a lot more on performance and they had kind of left brand awareness advertising. They were still doing it, but they were doing it at a much smaller level. And the Sense was over the last year, maybe year and a half of like, oh, okay, you know what? We maybe need to balance these scales a bit more and go back to having a bit more brand awareness as well as performance. We need both. And while I haven't heard from anyone just yet that they're going to stop that approach, there has been a little bit of chatter of like, okay, this push that we've done to do a bit more brand advertising and focus on brand a bit more, is this the time that we need to continue to do that right now? So my gut feeling is that we'll probably see a lot more performance, a lot more focus on performance once again. And we saw that during COVID there was a lot more of a focus on performance over brand. And I think that is generally the case when there's a sense of a downturn. You just need people to buy your stuff and that's your main focus. And I think we're probably going to see a bit more of that from advertisers right now.
- [35:09]
Kamiko McCoy
I think what's interesting is that this is so broad reaching, right, with all of the uncertainty, because on the one hand, you know, like, you've got the start and you've got the stop. I still think there's 145% tariff on most Chinese imports. They're still on imported terror, imported vehicles, excuse me, steel and aluminum imports and energy, and it's even down to like, fertilizer. So is there any industry that you guys are getting the sense of that's like, you know, even we've talked to creators and like, they're. They're also having to make decisions around this, right? So, like, is there, is there anybody that's not impacted by this? Anybody who's safe?
- [35:48]
Christina Manlos
I think that's the big question. When we've been talking to especially folks in advertising agencies who run new business, there's a sense of like, okay, so who are the industries that will not be impacted? Who is safe for us to go after right now? So far, the answer to that question that I've gotten from people is like, do you know of anything? Because I don't know of anything just yet. Like one, one person was saying, like, oh, I thought even financial services would be safe. And we're still seeing a lot of the same issues happening for them.
- [36:28]
Tim Peterson
I don't know, maybe consultants. The McKinseys of the world, aren't they?
- [36:34]
Kamiko McCoy
When are they not safe? When are they not safe? Every question, what is it not safe?
- [36:41]
Christina Manlos
You know, maybe. Maybe we should all Just be consultants. Our jobs would be safer. I don't know.
- [36:47]
Kamiko McCoy
Yeah, last week it was creators. For me, this is the industry that I should have gone into. This week it's consultants. I wonder what it'll be next podcast episode.
- [36:55]
Tim Peterson
All right, so everyone's screwed in some way. Maybe not so much consultants, but, you know, that was missing. That was just a joke. But maybe it's worth looking at like, who we think is the most screwed because not because that's a fun game to play, because it's absolutely not, but because that could be kind of an indicator of how things are progressing, but then also just like an indicator of, like, what really are the underlying factors impacting the ad market overall right now? Do you all have any thoughts on, like, is it, is it the brands, Is it the agencies that rely on the brands having money, or is it the vendors who rely on the agencies having the money from the brands? Is it platforms or publishers who also rely on the brands and the agencies having money? Like, who's. Who's in the least enviable position right now?
- [37:57]
Christina Manlos
I think you kind of just laid it out, Tim, because it's almost like it's a domino effect. It really is, because it's like the brand's cut that affects the agency business, that also affects the, you know, how much media is being spent with these publishers and platforms. But I don't know. I would definitely say the platforms are not nearly as screwed as the publishers. I don't know, maybe it's the agencies, unfortunately, because they get treated like banks when there's usually a more difficult time. And I was talking to someone the other day, I asked them, I was like, okay, well, it seems like a downturn is looming. Are you worried at all that procurement is going to say, you know what that 120 day payment terms, let's push those out even more because we haven't really talked about payment terms and how far those have been pushed out in a while because it's just been, you know, it's been on the back burner and there's only so far they can push them. But I wouldn't be surprised if there's someone working in procurement right now who is trying, who's considering that, you know, so unfortunately, my bet is agencies.
- [39:21]
Unknown Speaker
Yeah, well, I'd second the point in agencies. And we have seen a recent example of that when you saw agencies that depended heavily on a very specific sector, tech in particular, in the last couple of years, as that sector had its own troubles. The first sort of canaries in the coal mine were companies like RGA or Media Monks as it then was, or huge. For example, to name another IPGA shop that did a lot of work with the Googles and Facebooks and maybe not so much Apples of the world and saw their work drop pretty quickly. And it hasn't returned particularly fast since the kind of 2021, 2022 times when that activity wound down a bit after the initial Covid surge. But one company I'm keeping an eye on that I think is quite instructive about the early days of some decisions being made is Temu. The sort of Chinese e commerce giant as of between 2023 and last year, spent like huge amounts on Meta in particular in the U.S. i think three was one of the estimates I saw, like just vast amounts. Maybe that was the global. I should probably fact check that. But you know, significant amounts of money and very heavily oriented towards Meta. And we've seen some data just this week suggesting that they have tied off a lot of their ad spending in literature the last week to perhaps the last fortnight. They're dropping in the app rankings. They've cut a lot of their spending apparently on Google shopping ads and on Meta in particular, suggesting they're responding to the tariffs target in China where they're based, and pulling out the market, or at least pulling their spend out of the market. One of the interesting things I've been looking at alongside a colleague, Crystal Scanlon, this week was whether that represents any kind of opportunity for the advertisers that are competing with them or which have been displaced by them. But it doesn't seem to be as simple as that because as we just discussed, everybody is on the hook in some respect in their supply chains. Plenty of brands are still trying to work out to what extent they're on the hook. And it's not like nobody has their hands clean enough to exploit each opening that comes along at least as fast as you might think.
- [41:42]
Christina Manlos
So no one is celebrating that TEMU is pulling out of the market. And I think there was like maybe this time last year there were a bunch of performance marketing ad buyers who were like Temu's to blame for the CPMs being so insane. Like Temu's the problem on Facebook and they're not celebrating just yet.
- [42:07]
Unknown Speaker
I did see a couple of posts using the words the witch is dead in the last couple of weeks.
- [42:14]
Christina Manlos
Oh, really?
- [42:15]
Unknown Speaker
Yeah. I mean, people get clearly very emotional about these things. But that's X for you. That's the everything app these days.
- [42:23]
Tim Peterson
Yeah, which makes sense Because I think you were citing an Ad Week report that just came out citing data from Tenuity that was showing Temu and I think it was like March for US Google shopping ad impressions. Temu won 19% of those impressions. At least one, like Tenuity also was bidding for an impression by April 12, according to this report in Tinuity study, Temu was winning 0% of impressions. So that there definitely was that drop. And that's something I've been thinking about, is okay, if you have advertisers who are pulling back either entirely or just somewhat, what are the downstream effects of that? Because a lot of supply and demand, if you're going to have less demand, but the supply is still going to be there, especially for news publishers who are, I would imagine getting a ton of traffic and audience right now, they're still going to have this inventory to fill and so that's probably going to force them to bring down pricing. And so publishers are the ones that I would say are in the least enviable position at the moment. There was a story by Press Gazette citing research from marketing research company warc that or WARC that estimates ad spend with news publishers is going to be down 33.1% this year compared to 2019. So obviously a lot has happened between 2019 and 2025 at the same time. That kind of shows this is a category that's already having a hard time, probably going to have a harder time if the demand isn't there. But they have all of this inventory and obviously they're doing important work because this gets added to all the brand safety challenges that they're having. To what extent are advertisers going to want to be against tariff coverage now in addition to all the other types of coverage, they're going to want to be so news publishers, unfortunately for them, and get the crown from me.
- [44:44]
Kamiko McCoy
Kimiko, I actually was going to make the same argument that you just made. To me, publishers seem to be the most screwed in this predicament. One, because they are already having to like work from a disadvantage with, to your point, the brand safety and stuff like that. And also, you know, the, the money that goes towards publishers has kind of been on the, on the fritz for a while. So that's kind of my argument there, you know. And then also the brands are the purse holders. I think the, the next thing that it goes to is to the agencies and vendors, however that split up. The further that you get away from the purse strings, the less money that you know, you're gonna, you know, gonna get it is, you know, Reagan's trickle down economics not working in the sense of publishers. So I, I, my, my bet is that the, you know, that'll be the, the most impacted industry and they're working at the biggest disadvantage here.
- [45:37]
Tim Peterson
And yeah, I guess the not so silver lining to all this is everyone's kind of screwed in their own way.
- [45:44]
Kamiko McCoy
So one of the things that we always, I feel like we end every conversation on this thing of like, we'll see, we'll see, we'll see. And while there's like a lot of uncertainty and economic headwinds and things like that and a lot of we'll see moments, I think there are some signals that we can look to to kind of give us some clues as to where we go from here. Tim, one of the things that you mentioned was kind of like what this plays out for upfront. Same thing with like, you know, the negotiation deals. So not to make it red Robin style, but would love to kind of get you guys opinions on, you know, what indicators should marketers and advertisers and those in ad land kind of be looking for to determine, you know, what, what happens next and how this all shakes out.
- [46:23]
Tim Peterson
Yeah, I could go first for me it's the upfront in part because that's just what I'm going to be on top of for the next God, however many months anyways. But what I'm going to be curious, I think it was definitely the 2020 upfront was kind of like this. But also I believe with the 2021 and then the 2022, which was an upfront in which there was a lot of recession talk because supply chains were really impacting the ad market or ad budgets because they were impacting everything else about marketers, businesses. And that was one where, if I remember correctly, live sports moved really quickly. Like really quickly because sports has always kind of been its own market within the upfront. But then the rest of the market, cable TV in particular, reality shows, things of that nature, move very slow. And I think it was still late July into August when negotiations were still going on. I also believe it was the 2022 upfront. So interesting thing about the upfront. There's basically two periods to the upfront or kind of two mile markers to the upfront. There is the initial commitment period which is when you have a Disney and NBC Universal set. Hey, we sold out. We've wrapped up our upfront and sometimes they say we've gotten X billions of dollars committed from advertisers. That's committed, that's not registered. So what happens is that's when agencies and brands will say, okay, put us down for X dollars, but then we'll come back to you later this year in like August time frame. August, September time frame, usually. And that's when we'll put in our orders, which is actually when they, I can't say commit the money because again, that's the term for earlier, but that's when they put pen to paper really and say, this is the money we're actually spending. What happened in again, I believe it was 2022, there was a massive drop off between the amount of money that was committed and the amount of money that ended up being registered in the end of summer to the point where I had ad sales chiefs at TV networks texting me, asking what I was hearing from buyers because they were seeing this and they wanted to know how much this was happening across the board. Talked to some buyers at the agency holding companies, it was in fact happening across the board. So that's one of the things I'm going to have my eye on. Especially because this 90 day delay is going to happen right smack in the middle between when the commitments are likely to be made and when the orders are going to be put in. How much or to what extent is there a drop off? But that's not going to be for months from now. So I'm also curious how quickly sports and other parts of the upfront move. If there is a sense among advertisers and agencies of like crap, we gotta snatch up this inventory now. Because as much as we have to commit a lot of money in the upfront, the most favorable pricing comes in the upfront. And so we need to secure that so that we're not left holding a bag later on. And same with the TV networks, streaming services. This is when, this is their version of Black Friday. This is when they're securing a lot of their ad revenue to see them through the next year. Christina, what are you going to be looking for?
- [50:10]
Christina Manlos
It's a bummer. I'm going to be, I mean, I'm going to be probably looking for how many people in advertising are getting laid off right now. I think as advertisers cut their spending, that obviously has a lot of ripple effects. And you know, when the, the common term is always like, or the common phrase, sorry is always like, oh. Marketing is seen as a cost center and we're the first to get cut. And I think unfortunately, you know, we'll still see that and will end up Seeing a lot of employees posting on LinkedIn about how they're available for work or like I'm looking for a new gig or something like that. So it'll be less of the, oh, this agency cut 20% of its workforce stories in other publications and more of seeing a lot of talented people back on the job market. So kind of those like quiet layoffs where a lot of that's happening on LinkedIn. Sam, what about you?
- [51:33]
Unknown Speaker
Well, staying with automotive, which I've been focusing on a lot because it's one of the sectors most clearly affected by the tariffs and also like a massive sort of ad spend in the US I'll be keeping an eye on how the prices of vehicles themselves hold and whether the automotive advertisers that are trying to maintain their brand share at the moment, whether they decide or not to keep those prices held. For example, Hyundai has just launched a campaign promising to keep its prices steady until June 2nd. It's going to eat that cost for a little while to maintain sales. But when automotive manufacturers decide to stop eating that cost, that's when you can tell that things are getting bad because they it's not worth it for them anymore. They need to take in more cash. So I think when that changes, that would be an indicator that the temperature is really getting hot. Kimiko, what do you think?
- [52:28]
Kamiko McCoy
Since I've been stuck in retail media purgatory, I will obviously be looking at retail media and the impacts of the impacts of tariffs have, and economic uncertainty have on the JBP commitments on how much is expecting to be spent there. Right. As I noted earlier, this is kind of like a twofold conversation. Retalmedia is interesting because, you know, to your point earlier, Tim, it's the point of sale. It's where you can kind of get brand awareness and conversion in the same vein. So it's important at this point it's no longer nice to have. It's a must have for how marketers go to market. But at the same time, again, if I cannot prove incremental sales across the board in the way that I need to, the commitment to signing my name up for a year over year increase, they get a lot more hesitant about that. And that is for the advertisers that stay on board. As I reported a couple of weeks ago, some are actually just walking away from their JBP commitments or picking it apart to where it's kind of a shell of itself, something that they can commit to as opposed to, you know, some of these big all in one deal. So that is what I will be keeping my eye on. But I know that there are some more fun indicators that are not as depressing as layoffs and auto prices. Christina, obviously the team will be headed to to Canan this year. So talk to me a little bit about what you expect the recession indicators to be on the ground with the ros flowing.
- [53:54]
Christina Manlos
Yeah, I think we did a piece about this maybe four cans ago about the size of the yachts and whether or not, you know, just, just looking at how many yachts and the size of the yachts and obviously entertainment and level of flowing freely. I think all of those are indicators of whether or not these companies are comfortable spending as they usually do for their wheeling and dealing, though I don't know. These companies are also generally pretty comfortable spending around executives and not as comfortable spending for the lower level employees to travel to Cannes. So probably also fewer lower level employees traveling to Cannes to actually pick up the awards that they might win. Bummer for them.
- [54:53]
Kamiko McCoy
Yeah. Even if they do cut back on the. Maybe we can get some more ice water out there for those of us that are dying in the heat.
- [55:02]
Christina Manlos
It's definitely needed. And also maybe if they cut back on, the people will get to things earlier and actually get to some of the panels in the ballet. That could be good, could be positive.
- [55:16]
Kamiko McCoy
Silver linings. Silver linings. Sam, Tim, are you guys seeing any fun recession indicators on your ends?
- [55:23]
Unknown Speaker
Well, I think the ones I'm keeping an eye on perhaps pertain to the people staying home from Cannes because I'm keeping an eye on obscure British imported luxuries like Scottish whiskey, you know, Diageo, Perna Ricard, some indie distilleries that probably do spend a decent amount on digital ad spend. You know, your Land Rovers, because Jaguar Land Rovers poised exports to the US so no more. No more lovely 4x4s with absolutely no suspension for you. And finally, of course the Space Marines, you know, they belong to one of 40,000 which is made by Games Workshop in somewhere in the Midlands in England. They've already put their prices up. I was looking at that today. So I'd keep an eye on Sam.
- [56:05]
Tim Peterson
Did you say Space Marines?
- [56:06]
Kamiko McCoy
Are you talking about Katy Perry and Gayle King or. Who are we talking about here?
- [56:09]
Christina Manlos
Yeah, what, what are Space Marines?
- [56:11]
Unknown Speaker
They're, let's see, you need to ask the nerds in your life. But basically they're, they're little guys. They're little plastic guys that like one inch tall and you know, they fight aliens throughout the galaxy and Games Workshop is.
- [56:25]
Tim Peterson
Sam, are they real.
- [56:27]
Unknown Speaker
Well, I mean, they're as real as resin and pewter, for sure. And the company that makes them is one of the. I think has one of the best share prices in the uk. Quietly. They don't talk to the press, but there they are. And I think keep an eye on the price per Space Marine. That could go in your basket of goods.
- [56:48]
Tim Peterson
Sure, yeah. No, I could. Along with a dram. Don't pretend you don't know what they.
- [56:54]
Unknown Speaker
Are, Jim, you've played video games. I can see it in your eyes.
- [57:00]
Tim Peterson
Honestly, I was kind of in line with what Kimiko was thinking. Like, are we talking about Katy Perry and Gayle King here? Space Marines. Is that what we should be? Okay, but now, now, I can never deny is on record now. I am aware of Space Marines. I have been educated. I have seen the light.
- [57:19]
Kamiko McCoy
Tim, any fun recession indicators, which. The crazy that we're calling it a fun recession indicator, but are there any more lighthearted recession indicators that you're seeing?
- [57:29]
Tim Peterson
Right, yeah, the less. The less serious ones now. Space Marines for sure. That's. I'm going to be checking this. I'm going to add that to my like, stocks list in Apple stocks. Just track that daily. Um, for me, similar to what Christine was saying, if, like. So upfront week is the week of, I think May 13, like mid May, if Amazon or Paramount have a cash bar. That's. There's your indicator right there. So. So that's going to be probably. And then also similar to what Christina said, if the people that you would normally expect to travel to New York for upfront week, don't travel to New York for upfront week, I think that would also be a pretty notable indicator. I don't know that that's something you want to take to the bank with you. I think the earnings reports we're going to be hearing over the next month, we've already heard it from Publicis and Omnicom. Publicis did not revise its earnings forecast for the year. Omnicom did not hugely. But instead of Omnicom projecting 3.5 to 4.5% organic growth for the year, they revised it the low end down to 2.5%. So it's just a percentage point difference. And they're still forecasting growth. But every indicator seems to matter right now, whether it's earnings forecast changes or how much rose is flowing or how many space Marines are being sold.
- [59:04]
Kamiko McCoy
Yeah, Space Marines, my. My recession indicators are more historical ones, but also not related to marketing and advertising right now. At some point there will be fan out effects of it. But one of the things that have been like an old wives tale about recession indicators is the length of a woman's hemline, how much lipstick especially women buy, you know, as a like a recession indicator. Can't afford big luxury items, treat myself to some lipstick, cigarette, skinny, chic. Being in as a recession indicator and then also strippers seeing less income is also a recession indicators. There's less money being thrown on the floor. So you know that's and you'll see that firsthand.
- [59:52]
Tim Peterson
You're on the front lines in hot land.
- [59:53]
Kamiko McCoy
I am. I'm actually after this gonna go talk to the ladies at Magic City and Blue Flame immediately after this and see what they're seeing.
- [60:01]
Tim Peterson
The real. All right, so that's, that's what we'll all be tracking over the coming weeks and months and God knows how long between now and then. But Christina, Sam, thanks so much for joining us and helping us talk through all that is going on in the ad market at the moment.
- [60:22]
Christina Manlos
For sure. Happy to be here. Thanks for setting up the chaos.
- [60:28]
Unknown Speaker
Yeah, thanks for having me. Appreciate it.
- [60:36]
Tim Peterson
Thanks for listening to this episode of the Digiday Podcast. If you enjoyed it, please leave us a rating and a review on Apple Podcasts, Spotify or wherever you're listening. Get more from Digiday with our daily newsletter sent out each weekday morning. Visit digiday.comnewsletters to sign.