Branded Content: Growth for Marketers and Media Companies

Branded Content: Growth for Marketers and Media Companies

          
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Branded Content: Growth for Marketers and Media Companies

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  • A Big Opportunity for Media Companies

    Media companies are not only being invited to play a role in the future of branded content, they are also being offered a big and multifaceted business opportunity if they do. At the very least, media companies need to meet the growing demand of consumers and advertisers by developing a core offering that marries two capabilities: integrating native ads seamlessly into consumers’ interactions with media and working with brands to develop creative content for distribution through media platforms. A number of major media companies, from CNN to the New York Times to Condé Nast, have already started to set up branded-content capabilities, some complementing their editorial expertise with people hired from advertising and other marketing companies. We also see potentially attractive opportunities to build adjacent businesses in three areas: full-service branded-content offerings, native-ad sales on media companies’ private exchanges, and content management services for marketers.

    Developing these capabilities will require a transformation in the way most media companies do business. Many are not prepared to deliver their core offering effectively, much less build ancillary businesses. As the nascent ecosystem that has sprung up around branded content matures and consolidates, media companies have an opportunity to bolster their capabilities through acquisitions. Google’s 2008 purchase of DoubleClick is an example—from a previous wave of marketing technology innovation—of an incumbent player moving quickly to establish a strong position in an emerging value chain.

    The Core Offering

    Marketers are already accessing all manner of outside resources to help with their branded-content efforts, including both traditional ad agencies and new players, especially companies with expertise in digital content. Media companies have a built-in advantage over all these intermediaries: their involvement in branded-content creation raises the level of consumer engagement by some 17 percent.

    The biggest challenge for media companies is likely to be developing a clear delineation between editorial and branded content, while at the same time ensuring consistency between the two. Getting this balance right is critical because of the importance of credibility. Companies with a history of enforcing a strong division between editorial and promotional content, in particular, could face significant organizational and cultural hurdles, especially if they need to reassign talent across this longstanding “church-state” barrier.

    At a macro level, media companies will need to transform their business models and organizations in four key ways as the market continues to shift from a predominantly advertising-driven model to one in which branded content leads. They will need to move from their current models in the following ways:

    • Developing customized opportunities for audience engagement, rather than selling standard ad units, such as 30-second spots and banner ads

    • Producing short- and long-form content that appeals to audiences on behalf of brands, rather than placing advertisements created by a brand or its advertising agency

    • Cultivating creative-development teams to produce branded content, rather than managing standalone editorial teams separate from ad sales or publishing

    • Developing sales executives who market custom-content services, rather than deploying advertising sales teams that sell media time, space, or computer-​screen real estate

    Especially for traditional publishers and electronic-media players, making this transformation is likely to be an organization-wide undertaking that takes several years. Media companies will need to rethink their recruiting and training of sales staff. They will also need to integrate branded-content sales teams with existing staff responsible for customer relationships. It may be more expedient and productive to acquire some capabilities rather than try to build them. Because of the speed at which the market is evolving, those that move most quickly will have an advantage.

    Ancillary Opportunities

    The transition to an online world has been tough for many traditional media companies. Print publishers have seen ad revenue streams all but evaporate, and TV audiences have fragmented. Thanks to branded content, however, traditional media companies are looking at the potential for major new revenue streams—if they act quickly. Here are three of the most promising opportunities.

    Full-Service Branded-Content Offerings. With their creative and content capabilities and their strong relationships with consumers, many traditional media companies are in a terrific position to go beyond native ads and content production and offer a full, end-to-end branded-content service to marketers. This includes content strategy and planning (translating brand strategy into specific creative concepts); content optimization (analytics that measure the results of a branded-content campaign and provide recommendations to improve efficacy); and new branded-content production services and tools (such as social-media services, sourcing of creative talent, and creation of content for the marketer’s own platforms).

    The market for all these services is growing quickly and, as we have seen, is currently disjointed, with multiple players operating in various niches but very few
    (if any) one-stop shops. Moreover, the traditional ad-agency oligarchy is much less entrenched in branded-content services, and media companies have a unique combination of access to creative talent, credibility with consumers, ownership of audience data, and consumer respect. Most also have strong relationships with advertisers on which to build.

    Native-Ad Sales on Private Exchanges. Programmatic buying is already a $9 billion business globally and is growing at 30 percent a year. It is expected to be a $33 billion market by 2019, as marketers, increasingly driven by performance metrics, pursue real-time bidding and the other advantages that programmatic buying offers. This is also still a very young market, with no clear dominant players yet. As with full-service offerings, traditional media companies have the opportunity to differentiate themselves by combining existing and emerging capabilities. By inviting individual advertisers and agencies to bid on high-quality pools of inventory on private exchanges, media companies can combine the efficiencies of programmatic sales with the quality and efficacy of native-ad placements. They can also control pricing and inventory for their own exchanges and maintain direct advertiser relationships.

    Media companies can take the offering one step further. Few (if any) players today are integrating recommendation capabilities through Web widget add-ons or “other content you may like” features. By integrating recommendation capabilities, media companies can improve the efficacy of private exchanges and the differentiation among them.

    Additional Content Management Services for Marketers. Marketers face any number of needs as they build their branded-content programs, including the following:

    • Capturing the growing volume of their own, third-party, and user-generated content

    • Efficiently adapting content for new devices

    • Developing a user-friendly platform to serve as a single, searchable access point for content teams across all of a brand’s owned content

    • Integrating content data with user data for better ad targeting

    • Evaluating the quality of user-generated content

    • Reducing manual requirements for updating content across platforms

    • Personalizing their Web presence and consumer communications (custom landing-page content, recommendations, and e-mail offers, for example)

    Serving these needs was already a $7 billion market in 2014, a figure that is expected to grow by about 13 percent a year over the next five years. While there are a number of strong competitors, and switching costs are high for brands because of the complicated deployment of Web content management systems, we believe there is room for a few media companies to develop solutions. In the same way that Amazon realized it could lend its data management technology and skills to other companies and proceeded to build a multibillion-dollar cloud-based service business, a few ambitious media companies have the opportunity to leverage their content management capabilities into a new revenue stream. In addition to the requisite technology and skills, they have important built-in advantages, including existing relationships with marketers and a strong sales position with their current brand partners.

    Build or Buy—But Quickly

    In an evolving ecosystem that will inevitably undergo rationalization and consolidation, early movers may be able to establish positions that will be difficult for others to assail. Developing the capabilities necessary to offer both core and ancillary services will require skills and technologies that most media companies do not now have. These can be developed or built internally, but some companies may find it easier, less expensive, and quicker to buy what they need. The ecosystem has many players, and new entrants offering innovative services start up almost every day—whether it’s content discovery from Taboola, recommendations from Outbrain, native exchanges from Sharethrough, content creation from Contently, or content marketing from NewsCred. The best technologies and the people behind them will be targeted early. Those media companies that wait for the market to shake out may find themselves on the outside looking in—in just a few years time.