August 02, 2022

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Situational awareness: Sheryl Sandberg officially stepped down as Meta COO yesterday, days after the company posted its first ever quarterly revenue decline since going public in 2012.

  • Sandberg's last day as an employee is Sept. 30, though she will continue to serve as a member of the board.

1 big thing: Biggest midterm ever

Political ad spending in 2022, by media type
Data: AdImpact; Chart: Simran Parwani/Axios

Nearly $3.6 billion has been spent on political and issue ads so far this year, putting the 2022 elections on pace to obliterate 2018's record as the largest midterm election year by ad spend, according to new data provided to Axios by AdImpact, an analytics firm.

🖥️ Why it matters: A record percentage of ad dollars have shifted to streaming this cycle, allowing campaigns to target potential voters or funders with more precision than ever before.

By the numbers: Nearly half (44%) of the roughly $700 million spent so far on digital political and issue ads in 2022 went to connected TVs, according to AdImpact. That's a huge jump from 2020, when connected TV advertising barely made a dent in political ad spending.

  • In total, AdImpact estimates that $1.5 billion will be spent on connected TV ads this year, surpassing the $1.3 billion it expects to be spent on Google and Facebook.
  • To date, the biggest streaming platforms by share of political ad spend are Comcast's XFINITY Streaming (15%), Vizio's WatchFree+ (15%), Spectrum Streaming (14%) and DirecTV Streaming (13%).
  • Streaming devices and apps like Roku (6%), YouTube (5%) and Amazon Fire (3%) have commanded less political ad spend up until this point.

Between the lines: Unlike broadcasting companies, streaming and internet platforms aren't required to accept political and issue ads. Some, like TikTok and Twitter, don't take them. But the huge influx of cash is making some platforms rethink shutting out the opportunity.

  • Disney confirmed to Axios last week that it would allow political issue ads — in addition to candidate ads — on Hulu.
  • Spotify said earlier this year that it would resume accepting political ads after pausing them in 2020, though it won't accept issue ads.

Yes, but: The vast majority of political ad spend remains on local broadcast stations, where — despite ratings declines — political strategists are the most optimistic about outcomes.

Be smart: Changes to digital privacy standards are having a profound impact on campaigns, which in the past relied heavily on the ability to granularly target voters on Facebook to collect email addresses or solicit fundraising dollars.

  • "I think search (advertising) is going to be the beneficiary of a lot of it," said former Obama communications official and political strategist Bill Burton.

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2. CNN eyes multiple anchors for 9pm

CNN CEO Chris Licht is considering replacing Chris Cuomo's former 9pm primetime slot with a show led by multiple anchors, sources tell Axios.

  • It's one of a few different options he's looking at ahead of the show's relaunch this fall.

Why it matters: Ratings in the 9pm hour have declined significantly since Cuomo was suspended and then fired from the network late last year.

  • In the past few months, the show has typically seen around 500,000-700,000 viewers — around 70% of what it averaged in 2020.

Between the lines: CNN has tested various anchors for months. Laura Coates, a senior legal analyst at the network, has taken the helm frequently in recent weeks.

  • Other anchors, like Michael Smerconish and Brianna Keilar, have also guest-hosted in the time slot. Additionally, Anderson Cooper and Don Lemon, whose programs bookend the hour, have extended their coverage into it at times.
  • In the past few months, the 9pm hour has often featured panels of three to four guests discussing the news of the day.
  • Licht has vowed to lead CNN away from what critics have called partisan and alarmist programming in favor of neutral journalism and balanced debate.

The big picture: This is part of a larger game of musical chairs in cable news primetime.

  • Alex Wagner, Rachel Maddow's replacement on most days at the 9pm hour on MSNBC, will debut her new show "Alex Wagner Tonight" on Aug. 16, the network said Tuesday.
  • Chris Cuomo announced last week that he will join NewsNation, a 24/7 cable news network owned by Nexstar Media Group.
  • Stephanie Ruhle replaced Brian Williams at 11pm on MSNBC earlier this year.

3. Cable's new crisis

Residential broadband penetration of U.S. occupied housing units
Data: S&P Global Market Intelligence; Chart: Axios Visuals

Cable companies are being downgraded by Wall Street analysts in response to weak broadband growth coming out of the pandemic, Axios' Margaret Harding McGill and I write.

Why it matters: Cable companies have managed to stay afloat amid the cord-cutting crisis thanks to their booming broadband businesses. But some analysts see that safety net beginning to fade.

  • "Charter’s broadband print, like Comcast’s yesterday, had a decidedly 'end of an era feel," wrote Craig Moffett, senior analyst at MoffettNathanson, in a note to clients last week.

Details: Comcast reported flat broadband subscriber additions for the second quarter of 2022, while Charter lost broadband subscribers for the first time ever.

🏠 Yes, but: Both companies pointed to low churn figures, which suggests part of the subscriber slowdown is attributable to a slowdown in moves across the country, due to supply chain issues and inflation, which resulted in fewer new customers.

  • Still, analysts aren't totally convinced it's a temporary problem.

The big picture: Telecom giants began the massive pivot to broadband once their core business of pay TV was threatened by cord-cutting around a decade ago.

  • In that time, broadband "ushered in a decade-long rally in cable stocks," Moffett wrote. "Act II is now ending."

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4. Spotify resilient as tech sector crumbles

Photo illustration: Natalie Peeples/Axios. Photo: Sebastian Reuter/Getty Images for Spotify

Spotify was one of only a handful of tech companies to beat Wall Street's expectations on revenue, earnings and user growth last quarter.

Why it matters: CEO Daniel Ek told Axios that he remains "paranoid" about a potential recession, but that "so far, we're not seeing much of it at all."

By the numbers: Spotify added 19 million monthly active users (MAUs) last quarter, a 19% increase compared to the second quarter of the year prior.

  • The firm blew past its own expectations for user growth, thanks in large part to product improvements over the past year, as well as more localized marketing and content, Ek said.
  • Spotify reported revenues of €2.9 billion last quarter, a 23% increase compared to the same quarter a year prior.

Between the lines: Ad-supported revenue grew 31% year-over-year to €360 million, reaching an all-time high as a percent of total revenue at 13% during the second quarter.

Spotify quarterly revenue, by category
Data: Spotify earnings statements; Chart: Axios Visuals

What to watch: Expanding available ad inventory is by far "the single biggest contributor to growth" of the company's ad business, Ek told investors.

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5. 🍪 Post-cookie chaos

Illustration: Sarah Grillo/Axios

Advertisers and digital publishers are nowhere near an agreement on how to replace third-party tracking cookies, and instead have clung to various ad hoc solutions that don't work well together and lack sufficient oversight.

Why it matters: The push to be more privacy-centric has muddled an already messy digital ad ecosystem, and many of the changes being introduced could easily be upended by future legislation.

  • "This has been a prolonged period of turmoil since 2020," said Eric Seufert, an independent analyst and owner of Mobile Dev Memo. "It isn't getting any more clarity as time goes by, which is frustrating for marketers."

Driving the news: Google's decision last week to delay ending support for third-party cookies until 2024 — the second delay in two years — was a signal to the industry that this limbo isn't ending any time soon.

State of play: Looming privacy legislation and antitrust threats have forced major internet companies like Google and Apple to begin implementing privacy changes before regulators can take aim at their businesses.

  • Google hopes to create a cross-industry framework for all parties across the open web.
  • Apple is taking a much more blunt approach. It has already begun instituting its own unilateral privacy changes for its browser, Safari, and within its iOS mobile operating system.

Be smart: Instead of waiting to see how Google and Apple's changes shake out, many advertisers and publishers have begun to rally around new solutions that can — at least in the next few years — offer targeting alternatives for ads online without cookies.

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6. ⚖️ Books on the bench

Illustration: Aïda Amer/Axios

Penguin Random House's proposed acquisition of rival publishing house Simon & Schuster for $2.2 billion went to trial Monday, Kerry Flynn writes for Axios Pro Media Deals.

Why it matters: The verdict will not only dramatically affect the publishing industry, but also set a precedent for M&A at large as the Biden administration continues to challenge corporate consolidation.

  • If Penguin Random House's parent company, Bertelsmann, loses, it presents an opportunity for another company to buy Simon & Schuster from Paramount Global.

State of play: The Department of Justice, which filed the lawsuit last November, alleges the acquisition would violate antitrust law.

  • The publishers argue the deal would benefit authors and readers.

What's next: The trial is slated to run Aug. 1-19. A ruling is expected in November.