One Question Quiz
Image: Tina Tiller
Image: Tina Tiller

BusinessApril 13, 2024

Advertising largely funds the media. How do ad execs view the current crisis?

Image: Tina Tiller
Image: Tina Tiller

Above the Fold: Behind the end of Newshub and TVNZ layoffs is a simple truth: neither company is making as much money from advertising anymore. Duncan Greive asks some ad industry CEOs why that is, and what might change it.

This is the final entry in Above the Fold: 20 Media CEOs, Two Big Questions, a five-part series running all this week and featuring a selection of responses to two heady questions confronting the New Zealand media sector. Read the series introduction here and the full series here.

It’s fitting that in this week’s 20 CEOs, Two Questions series, advertising comes in last. Advertising is the most powerful force in the content business and remains the largest funder of not just news and television businesses, but also many of the world’s largest and most powerful companies. Google, Meta, ByteDance and Amazon all have enormously powerful advertising businesses, while Apple, Uber and Netflix are racing to catch up.

Take a look at that list, though: a search and software company, a social media conglomerate, a retail colossus, a device manufacturer, a streamer and a taxi service. Only three of them in the business of paying for content, only one with it as core to its business. This is the ad world now: vastly more complex and global than what it once was, with what was once the least-fashionable part – direct response, such as flyers and coupons – now the undisputed money-making king.

Some in advertising, like PHD’s Simon Bird below, believe this is fundamentally an attribution problem – that marketers are confusing proximity to the transaction for causation. Others, like Accenture’s Justin Mowday, think it’s a function of the dazzling innovation across product, data and measurement the tech companies possess.

Either way, it’s these seemingly irresistible forces which are causing both audience migration to digital and the huge advertising gains being made by big tech companies – all at the expense of local media brands, legacy and startup alike.

Because of the complexity of reaching digital audiences, many organisations are increasingly reliant on their partners in advertising. Most companies at any kind of scale don’t make advertising calls themselves or often exert all that much influence. Instead, the people who drive the ad business are agencies: media agencies, which advise where to spend money, and creative agencies, which make the content that goes in the ad slots. (There are also dozens of micro-niches between). The more local media suffers, the more eyes turn hungrily to media agencies to find out where they’re spending, and for answers as to why big tech is going up while local media goes down.

So to end this series, I’ve gone to a mix of thoughtful advertising leaders, from media to advertising to consultancy, to get a sense of what is going on, and whether there is a way out. Their answers below have been edited and condensed.

Nigel Douglas, CEO of OMD, a multinational and the biggest media agency in New Zealand

What’s the biggest issue in your corner of the media industry right now?

Digital transformation. Most media will transition to digital delivery this decade and this is being accelerated by the cost of living crisis. Interest rates have doubled and most of the fixed costs in households have increased significantly affecting discretionary income. People have less to spend with businesses, who have less to spend on media, who have less to spend on people and product. This is playing out with Warner Bros Discovery (WBD) and TVNZ right now.

With WBD no longer supporting Newshub the expectation is that audiences will be affected – most likely a decrease in numbers, but this is not a given. When Three dropped The Project, audiences actually increased. If audiences do decline then we will see supply and demand dynamics shift around. The reality of an all-digital video future is now much closer, and that means a much more fragmented marketplace for audience, making the need for technology, data and specialist skillsets more important than ever.

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

The market’s not broken. It’s just evolving and we need to evolve with it. At OMD this means anticipating what this looks like and gearing up our people and product accordingly. This means increasing our digital and data teams and their capabilities and platforms to operate effectively and efficiently in this evolving environment. We’ve been doing this for quite some time and the pace will only increase.

Local content is a more endemic issue. Local people consume local content – news, sport, entertainment etc. It is increasingly challenging for traditional producers to make this commercially viable. Government bodies already support this and now the market is looking to advertisers for more funding. We can, will and are supporting this where it makes strategic and commercial sense but I think we also need to think outside the box that we call New Zealand. If the market is too small to sustain local content we should also be thinking about taking that content to bigger markets where we can sustain it. New Zealand has a globally recognised creative industry. We need to leverage it.

Accenture country MD Justin Mowday. (Image: Supplied)

Justin Mowday, Country MD for Accenture, a global consultancy

What’s the biggest issue in your corner of the media industry right now?

The biggest issue, I think, is that advertisers follow audiences, and those audiences have shifted quite significantly. Unfortunately, that means that our local media industry is feeling the pain of that. A local media industry is critical for a number of reasons. But from an advertising point of view, the reality is local content works, local content gets eyeballs, reach and engagement. And once you start reducing local content, you reduce advertisers’ ability to reach people. But if you can’t get space around local content, you think, ‘I’ll just take any content that reaches people’. 

That’s when you start getting the global players coming in. They do undoubtedly have these vast budgets and technological abilities to innovate. But their biggest advantages are the sophistication of their targeting, the number of exciting new formats, and their ability to precisely measure their impact. And that measurement is almost becoming the most important thing. As pressure comes on advertising budgets, clients want to see a factual return on investment. And those big digital players are really good at that. 

These platforms tend to change their minds on how they measure stuff. And I think there’s a really strong case that people shouldn’t be marking their own homework – that the digital platforms should be subject to external ratings measurements. But nevertheless, to a marketer, and indeed to the CFO and CEO, you do get incredible measurement about where your marketing dollars are going. 

There is a bigger looming problem: I’m not sure that people will accept the interruption ad model going forward. It’s been advertising’s approach since the ‘50s – you create some great content, and then interrupt that content with an ad. I just think people are getting so good at filtering out bland shit. I think it’s driving the explosion of subscription models and sponsorship models, like The Spinoff has. You can’t keep shoving ads at people. In some places it still works; I’m not saying it’s lost its entire value. But I just think over time, as we go forward, that’s going to be a real challenge for the advertising industry and the media industry. 

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

I can’t see past some sort of way to levy or tax large international digital players who are profiting off local content but not paying for it or contributing back to NZ society. I don’t know the right mechanism. But there has to be some way to gain revenue from that and to make that revenue available back to the creators. We’ve got to close that circle somehow. 

Daylight CEO Lee Lowndes (Image: Supplied)

Lee Lowndes, CEO of Daylight, a creative and digital agency (which grew out of The Spinoff)

What’s the biggest issue in your corner of the media industry right now?

As an independent start-up creative and technology studio with just over three years under our belt, it’s the challenge of keeping up with the rapid pace in which technology is evolving, and how this is continuing to impact not only our own industry but industries around us. Within the creative side of the industry, film production, voice artists, content creation, retouching, animation, 3D motion – all of them are going to shift drastically. I’m certainly not saying the role of creative thinking is going to be replaced, but the outputs of that thinking are going to be turned upside down and put back together in a totally different way over the coming years (if not months).

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

I think it’s time we had a shift in how we look at media buying. For decades, we’ve been pouring millions into really polished brand films that are purpose-built for TV, during an ad break. I reckon it’s time we rethink not just the storytelling style but also where we’re placing these stories in the media world.

We’ve been throwing so much money at global social media giants that have convinced us that a six second clip is the way to get noticed – not to mention making sure our logo is front and centre. I’d love to see more bold thinking from our communications leaders. There’s so much potential in telling stories through different mediums and tapping into the incredible talent and local media platform we have right here in Aotearoa to reach our audiences.

Kelly Grindle, MD of Special PR, an arm of Special Group

What’s the biggest issue in your corner of the media industry right now?

PR and journalism live within the same ecosystem and the ripple impact is certainly being felt in our industry. Many of the journalists we work with are more than associates – they are friends. And while it feels repugnant to highlight the impact on the PR industry at a time of true hardship for many of those friends, it does underscore the far-reaching effect of these decisions. PR (or at least consumer PR, where I operate) is about garnering attention. That will not change. But with fewer newsrooms, we need to think of new ways to garner that attention.

This evolution is happening quickly – we are seeing more live experiences, designed to drive more impact through more social channels. We’re still gaining attention, but it is a very different construct. And the big question remains: will that attention carry the same weight?

Journalism has always added depth and credibility to PR campaigns. It is emotional, trusted, esteemed and respected – it has the power to influence opinions, shift behaviour and educate an audience, and therefore holds much more credence with our clients. Whether the same influence and education can be fostered when you’re scrolling through TikTok remains to be seen.

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

Can media create a commercialised ‘masterbrand’ and still maintain editorial independence? You can see this strategy beginning to pay dividends for some. Here in New Zealand, look at what MediaWorks is doing with its radio portfolio – a strong broadcast base, heavy investment in digital, the growth of social communities, live events and even merchandise. They have invested in strong masthead brands so people are willing to fork out for George FM t-shirts from their own pocket, or pay for an event hosted by The Edge. That all helps deliver revenue that can be reallocated to their core broadcasts, or dare I say it, journalism.

Hearts & Science CEO Jane Stanley (Image: Supplied)

Jane Stanley, CEO of Hearts & Science, a data-driven marketing and communications business

What’s the biggest issue in your corner of the media industry right now?

Obviously, there is a huge amount of change happening in the local market, from the reshaping of media owners (i.e. WBD’s recent announcement regarding Newshub) to changes in the way we can target and measure media (including the depreciation of online cookies). However, I still feel the overriding issues stem from way back before some of these more recent developments. Media has been blurring in shape for years and this includes the lines between media types disappearing, the rapid rate of digitalisation across channels, content being present 24/7, and consumers becoming creators across media channels.

With all this happening I feel in places we are still pushing media, whether in broader content or in media advertising, rather than truly connecting with audiences and building experiences that add value and build loyalty. We have to understand audiences are in the driving seat in terms of how they engage, view and respond to media. I still feel there is room in the industry to deliver more engaging connection rather than continuing to shout at audiences and emptying more media into the increasingly cluttered content graveyard.  

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

I really enjoy working with media and marketing leaders who think deeply about the solutions to these issues. They’re the ones who talk about the connected media worlds of their audiences, rather than getting caught up in the weeds of channel or platform tactics, which can lead to very out-dated and ineffective media solutions. They understand the world of their audiences, where they are more connected than ever before and demand personalisation and authenticity in the media they engage with.

From a more media-advertising point of view, I really admire what is happening in the retail media space. Retail powerhouses such as Tesco in the UK and The Warehouse Group here in NZ understand how to connect with audiences in a seamless way across media touchpoints including, but not limited to, TV. I really believe that it’s now about the industry building connections that matter, rather than adding more media noise which will ultimately switch audiences off.

Lee-Ann Morris, CEO of MBM, a large media buying firm owned by Publicis Media Group and agency of the year 2023

What’s the biggest issue in your corner of the media industry right now?

I find myself struggling to define our role as a media agency in nurturing and promoting a thriving local media ecosystem. As a media agency, our main goal goes beyond just investing our clients’ marketing money wisely. We’re here to make sure that money works hard, finding the best places and moments to connect and reach the right people effectively and efficiently. 

But there’s a bigger picture that has us scratching our heads. When we focus solely on getting results for our clients, we have to wonder: what does this mean for the future of the media and advertising world? And even more importantly, what are the consequences for New Zealand without a resilient and dynamic news and journalism environment?

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

Right now, we’re stuck with more questions than answers. We’re in a tough spot, trying to do right by our clients while also thinking about the bigger impact on our industry and community. The future seems uncertain, and we’re waiting for some direction from the government and media networks to see what comes next.

Our biggest challenge is not knowing how to tackle these issues yet. I want to say there is reason for optimism. By working together, we’re looking to find a way forward that keeps our industry strong and supports the crucial role of journalism in New Zealand.

Together CEO Rufus Chuter (image: Supplied)

Rufus Chuter, CEO of Together, an independent media agency and current IAB Digital Agency of the Year

What’s the biggest issue in your corner of the media industry right now?

There is no one single issue, but if I view the current situation through the lens of advertisers specifically, the biggest issue is the threat to local content that the current regulatory and commercial landscape is creating. This is an issue for advertisers because healthy brands build healthy businesses, and healthy brands need healthy, trusted local media contexts and content to grow in. Content that audiences relate to, trust and can see themselves in. So beyond the loss of livelihoods and wider plurality discussions, the current state of the media industry is also a marketing effectiveness issue.

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

For this challenge specifically, I think there’s a local marketing effectiveness story that could be told better, with more collaboration across local publishers. There’s an opportunity at an industry level to collaborate on research and insight that helps to better quantify the brand and business benefit of advertising in trusted local content and media contexts, and to balance short term business metrics that often favour investment in digital platforms with mid- and long-term brand metrics. Audiences are moving, but we need to recognise the audiences that remain and get better at quantifying the business value that reaching them in trusted local content and contexts represents.

Alex Radford, co-founder of D3, an independent media agency and chair of IMANZ

What’s the biggest issue in your corner of the media industry right now?

The biggest issue facing media agencies like D3 right now is, unsurprisingly, managing the rapidly shifting advertising landscape where global tech companies are capturing an ever-growing share of ad spend, while local media outlets shrink and face continued financial pressures. As a result, it’s becoming harder for agencies to find high-impact opportunities for our clients.

However, I believe that by focusing on our strengths – deep local market knowledge, strong client and publisher relationships, and the ability to craft tailored, innovative solutions, whilst staying lean by keeping costs down – indie media agencies will continue to thrive. But we need to double down on developing expertise in emerging areas like data analysis, content creation, and influencer marketing, as well as preparing for further disruption through technologies like AI, so we can offer value beyond traditional media buying.

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

To provide a genuinely robust long-term fix for the challenges facing New Zealand’s media industry, we need an approach that addresses both short-term financial pressures and long-term structural issues. In the short term, we could look at tax incentive programmes like the New York Local Journalism Sustainability Act, which will provide tax credits to local New York news organisations for retaining and creating newsroom jobs. Or we could go further and provide tax credits to advertisers who spend with local publishers.

As for long-term solutions, New Zealand in my view must invest in media literacy education to help audiences recognise the value of quality local journalism. Countries like Finland have made media literacy a core part of their national curriculum, fostering a culture that supports homegrown media. For me, however, the real gold lies in encouraging collaboration and resource-sharing among our local media businesses. By working together on stories and sharing data and technology, smaller newsrooms can punch above their weight. A real focus on all winning, not one company winning at the expense of another, is so important for a sustainable future.

Most importantly, we need to have a plan today, as for many media businesses tomorrow will be too late. 

Simon Bird, Chief Product and Strategy Officer at PHD, a multinational media agency

What’s the biggest issue in your corner of the media industry right now?

It feels like the marketing, advertising and media industry has fallen victim to its own technology. Sensationalist headlines like “(insert medium here) is dead” [ed’s note: guilty] trigger a literal and metaphorical algorithm; the headline becomes so common that it starts getting accepted as fact even if the data clearly refutes the claim. Furthermore, either inadvertently or consciously we have ended up with a regular and somewhat tedious headline of “digital is now bigger than TV”. It’s a hyperbolic and unhelpful claim which glosses over the fact that the digital number is an aggregate of channels and the TV number is a singular one that doesn’t even include broadcaster AVOD. 

Obviously, linear TV numbers are off their prime of the ’80s and ’90s – but so too, for example, is the number of people playing rugby, yet we don’t hear people say no one is playing rugby anymore. We accept that the decline in participation is just a function of the diversity of sports or entertainment now available. Furthermore, in 2024, ‘TV’ should really mean all content on the TV screen, not just linear TV. Using this definition would probably be rather helpful in refuting any “TV is dead” conversations. 

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

For marketing, framing the issue as global versus local or digital versus traditional are false constructs that aren’t very helpful. It’s not an easy fix, but going back to industry fundamentals would help solve some of the current issues facing the local industry. Knowing that what works for small brands often doesn’t work for larger brands should affect how and where brands communicate. Knowing that every channel conveys differing levels of quality and stature should affect how and where brands communicate. Knowing how to measure marketing success and over what time frame should affect how and where brands communicate. 

All channels have their use cases, and many of the newer ones provide options that some of the older ones don’t, but thinking more deeply about these questions would likely help mitigate some of the current direction of travel. 

Keep going!