1. The Decline of Facebook (The App, Not The Company)
Everything has its season. Facebook’s has lasted longer than most—14 years and counting. But Facebook should start to see the beginning of the end this year, as usage of the Facebook app begins to drop.
It is perhaps inevitable that a behavior so closely associated with a specific period in time begins to wane. That said, the 2016 election certainly hastened Facebook’s inevitable decline, as users quickly discovered that the kid who sat behind them in 9th grade algebra had strong opinions about Donald Trump and Hillary Clinton and wasn’t afraid to share them.
Multiple times a day.
While the election didn’t kill off Facebook, it made people aware of how irrelevant 90% of their Facebook connections were. And so many users slipped into a pattern of relying on Facebook for major announcements—vacations, graduations, weddings—and little else. The same half dozen people in their social circle continued to post daily but the need to log on became less pressing, more of an obligation than a want.
There were other things too. The shift in Facebook’s algorithm plus the scandals around fake news meant users could no longer count on Facebook being their primary news source as their favorite publications no longer showed up with anything resembling regularity.
Facebook is unlikely to suffer an AOL-like death, where that app seemed to disappear overnight. Likely the decline will be more like a slow-leaking balloon, sort of like Yahoo, where people just begin to use it less and less and it becomes more and more irrelevant.
Already, younger Gen Zs (middle schoolers) are eschewing Facebook for Snapchat and Instagram and we see no reason to assume that that behavior will change as they get older.
To counter both ennui and changing behaviors, Facebook recently launched a video app called Watch and has also announced plans to launch a separate TV app that lives on Rokus and smart TVs. Watch has not been much of a success—few people outside of the industry seem to have heard of it, and Facebook’s done nothing to promote it, thought that may be a sign that for Facebook, Watch is still in beta.
Watch, and the companion TV app (which may or may not wind up being a part of Watch) is reliant on niche content communities—finding people who are fans of a certain genre (e.g., anime) or YouTube channel and producing longer form content that’s related to that niche, either making use of the same talent or similar subject matter, expanded into episodes of 10-15 minutes with season long story arcs … and midroll ads.
Whether Facebook will be able to convince users to stick around once they start bumping into midroll ads will be the key to Watch’s success and the outcome will largely depend on how compelling the programming is: do users want to stick around after the commercial break or will the lure of their cousins’ vacation photos draw them back to the main app? Facebook is certainly counting on the former and many of the “niche” categories have sizable fan bases. But programming is always a risk—there are so many intangibles (casting, pacing) that can make or break a show and so nothing is a given.
One final point: the reason the subhead says “Facebook: The App” is because “Facebook: The Company” still owns Instagram and WhatsApp, both of which are still in the expansion phase. That means Facebook can use data from Instagram and WhatsApp to drive traffic to Watch and to understand the content categories their user base is most interested in.
Pushing Instagram and WhatsApp users to Watch won’t be simple—it means opening up another app, something users are often loathe to do. It also means sending notifications each time there’s a new episode and Facebook has been getting very aggressive with notifications as of late (“your friend Mary Jones just posted for the first time this week”) so that might be an issue too, how to strike a balance between informative and annoying, so that people don’t turn notifications off.
WHAT TO WATCH FOR: Look to see if Facebook starts to promote Watch both to users and to the press by announcing and promoting new Watch series. Keep an eye on whether Facebook launches a separate TV app—the original launch date was supposed to have been September 2017 and it’s already January and nothing’s been said. And don’t be surprised if Facebook completely revamps the interface yet again sometime in the next year or two. They seem to understand the value of change, and if user numbers are starting to decline, they are likely to try and do something about it.
2. The Rapid Rise Of vMVPDs
Virtual MVPDs or vMVPDs are poised to fix a lot of TVs ills this year, starting with the interface.
One of the big problems with TV, one we’ve discussed on here at length, is the notion that much of the current dissatisfaction stems from viewers feeling that they are paying Nordstrom prices for Kmart service: that for over $100/month, they’re are getting a really outdated looking interface that’s incredibly frustrating and difficult to navigate.
Without getting into the weeds on it, one of the main reasons for these interface issues is legacy deals the MVPDs struck with the networks in the early days of cable concerning how the grid needed to be laid out (and that there needs to be a grid, period.) A second issue is that many MVPDs make use of outdated cable boxes that can’t handle modern interface designs.
vMVPDs allow them to avoid all of these interface issues and present users with something clean and modern. They also allow them to present users with an optimal sized channel package.
While vMVPDs were initially billed as “skinny bundles,” consumers seem to prefer them as mid-sized bundles: packages of around 100 channels at a price point of around $40-50 month seems to be the sweet spot. That gives viewers pretty much every channel they want and then some, at a considerable savings from what they were paying for their MVPD service. (The set top box fees alone for three TVs can be $30/month or more.)
vMVPDs also give viewers a much more modern interface, one that relies on a library-based system that asks “what do you want to watch?” rather than a time-based one that asks “what’s on TV now?.”
The good news for the networks is that with 100 channels, viewers aren’t really cutting back. And that having everything on a single input makes it easy for viewers to switch from services like Hulu and Netflix to linear TV and back without grabbing an extra remote, which means that someone enjoying a “Netflix and chill” session may wind up clicking over to the vMVPD to see what’s one there, rather than just staying with Netflix because finding the TV remote is too much of a hassle.
WHAT TO WATCH FOR: All of the major MVPDs are planning to launch vMVPDs this year: Comcast, Cox, Verizon and Charter will join Dish and AT&T. Look at how aggressively they push those new services and how many people seem to be making the switch. If the numbers grow significantly, they will affect the way TV advertising is bought and sold, since vMVPDs are usually still considered “digital.” Also look to see how vMVPDs that are not affiliated with a broadband provider are doing. While we think Hulu Live TV is in a good place thanks to its network affiliation and connection to the Hulu app, YouTube TV, Sony Playstation Vue and others may find tough sledding in 2018.
3. The Continued Growth of Ad-Supported OTT
While ad-free subscription services like Netflix and Amazon get all the press, there’s been a slow but steady growth in the viewership of ad-supported OTT services and that trend promises to continue in 2018.
Hulu is the best known of the ad-supported OTT services, along with Sony Crackle, but they’ve been joined by Roku’s own TV channel (Roku TV), TubiTV and a host of niche platforms like CrunchyRoll and new services like Pluto.
The ad supported services appeal to several types of viewer, everyone from cord cutters who are looking for something to watch outside of Netflix to vMVPD subscribers who are seeing what else Roku has on offer, to traditional pay TV subscribers who are downloading the apps for their favorite channels so they can watch them on a broader range of devices. Then there are fans of of niche content, everything from anime to music to gaming. Those channels may not have massive user bases, but the users they have will be extremely dedicated.
The ad loads on OTT are considerably lighter than they are on broadcast TV, which makes for a better user experience, and they can be better targeted with interactive elements as well, both of which weigh in their favor.
Like vMVPD ads, these ads will be classified as “digital” for ad purposes and need to be factored into brand’s advertising plans, making the need for a more standardized measurement system across all devices and platforms even more necessary.
WHAT TO WATCH FOR: Look for increased viewership numbers on flagship services like Roku, along with increased ad spends on OTT from major advertisers.
4. Snapchat At A Crossroads
On paper, Snapchat has a lot going for it.
It’s incredibly popular with users under the age of 25. It’s got a good supply of original content from the most popular premium publishers, and no chance of fake news or other trollery showing up.
So what’s the problem?
There’s a massive disconnect between how Snapchat thinks users utilize the site and the way they actually do.
Most users see Snap as a chat app and immediately go to the chat feature to talk to their friends. They rarely, if ever, venture to the other side, where the Discover content is. (While Snap doesn’t deliver any real viewership numbers, it’s telling that CNN recently decided to discontinue the original programming it was producing for Snap.)
Snap also has an age problem: viewers over 25 have largely decided that the app is too confusing for them. Snap has acknowledged that while the labyrinthine interface may indeed help in attracting teens, it drives off adults. As a result, Snap has taken steps to make it more easily navigable. Those changes may be coming too late though, because without a major marketing campaign, most adult users are unlikely to hear the news and give the app a second chance.
The Discover section, where all Snap’s publisher content lies, also needs an overhaul. It’s hard to navigate, there’s no easy way to customize the order in which the content is presented and it still relies too much on the old Snapchat coda of “if you have to ask how it works, you’re too old to be here.”
WHAT TO WATCH FOR: None of this is unfixable, but Snapchat will have to make some major improvements to its interface while also looking to market the app to an older audience that is not aware of what is available and what has changed. They may consider taking a page from Facebook’s playbook and make Discover a separate app, marketing it to those 25 and older.
5. 5G Starts To Get Real
If there’s one thing that is holding up any real change in the TV industry, it’s the monopoly that the MVPDs maintain over broadband in the US. As discussed here, it’s why the repeal of net neutrality is worth fretting about: without anything resembling a free market, it’s too easy for a single bad actor to muck things up.
That’s all about to change though, as 5G mobile service becomes a reality. 5G is capable of reaching speeds of up to 1G and should be a real factor by 2020—that’s the year that enough consumers will have access to make it real.
5G will break up the monopoly hold the MVPDs have and offer real competition. Right now Verizon and AT&T are planning to roll out 5G and T-Mobile and Sprint are likely not far behind. That means anywhere from three to five broadband options in most markets—more if new players come in—but even three options is a vast improvement over just one.
What that will likely mean is an increase in zero rated content, as the various MVPDs all make sure that their own vMVPD services don’t count against data caps. We’ll also see the mobile 5G providers upping their TV games— which will likely mean Verizon will offer a mobile version FIOS (or Go90 … or both), AT&T with DirecTV Now, TMobile with their the new Layer3 TV service, and Sprint … possibly with Sling. (They would seem to be a good match given that Sprint needs a TV service as much as Dish needs to offer its users a broadband connection.)
WHAT TO WATCH FOR: All of the big MVPDs getting their vMPVDs in order so that they can sign up broadband customers who might otherwise defect to 5G, along with lots of two year lock-in deals. More mergers, especially for Sprint as they move into 5G. (While Dish is an obvious suitor, one of the GAFA companies may decide that they need a mobile carrier too—all that data—and Google already has YouTube TV. You never know.) Regardless, get ready for actual competition in the broadband market.
6. Rapid Adoption Of Multitouch Attribution Measurement
As TV viewing continues to take place on a multitude of platforms and as television continues to battle for ad dollars, multitouch attribution promises to be the television industry’s latest weapon in its war on digital.
Multitouch attribution is a way to take a much deeper look at what lead the consumer to an actual purchase, looking at top of the funnel activity (when did the consumer first google “new car”, when did they google “German luxury car”, when did they set up an appointment to test drive a BMW, etc.) and what ads they saw along the way. The systems will examine causality between certain ads and messages and the consumer’s journey through the sales funnel. That gives television networks the ability to show how effective TV advertising is and how much context matters.
Multitouch attribution goes beyond Nielsen to incorporate Automatic Content Recognition (ACR) data from smart TVs and set top box data along with mobile data to provide a complete understanding of how TV advertising works to help move product.
WHAT TO WATCH FOR: TV networks pushing back hard on digital with multitouch attribution data, using the combination of these stats and the once again fashionable notion that context matters, to push the effectiveness of TV advertising. (The context argument says that just finding an audience isn’t enough—you need to find them at a time and place when they are of a mind to to be reached by advertising and that TV accomplishes that much better than digital.)
7. Media Buying Based On Desired Results, Not Audiences
This is an outlier for sure, but we suspect we will see some forward thinking brands starting to plan their media buys around what they want the ad to do, rather than which audience they want to reach.
So, for instance, Nike will have one plan for its “Just Do It” brand ads, the purpose of which is to promote awareness of Nike and get consumers to think that Nike = cool, and another for an ad that’s designed to sell a new shoe designed for female triathletes.
That means different audience slices from the addressable pie, different programs, different KPIs.
And while brands and agencies already do this on an ad hoc basis, the growth of addressable buying and the large number of VOD sources on which TV ads can be viewed may help to formalize this sort of buy, which also ties in nicely with the multitouch attribution trend as it allows for apples-to-apples comparison of various campaigns.
WHAT TO WATCH FOR: A growth in addressable ad units sold on OTT platforms and the launch of a more formalized program to get brands over their fear of addressable, along with brands/networks/agencies actually giving “official” names to the different types of ads (branding, product, etc.) in their propaganda materials.