NBCU attacks Nielsen; Retail Media's growth; What Havas/Publicis Q1 results say

Speaker 0 · 0:00

Hello. Welcome to the Media Unfiltered podcast. This week, we're gonna look at a couple of really spicy news items. NBCU have just come out and attacked Nielsen saying that they are devaluing media companies, which is very interesting indeed. We're gonna look at the retail media market, and we've got some agency, Honco and Havas, reports from q one figures, which is very, very interesting. So, Ian, let's just crack on and start with this NBCU article we saw in, The Wall Street Journal. Interesting, isn't it? They've they've come out with some really strong words suggesting that Nielsen are devaluing sort of traditional media companies. What do you think about that? I don't think I've ever seen anything quite like this before, from from the industry. You've got Mark Marshall,

Speaker 1 · 0:48

making some, particularly pointed comments. What's your views on that? Yeah. Well, look. I think this is very interesting because if you look at the line of attack that NBCU is using and Mark Marshall as you said, it's not going after the this is the obviously, it's criticized in the methodology, but it's not coming from it from a methodology. So that a standpoint, it's really coming from it from a you're really impacting shareholder value with these reports because the gauge is while it may not be Nielsen's analysis that it shows the advertising industry, Paul, it does have a strong impact when it comes to sentiment. There's no doubt about that. And what Mark Marshall is saying leads on from what actually was talked about by the BAB, saying that what Nielsen is doing, it's not only a question when it comes to what's happening with the the audience share numbers. This is having a direct impact on the revenues of the broadcasters and therefore it's having an impact on the share prices and the overall valuations and that obviously then has an impact on investors. Now I think the sort of line of attack seems to be pretty clear. What they're trying to turn this into is to say, look, if you are Nielsen, the issue that you would have here is potentially there is a, are you effectively causing shareholder loss, I. E. Could some investors come after you and say, we are always in the main media stocks, their share prices have been impacted because of your analysis and therefore we are seeing damages from you. Obviously, in The States, when it comes to these sorts of shareholder class action suits, they tend to be quite litigious on things. And I think what both NBCU and the BAB were pointing to was saying, yeah, Nielsen, if you are thinking about actually pulling the sort of changes to your methodology because you're concerned about the impact of the streaming companies, also realize as well that we have a potentially a very powerful weapon here is that we can accuse you of impacting shareholder value. In the states that is treated very seriously. The SEC, quite frankly, anything to do with, you know, sort of perceived manipulation of share prices or valuations, it tends to get them quite active with things. So, I think this is it's a very interesting sort of, as I said, a very interesting line of attack that is coming through here. But what it also points to as well is this debate is really moving from just talking about methodology to really what is its logical step. It's the impact that it has overall in terms of both capital allocation and how advertising budgets are spread out between various platforms, which is what Marc Marshall was referring to, and consequently leading on from that, the impact it then has on the share prices and the valuations of these companies. And that just goes to show that what we're really seeing in a lot of the debate within media and tech at the moment and it's sustained that when you've got, for example, with the debate around AI and the impact it has on various business models and with this as well is what were, let's call it industry questions, are rapidly transforming into what they actually mean for share prices and valuations, which is a much bigger question and also as well potentially

Speaker 0 · 4:08

a lot more significant. So just so our listeners understand, the allegation here is the February figures were going to come out and look pretty rosy for, let's call it, traditional media broadcast basically, showing that, actually, they had perhaps overestimated streaming audiences and underestimated traditional. This is the allegation. Not too sure if it's true or not. And the thought process here is that they pulled it because their biggest customers, which are now streamers, didn't like the results. That's that's what they're looking at here. And now the point that you make about buyers, I know for a fact that agencies get presented with this data from media sellers and brands come in, and they're looking at share. We're not getting our share. Look at the gauge. We should be at 10%, 15%. So it there is important figures. And then it's the narrative. You know, we've talked about this before on television. It's the narrative around traditional media, viewing, where TV sits, what is TV, and this builds part of that. It gets a lot of column inches. So it is really important. And, this will be an interesting one to follow. I I can't think of a press precedence for something like this, but, I think we'll we'll we'll follow this and see if be interested to see if Nielsen respond, don't you think? Yeah. Definitely. I mean, I think they'll have to. Yeah. They didn't in the piece. Yeah. They didn't in the piece. No. They didn't in the piece, but there have been I mean, I've seen sort of, comments that come through that said, look, you know, the gauge is not what she's by advertisers and that's, you know, that will be true. But

Speaker 1 · 5:38

And and again, this is, as you say, and I mean, as as mentioned before, actually it is. And also as well, I think where this also impacts the narrative is at the board level. CEOs and CFOs don't have the time to go through the advertising detail advertising numbers or the TV audience numbers in detail. What they're really looking for is a very quick view that they can understand and one that they generally trust. Now that's what the gauge gives them. Yeah. It's saying, these are the audience share numbers, and it's easy to look at. It's in a nice chart. CEOs and CFOs can take that way very, very quickly. So therefore, it will have an impact on those how those CEOs and CFOs and major advertisers are looking at the performance of the broadcasters and the streamers. And there is no doubt that what CEOs and CFOs think about the overall media landscape does permeate down into how CMOs allocate their spend. There was a similar article in the Wall Street Journal a couple of months back that talked about one of the issues that YouTube, for example, is having in terms of gaining TV advertising budgets is CFOs not viewing it as TV, and CFOs sort of pushing back to their CMOs. You have a direct example there of a CFO essentially saying influencing where the advertising money goes. And so, absolutely, what's reported in the gauge will undoubtedly have an impact on how senior managements and boards view the respective strengths and weaknesses of the various players. Yeah. And I travel

Speaker 0 · 7:16

around the world, and I know Nielsen gets used in private discussions, public ones, in various different markets. Look what's going on in The US. This is the landscape. This is what should be the landscape here. I've seen it in sales decks as well from media suppliers from all over the count all over the world and from different sides, you know, the streamers and the traditional players. So the thought that it doesn't get used and doesn't get implemented in sales environments is is completely false. So, yeah, that'd be an interesting one to follow. So let's have a look at retail media. It's, when you look at the WPP figures for for 2026, it's gonna grow to a 190,000,000,000. Right? That's bigger than television. And, you'll see some consolidation as well. You know, there's lots of, little, I guess, providers, and there's a lot of con consolidation so they can they can have, significant shares in the various market. I don't know if you know this, but, China actually dominates retail media. It's about 44% of all global trade. And the the other third is from from The US. Obviously, you know, there's big examples there of of Walmart, Amazon, Target, all the rest of them. So it's it's very interesting space. My thing with retail media is arguing that it brings incrementality. You know, I'd I'd like to say to brands, really study the spend and see what you're getting. If it's just a point of sale discount or you're marketing heavily towards people who would buy your products anyway, are you wasting money? Do these platforms drive new demand? I think the measurement systems need to be put in place to prove that that's the case, and you're not just discounting

Speaker 1 · 8:53

right at the point of sale. But you you've seen this market you've seen this market grow. You've worked with some of the major providers, Ian. What's what's your view on retail media globally? Well, I mean, my view is look. I think the way that retail media has been discussed, certainly within the advertising market industry, is potentially looking at it through the wrong lens. Yeah. The way that it's viewed, this is a marketing story, and this is why you get the debate that goes on about is does retail media have any effect on this when it comes to sell sales? Actually, what this is is a capital market story, and it's really sort of it's again comes back to what the markets want, particularly from the retailers. So we look at the history of what happened with retail media, as you say, it grown in in China for many years. Also grown in western markets because Amazon was making significant revenues from advertising. Point being though, Amazon is a tech company. What does that mean? It's not covered by retail analysts. It's tech analysts and being US by US analysts as well. Really where the not the praise, but really where if you notice the timeline of when retail media really took off, It was when Walmart came out and said, we're growing our retail media revenues substantially and more importantly, that actually in terms of the contribution to profits, for some quarters it was mentioning around 25%, 30% of that profit growth in that quarter was coming mainly from retail media advertising. Now the key here is that retail media advertising is very high margin. If you are a retailer, Walmart probably means 3% to 4%. Well, it does make 3% to 4% operating margins. The margin on retail media advertising revenues can be around 70% to 80% depending on whose numbers you believe. You don't need to make that much in terms of revenues to have a significant impact on profits. But the wider point and the more important point here is that once Walmart actually mentions how retail media advertising was contributing to its profit growth, what then happened was that retail analyst investors, not just in The U. S, but also as well worldwide, particularly in Europe, suddenly realized, wait a minute, there is this story here about retail media advertising revenues that could be another leg up to the investment case when it comes to retailers. And what we suddenly have here is a fast growing source of revenues that is extremely high margin and potentially could lead to a rerating of these companies from a multiple perspective. And obviously, from a retailer standpoint, they were doing the same calculations as Walmart. We have margins, single digits, perhaps low double digits. We're having the stream of revenues here that is potentially can be anywhere up to six, seven times, maybe even more the contributions of profits per dollar per euro of revenues. And so what happened was that many retail CEOs and CFOs lent into the story for the capital markets, then made policies to analysts and investors to tell them that they would throw their retail media revenues that would be very high margin source of revenues for them. And these are promises that now they have to keep. The fundamental point from this is to say that essentially when it comes to the retail media advertising story, it is that investor and shareholder narrative that has driven the development of the product rather than necessarily the product itself suddenly coming through, I. E. What this is, is very much board driven and top down driven rather than necessarily developing organic. And that I think is really where we're now seeing these tensions come through when it comes to retail media, both in the fact that for smaller retail media providers, retailers, they're finding it hard to monetize it effectively, so that as much as they wanted. Also as well for advertisers saying what exactly are we getting out of retail media and does it really fit into our priorities? And I think there was a wider question here, particularly in terms of both retailers and advertisers, is they are both making strategic trade offs that they may not fully understand when it comes to retail media advertising. And I think we will see this coming out throughout the next couple of years. But the fact is, is that for many retail CEOs and CFOs, they've made promises to the market that they now have to keep. And that's You know it. Yeah. Sorry.

Speaker 0 · 13:25

And that alone is going to force force sort of pressure on, particularly the people in the in the retailer's marketing teams to continue to try to grow their revenues. Yeah. No. It it it's a very good point now. And we've seen this story before with advertising because it is in, a lot of businesses, high margin business. It's how Sky got into advertising, actually. It was a pay TV business, and they launched Sky Media because, actually, when you looked at their financial reporting, it was quite a small part of their business, but it was such high margin. It was incredibly profitable for them. So it's, it's a it's a consistent story that's from for over time for for advertising. And, it's interesting that a lot of the smaller providers are now struggling. So you're seeing a lot of consolidation in this space, and, and that growth will continue. I speak to marketers about this a lot because one of the things we're doing in marketing way too much is rating media against media in closed loop attribution environments, which is what retail media is. And it's really piss poor measurement, actually. We should be looking at our entire media ecosystem and spend across it all because it all has an impact. And I know a lot of marketing and media teams are frustrated because they have sales teams that work directly with the retailers, and they're buying this stuff, and they're spending it. I think it might be coming out of it'd be interesting to see where the ad spend is coming from, whether it's coming out of in store promotional to online or whether it's all the way around, whether it's coming out of, like, your traditional sort of brand budgets because that that would, for me, be a bit of a disaster for, for advertisers. And then the Sorry.

Speaker 1 · 14:57

Just a just a couple of points just very quickly to to add on to that. One is what you said about Sky, absolutely correct. I remember that as an analyst. It's also the same logic that's been applied by the streamers. Exactly the same sort of dynamic as goes on with Sky. Second of all, the comments that you've mentioned about advertisers exactly hear the same in terms of, you know, there is dissatisfaction about the retail media offerings and that's now started to be sort of more vocalized. I think the brand point is also very important one is here as well. Because what you could argue is that actually in a way, if that does happen, the brand budgets are actually reallocated to retail media, what potentially you could get is a vicious circle effect. Because actually the antidote you could argue to spending on retail media is to build up your brand, but consequently when a shopper goes in, they go online or they go physical, what they first purchase is your particular brand. Of course, if you divert money away from brand budgets into retail media, you're weakening your brand, and that, by its very nature, makes you more reliant on retail media spend in order to get your products promoted. And that that's a really that's a really good point. I find I don't know

Speaker 0 · 16:11

why we don't talk about this more, but the consumer experience, particularly even in Amazon and we mentioned Walmart, you try and look for a particular brand and product, but you get the first page of sponsored stuff. And it's sometimes total crap not relevant to the search that you've actually made. And I can't believe that that's effective. I cannot I find that a very frustrating process. The other thing I'm hearing as well from media teams are, in markets like Canada, there's, like, five major retailers, and in store purchasing here is, like, 85 plus of all purchasing. So they're pretty powerful, but they're putting a lot of pressure on the brands to spend heavily in this environment in order to have those benefits of being top of the page in store as well. So there's there's a lot of other aspects that are driving the spend from brands into retail media. It's not you know, we always talk about the purest form of effectiveness and rational media spend, and this isn't that. And there's a lot of other aspects of why why that 190,000,000,000 exists.

Speaker 1 · 17:12

Well, look, just on that. And I know we've got to talk about agencies and haven't got a huge amount of time. But, yeah, again, it comes back to this point. If you look at what's driving that behavior in terms of advertisers feeling pressurized to spend more on retail media, it's because the people on the other side, sort of the retail companies, their teams have to report to their bosses what they have done in terms of growing up revenues. And the reason why that is so important is because those companies CEOs and CFOs have gone out to the financial markets and given specific targets or ranges on retail media advertising growth. And therefore everyone's got a boss And those CEOs and CFOs

Speaker 0 · 17:51

have to now deliver on those commitments to the market. And if they don't, then what happens is the share price gets impacted and potentially depending on the scale of the miss, you know, there's question marks over those management's positions. Yes. And all of the major retailers are making these announcements with partnership announcements with AI platforms too. So there's gonna be a tie in as well with with AI and and suggesting products and all that. So that's gonna be an interesting development in this space. And the one thing I'll mention to brands and agencies who who listen is look for incrementality. Measure it properly. Siloed media ROI closed loop environments often sell to heavy likely buyers, and you're discounting in order to capture them. So so do so do do look at your measurement solutions and see whether these particular outlets are offering you new sales beyond what you would normally get. So the other the other thing that we wanted to mention was was agency stuff. I've stolen a little few lines here from Brian Weiser who put a post out today about it. Havas results are in organic growth of 2.8%. When you align that next to the market leader, which is obviously Publicis, They are about 4.5 net revenue organic growth, which is the the fastest pace in the market. What's interesting about Havas is, obviously, their their main growth is is from media and and creative, but it's from The US, 1.4% versus 1.1 in Europe. So why do you think, you know, with all the turmoil that we've got and we've got all this economic uncertainty particularly coming from The US, The US remains the growth engine for these, for these agencies and telcos. What why do you think that is, Ian? Yeah. Well, look. I mean, you've got publicists that reported 4.7.

Speaker 1 · 19:30

So it this is not just a last thing. I mean, it's it's pretty much across the board sort of there as well. What's more interesting, if you look at some of the other geographies, there is a noticeable difference. Asia Pac probably just did very well, 5.9% and pointing to 11% organic revenue growth in China. If you look at Havas, Havas was saying that actually they were weak in that by there. And that I think gives the answer. I think North America, what you're seeing here is that for many companies, while there may be sort of concerns about the consumer, quite frankly when it comes to their profits, it will be their profits that the ultimate driver of what they spend on advertising, profit growth still remains strong. And analyst expectations for Q1 results, which we're getting into, suggest that we're going to see sort of the S and P 500, the main U. S. Stock low double digit earnings growth. So that growth is expected to continue and that also as well as allowing The U. S. To remain sort of a strong engine of global advertising growth. There's obviously a lot that's going on within the market, sort of say, there's a lot of consumers sort of who are concerned. But as far as many corporates are going, yet they see that marketing is still a strategic investment and which I think has structurally sort of improved over the past couple of years. They've got the money, they've got the growth, they're therefore going to spend. I think when it comes to other markets, it's a little bit more sort of nuance of where things go. Obviously, economic growth plays a major pack to it there. Also bear in mind as well what happens is that many decisions in markets like Europe and Asia Pac, at the end of the day, the decisions about those spend, they are mainly global companies, a lot of those decisions are actually made in The U. S. So again, there can be some reallocation of spend, you've obviously got different agency performances that plays into things as well. What I would say is that obviously the fact that these two companies have come out and have shown good growth, that's obviously positive for the agency space, not really being reflected in share price performance, If you look at what the agencies have done and I think that reflects investor concerns about the wider business model particularly when it comes to AI. I would say with, Havas, I've been impressed just in terms of the organic revenue growth it's been able to show. I think it's there had been concerns about what would be its development. So moving forward, so I think what it's shown is that certainly over the past couple of quarters that it's been able to show steady growth and looks to be sort of performing well. One interesting thing on Publicis, which as you say remains very much the market leader here, another strong set of results. What was interesting, a small detail, it didn't actually beat their guidance, it was in line with their guidance. One thing that's interesting there, if you look at Publicis results previously, there have been, yeah, a number of quarters where quite frankly it's beaten its guidance. That's a small point, but it's, you know, it's worth picking up on. I think, you know, one thing, also as well that I would just say on the public results that I thought was interesting, their comment that, you know, they've got the dispute with the trade desk, but they're not looking to replace the trade desk in that particular market. I think that's the right strategic move on balance. The interesting thing I think there though, if you look at where AdTech is in its basic fundamentals, it's effectively involved in digital media and planning for the digital space. And in other industries, that was sort of an area that the major hold codes actually dominated. They didn't do in in digital. My feeling is that was the major strategic sort of mistake. So the but there are various reasons, for that. But it is interesting that even though you've got one of the major players in that market is now looks to have a number of issues, you still got one of the major hold codes and probably the best positioned of them saying we're not interested in replacing them. And I think what that shows is that just in the ad tech space, if you do get a collapse of the players within that space, I think the likely winners, it won't really be the traditional HoldCo's

Speaker 0 · 23:44

who arguably would have been the natural sort of natural sort of place to step in there. It will be the major tech platforms, the Amazons and the Googles that will will reap the benefits of the ad tech sector collapsing. Yeah. The, we're actually gonna do a specific part on looking at the ad tech market. And what's interesting is that actually ad tech on its own, when you take it out of everything, actually grow is growing faster than actually digital the digital advertising market. Obviously, digital advertising market is is way higher, but still it's it's a it's a very much, it's a huge huge part of, sort of market growth within this advertising industry and something to keep an eye on and how agencies and, the ecosystem adopt ad tech and use it and sell data. This is why I think they get better results in The US because a lot of the practices that agencies have adopted there, which they're looking to do around the world, are available to them in The US, and it's just a lot harder to do elsewhere, which will help their margins. The sorts of things that they're doing, like I said, in The US are just really, really difficult to implement elsewhere. So what's other what what else is interesting is when you look at EBITDA for margin for for the three Holdcoats, like, we we we sometimes are quite negative towards the Holdco business. You know, they're they're they're sitting at 14%, margin for these businesses, which is pretty healthy. I mean, we're we're we're quite negative towards them. You know, maybe you you look at AI and all these developments that's going on. Now the final point on this to perhaps when you actually zoom out and look at them, you go, shit. They're actually quite good businesses. You know, we're we're pretty hard on them. They're going through structural change at the moment. But on the on the face of it, they're pretty good businesses, aren't they? Yeah. I'm actually

Speaker 1 · 25:25

so, I mean, I'm actually a fan of the agency business. Yeah. I think if they get it right, they add a lot of value to their clients. I think the problem has been is that they've been really optimized for efficiency over the years, and what they really now have to do is they have to pivot. In an age of AI, which is the ultimate efficiency tool, the really what becomes more valuable is really their knowledge. And arguably also as well, creative. I think creative, yet again, has been something that has been neglected, but potentially adds a lot of value both to clients, but also as well to the agency groups as well. The positive case in terms of you're right, the margins are not bad given the business. The positive case for the agencies in the future is you're looking 60% plus of agency revenues are taken up by stack costs. You could argue that AI, you potentially could improve that ratio. If you can then demonstrate to clients in terms of the work that you do that it is higher value add, that if you can drive clients paying more, then that combined with low potential staff costs as a percentage of revenues can grow up your margins further. I think the biggest sort of issue for the agencies is in a way they've been their worst own enemies. The message they've given to their clients often has been, we are a commodity product. And because they've gone after price, Michael Palmer has shown this in terms of his work. The problem there, of course, is really twofold. You commoditize your own offering in terms of the agencies. You also commoditize as well the products you're selling, which is advertising. And that will take time to reverse when it comes to advertisers,

Speaker 0 · 27:02

but it is possible. Yeah. Yeah. So that's a good note to end on. And we we're gonna we're gonna cover cover the, that market a little bit more detail in the next next few weeks as well. There's lots of things for us to do. Ian, it's been great today. Thank you for listening. As usual, this is Nick. Got investment advice.

Speaker 1 · 27:18

Are you? I'll beat you to it. Excellent. Take care. Just

Speaker 0 · 27:23

k. Bye.