Rising online ad prices mean customer acquisition costs have spiked for D2C businesses, which already had a higher marketing spend base than offline equivalents.
At the same time, the data used to target and measure online advertising—the key channel to find and convert customers—is being eroded.
There will be consolidation in the crowded D2C landscape, providing scale benefits. Sellers will also have to refocus their marketing attention on increasing customer lifetime value.
While VMO2’s Q1 results were strong, its subscriber additions were weak, particularly on the broadband side, with a seemingly somewhat deliberate go-slow as the year began, but cost-of-living crisis and fibre overbuild may also be factors.
We see considerable scope to ramp up commercial aggression from here given the sizeable tailwinds from price increases, synergy benefits and the migration of the Virgin Mobile MVNO from Vodafone.
We remain sceptical of VMO2’s further network extension ambitions and hope that no news on securing a financial partner is good news, increasing the odds of it pursuing the less risky strategy of expanding its footprint through wholesale.
ITV met advertising expectations in Q1, matching the forecast 16% YoY increase in total ad revenue (TAR) (£468 million), while Studios (+23%, £458 million) bolted well above pre-pandemic levels. We assume, however, that Q1 was blessed in terms of the timing of programme deliveries
The amalgamation of ITV's three domestic digital services, ITVX, is on track to launch in Q4, with a bulked-up library, clearer strategy, and new features: perhaps arriving right on time to take on Netflix's ad-supported tier
The proposed Media Bill includes a couple of potential benefits for ITV, such as expanded prominence on connected devices and major online platforms, including on smart TVs, set-top boxes and streaming sticks, along with the possibility of a remit more aligned with the modern media landscape—however details around execution are currently lacking