Data is Free

Comscore's Online Retailing Report for Q1 '09 was released today. The results are incredibly sobering. Online spending is down 10% for people making under $50k. But the surprising thing is that it is only up 3% for people making more than $100k, and 2% for people making between $50k and $99k. Typically that group drives a great deal of online retail as they drive 80% of online retail.

Much of this decline can be attributed to the drop in spending for people over the age of 45 who, having seen their net worth pummeled in the market while also facing retirements and/or kids nearing college age, have basically stopped spending.

Diving a bit deeper, the only areas to experience any growth were Sports and Fitness and home entertainment options. I'd love to know what is driving the growth in sports/fitness spending. Are people trying to stay healthy and de-stress? Would love to know more.


As should be expected in our current economic times, discounts and coupons are incredibly popular. In fact, Comscore indicated in their presentation that coupon sites are experiencing a 15 year high in traffic. In fact, coupon sites are second only to search in importance for online shoppers. That's a fascinating stat given the hundreds of millions of dollars invested in search, online shopping comparison sites, and auction sites. I seem to recall that Microsoft recently bought Ciao, an online shopping comparison site, for nearly $US 500 M.


The following chart shows the amazing growth of visits to coupon sites.


What's also astonishing is that most people still get their coupons from the Sunday paper with a minority getting coupons online. So, while coupons are a huge source of information for online shoppers, people are getting their coupons from the paper?


Maybe I'm missing something here, but isn't there a massive opportunity for online retailers and merchants to drive sales and customer retention by investing a greater portion of their marketing budgets and product marketing efforts in online coupons and rebates? Moreover, isn't there a great opportunity to link giving consumers coupons in exchange for getting them to take a survey, agreeing to have their behaviors targeted online?

I know coupons aren't seen as being "cool," but they work to drive sales into a certain segment of the population that is price sensitive - which right not includes everyone. And given the opportunity to link the receiving a coupon to giving up some demographic or behavioral data, doing online coupons seems like a no-brainer.

Tons of interesting new data points on mobile advertising. Lai Kok Fung, Ph.D., CEO of BuzzCity makes is co-founder and chief executive officer of BuzzCity, reveals the results of their 2,000 person survey. One of the biggest findings is that people are not accessing the Internet through their mobile phones while they are "mobile." They are accessing the Internet while they are at home or at work, they are just doing so through a mobile device.

A global survey of users across the more than 2,000 mobile web sites that comprise our mobile advertising network. Perhaps surprisingly, the survey found that most people who access the mobile Internet do not actually do so while “mobile.” Rather, they are surfing the mobile Internet while they are at work, home, etc.

Less than six percent actually use the mobile Internet while travelling, commuting or outdoors. In terms of usage, the survey found that most people use the mobile Internet and applications for communication with friends through chat, blogs and discussion groups—basically, social networking (60%). We found much smaller, but still significant, use of the mobile Internet for entertainment (16%) and for looking up specific information (10%).

The latter point is also an important one. The phone is a communication device. People use it for "social networking." (When I was a kid and we had a "party line" phone, "social networking" meant having the neighbor listening to your calls.) Knowing that most of the page views on a mobile device will come from social networking applications has profound implications for ad targeting and ad budgets. Two spring immediately to mind:

1) Ad impressions on social networking sites must be targeted to the interests of the user, otherwise the advertisers is just wasting their budget.
2) Social networking sites can be an incredibly valuable source of data for marketers for monitoring what their customers are saying about their products. Monitoring and responding to those comments in real time with clever ads is an unexplored but important area for marketers and market researchers to better understand.

Finally, Garrick Schmitt, group VP of experience planning at Razorfish and the agency's global, has very interesting thoughts about "app-vertising" on the mobile phone. I think everyone would agree that custom apps aren't right for every campaign, but we've seen that apps can be hugely effective for campaigns where the medium can be tied to the message. I'm particularly impressed with the Adidas Urban Art Guide which has a map of Berlin that you can access on your phone, and Audi A4 free driving game app. Both of these apps take advantage of a phone's unique properties (mobile and gaming device) that makes the advertisements effective.

The only word of caution is that having a cool app is not enough. Campaigns need to be multi-channel (search, display, mobile) and possess a combination of reach and targeted placements in order to be effective for the marketer.

talking on the phone, but times change.

Richard Florida, writing in The Atlantic, makes a great argument for high speed rail by observing that areas of great density - and mobility - generate economic activity far above people working in relative isolation.

Mega-regions are large-scale economic units of multiple large cities and their surrounding suburbs. My research team and I defined them using satellite images of the world at night to identify contiguous economic areas with more than five million people producing $100 billion or more in economic output. The world's 40 largest mega-regions account for two-thirds of all the global economic activity and 85 percent of the world's technological innovation while housing just 18 percent of its people.

That last bit is an absolutely amazing statistic. 18% of the world's population produces 85% of the world's technological innovation?!

Florida then gets into the details of the US, and which mega-regions are driving the most economic growth. Unsurprisingly, the corridor between Boston and Washington DC generates the greatest amount of overall economic activity. What is fascinating is that, on average, the population of that area is significantly more productive than residents of other mega regions.


When you chart this data some other interesting observations pop out. Turns out that, on a per capita basis, Denver and Phoenix generates slightly more economic activity than Northern California. As a resident of Seattle I was also initially surprised to see that the Cascadia area (Vancouver/Seattle/Portland) is generating FAR less economic activity on a per capita basis than other areas.


But, really, it make a lot of sense. As anyone who has ever sat on a 5 hour+ flight from New York to Seattle can tell you, Seattle is a long way from everywhere. The people who live here may love our isolation, and Vancouver and Seattle are the two most beautiful settings for cities in North America, but our isolation comes at a real cost.

What this means, it seems to me, is that our region must invest far more in high speed rail links. High speed rail, with TGV speeds, would reduce the travel time from Seattle to Portland to just over an hour. The trip to Vancouver would only take 54 minutes. The faster we can move people from Vancouver to Portland, the more ideas we will generate. We'll also encourage more density in the cities while revitalizing the areas between the big urban cores.

Now this is interesting, Blackberry outsold iPhone in Q4. Price has always been a double-edge sword for Apple. On the one it drives profit margins that are terrific. On the other it leaves the door open for other players in the market.

I've always admired Apple's willingness to keep prices high. Where everyone else in the tech industry seems to only understand how to burn markets down, Apple has led the way in pricing the old-fashioned way: build a better product, charge a higher price. Raising prices for improved products isn't a sin but a virtue.

Via Yglesias

Bronnenberg, Dhar and Dube report on first mover advantage in consumer packaged goods brands:

We document evidence of a persistent “early entry” advantage for brands in 34 consumer packaged goods industries across the 50 largest U.S. cities. Current market shares are higher in markets closest to a brand’s historic city of origin than in those farthest. For six industries, we know the order of entry among the top brands in each of the markets. We find an early entry effect on a brand’s current market share and perceived quality across U.S. cities. The magnitude of this effect typically drives the rank order of market shares and perceived quality levels across cities. [...] Across 49 current leading national CPG brands, dating back to the late 1800s and early 1900s, we find that the current share in markets close to the city of origin, is, on average, 12 share (i.e., percentage) points higher than the national average of 22 percent.

Tyler Cowen remarks:

What’s amazing is how long these effects — however they are motivated — last. Miller Beer was introduced to Chicago in 1856 (a very early launch though technically not its first city) and it still has an advantage there, relative to other cities. Heinz Ketchup originated in Pittsburgh in 1876 and it still has an market share advantage there, again relative to other cities.

I've seen similar research regarding Internet products. The same effect of geographic proximity = brand awareness = adoption. Except that the geographic proximity is related to concentration of the product's target market. So, products like Facebook start strong where the companies are located, but they quickly migrate to where their target audience lives. So, Facebook is strong on college campuses. Political blogs have strong share in DC, but then quickly get adopted in college towns.

What I haven't seen is an evaluation of this on a global scale.

Michael Fassnacht has a terrific article at AdAge describing the changing nature of customer segmentation. One of the big challenges when analyzing a market is understanding how certain customers will react to a product offering. Having written 12 significant business plans, for companies or projects that were funded, I can tell you that market forecasting is - at best - an inexact science. Even the best, most elaborate forecasts are usually just precisely imprecise - they are incorrect down to the last digit.

The good news is that companies, particularly consumer facing companies, do not have rely solely on traditional market research tactics for understanding their audience. More precisely, technology enables us to understand that consumers are often drifting in and out of "traditional" segments. It seems to me that the best market research shops don't just rely on pre-launch research. Instead, we'll increasingly see the line between research, advertising, and analytics blur to the point where every interaction, every touchpoint, between a company and its market can be analyzed so that shifts in behaviors and circumstances can be picked up very early in the cycle.

Ad Age is reporting that Tropicana sales dropped 20% after a rebranding.

Apparently taking away that delicious looking orange with the straw stuck into it was a bad idea. This is a good reminder that if it ain't broke don't fix it is a good idea. Though in this case I think the better take away is that food packaging succeeds when it makes the food look tasty and desirable.

From the "ice" dripping down a Coke can, to the tasty cheeseburger's in a McDonald's ad, to the fake food in a teriyaki shop's window, food advertisements work when they make people's mouths water. The Tropicana redesign looked like they were selling insurance.

One of the interesting discussions around my family's house was, "if the papers die, where are we going to get our crossword puzzles?"

Only people who do the crosswords understand the enormous feature that the daily crossword puzzle represents for the newspaper. With the app store that need can be fulfilled.

Though it says something that the NY Times most valuable employee is Wil Schortz.

A new report, “Next Generation Smartphones: Players, Opportunities & Forecasts 2008-2013,” from Juniper predicts that between 2008 and 2013, annual sales of smartphones will rise by 95% to more than 300 million.

The key finding is that the Web 2.0 centric apps are what is driving the demand. This is reflected in the incredibly growth of the iPhone app store. We are rapidly reaching a point where the app is replacing the browser.

Other findings from the report: As margins on handsets fall, vendors such as Nokia and Sony Ericsson are increasingly diversifying into the service provision arena as a means of bolstering earnings - solutions such as music libraries and location-based social networking present significant opportunities in the future.

“The process of evolving mobile phones into internet-centric, highly personalized mobile computers is well under way,” said Andrew Kitson, the author of the report. “Looking ahead, the shape and form of next-generation devices will most likely be led by software and content, rather than hardware, as vendors such as Nokia strive to make their devices highly personalized and rooted firmly in the online environment.”

What Google has proven is that people will accept advertising in exchange for a free application. Given the current economy with rising unemployment and belt tightening I would expect the rise of advertising supported content and software to be extreme.

Though I was only in 1st grade the year that Jimmy Carter got elected, I still remember the early 70s quite well. Feels like we are going back to that era before cable television when ALL content was ad supported. Not sure how far down this path we'll travel.

I will say, however, that if we are returning to the 70s then Led Zeppelin OWES it to us to get back together. And every concert will be recorded on video-equipped phones and instantly posted to YouTube.

I had coffee with a friend of mine this morning who knows a ton about the ad space and social media.

When I got back to the office I found this note from the ITU announcing that there are 4.1 billion mobile phone subs.

Our conversation, and the link, reminded me of some research I did in grad school where I was working for David Gautschi, now the Dean of the Business School at RPI, then a marketing prof at Washington. He was doing a book on network-effects, and wanted to understand what causes the telephone to turn the curve and gain mass adoption.

The issue that AT&T faced in 1910-1920 was that telephones were strictly used for business, particularly in tall buildings. (People would pick up the phone rather than walk down several flights of stairs in un-airconditioned buildings. Go figure.) AT&T wanted to figure out how to make phones a consumer product.

What turned the corner was they did a test where the wired up farm houses in Iowa. This was in the early 1920s when it was hard to travel. Cars were expensive. Roads were bad. The women in these houses were usually stuck there for weeks at a time with no other women to talk to. You can see where this is going. Usage exploded because the women in these houses were no longer isolated.

This is happening right now with social media. People are going to use their phones as, well, communication tools to maintain contact with their peeps. The only difference is that it is happening at a global scale, not just in Ottumwa.

Someone, maybe Facebook but maybe someone else, is going to do what Coca-Cola did in the 20s and 30s and build a global brand that "teaches the world to sing," or at least teaches the world to harmonize together on the same social mobile platform.

Local newspapers are imploding for a lot of reasons, but those reasons have nothing to do with the quality of the product or the value of local news as an advertising medium.

The Chicago Trib, the Seattle PI, the SF Chronicle are shutting down because (a) their balance sheets are a disaster, (b) the product they are offering isn't suited for how advertisers want to reach people right now, (c) their cost structures - debt service, printing, etc. - can't be supported by the online advertising they do get.

But this doesn't mean that local news isn't valued. Ask any group of people what they think of local newspapers and they might shrug their shoulders. Ask them if they are interested in news about their community and they'll say they like it. Speaking from a sample size of n=1 I can tell you that I value having good reporters covering the state capital, city hall, the school board, the local sports teams, and the local restaurant and arts scene.

What is interesting is that the price of reporting is a really small part of a newspaper's overall costs. You can look it up. Reporter and editor salaries are usually less than 15% of a paper's costs.

So, if you have a low-cost model for having professionals gather the news - and can augment that with a robust local community of bloggers - then you have an interesting product.

Now, what is the revenue model.

According to an analysis by the Kelsey group mobile advertising will see a CAGR of 80% over the next 5 years. Mobile local search will increase from $20 million to $1.3 billion for a CAGR of $1.3 billion.

Cut those numbers in half and you still have a big number.

Other findings from the Kelsey Group report, Going Mobile: The Mobile Local Media Opportunity, include:

* The percentage of mobile searches that have local intent will increase from 28% in 2008 to 35% in 2013.
* Currently there are 54.5 million mobile internet users in the U.S., representing 25% of online users.
* Approximately 15% of iPhone applications are local.

And according to Comscore, 42 million people used their mobile devices in October 2008 to access news and information content on the Internet, an increase of 57 percent from October 2007.

As smart phones proliferate, the demand for local search is going to rise as well. And local search IS search. A local news source - properly marketed with the right connection to the community to attract eyeballs - could quite arguably capture the lion's share of mobile search.

Yes, this assumes that you can get people to use their phones to surf a local news source. Yeah, I know. But if you can pull that off, and if you can stitch a few dozen local news sources together so you can sell national advertising campaigns, then you have reconstructed a media empire. In 10 years we will look back and see that, while News Corp and Gannett have ceased to exist, new media companies rose to take their place.

A lot of people like to use the metaphor of "people selling buggy whips" to describe what dead tree newspapers are currently doing. Perhaps. But just because people stopped riding in buggies when the automobile came along didn't mean that the need to travel disappeared.

The need for high quality, local news and information is as strong as ever. A local news source with some marketing muscle behind it could capture that market. More importantly, the need for a trusted local news source to advertise in is not going away either. If you a local business where do you want to advertise, Craiglist, Google or next to a trusted, branded, local newspaper reporter?

The only real mystery is (a) when does mobile/portable device penetration grow to the point that reach is sufficient for decent sized ad campaigns, (b) the identities of the business people with the smarts and access to cash to launch the next great media company.

Mobile network operators in the U.K. are preparing to sell behavioral user data to help advertisers target mobile ad campaigns more effectively.

Mobile industry body the GSMA (Global System for Mobile Association) has proposed a measurement process that provides anonymous audience metrics and aggregated user behavior data, which it hopes will stimulate the uptake of mobile advertising and create an ad market akin to that of the fixed Internet.

The GSMA has formed a task force comprising major European operators, including Telefonica, Vodafone, Orange, T-Mobile International and 3. It now hopes to launch a fully audited mobile measurement service in the second half of 2009, alongside three further working groups, one each for advertisers, media and advertising agencies, and publishers

.

This is a brilliant idea. Working together the carriers can (a) mitigate the competitive privacy concerns while (b) actually providing enough data to be useful to advertisers.

From a strategic issue the biggest problem has always been carrier reluctance to be the first to offer behavioral data due to the likely response from their competition, as well as bearing the brunt of the privacy backlash. By banding together the problem is solved.

From a tactical point of view the carriers' aggregated data will prove far more valuable than a single source of data. It also places the carriers in the driver's seat for dictating the terms by which networks and advertisers buy their data. It will be fascinating to see how the carriers elect to monetize this asset, which seems tailor made for an exchange/auction mechanism

Interesting article today in the NY Times about the issues impacting the wireless industry. Though the current situation is a bit grim, the long term outlook should be great for both consumer electronics, Internet services, and carriers.

The state of the industry according to the article is.

1) People love smart phones because of the apps.
2) Smart phones are expensive.
3) The economy is down right now so sales are expected to be slow.
4) Carriers and handset vendors (like everyone else) are laying people off.

Yet over the next 18 months we know that:

1) The price of smart phones will drop, increasing penetration.
2) The greater the number of phones, the more robust the market will be for applications.
3) The bigger the installed base, the more developers who will create cool applications.
4) The cooler the applications, the more people will love their phones.
5) Go back to the top!

Another issue is that data not only wants to be free, it wants to be mobile. As Craig McCaw once remarked, people don't want to call places they want to call other people. The same goes for data.

I don't want data to come to my laptop. At least, I don't want to have to be tethered to a desk or coffee shop table where my laptop sits. I want a robust mobile device that provides the same level of functionality as a laptop, and I want that to device to fit in my pocket.

The iPhone is the most effective of those devices. There is no reason that Nokia, Microsoft, or another company can't launch similar devices that are competitive on both price and functionality.

Last word to Nokia:

Olli-Pekka Kallasvuo, Nokia’s chief executive, said recently in a conference call with investors to discuss the earnings. He added that he believed Internet-centric phones and mobile services would drive a new generation of growth.

“It is clear that there is a tremendous opportunity to extend the value of the handset market through the integration of device hardware and Internet services,” he said. “This will drive the next wave of industry growth, and innovation will not stand still.”

Call me crazy, but it seems like AOL has perfectly good display advertising options AND the ability to monetize its premium subscribers and page views via behavioral targeting.

Ad networks - including Google - are not there to rescue publishers or newspapers. Maybe the publishers should focus on attracting advertisers by giving them a product which drives clicks and raises awareness.

How? Targeting and data analysis would be one place to start. Publishers might want to (a) grow and know their audience, (b) use behavioral targeting and other targeting methodologies to give advertisers what they need which is clicks and/or awareness, (c) sell and serve the ads.

Outsourcing everything to Google, or pumping your impressions through a network, and hoping for the best isn't going to get the job done if you are AOL.

"The losers are the ones that don't keep it simple," said Westergren. "Companies that make things drop-dead simple are the ones that will win over and over again."

Today's article in MediaPost describes a panel at an AlwaysOn media event in NYC with Pandora founder Tim Westergren and Marco Argenti, vice president for media at Nokia, among others.

Westergren revealed that in the two days after the iPhone came out Pandora gained more subscribers than it had in the prior two years through distribution deals with Sprint and AT&T on 50 different handsets.

Not only was growth prior to iPhone slow, but the company was burning resources customizing its app across multiple phones due to a lack of standards. "We've been looking for a hero device," he said. "As a company now, we're thinking, 'what's the next iPhone?'"

I think the leap of genius in the iPhone app is abandoning the browser in favor of tiles, a move enabled by the touch screen. For years at Openwave and every other wireless software system the notion of the ultimate mobile browser was pursued. But a browser presumes that you can easily access content in a stream, and you have the ability to dip in and out of those streams.

But a phone isn't a computer. When someone uses a phone they are using it for discreet, bounded activities. Tiles are perfect for this because it directs the user to those discreet activities: make a call, play a game, listen to the radio, etc.

The message is that UI designers have to focus on keeping things simple. And wireless carriers and software/handset vendors that want to compete with Apple need to figure out how to make easy to use SDKs that run across their handsets.

The other day I was driving to Snoqualmie with Steve Kuhn to take our respective children to their ski lesson. All week I had been considering a thought experiment: what happens to the economy if energy was placed under Moore's Law.

Presume that technological advancements in solar, wind, and nuclear energy encounter massive investment such that the price of energy begins to fall over the next 20 years the way that the price of computing power has fallen over the past 20 years - what happens?

The first conclusion was that our standard of living would dramatically rise. Free energy = free heating for the house. Free transport costs = no longer having to burn a gallon of gasoline to buy a gallon milk. Free transport costs = no longer having to burn gallons and gallons of milk to transport milk from the farm to the dairy. Free energy = lowered costs of producing the feed required to raise a cow.

Ok, but what does that really mean for the economy? Assume nearly all of the energy costs are pulled out the economy, what happens to the manufacturing, transportation, and agriculture industries, among others.

When I got home that evening the McKinsey Quarterly arrived with a potential answer: power curves. The argument is that larger firms have increasing returns as the scale. The example is that over the past 30 years the biggest banks have gotten bigger as they have acquired smaller firms and used their resources to out compete the remaining firms.

The exhibit shows how much bigger the big firms are (or were).



This tendency has been repeated in other industries. In fact, in industries where access to capital but creativity is the constraint then the tendency to have dominant firms is even more pronounced.



So what does all of this mean if energy is subjected to a kind of Moore's Law? I think the answer is in the article

Power curves are also promoted by intangible assets—talent, networks, brands, and intellectual property—because they can drive increasing returns to scale, generate economies of scope, and help differentiate value propositions. ...the more labor- or capital-intensive sectors, such as chemicals and machinery, have flatter curves than intangible-rich ones, such as software and biotech.

If the cost of energy is no longer the chief constraint on goods and services, then the only thing left to differentiate on is creativity. Factor in additional conditions such as low cost of capital and the ability to harness creativity/organizational development becomes THE critical competitive advantage.

Great article today from Hayagreeva Rao, Professor at Stanford Business School, via the McKinsey Quarterly. The premise is that market insurgents are the ones who create massive shifts in industry or create new niches. His new book is out too.



I want to respect the fair use doctrines, but this sums up what he is talking about:

Rebels in new markets: Cultural acceptance of the car

The car, a radical invention that promised to transform the experience of transportation, was an extremely hot cause. In 1895, when the automobile industry was just beginning, the gasoline-powered car was poorly understood, notoriously unreliable, and reviled by vigilante antispeeding organizations. Colonel Albert Pope, a bicycle manufacturer who went on to make electric cars, could not fathom why anyone would use gas-powered ones, asserting, “You can’t get people to sit over an explosion.” And a lawmaker in Massachusetts suggested that motorists fire Roman candles at approaching horse-drawn carriages to warn them of the arrival of the car.

Yet as early as 1906, commentator Frank Munsey noted that the “uncertain period of the automobile is now past. It is no longer a theme for jokers, and rarely do we hear the derisive expression, ‘Get a horse.’” Henry Ford is widely regarded as the man who established the automobile industry by automating production and driving down prices so the car could reach the masses. But it wasn't until 1913 that Ford installed the moving assembly line in Highland Park, Michigan, to produce the Model T—long after the car became taken for granted. What’s more, Ford benefited from laws licensing drivers and mandating speed limits—and he didn’t lobby or otherwise agitate for those rules.

Ford didn’t need to, because a social movement powered by automobile clubs comprising car enthusiasts played a central role in legitimating the automobile and presenting it as a modern solution to the problem of transportation. These enthusiasts (primarily doctors and other professionals) were rebels who flouted convention, abandoned the horse-drawn carriage for the automobile, and sought to popularize its use. Neither sponsored nor financed by car manufacturers, the clubs were both social in nature and focused on improving quality, shielding car owners from legal harassment, and promoting the construction of good roads. Club involvement enabled members to construct an identity built around a new consumer role. By 1901, 22 clubs had mushroomed in cities from Boston to Newark to Chicago.

In addition to working with state governments to draft laws licensing cars and mandating speed limits, automobile clubs organized reliability contests that pitted cars against one another in endurance, hill climbing, and fuel-economy runs. Each contest—a cool mobilization if there ever was one—was widely viewed as a test that proved to audiences that the automobile was reliable. The first reliability contest was in 1895; by 1912 the contests were discontinued because organizers recognized that the automobile had become a social fact.

Even Henry Ford needed to win a race in order to achieve the transition from engineer to entrepreneur. In a celebrated 1901 race, Ford, then an upstart producer, defeated the better-established Alexander Winton. Ford’s wife, Clara, later described the scene after Ford took the lead in a letter to her brother, Milton Bryant: “The people went wild. One man threw his hat up, and when it came down, he stamped on it. Another man had to hit his wife on the head to keep her from going off the handle. She stood up in her seat . . . screamed, ‘I’d bet $50 on Ford if I had it.’” The public acclaim that Ford received enabled him to create the Ford Motor Company in 1903.

Naj Kidwai, CEO of Real Time Content, has a great article at AdAge describing how media companies and ad agencies need to embrace personalization as the next wave of advertising.

One of the key grafs, I think, is the notion that technology enables targeting to take place on the individual level.

The concept of personalizing online video shifts the paradigm from contacting the mass market to targeting on an individual level. Audience fragmentation is creating a fundamental need for marketers to make video advertising more relevant, addressable and personalized.

The reason that personalization matters isn't some abstract notion of "target every ad." The reason is matters is that word-of-mouth remains THE critical decision point for buying goods and services. One of the reasons that Japanese cars were able to conquer the US car makers wasn't because of their ads. It was because they consistently made high quality cars AND the purchasers of those cars told their friends.

On the local level our contractor gets all of his business through referrals. My other example of word-of-mouth is that a friend of mine read my post on Mexican Coke and went to Ro Ro Bar-B-Que to buy some of that cane sugar goodness. Note that the word-of-mouth function in the last example happened entirely online. A friend read the ad.

This is where personalization gets interesting. Media companies and agencies already have all of the data they need to deliver incredibly personalized ads. Their existing data could then be augmented by data from Twitter, Facebook, and other social media sites to create personalized and targeted ads.

For example, anyone who read my prior post could be served an ad from Coca Cola and a local ad for Bar-B-Que joints in the Seattle area. To make it more interesting, why couldn't Coke build an ad unit with a Coke bottle next to a Bar-B-Que sandwich.

Finally, Naj has a good summary and makes a great point about direct-response advertising. In the future, all ads should be direct-response.

Personalization is important, however, when advertisers are seeking a direct-response mechanism that can drive optimal online sales conversions. If you are looking to sell a product, it's natural to think that your conversion rates will be higher if you can target your message based on attributes such as personal preferences, gender, race or geographic location.

Now that we have the technology that delivers on the promise of personalization, agencies have no excuse not to find innovative ways to give their clients personalized campaigns to increase results and spend their media dollars more efficiently.

This is good advice. Reproduced here in its entirety.

The 10 Things Performance Marketers Should Do -- But Don't
by Nancy Marzouk, VP of Media at [x+1]

THE economic forecast for 2009 looks a lot like what we've already seen in the second half of 2008: pain. Thus, creating marketing initiatives that are both effective and accountable has never been more challenging, yet essential. With this in mind, buckle up and take a look at these 10 guidelines to help improve conversion rates while also strengthening your brand in the new year.

1. Take optimization into your own hands. Don't pay a premium for someone else's optimization that isn't transparent to you. Ad networks have optimization technology, but it's a black box -- you can't see how your ad dollars are moved around, or how keywords are being optimized. Demand transparency. Make sure you're getting value in return for the optimization premium paid.

2. Use your data to target and speak to your ideal costumer. Find a partner that can append your data to theirs and personalize your media plan. Pinpointing and targeting your ideal customer allows you to eliminate media waste. Most ad networks and agencies have their own data points and don't append advertising data to the system because they'd have to customize every single media buy.

3. Know your addressable market. Are your goals realistic given your addressable market? How big is your current market opportunity? How can you expand it? A Hawaiian airline just flying in and out of certain California locations shouldn't market across the Internet -- they'll hit their addressable market too many times. Know where the tipping point is in terms of diminishing returns.

4. Analyze your attribution method in relation to frequency and exposures. In display, where the last impression/last click always wins, it's easy for media aggregators to steal attribution, especially via cookies. What's your optimal frequency across the whole media plan? If you don't know because you're buying from too many aggregators, consolidate your budget. If you can't track frequency and exposures across the entire media plan, you can't assign attribution equitably.

5. Establish metrics based on cross-channel market opportunity. Too often I hear one ad delivery method is outperforming another, but they're not all created equal. You can't evaluate display the same as search since they are unique; instead your goals should be different. You need cross-channel attribution analysis in order to establishing metrics that allow you to effectively budget different channels.

6. Invest in good creative. Is there a clear call to action in the ad? What do you want the viewer to do? Is your message concise? Don't try to say too much - you have about two seconds to grab someone's attention. Is your logo visible? If you can't see it on a skyscraper ad without scrolling down, it's wasted.

7. Know where your ads are running. If you don't have control over where your ads appear, it won't matter how compelling they are. You need to know if the content on the placement sites is helping or hurting your brand. A children's advertiser doesn't want its ads alongside a review of 50 Cent; over time, it hurts brand association/interaction and people will start to think, "They're not that family-oriented."

8. Give your Web site the same amount of attention as your media. If all your attention is focused on driving traffic to your site, but you don't know how to dynamically personalize it through content management, your conversion rate will suffer. If someone's profile says Champagne, don't offer them domestic beer. A personalization conversion funnel can provide a minimum 20% lift, and it's not that expensive.

9. Challenge your ad agency. Why are they buying what they're buying? What are they doing that's innovative? Also, educate yourself. If you don't know the difference between a Tacoda and a Revenue Science, do your homework. Don't say to the agency, "Just do it all for me." Ask why they're doing what they're doing, so dollars are spent as they should be. You don't want them to push media at you because of their vendor relationships.

10. Clearly define your objectives. Clients often don't have clear objectives, such as firm CPA goals. Or they may have conflicting primary and secondary objectives, such as driving traffic and conversion. Just because someone is intrigued by your site doesn't mean they'll convert. If your goal is to drive traffic, don't piggyback a goal of conversion on top of it.

Do these steps appear daunting? Well, take heart -- I know of no Fortune 500 firm that is implementing all of them. However, a few to watch that are a bit ahead of the curve include AT&T Wireless, Capital One, Discover and Verizon.

Terrific thoughts on the proper direction for mobile marketing from Andrew Grill at Every Single One of Us.


MIR Show - jMac takeover - Andrew Grill from Mobile Industry Review on Vimeo.

The interesting part kicks in around 3:32 where the discuss how critical it is for mobile marketing messages to be tailored to the individual. Microtargeting is the new black.

I'm a Coca-Cola fan. I grew up in the South drinking at least a bottle of day. (Yes, my mouth is full of fillings.) I remember crazy hot summer days walking down to the store near our house, dropping my quarter in slot, and yanking an ice-cold bottle out of the machine, and having a Coke.

I was at RoRo Bar-B-Que on Stone Way and was delighted when, after ordering a Coke, the waitress said regular Coke or Mexican Coke. I answered Mexican right away because it is made with real sugar, and it tastes GREAT.

IMHO, the reason Coke sales are falling in the US is that they have screwed up their product with high fructose corn syrup. There is simply no comparison. Coke made with sugar is the real thing, to coin a phrase. Coke made with corn syrup is cloyingly sweet.

So it is with some interest that I read that Coke is debuting a new catch phrase "Open Happiness" and launching a big campaign. I wish them luck. But if they want to drive sales they need to fix their broken product before they pour cash into advertising.

Yesterday my meeting with Brad Hefta-Gaub was interrupted when his iPhone beeped with a marketing message about AT&T wireless tat he neither needed, wanted, or asked for.

Now the news comes that Brad wasn't alone. Sending messages to people over SMS that they don't need, want, or ask for is a profoundly bad idea. They may have attracted attention to American Idol, but they damaged their brand and their relationship with their customers.

WPP just re-branded their mobile marketing arm as Joule. Everybody in the article who has a vested interest in making mobile marketing work has optimistic things to say. Others are expressing doubts.

Let's be clear about mobile: it is a different medium. Twitter works because it is fundamentally tied to SMS: 160 characters is all you get. Until there is an iPhone or a Blackberry in every pocket then SMS is the dominant medium, and all marketing campaigns need to be geared toward SMS if mobile is to achieve the scale that marketers need to drive $.

The other thing about mobile that is fundamentally different is that it isn't passive, it is active. What is the difference? As Andrew Grill at London Calling says:

• Passive digital footprint - data collected about an action with no client interaction
• Active digital footprint - data collected about an action with client interaction

An active footprint means the customer has given the marketer permission to market to them over their phones. These types of customers are inherently more valuable. The challenge for marketers is to build mobile experiences that incorporate permission-based advertising over SMS (and more robust channels if the user's phone can accomodate that).

Getting permission is hard, but it has to be done. Fortunately for savvy marketers a channel for getting those permissions exists: it is called Twitter. Tweet!

Jonah Bloom has an interesting video at Advertising Age where he is urging publishers to go back to the subscription model.

I think is overall point is a good one, in theory. Publishers have definitely traded a revenue stream of, say, $24 per user per year to a revenue stream of a tiny fraction of that via online advertising.

For branded publishers with highly considered products (The New York Times, The Economist, etc.) the move to free is understandable, but also a disaster. Those organizations employ very intelligent people who create valuable content.

The issue is that through the years the high-end publishers, if you will, have degraded their brands by not putting out content that is as intellectually rigorous as the average blogger. Hence, you have the bloggers at Swampland (with the recent exception of Joe Klein) who are getting out thought on nearly a daily basis by the folks at Daily Kos.

The value of organizations like The Times, The Economist, and The Financial Times is that they can attract first-rate minds like Paul Krugman who aren't going to get outsmarted by some random blogger.

In this day and age competence is valuable. News media companies shouldn't be afraid to leverage their brands and their resources to put out authoritative publications that provide their readers with accurate and actionable information.

For a while the "Holy Grail" of television advertising has been crafting a response to the Internet's ability to track and measure ad clicks. Millions of dollars are being spent on multiple projects and products designed to give marketers the ability to target ads and measure their effectiveness. Project Canoe, Google, Microsoft's Navic, and TiVo are all in hot pursuit of the technology that's going to do for TV what Google did for text ads.

MediaPost just covered the "Viva" app which promises to do a lot of interesting things for marketers and agencies. The article, I think, is a clear example of burying the lead. Quoted here for your enjoyment are the last 4 paragraphs.

Pares acknowledged that "representativeness" was a key issue, but he also noted that DVRs are now present in two-thirds of households with incomes of $100,000-plus, and noted that advertisers and programmers need to understand how TV audiences behave in a DVR universe. Among other things, he said TiVo has found that so-called addressable commercials - TV spots that are relevant to specific types of viewers - do not perform as well as many people might think in a DVR environment.

Both Rentrak President Ken Papagan, and TNS Media Research President George Shababb, said it also is important to think of the new data as being more than just "set-top" data, but as one component of a new array of data streams being derived from a variety of new video platforms that also include online and mobile video.

"We call it return path data," Shababb said.

As important as access to the new data streams is, Shababb said the biggest issue in the business is not processing the data. "It's about how the data is being edited," and the business rules and guidelines the industry develops for valuing them.

Wait. What was that. Two of the top guys are saying that targeted TV spots do not perform as well as people think in a DVR environment. But I thought that the whole point of was to target television ads. Now you are telling me that, it turns out, targeted ads don't perform as well as people might thing. Furthermore, you're saying that "set-top" box data needs to be considered along side online and mobile video. AND you are saying that, at the end of the day, what really matters is how the data is "edited."

Not to put too fine a point on it, but isn't the real story here that a bunch of really smart guys have run the numbers and it turns out that targeted ads on television isn't the Holy Grail after all?

Let me be clear, I think that the research and the work that TiVo and the other people quoted here is incredibly valueable. The work they are doing is incredbly valuable. I wouldn't want anyone to confuse my criticism of this article with their work. In fact, my criticism of this article is rooted entirely in my belief that this team has uncovered a valuable insight.

If technology folks like myself want to add value to marketers we need to make sure that we are doing exactly what the TiVo et.al. team is doing run the numbers and overthrow gut reactions. Once we do that then we'll have products and services that drive value for our customers.

Brian Weiner, CEO of 360i, makes a great point regarding pricing of interactive ads. We're currently seeing the basic collapse of the free media (and maybe soon the subscription media) business because of the pricing of interactive ads.

His overall thesis is that the pricing of interactive ads are far too low to support the media ecosystem that marketers depend upon for getting their message out. He bolsters this point by making the observation that the price for interactive ads is artificially low given the benefits provided by interactive ads.

He's right. An ad viewed by 1000 people online should really be priced higher than the price of an ad viewed by 1000 people in print. Interactive ads are a superior product: trackable and measurable. In rational markets superior products are more expensive than inferior products. See Job, Steve, and Apple for a good example.

At CES Ballmer just made it official: $550 to $650 million a year for 5 years to be the default search provider for Verizon's 78 million subs.

Seems to me that this deal is going to live and die by how prominent Microsoft is on the Verizon decks, and how good a job Microsoft does in providing a compelling user experience. The mobile search experience is very different than the laptop search experience.

When I am searching from my laptop I'm seeking specific things (products and services) while also exploring (Icelandic currency price). On my phone I'm searching for very specific things (where is that damn restaurant). This doesn't meant that the rapidly increasing power of handsets and networks won't make the mobile search experience come to rival the laptop experience, but it isn't there yet.

Yet the rapidly increasing capabilities of the mobile browsing experience is what makes this deal somewhat problematic. A thousand years ago when I was at Openwave being at the top of the deck meant something because going beyond the first screen was a royal pain. Now phones ship with easy to use browsers runnng on fast networks that make bookmarking and going directly to specific information sources incredibly easy.

The issue is that, over the next five years, not only will the capabilities of mobile continue to increase, but those capabilities will filter down to mobile users who still have clam shell phones.

So, like I said, seems to me that this deal comes down to execution. If Microsoft can craft a compelling mobile search experience that keeps users from bookmarking someone else's search then this deal might work. But getting this deal done should be considered only the first step in a much longer journey.

In this presentation by Sergey Brin he confesses that he didn't think Wikipedia would work because too few people would contribute. He was right that far fewer than 1% of total Wikipedia users write articles.

The secret to the success of Wiki lies in its ability to let People participate in its creation. It is entirely a product of the power of generative products.

Following up on a post from yesterday, Google is taking the step with Android by actively soliciting ideas from customers.

Software for mobile phones is the perfect medium for soliciting generative ideas as the phone is such as personal device.

According to Attributor my old colleagues at Revenue Science are to be congratulated for breaking into the top 4 of Ad Server Market Share.

They've opened up a substantial lead on Microsoft, which is impressive. What's even more interesting is that their market share of large sites is bigger than Microsoft's Atlas.

Jack Shafer at Slate argues that the newspaper industry has long been attuned to new technology, that they were on the forefront of the Web, and therefore the industry deserves a break.

He's right. Anyone who calls newspaper industry execs dumb for "missing" the Web is a fool. The people I know in the paper biz are some of the smartest people I've ever met. The papers didn't miss the web, they just have the wrong model.

But buried in Shafer's article is a terrific description of the difference between generative and non-generative technology.

• Nongenerative technologies can't be tinkered with or otherwise improved by outsiders.
• Generative technologies such as the PC, on the other hand, invite improvement by outsiders, making them more and more useful to users as time passes—and often more useful in ways that the original designers never would have imagined.

Traditional businesses are 100% nongenerative. Nothing more nongenerative than your morning paper, for example. The challenge for all businesses going forward will be to strike a balance between the nongenerative and generative. Just enough IP to sell and to protect, but otherwise open and encouraging for others to add value.

I have a feeling that this is going to become a theme of mine: the upside down pricing model for online advertising on premium branded sites.

JP Morgan's Imran Khan makes the point that pricing for online ads will fall or remain flat through Q1 '09 and probably through all of '09. We are an a recession, prices fall during a recession. At least that is the conventional wisdom.

I realize how contradictory (and illegal) the following suggestion is, but let's make it anyway. The CEOs of the biggest media companies in the US should meet on, say, the 5th floor of an underground parking garage and agree on an across the board price increase for their online ads.

Given the extreme dangers of deflation to our economy in general, having an area of the economy where prices are going up wouldn't be a terrible idea.

Great article at The New York Times on R, the software environment for statistical computing and graphics. The article does a great job of capturing the history of R, and hints at what lies ahead.

The money quote is:

But while SAS plays down R’s corporate appeal, companies like Google and Pfizer say they use the software for just about anything they can. Google, for example, taps R for help understanding trends in ad pricing and for illuminating patterns in the search data it collects. Pfizer has created customized packages for R to let its scientists manipulate their own data during nonclinical drug studies rather than send the information off to a statistician.

With cloud computing, virtualization, and open source software like R the costs of serving content and analyzing data for media companies is rapidly approaching zero. That's good news since it frees up the media companies to do what they should be good at: producing content to attract eyeballs.