Sara Fischer
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Facebook's new subscription efforts hit a roadblock with Apple

Illustration: Lazaro Gamio / Axios

Facebook announced Thursday that it will begin testing a feature within Instant Articles that would help publishers get people to sign up for subscriptions to their sites. But the test will only roll out on Android devices at first because Facebook and Apple are still negotiating a revenue agreement — which is being complicated by Apple's rules on its partners' subscription services.

Why it matters: It's unclear, at this point, if and when Facebook will test the subscription feature on iPhones if it can't come to an agreement with Apple. For now, publishers will only be able to take advantage of the subscription tool test on Android.

Driving the news: Apple's longstanding rule that it takes a 30% revenue cut from partners when a user purchases a subscription within an iPhone app is complicating Facebook's commitment to giving 100% of subscription revenue to publishers.

" I trust they'll get their priorities straight soon enough," says Jason Kint, CEO of Digital Content Next, the premium publishers association. "Everyone is watching them."

Apple is conflicted because the company's policy is to take 30% of all subscription revenue from "in-app" sales in the first year of a user's subscription (15% in years that follow). Although Facebook will take people outside of the app to subscribe to a publishers' site, the transaction begins within Facebook's app. Apple's 30% rule has affected its partnerships with other big companies, like Amazon and Microsoft.

Aside from the Apple saga, Facebook has revealed new information about their subscription program that's being tested on Android:

  • Here are the 10 test partners Facebook is working with: Bild, The Boston Globe, The Economist, Hearst (The Houston Chronicle and The San Francisco Chronicle), La Repubblica, Le Parisien, Spiegel, The Telegraph, tronc (The Baltimore Sun, The Los Angeles Times, and The San Diego Union-Tribune), and The Washington Post.
  • The feature will support both metered models: It will start with a uniform meter at 10 articles and test variations from there, plus “freemium" models. That's where the publisher controls which articles are locked, similarly to the way Google is working with publishers to create a "flexible sampling" subscription model.
  • How users are prompted: When someone who isn't yet a subscriber to a publication encounters a paywall within Instant Articles, they will be prompted to subscribe for full access to that publisher's content.
  • Publishers keep the cash and do the transaction: If a person subscribes, the transaction will take place on the publisher's website and the publisher will process the payment directly and keep 100% of the revenue.The publisher has direct access and full control over setting pricing and owning subscriber data.
  • What users get: The subscriptions purchased through Facebook include full access to a publisher's site and apps. A user who is already a subscriber to a publication in the test can authenticate that subscription within Instant Articles in order to get full access to that publisher's articles.
  • Facebook will try to hook subscribers quickly: It will be testing other units to help publishers drive additional subscriptions before a person might hit the paywall. It will also test a "Subscribe" button that will replace the "Like" button on the top right corner of an article.
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Scoop: Hispanic group threatens action against Verizon over blocked signal

Univision / Verizon

The National Hispanic Media Coalition (NHMC) President and CEO Alex Nogales has written a letter to Verizon Chairman and CEO Lowell McAdam threatening to rally Latino leaders across the country against "Verizon products and services," if Verizon doesn't reinstate access to Univision for East Coast consumers.
Why it matters: The letter, obtained by Axios, shows particular concern over the fact that the signal was pulled Monday night from Verizon's Fios and mobile products without warning and that it was removed at a time when Hispanic viewers need coverage of catastrophic events affecting families and businesses in Mexico and Puerto Rico. Verizon argues in a letter to FCC Chairman Ajit Pai that they have offered alternative programming options to consumers and outlined the carriage fee negotiations.
"Despite diligent efforts by Verizon over the last two-plus months to reach reasonable termswith Univision and considerable movement on our own part during those negotiations, Univision has consistently insisted on unreasonable terms that would raise prices and harm our customers," the letter says.
New wrinkles: Fights between Pay-TV providers and cable networks happen often, but this one is different.
  1. Univision says the blackout happened without warning. Typically both parties, the distributor and the content provider, come to terms about next steps before a signal is removed during a dispute. People familiar with the matter say that has not been the case, and that the signal was pulled unexpectedly.
  2. The blackout has humanitarian effects: Univision argues that Verizon is not taking moral considerations when blacking out its signal from Hispanic communities that are reliant on access to Univision for information about the effects of the natural disasters in Puerto Rico and Mexico
  3. The blackout occurred on the distributor side. Often it's the network that threatens to pull a signal because a pay-TV provider refuses to meet their carriage fee demands. This time, Verizon pulled out of the agreement, citing cost.

The bigger picture: The fight is the latest example of what happens when a Pay-TV provider and a cable network can't agree on a new contract, which has been happening at an increasing rate. These disputes have led to more TV blackouts in 2017 than any year prior, per the American Television Alliance. By 2022, SNL Kagan predicts that retransmission fees being charged by TV networks will increase by roughly 50%, reaching a record-high of $11.6 billion.



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Political ad buyers skeptical of new disclosure bill

Lazaro Gamio / Axios

Political advertisers have some doubts when it comes to the Honest Ads Act, a bill put forward Thursday to increase political ad disclosures. According to several political ad buyers with experience buying ads on an array of platforms, the bill — while well-intentioned — is far-reaching and would be difficult to enforce. Some argue that the new disclosure rules would force advertisers to disclose highly specialized and proprietary information used by campaigns and their vendors.

Why it matters: Political advertisers expressed concern going into the legislative process that lawmakers with little understanding of the programmatic (automated) political ad-buying landscape would create rules that could not be easily implemented, or ones that would have unforeseen consequences. While many worked with lawmakers ahead of Thursday's bill unveiling to provide recommendations, some worry that the bill still has clauses that would cause adverse affects on privacy.

  • There's a privacy problem: "This is over-reaching and includes targeting information not supplied by broadcast or cable buyers," says Jaime Bowers, a consultant who has managed ad buying for dozens of ad campaigns for Republican candidates and advocacy groups. "Digital ads are bought in a variety of different ways, and views on social are proprietary because so much goes into what you pay for a view. Targeting is highly specialized and proprietary for the agency, campaign and pollsters."
  • Beware of loopholes: "I'm anxious to see how the legislation develops but one of the things we have to watch out for is the creation of loopholes that will let bad actors move their activities onto platforms that aren't regulated," Zac Moffatt, CEO of Targeted Victory, the ad agency that did buying for the Ted Cruz presidential campaign.
  • Bots need to be disclosed, too: "While digital is different than television, we believe it can be the most accountable platform in politics and we've outlined several ways to do that," says Ben Coffey Clark, partner at Bully Pulpit Interactive, the Washington-based ad agency that did ad-buying for the Obama and Clinton campaigns. Clark's firm recommends that that bots should not be used by campaigns for marketing without clear disclosure. They also recommend advertisers be required to disclose digital ad spend by month and eventually by week, among other suggestions."
  • Include more digital ad experts. "Overall, this is a significant step forward in much-needed transparency, but I worry they haven't consulted enough digital ad experts," said Keegan Goudiss, a partner at Revolution Messaging. "From what I have seen put out so far there are already loopholes malicious actors could exploit."
Featured

Social media chaos forces tech giants to rethink their standards

Richard Drew / AP

Over the past few weeks, social media controversies around election meddling, fake news, and censorship have put tech platforms on the hot seat. Three of the biggest platforms involved — Facebook, Twitter and YouTube — have all slowly introduced changes to their policies in response to pressure, mostly from lawmakers, as well as users and advertisers.

Regulators say that the tech companies are doing better to combat homegrown extremism, but that more needs to be done.

Why it matters: These companies all have business models centered around scale, and are not incentivized to apply more scrutiny to the content or ads on their platforms unless pushed to do so by outside forces. It's the beginning of a wave of backlash against big tech in Washington and beyond for failing to police the content on its platforms for years.

  • Twitter, pressured by users, is rolling out new content acceptability policies to its Trust & Safety Council members in response to backlash about recent account and ad censorship. An email, obtained by Wired, includes enforcement policies that will be rolled out in the coming weeks. Twitter says it will now take harsher actions on non-consensual nudity, unwanted sexual advances, hate symbols and imagery, violent groups and tweets that glorify violence. Earlier this week, it received backlash for banning the account of an actress who claimed Harvey Weinstein sexually abused her.
  • YouTube, pressured by advertisers, says its hiring more experts from different countries with expertise on localized approaches to complex issues like hate speech, radicalization, and terrorism, and it will apply tougher standards to content flagged as violating its policies. (Information about those new standards has not been revealed.) YouTube faced advertiser backlash for terrorist content on its platform in the Spring, and most recently was found to have been used by groups trying to spread disinformation during the election.
  • Facebook, pressured by lawmakers, says it's hiring 1,000 more people (unclear whether they are contractors or Facebook employees) to manually review ads, and says it will change its political advertising processes and tools for transparency in response to Russian-backed groups illegal buying ads on its platform.
Featured

Hearst to acquire magazine publisher Rodale Inc.

Hearst

Hearst has agreed to acquire Rodale magazine and its subsidiary health and wellness properties, like Men's Health, Women's Health and Bicycling. The deal is expected to close in early 2018. Terms have not been disclosed, although a source familiar with the matter tells The Wall Street Journal the price was under $225 million. Hearst Magazines, which includes dozens of brands like Elle and Good Housekeeping, will manage Rodale's multi-platform content business.

Why it matters: It's another example of consolidation in the print industry, which has struggled to stay profitable as users migrate to digital. The acquisition broadens Hearst's mostly lifestyle magazine portfolio and broadens their digital footprint.

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Pinterest adds self-service search ads

Photo: Larry Miller / Flickr cc

Pinterest is adding Search Ads to its self-service platform to help marketers of all sizes reach people who are searching for their products and services on Pinterest. The company has offered search ads for months, but now the ads can be purchased through Pinterest's self-service advertising tool, Pinterest Ads Manager, which makes it easier for small and medium-sized advertisers to take advantage of the technology. The new feature will also give advertisers the option to optimize campaigns with an "autotargeting" function which will automatically target users using similar search terms.

Why it matters: This is an example of how the search advertising market is becoming more accessible for marketers and expanding from search engines with self-serve platforms, like Google, to other platforms with large databases of information, in this case, pictures. Over 2 billion searches happen on Pinterest every month and, according to Pinterest, 97% of those searches are unbranded.

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Nielsen to measure subscription streaming, Netflix is skeptical

Lazaro Gamio / Axios

Nielsen, the decades-old TV measurement company, announced Wednesday that it will now independently measure viewership of subscription-based streaming content, like Netflix. Nielsen says eight subscription-based streamers are already on board, including A&E Networks, Disney-ABC, Lionsgate, NBCUniversal, Warner Brothers and others.

Netflix isn't buying it: Netflix, which is by far the largest subscription streaming company in the U.S. is skeptical. "The data that Nielsen is reporting is not accurate, not even close, and does not reflect the viewing of these shows on Netflix," the company said in a statement to Variety.

Why it matters: Nielsen has been considered the gold standard of TV measurement for decades, but has been criticized in recent years for using outdated techniques to measure TV viewership, especially as viewers migrate to digital streaming. This is the latest of steps the company has taken to resolve this, including doing away with "diaries" or written accounts of household TV viewership and adding more cross-platform TV measurement services.

Featured

Young people flock to Snap, flee Facebook

Teens overwhelming prefer Snapchat to any other social media platform, according to Piper Jaffray's 34th semi-annual Teens research survey. 47% of teens indicated that Snapchat is their favorite social platform, while only 24% of teens indicated Instagram was their favorite platform.

Data: Piper Jaffray, The Taking Stock With Teens survey; Note: Survey of 6,100 teens with an average age of 16 years; Chart: Andrew Witherspoon / Axios

Why it matters: Investors were initially bearish on Snapchat after Instagram launched a rival "Stories" feature, which put a dent in Snap's user growth. But now Snapchat is proving that its focus on engagement over scale can lead to more opportunities for advertisers. A recent analysis by MarketingLand shows that advertisers have more opportunities to reach 13- to 17-year-olds with ads on Snapchat than they do on rival properties, like Facebook or Instagram.

One philosophical thing: Snapchat executives tells Axios they are focused on connecting people with their closest personal contacts. Facebook COO Sheryl Sandberg told Axios' Mike Allen last week that their strategy is the exact opposite. Facebook connects people to their "weak ties," or people they aren't close to, Sandberg said.

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Game change: Half of American households subscribe to Netflix

A person displays Netflix on a tablet in North Andover, Mass. Photo: Elise Amendola / AP

Netflix blew past user growth expectations, reporting Monday that it added 5.3 million new subscribers last quarter, upwards of 1 million more than expected.

  • In total, it added 850,000 new U.S. subscribers and 4.45 million new international subscribers.
  • Netflix predicts that it will add 6.3 million new subscribers next quarter, which would bring its total to 111.2 million paid subscribers globally.
  • The company also continued to beat expectations on revenue, although profit came in slightly lower than anticipated.

Investors are thrilled: Netflix stock reached an all-time high in after-hours trading Monday after the network proved it could continue strong user growth internationally. Its U.S. subscription growth has been slowing, but that's because its user base is pretty saturated in North America.

Why it matters: Hitting revenue estimates is a big win for Netflix, given that it poured a ton of money into programming investments (more below), as opposed to focusing on profit. It's also another reminder for Pay-TV providers and TV networks that the traditional cable bundle can't compete with the power of on-demand.

  • "It's increasingly clear that the price/value of the legacy video bundle is unsustainable," says BTIG media analyst Rich Greenfield. "Netflix is growing subscriptions at higher prices, driving more money to spend on content — a virtuous circle."

What's next? Netflix's chief content officer Ted Sarandos on Monday'searnings said the tech giant is inching closer towards producing dailynew, original content and will invest a lot more in original films: "We plan on (releasing) about 80 (original films) coming up next year and they range anywhere from the million-dollar Sundance hit, all the way up to something on a much larger scale."

Featured

Verizon Fios pulls signal from Univision

Elise Amendola / AP

Univision announced last night that Verizon pulled its signal from its FiOS and mobile platforms "entirely without warning," leaving mostly East Coast consumers without access to programming. Univision says it's "deeply concerned," especially "in light of recent natural disasters and current events impacting the Hispanic community." Verizon says Univision is charging too much for its waning viewership.

Why it matters: It's the latest example of what happens when a Pay-TV provider and a cable network can't agree on a new contract. With new competitors in tech, the big Pay-TV distributors are incentivized to drop cable networks that are underperforming or too expensive, possibly to create their own skinny bundles. (We saw these dynamics play out two weeks ago when Altice threatened to drop Disney and Sunday when Charter struck a last-minute deal with Viacom.)

Go deeper: TV networks have been charging cable and satellite providers fees to carry their content for years, spurring more and more carriage fights. But pay TV providers are continuing to boycott the fees being demanded of them, causing TV blackouts all over the country. With more consumers cutting the cord, the atmosphere has gotten tense. By 2022, SNL Kagan predicts that retransmission fees being charged by TV networks will increase by roughly 50%, reaching $11.6 billion.