As more surfaces become ad inventory, the economics get complicated

Kimeko McCoy (0:10)

Hello, hello, and welcome to another episode of The Digiday Podcast, a show for anyone whose car is making them sit through a Spider-Man ad. I'm Kimeko McCoy, Senior Marketing Reporter here at Digiday.

Tim Peterson (0:21)

And I'm Tim Peterson, Executive Editor of Video and Audio at Digiday Media. Kimeko, was Spider-Man in your car?

Kimeko McCoy (0:28)

Spider-Man was not in my car, thankfully. Just regular old navigation system. What about yours?

Tim Peterson (0:35)

No, no, Toyota did not run Spider-Man ads in my car, but apparently BMW did.

Kimeko McCoy (0:42)

So I've heard, so I've heard. You go to start your car, and there's an ad for Spider-Man where your dashboard should be.

Tim Peterson (0:50)

Although, I mean, why should we be surprised? Because that feels, one, because we're both advertising reporters, so we've been at this long enough to know that everything's an ad. Now, work anywhere an ad can be served, and inevitably an ad is served. Netflix famously for the longest time, we will not do ads since they're running ads. Open AI, I don't think they were as demonstrative and never saying they will never do ads, but obviously is now doing ads.

But I think it all raises this question of, is the ad industry starting to violate the social contract with audiences with how many ads we as people are being served all the time, and all the different places in which we're being served these ads? So car, like you mentioned, what do we have now? Fridges are running ads?

Kimeko McCoy (1:47)

Yeah, I think it was Samsung LG refrigerators where there's that beautiful screen on the front where you're supposed to be able to say, here's my kid's lunch for the day or whatever the case may be. It's your screen, you bought the fridge, your screen. Lo and behold, you walk past it for your morning coffee, boom, ad.

Broken social contract, I paid you money for this fridge.

Tim Peterson (2:13)

Especially because if you're buying a fridge that has a screen, that's not going to be a cheap fridge. We're talking you're paying a couple thousand dollars for that fridge, maybe more. And I doubt it's like, oh, but don't worry, this is subsidized by advertising. So you would have been paying $10,000, you're going to get this for $5,000.

Kimeko McCoy (2:32)

Yeah, there's this great line from Mad Men. That's what the money is for. I paid you the money, I should not then be looking at ads. So I think the social contract, it's bending.

Tim Peterson (2:42)

Yeah, I mean, so we're recording this on Thursday, August 20th. Earlier this week, NBC Universal hiked the price of Peacock subscriptions. You know what the price of, this is for the Peacock premium, so you're able to watch Sunday Night Football, and the latest Bravo shows, and what have you on Peacock. So you're getting all the good stuff, but you do have to sit through ads. But you know how much it costs for this tier now each month?

Kimeko McCoy (3:09)

I feel like you're going to tell me it's going to shock me.

Tim Peterson (3:12)

$13.

Kimeko McCoy (3:14)

Every month?

Tim Peterson (3:16)

I think like five or six years ago, a Netflix subscription was $13 a month.

Kimeko McCoy (3:21)

And that was ad-free. So here we are.

Tim Peterson (3:25)

And so here we are. And so yeah, it just gets me feeling like, what are the ads paying for?

Because they don't seem to be paying for me to get a cheaper subscription because my subscription is no longer cheap.

Kimeko McCoy (3:42)

Yeah. That's just it. Going back to the idea of the social contract, here's the thing. Advertising, I think, is like always in this business, the first viable way to grab, it's cash grab for some platforms and some companies, right?

This push to like subscriptions, yeah, that's great. But like, you know what's really going to make us some bang for our buck? That's going to be advertisers. Bring them in, brand trying to get in front of people, cash cow there. And I feel like what's happening is you've got companies that are going after subscriptions, so they're taking your money there, and then also double dipping into advertisers to really turn to shareholders and say, look at this growth.

Tim Peterson (4:24)

Yeah, yeah, because I mean, so Seriguale Oni, our senior media reporter at Digiday, reported recently on how Time magazine, which has started creating versions of its article pages to be served to AI agents.

Kimeko McCoy (4:39)

That's a new one.

Tim Peterson (4:41)

Now it's inserting ads into those pages, which feels ridiculous. You get the business sense of, I mean, you had Mondeliz on the podcast earlier this year talking about AI visibility. All these brands are trying to figure out, how do I get into ChatGBT? How do I get into Google AI overviews results? I need to boost my visibility, and Time is saying, hey, we got AI agents coming to our sites, trying to get information. You pay us enough, we'll put you on those pages, and you're going to get in those large language models, the AI chatbots responses. So I get the business case, but if I start asking Claude, hey, why are you recommending this product? And Claude is just like, oh, because I saw some really great ads.