CEO Shane Smith Slams Programmatic, As Vice Trumpets GroupM Deal

shane-smith-dmexco-viceWhen Vice needed to diversify its distribution beyond Facebook and YouTube, it didn’t look to other digital platforms. Instead, said CEO Shane Smith, Vice partnered with HBO and hatched plans for a TV network.

“We realized we couldn’t be hostage to Facebook and YouTube. We had to go off-platform,” he told WPP head Martin Sorrell at DMEXCO in Cologne, Germany.

WPP also owns 8.4% of Vice and the two deepened their bond Thursday, as the publisher struck a multimillion dollar global ad deal with WPP's media-buying unit GroupM. GroupM will gain access to Vice's audience insights and content to enable advertising across Vice's properties.

For Smith, such partnerships are critical. He spoke with Sorrell about what will make media companies help or hinder publishers in the months and years ahead.

  1. No to programmatic. “If you look at programmatic, you are getting shaved on the agency side,” Smith said, a reference to ad tech fees. “Programmatic on the media side [is] an auction in reverse where you get the cheapest price.”
  1. Digital media publishers need strategic partners to stay afloat. Vice counts Disney (at 18% of ownership), WPP (8.4%) and 20th Century Fox (at least 5%) as strategic partners. Vice also works closely with Time Warner’s HBO, which isn’t an investor. “They work together until they don’t,” Smith joked, adding, “Global brands need strategic partnerships.” Vice has needed to partner with traditional networks to expand beyond digital. Disney has helped with Vice’s film distribution. And A+E Networks launched the Viceland channel, helping Vice navigate the realm of traditional TV.
  1. Massive scale plays are headed for rough seas. “We were looking to buy a company with billions of video views a month,” Smith shared. “I said, ‘Do you make money?’ They said, ‘No.’ I think the scale plays are in real trouble going forward. A lot of the players in the next 12 to 18 months are going to go away.” But ad money is shifting, Smith noted. “And because of this shift you have a culling of the herd in digital, and amazing consolidation in mainstream media.” Meanwhile, it’s become increasingly difficult for media agencies to get an accurate grasp of scale. Many focus on comScore numbers and make incorrect assumptions. “The problem is that everyone likes to measure the O&O. That doesn’t include Facebook video, YouTube, [Chinese video site] Tudou, Verizon, Vodafone. We need better metrics.”
  1. Media will consolidate into a handful of giants. It’s not just the smaller media companies that are susceptible to acquisition: Big fish will get swallowed by even bigger fish. “There is an M&A frenzy in America,” Smith said. “Viacom is under pressure and imploding, and because of that they are a target for Time Warner, which is looking at them because Fox is at its back. I don’t believe that’s ever happened before – where the big five will become the big three or big two.”
  1. But consolidation concentrates power. “The issue I’m concerned about is that you have two companies [Google and Facebook] controlling 75% of the market, and further consolidation in TV and mainstream media. When the internet started you had thousands and tens of thousands of sites. We are going to have four to five big sites and two to three big companies, and everyone gets shut out. Because of strange economic currents, you are going to have massive power in the hands of very few companies. Everything is being sucked up into one big vacuum.”

Correction: The original article indicated that Fox owns A+E. It is in fact a joint venture between Disney and Hearst.

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