May 23 2023 - Layoffs, TikTok & AI

👋Happy Tuesday all. We're back with another busy day of news, no fuss – let's get into it.

Quick Take

• Meta gets hit with it's biggest fine ever
• Disney layoffs continue this week with WBD confirming layoffs this summer
• TikTok dominating the headlines as usual
• Beauty and Social are thriving

Disney has begun its third round of planned layoffs, which is estimated to affect more than 2,500 jobs across the company. The cuts are not targeted at any specific division, and while television was hit hard in the second round, it will be largely spared this time with only a small number of layoffs. These layoffs are expected to be the last significant ones for a while, though there may be some smaller cuts in the coming months.

Meta has been fined a record $1.3 billion by Ireland's Data Protection Commission for violating European Union data protection rules. The company has also been ordered to stop transferring data collected from Facebook users in Europe to the United States. Meta plans to appeal the decision, and a new data-sharing pact between the EU and the US is being negotiated, which could potentially nullify the ruling. The fine highlights the increasing challenges faced by companies in moving data freely across borders due to data protection regulations and national security laws. The ruling could impact Facebook's business in Europe and its ability to target ads. Meta is relying on a new data agreement between the EU and the US to replace the invalidated one from 2020. Compliance with the order could pose technical difficulties for Meta, as it may need to delete significant amounts of data about Facebook users in the EU. The fine is seen as a signal that serious data privacy infringements have significant consequences.

Warner Bros. Discovery is preparing for another round of layoffs in its television business, specifically in its cable TV division, which includes Discovery-branded networks. The cuts are described as "pockets of refinement" rather than wholesale cuts, and the timing is expected to be later this summer. Warner Bros. Discovery operates a range of cable networks, including Discovery Channel, TLC, Food Network, TNT, and TBS. This comes after previous rounds of job cuts in various divisions of Warner Bros. Discovery, as well as layoffs in other media companies such as Paramount, Disney, and NBCUniversal throughout the year.

TikTok has filed a lawsuit to block Montana's ban on the video-sharing app, claiming that the legislation violates the First Amendment and constitutional limits on state powers. The ban, which is set to take effect on January 1, would fine TikTok if it operated in the state or if app stores allowed its download. This legal challenge adds to the ban's existing legal challenges, including a separate suit filed by TikTok users and outcry from civil liberty and digital rights groups. TikTok, with over 150 million US users, has faced bans on government devices in several states, as well as restrictions from universities and the military, due to concerns about its Chinese ownership.

OpenAI's leadership propose an international regulatory body for AI similar to the International Atomic Energy Agency (IAEA) for nuclear power. They acknowledge the need for coordination among leading AI development efforts to ensure safety and proper integration with society. The proposed AI-governing body would establish and monitor international standards, conduct audits, and enforce compliance with safety measures. OpenAI suggests that tracking computing power and energy usage dedicated to AI research should be reported and monitored.

TikTok's plan to address U.S. government concerns about potential Chinese meddling, known as Project Texas, is facing challenges as the company and its cloud provider, Oracle, have not reached an agreement on monitoring the app. TikTok's CEO, Shou Zi Chew, previously stated that Oracle would have unprecedented access to TikTok's source code and algorithms, but sources indicate that Oracle employees currently have limited access and are not thoroughly reviewing the software. The impasse could complicate TikTok's efforts to gain approval from the Biden administration for the arrangement. The situation could have global implications, as TikTok is also working on a similar plan, Project Clover, to address data privacy concerns in Europe.

• Blizzard Entertainment is exploring the use of generative A.I. in video game design. The studio has trained an image generator on assets from popular games like World of Warcraft, Diablo, and Overwatch, enabling it to create concept art for new ideas more quickly than human designers. Blizzard hopes that generative A.I. can streamline the design and development process, making it more efficient and enjoyable. Other game developers, such as Microsoft and Ubisoft, have also experimented with A.I. tools to improve various aspects of game creation, from dialogue generation to quality assurance testing. While there are concerns about the impact of A.I. on jobs and copyright, industry professionals emphasize that human creativity and perspective remain essential in game development. Smaller studios are turning to start-ups for assistance in leveraging generative A.I. for asset creation and character design.

• Meta's acquisition of Giphy has not gone as planned, with Giphy's business declining under Meta's ownership and finding a buyer becoming challenging. Meta shut down Giphy's ad sales operation immediately after the acquisition, and the U.K. competition regulator forced the two companies to operate separately during an antitrust review. Meta is currently in talks with potential buyers, but the limited universe of interested purchasers poses a challenge. The regulator has ordered Meta to provide $75 million in cash to Giphy ahead of the sale to ensure it is sold as a viable business.
• Bose has been focusing on its creator strategy to modernize its marketing approach. The company has built a dedicated creative department consisting of a diverse group of creators, including audio specialists, designers, and videographers. They produce thousands of personalized content pieces each month for platforms like Instagram, TikTok, YouTube, and Facebook, targeting specific listening occasions. Bose has reduced its reliance on traditional ad agencies and instead prioritizes its internal creative capabilities. The company has launched various campaigns centered around music, culture, and diversity, aiming to engage with its core audience and expand its reach. By leveraging its internal creative team, Bose has seen positive brand metrics and increased competitiveness in the high involvement audio market. The company's CMO, Jim Mollica, advises other brands to be bold, establish strong relationships with finance teams, and demonstrate how investing in internal content creation can yield positive results.
• A survey conducted by Gartner reveals that CMOs are facing challenges in managing their budgets in the current economy. While most CMOs are pressured to reduce costs, the report highlights that social advertising is still experiencing growth. Despite declining budgets, 53% of CMOs plan to increase spending on social media, while 26% are reducing investment in search advertising. Conversely, consumer products' marketing budget has grown from 8% to 10.9% of revenue. CMOs are also increasing technology investments while trying to decrease labor costs.

• Disney is facing challenges in its traditional television business as earnings from TV networks decline faster than expected. The company has been using cash from its theme parks and linear TV (which generates revenue from ad sales and cable subscription fees) to offset the losses incurred by its streaming division. Operating income from linear TV fell by 35% in the most recent financial quarter, highlighting the need for Disney to adapt to the changing media landscape. CEO Robert Iger aims to make the streaming business break-even by September 2024, but investors have not responded positively, and Disney's stock price has remained relatively stagnant. The company has raised prices for Disney+ and introduced an ad-supported tier to increase streaming revenue. However, challenges in markets like India and the overall decline in linear TV viewership pose additional obstacles. The pressure is mounting on Disney to make streaming profitable and reduce reliance on traditional TV revenue sources.
• Mike Cavanagh, the acting head of NBCUniversal and president of parent company Comcast, faces a challenging time as he takes over amid turmoil in the media company. Cavanagh, known for his role in JPMorgan Chase during the financial crisis, has become a key figure at Comcast, and his long-term appointment as head of NBCUniversal is expected. He has already started meeting with Hollywood executives and has emphasized that no major changes are planned for the immediate future. Cavanagh must navigate challenges such as the struggling Peacock streaming service, declining TV viewership, and a writers' strike, while also addressing the question of NBCUniversal's profitability and potential partnerships or acquisitions.
• The beauty industry is experiencing significant growth and attracting new companies and investors. With a revenue of approximately $430 billion in 2022, the beauty market is projected to reach $580 billion by 2027, driven by factors such as the evolving definition of beauty, the importance of sustainability, and the rise of self-care. The premium beauty tier is expected to grow at an annual rate of 8 percent, indicating consumers' willingness to trade up and spend more on fragrance and makeup. However, the industry is becoming increasingly competitive, with independent brands scaling up and new challengers emerging. E-commerce has played a significant role in the industry's growth, and it is expected to continue growing at a rate of 12 percent per year. While China and the United States have been dominant markets, geographic diversification is becoming essential, with the Middle East and India offering potential opportunities. The convergence of beauty and wellness is another trend, as consumers seek products that not only enhance their appearance but also contribute to their overall well-being. Gen Z's influence is also shaping the industry, with their emphasis on authenticity, sustainability, and community.

• YouTube star MrBallen, also known as John Allen, has launched his own management company. The company, in conjunction with talent agency UTA, aims to sign and represent the next wave of YouTube creators. Its first signings include Nick Crowley and Nexpo (Ryan Cantu), who will be represented by both Ballen Management and UTA. The management company will focus on top narrative digital storytellers under the Strange, Dark & Mysterious umbrella. Ballen Management will work with UTA to expand its creators' content across various verticals, including television, film, publishing, live touring, merchandising, and audio. The new unit will operate independently from the rest of Ballen Studios, which has a first-look deal with Amazon Music.
• Netflix is introducing new filtering options for its My List feature to help users easily navigate through their saved shows and movies. The feature will allow users to filter their list by movies, TV shows, and categories like "Haven't Started" and "Started." Additionally, sorting options such as when something was added to the list, release dates, and alphabetical order will be available. Netflix is also adding a "Coming Soon" row to the TV app's homescreen, providing information about upcoming shows and movies and allowing users to set reminders for specific releases.

• Amazon employees at the company's Seattle headquarters have announced plans to walk off the job on May 31 in response to frustrations over layoffs, the return-to-office mandate, and concerns about Amazon's climate commitments. The walkout aims to draw at least 1,000 participants and is a joint effort between employee groups focused on the return-to-office policy and climate justice. The organizers criticize Amazon's lack of communication, transparency, and failure to fulfill climate promises.
• TikTok's introduction of search advertising seems to be on hold, as the platform is not satisfied with its current ad products. While advertisers can buy ad inventory alongside searches, they cannot bid on specific keywords like on Google. TikTok is increasingly being used as a search engine, particularly among young people, who rely on its algorithm to personalize their content. Selling ads based on these searches could be profitable, as seen with Google, but TikTok is still refining its search product. Marketers are divided on using TikTok for search, with some expressing interest but feeling the platform is not yet sophisticated enough. In the meantime, TikTok's Smart Performance Campaign (SPC) is gaining traction among performance advertisers, providing an automated approach to campaign management. TikTok aims to build an inclusive ads business that appeals to marketers across the marketing funnel.
• Kraft is increasing its investment in digital media, focusing on digital out-of-home (OOH) advertising and targeting millennial parents. Kraft aims to establish a strong connection with millennial parents by leveraging nostalgia and digital platforms where they spend their time, such as social media and apps like Instacart and Uber Eats. The campaign includes television and digital ads, digital OOH banners, and social. Kraft is focusing on social platforms that are popular for food and recipe discovery, such as Instagram and Pinterest, while excluding Twitter. The specific budget for the campaign has not been disclosed, but a quarter of Kraft's marketing budget was allocated to connected television, with the remainder going to digital displays and social media.

• An influencer agency is offering people $1,000 to scroll TikTok for 10 hours straight
• DoorDash faces lawsuit accusing it of charging iPhone users more for delivery
• Fake Pentagon explosion photo caused a real dip in the stock market
• Yellen Warns the U.S. Could Default as Soon as June 1
• Bioré and Influencer Apologize After School Shooting Ad
• Deutsch LA’s Sara Singh uses culture to inform her viral strategies
• How DoorDash and e.l.f. Beauty Leverage First-Party Data to Fuel Personalized Experiences
• Adani Enterprises surge 19% after report finds no evidence of stock-price manipulation
• WhatsApp adds iMessage-like editing with a 15 minute window

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