Tuesday, February 27, 2007

Elvis Presley and the growth of search

 A version of this piece was published in Marketing in 2007

In 1954, the year he released “That’s all right”, there was just one Elvis Presley.  By his death in 1977, there were 170 Elvis impersonators.  That number is now estimated to be over 85,000 – and at this rate of growth by 2019 they will make up a third of the world’s population.

Back in the late ‘90s this anecdote was used regularly to satirise the endless supply of projections the internet’s growth tended to generate.  But the continued growth of paid search – the advertising taken by Google, Yahoo, MSN et al – is sticking two fingers up at such scepticism.

Search marketing in the UK grew 58% in the first six months of last year, and there’s no sign that this rate of growth is abating.  Google is widely expected to be the fourth largest media company by revenue in the world this year, and in the UK, the paid search market is already bigger than radio. 

But the dizzying growth of search and the powerful results it creates for their businesses is creating a dangerous tunnel-vision amongst online marketers.   They risk failing to reflect how consumers act online – and a marketer moves away from the consumer at their peril.

It’s always been recognised that different media work together.  Campaigns are created across TV, press and outdoor, and this is an accepted part of advertising life – reflecting consumers’ consumption of media and the different strengths each medium offers.

Online however, search is often treated as something different.  The ability to measure a cost per sale on search advertising is a powerful attractor to marketing folk, who have laboured for years under the disbelieving eye of their FD.  So there’s a real temptation to attribute the creation of a sale to the last step in the acquisition process – often a search – and call this ‘accountability’.

The impact of TV, press or other internet ad forms is ignored, because the last step was a search.  But understanding that these other channels might have influenced the inception of a search is not enough.  We need to understand the degree to which these media impact on searches in order to assess the true value of search, and recognise the precise role it plays – not just in a high-level ‘strategic’ way, but on the ground, minute-by-minute.

Search operators understand this interdependence.  That’s why Google are developing display products, why MSN launched Adcenter to integrate the management of display and search, and why Yahoo are rebuilding their interface with advertisers to move seamlessly between search and display.

But many advertisers and agencies continue to manage search, affiliate marketing and display in silos – using different tracking systems, different KPIs, teams and even companies.  These are specialist disciplines, but if they’re not tied together around the brand’s needs then they’re failing to deliver on the interdependencies that are proven to exist.

At worst, there will be duplication – results claimed by search, and also by affiliates or display, with no way of de-duping.  The ability dynamically to divert budget from one channel to another will be hampered by individual targets and P&Ls.  And the potential to exploit these synergies – how display can increase the cost effectiveness of search by influencing the ratio of brand to generic searches, how display advertising can form a crucial part of an affiliate incentive programme, how rules of engagement for search need to be agreed with affiliates – all of these can be lost in the gaps between silos.

Integration has long been an objective within traditional media operations.  Online, the integration of search, affiliates and display has tangible and immediate benefits – not at a corporate “one-stop shop” level, but at a real, down in the detail operational level – and many advertisers are way behind both media owners and consumers in reflecting this.

Search might be set to outstrip Elvis impersonation as the fastest growing industry ever.  But the irony is, it’s at the same time over-valued and under-exploited by many of the people whose businesses rely on it. 

Wednesday, February 21, 2007

The new media planner

How quaint it is that everybody who reads the Guardian newspaper sees the same ad.  Geography teachers and media executives, social workers and architects, all seeing the same brands.  People who buy 4x4s see Prius ads, people who never travel see easyJet ads.  This is how it always has been in traditional media, whether it’s TV, press or radio.

But this isn’t how life is in digital, and it could spell the death of the media planner as we understand them now.

Almost from the start, online advertising (and let’s be clear here, we’re just talking about banner-type ads) has been served to users in a ‘carousel’ – if I look at MSN’s home page at the same time as another person, there’s a good chance we’ll see different ads.

Initially, this was simply random.  But technology quickly enabled advertisers to target people based on the characteristics of their internet connection – where they were in the world, what language their computer was set to – as well as time of day, day of week etc.

But whilst this was useful, we still didn’t know anything about the people who were looking at our ads, and traditional approaches to media planning still dominated – inferring characteristics of consumers based on the site’s overall profile.

But technology is now being applied which could change all that, and improve the efficiency of the online channel still further.

Behavioural targeting is being used by publishers to create individual profiles of visitors to their site.  So a reader who has visited the motoring section of the Guardian’s website twice in the last month might be shown a car ad whilst they’re in the arts section.

Increasingly, the growth in advertiser demand is leaving sites short of first-class inventory, and behavioural targeting offers them the ability to charge a premium for ads appearing in less demanded environments.   And for advertisers, this is an important hedge against media inflation, as shortages would otherwise drive pricing up.

Revenue Science, who provide this technology to the Guardian, now work with most of the UK’s leading newspapers sites, and similar technologies are employed by a range of other publishers, including Yahoo, who are using the search behaviour of their visitors to segment and target them with display advertising.

But there’s an interesting conundrum that remains unanswered.  Publishers are using technologies to ‘top-slice’ their inventory, putting all of the more valuable consumers into one segment and selling them to advertisers at a premium.  Good for them.  But if they’ve taken the more valuable consumers out of the overall pot of impressions they have to sell, then what remains – the segment made up of all the people not deemed worthy of selling at a premium – is worth less.

Smart buyers are pursuing this in the market, arguing that a discount should be applied to any ‘untargeted’ media they buy.  So in the end, whilst this technology might be very smart, it could result in a zero-sum game for publishers as the premium for behaviourally targeted inventory is offset by the discount commanded by the leftovers.

But it isn’t just individual sites that are applying these technologies.  Ad networks (who sell inventory on behalf of multiple publishers) are segmenting audiences based on their behaviour across the network and their responsiveness to advertising, to target consumers across the network – making those ads more valuable to advertisers.

Media has come a long way from showing the same ad to everyone.  But behavioural targeting is moving the game on another step, as it shifts the focus of planning from media to consumer-centric.  This is a fundamental and exciting evolution – the challenge is for media planners to adapt, as the environment decouples from the ad message. 

As this happens, we could see a new breed of planner emerge, one who combines understanding of brand, consumer insight and a fluency with the new media ecosystem – a hybrid of account, data and media planners.  Perhaps they’ll drop the qualifier, and just be planners.

Wednesday, February 14, 2007

DRM didn't work for Apple, will it work in TV?

Back in 2007 when this was published in Marketing magazine, DRM was rapidly becoming an embarrassment for Apple and they dropped it soon after.  It seems that as Santayana said, "those who cannot remember the past are condemned to repeat it"; with Time Warner prevented from giving customers access via their iPads to channels they'd already paid to view.  They're at liberty to view in the kitchen or the living room.  Just not on an iPad in either room.  My guess is this won't last either, as customers just won't wear it.

Here’s the deal.  I’m going to sell you a CD that you really like, but there are a few conditions.

You can only lend it to your friends whilst they’re in your house, once you’re bored with it you can’t sell it on eBay or give it away.  You can only play it on the machine I sell you, not on any others (so forget buying a competitor’s machine next time, because your whole record collection will be useless).  Oh, and in a few years it won’t work anyway, because once you’ve changed machines a few times it won’t play any more.  And you’re going to change machines, because the batteries on the machine I sold you often stop working after 18 months.

I would be amazed if you didn’t tell me where to stick it.

But millions across the world have signed up to terms like this, as they download music from the iTunes website.

Digital Rights Management, or DRM, is the encoding given to music files that prevents or limits their being copied, and right now it’s causing a storm in the digital world.  

When the downloading of music started, it was mostly based on illegal filesharing – people allowing others to copy music they either owned or had themselves copied from others.  Services like Napster (now reinvented as a legal music service) and KaAaA enabled this to spread like wildfire, to the great concern of the music industry.

As they had when cassettes were launched, the music industry resisted the new technology, fearing its impact on sales.  

Then along came Apple with the iPod, and crucially the iTunes store.  The iPod used a different file format - .M4P – and for the first time, music companies could exercise real control over what happened to their music once it left their hands.  Within weeks, Apple were selling millions of legal downloads – over two billion by last month.

So with business seemingly booming in the download market, everything in the garden looks rosy.  Except it isn’t.

Apple are creating a timebomb – as users approach their fifth device, their music libraries are starting to die.  Consumers’ awareness is growing that they’re being taken for a ride, and there’s increasing resistance from consumer groups, with complaints from groups in France, Germany and the Netherlands.  They’re also the target now of an antitrust case in the US, alleging that the lack of interoperability that Apple forces upon its users is restraining competition.

On top of all that, business isn’t so good either.  Despite soaring sales of digital music players, downloads still represent only 10% of music sales.  And according to a Forrester analysis, iTunes revenues have fallen substantially during 2006.

Finally, the DRM just doesn’t work.  Every iTunes exclusive track has been available for illegal filesharing within minutes of release, and every copy of iTunes allows users to circumvent the restrictions by burning the music back to CD.  It’s beginning to look like DRM is just an inconvenience for honest consumers, and no more than an elaborate joke for the technically capable.

So in the light of this the recent call by Steve Jobs, CEO of Apple, for music companies to drop their insistence on DRM is perhaps less surprising.  

Many mobile phones now come equipped with an .mp3 player, as consumers prefer to carry just one device – and that’s hitting iPod sales.  At the same time, content owners are beginning to relax their attitudes to DRM.  Yahoo Music struck a deal with Sony/BMG to let it sell an unprotected .mp3 version of a Jessica Simpson track as a test, and after EMI-controlled Norah Jones followed suit, EMI have announced that they’re dropping DRM from all future CDs. 

As others abandon DRM, Apple know well that if they don’t put in some nimble footwork, the competition authorities are going to start seeing them as the cheerleader for restrictive trade – and with years of defining themselves as ‘not Microsoft’, that’s just not a place the Apple brand wants to be in. 

Thursday, February 8, 2007

Innovation is about survival; not just competitive advantage

First published in Marketing magazine in 2007, what's amazing is how the pace of chance hasn't let up one bit since I wrote this.  If anything, it's faster; and the capacity to innovate even more vital than it was back then.

In 1476, William Caxton established the first printing press in England.  It took him a year to get his first book out and whilst history doesn’t record whether it was a smash, by 1590, towards the end of the reign of Elizabeth I, over 250 books were being published every year.  This was the white heat of technology, and it ignited an explosion of knowledge and political discourse across Europe that changed the course of that civilisation. 

In 1993, the first graphical web browser was launched.  Later that year, the first commercial website for the Digital Equipment Corp was launched, and within just seven years, there were 17.5 million websites.  Fast-forward a further five years through the dotcom crash, and there were 65 million websites.

When printing came to Britain, the change it wrought was far-reaching, but it was gradual.  But now we are experiencing change that’s as far-reaching, but immeasurably faster.  The internet has caused markets to be created, subverted, destroyed.  It has introduced new competitors, new business models and new channels to market.  The ability it gives people to communicate and share information has caused an unprecedented surge in creativity and innovation in businesses, as people rush to take advantage of new opportunities and others scurry to defend positions.

Ten years ago, we typically looked at sources of sustainable competitive advantage in terms of processes and functional components of the business mix – the ability to make widgets cheaper because of a patent, the control of particular channels to market.

So now we need to look deeper within organisations to see where their winning characteristics lie.  In this new era of hypercompetition, companies increasingly derive advantages from the skills they deploy – and in a period of intense change, the most important is the ability to innovate.

This trend had already started some years before, spurred by globalisation, consumer choice and deregulation.  But the internet has accelerated it and multiplied its effects.

The capacity to evolve rapidly to thrive in new market environments, to respond to new consumer demand and to exploit new models.  This is what sets the winners apart – Google who adopted a charging model from a competitor but added it to their superior search product, eBay who exploited the power of online community by adding it to an auction site, Amazon who invented the affiliate market – beating wealthier competitors by creating huge distribution at minimal capital cost.

These companies demonstrated an ability to innovate, and each prizes its ability to do so over time, devoting significant resource to the continuous development of new products. 

But in the digital age, innovation isn’t something that just happens at this macro, corporate level.  Testing of new techniques, approaches and even just media selections should be part of business as usual at every level.

In the media and marketing world, this isn’t just a pursuit of ‘media firsts’ – innovation for its own sake.  The brutal reality is that chasing too single-mindedly the lowest cost conversions means you paint yourself into a corner, with no options in development when the market is disrupted by a new dynamic.

Your competitors, the media environment, individual publishers and your audience change all the time, and what failed to work three months ago might work today.  The successful online campaign continuously tests new approaches, because they offer the potential to deliver an edge.

And ultimately that’s what we all want.  An edge.  A competitive advantage – we know something our competitors don’t – something we can exploit for a while until they catch up, at which point we’ll already be off doing something else.

There’s a natural tendency to do what worked before, and that’s exactly what many agencies and advertisers continue to do.  But trying new things isn’t just a strategy for competitive advantage today – it’s a strategy for survival.

Thursday, February 1, 2007

TV moves to the net

A version of this was first published in Marketing in 2007; this piece looked at the future of TV, seeing Joost as a seminal moment in TV's move to the net.  It was (even though in the end it didn't happen for Joost), and we're now seeing online TV move to the big screen, closing the circle.