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U of Digital Newsletter - 8/28/24 (premium)

Author

Shiv Gupta
August 28, 2024

August 21st-August 27th // Estimated Reading Time: 9 minutes

Below is a roundup of last week’s notable industry news, with summaries and our opinions. Advertising is coming to AI (earlier than we thought)…

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Top Story 👁️ 

Summary: Perplexity AI is an AI-powered search startup that will begin selling ads later this year at $50-plus CPMs. Perplexity's advertising categories will include technology, food and beverage, health and pharmaceuticals, finance, and other topics to begin with, as well as sponsorships of "related questions" below answers and display inventory near answers. Launched in 2022, Perplexity's app has already been downloaded more than 2 million times, and it says it answers more than 230M queries per month. The company said in a pitch deck that more than 8 in 10 of its users have an undergraduate degree and 3 in 10 have senior leadership positions.

Last month, Perplexity introduced a revenue-sharing model with publishers whose content is referenced in answers; partners include Fortune, Time, and The Texas Tribune. The idea would be to split ad revenue with publishers if their content is used in responses. However, publishers such as Wired and Forbes have accused Perplexity of plagiarizing their content. That didn't stop the company from raising more funding in April, when its valuation topped $1B; that's double its valuation from just three months earlier.   

Opinion: Is it us or is Perplexity rushing this whole ads thing? It seems inevitable that AI consumer tools (especially those that are trying to be Google Search replacements) will sell ads in some form, but what’s the hurry? Scaling an ads business is hard. First, you need to nail your product / market fit and then your user growth model. THEN, you do ads. The last thing you want to do is to stifle user growth early on, which could happen if ads are introduced too early and turn consumers off. Perplexity was just founded in 2022 and only has a few million active users.

Timing aside, their CPM (cost per thousand impressions) model makes sense, even though a lot of people think “Google replacement” and expect to see a CPC (cost per click) model. Here’s the thing: Perplexity doesn’t work like “traditional” search. In traditional search, users are doing a lot of the work and clicking lots of links to get the information they need, so a CPC model works great. But in AI-assisted search—which aims to be more helpful and save users’ time—user journeys live entirely inside the app, which conveniently curates all the information the user needs. Clicks are not necessary and the user is captive, therefore a CPC model doesn’t make as much sense.

Sure a $50 CPM seems high. But why sell yourself short? Perplexity can negotiate down from that starting point (like Netlifx).

Just like Google intermediated everyone’s daily life 20+ years ago, companies like Perplexity believe that AI will do the same thing. And when you intermediate the daily lives of billions of people, you can then monetize access to those people. But who knows exactly how that monetization will ultimately work? A vanilla CPM or even a CPC ad model feels like an unlikely end state. If it’s not that, then what exactly might it be?

Here’s an idea. If AI is meant to act as an intelligent “agent” for everyday people, maybe it makes sense to look at the way agents have always been paid: on commission. If I’m an AI agent essentially brokering exchanges between human buyers and companies selling goods and services, shouldn’t I be paid a cut for my effort and expertise, not to mention the fact that I probably saved both sides a TON of time and hassle?

Maybe we’re wrong on the commissions thing, but CPM feels like a stepping stone; a weird, experimental phase in a monetization strategy that’s far from being figured out.

And maybe weirdness is just part of their strategy. After all, their name is “Perplexity”…

Other Notable Headlines ✍️ 

Google’s ad tech monopoly trial—a primer for advertisers 🔒- Google's ad tech antitrust trial starts next month, and it’s gonna be a doozy. Google is coming off a defeat in its recent search antitrust case, which some believe will influence and / or get tied into the outcome of the ad tech case. The US Department of Justice (DOJ) alleges that Google abused its dominant position on the publisher-side due to its position controlling the industry’s leading ad server and exchange. Google's search trial revealed loads of juicy details about the company's manipulation of ad prices and agreements with device makers to be the default search browser, and this trial will likely be no different. Already, newly released court documents 🔒outline the inner workings of Google's incentive programs for agencies to get them to buy some Google media. And it was revealed in court yesterday that Google has for years deleted litigation-related chats within 24 hours, likely destroying an enormous amount of evidence for the case, which the judge called “absolutely inappropriate and not proper.”

Warner Bros. Discovery International and CNN are extending audience targeting tools in bid for more CTV share 🔒- Warner Bros. Discovery (WBD) International's first-party data platform called AIM will be introduced across its global media portfolio. The company’s expansive properties include CNN, Max, discovery+, and others in regions such as Europe, Asia Pacific, Latin America, and the Middle East. WBD will be able to use its first-party data to create audience segments for targeting purposes, rather than always relying on context. So, if advertisers want to find first-time homebuyers, for example, they can target recent HGTV viewers on any WBD inventory as opposed to just running ads on HGTV. The segments will be accessible for targeting across WBD inventory through Magnite's Connect marketplace. AIM was initially built in 2015 for CNN and is now used for 90% of CNN's digital campaigns. AIM leverages Snowflake's data lake architecture and Permutive's DMP.

Circana to Acquire NCSolutions and Nielsen’s Marketing Mix Modeling Business - Circana helps advertisers plan, target, measure, and optimize their media investments. The addition of NCSolutions and Nielsen’s Marketing Mix Modeling business will add to Circana's media measurement chops. NCSolutions was launched in 2010 as a joint venture between Nielsen and Catalina, which combined their datasets and data science capabilities. Terms of the deals were not announced; the sales will close in Q4.

Yahoo Expands Commerce Media Reach with Planet Fitness Partnership, New Hire - Yahoo Demand Side Platform (DSP) has partnered with PF Media Network (Planet Fitness' media arm) and Rippl (Bridg's data and media network). Planet Fitness brings data from nearly 20M gym members to the platform, while Rippl offers more than 2,800 pre-built audience segments derived from 70M grocery store shoppers. It's part of Yahoo DSP's larger strategy to increase reach beyond traditional retail media into other verticals, through partnerships with companies like United Airlines, Uber, and Chase Bank. To shepherd these efforts, Yahoo DSP has brought on Mike Merna as senior director, commerce media specialist lead. In his previous position, Merna led commerce media strategies for Rite Aid, Dollar General, and other retailers at The Mars Agency.

The commerce media aggregation dance-off between Criteo, The Trade Desk, and Yahoo continues…

Other Notable Headlines
(that you should know about too) 🤓 

Omnicom Consolidates Creative Shops Under New OAG Unit - The new Omnicom Advertising Group will include BBDO, DDB, TBWA, Goodby Silverstein & Partners, GSD&M, Merkley+Partners, and Zimmerman.

Omnicom Media Group Wins Global Michelin Account - OMG will oversee the global media account, which was previously managed by Havas.

Criteo seeks new chief executive after Megan Clarken announces pending exit - Clarken joined Criteo in 2019 from Nielsen and has helped the legacy retargeter make a successful pivotto commerce media. Clarken will retire within 12 months.

Uber fined $324M for sending drivers’ data outside Europe - European regulators say Uber violated the General Data Protection Regulation and failed to protect drivers' sensitive data when transferring the data to US servers.

Comscore Audience Data Will Now Be Available In FreeWheel’s Platform - Advertisers buying inventory through FreeWheel’s ad server will gain more granular targeting. Paramount is the first to test-drive the integration.

Google sales reps allegedly keep telling advertisers how to target teens - Google employees continue to recommend this practice to buyers, going against Google’s own policy of not targeting ads to anyone under the age of 18. 

Google agreed to pay millions for California news. Journalists call it a bad deal - Google will pay $250M to pay for journalism initiatives and an AI research program. 

Publicis Wins $500 Million Sky Media Account - Zenith will likely take the lead in the account, which was previously managed by GroupM’s EssenceMediacom.

Hyundai marketing exec Angela Zepeda exits after losing CMO title 🔒- Zepeda reportedly left for another role a month after Hyundai reduced her marketing duties. Sean Gilpin was named the new CMO.

Chick-Fil-A Hatches Plans For Streaming Service As Reality TV Comes Home To Roost - Unscripted, family-friendly content such as game shows will be on the menu for Chick-Fil-A's upcoming streaming service…

That’s It For This Week 👋

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