Data is Free

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.