Archive for April, 2008
April 29, 2008
Fifteen years ago, enterprise technology was higher-quality than consumer technology. That’s not true anymore. It used to be that you used enterprise technology because you wanted uptime, security and speed. None of those things are as good in enterprise software anymore as they are in some consumer software.
Douglas Merrill
Google Chief Information Officer, Wall Street Journal, 3/18/08
The current pressure to deliver on exceptional levels of consumer technology – both in terms of hardware and software – is driven in no small part by the expected explosion in consumer IP traffic.
In 2005, for example, it was estimated that global IP traffic sat at around 5 billion TB per month, with the majority of that data made up by business traffic. In 2008, consumer IP traffic is expected to surpass business traffic for the first time, reaching a total level of 13 billion TB per month, and then doubling again to 27 billion TB per month by 2011. Of that, 17 billion TB will be made up from consumer traffic.
The consequences of these growth rates and enterprise-standard consumer technology platforms on digital advertising, video production, and online transactions cannot be underestimated.
The continued explosion in social connection inventory, (and associated widget/application and general user-generated innovation), is growing its online timeshare exponentially, admittedly from a low base given that most social media brands which currently dominate the online vortex simply didn’t exist three years ago.
These market fundamentals, particularly a marked improvement in the quality of consumer computing and application choice, means brands must raise the Internet, and digital marketing generally, beyond current lip-service and more towards their advertising medium of choice (with the proviso that the Internet can reach a market with the appropriate Digital Network Awareness (DNA) ranking).
Currently in the US, Internet advertising equates to US$288 (A$268) per household (calculated across 77 million Internet households), versus the situation in Australia where Internet adspend equates to ~A$233 per Internet household. In the US at least, the shift towards a reallocation of funds towards the Internet is now well underway. The glacier is moving.
April 27, 2008
While our local VM Index continues its majestic downwards trajectory, closing this week at 764.79, or down 1.83%, a remarkable thing is occuring amongst listed Internet stocks in the US, but more of that shortly.
The doom and gloom was perpetuated by rather strong negative sentient towards five particular stocks, namely, Fairfax (FXJ) down 4.56%, Wotif (WTF) down 4.74%, Austar (AUN) down 4.2%, Macquarie Media Group (MMG) down 4.97% and Seek (SEK) down a spectacular 16.2%.
Fighting against the tide were a minority of stocks including APN up 1.64% and Austereo (AEO) up 8.7%.
By comparison, US media indices, particularly the Dow Jones Media Index, has had its own fair share of drama, yet year-to-date, has gone from a standing start at 287 to roller-coaster its way to close, as of last week, at about 296 - up 9 points. Given the level of chatter about a recession right now, any positive outcome is remarkable, particularly for a discretionary market like media.
But that’s not the real story. What’s most interesting is the increasing bullishness around pure Internet plays, and how a sub-set of the index, graphed here in brown (the CBOE Internet Index), is diverging from the main DJ media index. Up until very recently (March 08), the CBOE Internet Index shadowed the broader media index very closely. However, since that time, the gap between media and the Internet pure plays has widened to a point where by mid-April the Interent index began setting its own direction, completely at odds with the broader media index.
Remarkably, Internet stocks are increasingly being viewed as being recession proof. Recent earnings announcements by the likes of Google and Yahoo seem to confirm that sentiment, and critically this reality suggests these companies are in a prime position to weather a US recession and become exceedingly stronger, vis a vis traditional media, in a post-recession period.
April 24, 2008
For all the challenges and opportunities facing the digital media industry in the next year, the one issue likely to avoid the quicksand of metric jargon and subsequently score a quick win is the standardisation of video advertising, or at the very least, solidarity amongst publishers around the goal of securing a greater percentage share of television advertising budgets.
In other words, makig sure any TV advertising campaign is accompanied by an online media buy, where there are certain economies to be achieved using the same (or similar) material.
This rather innocuous ambition carries enormous implications for television advertising, and every dependent or associated business, whether broadcaster, advertiser or agency. In short, the goal (and premium positioning) of online video advertising is to mesh the impact of television advertising with a cost-effective platform for reaching both portal-sized and niche, almost exclusive audiences (read $US20 CPM).
While industry players harp on about the pro and cons of pre-roll versus ticker, or watermark versus dynamic, real-time placement (similar to Hiro technology), the premise that online video ads are highly impactful, both in terms of generating awareness and developing association, is now indisputable.
How then is it that most forecasts suggest that by 2011, online video advertising will represent just 10% of total online adspend? The lack of inventory is one explaination, given that YouTube is assiduously avoiding the use of advertising on copyrighted materials. Yet, equally it is the cautious nature of many traditional agencies and clients to embrace online video which is also dampening down industry forecasts.
Interestingly, a recent survey of US advertising agencies indicated that the key reasons why agencies were not fully committed to online video were:
1) Lack of standardised formats;
2) Content quality;
3) Cost, difficulty to implement;
4) Branding opportunities;
5) The format was still too new to determine overall effectiveness.
It’s an interesting response given their wholesale, unequivocal support of the effectiveness of television advertising!
Importantly, it s the larger agencies, or those most tied to the TVC format, which have both the client base and technical expertise (from the perspective of video production) to drive online video ads to a critical mass. For example, for agencies employing between 1 and 20 people, only 18% had used online video ads in more than seven campaigns to date, copared with 57% fo agencies employing greater than 100 employees.
In terms of video ad formats, 71% of the larger agencies (>100 employees) preferred pre-rolls, versus 50% for the smaller groups, who incidently, overwhelmingly favoured the ‘opt-in’ format (60%), versus just 29% of the larger agencies.
For all the bluster about industry growth, digital media is still not firing on all cylinders. To fulfil this potential in the medium term requires the transition of the TVC (or something equivalent) to the digital space as an almost automatic augmentation to any relevant above-the-line media strategy.
Online video ads offer an impact unmatched by any online ad format seen to date, yet ironically the gatekeepers to this source of material remain, by-and-large, the traditional full-service agencies with a legion of troops experienced in the television format.
April 21, 2008
Forget the comparisons to MySpace or Facebook, Second Life never has, nor ever will achieve a level of membership or for that matter, communal harmony, on that scale. In March 2008, for example, 544,290 active users logged onto the grid (active user is someone who spends more than hour on the system for the month). That’s just over 4% of the total registered population of 13 million.
Of those active users in March, approximately 12,200 were Australians (rank 11th), compared with 195,000 from the US (rank 1st), and just under 45,000 from Germany (rank 2nd). In January 2007, the Australian figure was closer to 29,000. On this scale (and performance), the real investments made by the likes of Telstra and the ABC into establising a virtual presence in Second Life seem ill-advised.
Yet this post is far from another public trial (and lynching) of the virtual community, far from it. In many respects, Second Life is achieving a number of outstanding initiatives, not the least being a level of transparency around performance and audience engagement which puts even the largest publisher to shame. This is best-practice market reporting and Second Life deserves kudos for the initiative.
From user hours, active members and age splits through to land size, transaction values and volumes - its all publically available, and updated every month. The good, the bad and the ugly - no exceptions.
The group is also very forthright about the negative impact certain decisions have had on both activity and transaction levels. Stricter credit card processes, the closure of gambling facilities and charging a VAT (similar to Australia’s GST) on transactions were all responsible for hits on the business’s performance, yet done in the name of improving the user experience as well as prudential governance.
Unlike other social networks, Second Life doesn’t seem to be playing a volumes game. With just 982 premium accounts signed up in December 2007, how could it? Thus, a smaller, transaction-focused membership base seems to be the MO. It is this transaction issue which is the key metric, and a determinant in the enterprise’s longevity.
With 260L$ equivalent to US$1, more than US$9m was converted, via the LindExchange (LindEx), in March 08 - up 26% on March 2007. In terms of value, US$885,000 in sales were recorded in March 08 - which is only 6% up on the previous March.
In regards to these figures, two important points should be made.
Second Life is the first to acknowledge that its decision to ban gambling activity and introduce a VAT in Aug/Sept 07 did have a dramatic impact on transaction volumes (and values). Yet, despite the set-back, sale activity has now rebounded, with March 08 being a record month.
Secondly, the current record highs in currency transactions indicates that a) the US real-world slow-down is only having a marginal impact on Second Life’s own economic performance, and b) these currency exchanges should be seen a barometer for future transaction activity. On this basis, future transaction volumes look bullish.
Of course, I could be deluding myself and instead acknowledge that this is all just a currency play to hedge against a falling US dollar in the real world!
April 20, 2008
As we get to the pointy end of the public debate about the validity of an engagement metric, either in lieu of time and visitor numbers, or at the very least complementing other audience metrics, there is an increasing danger that designing a solution will slip into complexity rather than simplicity.
When making an argument for the effectiveness of online advertising, blinding the intended audience with science is not a recommended strategy.
Yet while publishers, agencies and analysts debate the merits of various engagement models, like the recently released Peterson model (get ready for a whole slew of others), several steps can be taken now to evaluate engagement to compare similar publishers. (As a side note, be aware that a single engagement metric cannot be applied across all advertising sites, as the concept of ‘engagement’ carries a degree of subjectivity.)
One of those steps is for 3rd parties to evaluate the engagement of online audiences through the publication’s feedback channels, including areas such as staff blogs and “yoursay” set-ups. In this example, there are six subjects areas evaluated, including the 2020 Summit, Indigenous policy (NT intervention), electricity privatisation, housing affordability, Zimbabwe and Melbourne’s favourite son, Corey Delaney.
In analysing the commentary around each area, across three online publishers, four variables are assessed.
1. The number of comments: the actual number of posts;
2. Threads: the number of posts reverting back to a previous comment;
3. Links: posts which include a relevant link to associated material;
4. Influencers: individuals who post more than once on a single issue, usually as part of a thread.
The final assessment of this research concludes that while a subject might report the largest number of posts (in this case, almost twice as many as the next most popular subject), the subject area which generates more threads, links and influencers, will always score a higher engagement metric. In this example, audience engagement about indigenous policy far outweighed all other content areas reviewed, despite a smaller number of posts.
This audience feedback or engagement score is simply another element in any assessment one makes about a publication’s brand position and its depth of association with readers, or more importantly, its community of readers. In the broader debate about user engagement, this angle of inquiry focuses on feedback channels as opposed to the more subjective elements of what constitutes a page view, unique user or a session’s duration.
Critically, what this content analysis demonstrates is that ‘big’ is not necessarily the way to premium ad dollars. An audience which is evidently more engaged (using the metrics described above) is a valid reason to support the argument that audience association with the publisher’s brand is justification for a market premium.
April 17, 2008
Fox’s decision to offer its box-office success, “Juno”, on iTunes the same day as the film is released on DVD and Blu-ray, is another step towards an inevitable re-alignment in the linear movie distribution channel.
Fox joins Disney in releasing films for sale on iTunes, four months after all the studios agreed to film rentals via the same platform. Already, a variety of first release films can be purchased or rented on Amazon’s Unbox service.
Interestingly, the decision by Fox to test the iTune waters with Juno is based primarily on the characteristics of the film’s audience - a demographic more likely to engage in online purchases, or participate in a VOD offer. In other words, the move reflect’s the studios case-by-case approach in deciding on the most appropriate distribution strategy.
On this basis, some films are likely to follow the traditional, linear path - cinema, DVD/Blu-Ray, cable, free-to-air, VOD - while others could be released via a retail mechanism like iTunes and Unbox, competely bypassing the cinema chains altogether.
Like media and advertising, distribution options can and should be customised based on the characteristics of the content and intended audience. This profiling is best illustrated by the concept Digital Network Awareness (in a previous post) and the increasing need to discriminate between customers based on their digital ‘graph’, which is determined by their awareness of, and familiarisation with, certain digital technologies.
More than just changing customer preferences, the changing economics of film distribution is placing further pressure on studios to consider all their digital options.
Controversially, recent economic research suggests that, given the growing number of retail options available to studios, such as VOD, there is an increasing amount of money being left on the table.
Economic modelling is now indicating that studio revenues can be maximised by releasing films on rental DVD and VOD at the same time as the theatre release. In fact, revenues can be improved by as much as 16% by enacting this change.
The downside? Theatre owners would experience a 40% decline in their own revenues, effectively decimating the theatre/cinema industry.
A 16% jump in revenue, however, particularly for a volatile industry like film production, looks very tempting. Unfortunately for cinema operators, film studios aren’t the most altruistic of businesses.
April 17, 2008
The VM Index slipped back 1.6% this week to 779.05, with little consistency across the portfolio in terms of stock performance.
Austereo (AEO) lead the pack, rising just over 6% to $1.57 (Thursday’s close), followed by Macquarie Communications Group up 5% to $4.58 - it’s highest point since late February 08.
On the flip side, the largest drop was reported by Prime (PRT), down by more than 8.5% to $3.20, followed by News Corp (NWS) down 5.1% to $19.73 and APN down 4.6% to $4.20 - its lowest point since the start of 2008.
Other stocks to get lost in the quagmire of negative sentiment, included WAN, realestate.com.au (REA), and Village Roadshow (VRL), all down 3.5%, 3.9% and 3.9% respectively.
The average change in stock prices for the week was -0.59% , so bettering the index’s performance, even in this climate, didn’t require much effort or imagination.
April 16, 2008
“I’m a network engineer for an ISP. We currently restrict P2P applications to 512kbps for all users. And for good reason. P2P applications can cripple a network, they’re like leaches. They consume all available bandwidth for endless periods of time. What I think will eventually happen is users will start having to pay for transfer.” - BitTorrent, 2007
The term “net neutrality” blasted onto the public scene in 2006, when blogging posts referring to the issue rose from 286 in 2005 to almost 39,000 in 2006. In 2007, 33,087 blogging references were made to net neutrality, and by already by April of this year, 14,000 comments on the subject had been posted.
2008 will be a record year for blog chatter on net neutrality, and why wouldn’t it be given recent comments by the likes of Virgin Media’s CEO (the UK’S second largest ISP), Neil Berkett, who said: “This net neutrality thing is a load of old bollocks.” Virgin Media, like Comcast in the US, is prepared to ’shape’ Internet traffic by capping P2P users and giving preference to groups which can afford to pay more for higher speeds.
Yet, as ISPs arch up and challenge the ‘free ride’ afforded to P2P users, selected media groups, including PBL here in Australia and NBC in the US, are toying with P2P model of content distribution, allowing their programs to be distributed free-of-charge across P2P networks like BitTorrent in return for encoded advertising content.
The PBL trial is using Hiro technology to encode the material, as well as track file-sharing and ad downloads. For users wishing to see the complete video file, they must download Hiro software and view embedded ads in the program. These ads canot be fast-forwarded or removed.
If a CPM-backed P2P distribution model proves increasingly viable and lucrative (for media), the pressure will be on content producers to flood the system with entire video libraries as well as first releases - all of it backed by targeted advertising.
So this is the scenario, P2P traffic booms with a wealth of content, media groups make a dollar, much of it at premium rates, and overnight ISPs are forced to shoulder an exponential growth in data volumes with little in the way of price compensation.
If you think Virgin’s CEO (and every other ISP) is going to cope that, you’re living in la la land.
April 15, 2008
Google’s Knol project was Beta launched in December 07, with a remit to give subject experts a very public voice, both through peer and reader reviews, as well as through Google’s own search results. Unlike Wikipedia, these entries require nominated authors, so accountability and transparency is supposedly high.
For authors, the payoff is a share in advertising revenues derived from the eyeballs as well as the kudos of ‘expert’.
Yet, Knol (meaning unit of knowledge) is not out of Beta and could possibly be one of those Google projects which start with the best of intentions, but quickly submerges in a sea of releases.
This delay presents local publishers (or entrepreneurs) with an opportunity to further build on their local credentials (and page impressions) by developing ‘who’s, who’ of local experts in fields as diverse as science, business, finance, technology, environment, community, marketing, and sport.
In fact any subject or issue can and should be canvassed by a relevant expert, who more importantly can put a local slant on the issue, with facts discussed in an Australian context.
Just as local directories are rapidly value-adding to their listings using maps and other location-based services, perhaps the addition of expert-based services adds further weight to a directory’s market position as first point-of-search?
In this mock-up, a search for computer software retailers will return the relevant business listings, store geo-locations and an advisory peice under the brand Second Opinion (see pink box). In this break-out box, the expert opinion (which is highly rated by readers) discusses the pros and cons of Microsoft’s Vista platform.
The objectivity of the opinion piece in no way comprises the businesses listed in the directory. On the contrary. A potential purchaser is now more informed, and certainly more confident about any software purchase. This empowering customer experience has a positive association with the directory’s listings.
One question remains, however. Will a revenue-share arrangement between publisher and author be the ticket to draw out the policy wonks, propellor heads and general class geniuses into the open, or are motivations more altruistic than that?
April 14, 2008
The plethora of media choices now available to satisfy every commercial requirement, either as a stand-alone option or in concert with an infinite number of other combinations, is certainly putting the effectiveness of the current system of media strategy and selection under scrutiny.
Further, the perchant of the current system to front-load the schedule, that is, plan and sign-off an entire schedule (including the integration of applications/virals) well before a single shot is fired, is looking increasingly outdated and dangerous.
In software terms, it’s comparable to building Vista to lock-up stage without so much as Q&A session! Ummm, OK, bad analogy.
The point is, the nature of audience interaction and mobility means a single, static solution which is expected to generate a return of x% over a month, or several, is simply incompatiable with current dynamics. As a consequence, the initial match-up between target group(s) and media (maybe in the first 24 hours) quickly deteriorates, with targeting becoming imprecise and wasteful.
Media needs to take a leaf from the world of open, collaborative software development, where ever-more elaborate projects are increasingly being managed in an agile environment. Here feedback and collaboration are encouraged after every bite-sized peice of coding or module is completed, rather than relying on final testing/feedback at the end of a major release.
Interaction and individuals over process and tools - that’s the agile way.
The MO of media strategy and management should be to increasingly focus on smaller fragments of the masterplan, enabling each phase to be measured and tested using velocity metrics (preferably within a few hours of execution), user stories (quantitative feedback from the field), collaboration between media and creative, as well as the resources (and courage) to refactor or recalibrate the masterplan after each feedback session.
The one critical point in all this gratuitous advice is that media agility requires the intimate involvement of the customer. Their IP on sales and customer data is critical to this test-driven environment. In short, for contemporary media to work most effectively (ie optimised) requires radical transparency (in terms of data and customer intelligence) on the part of both customer and media house.
