Archive for March, 2008
March 30, 2008
Throw in a some decent useability around handset design and menu selection, add in an unlimited data plan, and you have the makings of a very serious effort to position mobile/wireless as the consumer’s preferred digital platform. Not an adjunct to existing screens, but a full blown, stand-alone interface with the person’s immediate surroundings, where ever they are.
As these usage stats prove, the iPhone’s first six months has revolutionalised data behaviour of handset owners; and not just be degree, but by magnitudes of 10 and 20 times ‘normal’ usage. For example, in the broader mobile market, only 1.4% of users view on-demand video/TV , compared with 7% for smartphone (RIM, Apple, Windows, Symbion operating systems) owners and 21% of iPhone owners.
There are some very telling indicators in this data. At the very least, as handset functionality improves, a seperate MP3 player will be almost redundant; which is more of issue for Apple than anyone else. Further, the symbiotic relationship between browsing and searching has some validity here, with an improved browser experience on the iPhone obviously having a marked impact on search activity.
In short, as the handheld browser experience improves (from standard to smartphone to iPhone), the consumer’s propensity to search rises exponentially. This has massive implications for business forecasts attached to mobile search, as market intell on the penetration of smartphone and iPhone technologies will have on content development issues.
Content providers, particularly news publishers, will be the category likely to experience the quickest up-tick in mobile audience numbers with the proliferation of smart handsets. In turn, there will be a similar upswing in video, blogging and social media activity, all of which now move in lock-step with the news cycle and overall product design.
For the lucky publisher which secures a spot on the user’s ‘favourites’ menu (and this is critical), there is likely to be a significant level of further drill-down on more content sections and more content types (video, audio, direct-downloads etc.) than what has been typically experienced from ‘wired’ users in the past.
In the Australian context at least, the market belongs to the first news publisher prepared to go beyond the simple m-site and push mobile technology to the next level of interaction, transaction and user experience. The outcome of which is likely to be the creation of another audience peak, this time between 6am and 9am - premising the mood and story leads for that other prime time of between 11am-2pm. Two peaks, two premium audience times, two different platforms.
March 30, 2008
Mobile Internet (predominantly 3G) now represents almost 35% of the entire Australian mobile population, with just over one in three (35%) Australians having accessed the Internet via a wireless connection at some point in the last 12 months. This growth is almost unmatched by any other digital technology (with the possible exceptions of the MP3 format and the iPod); and this is happening even before the proliferation of iPhone-like technology in Australia.
The optimism around mobile broadband (3G) as the preferred consumer digital channel is based on increasing evidence that the content preferences of 3G subscribers are more innovative, especially in the way many are prepared to apply their handset in a retail or point-of-sale environment to augment the experience.
In terms of profiling their broader content preferences, the differences between 2G and 3G users are profound, particularly in terms of the step-up in content/application usage.
While 84% of non-3G users, for example, have a preference for messaging and chat, that figure rose only slightly to 94% for 3G users. This slight difference between the two groups was consistent across most applications like ‘search’, email and address book/calendar functions where we already have an pplication saturation.
The larger differences, however, occurred in content areas like music (65% to 87%), weather (55% to 81%), games (47% to 65%) and movies (44% to 70%). In terms of the magnitude between the size of the two audiences, the shopping category experiences the third largest variation (+25 point difference), behind weather (+26 point difference) and movies (+26 point difference).
As the retail preferences show, when bandwidth and handset experiences improve, mobile will be less about microsites and ad-fed content, and more about transaction, location-based experiences. The augmentation of the retail environment using mobile devices and applications (eg bluetooth, phone scanning/photos, SMS codes) will come down to a burgeoning developer community, unencumbered by proprietory source codes and telco ‘walled gardens.’
The smarter retailers will encourage the development of these types of mobile applications, allowing their brands to be leveraged while the application does the ‘heavy lifting’ in terms of customer engagement. If the application is successful in delivering actual sales via the retailer’s mobile channel, then the more innovative agreements will allow the application owner to take a clip of every sale. This is the peak of performance marketing.
March 26, 2008
Week 13 and the index fell 0.74% to 778.56 - the same level the index closed two weeks ago.
Overall, stocks moved an average of 1.5% over the week, lead by Austar (AUN) up 5.5%, Consolidated Media (CMJ) up 5.6% and APN up 4.9%, while stocks which dragged the index down included Crown (CWN) -6%, Ten -2.2% and Village (VRL) -2%.
The index is reflecting the market’s genuine consideration of some very conflicting data. On the one hand, the large media buying house, Group M, slashes its 08/09 forecasts for advertising growth, while at the same time, groups like GM in the US and Unilever in Australia announce major changes to their media strategies, emphasising sizeable shifts in budgets towards digital media and associated platforms. As one hand taketh, the other giveth away.
March 25, 2008
There seems to be a tale of two cities emerging in this endless analysis of social networking and its potential business application.
On the one hand, there is a category of businesses which collect reams of customer data as a result of: a) multiple touch points (through a combination of products and distribution points, like retail, online, affiliates) and, b) depth of questioning, especially around the veracity of the person’s ID.
On the other, there are businesses, predominantly media-related, which are attempting to populate databases in exchange for the benefits of interacting with other members and the business itself, while also having the freedom to develop relationships, form groups and build applications (member decentralisation).
This issue of decentalisation, for example, is a critical plank to the success of a network’s economics.
As the above diagram illustrates, a number of business segments are data heavy but lack the skills (or willingness) to ‘activate’ that data beyond a few DM mining queries. In comparison, other segments are relatively data poor (or so have the data in some form but don’t process/analyse it effectively), but invest heavily in audience/member activation and networking anyway.
The strength of one sector is a weakness of another.
Those businesses showering in data tend to have a core transaction function, where recency amongst customers is high, as is the profile data on these customers. In other words the accuracy (integrity) of the data is high because of the financial transactions in play. Taking licence with your own ID and fantasising about an avatar-like persona is der rigour on MySpace but off-limits when it comes to your bank account.
Yet, at the same time, these businesses lack the self-confidence to empower customers to share opinions, feedback and questions, whether from a service/support perspective or in terms of product purchases. This lack of transparency or engagement with customers - in order to elicit customer ‘content’ - is a fundamental roadblock in the way of social network platforms reaching their potential in an enterprise environment.
And this doesn’t even take in account the process and management issues associated with data collection, building deeper, richer customer profiles, interrogating the data to ensure accuracy and then aggregating separate data silos to ensure customer intelligence is leveraged for the benefit of the entire business and not just one or two product fiefdoms.
In short, many businesses are doing many things right, but few are willing or resourced enough to fill-in the blanks to build architecture which collects the data, checks the data and empowers marketing to engage customers in an intelligent manner as well as empower customers to engage one another.
March 24, 2008
There’s a certain amount of indecent haste towards the development of ad exchanges and inventory management platforms in the name of efficient intermediation. The arguments for the aggregation and sale of remnant inventory are relatively sound, however, would this line of innovation be viable if the level of remnant inventory was to drop, both in real and percentage terms?
In other words, what if publishers were to take further initiatives to minimise the amount of remnant inventory available by ‘value-adding’, via segmentation, to churn out even larger volumes of high-margin premium real estate? The case of making this commitment is not all one-sided. Advertisers would benefit from a higher ROMI relative to other solutions (with the possible exception of CPC, CPA, CPL etc. deals), even if the exchange solution conveniently provides the volume at a significantly lower CPM rate.
Already there is a limited evolution in this regard, involving behavioural targeting (BT) platforms, and to some extent, consideration of psychological targeting using a person’s comments/opinions to draw out profile data. Where this ‘evolution’ is likely to falter (or at the very least, fail to be optimised) is the relatively resource intensive nature of the systems involved. Technology, licensing, internal teams, business rule and target group definitions, as well as 3rd party access to the data, are all costs (and risks). Obviously we’ve reached this far into the debate because the returns are expected to be higher than these one-off and ongoing costs.
Put simply, the more precise the targeting, the higher the immediate or longer-term impact of the advertising involved. - both in terms of campaign and brand metrics.
Yet no matter how sophisticated the algorithms or business rules might be, the selection of person A over Person B is based on a set of assumptions; a higher propensity to purchase the item being advertised - not a 100% guarantee of a sale.
Within these systems, further refinement is possible, but now the game is a matter of degree rather than any significant improvement beyond the initial leap in advertising performance found when going from ROS or contextually-based targeting to a BT-based version.
The alternative (or at least complimentary) platform to BT is the possibility of an opt-in advertising model, where audience members or consumers self-select advertising categories pertinent to their interests and needs. No longer are users ’second-guessed’ by propensity models. Instead, ad serving is based on actual needs - genuine pre-search behaviour.
Through the opt-in model, consumers are genuinely engaged in the content, reflecting a higher degree of association with the site or publication. In this context, if an advertiser wants a measure of audience engagement, then all they need do is to consider the proportion of the audience who have opted-in for the service.
The opt-in model is essentially a new audience contract between publishers and their audiences. In opting in, the consumer accepts the inevitability of advertising-based content, but in return, expects an almost error-free approach to the relevancy of that advertising (ie very high propensities - significantly higher than BT), and controversially, a share in the advertising revenue.
March 23, 2008
To paraphrase Rupert Murdoch, the industry simply doesn’t know its own future, its the wild west out there.
Despite this sentiment, its worth looking closer at US advertising revenue projections for the next four years, spread across 10 platforms. The accompanying data is averaged out across sources such as Veronis Suhler and TNS.
Ignore the absolute figures - they never project accurately - but pay attention to the relativities between platforms and the Compound Annual Growth Rates (CAGR). Both indicate that even within the context of digital, there is an emerging hierarchy, with specific reference to mobile, entertainment media (gaming), and pure play Internet.
Off a low-base in 2007, mobile and entertainment media indicate the highest CAGRs for any media category, followed by the pure plays. The bullish nature of mobile’s CAGR, for example, is justified by simple anecdotal evidence that the radical interface (and menu selection) design offered by Apple’s iPhone is already encouraging higher mobile data usage amongst its users (well above non-iPhone users). Once the likes of Nokia and Motorola join in battle, mobile data rates will sky rocket. This is a guarenteed market outcome in 2008. The only variable likely to short-change the result is a lack of local compelling content (again).
Of concern to incumbent media is the near flatlining of advertising revenue growth. The outlook for newspapers, broadcast television and directories drags down the sector’s CAGR to an anaemic 4.6%. Interestingly, outdoor scores a CAGR of 10.4%, aided by the proliferation of touchscreeen and LCD technology (think about the visual madness of Bladerunner).
Pure-play Internet will continue to grow market share through ‘bargain-basement’ advertising rates (relative to TVC and print), and the optimisation of audience data and targeting capabilities. In fact, if stronger efforts are made to accelerate the implementation of behavioural targeting in 2008/2009, then its reasonable to add a few points to the CAGR for pure plays over the 2007-2011 period.
March 20, 2008
The VM Index flat-lined this week, moving just +0.78% to 784.37. Over this period, a majority of stock prices fell between 1% and 4%, but it was the 11%+ rise in realestate.com.au’s (REA) price which is largely responsible for dragging the index’s performance back into positive territory.
News (NWS) was up 3.5%, along with Crown (CWN) up 5.3% and Prime (PRT) up just over 2%. By contrast, Seek (SEK) suffered a drop of more than 9% - the largest fall of any individual stock this past week.
Taking stock of the total value lost in the past 12 weeks, the VM Index has dropped 27.5% in value over that three month period, lead by stocks such as Photon (PGA) -41%, Mitchell (MCU) -38%, followed by Seek (SEK) and Austereo (AEO) both of which fell by around 35%. Across the portfolio, the average loss in value was 22%.
Only two stocks contained their loss to single figures - Prime (PRT) and Macquarie Media (MMG), down 4% and 9% respectively.
March 19, 2008
“It’s not slowing at all - these three minute videos have really become a standard part of almost everybody’s day. And there should be a way to use targeted advertising to make some money out of that.” Dr Eric Schmidt, CEO, Google, speaking about YouTube. (AFR, 19 March 2008)
Look no further than the games industry to demonstrate the power of mixing brands and a type of content which ticks all the right boxes in terms of the audience’s involvement and attachment. In short, the affiliation between creative media and associated advertising has already proven to be very strong, hence the US$80m spent on in-game advertising in 2005 rising to an estimated US$400m by 2009.
As Dr Schmidt mentioned, the YouTube ‘experience’ is now ingrained in our overall media repetoire, but more than that, the search and view of that three minute video is akin to the affiliation gamers have with their medium of choice. This is the starting point for conceptualising each video as a mini-game, which in turn raises the argument about the viability of in-video advertising, leveraging off the positive experience/feelings generated amongst the YouTube audience.
That’s YouTube’s greatest asset - audience engagement - and one which can be exploited in a ’sensitive’ fashion. Afterall, if the research shows that fanatical, hardcore gamers are positively predisposed to in-game advertising (because it adds to the story’s authenicity, for example) then there’s certainly a window of opportunity for an ad-supported YouTube experience.
Aside from the technical issues of embedding brand names and logos into video files (LucasArts is apparently very proficient at digitally revising history), the key issues will be (as learnt by the gaming industry itself after years of experimentation):
- Location or proximity to the video’s point of focus. In other words, is the placement made on or near the frame, inside the frame or embedded on particular items within the video, say a building, t-shirt, car or packaged good on the breakfast table?
- Visual or audio cues?
- What ‘media buy’ is employed? For example, does the brand monopolise the video? Is the brand billboarded across ‘natural’ elements of the video (more background type placements)? Or, is ‘utilisation’ involved, where people in the video use the branded products in a natural way (i.e. billboarding in the foreground or in the focus point), such as holding a can of soft drink or kicking a football?
It would certainly pay dividends for Google and YouTube to closely study the games industry and how it has managed to successfully commercialise itself as one of the most effective platforms for brand building to date, despite having a core group of customers who would otherwise be deeply cycnical and suspicious about the agendas of major (multinational) corporates.
March 18, 2008
There is something uneasy about the realisation that your customers/readers/prospects have alot to say, and are expressing those opinions on an almost daily basis in public forums (whether about your company directly or simply about a range of issues or experiences which are top-of-mind) but little effort is going into collecting and analysing their profiles, comments and sentiment.
Possibly similar to that sensation you have in an elevator when your 30 storeys up and you realise there’s a dark chasm beneath you and not much holding you there.
That level of quality customer intelligence expressed in the form of user generated content (UGC), and powered by electronic word-of-mouth (eWOM), is increasingly prolific, time-sensitive and feeds directly into customer retention and acquisition strategies.
Content which is generated (UGC) or conveyed (eWOM), has an immediate, or at the very least, secondary impact on product design/development/sales and professionally generated content. And with the support of a dedicated CRM strategy sucking up details (meta data) on UGC and PGC, which in turn allows for a more effective method of targeting ‘influencers’ in the context of both UGC and PGC, this connection between content, customer intelligence and business outcomes effectively closes the loop.
The critical point in this architecture is the CRM system and its capacity (and the business’s willingness) to collect and analyse UGC to identify and exploit so-called ‘influencers’. In most markets, approximately 10% of consumers will be categorised in this way, though in the context of UGC, influencers will be the active contributors to blogs and the like who might make up a much lower proportion of the customer base. In turn, these individuals will infect the ‘network’ through eWOM - for better or worst.
In short, current CRM and Customer Intelligence systems must be customised to recognise the social graph of customers (links, comments, opinions etc.) to optimise its value to the business.
March 16, 2008
Ad Networks (and exchanges) attracted their fair share of acquisition dollars over the course of 2007, accounting for almost US$11.5b in M&A activity, including a ludicrous US$6b paid by Microsoft for aQuantive. That acquisition includes the DrivePM ad network which accounts for less than 15% of the group’s revenues.
In comparison, two ad network deals were completed in 2006 - Time Warner’s LighteningCast (for video) and Microsoft’s Massive (for gaming); the latter purchased for between US$200 and US$400m.
Despite the frenzy, Microsoft is still locked in 9th place in terms of online audience reach, at 55.4%, while Time Warner’s Platform-A gives the group a 90.5% reach, seperate again from its other ad network, Advertising.com, which has a reach of 88.9%. Yahoo! is in third position on 84.6%. (Source: Comscore, 2008).
In terms of further M&A activity in this space, early indicators are that there will be more deals, though with lower valuations. Nevertheless, the VC community smells blood and is circling a number of options which differentiate themselves by focusing on specific platforms (like mobile or video) as well as content verticals, like health (Source: DeSilva & Phillips, Company reports).
