The Media Business and its Disruptions

The Strategic Core of Search

Search is disrupting the media business by making complexity simple.

Search engines organize information (live and recorded text, pictures, videos, and physical objects) to assist people in where to find things. They make money by aligning advertisers with likely prospects, predicting interests from search words. Internet retailers like Amazon taking a similar tack. They suggest products from purchase pattern analyses to make purchasing easy. What makes this model powerful is the value that consumers place on these “assistance” services. They trust the services to be helpful, and show their trust with loyalty. This trust “of being helpful” then becomes a strategic lever to sell to people’s interests.

The “magic sauce” is to have sufficient information and technology to make sense of what’s helpful. Google jumped into the pole position by applying technology to deliver help. Despite the powerful impression that Google’s mono-focus on technology has made, there are many recipes to a good sauce with room for differentiation.

What companies require is a laser-focused mission to be helpful. It is here that their value rests. Any expansion of service needs to be done with careful, balancing new ventures with their ability to be helpful. If companies dilute their usefulness, their trust deteriorates.

Recipes for helpfulness…

Foremost, companies need information to be helpful. Even technology bound Google needs the direction of search words and the massive relevancy cataloging of the Internet to be helpful.

Microsoft, Yahoo!, and Google are experimenting with growing helpful relationships.

Early on Microsoft and Yahoo! provided email to capture relationships but failed to monetize it. Now most portals offer free services for information. The latest iteration is free search engines for personal computers with the offer of getting better answers to questions while providing a better way to manage personal or business information. Microsoft’s new “Live” versions of Windows and Office are intended to extend this thinking into traditional software. This experiment may become the core of a new sponsored or partial fee revenue model.

The quandary is how to optimize revenues without invading the trust. Of course, Google’s sponsored search results are a famously good idea. It maximizes the value consumer “search words” to Google; it gives advertisers transparency on competitive pricing; and it provides consumers with focused helpfulness.

What makes this idea work is the auction of successful clicks. Google tracks the click rates of advertisements associated with search words, and gives top billing to highest value (the product of click volume times advertisers bid for the search word). Advertisers judge the value of the words based on competitive pricing for clicks.

The obvious next step is to enhance the information around the clicks being auctioned for better auctioning. Imagine databases like MRI, Simmons, NPD, NetRatings, comScore, ACNielsen, IRI, Experian, and/or Personix describing who is clicking. The simple technique of name matching can provide Google with a deep understanding of who is typing in the search words. Google can capture names by promising better searching for users who sign in. Google can provide better searching by enhancing their PageRank algorithm to incorporate this deeper knowledge about the searcher’s behavior. The searcher name provides a pattern of searching behavior over time and may also match one of the research databases. The names that match can qualify search patterns with deeper information. Heuristic analyses of search patterns can score the probability of patterns relating to deeper name matched data. Pattern scoring means all signed-in searchers can be better helped by Google and better targeted by advertisers.

Advertisers would certainly pay more for click that are qualified with consumer attitudes and behavior.

Or imagine the less obvious enhancements. People find themselves surrounded by digital devices, from televisions to gameboys to iPods to RFID chips embedded in everything. Imagine a WiFi device that catalogs and links all these devices. Then to make complexity simple, people decide to provide Internet companies with controlled access to their domain of digital devices. When the Internet becomes the single source database of exposures, purchases, and ownership, search will go through iterative disruptions and going through revolutionary cycles.

Just think about radio-frequency IDs… RFID tags have been helping the US Armed Forces manage their equipment and parts for years. Now that RFID prices are coming down, Wal-Mart and others are embedding them in products to manage low cost stock items. Forget plastics and think logistics. Think about walking into a RFID aware household that keeps a live catalog of product information (“walk in” date, “product state” meaning freshness or condition, current location, and use-to-date.) Imagine a search tool that helps you find things around the house, conjures recipes from in-house items, suggests shopping lists, and manages warranties and associated product services. Then if you like, it suggests ideas and recommends new things from its database of similar people.

Add GPS to the RFID chip, and people become mobile catalogs, ready to be “informed” with timely advertiser advice. This sounds extreme, but all this technology already exists today.

Maybe Microsoft and Yahoo! should stop worrying about Google and just march forward.

The Shape of Media Business Models – May 19, 2006

The most vexing questions about evolving media are: “what are they?” and “what will their business models look like?”

Today media communication vehicles come in entertainment and functional flavors that are evolving into blends.

In the mature entertainment space, we have advertiser sponsored (examples: Broadcast TV, Broadcast Radio, most websites, and most podcasts); consumer purchased (examples: HBO, iTunes, ringtones, Bloomberg, most Satellite Radio, and most games), and partial purchased (examples: non-premium cable networks, magazines, newspapers, and most theatrical movies). In the immature entertainment space, we have struggling start-ups and a phenomenon called Consumer Generated Media.

In the functional space, we have cell phones, cameras, recording and storage devices, all sorts of software for personal and business use, communications access points (and associated infrastructure). Over the past decade, retail outlets have crossed into the media space in the guise trading posts, auction houses, and e-stores. More recently, search has combined elements of recording, storing, and trading with a powerful consumer lens to manage choice. This is becoming a dominant digital consumer management tool. Yet it may evolve further into managing all sorts of things, as radio frequency id tags (RFID) and GPS location finders new dimensions to information and products.

In the blended space, we have all things social (sites, game worlds, and instant messaging), and the continuing evolution functional hardware and software that also entertains.

Time pressures and complexity are likely to drive innovations in cross-entertainment, cross-functional, and particularly in the blended space to resolve overlapping responsibilities.

The revenue models are likely to be sponsored, partial fee, and fee based. What’s new is that it will evolve beyond entertainment to encompass functional media. The specific business model forms (like search) will probably develop around making complexity simple, increasing productivity, having fun, and providing relaxation.

Forces Driving Change – Dated May 3, 2006

Lives are changing. People have no time, many things to do, multiple places to be, all while craving stability and company. Old media is becoming too time-consuming for its return on pleasure. Remember “nothing is on”.

The evolution of media empowerment (the remote control and choices) has led to audience fragmentation. Further lifestyle pressures, a fresh wave of media control devices that have crossed over to management tools (DVRs, iPods, Search Engines, etc.), and the new portability of content through digitalization has slowed down evolutionary development. Old school media are no longer sure how to evolve.

This combination of consumer media management and portable content is disrupting the concept of broadcasting. Adding to the fray, new content development tools are practically eliminating publishing costs and disrupting the concept of publishing. On an intersecting plane, eBay with Paypal and Skype is targeting the concept of retail outlets. GoogleBase with its competing e-payment scheme is aiming to compete here too.

Over the past twenty years, the business gurus have been isolating why some apparently healthy well run businesses go bust. They concluded that innovation comes in two flavors, sustaining and disruptive, and that the disruptive flavor has a killer taste.

Sustaining technologies foster iterative improvements in price/value. Disruptive technologies change the value proposition. At first, the new products under-perform sustaining technologies in mainstream markets, while winning in fringe markets with their new benefits. Then as their usually simpler solutions are made cheaper through quicker development cycles, they enter the mainstream fray with better price/value competing on the traditional benefits while maintaining the added value of their fringe benefits. The mainstream products don’t stand a chance. Read: Clayton Christensen’s book, "The Innovator's Dilemma" for explanations and case studies.

Upcoming posts will delve into why the new video and publishing platforms fit the classic mold of disruptive technologies.

What is truly interesting are the experiments in new media business models. They are iteratively disruptive. In the confluence of the overlapping platform disruptions, the business model competitions have taken on Darwinian dimension. Mutations continue to happen as the new platforms fight for market dominance. As an example, Auctions and Search engine business models use to be distinct and now are starting to compete. All this makes it hard to define the mainstream let alone determine who will win. Complexities are everywhere as platform disruptions have not stopped. A case in point, RFID and GPS are on the verge of having a meaningful impact. All this makes crystal ball gazing particularly hard.

Discovering Social Networks

Last June, 68% of adults were using the Internet according to the Pew Internet & American Life Project. Conversely, 22% of Americans were not only not using the Internet, but did not even live in Internet connected home. These truly disconnected Americans have remained stable over the past three years.

There are many dichotomies in the Internet community.

·        84% of those age 18-29 connect while 74% of those 65 and older do not.

·        89% of college graduates connect while 71% of those without high school diplomas do not.

·        83% of parents with young children connect while 40% of those without children do not.

When we follow the connected online, we find their interests and behaviors become individualized. Digital media is hardly a uniform thing. It is a mosaic of communities. It is no longer household viewing. It is individualized networks. It is no longer neighborhoods. It is dispersed networks. For those that play, the Internet is creating broader and stronger social ties. The discipline of sociology is now being applied to understand what is happening. Each person’s circle of family, friends, colleagues, and acquaintances is called a social network. Email is the empowering ingredient. Without active email, as social networks grow the frequency of contacts declines. With active email, as social networks grow the frequency of email contact remains constant while the frequency of in-person and phone contacts increase. Email enhances communications, while other Internet dimensions empower consumers with knowledge tools. These include the increasingly popular find-it-yourself search engines, websites, blogs, and the more dynamic social networks. Broader and stronger social ties in tandem with everyone’s increased access to information sources are converting the age old adage “ask a friend” into “ask a knowledgeable friend”. This is becoming a pervasive approach to decision making among the connected. When questions about illness, finance, jobs, votes, or purchases come up, 81% of Americans ask for help from at least one frequent contact, and 46% ask for help from one or more, less frequent contacts within their social network.

Many have said that the Internet as a medium will be different than television, just as television was different from radio. Digital video and consumer generated media have both been examples to date. However, the power of individualized networks and the growth of social networks are starting to provide the unifying force. The popularity of online industry communities, clubs, consumer gatherings like epinions.com, and highly focused nano-communities are examples of this force at work. The Internet has not only converted media from mass to individual, but it has switched its direction from push to pull, where you find, take, and build what you want. Even more fundamental, the Internet is changing communications and communities. Yet digital media needs some thought. What is really happening? American culture is segmenting, and the concordant cultures of communications and communities are splitting into the connected the not connected; and within the connected, Americans are becoming a patchwork of interwoven tight knit communities across many micro areas. Following history, this new American culture is becoming a global phenomenon.

Of course nothing is really ever new new. Understanding social networks has been a science since August Comte first hypothesized them in the 1840s as interconnections of social actors. In the 1960s, the idea was pushed forward with the evolution of the “small world” theories. Today, the physicists and mathematicians are driving the theory and analyses of social networks into computational models of channels through which ideas, values, friendships, esteem, money, sales, disease, or almost anything can flow. The math behind Google’s PageRank is a simple example that tabulates site citations of sites to discern importance and ultimately relevance to the searcher. BuzzMetrics and other firms are working on ways to tap into the Internet “rumors and buzz” to understand the consumer moods of the moment. While the heavy lifting is being worked on in academia and the serious sciences like epidemiology, the time is increasingly right to consider social network analyses in media. The ever fun science of media measurement with all its yapping about engagement could certainly use it on the vast mass of networked Internet data to improve the targeting and tracking of consumer mindsets.

The Importance of Mavens

Every once in a while Walt Disney teaches us something important. His notion that “it is a small world after all” turns out to not only be true, but a key ingredient to smart marketing.

Stanley Milgram discovered in his now famous 1967 small world experiment in that two random

US

citizens are connected by an average chain of six acquaintances.

Since Milgram’s ground breaking experiment, refinements from a bevy of researchers have empirically proven that the small world phenomenon is real. While debate still surrounds whether the "whole world" is a small world, there is uniform agreement that there are many small worlds within the whole. Popular examples are mathematicians and actors. Mathematicians created the Erdős number to have fun describing their distance from Paul Erdős through shared publications. Elsewhere, three movie fans created the parlor game “Six Degrees of Kevin Bacon”. The fun here is to figure out how many movie connections away (the distance) any actor or actress is from performing with Kevin Bacon. The fun of these games is finding who the hyper-connected people are. Research shows that while many people are six connections away from anyone else, it also shows that there are a few highly connected people out there.

What makes the small world phenomenon meaningful is that certain types of individuals can be as influential as mass media under the right conditions. In the midst of our social networks, there are select people we think of when we need expert help. In turn our experts gravitate to a handful of uber-experts, who appear to know everything about a specific topic. These select few are Mavens. When Mavens speak, people listen. And when Mavens express opinions that “stick” as particularly meaningful, hyper-connected people get the message out, and mass opinions change.

Connectivity is speeding up and morphing with the inventions of email and now blogging, but the fundamental influence of Mavens remain. BuzzMetrics tracks the evolution and impact of opinions in the blogosphere. In a white paper on trans fats, BuzzMetrics illustrates the importance of Mavens with sticky messages. They report how the topic of trans fats evolved from an esoteric subject into a national health craze with no appreciable news coverage, convincing Frito Lay to remove these common artificial fats from their snack foods in less than a year.

Not surprisingly, marketers have been trying to pin down these influencers for some time. However as Feick and Price pointed out in 1987, “targeting mavens with communications may be difficult.” Much research has found mavens to be active media consumers, avidly consuming all media that touches their topics of interest; yet challenging to describe with no discernable geo-demographic characteristics.

Marketers know the value of mavens and have set traps to collect them. Examples abound but mostly involve phone numbers and websites providing free expert information on products and product areas, delving into the art, science, and market pricing for specific topics. After finding the mavens with info-honeypots, marketers try to empanel them. Quality CRM databases identify the mavens and treat them with special care. Intuitive marketers are less formal. They connect with mavens by building them into their social networks. In all cases, marketers check new ideas with their mavens before investing. Clever marketers then leverage their mavens with free merchandise to diffuse new products and positioning to the public before launching advertising and promotions. In the case of new products, marketers also spend excessive attention on early adopters to maintain positive word of mouth.

Online researchers would do well to take note. Instead of using statistically meaningless quota samples, they would provide value in trapping and reporting on category mavens and other important influencers like connectors. These new research panels, like well managed CRM databases, could easily evolve into new high-impact personal media channels. Imagine the value of ready made word of mouth media channels, or better yet auction them off like Google, track their impact with BuzzMetrics, and discover the value.

Disruption in Television

You can feel the tremors. A major earthquake is about to disrupt television as we know it.

This year, the piping companies are working hard to replace the old platforms of broadcast, cable, and satellite with Internet portals. Verizon and SBC Communications made major investments to build Internet TV portals. Comcast recently reacted by telling Wall Street about its own Internet TV portal under development and to be fully stocked with programs, movies, interactive features, and a new fangled television search engine. Then Comcast created more buzz with hints of partnership talks with Google and interests in buying AOL’s Internet portal.

Meanwhile, the content companies are trying to break free of the pipe companies. ESPN is leading the charge with its own major Internet portal, branded magazines, radio shows, podcasting, branded phones and services, games alliance (with Electronic Arts,) events with the X-Games and ESPY Award, and Zone restaurants. Change is so prevalent that even the Tiffany Network (CBS) announced a strategic initiative to in its own words “bypass cable”. It is working on an online service for people to watch as an alternative to the evening news.

And of course, Apple is shattering the mold again. While everyone talks, Apple launched its much anticipated video iPod in a content alliance with Disney. You can now watch “Desperate Housewives” and “Lost” for $1.99 an episode. Maybe tomorrow, Pixar and possibly Disney movies will be $3.99 each. It will be a matter of days, before video podcasting takes off. And the latest report has Sony smartly out maneuvering Matsushita (Panasonic and friends) in its next generation DVD fight. Which vision is clairvoyant? Who will buy DVDs at the store, when they can download and watch on their iPod or anywhere in the house through their iMac or Microsoft Media Server?

As content becomes pipe independent, Lifestyle Internet portals like MySpace with social networking at their core will start disrupting the traditional TV portals currently under construction. It is a vision thing. Content and packaging are changing. Viewing is about time, place, and involvement. Essentially, media is becoming personal. Will people be attracted to CBS or some cool news center that speaks to them? If you expect CBS will win, think about what is happening with blogs and you may change your mind. Les Moonves will have to think beyond CNN to keep CBS branded news alive in the long-term. The same goes for all types of television. Interestingly, the niche cable networks are best positioned to win if they move fast. ESPN understands.

If we come back to our monthly topic of measurement, this fun discussion of disruption hits home hard. People-meters measure channel frequencies of “piped” tuning to television sets. The next generation A/P meter is more flexible, measuring content as long as it is wired to the meter. Yet everything we have been talking about involves throwing away the pipe. The Personal People Meter (PPM) is mobile, but requires ambient audio. While this clearly would not capture the earphone prone iPod devices, it certainly casts a wider net. Besides the nasty little requirement of sample cooperation, the PPM concept makes a huge assumption. It requires all content to be coded with audio signatures. This means both programming and commercials. If games and movies are in scope, then they need continuous signatures too. Despite all the fanfare, the PPM crowd is still struggling to get basic television cooperation. The Internet oriented folk of course think these measurement techniques are wrong-headed. They believe that tracking technologies should be designed to monitor interactive communications. Yet, they face similar challenges. Clickstream tracking requires website cooperation and struggles with offline content.

This is why media research is fun!

Maybe the answer is outside the box. Content owners are becoming paranoid about who is using what and how many times. Serious money is being lost through copyright infringements, from file sharing to piracy, and much more is at risk as videos follow music into the digital ether. Maybe media researchers should partner with the Digital Rights Management companies and consortiums to develop technologies that monitor and follow the content and its usage.

Why Target?

“I have a mass product. It sells everywhere. I need to reach everyone. Why should I target? It just makes my CPMs more expensive.” This common viewpoint birthed the bottom feeder, media managers whose primary mission is to procure low cost mass media. It begs the question: Why target?

The answer comes in three parts.

1)      Competition forces brand positioning. Even with ubiquitous products like toilet paper, competition introduces perceptions and each brand ends up with a piece of the market. So who is your brand’s market? Certainly not everybody. In the case of toilet paper, the brands cluster around price points – though some would argue it’s about comfort. In the case of cereal, brands cluster around health, taste, and personality. Yet if you look at purchasing of mass products from a demographic standpoint, it is typically flat. This leads marketers to simplify and not target.

The challenge to driving mass products is to find and apply the right tools to discern and execute against the different consumer groups in the category. Market structures and Attitudes & Usage segmentations are the standard tools to discern differentiating product attributes and consumer groups. However, these studies typically are stand alone analyses, lacking connectivity to marketing execution and making them difficult to use. This leads marketers back to flat demographics and to simply no target.

The purpose of targeting here is to protect, grow, or re-position the brand. Ubiquitous products cannot remain undifferentiated if they want to survive let alone thrive in a red ocean environments with aggressive competitors. The key is to map relevant differentiation, stake out your piece of the business, and then execute against it.

2)      The fact is: consumers are not uniformly responsive to media. Quality marketing mix analyses will not only tell you the average effectiveness of specific media advertising, they will also tell you the areas of effectiveness within your targeting framework by highlighting the distribution of responsiveness across your target segments.

Knowing how different parts of your marketing target are responsive to different media is central to media targeting and planning. Classic media planning efficiency metrics like CPMs (cost per thousand exposures) are only relevant within the context of a target audience. Low CPMs are meaningless if they are calculated against the wrong target. Even with the right target, CPMs do not consider the impact of the medium to generate responsiveness from your target. Analysis of brand and category sales to media exposures across a category’s relevant targeting framework provides the necessary context of media impact benchmarks to qualify media exposures across a matrix of media and target segments. These media impact benchmarks differentiate the value of media exposures beyond straight CPMs by qualifying their ability to drive response in different targeting segments across media. Quality mix studies then answer “how am I doing” by posting how effective the brand was at driving response across its targeting framework in comparison to the category benchmark.

The purpose of targeting here is to drive efficiencies by managing media investments effectively. Knowing which consumers respond to which media for your category of products is the foundation of effectiveness media investment management. Media effectiveness segmentation benchmarking provides a target evaluation framework to efficiently plan media.

3)      Better data analytics makes marketing targets actionable. We now know that we want to stake out a differentiated product position, even for apparently ubiquitous brands, and that the value of specific media vehicles is not uniform across marketing targets. These two reasons for targeting are only meaningful if they can be executed.

Better data analytics exist today with integrated meta-databases and their off-spring analytics. The new new is the resulting normative knowledgebases that come from these meta-database analytics. ACNielsen Consulting Services is re-founding its business in this space. Targeted media response benchmarks and related performance analyses are here.

Why target? Because brands need to be positioned in competitive environments, not all consumers respond the same way to media, and most importantly, tools exist today to take measurable action.