Does the £114m Unruly deal represent a future-proofing coup for News Corp?

18th September 2015

Last week media agency Zenith Optimedia published a report about mobile advertising, and how mobile ad spend will overtake that for print advertising for the first time.

It was a timely report, for a week later (16 September) News Corp, owner of UK newspapers the Times, Sunday Times and the Sun, bought digital ad firm Unruly Media for £58m.

According to the Zenith report, Advertising Expenditure Forecasts, mobile internet advertising will overtake newspaper advertising next year, accounting for 12.4 per cent of global adspend while newspapers account for 11.9 per cent.

Mobile internet will be the third-largest advertising medium, behind television and desktop internet, growing 38 per cent in 2016 to $71bn, while newspaper advertising will shrink 4 per cent to $68bn (although this does not include news brands’ mobile and web desktop operations – for example Mail Online).

Zenith believes – and it is by no means alone – that mobile advertising remains the driving force behind the growth of the entire advertising market, contributing 83 per cent of all new ad dollars between 2014 and 2017.

Essentially the Zenith Optimedia report says there is a massive shift in where brands are putting their money, away from “old” media like print and TV to the new. Desktop internet advertising will continue to grow, but will lose market share for the first time this year, dropping from 19.8 per cent of global adspend in 2014 to 19.4 per cent. By 2017 Zenith forecasts desktop internet will account for 19.1 per cent of global adspend.

Meanwhile, mobile internet advertising’s share of the global ad market will rise from 5.7 per cent in 2014 to 15 per cent in 2017. Any ad or media agency (or indeed brand) that hasn’t already invested in this space needs to do so – and fast.

Overall, internet advertising will account for 34 per cent of global adspend in 2017, slightly behind television’s 35.9 per cent. Now this isn’t one of those ‘TV advertising is dead’ pieces – TV is still a fundamental channel for advertising messages, and will continue to be so for some time yet. But the report makes an interesting point: at current rates of growth, internet advertising will overtake television in 2018.

But let’s return to print. Adspend there continues to decline across most of the world, as it has done since 2008. Zenith Optimedia predicts newspaper adspend will shrink by an average of 4.9 per cent a year through to 2017, while magazine advertising will shrink by 3.2 per cent a year. Newspapers and mags’ combined share of global adspend has fallen from 39.4 per cent in 2007 to 19.6 per cent this year, and is expected to fall to 16.7 per cent by 2017.

But as I said earlier, when Zenith talks about print it means literally that – words and pictures on paper. It doesn’t include the ad revenue newspaper publishers like the Mail, Telegraph or Guardian make from their mobile and online activities.

Which makes News Corp’s acquisition all the more interesting. Although the UK’s biggest newspaper publisher, News Corp – the publishing and Australian broadcast assets of the old News Corporation, split off from the rest of the Murdoch empire in the wake of the phone-hacking scandal – has a mixed record when it comes to “new” media, and has recently lagged behind some of its rivals when it comes to making acquisitions in the digital space.

So I think that even at a premium price of £114m (£58m in cash now, a further £56m if certain performance targets are met), Unruly looks like a good buy for News.

For a start, it gets one of the very best video ad companies in the business. Unruly, based in – where else? – Shoreditch, specialises in creating video content on the open web (ie outside YouTube or Facebook), and it has a very good web video analytics tool. Its clients include Unilever, T-Mobile, Adidas and Renault, and in the past it’s built partnerships with the likes of Hearst and USA Today, and despite the fact it’s never made a profit – not unusual among tech start-ups of course – has long been a darling of the ‘Tech City’ scene.

Better still, News gets to keep Unruly’s three founders, Scott Button, Sarah Wood and Matt Cooke, who will work within a separate business unit and report to… new News Corp boss Rebekah Brooks, who is thought to have led the buyout. These three and their team can bring an awful lot of experience in a market that News’ senior execs won’t necessarily be familiar with.

Tellingly, Unruly won’t just be working for The Sun and the Times titles, but also HarperCollins and other publishing brands; and it’ll be interesting to see how it will link with Storyful, the ‘social news agency’ News Corp bought last year.

Investors in the News Corp business will also be cheered by the news.

To return to the Zenith Optimedia report: it forecasts that global adspend will grow 4 per cent to reach $554bn in 2015, and will accelerate to 5 per cent growth in 2016, boosted by the 2016 Summer Olympics in Rio, the Uefa European football championships and the US presidential elections.

Adspend will then slow down slightly in the absence of these events, growing 4.4 per cent in 2017 (and of course, many, including WPP’s Sir Martin Sorrell, have said that the outcome of next year’s UK EU membership referendum may have a dampening effect).

But the lesson is clear: advertising is growing, all over the world – even in mature markets like the US and UK; but the channels by which those advertising messages reach end users are changing, and changing fast.

Steve King, Zenith Optimedia’s worldwide CEO, and the man who commissioned the research, says: “Mobile technology is rapidly transforming the way consumers across the world live their lives, and is disrupting business models across all industries.

“We are now witnessing the fastest transition of ad budgets in history as marketers and agencies scramble to catch up with consumers’ embrace of the mobile way of life.”

The challenge for brands and their agencies, as well as media owners, is to understand that. To be fair, News Corp CEO Robert Thomson and Rebekah Brooks seem to have done just that.