Vodafone’s deteriorating financial performance is as much due to an increasing margin of underperformance relative to its peers as to challenging markets such as Italy

A strategic refocus on operational performance is long overdue and seems largely sensible, save for the continued push for discount-led convergence products which are driving underperformance

Although Vodafone posted 3% organic EBITDA growth for H1 of this year and is guiding to same for the full year, we view this definition as overly flattering with true EBITDA performance flat and revenues in decline

Most UK consumer spending, and the vast majority of its growth, is in categories which reflect who we are and where we feel we belong: lifestyle signifiers, passions, and social activities.

Communities are at the heart of this growing economy, but ad spend on media which visibly targets us as members of a group in a relevant context has on average lagged behind in these categories.

Advertisers recognising the power of emotionally and culturally relevant context in media, sponsorships or events, are finding an opportunity for building brands for the identity economy.

European mobile service revenue growth was sharply lower this quarter dropping to -0.7% after two years in positive territory, owing to weakness in the southern(ish) European markets of France, Italy and Spain

Iliad has strong momentum in Italy and we expect ARPU dilution to worsen into Q3, with the subscriber loss impact also growing.  Any loss of traction for Iliad is likely to drive another round of price cuts

We expect continued north/south divergence in Q3 with the anniversary of the European roaming cuts boosting the UK and Germany in particular whilst the outlook for Southern European operators remains challenging

EBITDA growth guidance of 1-5% is in question with group revenues flat to down. Counting AMAP growth in local currencies helps, as will cost control and roaming relief. Sustaining growth in Germany will be key; convergence-led ARPU declines could prove to be something Vodafone can’t afford

Vodafone’s UK business performed strongly in terms of mobile subscribers and fixed business financials, although revenue growth is still lacklustre. Profitability is expected to increase markedly, boosted 10ppts by roaming tariff relief

Although we view Iliad’s business model in Italy as unsustainable, it will nonetheless continue to put significant pressure on Vodafone Italy’s ARPU, which is almost three times that of Iliad’s package

Rigour and consistency in AV ad metrics is proving elusive. A 10-second ad on YouTube, ITV1, All4, MailOnline, Sky AdSmart or Facebook is measured in as many different ways, often indifferently. It is tricky, costly or impossible for agencies/advertisers to comprehend the overall picture.

By 2020 JIC-based BVOD ad impressions should be available from BARB all being well, giving BVOD a clear advantage over other premium online video measurement.

Google/YouTube seems to be ‘getting’ JIC co-operation now and has begun to galvanise video ad measurement, but forceful advertiser intervention is needed to extend and improve standards. Otherwise, advertisers are simply funding a JIC-free jamboree, and they (with content media) will lose the most.

The workings of the TV advertising market are a mystery to most. Overlaying an arcane ‘share of broadcast spend’ trading mechanism is regulation in the form of CRR, which has prevented anti-competitive activity by ITV since 2003

CRR will protect advertisers ‘for as long as needed’. Most advertisers we canvassed believe it should stay in place, but the sell-side and auditors say CRR has passed its ‘Best before’ date and is heading towards its ‘Use by’ date

We propose a review of CRR by the Competition and Markets Authority (CMA) to determine whether it is now helping or hindering the TV advertising ecosystem to become fit-for-purpose for the digital age

Online advertising became the majority of all UK ad spend last year, in step with China but ahead of all other major markets. 

Direct response has further increased its share to 54% of UK ad spend, fuelled by the self-serve platforms of Google, Facebook and Amazon, while content media nets just 11% of the online advertising pot.

We estimate that all online-delivered channels - including "pure play" online properties, broadcaster VOD, digital out-of-home and online radio - could account for well over 60% of UK ad spend by 2020, but only with improved commitment to industry governance. 

European mobile service revenue growth was down slightly to 0.3% in Q1, with improving trends in all countries other than France, which was down sharply due to the closure of the VAT loophole and intensifying competition

Iliad's launch in Italy was somewhat muted but its focus on straightforward tariffs is likely to hold considerable appeal there, with hidden charges there commonplace and being investigated by the antitrust authority

We expect greater polarisation between the North and South as the year progresses, the key question marks being Vodafone's strategy in Germany, Iliad's traction in Italy, and whether Iliad's revamp in France will lessen or worsen mobile competition there​

Bleak prospects for digital advertising leave no choice to news publishers but to generate revenue from readers, and the lack of widespread frictionless micropayment options means there is no alternative to subscription — the vast majority of western ‘quality’ newspapers have rolled out paywalls; meters and registrations are the most promising approaches

Recent politics have increased demand for quality journalism and readiness to pay. Despite clumsy commercial models the rise in subscriber numbers is encouraging, but current price points may be too low for a sustainable digital transition. Churn is high, publishers have yet to fully develop and optimise ecommerce

The transition to an audience-centric model is a shift away from click bait, with distinctiveness, curation and news agenda hierarchy among the most important factors. Leveraging data to optimise audience engagement remains challenging

Technology has brought both capability and complexity to audience measurement. Joint Industry Committees (JICs) face the twin-headed problem of measuring the online versions of existing media, as well as a raft of new online media and formats across a range of devices.

While JICs wrestle with discrete media, cross-media measurement is a melee of methodologies across platforms, devices and companies. The operational reality is an abundance of metrics – including the incompatible and unsuitable – but with crucial pieces missing, such as universal online currencies.

Exuberant ad expenditure is masking online’s AV measurement weaknesses for now, and YouTube and Facebook may come to regret their lack of industry collaboration. Premium video is where incentives align, and there is a case for a new AV middle ground currency –but only if the tech giants are involved.