This is a companion piece to Ben Shepherd's predictions for 2014. You can read the article here.
Biggest advertising/media stories of 2013
As expected, 2013 was another year of change and disruption within the media and technology world. In a year full of big stories and movements, these were the main themes that seemed the most important.
The rise and rise of Facebook
Its stock price is up over 100 per cent across the year, and the company has continued to defy the doubters with revenue growth eclipsing 40 per cent year on year. Facebook has successfully grown into a large scale advertising business and the reality is it is just scratching the surface of what it can do in this area. Its data and user engagement is matched only by Google. And like Google, Facebook is demonstrating that it has become indispensable for users, the media and advertisers. $2 billion in calendar Q3 revenue this year crushed all expectations and buried all the memories from the clunky IPO and moved focus to a big future for the company.
The trials and tribulations of Ten
When Ten’s Chairman and CEO got up at the company’s AGM and described their 2013 performance as unacceptable, it was Groundhog Day. This is the same sentiment the network has rolled out since 2010 and 2013 was the worst year yet for the network. Its share price is down 5 per cent for the year to date at 27.5 cents, but down 85 per cent on its 2010 high point. New CEO Hamish McLennan can’t be accused of sitting on his hands – he has placed new executives in charge of sales, marketing and digital; acquired the rights to the domestic 20/20 competition and somehow managed to steal the V8 Supercars (whose CEO is fired Ten CEO James Warburton) franchise from Network Seven. Ratings-wise the network’s performance has been sluggish but there are some faint signs of improvement towards the end of the year, including the performance of the debut 20/20 game on a Saturday night with a 753,000 metro rating. McLennan and Murdoch will be hoping in 2014 there will be more media attention on Ten’s programming and less on its financial performance.
The rapid revenue decline of print media
Month after month the Standard Media Index data sourced from Australian media agencies told the same story – print media advertising revenue is bleeding rapidly in the Australian market. Despite circulation declines being in the mid single digits, advertising revenue is down by over 20 per cent and essentially revenues that formerly were placed into print are the largest contributor to the growth of digital media channels. The reality is most local content requires both print and digital revenues for funding, and the rapid erosion of print advertising revenue will ultimately hurt digital media content quality in time.
And the resilience of TV
TV advertising continues to be the lead channel for most advertisers – and is on track in 2013 to basically remain at the same levels it was in 2012 – hovering around the $3.7 billion mark. Digital advertising hasn’t killed television whatsoever – digital’s growth has come predominantly from print channels and TV continues to evolve and show relevance for viewers and advertisers. Both Seven and Nine had strong years in 2013, and Foxtel continues to become a larger player in the advertising market via its sales vehicle Multi Channel Network.
Gyngell’s jam packed year
In December of 2012 David Gyngell was trying to save his company as well as adjusting to life as a new father. Twelve months later, Nine Entertainment Company has floated successfully on the ASX and Nine had another strong year. Nine had a 38.4 per cent share of the key 25-54 demographic and enjoyed solid results from local productions The Voice, The Block, House Husbands, NRL and Big Brother. He also led NEC’s digital business Mi9 splitting from former joint venture partner Microsoft, and sold NEC’s stake in iSelect for a reported 6x return. 2014 is unlikely to be any less frantic, as NEC aims to demonstrate to investors and the market it can successfully find a lucrative strategic fit between across its varied assets.
Celebrity as media
It used to be that celebrity needed the media to reach an audience, now it appears to be the other way around. Big time celebrities have direct to fan media reach that eclipses many large-scale media outlets, and realising that advertisers generally follow the eyeballs some of these celebrities are looking to generate revenue from these social media assets. The best example of how Hollywood is tackling this new dynamic is in the rapid evolution of talent agency WME. This year it purchased a 49 per cent stake in ad agency Droga5, and just last week it purchased IMG Worldwide – a leader in sports, fashion and media representation. Sure, brands have always used celebrity as a conduit to their desired audience, but now they can use the same celebrity not just for the creative but also for the distribution. WME also has close ties to live entertainment juggernaut Live Nation. It begs the question – what is the media’s role in all of this?
It started the year valued at $US11 billion, it ended the year valued at $US32 billion. The Twitter IPO was closely watched as it gave investors the first chance to take a look at the company’s operations and most importantly, its financials. Results were mixed – growth was modest and Twitter, despite its age and scale, had yet to turn a profit across a single quarter. That didn’t scare the market, and Twitter debuted at $44.90. It hasn’t dipped below $40 and right now is above $60. When Twitter will turn a profit is unclear, but what is clear is many investors are more than willing to bet now on the company working it out sometime in the future. Twitter is hitching its wagon to sports, celebrity and TV in a hope to fuel advertiser interest in 2014.
Increased appetite for tech investments driving valuations even higher
Based on recent investor activity, Snapchat is worth over $3 billion, Airbnb north of $2.5 billion, Spotify north of $5 billion, Foursquare close to $1 billion, Box at $2 billion and Uber at $3.5 billion. Valuations remain sky high and the likely scenario is that they will continue to head upwards in 2014. There appears to be more demand for technology investments than there is supply in terms of businesses with scale and big potential which continues to push valuations upward as investors and VCs scramble to find the next big payoff.