VidCon This Week - "Must Attend" - Here's Why

[VidCon -- the premier "gathering place" for the new digital economy and ecosystem -- starts later this week in Anaheim, California.  I'll be there Thursday and Friday -- including co-hosting an exclusive event with YouTube.  

If you don’t know VidCon, you should.  In fact, you must.  It's all about everything that IS digital video -- YouTube, YouTube “celebrities,” all new "off YouTube" video platforms (like Facebook, Snapchat, Vessel), Viners, MCNs, OTTs, and all of the brands, ad-tech companies, data analytics companies, VCs, and others that support them.  This one is NOT to be missed.  

Here’s why.  Here’s my in-depth article after experiencing my first VidCon last year.  This should give you an idea of why VidCon matters.]

VidCon 2014 --  like the 1892 Chicago World’s Fair that heralded a new era of disruptive technology (how do you like that reference?) -- this may be the event upon which we look back and say, for media companies, brands, and marketers, “this was the moment that defined the mainstreaming of premium short form video content and consumer engagement via technology and the fundamental overall transformation of the media and marketing business in general.”

That is no hyperbole -- that analogy is apt, and this sea change is real, very real.  And to “get” -- really “get” -- that fundamental point (from which fundamental strategic shifts inevitably must follow -- or not, at your peril), you just gotta be there.  On the ground.  At VidCon.  You just gotta see and “feel” the energy of the throngs of 10-20 year old kids who scream and swarm -- a la “back in the day” with The Beatles (another bell-weather of things to come at that time) -- every time they saw a YouTube “star”.  Those shrieks -- that frenzy -- happened every 10-15 minutes (or more) throughout the 7 hours I attended my first VidCon yesterday.

And those 7 hours cemented -- even more deeply -- what I had already concluded (but hadn’t really “felt” on a mass scale with the new generation of consumers -- i.e., the kids that media and brands want and need to reach right now).  That you better get on the bus in this transformed YouTube economy or forever be left behind (this picture of the kids with the signs says it all).  I was not alone with the deep internalization of this point.  Long-time digital media exec David Hyman -- who founded MOG music (acquired by Beats Music) and with whom I interacted “back in the day” at Musicmatch when he was with Gracenote (acquired by Sony) -- summarized it perfectly.  In his words, “This Blows My Mind!”  I violently agreed.

But it is not just about the fans.  VidCon brings together industry execs and the creative community together with the fans -- something that is rarely done at industry conferences (Comic-Con is another rare example).  And here’s the point -- all media companies and brands need to have their minds blown.  We are in the midst of a sea-change people.  Fundamental sea-change.  The media business -- and the way that marketers/brands engage with consumers -- will never be the same.

But, the vast majority of media and marketing execs still just don’t “get” it (or don’t want to “get” it and hope to wish these transformative/disruptive changes away).

One glaring example.  YouTube apparently invited the top 100 brands to attend VidCon -- to experience it -- on their dime.  Yes, YouTube offered to pay for all of their expenses.  But you know what?  Only 30 of those 100 brands took them up on that offer!  That is insane!  Those other 70 marketing execs should be, um, demoted!  They will be if they don’t change their mindsets fast, because their worlds are being rocked right now.  And, the pace of this transformation (disruption, or whatever you want to call it) is accelerating.

 Here is another example.  These 10-20 somethings “think different” -- they just do.  The world of YouTube has wired their brains differently -- and their sensibilities are just different (and in many ways, refreshing).  Gone are the days -- at least for them -- of the traditional definition of “Celebrity.”  Yes, they still may like the boys of One Direction, but “celebrities” of this new media age are fundamentally different from the celebrities of yore.  They are relatable.  They are approachable.  They are authentic.  They are just simply “regular” kids who somehow amassed a frenzied following using the YouTube platform.  That’s why, no matter how many times they were accosted at VidCon yesterday, they stopped, talked and took pictures with the kids who adore them.  Again, the only way to really “get” this is to attend VidCon -- to swim in that sea of kids -- to watch how they react.  To watch how they cry after meeting their favorite YouTube “star” (yes, I saw several girls crying because that experience was simply overwhelming).  If you have any doubts, just watch these two videos (the first shows screaming girls flock to YouTube “star” Ricky Dillon -- and the second shows fellow stars Kingsley and Lilly Singh take the stage for a Q&A).  VidCon 2014, among other things, was Coachella for Kids! (I coined that, so don’t use unless you give me royalties ...).

 One more glaring example underscoring how the media world has changed for Gen Z took place when legendary media mogul Jeffrey Katzenberg took the stage for a fireside chat following a panel of digital media/YouTube economy execs.  In the words of a colleague who attended that event, “the room was packed, but half the people left when Katzenberg took the stage.”  To be clear, this is no slam on Katzenberg.  He absolutely fills (and overflows) a room in the “traditional” media world.  But, that’s the point.  That world is gone.  Nothing is “traditional” anymore.  For media execs.  For marketing execs.  (Fortunately for DreamWorks, Katzenberg “gets” it -- that’s why DreamWorks is ahead of the curve with its acquisitions of MCNs AwesomenessTV and Big Frame, as well as its recent launch of YouTube network Dreamworks TV (about which I recently wrote)).  Doesn’t mean that “traditional” media has no role in this brave new world -- it just means that so-called traditional media platforms (TV, motion pictures, etc.) are now just part of the overall multi-platform spectrum and world in which we live.

VidCon 2014.  For me, the single most important and “must attend” industry event of the year.  I would argue that it should be the same for media, marketing and brand execs.

Mobile Is The FIRST Screen - Wash. Rinse. Repeat.

Media executives -- shower yourself in the new reality.  Mobile is the second/companion screen no more.  Mobile is the FIRST screen plain and simple.  Read that again -- and soak it in -- because this new reality should influence EVERYthing you do.

I have written about this -- and have counseled anyone who would listen -- over and over again for the past year.  But, only now is it sinking in at a mass scale, because the statistics to this effect are undeniable.  Here are some of the latest "must read" stats from Deloitte:

(1) Millennials now watch more TV shows (not just YouTube videos!) on mobile devices than on the traditional TV box -- 57% of their viewing behavior is on the small screen -- their first screen;

(2) 25% of these Millennials outright cancelled their pay-TV services in the past 12 months or haven't had one for over one year (that's why Cablevision's CEO, in a remarkable watershed announcement just last week, expressly marketed new "cord cutter" and "cord never" packages and told the Street that it considers itself to be a "connectivity" company (rather than a content/programming company);

(3) 72% of these Millennials indicated that streaming video is the most important way for them to view video (including television programming).

Here's one media executive who fully "gets" this -- and recently prodded other media executives at MIP to embrace and act upon this new reality -- Eric Scherer, Director of Future Media at French broadcaster France Televisions.  Here are some choice quotes from his speech at MIP:

"The TV industry will have to work on a mobile-first strategy.  Not a digital-first strategy, but a mobile-first strategy, because mobile is now the first screen, and it's taking time away from the TV."

"They [the millennials] are always mobile, they are always social, they are always interactive ... and it is more and more live ...".

"The young people will not come back to the TV screen -- at least the major TV screen that we knew for the last 40 years."

In commenting about multi-channel networks (MCNs) -- most of whom increasingly consider themselves to be multi-platform networks (MPNs) -- Scherer said, "These are the kids now ruling the entertainment, and it's just the beginning of it.  Again, new grammar, new syntax, new vocabulary."

Amen to that Eric.  Amen.

Let's meet up in June at Live Earth (expect my separate Forbes article about Live Earth soon) in Paris and look back at how much more things have changed in just the couple months from this point.

Because they will ....

MCNs No More, "MPN" Please"! (or, What's In A "P"?)

As you readers know, I write continuously about MCNs (multi-channel networks).  And, recently, I have been writing about escalating challenges to YouTube.  So, where do the "'twain" meet?  At the nexus of the overall OTT video lexicon, that's where.

You see, several of the leading digital-first video networks formerly known as "MCNs" no longer answer to that name/acronym.  They prefer (justifiably) the new significantly expanded label "MPN" -- as in, multi-platform network.

What's in a name?

In this case, a lot!  "MPN" connotes mass distribution of videos across multiple distribution platforms -- not just YouTube.  While these mobile/millennial-focused new media companies initially birthed and aggregated their videos as channels on YouTube only (hence, the moniker "multi-channel" networks), now YouTube is only one of many (to be sure, still the most critical "one").  The new MPN game for most is to now initially build mass audiences on YouTube, but then take those audiences -- and monetize them -- off YouTube.  That's why these MPNs seek the widest spray of their video programming across the widest array of distribution platforms (including the likes of Facebook, Snapchat, Twitter, Vessel, Xbox -- just to name a few) to create a non-55/45 revenue story.  They just can't drive 55! (a musical reference that is likely lost on several of you ...).

Call it simple evolution in the OTT video world.  Just like Webster's continuously expands to meet the changing language of the times, the OTT video and digital media/tech dictionary expands to more accurately reflect movement in the overall space.

And, significant meaning in that movement there is ....

Disney/Maker, 1 Year Later -- Your "Must Read" for SXSW (or, "Studios, Do Not Go Gentle Into That Good Night ...")

It's SXSW time.  Are you ready?

Well, I'm here to help.  Here's some easy prep for the endless conversations you will face while clutching your drink.  Here's my SXSW digital media ice-breaker.

TOPIC?  Disney/Maker Studios.

CONTEXT?  It's been almost exactly one year since Disney snapped up mega-MCN Maker Studios for a mega-price-tag ranging from $500 Million to $950 Million.

THOUGHT-PROVOKING 2-PART QUESTION?  Too high, too low?  Smart deal, dumb deal?

I know, I know, the vast majority of you will immediately dismiss the question itself -- undermining its essence by refusing to give it any semblance of merit.  In other words, most of you will now excuse yourselves, find the nearest bartender, and ask for your next drink.

But, hold on there Cowboy.  Not so fast.  Lots of reasons for Disney to do that Maker deal.  Lots of good reasons.  In fact, lots of excellent reasons (I wrote these down in my year-ending Variety piece titled "3 Digital Media Mega-Deals That Defined the Year").

So, here we are, one year later.  SXSW-ing.  How are things different now in the video world from where we were one year ago when we last partied in Austin?

Alas, how do I count the ways?

Just think about the last 12 months.  Just think about the pure exhaustion you felt (and continue to feel) every time you checked your favorite digital media publication -- only to find yet another mega-deal or mega-investment in the MCN/YouTube economy.  Since Disney/Maker, we have heard a steady -- and accelerating -- drumbeat of hundreds of millions of dollars of investment and hundreds of millions of dollars of M&A in connection with new digital-first video companies (my company, Manatt Digital Media, laid these out in this year-ending Infographic -- and also in this MCN "Score Card").  I recently discussed related themes in this recent post where I laid out some of the most recent deals in this space.  Consider these you relevant "cheat sheets" for plane reading as you fly to Austin.

But, here's the main point of all of this -- IT IS HAPPENING!  MCNs are "happening."  MCNs are real.  Very real and very now.  They are not a fad.  Why?  Because an MCN represents so much more than its frequently dismissed and limiting acronym suggests.  An MCN symbolizes the fundamental transformation of the media and entertainment business in which we find ourselves today -- a transformation fueled by mobile-first, millennial-focused video content that is significantly more advanced today than it was when we found ourselves in Austin one year ago.  The pace of this transformation, in fact, is incredible.  And this breakneck pace demands bold actions that may make or break companies.  Companies big and small.  Including major media and entertainment companies.  It is "go" time.  Time to take action.  There is little time to study.  Get smart, fast!  It's time for all-nighters -- and grab your favorite study-buddy.

We are seeing (nay, feeling!) this sense of urgency at real scale for the very first time in the "traditional" media and entertainment business.  I hear it in virtually all of my conversations with industry insiders.  Only one year ago, the vast majority of senior level studio execs (I'd peg the number at 90% or more) had one of 4 reactions to news of the Disney/Maker deal: (1) "who is Maker and what is an MCN?"; (2) "why do I care about Maker and MCNs when I have a real media business to run?"; (3) "why would anyone pay anything for an MCN (let alone what Disney paid)? - they aren't profitable, after all, are they?", or -- at best -- (4) "interesting, let's see how things play out and learn from the other guys' mistakes."

Well, my friends, that ain't the case today.  Now, FOMO is in the air.  It is pervasive.  Disney/Maker and its endless MCN progeny of mega-M&A and mega-strategic investment have flipped the media and entertainment reality (or at least perception of it) on its head.  Now, the MCN alphabet is required learning in the studio classroom.  And now, it's not so much a question of "if" we should get into the mobile-focused, digital-first, millennial-fueled MCN/video game (after all, the majority of thoughtful studio execs now truly believe they are living in transformative times).  Rather, the questions are "how" and "when."  And, many of them now correctly fear that others will take the remaining MCN crown jewels sooner rather than later.  A smell of scarcity is very much in the air (as it should be).

So, my fundamental advice to all who listen -- advice which I pontificate passionately in virtually every conversation -- is this.  TAKE ACTION!  And take it now!  Make your moves -- or at least, a move (perhaps a significant strategic investment at a minimum).  Don't have the business model figured out?  Understand this -- NO ONE DOES!  Business models are evolving as fast as the media landscape is.  But, that doesn't change the fact that you just gotta be there (in the digital-first, mobile-driven millennial world -- where the kids are).  This is no time to waltz delicately and methodically into this feverish dance.  It's time to partner up.  If you hesitate -- if you turn around to grab some punch -- you just may find that your erstwhile dance partner has found another suitor. There are many to be found.  And many who are anxious.

This is a time to be aggressive.  This is a time to be bold.  This is a time to experiment and damn the torpedoes.  It's innovation time.  It's transformation time.

And, it's opportunity time ... for those who have the courage to seize it!

Media executives, "Do not go gentle into that good night ...."

Media Companies v. 2015: Smartphone-Powered, Digital First

[My post here originally appeared as a guest article in Digiday a few days back; I have updated it to reflect the new $24 million investment in gamer-focused MCN Machinima led by Warner Bros.]

That smartphone in your pocket.  Small form factor.  Massive impact.  That tiny screen is fundamentally transforming (disrupting?) each of our lives, including how we engage with content (movies and television).  That means fundamental transformation of the media and entertainment business right here, right now – with tens of billions of dollars at stake – yet very few media execs “get” this.  This changes in 2015.

A whole new class of mobile-driven digital-first media companies sprouted and blossomed in 2014 – so-called multi-channel networks (MCNs).  MCNs most typically are venture-backed start-ups that aggregate individual YouTube personalities and channels -- frequently for specific niche passionate audiences (think fashion and leading MCN StyleHaul) -- in order to achieve scale, fund video production, and maximize ad dollars.  Sounds benign enough, right, especially when their impact is marginalized by the almost-dismissive and somewhat-faddish acronym “MCN.” 

But, make no mistake, MCNs are media companies with transformative impact.  They simply are a new kind of media company.  Digital-first media companies.  These are media companies by millennials, for millennials.  And, while they do not supplant “traditional” media companies, they most definitely are a necessary extension of them in this new multi-platform media world.  After all, mobile is where the youthful eyeballs that “matter” (at least to marketers) now consume the majority of their video content.

That’s why Disney – the largest traditional media company of them all – slapped down up to nearly $1 billion last year to buy one of the largest MCNs -- Maker Studios.  As vast as its resources are (and the Mouse House certainly has plenty of cheese), Disney had the commendable self-awareness to recognize that it lacked the DNA to play effectively in the smartphone-driven, short-form video, millennial world – a world that demands a very different way of thinking about content development and engagement.  Rather than build it themselves, they bought that expertise and critical mass of short-form content (and the personalities behind them).  They paid up to double down on the MCN world, which was excellent news not only for Maker’s investors, but also for other leading MCNs and the investors behind them. 

Other major studios – and perhaps even technology companies like Apple, Samsung, and Amazon, whose divergent business models increasingly are content-driven – will follow suit in 2015.  This is a classic case where demand for MCNs with scale outstrips supply.  After all, content is increasingly king, and that means big numbers.  Last year, in addition to the near-$1 billion Disney/Maker deal, Otter Media (the joint venture between AT&T and The Chernin Group) paid a rumored $200-$300 million to buy competing MCN Fullscreen, and European-based media company RTL Group recently sewed up fashion-focused MCN StyleHaul for a price that values the company up to $200 million with earn-outs.

These are numbers that make even Northern California VCs – ever-cynical about all things content-driven (especially when they are driven in LA where most leading MCNS are based) – take notice.  They have smartly started to pour tens of millions of dollars into video-driven new media companies.  Case in point, BuzzFeed.  Blue-chipper Andreessen Horowitz invested $50 million to accelerate smartphone-targeted digital-first video production.  And, the accelerating pace of foreign-driven M&A (like RTL with StyleHaul) and investment (like BSKYB and Liberty Global’s recently announced $28 million investment with others in sports-focused MCN Whistle Sports) underscores that this sea change in the media business is not just a U.S. phenomenon.  Digital-first content is borderless and globally shareable.  We live in a new world order of digital media.

Brands too are finally taking notice and fundamentally changing their behavior.  They understand that smartphones – and the millennials who hold them – demand a different and deeper form of engagement.  Pre-roll and pop-up ads simply don’t work anymore.  Millennials demand “authenticity,” a word that is a fundamental part of the new digital-first lexicon.  You hear that word – and the resulting marketing solution of “branded” or “integrated” content -- everywhere.  While that notion certainly is not completely new to marketers as we enter 2015, what is new is that for the first time, they will shift significant marketing dollars away from traditional media to more engaging and measurable digital platforms. 

Yes, there will be blood as digital begins to cannibalize traditional ad spends.  That’s why we have seen an accelerating pace of ad-tech company exits like increasingly video-focused Facebook’s reported $400-$500 million buy of LiveRail and Yahoo!’s recent $640 million acquisition of BrightRoll. 

But it doesn’t end there.  Several brands will go even further and invest big to become millennial-driven, digital-first MCN-like media companies themselves.  Red Bull is the poster child here, aggressively developing and aggregating its own video content for digital consumption whenever, wherever.  GoPro, Marriott, and Pepsi also have proudly announced such ambitions.  Make no mistake.  We are not just talking advertising and marketing here.  We are talking whole new media businesses for brands, bringing them head-on against both studios and other MCNs.  Red Bull, in fact, operates its “Media House” studio as a separate P&L and is measured by its stand-alone success.

Those who listened closely in 2014 heard (and internalized) these smartphone-driven digital-first media transformational winds of change.  So, listen closely now.  Do you hear it?  Yes, that is the “whoosh” of massive mounds of money changing hands all around the video ecosystem.  Just last week, Warner Bros. led an additional $24 million round in gamer-focused Machinima -- and a few weeks before that, BSKYB and Liberty Global formally announced their $28 million Series B round with others in Whistle Sports – a double-barreled MCN big bang to start the year.

In the immortal words of Karen Carpenter (how ‘bout that for a deep reference?), “We’ve only just begun …”.

All About MCNs - My Panel Tomorrow at the DEW Conference

Digital Entertainment World (DEW) starts today in LA -- and tomorrow I moderate a panel from 12:40-1:20 pm titled "MCNs: Monetizing the YouTube Economy" that features a "who's who" list of MCN CEOs as panelists.  Joining me are:

Roy Burstin -- Co-Founder & CEO of MiTu -- the leading Latino creator-focused MCN that just recently announced a $15 million round of financing;

Amanda Taylor -- Founder & CEO of DanceOn -- the leading multi-platform dance-focused company that counts Nigel Lythgoe (founder of American Idol & Dancing with the Stars) and Madonna, as well as major media company AMC Entertainment;

Allen DeBevoise -- Co-Founder & Chairman of Machinima -- the leading young male focused MCN; Allen serves on the boards of several A-list MCNs, including StyleHaul, DanceOn, MiTu, and IndMusic;

Sanjay Sharma -- President & COO of All Def Digital -- which is urban-focused, backed by Russell Simmons and closed a $5 million Series A round last year;

Reza Izad -- Co-Founder & CEO of Collective Digital Studio -- a major MCN that received a major strategic investment from European mega-media company ProSieben last year and counts billions of views per month.

Marvin Scott Jarrett -- Co-Founder & CEO of Popular -- a new young female-focused MCN that launches March 15; he previously created iconic mega-creative and visual media brands Nylon and Raygun;

Of course, I will ask the panel how both they and video creators make money.  But, I will also ask each of them started, why they chose their particular focus, how they amassed their initial critical mass of content, and what was their particular tipping point.  I will also ask them to justify the mega-price-tags fetched by other leading MCNs last year (e.g., Disney buying Maker Studios for a deal that could value the company up to nearly $1 billion) and how they see MCNs evolving in 2015 and beyond.

Should be a good one.  Tomorrow, Wednesday, 12:40 - 1:20 pm.  See you there.

My 5 Predictions for Digital VIDEO in 2015

My post below was originally featured as a guest article in VideoInk, titled "5 Predictions for Digital Video in 2015."

2014 proved to be a transformational year for digital-first video and the YouTube economy.  The short-form video world essentially “grew up” and traditional media, major brands, and even previously cynical Northern California investors took notice.  It was easy to see why.  2014 introduced the video content-driven mega-deal. Disney bought leading multi-channel network (MCN) Maker Studios for up to $1 billion, Otter Media uploaded rival MCN Fullscreen in a deal rumored to be up to $300 million, and European-based RTL Group tried on Stylehaul for a deal that values that vertically-focused MCN up to $200 million.

So, with that backdrop, here are my Top 5 predictions for digital video in 2015:

(1)  The pace of MCN acquisitions will accelerate as more studios jump into the M&A game rather than try to figure out this new content platform themselves.  Some leading MCNs ripe for acquisition include foodie-focused Tastemade, dance-focused DanceOn, Latino-focused Mitu, sports-focused Whistle Sports, and Collective Digital Studio.  (Note – Manatt Venture Fund is an investor in DanceOn and Whistle Sports is a client).

(2)  But the MCN action won’t be just domestic.  International becomes a major new battleground in the borderless digital video world.  Companies big and small will extend their reach via major partnerships, investment, and M&A.  Notable 2014 deals included RTL’s acquisition of Stylehaul, BSKYB’s $7 million strategic investment in Whistle Sports, and Fullscreen’s partnership with major Indian MCN Qyuki.

(3)  Major consumer brands follow suit.  For the first time, marketing dollars shift in significant scale from traditional media to more measurable digital platforms.  This takes the form of branded content -- not just ads.  As a result, investors place major bets on ad-tech companies to maximize and measure those spends.  We will see a number of significant ad-tech exits like Yahoo!’s recent acquisition of BrightRoll for $640 million.  Several brands will go even further and invest big to become digital-first lifestyle media companies themselves a la Red Bull, developing and aggregating content.  GoPro, Pepsi and Marriott have proudly announced such ambitions.

(4)  Both “traditional” media and YouTube itself are increasingly challenged by this fast-accelerating activity and by new competing video platforms like Facebook and Vessel (which just opened its paid subscription-first MCN kimono last week).  These “off YouTube” platforms will seek to lure content creators with tales of more attention and significantly greater revenues.

(5)  Seeing all this activity, and harboring a FOMO mentality, Silicon Valley investors will increasingly make pilgrimages down to LA --  the epicenter of this video content innovation and creativity.  After all, even super blue-chip VC Andreessen Horowitz vouched for video via its $50 million investment BuzzFeed.  That accelerated pace of investment will only further fan the flames of the vibrant SoCal entrepreneurial scene and the digital-first video revolution.

2014, exciting, transformative times for the media world.  And, just a precursor of more (much more!) to come in 2015.

MUST READ White Paper -- Brands, "Earning & Owning YouTube"

All major brands and digital media mavens in general -- here is a “must read” brand-focused analysis/report titled “Earning & Owning YouTube” from our friends at leading digital video-focused publication VideoInk. Thanks to JJ and Sahil of VideoInk for their insights and overall support throughout the year. VideoInk has become one of my “Must Read” publications.

MCNs Beware! New Rules for Branded Content & Native Advertising? (or, When Oreos Meet MCNs) -- A “MUST READ” Guest Post

Below is a critically important guest post by Manatt Digital Media’s Linda Goldstein, a partner and the chair of our Advertising, Marketing & Media Division.  She is widely recognized as being one of the leading advertising lawyers in the country, representing clients in every sector of the advertising and marketing industry in advertising, intellectual property and digital media matters.  So, when she talks, people listen.  That means what she writes below should be carefully considered -- and is not intended to be alarmist at all.  It is just the facts -- and, now “just the way it is ....”  This is MUST READING for anyone participating in the YouTube economy.

An Oreo Cookies digital ad campaign -- featuring a series of videos by famous UK-based YouTube personalities -- has been banned by the UK’s Advertising Standards Authority on the grounds that it failed to clearly disclose the fact that those videos were part of an advertising campaign. The case, which was based on Oreo’s “Lick Race Challenge” campaign, understandably has sent shock waves through the MCN community here in the U.S., as well as in the U.K., particularly in light of the FTC’s focus on native advertising (and increased enforcement of its own testimonial and endorsement guides which require disclosure of material connections between endorsers and brands in social media).

The YouTubers involved were all paid by Mondelez, the owner of Oreo, to participate in the “Lick Race Challenge.”  Each produced videos of themselves licking, dunking and performing other entertaining “acts of kindness” with their Oreo cookies.  One such video by YouTube stars Phil Lester and his mate Dan Howell -- whose “Amazing Phil” YouTube channelcounts over two million subscribers -- captured over 1.5 million views in five months.

The case has all of us who specialize in digital marketing and advise the advertising world scratching our heads.  Looking at the facts, it’s hard to understand exactly what Mondelez did wrong. In fact, there seems to be a lot that Mondelez and the YouTubers actually did right.

First, in its creative brief to the YouTube stars, Mondelez instructed them to make it clear that their videos were promotional in nature.  That’s a good thing.

Additionally, the ASA itself acknowledged that all ads contained express references to the Oreo company and to other “Lick Race Challenge” videos.  In fact, the ASA acknowledged that most of the videos expressly stated "Thanks to Oreo for making this video possible" (or similar variations) in the video description box and/or as part of the video itself (and further either mentioned contact with Oreo or that the video was part of a promotional campaign).

So why wasn’t this enough?

Two reasons. First, the ASA felt that the commercial nature of the videos needed to be disclosed before viewers engaged with that content, because those native ads were featured on online video channels that usually are editorial based.  And second, the ASA felt that statements like, "Thanks to Oreo for making this video possible," were not sufficient to make it clear that there was a commercial relationship between Oreo and the YouTubers.  The ASA concluded that the presentation of each ad was similar to the editorial content of the respective channels (i.e. “native advertising”).  So, while consumers might have understood that somehow Oreo was involved with the relevant videos, they might not have appreciated the full extent of the commercial relationship.

If these concerns sound familiar, they should.  These are many of the same concerns being expressed here in the U.S. regarding native advertising. Earlier this year, the Federal Trade Commission held a workshop on the subject of native advertising to explore how disclosure of the commercial nature of sponsored advertising.  Separately, the National Advertising Division (“NAD”) of the Better Business Bureau, which is the leading self-regulatory body within the advertising community, has been extremely active in bringing cases against sponsors of native advertising who, in the eyes of the NAD, have failed to adequately disclose the commercial nature of these ads.

Like the UK’s ASA, the NAD has also stated -- in several cases -- that disclosure of the fact that the native content is “sponsored” or “commercial” in nature should be made before the consumer engages with the content.  The NAD has also stated that the native content should clearly disclose the nature and extent of the advertiser’s involvement. While NAD is a self-regulatory body, companies who fail to comply with NAD recommendations can be referred to the FTC.

So why is this relevant to MCNs?

Because, as the ASA has just reminded us, MCNs by their nature are a form of “native advertising” -- and the talent involved in such videos have an obligation to disclose any material connections they have with the brands that pay them.  To the extent that these videos do not contain adequate disclosures both of the commercial nature of the content and of the relationship between the talent and the brands, both the brands and the talent could find themselves the target of an enforcement action by the FTC.  And, those are never a pleasant experience.

Many segments of the publishing industry are currently working on self-regulatory models for disclosure before the government steps in. The MCN community might be equally well advised to consider these issues as an industry and come up with disclosure solutions that satisfy both the marketing and legal objectives.  

No matter how you stack it, Linda’s guest article should be taken seriously ... very .... due to the potential far-reaching implications.