THE FORECAST CALLS FOR DATA
How our obsession with the elements is fuelling Weather Network’s big ambitions
People from Victoria to Torby, N.L., are pleading with the broadcast regulator to keep The Weather Network as a channel with mandatory distribution in basic cable packages.
In a renewal process that comes every seven years, the Canadian Radio-television and Telecommunications Commission solicits arguments from stations and comments from the public on who should get the coveted spots.
Companies want the spots because they guarantee millions of dollars in revenue from TV providers. For example, The Weather Network currently gets 23 cents per subscriber per month, which adds up to almost $31 million a year given that there are 11.1 million TV subscribers across Canada.
Three weeks into a seven-week process, there are already more than 7,500 comments on the CRTC’s website in support of Pelmorex Corp., the parent firm of The Weather Network and MétéoMédia, as well as Entiempo.es in Spain.
One woman from Calgary says her seven-year-old child loves to learn about storms. Another from Richmond Hill, Ont., uses the channel to plan when she can take public transit to visit her hus- band in a nursing home. A Vancouver man constantly monitors the weather, but can’t afford to upgrade if the channel is bumped out of the basic cable package.
The outpouring is big for such a staid regulatory proceeding — other channels facing renewal have received a fraction of the support so far. It’s this engagement that Pelmorex’s new chief executive Sam Sebastian wants to build on as he vies to compete for advertising revenue in the digital world against tech giants such as Facebook Inc. and Alphabet Inc.’s Google — his former employer of 11 years.
Despite its passionate TV viewers, Pelmorex has its eyes on a different market as advertising dollars shift toward mobile app and internet audiences.
“I love the fact that we’ve got such passionate users,” Sebastian said in an interview last week, less than two months into his tenure at the top of the 28-year-old Oakville, Ont.-based company.
Sebastian moved to Pelmorex after three and a half years as vicepresident and managing director of Google’s Canadian operations. When he was hired in July to succeed founder and president Pierre Morrissette, Pelmorex dropped the word “media” from its legal name and announced a transition into the data business, using its weather and consumer data to sell marketing insights to advertising partners instead of just airtime.
Pelmorex is a private company and doesn’t reveal its finances. But executives have previously pegged its annual revenue at about $100 million, about 30 per cent of which comes from broadcasting. (Sebastian called these numbers “a little historical.”)
Yet broadcasting revenue is expected to shrink. Canadian conventional television advertising revenue dropped to about $1.55 billion in 2016 from $1.94 billion in 2011, down 20 per cent over six years, according to CRTC data.
Since Sebastian’s September start date, Pelmorex has acquired Toronto-based Addictive Mobility, a 55-employee mobile data and media buying platform, and hired Rory Capern, former managing director of Twitter Canada. He said hiring Capern validates the company’s new direction by proving it can attract talent from Big Tech.
Sebastian doesn’t hesitate when asked why high-level executives would jump from two of the world’s biggest tech platforms to run a weather channel, especially amid escalating cord-cutting and stagnation in the broadcast industry.
First, he said, Pelmorex has been successful at embracing digital disruption. He said it was one of the first channels to launch websites and mobile apps.
“I don’t think most folks know that we’re one of the top four or five digital publishers and one of the top apps in Canada,” Sebastian said.
About 25 million people use The Weather Network’s various platforms, he said, adding the app has been downloaded by 10 million users in Canada, making it the fourth most-popular app after Facebook, Google and Apple, according to comScore, an analytics company.
All this online activity generates data, including a person’s location when they check the weather. Pelmorex wants to use machine learning and artificial intelligence to analyze patterns. It would then use this data to sell highly targeted ads if it notices, for example, a web user repeatedly checks the weather at a vacation destination or a mobile user is near an outerwear store when it starts raining.
“Most folks recognize that digital advertising is driving folks in store, but very few can prove it,” Sebastian said, adding that the Googles, Facebooks and Pelmorexes of the world are trying to figure out how to use data signals to prove digital ads get people in the door.
Weather data may be widely available, but Sebastian said Pelmorex owns its forecasts that keep users checking in repeatedly.
The Weather Network’s user demographics mirror the census, he said, so the platform reaches “pretty much” everyone. (He added one caveat: Young teens are more likely to be found on Snapchat.)
These users are willing to give up their personal data — including their location — so long as they get a good product and the assurance that their data won’t be compromised, something Pelmorex takes very seriously, Sebastian said. It removes all identifying information from its databases.
But his second reason for joining Pelmorex has more to do with Google’s market dominance in the digital advertising space — a problem that has left the media industry, including newspapers, grappling with declining revenue as businesses shift their advertising dollars online.
“They had developed the scale, they had the people, they had the products, and it was difficult for many other local regional brands to compete. At some point, that just makes for an unhealthy ecosystem,” Sebastian said.
“That’s why I loved coming here. I think I can help build us up so that we’re the next best local alternative to Google and Facebook in this market. We just have to work harder, we have to be scrappier, we have to continue to build really good products, we have to make sure we keep building up our reach so that we have the scale.”
U.S. tech giants have thus far been the major winners of the explosion in online advertising, which increased to about $5.5 billion in 2016 from $560 million in 2005, according to the Canadian Media Concentration Research Project. Google and Facebook captured nearly three-quarters of that revenue in 2016, up from about two-thirds in 2015, said Dwayne Winseck, a Carleton University professor and director of the research project. The pair captured all of the growth in internet advertising revenue in the past year and then some, he said, indicating smaller local players are losing ground.
“The distance between Google and Facebook and everybody else in the field is enormous,” he said.
But Winseck thinks Pelmorex has a shot at capturing more of the pie. He noted it’s the second most popular news source for Canadians after the CBC, according to comScore data, and its internet advertising revenue is growing.
Plus, he added, political backlash to the consolidation of power by Google and Facebook may eventually lead to regulations that will help local advertisers.
For Sebastian, even capturing one or two points of the digital ad revenue growth would “help build up a very strong Canadian brand so that we don’t get swallowed up by a lot of the larger folks.”
Getting a point or two is a goal shared by many across the media industry, which has faced structural declines over the past decade. But Sebastian is convinced he can make it work in despite the backdrop.
“We really like a lot of the momentum that’s going on in the country, especially around the tech space,” he said.
It doesn’t hurt business that Canadians are obsessed with the weather.
“In Canada, you have so much variability across the country, there’s kind of more reasons to be checking in to see what the state of the state is,” Sebastian said.