What Are They Thinking? Times Aims to Double Its Branded Content Business
You can almost hear the beeps. Fortune 500 companies have taken a big liking to content marketing and native advertising, creating a battlefield competition among the biggest publishers. Those beeps? Those are the sounds of the many hands in the content marketing game joining in on conference calls to plan, present and okay strategies.
“We might have eight to 12 beeps,” says Sebastian Tomich, who heads the New York Times T Brand Studio content marketing operation. “There’s the brand people, the social people, the PR people, the media buyers and the creative people,” he told me as we discussed the state of the new business recently. One such collaboration: Ads on Volvo’s crash testing prowess, shot by a Times video team dispatched to Volvo’s Goteborg, Sweden headquarters, working with the car company’s own creative teams.
Content marketing has gotten more complex in some ways, and yet it is clarifying in others. Remember just a couple of years ago, when people were hot and bothered about the colors and thickness around the Times’ first Paid Posts? Some raised good questions of the lines between church and state, editorial and advertising – and others mistook contemporary content marketing for old-fashioned, unmistakably boosterish “advertorial” that has long plagued newspapers and magazines.
The Times has found the big budget sweet spot for its T Brand Studio: between $250,000 and $500,000. It now has completed 70 campaigns for 60 advertisers, says Tomich. That’s right: five dozen advertisers. Branded content – what the Times calls its native or content marketing business – works a very thin slice of the nation’s advertisers. (The Globe and Mail, Canada’s leading, high-end branded content publisher counts fewer than 10 big clients.)
This new art form of ads is built on so-far shallow foundation. Consequently, one big question lies ahead: How much growth may be possible and how quickly?
Now, in mid-2015, the Times and its competition approach a second phase in the life of native. While almost every big publisher has jumped in, or plans to, we’ll start to see the separation between those who excel and those who don’t. We also witness the potential of much greater distribution of these highly produced ads, given publishers’ willingness to newly partner with Facebook, Apple and Snapchat.
Tomich, who was recently promoted to senior V.P. of advertising and innovation, clearly intends his operation to grab a place at head of the line. His thinking of the state of content marketing is timely, and I’ll summarize that here. First, though, let’s put the new business in perspective.
The Times did $186 million in overall digital advertising in 2014. Of that, by my own calculations, we can figure the first year of T Brand Studio contributed about $12-15 million. Tomich says the company plans “double the business this year, in revenue and in profit.” That could mean somewhere between $24 and $30 million in annual revenue for 2015
Let’s say that new Chief Revenue Officer Meredith Levien (Capital: “What are they thinking: Mark Thompson’s approach at the Times”) can continue with her double-digit digital ad revenue increases; it came in at 10.7% for the first quarter. That would mean a year of just over $200 million in digital advertising for the Times. T Brand Studio’s contribution might be as high as 15%, at $30 million.
That’s not a bad contribution for a branded news business.
(Let’s just note that the Times’ monthly and annual digital revenues parallel those of the Huffington Post (Media Notebook: “Bubble poppers”), a comparison that is worthy of pulling apart in its own seminar.)
First published at Capital New York
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Tomich puts T Brand into the larger context of change in digital ads. His top three:
“Mobile, programmatic and branded content – and that’s on par with the market and that’s where the industry is headed. And by no means are they mutually exclusive,” he said.
To get there, the studio staff now counts 37, up from just 10 last year. (Capital: “Times to staff up content studio”). It is the mix of hires that defines this new age of studios that we keep hearing more about, as people play with the definitions of newsrooms and ad departments. For the Times, that group of 37 contains talented editors and writers, creators, producers, developers and strategists, about evenly divided.
The advent of this trade has offered up a confusing set of names, with content marketing, native and branded content among them. I asked Tomich how he defines the work?
“I view it as two separate things. T Brand Studio is a content marketing agency, specializing in long-form quality content that’s akin to The New York Times. I view native advertising as a distribution outlet for content. Our platform is called Paid Posts.”
Within that definition, we see this division vital to understanding the nature and evolving economics of content marketing.
Think of the work in two parts, like in the old days. First, there are agencies that do the creative. Those used to be pretty much national and regional ad agencies and the in-house ad departments of larger companies.
Second, there’s the placement, how the ad is distributed. The Times — and its content marketing competitors including Atlantic Media, Forbes, Buzzfeed, Vice, Hearst, CNN, Time Inc., Condé Nast and Business Insider, to name just a few — have always been in the distribution game, selling print space and then digital space.
What’s changed, of course, is that publishers have moved into the creative. They were given an opening as the storytelling potential of real interactive media became apparent in the iPad/iPhone era. So, now publishers try to expand beyond mere space-selling – which is under lots of market pressure – to the creative business.
The question: How do you manage both, and profitably?
“Here’s the challenge,” says Tomich. “You are not going to get a brand that will pay $100,000 in creation and then only $50,000 in distribution.
That creation cost is what greatly narrows down the list of prospects.
“As far as doing big splashy creative work, it is definitely reserved for the larger advertisers. Generally, a brand comes to you, and they want to invest a certain amount in creative and that can be sizable if they are going to video, infographics or visualizations.”
That’s where we get into a soon-coming next phase of branded content. If you’ve spent $100,000 on creative, you’d like to buy distribution of that creative beyond a single publication. In these early days of branded content, many – I’m told, most – of the deals have been one-offs. Pay a lot of money for high-quality creative – tailored to the specific audience of the publisher who has created it – and make that big splash.
Now, clients begin to use the creative – which they usually own, having paid for it – beyond the original publisher. If we see this trend grow, then the potential of multiplying publisher agency dollars grows. If we don’t, the business will stay smaller.
Connect the two dots here. Coincidental with the rise in publisher-produced branded content is the new Age of Distribution. As Apple News joins Facebook Instant Articles, the potential to gain wider distribution of branded content on distributed platforms is magnified. The Times could make a persuasive case that its audience on Instant Articles audience is fairly similar to the audience on NYTimes.com and its apps – and sell extended distribution.
In truth, there’s great overlap in audiences among the big branded content play publishers anyways, so extending distribution of, say, the Times branded content to certain Hearst titles makes some sense.
That kind of distribution is now increasing, says Tomich.
“You’ll see more and more of this. You’re seeing publishers through a campaign cycle that was more of a test. On the second go-round, they are being much more conscious about building a plan up front. We are urging our brands to take the work and use it wherever they like.” Cole Haan, Discover and Goldman Sachs have all recently used T Brand Studio-produced content on their home pages.
“Many brands use creative on their social channels. Most of them use it in some other form, they all will, as soon as Q4.”
“We have lofty ambitions to grow the team in both creative services and in distribution.
How do the economics of the two parts of the business – creative and distribution — work together? In early branded content days, some publishers threw in the cost of creative, naming one price for the distribution buy. Those may not quite have been loss leaders – to prove out branded content chops – but profit margins suffered.
“The key is turn your creative services into a profit center,” says Tomich. That’s where we’ve seen lots of other publishers make a mistake. No doubt, the agency creative business yields lower margins than space-selling. One key reason, say Tomich: greater overhead requirements.
Then, there’s the harder-to-calculate value of branded content opening new doors to clients who hadn’t advertised much in the Times.
“It’s absolutely bringing in new advertisers, absolutely incremental. It’s really three things: Incremental, budget shift and defense, with a fairly even split among them.”
Tomich is an early veteran of branded content, having developed it along with Meredith Levien when both worked at Forbes, and made that title a pioneer.
He believes the competition in this new field will intensify over the next year.
“There will be a market requirement for publishers in the future if you are going to have a direct relationship with advertisers. By the end of next year every [national] publisher will have a studio.
“It’s got creative agencies that do this, P.R. agencies that do this, media buying agencies that are starting content consultancies,” he added. “It’s becoming a very unpredictable space. Everyone’s going to have to cooperate with your ‘frenemies.’”
That said, Tomich says it’s essential for publishers to find a place that’s comfortable in the unpredictability. That means more cooperation with the top creative agencies – which still employ far more creative firepower than the top publishers – than the competition.
“I don’t think you’re going to see publishers becoming AORs [Agencies of Record] for the likes Nike and Coke. It’s more niche,” Tomich said.
“In the world of content creation, I feel like publishers have a leg up,” he added.
The Times intends to leverage that brand authority and excel at hiring and retention. “We took a different approach. About 3 weeks in, launching the Paid Posts platform, we decided that talent would be our differentiator.”
Financial services and corporate advertisers have dominated the branded content space so far, seeing “thought leadership” as a new way to sell. Technology is now following, says Tomich.
What’s the most fun? “We love working on entertainment. It’s a delicate balance in this work on how much you want to focus on the product and how much on the higher-level storyline. In entertainment, the product is the story. It makes for great advertising.