Trialogue brands

A version of this piece was published in Marketing in 2007

Last week, I wrote about how the emergence of the trialogue is fundamentally altering the dynamics of engagement online.  This three-way exchange between consumers and with brands has made itself felt right across marketing, influencing the way that price, distribution, promotion and even the product itself is created.

This is the point where user-generated content meets brands, and it’s an area fraught with difficulty for the unwary and rich with opportunity for the creative.

Most of the focus on user-generated content has been on the media phenomenon it has created.  Google buying YouTube for £850m was the richest of a series of UGC media brand acquisitions that have included Flickr (bought by Yahoo), MySpace (NewsCorp) and Last.fm (CBS).

Other media owners have watched with envy as audiences have flocked to these sites, and brands have looked on perplexed – knowing the value of that audience (they’re hard to find elsewhere) but conscious that this isn’t simply a medium in which you can just advertise.

And whilst some have exported familiar techniques from the traditional armoury, running quizzes and competitions on MySpace, others have taken a radical approach, building the trialogue into the very fabric of their products.  The products I’ve chosen here are about as far from being digital as it’s possible to be – you don’t need to be virtual to take advantage of the trialogue.

When I was a kid, Lego was a fantastically creative toy that inspired endless innovation – you could build anything, as long as it was essentially square.  But now Lego have built the trialogue into their brand.  Lego Factory allows web users to design their own kits and order the parts, even customising the packaging.  But it also lets them share their designs and discuss them, building a community that helps Lego to stay close to their enthusiasts.  

Whilst running is a competitive sport, most training is done alone.  But Nike+ has turned a solo activity into a social phenomenon.  A sensor placed in your shoe sends data on your run to your iPod, which shows your distance run, calories burned and so on.  But when you synchronise the iPod with your computer, it uploads those details to the website, where it’s shared with thousands of other runners.  

When I looked last night, over 35,000 runs had been recorded in the past 24 hours, and people were mapping their routes, challenging each other and competing in vast global 10k runs.  As you’d expect, music is integral to the experience, and the iTunes playlists of top athletes can be bought from the store, whilst charts are compiled from runners’ favourite powersongs.

Any retailer will tell you how hard it is to predict demand for individual lines.  Regardless of the sophistication of predictive models, trend-spotters and other sooth-sayers, there are always things you thought would shift like hot cakes but instead just take up shelf space.  Less frequently, but just as frustrating, are those at the other end of the scale – surprise hits that customers just can’t get enough of, and inevitably are on a six-week lead-time from the Philippines. 

How great it would be if you just sold things that people like.  Better still, if you only made things people like, and knew they’d buy them.  Threadless, the online t-shirt store, carries only designs its users have uploaded – and manufactures only those that get a critical mass of votes.  You won’t see them having sales to shift that unmovable stock. 

A clothing brand, a toy, a sports shoe.  Each has empowered a community of its consumers, and by connecting them together has itself benefited.  But these aren’t just ‘soft’ benefits.  They’re driving new revenue streams, repeat purchase and real engagement – consumer relationships whose strength is founded not in the transient moment of a product need, but in the enduring nature of humans to be social animals.

The rise of the Trialogue

A version of this piece was published in Marketing in 2007

When Moses climbed the mountain to collect a set of tablets, he wasn’t expecting a consultation exercise.  No focus groups had been conducted, and no quantitative research.  The tablets came with commandments on them, and there was a certain amount of implied definitiveness that came with that term.

And media’s been pretty much like that for most of the several thousand years since then.  A small number of people told a large number of people what they thought, and there was very little opportunity for the mass to respond – and if they did, it was subject to the editorial control of those in power.

Which is why when the web appeared in 1994, people started getting excited.  A new paradigm was emerging, they said.  In the future, where there previously had been a monologue, there will be a dialogue.  Consumers will be able to respond to communications just as easily as they can receive them, and the implications for brands are enormous.

I went to a conference in 1996 in Edinburgh, where hundreds of marketing and media folk debated hotly the exciting opportunity this new world of dialogue would bring their brands.  We spent three days talking about how brands would be able to have a dialogue with consumers, and that this would be a more powerful means of communication because of the level of involvement that consumers would have.

Throughout the debate it was clear what benefits a dialogue with consumers could have for brands.  The trouble was, there wasn’t much in it for consumers.  Speaking for myself, I don’t really want to have a dialogue with Persil, or Sainsbury’s or Yoplait.  I don’t even want to have a dialogue with Audi or Vodafone or Selfridges, in which I would normally be expected to be considerably more interested.  

Ultimately I want them to get on with being them.  Make my clothes clean, connect my calls – the hygiene factors are important, but the emotional elements are just as much theirs too, and I either buy into them or I don’t.

So the ability to create real, meaningful dialogue often ended up being too costly, too difficult and often simply too much work for the value generated.

But emerging over the last few years has been a new dynamic, infinitely more powerful than the dialogue ever promised to be, more threatening, more revolutionary and more valuable.

When we look back in another ten years, we will see that the true impact of digital media was not to find new ways to connect brands to consumers, but in connecting those consumers (or “people” as they like to refer to themselves) to each other.

This simple fact has created a new ecosystem.

Now, people collaborate together to create software, which they release back onto the web where it outperforms the ‘commercial’ competition.  They share information about medical conditions, challenging the authority of the medical establishment.  They co-operate to drive down fuel prices, publishing the cheapest price for your postcode.  And they join forces to bring down brands who let them down, publishing video of underperforming products.

The age of the Trialogue has arrived.

The challenge this poses for brands is that they’re no longer handing down the tablets.  Their consumers have relegated them to the position of supplier, and are talking about them, not to them.

Whilst this is a threat to those who adhere to the status quo, it’s an opportunity to those brands who can reinterpret themselves as facilitators.  They recognise that the bulk of the discourse will take place between consumers, and their role in this is to enable, empower, listen and just occasionally, talk.

The trialogue will influence every aspect of marketing, from product design (threadless.com) through to product recommendation (tripadvisor.com), and its potency derives from opportunity brands now have not to talk at people, but to be a small part of billions of their conversations.

Domain names are part of brand architecture

A version of this piece was published in Marketing in 2007

The internet may be big these days, and it might be respectable.  It might once again be the darling of the stock markets and the ambition of the graduate, but there are still areas where spurs and a Stetson wouldn’t be out of place.

But unlike your run of the mill cowboy, the people that roam these spaces make millions of dollars.  They’re highly organised, professional and skilled, and they’re probably costing you money.

Domain names are the street addresses of the internet.  Amazon.com, google.com, and Yahoo.com were brand names that didn’t exist before they launched onto the web, but McDonalds, Harrods and the BBC were all brand names that weren’t swift enough to register their .com domains before cybersquatters secured them. 

The McDonalds.com domain was temporarily lost to a journalist back in 1994.  After repeatedly contacting them to encourage them to register, Joshua Quittner finally registered it himself, later being stripped of it by NSI, who looked after registrations then.  MTV.com was registered by one of their own VJs, Adam Curry, after the channel showed no interest in setting up a website – he set up his own unofficial site and then left, to the later consternation of the broadcaster.

Although legislation has now largely caught up with this practice, and arbitration procedures exist to resolve the problems it causes, it’s nevertheless inconvenient and costly to resolve.

So how important are domains, and how threatened are they?

For many companies, the domain name is an integral part of their brand architecture – often the primary point of contact for customers.  And a company that’s not sufficiently organised to retain control of its domains can lose them easily to domainers, who circle constantly in the waters beneath.

Domainers often register names on a speculative basis, often taking misspellings – one of the most-typed web addresses is www.goggle.com, occupied by a site claiming to give away laptops.  Other tricks include watching the ‘drop list’ – the registrar publishes a daily  file of all the addresses registered, and Domainers use software to compare the lists day to day, picking out those that have expired – ‘dropped’.

Unwary companies who let their domains lapse – “what are the chances it’ll be noticed?” find themselves having to buy back, sue or go to arbitration.  Most buy back, as the alternatives can be too time consuming when business is being lost minute by minute.

Whilst you can’t simply set up a domain in the name of a well known brand and get away with it, there are all sorts of greyer areas where companies can come unstuck.  A multinational company trading with the same name as a local company can find it’s simply beaten to the name, whilst generic terms can be registered by anyone, as B&Q have with diy.com, and British Gas with gas.co.uk.

It’s not just external forces that battle for control of the website.  Internal conflicts between divisions of companies often cause confusion too.  The web address ‘Britishgas.co.uk’ was until recently controlled by BG Group plc, the overall holding company, which placed a company organigram there, although the overwhelming bulk of traffic there was of domestic consumers.  And until its acquisition by P&G, Gillette.com housed an investor relations website with little consumer information.

But a new trick has arisen that’s getting around the trademark lawyers.  The African state of Cameroon, (whose country domain is .cm) is benefiting from the millions of internet users who daily mis-type .com.  In a deal with a major domainer, they divert all traffic to unregistered addresses (in a county with 18m population and fewer than 200,000 online that’s most of them) to a site called agoga.com – agoga then run ads relevant to your search, potentially presenting competitors to the user.

Domain names are valuable brand commodities – to be guarded and seized when the opportunity strikes.  If Kevin Ham, the man behind agoga, is now worth $300m as a recent magazine article claimed, he’s mostly made it from those who let their guard down, or simply weren’t alert enough to the true worth of these assets – and that includes some big names. 

Microsoft buys aQuantive

A version of this piece was published in Marketing in 2007

Microsoft buys aQuantive

Who own AvenueA/Razorfish

Who have Microsoft/MSN as a client

Whose Performance Plus system is driven by Arbiter

Which belongs to aQuantive

And they all live happily in Seattle

Adserving is the technical bedrock for both publishers and agencies.  For publishers it acts like a carousel projector, placing banner ads into web pages and managing their rotation and display so that the publisher’s revenue is maximised.  For agencies, it allows the performance of hundreds of different ads on many different sites all to be tracked in one place, and for copy to be targeted based on behavioural or other audience information. 

For both sides, adserving is about two things.  Data, and control.  The ability to make advertising accountable, and to act on that information quickly and efficiently.  So fundamental to the business are these technologies, that the online media business simply couldn’t exist without them.

So as the last few weeks have seen a flurry of significant deals in the adserving space, agencies and publishers alike have been staying close to the game.

Like the small tremors felt before a big quake, early signs started last year when Doubleclick bought German-based Falk, an adserving company with strength at home and in Benelux. 

But the ramp up started just a few weeks ago, with Doubleclick going on to acquire the UK’s Tangozebra for £15m, and really warmed up when in turn Doubleclick was snapped up by Google for $3.1bn following a bitter battle with Yahoo and Microsoft.

Microsoft had for years unsuccessfully tried to develop an adserver, and as operator of one of the world’s biggest media websites was loath to put its data in the hands of a bitter rival in the search space.

Having lost out, irony fans were pleased to see the software giant calling for competition investigations into the deal.  But the ink was hardly dry on the letter of intent when Yahoo sucked up the remaining stake in Rightmedia.  Two weeks later, AOL bought Adtech in Germany, and on the same day WPP announced their acquisition of 24/7 Realmedia, an adserving and media sales network.

It wasn’t WPP’s first foray into media sales, but the absorption of an adserver underlined just how concerned Sir Martin Sorrell must have become about the power that the Doubleclick deal might give his frienemy.  Whether it’s to the benefit of WPP’s clients to have an in-house solution is for another article, but it started to look like Microsoft were always the bridesmaid, never the bride – and they were feeling the pressure.

Which brought them to the acquisition of aQuantive, owners of the Atlas adserving business.  If observers had thought the Google/Doubleclick deal expensive at just over ten times the previous year’s revenue according to some estimates, this was even saltier at nearly fourteen times 2006 revenues - $6bn.  Given that Microsoft has been rumoured to have made an offer for Doubleclick at just under seven times revenue, they had to dig deep to play catchup.

And it’s deeper still than it looks.  aQuantive generated more than half of their revenues (58% last quarter) from their ownership of AvenueA/Razorfish – a digital agency business, and got just one-quarter (27%) of their revenues from Atlas, their adserving business.

It’s a bit like buying the house because you like the garage.  Microsoft have ended up with a whole raft of other businesses that they’ll probably dispose of, just to make sure they got the adserver they wanted.

So the music’s stopped and everyone’s sat down.  Is this it?

The truth is, nobody knows how big the online economy is going to be, but by the scale of some of these investments relative to their current income, some people are really betting big.  Adserving is just one service business in the internet economy – there are going to be many more rounds of musical chairs before this year’s out.

The UK is ahead of the US?

A version of this piece was published in Marketing in 2007

Since the earliest days of online marketing, it’s been the widely received wisdom that the US is ahead of the UK.  The gap varies – it used to be two years, and now it’s often quoted as six months.  Whatever the lead, most observers in this country agree it’s the US that has the head.

But talk to American online marketers, and they’re keen to know why the UK is ahead.

The first time I heard this, I thought I’d misheard.  But news had reached the US that the share of media budgets accounted for by online had reached 10.9% - almost double that in the US, and they wanted to know why.

The US advertising market is huge.  At £143 billion a year, it dwarfs the UK’s £18bn.  Americans spend 57% more per head of population on advertising, and seven of the top twenty advertising cities (in billings terms) in the world are in the US.

But online, the picture is reversed.  The UK spends 20% more per head of population than the US does.  And whilst in traditional media, New York is the biggest advertising market in the world (and twice the size of London), the London online advertising market is as big as New York’s.

This reversal of fortune has been caused by three key factors that have held the US back, whilst the UK benefited from local conditions that accelerated its boom.

A third of the US ad market is accounted for by local/regional advertisers, and yet only 8% of online advertising comes from this sector.  Regional advertisers’ importance to the US market is not represented online, where these businesses are failing to make an impact.

Second, the UK market’s rapid growth has been largely driven by direct response, whilst in the US, a greater share of advertising is brand-based.  Whilst 57% of UK online adspend is in search, this figure is just 44% in the US.  US advertisers are much more sophisticated in their understanding of the medium as a brand advertising environment, but the immediacy of the returns experienced by direct marketers has prompted much faster growth.

Finally, the ‘upfronts’ – the US TV networks’ practice of committing advertisers for a year in advance in order to secure the best slots – has meant the market there is considerably less flexible and iterative than in the UK, where budgets tend to have more flexibility on a quarterly level.  Advertisers here have been able to respond much more quickly to the extraordinary growth in the online market, upweighting spend whilst their American colleagues have been tied in to long-term TV deals.

The UK meanwhile, has been making hay whilst the sun shone.  TV suffered as the brand leader laboured under a CRR formula conceived in a pre-broadband era.  Radio struggled as secondary medium status was ceded to online.  As audiences fell, waning confidence amongst advertisers in these media led to revenue falling faster, with online the prime beneficiary.

But despite its success, the UK market is still smaller, less sophisticated and narrower based than the US.

The US market’s scale has given it a natural advantage in the deployment of behavioural targeting tools that let publishers segment their non-prime inventory and sell it at a premium.  These technologies track viewers, so that someone viewing say, more than three pages of sports content in a session can be shown sports-targeted advertising later when they’re looking at the news.  This creates more effective advertising, but also increases revenues as publishers can expand the supply of more highly-demanded audiences.

Video advertising, just starting in the UK, has been established for over a year now in the US.  The heavier share of brand advertisers, particularly in FMCG, has led to faster demand for these less response-focused ad formats.

So the received wisdom that the US is ahead isn’t flawed – it just isn’t that simple.  In any other market, these gaps would be seen as failures – it’s telling that the online media community universally regards them as opportunities.