Saturday
The (online) music man
In 1995, RealNetworks CEO Rob Glaser pitched skeptical record labels on using the company's then-new audio-streaming technology to build a "jukebox in the sky."
Eight years later, that dream is reality in Glaser's mind. And its manifestation--monthly subscription music services such as that offered by RealNetworks' Rhapsody--will be the predominant way people access audio online in the years to come, Glaser contends. His evidence: the company's 46 percent rise in subscribers for Rhapsody and RealOne's premium radio from the second to third quarter.
That may also serve to steady concerns that RealNetworks' core subscription service for streaming video, RealOne SuperPass, may be losing steam. Indeed, RealNetworks has a head start on a raft of rival services, including Apple Computer's iTunes pay-per-song service and an overhauled Napster that's emerging to compete with the top-rated Rhapsody.
At the same time, the company faces continuing weakness in sales of system servers for delivering digital audio and video files--a business Microsoft dominates on the PC but Real aims to command in the wireless market. CNET News.com talked to Glaser a day after RealNetworks announced third-quarter revenue that met analysts expectations, based on a rise in music subscriptions.
Q: Revenue was up this quarter, and music subscriber numbers were up. Can you talk about the main driver of this growth?
A: Glaser: Not only is RealNetworks doing extremely well, but the subscription model, which we have long-advocated, is at the core of how consumers are going to experience music. It's not the only way, but we think that it may be the single most important way and certainly the most logical successor to services such as the old pirate Napster and Kazaa.
Why is the subscription model better?
It's simple economics. The average consumer who uses Rhapsody--and we now have a quarter million music subscribers--listens to more than 100 different songs per month. That pattern's pretty consistent. If you go with a purchase model, that costs you over $100 a month as a consumer. If you go with subscription model...we are able to deliver that same experience to consumers and have a good business at selling it at $10 a month. So it's less than a tenth the cost.
That was the great thing about Kazaa and pirate Napster from the consumer standpoint--that you got access to all this stuff, and you didn't have to choose before you listened to a song whether you wanted to buy it or not. We offer the same thing: You can listen to 100 songs a month or 1,000 a month. Listen to five seconds of them or 30 seconds of them. You decide if it's something you want to permanently own.
Is there any support left inside Real or outside for MusicNet (a joint venture between Real, America Online and several record labels)?
MusicNet, interestingly enough, is the second-largest online music subscription service. We own lock, stock and barrel in No. 1, and we're the largest single shareholder in No. 2. MusicNet, near as I can tell, has a very solid relationship with AOL...The reality is there will be a variety of services out there. For us, it's the best possible outcome: We're the 100 percent owner of No. 1 and majority owner of No. 2.
Is Apple's iTunes, which is gaining a lot of exposure, plus QuickTime, a threat to Real's software?
We have had a multidimensional relationship with Apple for some time...The thing Apple has to decide--not for us but for the industry--is whether it wants to be completely vertically integrated, in which only things invented in Cupertino are used and promoted on the Apple platform, or whether it wants to be a broader platform. It's hard when you have a single-digit share of the market, because you have a hard time figuring out how to grow your business. So I understand the lure of going in that vertical direction. But Apple's already lost things like Adobe Premiere on its platform.
Does it want the iPod to only talk to the Apple version of the store, or does Apple want to sell iPods no matter what method (consumers want to use to) connect to iTunes? So there's this Soviet model, or there's the open-market chaotic model, exemplified by the Web and by some aspects of Wintel. And Apple has to choose.
So it's better for you if they stay in that niche market?
Either way, it's fine. Apple makes fine hardware. If Apple opens it up so that other people can support, then that's good. If Apple stays "company down" on everything they do, then the market forces over time will render them into the kind of niche we've seen them in time and time again.
Is there much of a profit margin on digital downloads as opposed to selling subscriptions?
I understand the lure of going in that vertical direction. But Apple's already lost things like Adobe Premiere on its platform.
We think that the services model long term is a better deal for everyone...Our take on it is the business of selling tracks will be a low-margin business, with low barriers to entry and lots of people jumping in. The business model we've focused on with subscriptions as the center will have the best long-term economics.
At what level of subscribers does the business become really lucrative?
One of the delightful things about being a public company is I can say things that go forward one quarter or 10 years. In the middle, it gets a little bit tricky. I'll say this: We are focused on a long-term business. It'll be 10 years in February. And if I look back and ignore this financial bubble in '99 and 2000 and think about where we thought we'd be, we're ahead of schedule. In the 20 years in the information technology and Internet industries, I've never been associated with a legal, legitimate consumer product that had the kind of consumer excitement that Rhapsody has, so that's got to be worth something.
Is Real going to get into the portable business so that people can port their music collection around?
With RealOne, we support a couple dozen significant volume devices.
In terms of the economics (of the subscription model), that's still a model in which you have to pay 99 cents a track. If you look at all the excitement about the iPod, the content on the iPod is (largely) not purchased by either CD or download by the recipient. That business has been living off the afterglow of pirate services.
Yes, that category of product is a great product. The primary action is in support that's based on personal use content, where people ripped their own content. We've got great support for that. In terms of tying it into Rhapsody, it's the early days yet.
Has the RealOne subscription business flattened outside of Rhapsody?
No...we had overall growth. Because we broke out music for the first time we didn't explain to people what the number for music subscribers would have been if you rolled the clock back, other than to say that music was up 46 percent (quarter to quarter).
You cautioned investors, in your conference call, about the Major League Baseball contract--is there heated competition for its hand in streaming ball games? What do you stand to lose, and how will you make up for it if that happens?
As you may know, I'm a tiny percent minority owner of the Seattle Mariners baseball team. I've been associated with them for 10 years and it's been terrific. So I've been around the block a bit with...the economics of baseball. We're trying to tell the folks that follow our business that we're not going to do something uneconomic when it comes time to renew our relationship with MLB.
Long-term, video is going to be more important than audio in aggregate. It's been a terrific relationship from the standpoint of fans. Baseball has been one of the most exciting ways to enjoy the Internet...I was in Berlin for the seventh (playoff) game between the Red Sox and the Yankees, up to the wee hours of the morning watching that amazing game. It's clear that it's a core part of the culture...but we're just telling people, "Don't expect us to do something irrational just for the love of the game."
How will you compensate if you lose it?
It represents less than 2 percent of our revenue. Depending on the circumstances, we could end up more profitable than we are today. Baseball has been a great relationship, and it would be great if it could continue.
Momentum is building for original video programming (such as AOL's new sports show) and movie services online. Where's Real going to get its next wave of subscribers on this front?
(Laughs) I appreciate the question--this is in a context in which we just announced 46 percent quarter on quarter growth in our fast-growing content area, so I don't think that the biggest question I lose sleep about is what wave is going to drive this forward now. We have several waves driving this forward now, music most prominently.
In other words, how committed are you to video streaming?
Long-term, video is going to be more important than audio in aggregate. By working with the industry, we cleared more than 400,000 unique pieces of content in music that we're able to offer consumers a lot of flexibility on. They can stream it; they can purchase it.
The biggest thing that has to happen from the scale that music is at is to get the content flowing--be it old TV archives, be it movies. Folks at services such as Movielink are off to a nice start. But if you look at the number of movies Movielink has, and you compare it to the number of tracks of music, Movielink is sort of where music services were in 1999 or 2000. Maybe a little bit ahead of that.
The big message we put to all these content industries is: "Look, the lesson of the music industry is if you don't get ahead of the curve and make your content available for legitimate services, consumers will find a ways to get it, anyway, to your detriment." As I've discussed with guys such as Jack Valenti, the danger is that they'll move too slowly.
Does Real have any plans in the offline world, such as in digital cinema, as does Microsoft?
The digital cinema initiatives today are mostly stunts. Every once in a while, we'll do a marketing stunt. But long term, digital distribution will impact everything, be it taking HD (high-definition)-quality content and flowing it out to cinemas and not having to make and ship 35mm prints.
I've had a number of fun conversations with my buddy (Dallas Mavericks owner) Mark Cuban, and on that front, he's a big believer--so much so that he bought a theater chain to experiment in that world. That world's going to come, and we'll always be happy to have our platforms and technologies used in that area. But in terms of that being a primary business in the next year or two, I think that it's still the early days yet for that business. We'd rather just let people build technologies and services with our technology rather than get involved with it first-person.
As the market changes, are there pieces Real is missing? Are there other potential acquisitions on the horizon?
We will be active but selective. I look at what we did with Rhapsody--best product in the business--and under-distributed. In that case, we had the opportunity for the perfect fit. When there will be opportunities like that, we will be active. There will be situations in which there will be an ingredient piece, something we can add to other things we're working on that will scale things up. But I don't think we'll be like the old Computer Associates International, for which acquisition is the fundamental growth strategy.
Eight years later, that dream is reality in Glaser's mind. And its manifestation--monthly subscription music services such as that offered by RealNetworks' Rhapsody--will be the predominant way people access audio online in the years to come, Glaser contends. His evidence: the company's 46 percent rise in subscribers for Rhapsody and RealOne's premium radio from the second to third quarter.
That may also serve to steady concerns that RealNetworks' core subscription service for streaming video, RealOne SuperPass, may be losing steam. Indeed, RealNetworks has a head start on a raft of rival services, including Apple Computer's iTunes pay-per-song service and an overhauled Napster that's emerging to compete with the top-rated Rhapsody.
At the same time, the company faces continuing weakness in sales of system servers for delivering digital audio and video files--a business Microsoft dominates on the PC but Real aims to command in the wireless market. CNET News.com talked to Glaser a day after RealNetworks announced third-quarter revenue that met analysts expectations, based on a rise in music subscriptions.
Q: Revenue was up this quarter, and music subscriber numbers were up. Can you talk about the main driver of this growth?
A: Glaser: Not only is RealNetworks doing extremely well, but the subscription model, which we have long-advocated, is at the core of how consumers are going to experience music. It's not the only way, but we think that it may be the single most important way and certainly the most logical successor to services such as the old pirate Napster and Kazaa.
Why is the subscription model better?
It's simple economics. The average consumer who uses Rhapsody--and we now have a quarter million music subscribers--listens to more than 100 different songs per month. That pattern's pretty consistent. If you go with a purchase model, that costs you over $100 a month as a consumer. If you go with subscription model...we are able to deliver that same experience to consumers and have a good business at selling it at $10 a month. So it's less than a tenth the cost.
That was the great thing about Kazaa and pirate Napster from the consumer standpoint--that you got access to all this stuff, and you didn't have to choose before you listened to a song whether you wanted to buy it or not. We offer the same thing: You can listen to 100 songs a month or 1,000 a month. Listen to five seconds of them or 30 seconds of them. You decide if it's something you want to permanently own.
Is there any support left inside Real or outside for MusicNet (a joint venture between Real, America Online and several record labels)?
MusicNet, interestingly enough, is the second-largest online music subscription service. We own lock, stock and barrel in No. 1, and we're the largest single shareholder in No. 2. MusicNet, near as I can tell, has a very solid relationship with AOL...The reality is there will be a variety of services out there. For us, it's the best possible outcome: We're the 100 percent owner of No. 1 and majority owner of No. 2.
Is Apple's iTunes, which is gaining a lot of exposure, plus QuickTime, a threat to Real's software?
We have had a multidimensional relationship with Apple for some time...The thing Apple has to decide--not for us but for the industry--is whether it wants to be completely vertically integrated, in which only things invented in Cupertino are used and promoted on the Apple platform, or whether it wants to be a broader platform. It's hard when you have a single-digit share of the market, because you have a hard time figuring out how to grow your business. So I understand the lure of going in that vertical direction. But Apple's already lost things like Adobe Premiere on its platform.
Does it want the iPod to only talk to the Apple version of the store, or does Apple want to sell iPods no matter what method (consumers want to use to) connect to iTunes? So there's this Soviet model, or there's the open-market chaotic model, exemplified by the Web and by some aspects of Wintel. And Apple has to choose.
So it's better for you if they stay in that niche market?
Either way, it's fine. Apple makes fine hardware. If Apple opens it up so that other people can support, then that's good. If Apple stays "company down" on everything they do, then the market forces over time will render them into the kind of niche we've seen them in time and time again.
Is there much of a profit margin on digital downloads as opposed to selling subscriptions?
I understand the lure of going in that vertical direction. But Apple's already lost things like Adobe Premiere on its platform.
We think that the services model long term is a better deal for everyone...Our take on it is the business of selling tracks will be a low-margin business, with low barriers to entry and lots of people jumping in. The business model we've focused on with subscriptions as the center will have the best long-term economics.
At what level of subscribers does the business become really lucrative?
One of the delightful things about being a public company is I can say things that go forward one quarter or 10 years. In the middle, it gets a little bit tricky. I'll say this: We are focused on a long-term business. It'll be 10 years in February. And if I look back and ignore this financial bubble in '99 and 2000 and think about where we thought we'd be, we're ahead of schedule. In the 20 years in the information technology and Internet industries, I've never been associated with a legal, legitimate consumer product that had the kind of consumer excitement that Rhapsody has, so that's got to be worth something.
Is Real going to get into the portable business so that people can port their music collection around?
With RealOne, we support a couple dozen significant volume devices.
In terms of the economics (of the subscription model), that's still a model in which you have to pay 99 cents a track. If you look at all the excitement about the iPod, the content on the iPod is (largely) not purchased by either CD or download by the recipient. That business has been living off the afterglow of pirate services.
Yes, that category of product is a great product. The primary action is in support that's based on personal use content, where people ripped their own content. We've got great support for that. In terms of tying it into Rhapsody, it's the early days yet.
Has the RealOne subscription business flattened outside of Rhapsody?
No...we had overall growth. Because we broke out music for the first time we didn't explain to people what the number for music subscribers would have been if you rolled the clock back, other than to say that music was up 46 percent (quarter to quarter).
You cautioned investors, in your conference call, about the Major League Baseball contract--is there heated competition for its hand in streaming ball games? What do you stand to lose, and how will you make up for it if that happens?
As you may know, I'm a tiny percent minority owner of the Seattle Mariners baseball team. I've been associated with them for 10 years and it's been terrific. So I've been around the block a bit with...the economics of baseball. We're trying to tell the folks that follow our business that we're not going to do something uneconomic when it comes time to renew our relationship with MLB.
Long-term, video is going to be more important than audio in aggregate. It's been a terrific relationship from the standpoint of fans. Baseball has been one of the most exciting ways to enjoy the Internet...I was in Berlin for the seventh (playoff) game between the Red Sox and the Yankees, up to the wee hours of the morning watching that amazing game. It's clear that it's a core part of the culture...but we're just telling people, "Don't expect us to do something irrational just for the love of the game."
How will you compensate if you lose it?
It represents less than 2 percent of our revenue. Depending on the circumstances, we could end up more profitable than we are today. Baseball has been a great relationship, and it would be great if it could continue.
Momentum is building for original video programming (such as AOL's new sports show) and movie services online. Where's Real going to get its next wave of subscribers on this front?
(Laughs) I appreciate the question--this is in a context in which we just announced 46 percent quarter on quarter growth in our fast-growing content area, so I don't think that the biggest question I lose sleep about is what wave is going to drive this forward now. We have several waves driving this forward now, music most prominently.
In other words, how committed are you to video streaming?
Long-term, video is going to be more important than audio in aggregate. By working with the industry, we cleared more than 400,000 unique pieces of content in music that we're able to offer consumers a lot of flexibility on. They can stream it; they can purchase it.
The biggest thing that has to happen from the scale that music is at is to get the content flowing--be it old TV archives, be it movies. Folks at services such as Movielink are off to a nice start. But if you look at the number of movies Movielink has, and you compare it to the number of tracks of music, Movielink is sort of where music services were in 1999 or 2000. Maybe a little bit ahead of that.
The big message we put to all these content industries is: "Look, the lesson of the music industry is if you don't get ahead of the curve and make your content available for legitimate services, consumers will find a ways to get it, anyway, to your detriment." As I've discussed with guys such as Jack Valenti, the danger is that they'll move too slowly.
Does Real have any plans in the offline world, such as in digital cinema, as does Microsoft?
The digital cinema initiatives today are mostly stunts. Every once in a while, we'll do a marketing stunt. But long term, digital distribution will impact everything, be it taking HD (high-definition)-quality content and flowing it out to cinemas and not having to make and ship 35mm prints.
I've had a number of fun conversations with my buddy (Dallas Mavericks owner) Mark Cuban, and on that front, he's a big believer--so much so that he bought a theater chain to experiment in that world. That world's going to come, and we'll always be happy to have our platforms and technologies used in that area. But in terms of that being a primary business in the next year or two, I think that it's still the early days yet for that business. We'd rather just let people build technologies and services with our technology rather than get involved with it first-person.
As the market changes, are there pieces Real is missing? Are there other potential acquisitions on the horizon?
We will be active but selective. I look at what we did with Rhapsody--best product in the business--and under-distributed. In that case, we had the opportunity for the perfect fit. When there will be opportunities like that, we will be active. There will be situations in which there will be an ingredient piece, something we can add to other things we're working on that will scale things up. But I don't think we'll be like the old Computer Associates International, for which acquisition is the fundamental growth strategy.
Friday
PointRoll Providing Enhanced Branding Reports
Company Improves Metrics to Demonstrate Branding Capabilities of Panels within PointRoll's FatBoy Page-Based Expandable Ads
For years, marketers have debated whether the Web can be an effective branding tool. While there are those who assert that the Web is primarily a direct response medium, others feel that there is significant branding value in advertising online. However, the main question revolves around an advertiser's ability to quantify that branding value.
PointRoll has answered this question with robust branding metrics that have been available to its clients for years, free of charge. These metrics have included each expandable banner's average interaction rate, as well as other quantifiable data designed to measure a campaign's branding success.
Today, the Company announced that it has begun providing enhanced metrics to clients who use FatBoy(TM) units. The enhanced metrics enable clients to see the average panels per interaction and the average brand interaction time on each creative unit served as part of their campaign.
"The new metrics will allow us to better evaluate each ad's performance, thus allowing us to better assess the value of each FatBoy ad," said Vic Drabicky of Range Online Media. "Television ads can have tremendous reach, but TV metrics can't tell you how long each person watches your ad or how long it takes a viewer to change the channel. With the new Point Roll metrics, we will actually be able to measure how long each user pays attention to our ad, which can help us create more efficient ads for both the consumer and the client."
PointRoll provides millions of FatBoy expanding banners that are seen on Yahoo!, AOL, and MSN, as well as hundreds of other Web properties every day. Each PointRoll FatBoy generates valuable data that can be viewed in the Company's Ad Tracker via several canned reports and aggregations. The power behind these reports is the advanced metrics that quantify branding and interaction.
-- Interaction Rate - The percent of ads that users interacted with;
-- Average display time per panel - Average number of seconds that a panel was displayed;
-- Average time spent with brand - Average number of seconds a user viewed a FatBoy when interacting with it.
The aforementioned three metrics are only a sampling of the advanced data metrics available in PointRoll's Ad Tracker. Many other data sets are available and provide excellent analysis of a campaign's effectiveness.
"Time spent with the brand is a vital measurement, one that quantifies the value of the rate paid to put forth a campaign, said Mark Redetzke, Vice President, Online Media for Zentropy Partners. "Using FatBoy instead of a .gif or Flash is becoming a given as advertisers capitalize on publishers' decision to offer at no additional charge. Having hard metrics to back up how we spend our clients' dollars is priceless."
"PointRoll delivered our multiple branding metrics when we launched in August 2000 with our first client, Universal Studios. Since then we have served billions of FatBoy ads for hundreds of clients with various campaign objectives that have required us to constantly offer additional metrics in an effort to substantiate our additional fees," said Chris Saridakis, PointRoll's Chief Operating Officer. "Today, we have Yahoo!, MSN and AOL offering PointRoll FatBoy at no additional charge as added value for their advertisers. So, we believe that we must do our part to standardize and constantly expand rich media quantifiable branding metrics to ensure a growing market with satisfied advertisers. These latest enhancements are part of that, and we expect to drive even more branding empiricism in the interactive marketplace."
For years, marketers have debated whether the Web can be an effective branding tool. While there are those who assert that the Web is primarily a direct response medium, others feel that there is significant branding value in advertising online. However, the main question revolves around an advertiser's ability to quantify that branding value.
PointRoll has answered this question with robust branding metrics that have been available to its clients for years, free of charge. These metrics have included each expandable banner's average interaction rate, as well as other quantifiable data designed to measure a campaign's branding success.
Today, the Company announced that it has begun providing enhanced metrics to clients who use FatBoy(TM) units. The enhanced metrics enable clients to see the average panels per interaction and the average brand interaction time on each creative unit served as part of their campaign.
"The new metrics will allow us to better evaluate each ad's performance, thus allowing us to better assess the value of each FatBoy ad," said Vic Drabicky of Range Online Media. "Television ads can have tremendous reach, but TV metrics can't tell you how long each person watches your ad or how long it takes a viewer to change the channel. With the new Point Roll metrics, we will actually be able to measure how long each user pays attention to our ad, which can help us create more efficient ads for both the consumer and the client."
Improving the Best Data Available
PointRoll provides millions of FatBoy expanding banners that are seen on Yahoo!, AOL, and MSN, as well as hundreds of other Web properties every day. Each PointRoll FatBoy generates valuable data that can be viewed in the Company's Ad Tracker via several canned reports and aggregations. The power behind these reports is the advanced metrics that quantify branding and interaction. -- Interaction Rate - The percent of ads that users interacted with;
-- Average display time per panel - Average number of seconds that a panel was displayed;
-- Average time spent with brand - Average number of seconds a user viewed a FatBoy when interacting with it.
The aforementioned three metrics are only a sampling of the advanced data metrics available in PointRoll's Ad Tracker. Many other data sets are available and provide excellent analysis of a campaign's effectiveness.
"Time spent with the brand is a vital measurement, one that quantifies the value of the rate paid to put forth a campaign, said Mark Redetzke, Vice President, Online Media for Zentropy Partners. "Using FatBoy instead of a .gif or Flash is becoming a given as advertisers capitalize on publishers' decision to offer at no additional charge. Having hard metrics to back up how we spend our clients' dollars is priceless."
"PointRoll delivered our multiple branding metrics when we launched in August 2000 with our first client, Universal Studios. Since then we have served billions of FatBoy ads for hundreds of clients with various campaign objectives that have required us to constantly offer additional metrics in an effort to substantiate our additional fees," said Chris Saridakis, PointRoll's Chief Operating Officer. "Today, we have Yahoo!, MSN and AOL offering PointRoll FatBoy at no additional charge as added value for their advertisers. So, we believe that we must do our part to standardize and constantly expand rich media quantifiable branding metrics to ensure a growing market with satisfied advertisers. These latest enhancements are part of that, and we expect to drive even more branding empiricism in the interactive marketplace."
PointRoll (www.PointRoll.com) has changed the way that Internet advertising works to become the leader in Rich Media advertising technology. Founded in April 2000, PointRoll works with more than 300 recognized brands from multiple verticals, including pharmaceutical, automotive, finance, entertainment, CPG and others. The company's proprietary technology platform delivers a suite of rich media page based products, including: FatBoy expanding banners, TowelBoy(TM) snap-back units, and BadBoy(TM) floating ads, dramatically enhancing the impact of any Internet ad campaign. PointRoll's technology performs for ad agencies, advertisers, and publishers, measurably increasing conversion opportunity, brand awareness, creative expression, and message content.
Online Marketing’s Mass-Market Mentality
Marketers place too much emphasis on demographics because they are uncomfortable or misunderstand how to use behavioral data in evaluating marketing decisions.
The Internet’s emergence changed a fundamental approach to target evaluation – the assumption that demographics and the closely related psychographic methodologies determine how marketing and media plans are shaped.
Within a traditional offline broadcast model, demographics remain relevant. However, in the online marketing world, too much emphasis has been placed on demographics and not nearly enough on behavior. This may be due to a limited mass-marketing mentality and because marketers are still uncomfortable evaluating behavioral data.
Why does behavior-driven marketing run in the shadows of demographics in marketing considerations? There are a few reasons – common sense to some, controversial to others:
Weak marketing and media skills in the industry
I recently met with a client to develop a business and marketing plan. The client discussion focused heavily on defining the demographic for an online audience -- not what they do, but who they are… . This appears a central issue to the state of online marketing, and the problems marketers face in successfully positioning goods and services online.
The client is a new software company, still in the beta phase, with an extremely exciting new online service for peer-to-peer dynamic collaboration that can be made public or private as an email, Website or both.
As with any new offer, the challenge is to determine the market and the possible audience. But for a product such as this, it’s possible to imagine all types of users and uses. While demographics may be a factor, it’s unlikely that any one demo would be more important than another. It became apparent that usage behavior is primary to identifying groups most likely to find a value in such a service.
We set out to determine the behavior flow, i.e., set conversion goals from consideration to initial trial, to repeat usage, and identified prospective usage patterns. We then outlined the data metrics to measure and help evaluate the behavior flow.
This helps to address questions, such as, where are users coming from? What registration and related Website service path issues are affecting conversion? And so on.
Once we accomplished this we were in a superior position to determine media considerations and placements based on ‘like’ behaving groups who shared similar interests and activities.
So, for example, if placing real estate, personal or business classifieds is a usage behavior, then the audience is opting in based on the behavior-driven need; the audience demo takes second to usage habits.
The Web, of course, blurs the media and context consideration because unlike offline it’s not apparent who the intended audience is by viewing the magazine cover or television show -- it’s the content and utility to the Web user that matters.
Web users are engaged in all types of activities representing wide-ranging age demographics. Therefore, how do you define the eBay, Amazon, AOL, Yahoo!, or MSN audience?
You don't. It's the usage-based behavior that counts, and one finds that common interest behavior, more often than not, cuts across a lot of demos.
Is it really relevant to buy 18 to 49 demographic banner packages through a portal? This is akin to being everything to everyone and of little value to anyone.
Part of the reason this approach is not more prevalent might be due to the proverbial revenge of the traditional marketers in the wake of the dot-com bust.
We’re in a reactionary climate for the marketing and communications industry. The Internet was going to change the way we did business. Remember the frictionless economy, how brick-and-mortar businesses were not relevant?
The most significant change the Net brought is accountability for understanding and measuring Web user interaction or behavior. Inherent in Net technology is of course the ability to track data footprints through the Web -- a wonderful marketing byproduct of the Net that is still misunderstood. Why is that?
For starters, the technologists driving the first consumer and commercial wave of the Net in the mid ‘90s didn’t view the marketing benefit as the Net’s purpose. Consequently, the Web logs that buried user path data were pretty arcane.
Second, the early commercial enterprises focused too heavily on defining and shaping the Web as a “new mass medium”. This burdened the Web with an antiquated advertising model that is one part broadcast, one part publishing, confusing the marketplace about the Web’s value as a branding or direct-response medium.
The Web offers both capabilities, but the marketer will come up empty on both if behavior-based marketing is not understood. In other words, the consumer consideration and buy pattern.
For example, a successful marketer identifies and measures various questions, i.e., how to create awareness, consideration, trial, repeat, loyalty conversion, usage segmentation and purchase frequency. This is a classic marketing discipline that applies to any business.
So, yes, the Web is still so new, the dot-com frenzy created a lot of misunderstanding, and we’re still learning. However, this raises other quite significant reasons why online marketing continues to be dominated by a demographic, mass-market mentality:
The industry is not training communication and marketing professionals in the art of marketing and creativity. The result is ignorance about classical methods of understanding the consumer buying process and human behavior. Consequently:
Advertising and marketing professionals default to following a mass-market model of the post World War II economy, and apply broadcast thinking to the Web.
Marketers lack the study and understanding of the importance of consumer usage patterns, and the application of direct and database marketing principles to Internet marketing.
Fewer people understand what business questions to ask as the basis for behavior-driven marketing -- for example, points on positioning, price, promotion, distribution, and packaging -- to be able to create an effective marketing plan that stimulates trial and usage for sustainable businesses.
Industry emphasis on broad-based generalizations about demographic audience profiles relegates online to tactical status, e.g., primary consideration is given to how to execute rich media, email blasts, or the equivalent of television online. Ever decreasing click-through rates indicates a lack of understanding of consumer usage behavior. The consumer is telling us something...
Organizations that drive marketing and communications from the agency and client side continue to be organized around the mass-market model. The principal is to create economies of scale in the offering of goods and services, and then support the volume produced by growing the buying audience; this is a demographic-driven approach.
The Web raises the opportunity and question of accountability or ROI. By contrast, the norm for a general marketing and communications plan is to focus on indirect goals for success. For example, survey measures of attitude and awareness for such points as brand consideration, preference, or purchase intent. None of these gauge or gather data of actual consumer behavior or actions in the buying process.
It’s a good bet that some organizations undercut change efforts because the impact of behavior or performance-driven marketing can be so profound. Unless a company considers organizing itself around behavior-based marketing, then it might be better off not knowing the marketing campaign’s ROI. Therefore, there’s a natural aversion to stepping outside of an organization’s cultural practice to say one is willing to become ROI accountable for a campaign’s marketing performance when it was never required before.
Mass marketing that delivers broad audience demographics continues to pay for media companies and large advertisers. Despite dramatic reductions in audience viewership the television networks continue to command huge price increases. .
The 2003 to 2004 upfront network buy was the largest ever. Big companies continue to invest in broad-based media because of awareness-driven goals. Moreover, their advertising and marketing spending remains a comparatively smaller part of corporate expenditures so the pricing has not yet discouraged spending. However, companies with smaller brands are being priced out of this market.
For now the adage appears to be you can’t go wrong in your marketing organization if you buy NBC. This is what people use to say about buying IBM for all technology-related purchases.
This will all change of course, though not at Internet speed. It is most likely that newer and more entrepreneurial companies will adopt behavior-based marketing as a customer-driven operating principle for their success. The law of supply and demand will eventually erode the value of demographic-driven mass marketing, thereby, enhancing the value and true potential of the Web as a commerce medium.
The Internet’s emergence changed a fundamental approach to target evaluation – the assumption that demographics and the closely related psychographic methodologies determine how marketing and media plans are shaped.
Within a traditional offline broadcast model, demographics remain relevant. However, in the online marketing world, too much emphasis has been placed on demographics and not nearly enough on behavior. This may be due to a limited mass-marketing mentality and because marketers are still uncomfortable evaluating behavioral data.
Running in the Shadow of Demographics
Why does behavior-driven marketing run in the shadows of demographics in marketing considerations? There are a few reasons – common sense to some, controversial to others: Weak marketing and media skills in the industry
Organizational inertia
Business orientation to 50-year-old techniques for mass marketing.
I recently met with a client to develop a business and marketing plan. The client discussion focused heavily on defining the demographic for an online audience -- not what they do, but who they are… . This appears a central issue to the state of online marketing, and the problems marketers face in successfully positioning goods and services online.
The client is a new software company, still in the beta phase, with an extremely exciting new online service for peer-to-peer dynamic collaboration that can be made public or private as an email, Website or both.
As with any new offer, the challenge is to determine the market and the possible audience. But for a product such as this, it’s possible to imagine all types of users and uses. While demographics may be a factor, it’s unlikely that any one demo would be more important than another. It became apparent that usage behavior is primary to identifying groups most likely to find a value in such a service.
Evaluating the Behavior Flow
We set out to determine the behavior flow, i.e., set conversion goals from consideration to initial trial, to repeat usage, and identified prospective usage patterns. We then outlined the data metrics to measure and help evaluate the behavior flow. This helps to address questions, such as, where are users coming from? What registration and related Website service path issues are affecting conversion? And so on.
Once we accomplished this we were in a superior position to determine media considerations and placements based on ‘like’ behaving groups who shared similar interests and activities.
So, for example, if placing real estate, personal or business classifieds is a usage behavior, then the audience is opting in based on the behavior-driven need; the audience demo takes second to usage habits.
The Web, of course, blurs the media and context consideration because unlike offline it’s not apparent who the intended audience is by viewing the magazine cover or television show -- it’s the content and utility to the Web user that matters.
Web users are engaged in all types of activities representing wide-ranging age demographics. Therefore, how do you define the eBay, Amazon, AOL, Yahoo!, or MSN audience?
You don't. It's the usage-based behavior that counts, and one finds that common interest behavior, more often than not, cuts across a lot of demos.
Is it really relevant to buy 18 to 49 demographic banner packages through a portal? This is akin to being everything to everyone and of little value to anyone.
Part of the reason this approach is not more prevalent might be due to the proverbial revenge of the traditional marketers in the wake of the dot-com bust.
A Reactionary Climate
We’re in a reactionary climate for the marketing and communications industry. The Internet was going to change the way we did business. Remember the frictionless economy, how brick-and-mortar businesses were not relevant? The most significant change the Net brought is accountability for understanding and measuring Web user interaction or behavior. Inherent in Net technology is of course the ability to track data footprints through the Web -- a wonderful marketing byproduct of the Net that is still misunderstood. Why is that?
For starters, the technologists driving the first consumer and commercial wave of the Net in the mid ‘90s didn’t view the marketing benefit as the Net’s purpose. Consequently, the Web logs that buried user path data were pretty arcane.
Second, the early commercial enterprises focused too heavily on defining and shaping the Web as a “new mass medium”. This burdened the Web with an antiquated advertising model that is one part broadcast, one part publishing, confusing the marketplace about the Web’s value as a branding or direct-response medium.
The Web offers both capabilities, but the marketer will come up empty on both if behavior-based marketing is not understood. In other words, the consumer consideration and buy pattern.
For example, a successful marketer identifies and measures various questions, i.e., how to create awareness, consideration, trial, repeat, loyalty conversion, usage segmentation and purchase frequency. This is a classic marketing discipline that applies to any business.
A Mass-Market Mentality
So, yes, the Web is still so new, the dot-com frenzy created a lot of misunderstanding, and we’re still learning. However, this raises other quite significant reasons why online marketing continues to be dominated by a demographic, mass-market mentality:The industry is not training communication and marketing professionals in the art of marketing and creativity. The result is ignorance about classical methods of understanding the consumer buying process and human behavior. Consequently:
Advertising and marketing professionals default to following a mass-market model of the post World War II economy, and apply broadcast thinking to the Web.
Marketers lack the study and understanding of the importance of consumer usage patterns, and the application of direct and database marketing principles to Internet marketing.
Fewer people understand what business questions to ask as the basis for behavior-driven marketing -- for example, points on positioning, price, promotion, distribution, and packaging -- to be able to create an effective marketing plan that stimulates trial and usage for sustainable businesses.
Industry emphasis on broad-based generalizations about demographic audience profiles relegates online to tactical status, e.g., primary consideration is given to how to execute rich media, email blasts, or the equivalent of television online. Ever decreasing click-through rates indicates a lack of understanding of consumer usage behavior. The consumer is telling us something...
Organizations that drive marketing and communications from the agency and client side continue to be organized around the mass-market model. The principal is to create economies of scale in the offering of goods and services, and then support the volume produced by growing the buying audience; this is a demographic-driven approach.
The Web raises the opportunity and question of accountability or ROI. By contrast, the norm for a general marketing and communications plan is to focus on indirect goals for success. For example, survey measures of attitude and awareness for such points as brand consideration, preference, or purchase intent. None of these gauge or gather data of actual consumer behavior or actions in the buying process.
It’s a good bet that some organizations undercut change efforts because the impact of behavior or performance-driven marketing can be so profound. Unless a company considers organizing itself around behavior-based marketing, then it might be better off not knowing the marketing campaign’s ROI. Therefore, there’s a natural aversion to stepping outside of an organization’s cultural practice to say one is willing to become ROI accountable for a campaign’s marketing performance when it was never required before.
Mass marketing that delivers broad audience demographics continues to pay for media companies and large advertisers. Despite dramatic reductions in audience viewership the television networks continue to command huge price increases. .
The 2003 to 2004 upfront network buy was the largest ever. Big companies continue to invest in broad-based media because of awareness-driven goals. Moreover, their advertising and marketing spending remains a comparatively smaller part of corporate expenditures so the pricing has not yet discouraged spending. However, companies with smaller brands are being priced out of this market.
For now the adage appears to be you can’t go wrong in your marketing organization if you buy NBC. This is what people use to say about buying IBM for all technology-related purchases.
This will all change of course, though not at Internet speed. It is most likely that newer and more entrepreneurial companies will adopt behavior-based marketing as a customer-driven operating principle for their success. The law of supply and demand will eventually erode the value of demographic-driven mass marketing, thereby, enhancing the value and true potential of the Web as a commerce medium.
Microsoft Realigns MSN Into Two Divisions
Microsoft Corp. (MSFT) is splitting its MSN division into two units, one to take control of Web communications while the other develops its information portal and targets growth in areas such as search technology and music services, executives told Reuters on Wednesday.
MSN, which reached profitability on an operating basis for the first time in the latest quarter, was started in 1995 as Microsoft's answer to the emergence of red-hot Internet businesses such as Yahoo! Inc. and America Online.
But as Microsoft poured billions into the division to tackle emerging threats, MSN evolved into something of a mishmash of software and services managing everything from dial-up access, a Web portal and Hotmail to the MSN Messenger instant messaging service.
At the same time, top Microsoft executives decided earlier this year to invest in developing search services to challenge Google Inc.'s position as the Internet's top search engine.
But executives also determined that MSN's structure was making it harder for Microsoft to ensure that it remained permanently profitable, said David Cole, Microsoft's senior vice president in charge of MSN.
Over the next few weeks, MSN will split into two operating units, Communications and Information, that will be divided based on the customers they serve and the products they offer.
The information unit, which will be headed by Yusuf Mehdi -- a longtime Microsoft executive known for his work on Internet Explorer -- will include the MSN portal, its emerging search service, e-commerce sites, and entertainment and other services.
The communications division, which will be headed by Blake Irving, will focus on growing MSN's communication-focused products, such as its subscription MSN service, Hotmail, MSN Messenger, and its Passport identity service.
Microsoft, which initially marketed broadband access services under the MSN name, but lagged behind other providers, has shifted its focus to selling users a broadband portal, specialized Web browser, enhanced e-mail features, and other features under monthly subscriptions.
Both executives will report to Cole.
``One thing that we want to do is innovate at a more rapid pace,'' Cole told Reuters.
Mehdi, who will oversee a lot more of MSN's research and development in the new structure, said that search technology and music services were also key growth areas for MSN.
``We're moving to reorganize and capitalize on those opportunities,'' Mehdi said.
MSN executives also said that they had hired Paul Ryan, former Chief Technology Officer of online search advertising company Overture Services Inc. (OVER), to head up MSN's nascent search efforts.
Redmond, Washington-based Microsoft has not provided figures detailing MSN's profitability, although those are due when Microsoft files its quarterly report with the Securities and Exchange Commission within the next few weeks.
MSN executives also cautioned that the entire division could slip into the red again, as the company invests in developing new services.
MSN, which reached profitability on an operating basis for the first time in the latest quarter, was started in 1995 as Microsoft's answer to the emergence of red-hot Internet businesses such as Yahoo! Inc. and America Online.
But as Microsoft poured billions into the division to tackle emerging threats, MSN evolved into something of a mishmash of software and services managing everything from dial-up access, a Web portal and Hotmail to the MSN Messenger instant messaging service.
At the same time, top Microsoft executives decided earlier this year to invest in developing search services to challenge Google Inc.'s position as the Internet's top search engine.
But executives also determined that MSN's structure was making it harder for Microsoft to ensure that it remained permanently profitable, said David Cole, Microsoft's senior vice president in charge of MSN.
Over the next few weeks, MSN will split into two operating units, Communications and Information, that will be divided based on the customers they serve and the products they offer.
The information unit, which will be headed by Yusuf Mehdi -- a longtime Microsoft executive known for his work on Internet Explorer -- will include the MSN portal, its emerging search service, e-commerce sites, and entertainment and other services.
The communications division, which will be headed by Blake Irving, will focus on growing MSN's communication-focused products, such as its subscription MSN service, Hotmail, MSN Messenger, and its Passport identity service.
Microsoft, which initially marketed broadband access services under the MSN name, but lagged behind other providers, has shifted its focus to selling users a broadband portal, specialized Web browser, enhanced e-mail features, and other features under monthly subscriptions.
Both executives will report to Cole.
``One thing that we want to do is innovate at a more rapid pace,'' Cole told Reuters.
Mehdi, who will oversee a lot more of MSN's research and development in the new structure, said that search technology and music services were also key growth areas for MSN.
``We're moving to reorganize and capitalize on those opportunities,'' Mehdi said.
MSN executives also said that they had hired Paul Ryan, former Chief Technology Officer of online search advertising company Overture Services Inc. (OVER), to head up MSN's nascent search efforts.
Redmond, Washington-based Microsoft has not provided figures detailing MSN's profitability, although those are due when Microsoft files its quarterly report with the Securities and Exchange Commission within the next few weeks.
MSN executives also cautioned that the entire division could slip into the red again, as the company invests in developing new services.
Thursday
See Ya' Later Gator
Gator Corp., a name that still carries a certain degree of infamy in some online marketing circles, today will change its name to Claria Corp., MediaDailyNews has learned.
The company, which in the five years since its founding has grown into a leader in ad-supported software and what is known as online behavioral marketing, provides ads that are targeted to consumers based on behavioral research. It’s also become a lightning rod for controversy in the online industry, having been sued over its pop up advertising and suing to distinguish its permission-based marketing from the kind practiced by spyware that creeps into computer systems and displays pop ups and tracks where an Internet goes on the Web. A lawsuit involving major Web publishers was settled earlier this year.
While the identity change had been planned for some time, it took a longer than expected, because it is tied into a broader repositioning strategy that will emphasize the company’s expansion into new areas beyond Gator’s so-called eWallet technology, an application that remembers login IDs and passwords for users without having to keep typing them. The eWallet will still have the Gator name.
“Gator won’t go away. We love the name and the logo behind the wallet,” Scott Eagle, senior vice president and chief marketing officer of Claria tells MediaDailyNews.
That’s just one part of the business, which has evolved into online behavioral marketing. Claria now has more than 900 online advertisers and 38 million subscribers to the company’s ad-supported software, which not only includes the eWallet but other applications as well. The company has three business units, including GAIN Publishing, the GAIN Network and Feedback Research, which provides online research and analytics through an online marketing research panel.
Eagle acknowledges that the name “Gator” has some baggage to it but said that it’s not the reason for the name change. Claria, with its image of clarity and focus, better represents the business today.
“The consumer relationship with 38 million people is not with Gator anyway, it’s with GAIN. That does not change with this name change,” Eagle said. He pointed out that changing the name won’t make a difference to the pending lawsuits, or to consumers or the clients.
“The model isn’t changing. Just the company name,” he said.
The company, which in the five years since its founding has grown into a leader in ad-supported software and what is known as online behavioral marketing, provides ads that are targeted to consumers based on behavioral research. It’s also become a lightning rod for controversy in the online industry, having been sued over its pop up advertising and suing to distinguish its permission-based marketing from the kind practiced by spyware that creeps into computer systems and displays pop ups and tracks where an Internet goes on the Web. A lawsuit involving major Web publishers was settled earlier this year.
While the identity change had been planned for some time, it took a longer than expected, because it is tied into a broader repositioning strategy that will emphasize the company’s expansion into new areas beyond Gator’s so-called eWallet technology, an application that remembers login IDs and passwords for users without having to keep typing them. The eWallet will still have the Gator name.
“Gator won’t go away. We love the name and the logo behind the wallet,” Scott Eagle, senior vice president and chief marketing officer of Claria tells MediaDailyNews.
That’s just one part of the business, which has evolved into online behavioral marketing. Claria now has more than 900 online advertisers and 38 million subscribers to the company’s ad-supported software, which not only includes the eWallet but other applications as well. The company has three business units, including GAIN Publishing, the GAIN Network and Feedback Research, which provides online research and analytics through an online marketing research panel.
Eagle acknowledges that the name “Gator” has some baggage to it but said that it’s not the reason for the name change. Claria, with its image of clarity and focus, better represents the business today.
“The consumer relationship with 38 million people is not with Gator anyway, it’s with GAIN. That does not change with this name change,” Eagle said. He pointed out that changing the name won’t make a difference to the pending lawsuits, or to consumers or the clients.
“The model isn’t changing. Just the company name,” he said.
Wednesday
Telecommunications in the Virtual World
Telecommunications advertisers are BIG. They spend a great deal of money on a regular basis making sure we don’t forget who they are or what they have to offer.
Telecommunications businesses depend on as many people as possible knowing what products and services they have to offer and they want to be sure as many people as possible are enticed to use them.
This is no accident, of course. We are a society – a world – that relies on telecommunications products and services on a daily, hourly, and even minute-by-minute basis to maximize the flow of our lives.
Being ubiquitous, however, means you have to always be there. And to always be there means you have to always be where the people you are trying to reach are. Among those places is online.
With the telecommunications industry being a top 10 advertising category, the goings-on in telecommunications marketing affects all of us who work in this business. As an industry, its products are well suited to being promoted on the Web, a place replete with constituents of the wired and wireless nation.
The telecommunications industry has always been one driven by a unique combination of common forces: consumer needs and wants, and technological and scientific discoveries. I mean, the guys who won the Nobel Prize of Physics in 1978 -- Arno Penzias and Robert Wilson – in 1965 were trying to figure out how to eliminate static and ended up finding evidence of the Big Bang. By virtue of this unique combination of forces, they were in a position to make use of the Internet as a marketing tool early on. It should come as no surprise, then, that it has been largely agreed upon that the first true banner to run on a Website was an ad for AT&T on Hotwired back in ’95.
When we look at where telco’s spend their ad dollars, we see that although they spend a significant amount of money online compared with other advertisers, as a percentage of overall dollars, their spend is still within the range of the average (about 3% of total). Whereas the top three telecommunications advertisers spent some $2.5B in 2002 according to TNS/CMR, they spent just $82MM online. Yet only the tech category outspent them.
It seems, then, that telecommunications advertisers are still looking for something specific when they advertise online that they aren’t necessarily looking for when they are advertising in all other media.
Larry Everling, president of Grady Rose Consulting and former director of Web sales/director of online marketing at Nextel, says sales is still the focus for many telecommunications advertisers. Nextel’s online efforts have traditionally been to “drive traffic to the Website for the purpose of selling phones,” he says.
Nextel’s legacy has been mostly selling to the business provider, and getting that audience to buy online hasn’t always been easy. When it comes to trying to use the medium solely as a distribution channel, the results can be disappointing and threaten the medium’s being used for less direct response-driven objectives.
Other audiences have been targeted by telecommunications advertisers, such as the youth segment and the general consumer, but the objective has been the same.
Jeff Lanctot, vice president of Media at Avenue A, agrees that the telecommunications advertisers have primarily been looking at making sales when they make use of online advertising, but they are starting to realize there is more to online advertising than just clicking and buying.
“Branding is certainly a consideration, but ultimately advertisers recognize the ability to use online as both a channel and a medium,” Lanctot points out. “Selling wireless phones and plans online is still in its infancy, as the process is not as easy or elegant as it will be. There is also a recognition (supported by solid data) that consumers are likely to go through the wireless research process online, but purchase in a store.”
Everling thinks that use of online as an advertising vehicle should reach beyond just its use as a distribution channel.
“There are advantages to buying from other channels,” he says, such as lower costs to be found not only through terrestrial retail sources, but other online retailers like Amazon.com or Buy.com.
An advantage of online advertising for an advertiser with a more complicated pitch, like cell phone service and product providers, is that it can accomplish a lot of the heavy lifting that sales personnel have traditionally had to do, freeing them up to do more “closing.” This would be particularly valuable for the business-to-business segment.
“Why not push customers to the field, where many of the bulk sales are taking place?” muses Everling.
It is the uncertainty inherent in the process of evolving marketing methodologies that has continued to keep the online medium a cautious investment. Companies do not like to take risks, particularly with their money. So, for many, it has been a long series of tests and trials. Sometimes it has been one toe into the water and two steps back from the shore.
But significant results ultimately require significant investments, and some advertisers are making them, albeit the significance is relative.
AT&T Wireless is probably the biggest telecommunications advertiser spending money against online advertising, which is approximately 5% of total reported spending. The amount AT&T spent online in 2002 was 2.7 times more than what was spent on Outdoor and 2 1/3 times more than consumer magazines.
Still, television and newspapers dominate.
“While online is becoming a bigger part of the mix, other media such as metro newspapers still receive the bulk of the ad dollars,” says Catherine Weitnauer, the Telecommunications Category Leader at Yahoo!.
Television benefited from about 44% of spending in 2002 from the three biggest advertisers in the space, whereas over 36% of their money was spent in newspapers. This suggests local media plays a significant role and might be a harbinger for things to come for online media and these advertisers.
“[Online] represents a very small percentage of total spending -- even the most aggressive wireless advertisers are well below 10%,” says Lanctot. “However, [use of the Internet] is highly competitive and growing quickly. In terms of efficiency, it represents an opportunity to start anew. Offline, wireless companies are beholden to third-party retailers -- they pay these retailers huge incentives to sell their services. Online represents a way to get back to their customers -- and their margins.”
So, again, the share of ad dollars spent against online media will likely be driven by channel considerations, still a primary driver for a lot of advertisers online. The risk, as ever, is that the other benefits of the media will go overlooked.
But the existing attraction of the medium is what will likely contribute to its continued use by telecommunications advertisers and its wider adoption in the future. As mentioned, that attraction is the medium’s ability to serve as both a distribution channel and a messaging channel.
“Online’s unique ability to be both an advertising medium and a sales channel” is what telecommunications advertisers see as the biggest role online media has to play in contributing to their businesses, says Lanctot.
“Promotional efficiency, precise targeting and message immediacy drives sales,” says Weitnauer of Yahoo!. “It’s what led these advertisers to metro newspapers in the early days of adoption and it’s what’s increasingly bringing them online.”
Says Everling: “The traffic to the Websites is phenomenal. It is going to be a matter of time before some CFO takes a look at this and asks what are we going to get out of this? It will be a matter of time before the blind trust of handing money over to the networks is going to end.”
It’s going to take an advertiser outside of the finance or travel categories to tell us what else an advertiser’s Website does beyond just selling. And telecommunications might be where this comes from.
Telecommunications businesses depend on as many people as possible knowing what products and services they have to offer and they want to be sure as many people as possible are enticed to use them.
This is no accident, of course. We are a society – a world – that relies on telecommunications products and services on a daily, hourly, and even minute-by-minute basis to maximize the flow of our lives.
Being ubiquitous, however, means you have to always be there. And to always be there means you have to always be where the people you are trying to reach are. Among those places is online.
With the telecommunications industry being a top 10 advertising category, the goings-on in telecommunications marketing affects all of us who work in this business. As an industry, its products are well suited to being promoted on the Web, a place replete with constituents of the wired and wireless nation.
The telecommunications industry has always been one driven by a unique combination of common forces: consumer needs and wants, and technological and scientific discoveries. I mean, the guys who won the Nobel Prize of Physics in 1978 -- Arno Penzias and Robert Wilson – in 1965 were trying to figure out how to eliminate static and ended up finding evidence of the Big Bang. By virtue of this unique combination of forces, they were in a position to make use of the Internet as a marketing tool early on. It should come as no surprise, then, that it has been largely agreed upon that the first true banner to run on a Website was an ad for AT&T on Hotwired back in ’95.
When we look at where telco’s spend their ad dollars, we see that although they spend a significant amount of money online compared with other advertisers, as a percentage of overall dollars, their spend is still within the range of the average (about 3% of total). Whereas the top three telecommunications advertisers spent some $2.5B in 2002 according to TNS/CMR, they spent just $82MM online. Yet only the tech category outspent them.
It seems, then, that telecommunications advertisers are still looking for something specific when they advertise online that they aren’t necessarily looking for when they are advertising in all other media.
Larry Everling, president of Grady Rose Consulting and former director of Web sales/director of online marketing at Nextel, says sales is still the focus for many telecommunications advertisers. Nextel’s online efforts have traditionally been to “drive traffic to the Website for the purpose of selling phones,” he says.
Nextel’s legacy has been mostly selling to the business provider, and getting that audience to buy online hasn’t always been easy. When it comes to trying to use the medium solely as a distribution channel, the results can be disappointing and threaten the medium’s being used for less direct response-driven objectives.
Other audiences have been targeted by telecommunications advertisers, such as the youth segment and the general consumer, but the objective has been the same.
Jeff Lanctot, vice president of Media at Avenue A, agrees that the telecommunications advertisers have primarily been looking at making sales when they make use of online advertising, but they are starting to realize there is more to online advertising than just clicking and buying.
“Branding is certainly a consideration, but ultimately advertisers recognize the ability to use online as both a channel and a medium,” Lanctot points out. “Selling wireless phones and plans online is still in its infancy, as the process is not as easy or elegant as it will be. There is also a recognition (supported by solid data) that consumers are likely to go through the wireless research process online, but purchase in a store.”
Everling thinks that use of online as an advertising vehicle should reach beyond just its use as a distribution channel.
“There are advantages to buying from other channels,” he says, such as lower costs to be found not only through terrestrial retail sources, but other online retailers like Amazon.com or Buy.com.
An advantage of online advertising for an advertiser with a more complicated pitch, like cell phone service and product providers, is that it can accomplish a lot of the heavy lifting that sales personnel have traditionally had to do, freeing them up to do more “closing.” This would be particularly valuable for the business-to-business segment.
“Why not push customers to the field, where many of the bulk sales are taking place?” muses Everling.
It is the uncertainty inherent in the process of evolving marketing methodologies that has continued to keep the online medium a cautious investment. Companies do not like to take risks, particularly with their money. So, for many, it has been a long series of tests and trials. Sometimes it has been one toe into the water and two steps back from the shore.
But significant results ultimately require significant investments, and some advertisers are making them, albeit the significance is relative.
AT&T Wireless is probably the biggest telecommunications advertiser spending money against online advertising, which is approximately 5% of total reported spending. The amount AT&T spent online in 2002 was 2.7 times more than what was spent on Outdoor and 2 1/3 times more than consumer magazines.
Still, television and newspapers dominate.
“While online is becoming a bigger part of the mix, other media such as metro newspapers still receive the bulk of the ad dollars,” says Catherine Weitnauer, the Telecommunications Category Leader at Yahoo!.
Television benefited from about 44% of spending in 2002 from the three biggest advertisers in the space, whereas over 36% of their money was spent in newspapers. This suggests local media plays a significant role and might be a harbinger for things to come for online media and these advertisers.
“[Online] represents a very small percentage of total spending -- even the most aggressive wireless advertisers are well below 10%,” says Lanctot. “However, [use of the Internet] is highly competitive and growing quickly. In terms of efficiency, it represents an opportunity to start anew. Offline, wireless companies are beholden to third-party retailers -- they pay these retailers huge incentives to sell their services. Online represents a way to get back to their customers -- and their margins.”
So, again, the share of ad dollars spent against online media will likely be driven by channel considerations, still a primary driver for a lot of advertisers online. The risk, as ever, is that the other benefits of the media will go overlooked.
But the existing attraction of the medium is what will likely contribute to its continued use by telecommunications advertisers and its wider adoption in the future. As mentioned, that attraction is the medium’s ability to serve as both a distribution channel and a messaging channel.
“Online’s unique ability to be both an advertising medium and a sales channel” is what telecommunications advertisers see as the biggest role online media has to play in contributing to their businesses, says Lanctot.
“Promotional efficiency, precise targeting and message immediacy drives sales,” says Weitnauer of Yahoo!. “It’s what led these advertisers to metro newspapers in the early days of adoption and it’s what’s increasingly bringing them online.”
Says Everling: “The traffic to the Websites is phenomenal. It is going to be a matter of time before some CFO takes a look at this and asks what are we going to get out of this? It will be a matter of time before the blind trust of handing money over to the networks is going to end.”
It’s going to take an advertiser outside of the finance or travel categories to tell us what else an advertiser’s Website does beyond just selling. And telecommunications might be where this comes from.
HP Joins McDonald's to Spread McInternet in Brazil
McDonald's Corp. said on Tuesday it would team up with computer maker Hewlett-Packard Co. to offer its clients across Brazil the ability to surf the Web while eating their Big Macs and fries.
Already on the menu in 75 stores across the South American country as a pilot program, McDonald's said it would roll out its "McInternet" service to the rest of its 584 outlets in Brazil by the middle of next year.
"We will be synonymous with Internet in the country," Marcel Fleischmann, the head of McDonald's operations in the South American nation, said in a statement.
McDonald's and Hewlett-Packard will join the Brazilian unit of America Online Latin America Inc. and Brazilian bank Itau (ITUA4.SA: Quote, Profile, Research) in the project, in which the four plan to invest $20 million over the next five years.
Under the program, customers will be allowed to navigate the Web as long as they make food purchases at McDonald's. On average, there will be four computers at each McDonald's, which HP will provide.
Because so few people in Brazil own computers with Internet access, Brazilian public Internet stations are expected to increase in popularity.
In the United States, McDonald's is offering fast wireless Internet access to customers at some of its outlets via Wi-Fi, a relatively rare technology in Brazil.
The expansion comes as McDonald's operations in Brazil come under pressure from the sluggish economy, which has crimped consumer spending.
It is also facing lawsuits from some of its franchisees in Brazil, which claim the company has been inflexible during the troubled economic times.
Already on the menu in 75 stores across the South American country as a pilot program, McDonald's said it would roll out its "McInternet" service to the rest of its 584 outlets in Brazil by the middle of next year.
"We will be synonymous with Internet in the country," Marcel Fleischmann, the head of McDonald's operations in the South American nation, said in a statement.
McDonald's and Hewlett-Packard will join the Brazilian unit of America Online Latin America Inc. and Brazilian bank Itau (ITUA4.SA: Quote, Profile, Research) in the project, in which the four plan to invest $20 million over the next five years.
Under the program, customers will be allowed to navigate the Web as long as they make food purchases at McDonald's. On average, there will be four computers at each McDonald's, which HP will provide.
Because so few people in Brazil own computers with Internet access, Brazilian public Internet stations are expected to increase in popularity.
In the United States, McDonald's is offering fast wireless Internet access to customers at some of its outlets via Wi-Fi, a relatively rare technology in Brazil.
The expansion comes as McDonald's operations in Brazil come under pressure from the sluggish economy, which has crimped consumer spending.
It is also facing lawsuits from some of its franchisees in Brazil, which claim the company has been inflexible during the troubled economic times.
Omnicom Eyes New Targets
The world's largest agency holding company acknowledged Tuesday that the pace of its acquisitions has slowed in recent months following the June purchase of Agency.com.
"There's an awful lot of opportunities out there to do acquisitions. We've just been very deliberate," said John Wren, president and chief executive officer of Omnicom. "The pace is really dictated by our strategy."
Wren said that Omnicom's strategy hadn't changed but it involved taking the time to find firms that would serve its largest 250 to 300 clients and add to the holding company's portfolio and figure in its future growth. Omnicom is the parent company of OMD Worldwide and PHD.
Earlier Tuesday, Omnicom announced that earnings rose double digits in the third quarter on the strength of higher advertising spending in the United States. Omnicom reported a 14.7 percent increase to $2.02 billion in third- quarter revenues. Advertising, which made up 41 percent of the revenues, grew 12.7 percent to $844 million in the third quarter. CRM, which was 35.4 percent of revenues, grew 19.8 percent to $717.7 million. Specialty communications and public relations, each about 11 percent of revenues, also grew in the quarter. More than half of Omnicom's revenues came from operations in the United States.
New activity continued strong, said Chief Financial Officer Randall J. Weisenburger, citing more than $1 billion in new business in the quarter and $3 billion so far this year.
Wren sounded positive about the advertising economy's prospects in the new year.
"I think that you're seeing a more bullish attitude," Wren said. Wren, like his counterpart at WPP Martin Sorrell, said that clients spent the last several years focused on costs.
"The companies that are going to be successful going forward are going to have to focus on their revenue," Wren said.
"There's an awful lot of opportunities out there to do acquisitions. We've just been very deliberate," said John Wren, president and chief executive officer of Omnicom. "The pace is really dictated by our strategy."
Wren said that Omnicom's strategy hadn't changed but it involved taking the time to find firms that would serve its largest 250 to 300 clients and add to the holding company's portfolio and figure in its future growth. Omnicom is the parent company of OMD Worldwide and PHD.
Earlier Tuesday, Omnicom announced that earnings rose double digits in the third quarter on the strength of higher advertising spending in the United States. Omnicom reported a 14.7 percent increase to $2.02 billion in third- quarter revenues. Advertising, which made up 41 percent of the revenues, grew 12.7 percent to $844 million in the third quarter. CRM, which was 35.4 percent of revenues, grew 19.8 percent to $717.7 million. Specialty communications and public relations, each about 11 percent of revenues, also grew in the quarter. More than half of Omnicom's revenues came from operations in the United States.
New activity continued strong, said Chief Financial Officer Randall J. Weisenburger, citing more than $1 billion in new business in the quarter and $3 billion so far this year.
Wren sounded positive about the advertising economy's prospects in the new year.
"I think that you're seeing a more bullish attitude," Wren said. Wren, like his counterpart at WPP Martin Sorrell, said that clients spent the last several years focused on costs.
"The companies that are going to be successful going forward are going to have to focus on their revenue," Wren said.
Monday
Study Confirms Viewers Tune Out TV Ads
A new survey on simultaneous media usage finds – not surprisingly – that a majority of multi-tasking viewers tune out TV commercials.
The Simultaneous Media Usage Survey (SIMM), released last week by BIGresearch, showed that of those who say they go online while watching television, 94% regularly or occasionally tune out mentally when a commercial comes on. Similarly, 95% of those who read the newspaper while watching television mentally tune out commercials.
In response to the findings, BIGresearch is calling upon the media industry to think differently about consumers, and find new ways to measure its effectiveness in reaching them.
"The power lies with the consumers -- they know how they're going to spend their money," says Gary Drenik, president of BIGresearch. "The industry needs to tap into that before those dollars are spent."
The following chart illustrates the habits of Wal-Mart shoppers who watch TV while using other media:
A program built to reach that consumer, then, must be measured in relational terms rather than in linear ones.
The Simultaneous Media Usage Survey (SIMM), released last week by BIGresearch, showed that of those who say they go online while watching television, 94% regularly or occasionally tune out mentally when a commercial comes on. Similarly, 95% of those who read the newspaper while watching television mentally tune out commercials.
In response to the findings, BIGresearch is calling upon the media industry to think differently about consumers, and find new ways to measure its effectiveness in reaching them.
"The power lies with the consumers -- they know how they're going to spend their money," says Gary Drenik, president of BIGresearch. "The industry needs to tap into that before those dollars are spent."
The following chart illustrates the habits of Wal-Mart shoppers who watch TV while using other media:
A program built to reach that consumer, then, must be measured in relational terms rather than in linear ones.
Blogs Emerge As Hot New Ad Medium
When popular new media formats emerge it usually doesn’t take long for advertising to follow, so it’s not surprising that the rapid proliferation of Web logs – a.k.a blogs – is establishing a new advertising marketplace.
Blogs, online’s niche media format du jour, are chronologically structured logs of text and images published to the Web with easy-to-use software tools. The segmentation and abundance of blog content (think anything from the naval-gazing minutiae of a teenage girl’s life to the practical punditry of a tech firm CEO) is fueling a new form of online advertising.
“Everybody needs to do a bit of guerrilla marketing, and blogs qualify as that,” asserts Henry Copeland, CEO of Blogads, a blog-exclusive ad network launched in August of 2002 by newspaper and magazine website publisher Pressflex.
The American Civil Liberties Union, pop artist Coop and spam blocker Messagefire have placed ads on the network’s blogs. Advertisers buy sponsorships of specifically chosen blogs for blocks of time rather than on a CPM basis, and ads can be updated regularly.
But advertising on blogs isn’t for everyone, cautions Todd Copilevitz, director of Richards Interactive, an agency that’s developed blog marketing strategies for Nokia, Home Depot and, most notorious, Dr Pepper’s flavored milk drink Raging Cow. “If you want the steady drumbeat of sell, sell, sell, buy, buy, buy, this is not the forum for you. You do not control message.”
The agency first began using blogs as ad medium nearly two years ago. Richards now has a blog network that can be used spur viral buzz for its advertisers. One recent effort, for example, helped launch the Nokia 3650 camera phone. The authors of carefully selected photography-focused blogs were given the camera phones in the hopes that they would discuss their opinions of the product on their blogs. The tactic worked.
“We wanted to hear from people what they liked, what they didn’t like and how their friends reacted to it,” notes Copilevitz, “It’s often the little things that click-in with consumers.”
The Holy Grail for many marketers is to get a discussion their brand going among influential consumers but the uncontrolled nature of blog communications may not be for the feint of marketing hearts.
“The problem with blogs is that with some free-form input from users we’re not able to have content control,” contends Jeff Hirsch, chief revenue officer of ad network Fastclick. The company doesn’t include blogs in its network of sites, all of which “undergo a rigorous editorial review process to ensure that the content and demographic of the readership is appropriate.”
When Richards attempted to monitor blog content written in conjunction with the launch of Dr Pepper’s Raging Cow beverage, the tactic inspired hype, but much of it negative. Dr Pepper got six influential blog authors to agree to promote Raging Cow in their blogs without disclosing their affiliation with the company. When they discovered the stealthy nature of the effort, some members of the blog community who consider honesty and integrity to be integral to the blog medium, called for a boycott of the product.
Despite the risk of being affiliated with inappropriate content, numerous advertisers have run ads within Google’s AdSense network, which includes blogs. The contextually driven system places ads on pages based on what it perceives the site’s subject matter to be.
Michael Zimbalist acknowledges that AdSense advertisers, whose ads appear on blogs, are achieving reach. Still, the executive director of the Online Publishers Association contends, “It’s not clear what you’re buying if you’re an advertiser. There’s not a strong identity with where consumers are seeing the ad.”
Texturadesign, Inc., makers of a bag-closing and -resealing contraption called Clip-n-Seal, are willing to risk the possibility of negative portrayals of their brand in blogs. The company was the first to run a campaign through Blogstakes, a sweepstakes service that takes advantage of the fact that blogs frequently link to other blogs. People who linked to the Clip-n-Seal Blogstakes promotion on their blogs automatically won a package of Clip-n-Seals when they referred a winner to the contest.
Within a month, says Texturadesign CEO, D.L. Byron, “thousands” of people had linked to the Blogstakes contest. “The effect that had, is it shot us up to the top of Google’s page ranking,” he adds.
With potential results like these, it’s little wonder blogs have begun to pique advertiser interest.
Blogs, online’s niche media format du jour, are chronologically structured logs of text and images published to the Web with easy-to-use software tools. The segmentation and abundance of blog content (think anything from the naval-gazing minutiae of a teenage girl’s life to the practical punditry of a tech firm CEO) is fueling a new form of online advertising.
“Everybody needs to do a bit of guerrilla marketing, and blogs qualify as that,” asserts Henry Copeland, CEO of Blogads, a blog-exclusive ad network launched in August of 2002 by newspaper and magazine website publisher Pressflex.
The American Civil Liberties Union, pop artist Coop and spam blocker Messagefire have placed ads on the network’s blogs. Advertisers buy sponsorships of specifically chosen blogs for blocks of time rather than on a CPM basis, and ads can be updated regularly.
But advertising on blogs isn’t for everyone, cautions Todd Copilevitz, director of Richards Interactive, an agency that’s developed blog marketing strategies for Nokia, Home Depot and, most notorious, Dr Pepper’s flavored milk drink Raging Cow. “If you want the steady drumbeat of sell, sell, sell, buy, buy, buy, this is not the forum for you. You do not control message.”
The agency first began using blogs as ad medium nearly two years ago. Richards now has a blog network that can be used spur viral buzz for its advertisers. One recent effort, for example, helped launch the Nokia 3650 camera phone. The authors of carefully selected photography-focused blogs were given the camera phones in the hopes that they would discuss their opinions of the product on their blogs. The tactic worked.
“We wanted to hear from people what they liked, what they didn’t like and how their friends reacted to it,” notes Copilevitz, “It’s often the little things that click-in with consumers.”
The Holy Grail for many marketers is to get a discussion their brand going among influential consumers but the uncontrolled nature of blog communications may not be for the feint of marketing hearts.
“The problem with blogs is that with some free-form input from users we’re not able to have content control,” contends Jeff Hirsch, chief revenue officer of ad network Fastclick. The company doesn’t include blogs in its network of sites, all of which “undergo a rigorous editorial review process to ensure that the content and demographic of the readership is appropriate.”
When Richards attempted to monitor blog content written in conjunction with the launch of Dr Pepper’s Raging Cow beverage, the tactic inspired hype, but much of it negative. Dr Pepper got six influential blog authors to agree to promote Raging Cow in their blogs without disclosing their affiliation with the company. When they discovered the stealthy nature of the effort, some members of the blog community who consider honesty and integrity to be integral to the blog medium, called for a boycott of the product.
Despite the risk of being affiliated with inappropriate content, numerous advertisers have run ads within Google’s AdSense network, which includes blogs. The contextually driven system places ads on pages based on what it perceives the site’s subject matter to be.
Michael Zimbalist acknowledges that AdSense advertisers, whose ads appear on blogs, are achieving reach. Still, the executive director of the Online Publishers Association contends, “It’s not clear what you’re buying if you’re an advertiser. There’s not a strong identity with where consumers are seeing the ad.”
Texturadesign, Inc., makers of a bag-closing and -resealing contraption called Clip-n-Seal, are willing to risk the possibility of negative portrayals of their brand in blogs. The company was the first to run a campaign through Blogstakes, a sweepstakes service that takes advantage of the fact that blogs frequently link to other blogs. People who linked to the Clip-n-Seal Blogstakes promotion on their blogs automatically won a package of Clip-n-Seals when they referred a winner to the contest.
Within a month, says Texturadesign CEO, D.L. Byron, “thousands” of people had linked to the Blogstakes contest. “The effect that had, is it shot us up to the top of Google’s page ranking,” he adds.
With potential results like these, it’s little wonder blogs have begun to pique advertiser interest.
