This iteration focuses on media companies in the 2020 first quarter.
Q1 2020 earnings analysis and outlook
Insight into the new normal/abnormal, covering a wide range of companies and categories, not just media. Focused entirely on the Q2 outlook, as January through March 11 is meaningless. Strong evidence that the media landscape has changed forever, especially the TV upfront. Focus is now on the recovery and opening of businesses with advertising as the fuel that drives demand. The broad reassessment by marketers on all spending is occurring. Cautiously optimistic that the worst is behind us, though still a tremendous amount of macro uncertainty. We have all learned to live with things we never thought we could live without, as consumer habits are changing forever. The future is being accelerated to a more digital economy.
Q2 media outlook
Q2 advertising for publishers is down 25-30% year over year, some even down 50-55% year over year; companies that did not use figures used terms like “materially weaker” and “significantly down.” Though a handful like Facebook, Roku, Snap, Dotdash and J2 are seeing Q2 revenue flat or up slightly year over year.
For Google, in March, revenues began to decline and entered the month at a mid-teens (15%) percentage decline in year-over-year revenues; although search activity increased, their interest shifted to less commercial topics. In addition, there was also reduced spending by our advertisers. International TV ad sales are down 30-50% yer over year. DR [direct response]/performance ads are strong, and advertising for purely brand/awareness building is decreasing. On a relative basis, broadcast is strongest followed by cable, then digital. Local is weakest driven by decreased spending of small- and medium-sized businesses. Declines in demand from industries like movie studios, restaurants, travel, tourism, retail, auto and luxury. Some advertisers are opportunistically increasing their spend like financial services/insurance, technology, telecom, streaming services, CPG, ecommerce, and APP downloads, especially games. Gaming and streaming seem to be the two categories that are most poised to permanently take more share of our time and wallets. New marketing budgets moving to streaming from traditional TV given cancellation of high-profile, live sports and entertainment events. Impressions/ratings up across the board, especially for the Triopoly. Programmatic revenue seems to be down 40-50% year over year so far in Q2, though CTV is up year over year. Revenue has stabilized in the second half of April for most companies; the worst was the five-week period from March 11 to April 15. Many companies expect to benefit from political advertising later in 2020. The last marketing dollar cut is usually the best-performing dollar. Many businesses are simply pausing campaigns, not canceling them to refresh the messaging. Triopoly may not need publishers’ inventory as much, since they are seeing significant traffic increase on their owned and operated properties. CPMs may be down 50%+ year over year (yes, 50%+), so all advertisers are getting huge bargains. New and existing advertisers are trying to acquire customers at a reduced lifetime value. With no commuting, many consumers have shifted their days one hour.
The TV upfront will be postponed until September/October, helping CTV thrive. Audiences want their entertainment on demand and their news, sports and events live. Holding companies/agencies are in a world of hurt, especially in Q2. They say they are down 15-20%—I don’t buy it; I think it will be much worse. The large agencies will be most hurt by the shift away from the TV upfront. Attribution from marketers is now easier since most sales are online and not in store. Easier for marketers to deal with/pause digital vs. linear. Programmatic is flexible and agile. Animation should be robust in Q3 and Q4. Cable subscribers will go down because live sports are paused.
Most media companies seem to be operating with 90-95% of employees working at home—what does that mean long term for the office? Can work at home continue as we hit the fall? Is this pace sustainable? Starting a new job with all new people will be very hard as the personal interaction is removed from the process. CMOs more than ever have to defend their spending to CFOs, that’s best done in data-driven advertising with trackable ROAS. Land grab and white space out there; companies just need to take the risk, especially as we emerge from this.
Advertisers historically try new advertising approaches, post-recessions
- Gulf War recession (July 1990-March 1991): Ad-supported cable TV networks start to grow.
- Dot-com recession (March 2001-November 2001): Google emerges and the portals start to lose power.
- The Great Recession (December 2007-June 2009): Facebook emerges and print advertising decline accelerates.
- The coronavirus recession (March 2019): Broadcast TV advertising decreases and maybe Google search revenue also decreases, so other advertising mediums grow such as connected TV; advertisers bypassing agencies; private deals/PMPs replacing the open exchange needs to be reinvented—maybe we call it the Publisher Dow 30 or the Publisher S&P 500; ads in video games; ads in video conferencing.
- The Trade Desk: For a brief period of time, programmatic was hurt by one of its greatest features, its agility. You can easily start and stop programmatic campaigns in ways that are not possible in most other mediums, like linear television. In early April we saw more advertisers slow spend or hit the pause button, across every channel. Some verticals cut most of their budgets, such as the travel vertical. Of course, some did remain active, particularly in health and fitness, technology and computing, and home and garden. However, many businesses were simply pausing campaigns, not canceling them to refresh the messaging. The way a CPG or pharma company planned to message in January had to be redone. Overall, by mid-April the year-over-year spend decline stabilized. And as April progressed, we started to see stabilization and even some improvement. Advertisers started to adapt to the current environment. For example, restaurants shifted their messaging to “we are open,” or “we deliver.” Consumer products companies turned their focus to pantry-loading products. And some travel companies started to message that they would waive all change or cancellation fees for bookings. And beyond the present, many advertisers started to strategize about how they emerge on the other side of this pandemic. Flexibility and agility are super important for advertisers. But overall, there will be a massive land grab opportunity. And I expect that marketing will be a critical success factor in that land grab. Think about it. If you’re Uber or Lyft, for example, your business is largely on pause. And you’re not advertising much right now. But as we start to emerge from this, companies will start marketing more heavily because that’s the moment a company can gain awareness, loyalty and share. Whichever of those two companies markets more effectively, will gain share. And that same scenario will play out across every industry. Marriott versus Hilton. Domino’s versus Pizza Hut, Toyota versus Ford. All of these companies, and every other company out there is figuring out, right now, how they use advertising to connect with consumers and gain share once the gears of the economy start cranking again. What will they advertise, using what kind of creative, to what kinds of audiences, in precise locations, using what kind of channel, it’s all being strategized right now. CMOs more than ever have to defend their spending to CFOs; that’s of course best done in data-driven advertising. I believe that the media landscape has changed forever starting in the middle of March. Every channel and every participant is in a different position today versus a few months ago, because of one dramatic shift. Linear TV’s shelf life has shortened as viewers have moved, en masse, to CTV. The biggest loser in all of this is traditional, linear TV. And CTV is without a doubt the biggest winner. For advertisers, the cancellation of the upfront can be liberating. I hear it from brands and agencies every day. For them, the upfronts are a bit of a burden. They’re asked to commit billions of dollars to content they don’t know much about, chasing audiences they can’t measure. Now they have the freedom to be more deliberate, agile and data-driven in their TV ad investments.
- Viacom: Audiences want their entertainment on demand and their news, sports and events live. Now with respect to Q2 specifically, on a relative basis, broadcast is strongest, then cable, then digital; local is weakest. Interestingly, though, the weakness is dominated by five categories, and they’re categories you would expect: auto, restaurants, retail, travel, movies. At this point, we know there will be a significant impact on ad sales in Q2. But based on what we’re seeing today, we believe there will be an improvement in advertising in the third and fourth quarters, assuming businesses begin to reopen at scale. In terms of the upfront, we expect it to be later and longer than normal, but we’re ready whenever our clients are, and deals will get done. In fact, we invited more than 5,000 agency and marketing executives to our virtual presentation on May 18 and 19. We believe Q3 ad sales will be better than Q2. And, again, right now, May and June scatter looked better than April. So that’s a good sign. We do see categories active in the market; again, pharma, CPG, financial services and tech. We do see categories continuing to be active in the market: pharmaceuticals, CPG, financial services, tech. Importantly, we continue to expect to benefit from political advertising later in 2020.
- J2 Global: In any downturn, the first expense cuts happened within the marketing and advertising budgets of companies. It’s the easiest thing to turn off as there are few long-term noncancellable contracts. There are few penalties or costs associated with canceling and the revenue impact is felt in future periods. In this particular market, we have another factor, which is the explosion of ad inventory based on significant increases in media consumption that are causing compression on advertising rates. As a result of all of these trends, a number of the largest sellers of advertising in the world have reported significant, sudden and steep declines in revenue. At J2, however, we are cautiously optimistic that our $510 million annual ad business can perform better in relative terms. Our advertising business has little local retail exposure in terms of customers. We have roughly 1,100 advertisers who are mostly big companies, while many of the social media companies have millions of advertisers, a good number of them, local businesses that have been hit hardest by the pandemic. Little exposure to the hardest hit ad category so far: travel, retail, food and auto. In fact, roughly 40% of our ad revenues fall into the health category, where we are seeing growth from pharma marketers. As a point of reference through April, everyday health has seen organic ad revenue growth of 5%. The last marketing dollar cut is usually the best performing dollar, and as you know, about half of our ad business is performance-based, meaning cost per click, cost per lead or cost per acquisition; the other half, which is impression-based display, is usually measured and optimized on performance outcomes. Believe that video game play will only grow and establish itself as a leading form of entertainment. The spikes in consumption are evident. Now, a few words about M&A: We are pleased to have consummated two transactions in Q1. During this pandemic, we are very reluctant to close on transactions without visiting companies. Right now, we are planting a ton of seeds and when the clouds lift, we think we are going to be very well positioned strategically and financially to act on some very interesting opportunities. April revenues are also relatively healthy coming in flat year over year. In Q1 of 2020, performance-based marketing slightly eclipsed display advertising.
- Snapchat: Thus far in Q2, year-over-year revenue growth to be 15% through April 19. And our estimated growth rate in the most recent week is 11%. Today, we have less visibility into Q2 results, because so much depends on factors beyond our control. While it’s extremely challenging for the world to stay at home, it does accelerate the move to a digital economy where people are buying and discovering new brands. Pivoted our sales teams and product teams to focus on categories that are best positioned in the current environment, such as gaming, home entertainment, ecommerce and CPG. Continue to help industries that have experienced outsized impacts to build a long-term roadmap to recovery with them as our partner. Like everyone, we’re hearing from advertisers that the global outbreak has dramatically shifted the way that they’re thinking about marketing. Some have paused while they’re rethinking their messaging and others are cutting funding to save jobs. It’s a tough time for the industry. But we are very fortunate to have a well-diversified business across both brand and VR. In fact, VR now accounts for over 50% of our overall revenue. Right now, we’re focused primarily on the partner needs and helping them craft thoughtful messages and create valuable experiences. App is one of the areas in which we are seeing this level of success. That includes apps that are about in-home entertainment, apps that are about gaming, apps that are about at home fitness, and really anything that you can do, when you do not need to physically leave your home. We built this very big DR business, and that’s really an important driver of the growth at this moment. Doubling of the upfronts year over year really tells you that in addition to a very solid DR business, we’re becoming more of a core part of folks always on business. The price per impression has dropped. But that is allowing both our existing advertisers as well as new advertisers to see highly performing advertising and really strong ROI. So while we are seeing new advertisers come in, we are actually really focused on growing the categories on which we’ve doubled down during this period.
- Roku: The pandemic is accelerating the shift to streaming by both viewers and the industry. People are spending more time at home and so TV viewing is increasing. Viewers are selecting streaming because of its excellent content and value. Increased unemployment and a likely recession are making value more important than ever. These factors have driven dramatic increases in our new account growth rate since the pandemic took hold. In the short-term, the pandemic is slowing the growth of Roku’s video advertising business. While advertisers are spending less, reduced budgets mean marketers are looking for ways to invest more effectively and this should accelerate the shift to streaming. Acceleration in new accounts and viewership have continued in April. Active accounts grew roughly 38% year over year, driven by an increase in new accounts of more than 70% year over year. Streaming hours grew approximately 80% year over year in April driven by an increase in streaming hours per account of roughly 30%. On the other hand, our advertising business has seen cancellations as some marketing budgets have declined. But this has been partially offset by new marketing budgets moving to Roku from traditional TV given cancellation of high profile, live sporting and entertainment events. Ad cancellation levels were most pronounced in late March and have since decreased in early to mid-April. We anticipate that our ad business will continue to grow substantially on a year-over-year basis, albeit at a slower pace and lower gross profit than we originally expected for the year. We believe the behavioral changes by TV ad buyers are likely positive for us in the longer term and that with more time spent at home in many households curtailing spending in light of economic hardships, cord cutting and the shift to streaming will continue to accelerate.
- Facebook: After a strong start to the quarter, we saw a significant impact on our business as a consequence of the pandemic from the second week of March onward. This impact has not been felt evenly. We’ve seen strong growth in gaming and relative stability in technology and ecommerce, which is one of our largest sectors. There are few contributing factors here. First, as people stay at home, these sectors are seeing more use of their products and services. Second, advertisers in these sectors tend to optimize for measurable objectives, and we are generating sales at lower prices due to the overall reduction in ad demand. Seen significant declines in travel and auto as these industries have been hit particularly hard. These trends are continuing in the first two weeks of Q2. Revenue was strong from the beginning of the quarter through the first week of March, when we began to see a steep slowdown in our ads business, particularly in countries that implemented shelter-in-place measures to reduce the spread of the virus. During the last three weeks of March, travel and auto were our weakest verticals, and we saw relative strength in gaming technology and ecommerce. These trends have continued into Q2. We’ve seen relatively comparable pullbacks among large and small advertisers. In Q1, the total number of ad impressions served across our services increased 39% and the average price per ad decreased 16%. The decline in average price per ad was largely attributable to the reduction in advertiser demand during the last three weeks of March. The growth of impressions was primarily driven by Facebook Mobile newsfeed, due to product optimizations we made prior to the pandemic as well as from increased engagement.Given the increasing uncertainty in our business outlook, we are not providing specific revenue guidance for the second quarter or full year 2020; rather, I would like to provide a snapshot of revenue performance in the second quarter thus far. There is a tremendous amount of macro uncertainty. So it’s difficult to extrapolate performance based on a small sample of data. After an initial steep decrease in ad revenue in March, we have seen signs of stability reflected in the first three weeks of April. Ad revenue has been approximately flat compared to the same period a year ago, down from the 17% year-over-year growth in the first quarter of 2020. The April trends reflect weakness across all of our user geographies, as most of our major countries have had some sort of shelter-in-place guidelines in effect.
- Fox: In April, Tubi generated a total viewing time of over 200 million hours, which is up more than 150% versus prior year. Categories that have moved spending into Fox News to reach our expanded and engaged audiences include insurance, fast-service restaurants, telecom, streaming and tech. Where the impact of the pandemic is most apparent in our business is at our local stations across the country, where despite viewership gains for our local news programming. Fiscal fourth-quarter advertising revenues are pacing down around 50% from year ago levels. The local auto, local retail, local travel and local entertainment categories are leading this decline for us and the rest of the local TV market. We’ll only see the pattern of how these categories will return after states and municipalities open back up for business. We have seen a slowdown in the active political advertising spend. Canceled our advertising upfront, which would otherwise have taken place [May 11]. The most immediate impact has been on advertising revenue at our local television stations, where inventory is sold essentially on a spot basis and many of our advertising partners operate in sectors most displaced by Covid-19. If pacing continues at current levels, we would expect our local advertising to be down by approximately 50% vs prior year. Meanwhile, our news and entertainment businesses are expected to be more insulated in the immediate term. News is being supported by strong ratings, the growth of its digital properties, the category mix of its core advertisers, along with the new advertising clients it is attracting that help partially offset decline from the legacy advertising base. At entertainment, we are already substantially through the broadcast season with our advertising revenues well supported by inventory that was sold during last year’s upfront and until recently, a strong scatter market. So before we get to our sports business, the impact of weaker advertising demand at our local TV stations, national news, and entertainment businesses is anticipated to be around $200 million to $240 million or 25% to 30% compared to prior year. The categories that you would expect are being affected significantly worse by Covid-19; they’re pacing 50% below. So travel, entertainment, restaurants are all pacing worse than 50%. But that’s offset by many categories that are down significantly less than that. Professional services, insurance and some categories frankly that are up like pharmaceutical. So, it’s a real mix.
- Dotdash: At Dotdash, we’ve been pleasantly surprised by how well Dotdash is holding up here. We’ve seen a big surge in traffic and—as more people are spending more time on devices. But the advertising revenue has held up, in particular the performance revenue. The fundamental thing of Dotdash is our traffic is about intent. Our audience is trying to get something very specific done on our properties like learning to cook new things or what to stock in the pantry or things that you could imagine that demonstrate a level of intent that advertisers would want to reach in a moment like this. You can see that playing out even more in the performance marketing where that advertising revenue is specifically related to performance, so a user taking a specific action and the advertiser paying only when that specific action happens. And obviously, that’s doing really well right now. Still going to make investments to continue to capture share against the bigger brands in which we compete against. In healthcare, we can be multiples bigger than we are right now. In finance, with Investopedia and The Balance, we could be multiples bigger in each of those areas. In home, same story. In each of those areas, we have a much bigger competitor, and that’s what we’re going after to build that business. Display advertising revenue -7% in April and performance marketing revenue +115% in April.
- Google: Many parts of the economy are also able to continue with some semblance of normalcy. Thanks to advances in remote work, online shopping, delivery options, home entertainment and telemedicine. In March, we experienced a significant and sudden slowdown in ad revenues. The timing of the slowdown correlated to the locations and sectors impacted by the virus and related shutdown orders. As we saw after 2008, one of the strongest features of Search is that it can be adjusted quickly, so it’s relatively easier to turn off and then back on, and marketers see it as highly cost effective and ROI based. At the inception of the crisis, the increase in user interest was for information about Covid-19 and related noncommercial topics. Although we have seen some very early signs of recovery and commercial search behavior by users, it is not clear how durable or monetizable this behavior will be. As of today, we anticipate that the second quarter will be a difficult one for our advertising business. Google Search and other advertising revenue generated $24.5 billion in revenues in the quarter that was up 9% year over year. This reflects strong year-on-year growth for the first two months of the quarter. In March, revenues began to decline and entered the month at a mid-teens percentage decline in year-on-year revenues, although, users’ search activity increased, their interest shifted to less commercial topics. In addition, there was also reduced spending by our advertisers. YouTube advertising revenues were $4 billion, up 33% year on year. Significant YouTube revenue growth persisted until late in the first quarter with different performance trajectories for the brand and direct response components. Direct response continued to have substantial year-on-year growth throughout the entire quarter. Brand advertising growth accelerated in the first two months of the quarter, but began to experience a headwind in mid-March. As a result by the end of March, total YouTube ads revenue growth had decelerated to a year-on-year growth rate in the high-single-digit. Network advertising revenues were $5.2 billion, up 4% year-on-year with healthy year-on-year growth for the first two months of the quarter. We ended March at a year-on-year percentage decline in network revenues in the low-double-digits.
- Criteo: Now I acknowledge these assumptions carry a lot of uncertainty. There are still many things we don’t know today and things are rapidly changing. Taking all of these considerations into account and as of today, we believe our business in Q2 will decline by 32% to 35% year-over-year on a revenue ex-TAC basis. Traditionally, our business mix is about 70% retail, 10% travel, 10% classified and the remaining 10% a collection of verticals including auto, finance and gaming. Spend in the travel vertical decreased by around 95%, compared to pre-Covid-19 levels, while spending classifieds decreased by 40% or more. Retail, by far our biggest vertical, has held up well with spend reductions in our core solutions limited to about 10%. Going into Q2, we’ve seen our April performance declined by about 25% year over year on a global Revenue ex-TAC basis.
- Amazon Advertising: On advertising what we’ve seen is it’s been a very strong quarter in ad revenue. Advertising growth rate has stayed consistent with last quarter. And we’re very happy with the progression of that offering for not only sellers, authors, vendors and the positive impact it’s had on customer selection. In March, some pullback from advertisers and some downward pressure on price. It wasn’t as noticeable maybe as with what some others are seeing, and it’s probably offset a bit by the continued strong traffic we have to the site. So it’s a bit of a mixed bag. We have again seen a downward pressure a bit on pricing. A large portion of our advertising relates to Amazon sales, not things like travel and auto, which offsite may have been disproportionately impacted at least early on here in the Covid-19 crisis. And I think our advertising will prove to be very efficient as well. And it can be directly measured. So even as people are cutting back perhaps on advertising, or are their costs, I think this will be one area that will prove its value. It has in the past.
- News Corp.: In April, advertising revenues at Dow Jones was down more than 20% with digital down modestly. Advertising revenues in Australia and the UK were down more than 45% on a reported basis, or around 40% in local currency. In Q1, digital advertising at Dow Jones rose 25% year over year, despite the challenges we faced with ad sales later in March. This is in strikingly marked contrast to the performance of The New York Times, where digital ad revenue actually declined 8%. In terms of advertising, clearly, traffic has been particularly strong. There had been, as you may well be aware, some concerns early in the Covid-19 crisis about blocking of ads related to Covid-19 crisis coverage. Gradually, that problem has diminished. And so we are noticing that the amount of advertising we’re getting is matching, not quite, but to some extent, the significant increases in traffic we’ve had across The Wall Street Journal and MarketWatch. We noticed that tech advertising has increased. Custom advertising is also on the rise, and to a certain extent, programmatic. And they want to deal directly with us rather than necessarily through an advertising agency.
- Twitter: Ad revenue from March 11 to March 31 declined approximately 27% year over year. Increased focus on DR. An improved MAP product and more direct response ad formats would increase our addressable market with more exposure to advertising demand that may be more resilient through an economic downturn, while building on our strengths and helping brands launch something new and connect with what’s happening. I’m also pleased to share that cost per engagement (CPE) decreased 19%, driven by like-for-like price decreases across most ad formats and lower demand in March.
- Comcast: Looking ahead, we anticipate advertising revenue will materially weaken from the first quarter due to the continued postponement of sports as well as the shape of the economic recovery as it reopens from Covid-19 shutdowns.
- Spotify: Ads are a very, very small portion of our business. It’s about 10% of our overall revenues. So, to the extent that were impacted by ads, we’re likely a lot less impacted than many other businesses. So long term, we believe this is a great opportunity for us, as the trend line of moving from linear to on demand will likely be accelerated by the Covid-19 crisis. And we suspect that our advertisers will shift from pure reach to more measurable ad formats, of which ad formats are obviously a lot better compared to analog ad formats. So our suspicion both on the advertising front, as well as the consumption front, is that this will play into the tailwinds of what’s already been happening of linear moving to digital.
- Discovery: For U.S. ad sales, predictably seen higher cancellations and deferrals in Q2. And based on preliminary results, April is down around 20% year over year. And based on business booked for the remainder of the quarter, both May and June are looking slightly better than April. Based on preliminary results, international ad sales for April are down about 40% in aggregate across all international regions. Depending on the market, the range is anywhere from down 30% to down 50%. The number of Discovery’s largest advertising categories are holding up nicely, such as certain CPG verticals like food and cleaning products, pharmaceuticals, insurance, financials and ecommerce companies, while travel, movie studios and some autos and retailers understandably cut back significantly.
- Rubicon: The impact continued to worsen through the first half of April, before showing signs of stabilizing in the second half, with total April revenue down roughly 30% year over year. On a more positive note, CTV has continued to grow, albeit at a lower rate with a year-over-year increase in April of approximately 10%, and has also stabilized in the last several weeks. As an omnichannel SSP, we have significant diversity across ad categories and even more so post merger with Telaria. As you can imagine, certain verticals have been significantly impacted, such as travel in media and entertainment, whereas others have benefited such as ecommerce, technology, direct-to-consumer and performance advertising. Post-Covid-19 CTV ad slot availability grew roughly 25% when compared to pre-Covid-19 volumes. Upfront deals have been and are expected to be canceled, shifting more spend from linear to the spot market that programmatic serves. Seeing an increase in direct-to-consumer and performance advertisers, who really never had an opportunity to get in to CTV.
- Microsoft: Significant reduction in advertising spend, which impacted our Search and LinkedIn businesses. Search revenue ex-TAC increased 1%, below our expectations, driven by significantly reduced advertising spend. We assume advertising spend levels from March do not improve in Q2, which will impact Search and LinkedIn.
- Apple Advertising: Advertising, which is comprised of third-party agreements, our App Store search ads, and Apple News ads has been impacted by overall economic weakness and uncertainty on when businesses will reopen. The other business, which we think is going to be impacted by the overall economic weakness and the uncertainty on when businesses will reopen is advertising, which is the sum of our advertising business on the App Store, on Apple News, and the third party agreements that we have on the advertising front. So, these are two things that during the June quarter will create a headwind for the Services business.
- Disney: Obviously this whole Covid-19 pandemic has had a significant impact on our ad sales. I think that’s fair to say for anyone in the advertising business on one side or the other. And it’s really due to the lack of live sporting events and the pullback from advertisers in categories that are most impacted. So we have seen declines in demand from industries like movie studios, restaurants, travel, tourism, retail, domestic auto, those are all the things that have—we are seeing pullbacks in. But on the other hand, we’ve seen some advertisers opportunistically increasing their spend and some of those industry groups are things like financial services, tech, telecom, the DTC/streaming services and also consumer packaged goods. When you net out all of that, the net impact is what we are expecting as a significant decline in ad sales. And we will see it more at ESPN because of the lack of live sporting events than we will at the broadcast network.
- iHeart: Let me start with the consumer. We know advertising is driven by consumer engagement, and engaged audiences are the key to strong sustainable revenue. I know that’s not the case right now given this temporary downturn in advertising, but it will be when it returns. We know the reopening of businesses and brands depends on consumer demand, and advertising has always been the fuel that drives that demand. Importantly, we’re now focused on recovery. Advertising overall and most of our advertising streams have seen a major drop, and the reasons are obvious. Many businesses are shut down. Businesses and brands needed time to rebuild their messages to be relevant in a completely changed world. And companies needed to save money, and many did so by reducing or eliminating ad spend. Characterize April as probably the worst monetization month I’ve ever seen. Most of our morning shows added an hour and now end at 11 a.m. instead of the traditional 10 a.m. Our listeners have shifted their days.
- Gannett: But as the pandemic significantly affected the U.S. in March, we also saw a spike in advertising cancellations and a slowdown in new sales across both print and digital. Results are still preliminary for April; however, our initial view is that same store revenue was down approximately 30%. In response, we’ve adjusted our new sales focus around business segments that are better positioned during the crisis. We’re also working with our existing clients, particularly our small businesses, to make sure their digital presence is strong. We’re able to shift messaging for them, emphasizing features that build online presence, ecommerce capabilities and also to implement digital marketing programs to help them be discovered online. Given the range of advertisers we touch, from the very smallest local business to the largest advertisers in the world, we expect to have a front row seat on the recovery. We’re ready to adjust resources, messaging and products as opportunities present themselves. Obviously, we’ve seen the biggest hit during the crisis come to print advertising, which is down more than 30%. Our digital business has definitely held up better. It’s been more resilient than print advertising. Cautiously optimistic that the worst is behind us.
- Pinterest: Working with advertisers as they adjust to this new economic climate. The quarter began with a continuation of the strength we’ve seen in Q4, but the pandemic began to impact our business during March. As offline stores closed around the world, many advertisers slowed or paused their advertising spending on Pinterest. For those advertisers that paused, we’re sharing our insights to help them plan and eventually reaccelerate and reactivate their spend. Pinterest is where consumers have always looked for ideas and plan their lives, and we’re offering CMOs valuable insights to help them decide how to spend their 2020 budgets. For those advertisers that continue to spend, we’ve seen a shift away from awareness campaigns and towards highly performant ads, an area we’ve invested heavily in over the past year.
- The New York Times: We saw advertising fall rapidly toward the end of the quarter and believe that advertising in the second quarter will fall between 50% and 55% compared to a year ago with limited visibility beyond that. We believe that the company will emerge from this global crisis with a distinctive and valuable advertising revenue stream to complement a digital news subscription business which is now by far the largest and most successful in the world. The revenue from those subscriptions give us real confidence, not just that we can remain financially sound through the pandemic, but also that we can safely invest in our digital growth strategy and continue to hire new talent to help execute it. Q2 digital advertising revenue expected to decrease approximately 40-45%, largely due to the impact from the Covid-19 pandemic. Print advertising revenue decreased as the Covid-19 pandemic further accelerated secular trends, largely impacting the luxury, media, entertainment and financial categories. One of the trends we have talked about for a while is just the idea that we will have a larger concentration of advertisers and a smaller number of categories. And I think it is fair to say, in both print and digital we saw more pressure in our legacy categories. And I think we can assume that that will continue through the crisis.
- Verizon: In Verizon Media, we are experiencing a decline in advertising and search revenue as advertisers pause, hold back or cancel campaigns during this time and users are searching for fewer commercial terms providing us with less opportunity for monetization. As a result, advertising revenues declined by nearly 10% in the month of March with Covid-19 mostly impacted in the second half of the month and that rate of decline has increased in April. A number of industry forecasts expect a 20-30% decline in digital media revenues in Q2 and Verizon Media’s results are likely to be similar to those experienced in the broader industry. Seeing some staggering numbers like over 200% up on gaming, 10 times up on collaboration tools, 40% up on video. 800 million calls a day, which is twice the amount of what we have on Mother’s Day, which is the biggest day a year.
- Netflix: Increase in subscriber growth in March. It’s essentially a pull forward of the rest of the year. So our guess is that subs will be light in Q3 and Q4 relative to prior years. When it comes to production, almost all filming has now been stopped globally, with the exception of a few countries like Korea and Iceland. We’ve taken on another 2,000 customer service agents (all working remotely), so our customer service levels are almost fully restored despite the increased demand. Within two weeks of the shelter-in-place orders coming into effect in Los Angeles, most of our animation production team was back up and running, working from home. On the post-production side, we’ve been able to get 200+ projects going remotely. Most of our series writers rooms are operating virtually. Over the years, we’ve invested heavily in Open Connect, a pioneering caching system that puts our library of content as close to members’ homes as possible. This enables ISPs to run their networks more efficiently and at a lower cost. However, given the surge in internet use, networks in some countries have struggled to cope.
- Meredith: With April complete, we see Q2 pacing for local television nonpolitical advertising and National Media Group digital advertising revenues down approximately 40% and print advertising revenues down approximately 30%. On the national side, not a surprise, the categories that are feeling pressure: automotive; entertainment; obviously, luxury, retail and travel are the categories where we’re seeing the most pressure. On the positive side, the areas that are holding up well: pharma, pets, home and food early on. We’re seeing a little decline in food now because some food advertisers don’t have enough inventory and have actually paused a little bit in the current month.
- AT&T: Covid-19 impact of ~$600M, mostly from lower sports related advertising and lower wireless equipment sales. WarnerMedia revenues reflect lower advertising due to March Madness cancellation along with comparisons to strong 1Q19 theatrical results. Covid-19 uncertainty limits visibility for now. The most disconcerting troublesome area that we are seeing is what’s happening in small business. There is no sports content, one of the best yielding pieces of inventory that we have access to.
- Omnicom: We don’t collect weekly revenue numbers by agency and roll them up at the Omnicom level. But the expectation is that year-over-year revenues will be down in the month of April. Looking at a Q2 downfall, which could be double digits. I don’t think it’s going to be rosy, but we do fully expect to bring many of those people back as we get later and later into the year.
- Interpublic: The second quarter is not going to be pretty, hard to predict where this is going. The second quarter should be the worst of the quarters. The conversations we’ve had with the clients range from, yes, we think it’s coming back in the later part of the third quarter or some clients don’t think it’s coming back until the first part of the next year. Sectors that are basically come to a standstill and particularly in the events side and in the sectors like airlines and cruise ships and things like that, our model dictates staffing reductions in those environments. Much more flexible to deal with digital than linear. Many of the senior teams are reporting that the intensity of what we are living through is leading to very deep engagement with clients, which could mean over time even stronger and more productive relationships with our clients. Clients understand the value of our services and the importance of work for their long-term competitiveness and growth.