Programmatic Trends Depress Digital Ad Revenue at Meredith

Digital Sales Slip 4% at the Publisher of AllRecipes, Family Circle

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Meredith started publishing a print version of its popular AllRecipes website last year.
Meredith started publishing a print version of its popular AllRecipes website last year.

Advertising technologies such as real-time bidding and automated auctions are driving digital revenue downward at Meredith Corp.'s National Media Group, which includes the company's magazines like Better Homes & Gardens as well as websites such as AllRecipes.com.

Digital ad revenue fell 4% at the National Media Group during the quarter ending June 30, Meredith said in an earnings release today. The decline comes despite Meredith's 2012 acquisition of AllRecipes.com, a large website in a popular area, and is partly to blame on the shift to programmatic ad-buying, executives said during a call with analysts to discuss the results.

"The marketplace has changed a quite a bit in the digital landscape," said Tom Hardy, president of the National Media Group, referring to both consumers' shift to mobile and marketers' move toward programmatic technology. Procter & Gamble, the world's largest ad spender, is working toward buying most of its digital ads through programmatic tech by the end of thisyear.

Quarterly revenue for Meredith's National Media Group declined 5% to nearly $280 million while ad revenue fell 8.5% to about $122.7 million.

The quarter was the last in Meredith's fiscal year, and the National Media Group's revenue for the 12 months ending June 30 totaled roughly $1.1 billion, about the same as the 12 months prior. Ad revenue was off 6.4%, to $482.8 million.

Digital ad revenue comprised 16% of advertising sales across the National Media Group during Meredith's fiscal year, up only slightly from 15% the year prior.

Weakness came from digital display ad sales across its women's network, which includes the websites of Better Homes and Gardens, Family Circle, Fitness and More magazines, Meredith Chairman and CEO Stephen Lacy said Thursday.

"AllRecipes continue to perform in a very strong way," he added.

AllRecipes drew 26.3 million unique U.S. visitors across desktop and mobile devices in June, according to ComScore, behind only the Food Network among food websites. Meredith began also publishing AllRecipes as a print magazine last year.

As print ad revenue declines across the magazine industry, publishers have looked to their websites and mobile platforms to deliver growth. The rise of programmatic buying, in which digital ads are often bought and sold in automated auctions, has stymied their efforts by undermining digital ad rates overall. Publishers have fought back by creating private ad exchanges, setting price floors and placing an emphasis on custom content, often in the form of native advertising packages.

Meredith has hired staff to focus on its own programmatic technology, Mr. Hardy said on the earnings call Thursday. In January, for instance, the company hired Chip Schenck from Pubmatic, a company that specializes in programmatic technology, to lead its efforts in the space.

The company has also made "significant investments" in the data it collects from readers. "What we are finding is that our proprietary data has a lot of value to lot of leading advertisers and we will be able to target that data to specific advertising campaigns and also in the mobile area," Mr. Hardy said.

A rise in mobile consumption among readers has also created problems for publishers, because ad rates on mobile are typically cheaper than on desktop and in print.

Meredith benefits from owning a number of TV stations in local markets in addition to its magazines. And the TV stations delivered more than $111 million in revenue in the fourth quarter, a 20% increase over the previous year, and nearly $403 million during the fiscal year it just finished, a 7% boost.

Net profit across all of Meredith, including its magazines and TV stations, climbed about 20% to $40.4 million during the fourth quarter. But profits fell 8.1% to $113.5 million for the year it just ended.

Mr. Lacy said the company is looking into possible acquisitions of both magazines and digital properties. It's currently "in conversation" with individual players in the magazine space, he added.

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