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November 20, 2019Consumer magazine publishing in the UK
Market Outlook, ReportsLong-known market trends have become even more accentuated: circulation decline is -13% (consumer spend decline is c. -3%); print advertising is down -12%, with online advertising spend up a mere 1% (see pages 3, 11)
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October 8, 2019Australian Data Centres and Submarine Cables Report
Market Outlook, ReportsThe Australian data centre (DC) market is rapidly expanding, forecast to reach over A$3bn by 2026 with nearly 1,200 MW of capacity. Current revenues are A$1.5bn with 530 MW capacity. Currently, a majority of data stored in outsourced DCs are from enterprise and government clients. However, the market is moving towards the hyperscale segment, due to ongoing shift to cloud-based computing. We predict hyperscale to generate 35% of total DC revenue in 2026, occupying 50% of total supply. The major providers of DC capacity in Australia are a mix of international players and Australian based DC specialists. We predict that relative market shares of these players will converge over time due to relatively small areas of product and service differentiation.Driving the DC market is the submarine cable industry with four new cables planned. Perth and Brisbane are key growth areas, while Sydney will continue to remain the market leader by a large margin. A cable landing station was completed in Sunshine Coast in September 2019.
September 17, 2019Cut-price iPhones: Apple’s innovative approach
Flash Report, ReportsApple’s iPhone launch event was relatively light on iPhone, which shared the stage with games, TV, Watch, iPad and retail announcements. This reflects Apple’s developing priorities: as iPhone sales soften, it needs to find new ways to extract value from the wealthy user base it has spent a decade nurturing. Apple has embraced this new strategy, offering a range of cheaper points of entry into its ecosystem, making the lost profits back on accessories or content subscriptions
September 16, 2019Spotify’s podcast play
Flash Report, ReportsSpotify is investing heavily in podcasting through acquisitions, original content and product innovation. It is under pressure to reduce dependence on record labels, whose power makes generating large profit margins difficult. Podcasts promise a non-music content genre where Spotify can capture more value. Secondary benefits abound: Spotify can take an active and lucrative role in modernising online audio advertising, it can solve the podcast discovery problem, and engagement across more forms of audio will improve retention
August 21, 2019What Amazon and Uber can learn from Chinese food delivery apps
Flash Report, ReportsOn 15th August 2019, Telstra announced its FY19 earnings. Falling ARPUs and NBN related impacts outweighed subscriber gains resulting in earnings declines. The Australian telco market remains competitive with nearly all sub-segments experiencing varying degrees of pricing pressure. Telstra as the market leader is most at risk as competitors increase share across different segments.
July 1, 2019Reader-first news media: From transition to transformation
Market Outlook, ReportsThe number of people willing to pay for online news now roughly matches print paid circulation, and will soon be substantially greater, with publishers increasingly demonstrating that their strategies are influencing industry outcomes. Our thesis is that subscriptions work in some cases, but that a more systematic reader-first approach benefits all cases, recalibrating management focus to media’s core purpose. Effectively implementing such an approach is a more radical, transformative development than is sometimes assumed. The winners will deploy sophisticated, bespoke audience acquisition and retention funnels and undergo detailed appraisals of the trade-offs necessary for optimal user experiences.
June 12, 2019Monetising user-generated video
Flash Report, ReportsVideo sharing platforms, like YouTube, Facebook Watch and Twitch, are vying to attract creators with monetisation options such as branded content and user payments. Advertising income, already limited for many small and medium-sized creators, has been undermined by YouTube’s response to brand safety concerns. The new tools come with their own obstacles, but are necessary to keep platforms attractive to video creators.
December 18, 2018UK Vertical marketplaces overview and property classified outlook
Market Outlook, ReportsThe UK consumer’s loss of confidence since the June 2016 referendum vote in favour of Brexit has reduced the revenues of both estate agents and auto dealers, with knock-on effects on their media spend, entrenching further the leadership positions of Rightmove and Auto Trader respectively. Only the UK’s recruitment marketplace is buoyant with a record level of vacancies, benefiting general recruitment aggregator Indeed, although deepening Brexit gloom among businesses will rapidly melt away vacancies. With internet users flocking to portals and away from print media, advertisers have followed suit with media spend on these portals to stimulate purchaser interest, although transactions are still conducted offline. Facebook and Google, which have long histories of contesting markets for local advertisers with little success, have re-entered classifieds. Facebook Marketplace is now accepting listings from estate agents and dealers, expanding from C2C to B2C in homes and cars. Google Jobs launched in the UK in July 2018 and enjoys partnerships with all the major portals other than Indeed. The sharp decline in sales and shift to lettings, sluggish price growth and pressure on estate agents’ commissions, are making marketing key to driving transactional activity in a longer sales funnel. Rightmove’s revenues are on track for a 10% increase in 2018 on the uplift in average revenue per agent (ARPA). Zoopla's market share rose with the end of OnTheMarket's 'one-other-portal' rule for shareholders upon its AIM listing in February 2018.
October 11, 2018UK Esports & broadcasters: No game for old players
Focus Report, ReportsDrawn by its rapid growth and enviably youthful audience profile, incumbent broadcasters are paying increased attention to esports and its followers. Viewership of esports on UK broadcasters’ linear channels is low, with consumption on their online platforms likely the same. The market’s fragmented nature and global audience, along with the dominance of Twitch—and to a lesser extent YouTube—makes this unlikely to change. Broadcasters’ low-cost approach has primarily benefited competition organisers and games publishers. For broadcasters to create real revenues, massive upfront investment would be needed, with the risk of failure high.
August 21, 2018Regulating harmful video content and advertising online: Publishe [...]
Market Outlook, ReportsVideo-sharing platforms, such as YouTube and Facebook video, enjoy a light-touch regulatory regime for harmful content and advertising. As video viewing of non-broadcaster content grows, the regulatory gap between TV broadcasters and video-sharing platforms widens, part of a broader uneven playing field for publishers and platforms. However, there is momentum against this: the “platforms vs publishers” divide looks set to weaken in EU law, and the platforms themselves are investing more in combatting harmful content within a self-regulatory regime, though their internal policies and outcomes are still opaque. Effective and fair regulation of video-sharing platforms would involve the balancing of national freedom of speech conventions and the public utility of user-generated video hosting with concerned stakeholder views: something approaching a co-regulatory system for online video-sharing platforms.
August 20, 2018Virgin Media Q2 2018 results: Measured approach in a tough market
Focus Report, ReportsVirgin Media had a mixed quarter, with subscriber ARPU growth maintained, partly driven by a triple play focus with pay TV and telephony adds much improved, but subscriber and broadband net adds unchanged. Cable revenue growth did slow from 3.6% to 3.1%, mainly due to the previous quarter’s net adds slowdown working through, and it is still growing the fastest of the big operators in a slow-growth market that still suffers from pricing pressure at the low end. Its network roll-out was slower than last year and only just above the weather-impacted previous quarter, which appears to be deliberate, and which may at least partly relate to an uncertain regulatory and commercial climate over ‘full fibre’ roll-out by others.August 15, 2018Consumer magazine publishing: Quality, not quantity
Market Outlook, ReportsThe decline in demand in print presents trading challenges, but the more immediate pressures are on the supply side, with a 15% rise in paper prices accentuating the burden of production and distribution costs.With digital advertising growing at stubbornly low rates, UK publishers need to return to their fundamental consumer-centred strengths by switching their strategic attention towards strong brands, curation, and community. The case for specialist, branded publishing media remains robust: products, services, and consumers are still best brought together in an authoritative, trusted media environment. Advertisers and agencies (and also media) have undervalued the effectiveness of those environments, and direct-to-consumer opportunities have been exaggerated by many brands.June 19, 2018Advertising after the turning point: When offline is the exceptio [...]
Market Outlook, ReportsOnline advertising became the majority of all UK ad spend last year, in step with China but ahead of all other major markets. Direct response has further increased its share to 54% of UK ad spend, fuelled by the self-serve platforms of Google, Facebook and Amazon, while content media nets just 11% of the online advertising pot. We estimate that all online-delivered channels - including "pure play" online properties, broadcaster VOD, digital out-of-home and online radio - could account for well over 60% of UK ad spend by 2020, but only with improved commitment to industry governance.
May 25, 2018Retailing in the material world
Focus Report, ReportsEcommerce has grown to 17.5% of retail spend, and accounts for almost all growth in spend. Physical retailers are beginning to feel the effects, with chains reporting falling profits and even bringing in administrators. The UK picture is muddied by a general lack of economic recovery, and irrelevant comparisons with the US. Finished goods stores, however, are clearly under extreme pressure. We are moving into a retail paradigm of online and offline elements being freely matched. To survive this transition, brick and mortar retailers have to become differentiated experiences and close the data gap with e-retailers
May 3, 2018Grand new ideas for the content industry: Lessons from GDC 2018
Focus Report, ReportsLast month’s Game Developer’s Conference in San Francisco was a triumphant showcase for crossover technologies and ideas designed to attract and engage new customers; ideas coming soon to all parts of the digital entertainment industry. Google and Facebook launched new “Instant App” technologies for game developers on their platforms, which will eventually have a significant impact on mobile app curation and discovery for not just games but the broader entertainment sector. Universal Pictures showed how media and entertainment companies should be working with indie developers to drive franchise development, utilise creative IP, and bring new ideas to market quicker.
March 28, 2018Value in volumes: Books, midlists and retail
Focus Report, ReportsThere are signs of hollowing-out in the book trade: a lack of disruption at the top line obscures the fact that mid-selling breakthrough titles are becoming rarer, debuting authors is becoming more difficult and loyalty is declining. Publisher tools to overcome these trends are weakening, while self-publishing has introduced fierce competition in price, if not yet quality. To fight the tide, publishers will need to concentrate on the remaining points of differentiation, as well as preserving dedicated retail channels and changing conceptions around reader relations.
March 8, 2018Importance of News Content
Focus Report, ReportsIn an increasingly digital world, the free flow of information has lowered the value of paid news. News providers, which could earlier rely on advertising to subsidise journalism, continue to face aggressive competition from global tech giants and are being forced to find new revenue streams
March 6, 2018UK Internet Trends H2 2017: From shallow online to the online imm [...]
Flash Report, ReportsIn this report we develop a rough segmentation of the adult population by level of online use: offline (10% of adults), shallow online (10%), deep online (80%). We examine how online services seeking to reach new audiences increasingly face the obstacle of missing demand rather than a lack of consumer skills or access. The app economy still relies on a limited consumer pool, but ecommerce is now reaching almost all of the deep online. Bridging the current gap between occasional and frequent online buyers is a clear opportunity and we are still in the early days of evolving buying services into shopping services. The only industry monetising all online users is advertising. Ad platforms, led by Google and Facebook, also play a critical role expanding the ranks of the deep online and online immersed. But offline brand display media, led by broadcast TV, remain critical for online brands wanting to expand their audience.
March 2, 2018UK broadband, telephony and pay TV trends Q4 2017
Flash Report, ReportsUK residential communications market revenue growth fell again to 1.2%, with weakening ARPU growth the main driver. New customer pricing remains flat to down, and existing customers are being increasingly discounted, fuelling the ARPU weakness. High speed broadband adoption is proceeding apace, but the high speed premium is fairly thin, muting the impact on ARPU. Regulated wholesale price cuts from Openreach finalised today and due in April 2018 will not help. Looking forward, the March quarter will benefit from price timing effects at BT and Virgin Media, but we fear that the rest of 2018 will follow the current downward trend and the operators will need to adjust to an ex-growth environment.February 9, 2018Tencent: gaming giant heads west
ReportsTencent, by some counts the world’s most valuable media and entertainment company but still relatively unknown outside Asia, is riding games growth to global clout. The company offers a blueprint for successfully integrating media and entertainment companies, saving on overheads while retaining key talent and organisational culture . Tencent’s recent investments in Snap and Spotify suggest media platform ambitions beyond games in the West, but close ties to the Chinese government could complicate regulatory approval for strategic acquisitions.
February 5, 2018Chinese online media platforms
ReportsBaidu, Alibaba, and Tencent (BAT) have built their leading market positions in Chinese online media on the back of the mobile revolution and an absence of foreign rivals. The big three’s rivalry in online advertising reflects a broader struggle over key gatekeeper roles in the Chinese online economy, albeit one shaped by state intervention. While benefiting from protectionism at home, BAT are weak in most foreign markets and links to the Chinese state may hamper international expansion, particularly in the US
January 16, 2018Stitch Fix IPO: profits are back in style
ReportsSubscription fashion retailer Stitch Fix has gone public, revealing a rare example of a new, private, technology-based company capable of making a profit. Stitch Fix relies on the ‘mixed intelligence’ of algorithms and human stylists to offer its customers a curated fashion “Fix” of clothing and accessories, aiming to cut through some of the chaos of ecommerce. Though Stitch Fix’s success is not guaranteed, there is much to be learned from its approach of focusing on building a solid business and generating positive earnings early, rather than growing users at any cost
December 21, 2017Recruitment classified marketplace: Tech giants eye up LinkedIn [...]
ReportsA strong UK labour market, with record low unemployment but historically high vacancies, has supported growth in the recruitment industry, though trends may be peaking as we reach unknown territory. These trends play out in the recruitment market before they become apparent in the labour market.Despite the fragmentation of the online recruitment listings marketplace, Indeed is well-placed to dominate this space due to its increased scale and aggressive investment strategy. Both Google and Facebook have announced their intention to move into the recruitment listings sphere, which may have consequences not only for classified expenditure but further up the value chain with the agency model. However, both giants have attempted to move into online classifieds before, with little demonstrable success.
December 21, 2017Vertical marketplaces overview and property classified outlook: E [...]
ReportsThe slowing UK economy since Q3 2016 has had a knock-on effect on the property and autos marketplaces underlying UK classified advertising revenues, with house prices slowing, transactions stabilising (instead of rising), and new car registrations down sharply in 2017 to date. Recruitment activity by agencies and employers has instead been dynamic as the UK nears full employment. Advertisers in these verticals continue to switch expenditure from print classifieds to internet portals and search, which offer superior lead generation, analytics, and user experience. Only in property do local newspapers still fulfill an important estate agency branding function for the local area, although declining readership is blunting this value to advertisers. Portal dominance comes at a price to advertisers in property, where Rightmove has resisted agent efforts to lessen dependence by listing on other brands, as well as in used autos, where Auto Trader has long reigned supreme. Recruitment is a more contested market for portals, reflecting the diverse and fragmented nature of the jobs market, but Indeed has a strong grip on the low-end, while LinkedIn remains unchallenged in social recruitment advertising
