UK online advertising: Brexit year forecast and trends
UK online advertising spend continued its double-digit growth in 2018, up 11% to reach nearly £13bn in annual spend or 58% of the total advertising market, but a no-deal consumer downturn could nearly stop growth this year
Google, Facebook, Amazon, professional services firms and the largest marketing cloud companies are the biggest winners, while content media, media agencies and independent advertising technology firms languish
Self-regulation has improved as pressure mounts on advertising technology firms, but interventions by both privacy and competition authorities are now inevitable
|Media||15 March 2019|
Virgin Media: proceeding with caution as speed advantage comes under fire
After strong underlying 2018 results, the more subdued outlook for 2019 is an important shift, driven by regulatory pressure on mobile, higher programming costs, one-offs and softening demand
Lightning is continuing to drive market share gains in new build areas, and should provide a 2ppt tailwind to revenue growth in 2019, but enhanced visibility on the economics of rollout suggests that its conservative approach is a wise one
In existing build areas, Virgin Media is facing-off pricing pressure from TalkTalk on high speed, and potentially from BT on even higher ultrafast speeds, with it moderating pricing and launching a market-beating 500Mbps product in Spring 2019 in response
|Telecoms||14 March 2019|
Huawei and 5G: Identifying the risks
Governments and operators have come under increasing pressure to exclude Huawei’s 5G equipment from national networks, with justifications usually kept vague and wide-ranging rather than specific, and no evidence provided
Given the role of Huawei’s 5G equipment in the network and the extent of existing testing and checking, realistic security risks that apply to Huawei and not to all other equipment suppliers are hard to conceive
The risks of any ban are however very real; with Huawei one of only three global-scale telecoms equipment suppliers, and the preferred early choice for 5G radio equipment in the UK, removing this choice will massively increase costs and delay roll-outs of cutting-edge connectivity
|Media, Telecoms||7 March 2019|
The future of video viewing: forecasts to 2028
Linear TV is still a mass market medium, watched by 90% of the UK population each week. However, our latest viewing forecasts predict broadcasters will account for two-thirds of all video viewing in 2028, down from c. 80% today, due to the relentless rise of online video services
Total viewing will continue to increase as more short-form content is squeezed into people’s days, particularly on portable devices, but the key battleground for eyeballs will remain the TV screen
The online shift has already had a huge impact among younger age groups, with only 55% of under-35s’ current viewing to broadcasters. Older audiences are slowly starting to follow suit, but have a long way to go
|Media, TV, UK Media||6 March 2019|
TikTok's challenge to Western social media
Launched to the world in September 2017, TikTok is the first Chinese app to pose a serious threat to Western social media companies as it attracts hundreds of millions of Generation Z users around the globe
Privately-owned parent company Bytedance earned $7 billion in online advertising revenues in 2018 and is valued at $75 billion, placing it ahead of Uber as the world’s most valuable internet start-up, with an IPO likely this year
Bytedance’s goal of earning half its revenue outside China by 2022 is far from certain. In order to hit the target, TikTok will need to attain super scale with best-in-class revenue per user, an unlikely combination
|Non-UK Media, Internet, Media, Technology||5 March 2019|
GDPR tested on Google, ad tech and Facebook
Recently issued regulator rulings on Google, ad tech companies and Facebook challenge prevailing online advertising practices of obtaining user consent under the EU’s General Data Protection Regulation (GDPR)
Rulings from France on Google and ad tech partners of media owners called them out for inadequate disclosure to users, and excessive merging and processing of data
In a landmark precedent for Germany, the Federal Cartel Office found that Facebook lacked “freely given” consent from users, calling its terms “exploitative” and an abuse of its dominant position, also harming competitors
|Non-UK Media, Non-UK Telecoms, Internet, Media, Non UK Media, Public Policy, Technology, Telecoms, UK Media||1 March 2019|
The Next solution to ecommerce
Consumers have more shopping options than ever, forcing businesses to expand how and when they offer services. Online giants Amazon and Alibaba are adding physical retail to extend their routes to market
Omnichannel provides consumers an enhanced, seamless brand experience from research and discovery to purchase, delivery and after-sales, and allows businesses to react to changing consumer preferences more flexibly
Next is an omnichannel success story, introducing 48-hour home delivery in 1988 and online sales in 1999. Its market-leading fashion ecommerce business offers lessons on the future of retail
|Brexit, Media, UK Media||28 February 2019|
MWC – all very exciting but where's the money?
The combination of 5G, AI, IoT and big data were evangelised at MWC as generating massive scope for the transformation of multiple industries.
That much is probably true, but it is the tech and consultancy companies who will likely receive the benefits, with connectivity revenue likely to be modest.
For the operators, 5G brings more capacity much needed for hungry smartphone users, and perhaps the opportunity to transform themselves into a leaner operating model.
|Media, Telecoms||28 February 2019|
O2 delivering well on many, but not all, fronts
O2’s Q4 results delivered market-leading service revenue growth of 3%, double-digit EBITDA growth, sustained strong net adds and low churn.
With ARPU service revenue growth flat, all of the growth came from other service revenue including M2M (machine-to-machine) and MVNO; a lumpy category up by more than 40%.
Following a period of strong outperformance, O2 will face some challenges in 2019: some cost inflation to mitigate and the risk of a churn increase following December’s outage although experience suggests this is likely to be short-lived.
|Media, Telecoms||27 February 2019|
The price is right for national newspapers
The average cover price of national newspapers has risen by 58% since 2010, more than twice the CPI increase of 22%. Are publishers “shooting themselves in the foot” at a time when buyers and advertisers are defecting to online?
To settle this, we analysed all the cover price events by national titles between 2010 and 2018, which reveals the relative success of The Times when it has raised its price.
For mid-market and popular titles, cover price hikes have on balance reduced circulation revenues and, by lowering reach, drained advertising revenue: a lose-lose scenario.
|Media, UK Media||25 February 2019|
BT Global Services: Playing a bad hand as well as it can
BTGS’s strategic plan seems like a sensible move in a very challenging market but it heralds its transition to a new operating model where its competitive advantage is largely eroded, its addressable market squeezed and it is arguably sub-scale
Although hybrid infrastructure and revenues from transition to cloud-based IT will provide something of a cushion, guidance and consensus forecasts are too optimistic in our view – cost-cutting plans are therefore likely deficient
Longer term, with IT services increasingly easy for corporates to manage themselves, diminished appetite for hybrid networks and global giants such as Amazon, Microsoft and Google squeezing out the middle-man, the space that BTGS occupies is likely to be considerably smaller
|Media, Telecoms||19 February 2019|
Time to create an addressable TV market
Addressable linear TV advertising, where precision-targeted ads overlay default linear ads, could enhance the TV proposition for advertisers, agencies and viewers, benefiting all broadcasters
In the context of dwindling linear viewing and rocketing online video ad spends, the adoption of Sky AdSmart and similar services on YouView and Freeview could take addressable TV ads from a sideshow to a pillar of revenue
Addressable linear is a bigger and more strategic prize for broadcasters than BVOD ads. Sky holds the key to wider adoption of its AdSmart platform if it can find a way – or a price – to bring ITV Sales and/or 4 Sales on board
|Media, TV||18 February 2019|
Free TV Licences for over-75s
The BBC’s consultation on rescinding free TV licences for all those aged 75 and over, in whole or in part, has sparked a heartfelt petition from key stakeholder Age UK to restore Government funding for the elderly, which we support
The Government has put the BBC in the intolerable position of choosing between funding the remit, whose delivery is regulated by Ofcom, and free TV licences for the over-75s, a lose-lose for the BBC, its viewers and listeners
In our submission to the BBC we highlight the human impact of reduced services and/or higher monthly expenses on the 2 million single-income households, 75% headed by women, for whom the BBC is a lifeline
|Media, TV, UK Media||15 February 2019|
European Pay-TV - Resilient In The Face Of SVOD's Growth
Across the EU4, pay-TV is proving resilient in the face of fast growing Netflix (with Amazon trailing), confirming the catalysts of cord-cutting in the US are not present on this side of the Atlantic. Domestic SVOD has little traction so far
France's pay-TV market seems likely to see consolidation. Meanwhile, Germany's OTT sector is ebullient, with incumbents bringing an array of new or enhanced offers to market
Italy has been left with a sole major pay-TV platform—Sky—following Mediaset's withdrawal, while Spain's providers, by and large, are enjoying continued growth in subscriptions driven by converged bundles and discounts
|Media, Telecoms, TV||14 February 2019|
BT Q3 2018/19 results: Openreach stronger than it looks, but Consumer slowing
BT’s Q3 results were a little mixed, with mobile particularly weak, but the company remains on track to meet/exceed its (fairly conservative) guidance for the current year, and hit (modest) consensus expectations for 2019/20
Openreach was very weak at the headline level (-9%), but stripping out an accounting effect and internal revenue the division grew by 2% by our estimates despite significant price cuts, and full fibre roll-out is progressing well
While Openreach should accelerate this year, Consumer will be hit by a price rise holiday and slowing mobile, with investors likely having to wait for existing sports rights contracts to play out to see significant profitability improvement
|Media, Telecoms||12 February 2019|
Cairncross: platforms intervention to save news
The Cairncross Review has now reported on the tough question of “how to sustain production and distribution of high quality journalism in a rapidly changing technology environment”. New codes of conduct for the platforms and publishers are the Review’s key policy recommendation
In particular, the Review addresses the sustainability of public interest, including local, journalism. This news is important for democracy, but expensive to do well, not particularly popular and most sabotaged by an online ecosystem that rewards traffic over quality
This is a landmark public intervention, but implementation will be critical, even if there is no silver bullet – platforms, publishers and citizens need to rise to the challenge
|Internet, Media, Technology, UK Media||12 February 2019|
Wobbles ahead for TalkTalk's fine balancing act
TalkTalk is delivering on its subscriber and revenue growth targets but is straining to get there. Price rises such as a £4 ‘TV access fee’ look increasingly risky
Whilst migrating to discounted high-speed helps to deliver top-line growth, margins are c. 40% lower; an unwelcome dent to already negative cashflow and stressed leverage
Both TalkTalk’s focus on revenue growth in a tight market and fibre rollout plans look increasingly unaffordable; a more modest ambition of stable revenues might allow a healthier business model to unfold
|Telecoms||8 February 2019|
In the midst of the Brexit news morass, here are some framing thoughts for the bigger picture…and why all roads lead to no-deal, after the Commons’ rejection of the package of the withdrawal agreement and the framework for the future trade relations between the EU and UK.
|Brexit, Media, Telecoms||8 February 2019|
TV set viewing trends: linear audiences tumble in 2018
2018 was another bad year for traditional TV set viewing of broadcast channels, with a 5% decline year-on-year—its steepest since 2011. The decline accelerated among most demographics, but particularly for 16-34s, down 13% YOY from their already relatively low levels of TV viewing
Unmatched use, which includes viewing to Netflix, Amazon and YouTube, continues to grow, up 16% YOY, with both linear viewing and unmatched use becoming increasingly solitary activities. While heavier linear TV viewers are accounting for a greater proportion of linear TV viewing, it is the lighter TV viewers that are accounting for a greater proportion of unmatched use
Within the broadcast ecosystem, ITV had the strongest 2018 thanks to the FIFA World Cup, more Coronation Street, and Love Island. Most other broadcasters struggled in terms of viewing share, but the maturity of the market means major shifts continue to be rare
|Media, TV, UK Media||7 February 2019|
Why does Amazon sell the Echo?
Smart speakers like the Amazon Echo and Google Home accelerated their prodigious rate of adoption in Q4 2018, and we expect they will soon be in 20% of UK homes
Amazon and Google price devices low to drive adoption to mass-market levels and win the race to own the home, in contrast to Apple’s profit-making strategy for its speaker
Echo’s main strategic benefits to Amazon are the scope for data collection and the intelligence it supports, and gatekeeping partners’ access to customers
|Internet, Media, Technology, TV||4 February 2019|