Vertical search booms

A version of this piece was published in Marketing in 2007

Read about search, and you read about Google.  The powerhouse search business dominates how we think about search, and few places more so than in the UK.

We’re Google’s second biggest market (next to the US) –16% of their revenues – and a 79% share of searches, a far bigger share than it takes in the US.  Its share of ad revenue is even higher, as many advertisers lack the resources to spread their programmes beyond one search engine.  

So is there life beyond Google?

It’s tempting to think that the market’s sewn up, but just as in the display sector, where from many advertisers behaviour you’d think that only three websites exist, there’s actually a diverse ecosystem out there, full of niches Google hasn’t reached.

Online retail is now worth £11bn in the UK, and most purchases start with a search.  But search engines themselves are more important in the research phase – for buying itself, many people use price comparison sites.  Pricerunner, Kelkoo and Shopping.com all provide one stop access to hundreds of retailers, allowing consumers to compare features and pricing at a glance.

Whilst this has made a huge impact on white and brown goods, it’s gained little traction in clothing, where much of the recent growth in online retail has been focused.  Like.com could change this, by allowing users to search for similar items to the ones they see.  Search for ‘shirt’ in men’s apparel, and a range of different ones are presented.  But click ‘likeness search’ next to the light blue short-sleeved shirt, and around 300 similar ones are displayed from dozens of manufacturers.

The retail vertical is further subdivided, with uSwitch and Confused.com fighting for the market in financial services and utilities, and Moneysupermarket adding travel to these.  This area has generated a flurry of M&A activity recently, with Scripps buying uSwitch last year for £210m, Admiral considering the flotation of Confused, and Moneysupermarket’s expected £800m+ IPO this month.  These businesses have created a new intermediary in the value chain, and P/Es of around 40x show the expectations this market is creating in the city.

But search isn’t all about buying.  As the internet shifts from being an information to an entertainment medium, online video is booming.

Whilst much of the talk around online video has centred around sites like YouTube and Heavy.com, the fight for video search is a potentially much more lucrative one.

The most talked about name here is Blinkx.com, whose recent IPO on AIM values it at £120m.  Blinkx claims to index video in a completely different way to other search engines, and have a broader range of content than either Google or Yahoo.  But it’s playing in possibly the most competitive development area online, up against dozens of startups like Clipblast and Everyzing, together with the big guys, AOL’s Truveo and Google Video. 

Whilst volumes are still small, video search holds the navigation key for future TV consumption.  So these guys are well-resourced, and not keen for anyone else to eat their lunch.

The web is a medium where consumption is based on interest, and particular fields can attach very specific meanings to given words.  In these cases, a general search can be a wild goose chase.  Engineering, science, motoring and business have all spawned search engines particularly dedicated to their topics, but perhaps the biggest area is medical search.

Described as the world’s second opinion, medical search engines like Medic8.com and omnimedicalsearch.com provide access to information on virtually any condition, not just for consumers, but for doctors too.

These sites have created useful services that are clearly differentiated from the big guys.  They’re adding real worth to the search economy, and proving that the quality of search listings isn’t measured by their length.  But whilst they’re making money and creating real businesses, they’re not worrying Google.  For most people, the start and end of search is still there, and that’s the way it’ll stay, at least while the most common search term on Yahoo is… Google.

Retail and publishing merge

A version of this piece was published in Marketing in 2007

For as long as anyone can remember, publishing’s been a business with two principal sources of revenue.  You sold advertising and sponsorship to companies who wanted to promote themselves to your audience, and in some cases, you charged that audience to view your content. 

Then along came the web.  Those media owners who had been used to charging their audience suddenly found that they couldn’t. 

Each extra newspaper printed costs money, and with rising newsprint costs this has been a major pressure in newspaper production costs.  But the economics of web distribution are different to print media, as each extra reader is gained at a zero marginal cost.  Consequently, so much free content was available online that consumers were simply unwilling to pay.

Culturally, this was hard to accept for many in the business.

Simon Kellner, at the time editor of the Independent, told the ISBA annual conference that it was wrong not to charge for content, that journalism had value and that it shouldn’t be given away on the web.

Martin Sorrell speaking at Google’s Zeitgeist conference in 2006, echoed this thought when he noted that he advised media clients not to give their content away for free.

Clearly, both ITV and Metro have managed to make viable media businesses out of giving away their content, so ‘free’ is nothing new.  But this focus on charging audiences for content belied a lack of imagination about the true commercial value of that audience.  As some publishers have discovered, there are other ways to monetise audience – and as they do so, the boundaries between what is considered ‘publishing’ and ‘retail’ are becoming increasingly blurred.

Online-only media owners were quickest to exploit this, untrammelled as they were by historic notions of how to make money.  A quick look at MSN’s site shows editorial about the best deals available in various financial services – but look at their credit card recommendations, and you can click to apply there and then.  An article about jet-set luggage in the travel channel carries a link to buy suitcases from MSN shopping.

AOL’s music channel sells you iTunes downloads, their travel channel sells you flights.  Yahoo will find you a house to buy and Lycos will rent you a car.

All of these transactions are handled and fulfilled by partners of these portals, and although there are often tenancy agreements in place, a large portion of the deal is often on a revenue-share basis.

These publishers are adopting some of the transactional risk, on the basis that by doing so they generate greater spend by the advertiser/supplier than they might do if they were simply pitching for ad budgets.  In this way, they’ve branched out from advertising to become part of those marketers’ distribution strategy.

It isn’t just the online pure-plays that have grasped this. RunnersWorld.co.uk makes most of its money from advertising.  But a third of their revenue comes from runners registering to participate in running events – Natmags keeps a percentage of each transaction.

The Sun makes substantial revenue from Sun Bingo online – using both the print and online editions to drive traffic into the game.   The new football season will see Sun readers paying to download premier league goals to their mobiles, in addition to the Page 3 videos they can already buy.

This spread into retail from the publisher side has been mirrored by retailers, who are increasingly understanding that content sells.

The best of these is undoubtedly Net-a-porter.com, a fashion site selling premium brands from Jimmy Choo to Miu Miu.  High-quality magazine content and engaging style has led to an average order value of over £500 and very high levels of repeat purchase. 

The internet is a marketing channel (media), but it’s also a channel to market (distribution).  So whilst those who view it purely as ‘media’ will continue to limit their own potential, those who understand this new marriage of what Net-a-Porter founder Natalie Massenet calls ‘content fused with commerce’ are tapping a rich seam.

Chuggers and fundraising on the internet

A version of this piece was published in Marketing in 2007

I used to work in the heart of adland, Soho, and it was a constant challenge to walk down Carnaby Street without being accosted by a camera crew gathering vox pops.  People who worked around there developed natural defence mechanisms – staring at the ground, trying to look really late – to avoid their clutches, leaving it to the Nordic backpackers to get nobbled.  Just a few days experience was all it took, and you could breeze past them with an “I’m incredibly important/late/psychotic” look, the body language equivalent of “shields to maximum”.

Now I work in Victoria, home to the chugger.  These guys are much tougher.  Trained in clipboard concealment techniques and come-hither smiling, they’re the ninjas of the street hustle, and they take no prisoners with their cheery greetings.

But not content with being assaulted by these breezy budget Lord Levys, we are starting to adopt their techniques for ourselves.

Hardly a day goes by without some colleague, friend or acquaintance threatening to climb Kilimanjaro, run somewhere or give something up in the name of charidee.  But in times past they’d have to flog round the office begging for signatures, abasing themselves in front of potential sponsors and generally nicing up to everyone.  And after subjecting themselves to whatever trial they’d selected, they’d have to repeat the process, chasing up reluctant donors to dust off their wallets.

All of which meant that your generosity of spirit was rarely exercised by these approaches.

But all that’s changed with the application of digital technology.

For some time now, email has enabled sponsorship nets to be cast much more widely.  One email to the whole department or even company, and you’ve hit your sponsorship target.  Dozens or even hundreds now know both how fit and how benevolent you are, and signups are easy. 

But getting them to pay was still a problem, and managing the logistics of acquiring, collecting and chasing sponsors was a burden that was as one marathon runner I know put it “almost as much arseache as the run itself”.

So websites like Justgiving.com provide infrastructure to deal with all these logistics.  All the user has to do is follow the easy steps to register their event and designate their charity, and the site does the rest for them.  The site handles credit card transactions, reclaims the tax on donations and even sends out a thank-you note, leaving the contestant to focus on treating their blisters.

The consequence was a further surge in sponsorship requests.  I’m now running at about one a day (amazingly just as I typed that, another came in, so make that two).

And it hasn’t stopped there.  The dizzying growth of Facebook over the past few months has added further fuel to the fire, adding yet another channel by which we can be mugged for charity.  Now we’re approached not just by Tracy in finance (for it was her just a moment ago), but by our friends as well.   Frugging (I just made this term up), the practice of charity mugging your friends through social networks, is set to be the next wave to sweep through Facebook, and it’ll only get worse once someone writes an application for the site to integrate donation into your network.

The tactic we’ve all adopted, of ignoring mass sponsorship emails in the hope that their volume grants us anonymity, is going to be crushed without mercy, and our parsimony exposed to the rest of the online world as all can see our profile.

Ultimately, the only comfort is that the people it’s going to hit hardest are those who maintain multiple online personalities.  In order to maintain face with their various communities, they may be forced to give many times over.  Perhaps someone will launch a charity for them.

In the meantime, I’m going to start smiling at chuggers.  I realise this might confuse them, but at least they’re less persistent than my friends.

BBC too slow to launch iPlayer

A version of this piece was published in Marketing in 2007

The long-awaited BBC iPlayer is set to launch on 27^th July this year.  Knocking around in one form or another for around four years now, and beset by rights and regulatory troubles, the iPlayer is joining a market that looks very different now to the environment at the time of its conception.

The iPlayer is a program that’s installed on a PC (bad luck, Mac users) that allows the viewer to watch BBC TV shows from the past seven days.  Programmes are downloaded to the user’s PC (streaming, which allows the user to watch there and then without waiting for the download, will follow) so the picture quality’s good, and they can be transferred onto a portable device (video iPod or phone) so you can watch on the go.

Last year, the morning after I’d installed the software on my laptop, I got stuck on the tube in one of those familiar ‘District Line moments’, with nothing to read and no phone signal.  Out came the laptop, and I watched an episode of Horizon.  During the few weeks I had the trial system, I came to love it – my kids got to watch TV on long car journeys, and it became pretty much the only TV I watched.

But Sky’s Anytime TV by PC service went live last year, Channel 4 launched 4OD early year, and even ITV expect to debut their 30-day catchup service soon, leaving poor old Auntie reduced to announcing (for the umpteenth time) that it’s launching soon too.  

So the BBC’s gone from being market leading to market laggard – bogged down by interminable wranglings over whether it should be allowed to launch the platform, together with problems in securing the agreement of the independent production companies who control the ongoing rights for programming. 

Is there still a market for the iPlayer, or is the BBC too late?

There are two key issues that will determine whether the new platform will have a chance.

First, the DRM.  Digital Rights Management is much derided in the online world.  Officially, these software solutions protect the copyright holder by preventing copying or sharing of content between users – in the BBC’s case effectively erasing any programme you’ve downloaded after thirty days.  But whilst these systems are an inconvenience to the everyday user, often they’re just a speedbump to the technically competent, who usually find ways around them.

Last year, one broadcaster’s service was temporarily suspended after software was released that enabled Microsoft’s DRM to be circumvented by users.  Although they issued a fix for this, within three days it too had been nobbled, and the game of tag continues.

The problem is that whilst internet users dislike DRM, the deals struck by the BBC mean the producers don’t sell their programmes to the BBC, instead licensing them for limited usage.  If the BBC wants to buyout the rights, it’s going to take money – meaning overall fewer programmes can be acquired for a given level of investment.

Perhaps more of a gripe for consumers is the sheer amount of software users are being expected to download.  Channel 4, the BBC and Sky all require different systems to be installed – rather like having a different set-top box for each.  This lack of interoperability is a pain for viewers and will hold back the development of the platform.  With the exception of Sky, who are developing this as part of their pay-TV portfolio, control of the platform isn’t a particular competitive advantage, so we may see future co-operation between broadcasters on this, especially when faced with the corporation’s considerable marketing muscle.

But bigger, perhaps, than either of these is the BBC’s own bureaucracy.  Viewers may welcome the new service, and with a reputed 19million online visitors to the BBC website every month, there’s an appetite online, but unless Auntie can get her skates on, the world will have moved on.  The digital world moves at warp speed, and taking four years to get to market is just not going to cut it.

Death of interruptive advertising

A version of this piece was published in Marketing in 2007

Generally speaking, advertising and marketing folk aren’t renowned for their reserve.  On the whole, they’re more likely to be outgoing than introverted, gregarious than shy. 

And when you think about what they do, it makes sense.

Since the Romans pioneered the outdoor advertising market, with everything from ads for wine to brothels, the world of advertising has largely been an interruptive one.  We decide who we want to talk to, what we want to say and where to say it, then we go out and shout it as loudly as we can, as many times as we can afford.

Whether it’s in a newspaper or on TV, we wait until our target is doing something they enjoy, then we leap out:

Boo!

Buy some stuff!

And it works.  For thousands of years, we’ve been jumping out at people, trying to distract them, grab their attention and sell them something, and they’ve responded by doing as they’re told.  Mass literacy led to mass media, which led to mass brands, and all built on digging people in the ribs whilst they’re going about their lives and telling them something there’s only a slim chance they really wanted to know.

So if we’re so boorish, why did people let us get away with this for so long?

The conduit for all this rib-digging attention seeking, mass media, carries an implied contract with its readers/viewers.  They expect to see ads in the breaks, and they know that the content they’re consuming is cheaper as a result.

So when we speak to them, it’s on our territory.  These are our media, they know the deal, and have developed natural techniques for filtering out our noise, decoding advertising subconsciously to determine its relevance and ignoring the vast bulk of it (which only prompts us to shout louder).  And when they want a little peace and quiet, they get Sky+.

Now marketing and advertising folk may be noisy, but we’re not stupid.  As interactive and direct media have emerged, we’ve tried hard to be more relevant.  More targeted and more discrete in our communications. 

We’ve realised that the interruptive model is broken, and we’re trying to be a bit smarter.  The web has led the charge as media have shifted the centre of their consumption from being predicated largely on availability to being consumed solely on the basis of interest, and everyone with a blog is proclaiming the age of the empowered consumer.

Certainly, we’ve learned that we can’t rely on our ability to butt in on peoples’ lives any more – they’ve become too adept at avoiding us.

The trouble is, this is only half the picture. 

I’ve written several times about the trialogue – the three-way exchange between consumers themselves and brands.  This new dynamic is founded in social media, where the interaction is principally between consumers. 

Here, brands can be facilitators.  They can bring value to the community, and reap rewards for it.  But interruption, lack of value and relevance are met with rejection.  Worse than simply being ignored, this behaviour is spurned by the community.

Because now we’re in their space.  This is their media, not ours, and the old contract has expired.  Interruption fails not because people can avoid our message, but because they now actively resent our presence.

So the answer isn’t simply about shouting and repeating ourselves less, and it isn’t just about being more relevant (although all these help).  We have to think about what we can do for the community, and what we can help them to do.  The value we bring is more direct, and in many ways it’s more transparent – but it’s how we earn our place in the social media environment. 

The contract has changed, and smart brands know their place.  We’re in their media now, and they know it.

Social networking is changing the fabric of the web

A version of this piece was published in Marketing in 2007

Back in the bad old days of the dotcom boom, all you needed to do to give your stock a boost was to append the suffix ‘.com’ to your company name.  Everyone was doing it, from oil companies to greengrocers, and somehow not to join in made you look like you just didn’t get the digital revolution.

Now, if you spend any time amongst the venture capitalists of Silicon Valley, the buzzword you hear is ‘Social Networks’.  Anything being pitched for funding seems to have a social networking component – the success of MySpace (sold to Newscorp), Bebo and latterly, Facebook have made these Web 2.0 business models very attractive as investment prospects.

So is Social Networking just the new ‘dotcom’, or is it changing the fabric of the web, and the next big business sector in media?

First, we need to understand what social networking is.  Most outside observers think about it in very narrow terms, equating it to what happens on Bebo – social in the ‘leisure’ rather than in the ‘collective’ sense.  But these sites (though important) are just one manifestation of social networking.

At its most fundamental, social networking is about the ability the internet gives people to share their experience.

So social networking covers a broad spectrum from sites where users expressly contribute information through to those that collect tacit data and share it back.

At one end of this spectrum, the sites we all know, MySpace, Bebo, LinkedIn, Facebook, have experienced huge growth in audiences as people have discovered the power of connecting with others – either supplementing their existing social networks, or finding new friends and building new contacts.

This space is changing rapidly at the moment.  Facebook opened up their API (the code that lets other people and companies develop systems that integrate with Facebook) back in May, and within a month, 40,000 new applications have been developed for the site.  Ranging from a horoscope widget to a tool that lets you rate people anonymously, some applications have already attracted over 6 million users, and have contributed to a massive takeoff in Facebook usage in general.  If you’ve been getting a lot of Facebook invitations recently, this is why.

In the middle of the spectrum are sites like Digg and Flickr, where whilst you might add content yourself, the biggest area of activity is rating or classifying the content added by others.  The brilliantly un-PC site hotornot.com is a great example of this - 12 billion votes have been cast in the last seven years as people put themselves up for judgement and rate each other.

Finally, there are the sites which collect tacit information – data you leave behind as you use a site.  These are often similar to ‘collaborative filtering’ technologies employed by retailers like Amazon – ‘people who bought this book also bought books like this’, in that they aggregate the behaviours of many people in order to make recommendations back to individuals.

                                                     

Last.fm (recently sold to CBS) uses information on the music you listen to on your computer to suggest tunes that match your tastes, based on what other people with similar habits listen to.  StumbleUpon learns what websites, images and videos you like, and shows you similar ones it thinks you’ll like.

But wherever these sites sit on this continuum, they’re networking society together in entirely new ways.  Whilst theoretically we could have done any of this stuff before the internet arrived, the reality is that it was neither economic nor practical.

So social networking isn’t just a flash in the pan – it’s changing the way we share information with each other, and allowing us to establish and maintain relationships with people we just couldn’t have stayed in touch with before.

Within this there will always be companies that are overvalued, or simply overtaken by new ideas.  But we’ve hardly scratched the surface of the value that social networking as a whole will create both for users and investors.