The Fourth Estate

Be Sweet, Please Retweet

2009-10-08T10:13:44+11:00

There has always been something alluring about the myth of the creative advertising genius. A Mad Man style maven sitting in a palatial corner office, twirling a pencil and then devising a diabolical way to sell more cigarettes, cars or potato chips. But the new media landscape has made a mockery of that. It used to be enough to make ads that people remembered when they watched them. Now, being a great creative means being smart enough to ensure people watch them at all.

Early this year, I spoke at PromaxBDA Europe - a TV marketing conference in the Czech Republic. Prague is a beautiful city. Look outside your window and you will be rewarded with an exquisite gothic skyline marred only by a single building — the Žižkov TV tower. When I asked about it, I was told that the Soviets thought that if they beamed out a strong enough TV signal, they could blanket out any competing programming from Western countries. It was a cunning plan and quite possible in a world where television had a monopoly on moving pictures and sound in households. For the last 50 years or so, you could literally buy people’s attention. Now, it’s not so easy.

On the Internet, there is no concept of prime time. You can program television, but when online people discover and consume content, it is often because it has been sent to them by other people they know. Whether a tweet on Twitter, a blog post on Wordpress or a shared link on Facebook, the most influential distribution assets now are not broadcast networks but rather audience networks.

Consider the recent transformation of the social media space. Social networks have evolved from an orgy of self-expression to brand communication channels and tools of political influence. The new prize is realtime search. Traditional search is great for finding non-time-sensitive material, but if you want to know what people are saying and thinking right now about your brand, TV show or anything else, you need to be able to dip into the live stream of social chatter and link sharing.

From a creative perspective, real-time search creates a unique challenge. Stunning art direction is useless if no one actually watches your ad. In a world of audience networks, people will only forward your content to their friends and followers if it makes them look smarter or cooler by doing so. Their brand, not yours is at stake. You would be surprised how few marketers take that into account and are left wondering when their viral campaigns are socially vaccinated before they get off the ground.

Funnily enough, one of the best examples of smart social creativity this year came from far North Australia. Tourism Queensland’s “Best Job in the World” campaign took three Grand Prix awards at the Cannes advertising awards this year. The campaign, which was ostensibly just promoting a caretaker job on Hamilton Island, generated more than AU$332 million in media coverage, 34,684 video entries from 197 countries and eight million site visits with an average of eight minutes and 15 seconds spent on the site per visitor. What made the campaign so effectively viral was not how it looked or where the ads were placed, but rather the power of its core idea. After all, who wouldn’t want to get paid to hang out on a desert island? Great ideas are like social candy to consumer networks.

Social media doesn’t mean the death of TV advertising, but it does place it into context. Broadcast is a powerful medium for rapidly raising awareness, but the reality of media fragmentation means that to get real engagement requires your customers to do the distribution for you. And that, quite frankly, is not easy. The trick of turning audiences into advocates requires more than just savvy media planning or bribing people with free iPods.

It takes true creative genius.

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What do you think? As always - I welcome your thoughts and feedback through the community forum. Click here to comment.

What's Next For Music?

2009-06-08T15:50:51+10:00

The funny thing about the music industry these days is the growing influence of people you would least expect to be hanging backstage with the band. Mobile operators, handset manufacturers, broadband providers and even social networking geeks - Music is fast becoming the digital currency de jour for anyone who wants to engage with consumers online. But what does that mean for the value of music going forward?

The future of music was a question hotly debated at this year's Music Matters conference - Asia's peak music industry summit held in Hong Kong. Value is a complex issue. If songs have intrinsic worth in themselves, then their commercial distribution should be defended to the hilt even in the wake of overwhelming piracy. If greater value lies elsewhere - for example selling concert tickets, branded merchandise or reducing churn on mobile data plans - then music should be free and leveraged as a promotional platform.

With fast broadband, advanced mobiles and media hungry consumers - Asia is a great laboratory for understanding where the entertainment industry is heading. In most cases, consumer behavior is still way ahead of corporate attempts at commercialisation - hence the lawsuits. But there are growing pockets of innovation. Here is a quick primer on four areas where consumers are pushing the boundaries of the traditional music industry:

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1. Buying Music From Your Phone
Until very recently, ringtones were a major cash cow for Telco operators. But as mobile networks have become faster and handsets smarter - mobile music products have also had to innovate. Japan's sophisticated mobile market is a case in point. According to the RIAJ, last year 90% of Japanese digital music sales took place on mobile phones, with only 10% over the Internet. The new music profit driver in Japan 'over the air' (OTA) song purchases. 'Chaku-uta', (30-second song snippets) and 'Chaku-uta Full' (MP3 full-length songs) have become very popular with consumers, and are largely distributed through a platform called Label Music, owned by all the major record labels.

Nevertheless, Japan is a curious and unique market. Contradictions abound. An aging population, which still prefers buying CDs, continues to support the sales of physical music. So local music labels have a segmented marketing strategy. They target the over forties with CDs and albums, and kids with mobile distribution and digital singles. The latter has had an interesting impact on the creative process. Take superband GReeeeN for example, which are focused primarily on the mobile and download markets. Unlike typical Japanese Tarento, the band refuses to show their faces - the cute story being that they haven't told their parents yet. Their hit song "Kiseki" recently broke all the records with 2.3 million chaku-uta full downloads.

Japanese mobile success may be hard to replicate elsewhere. While Asian kids have adopted their phones as music devices - sideloading poses a longer term challenge to the OTA business model. According to Synovate, across Asia 46% of young users download music and transfer tracks to their phone. Only 21% regionally download music directly to their phone.

2. Finding Music on Search Engines
The second area where the music industry is being forced to keep pace with consumer innovation is around search. In China, digital piracy is rampant. The vast majority of music is illegal - and even if you do buy a physical CD - chances are, the retailer selling it to you stole it himself. Not surprisingly, MP3s are one of the most popular search items on the major search engines in China. The China Market Research Group estimate that music accounts for 20 to 30 percent of all searches on Baidu. To combat Baidu, Google China launched its first music platform - Google Music, which in partnership with Top100.cn offers free advertising supported music search and streaming. All the music on the site has been legally provided through deals with the major labels - the vast majority of which had long since given up making money from anything other than ringtones in China anyway.

What makes Google Music interesting, however, is not just free legal music. One of the key enteratinment issues in China is discovery. An unusual consequences of the growth in ringtones in China has been the proliferation of what literally translates as 'saliva music' - songs that are simple in melody, and designed for the limitations of a 2G ringtone. Unfortunately, that makes the long tail in China pretty short.

To help expose Chinese users to a greater depth of artists and music tracks - Google Music uses an algorithym that analyses the timbre, rhythym and beat of songs, in order to recommend similar tracks. The results are impressive but like elsewhere in the world - the jury is still out as to whether revenue sharing on free streamed and downloadable music tracks will be worthwhile for content owners. But at least now, unlike before - the labels in China have skin in the game.

3. Mixing Music with Friends
The third trend in music innovation is around social media. Forget Myspace Music - if you want to see the future of commercialising music through social networks, take a look at Tencent. Tencent operates the instant messaging community QQ. It has over 200 millions users in China, and even more impressive - over a billion (USD) in revenues. Unlike social networks in the US like Facebook or Myspace - online advertising last year contributed only $120.9 million to Tencent's revenues. The vast majority of the top line revenue figure ($719.1m) came from interactive services like virtual items, personalisation and music.

In exchange for small transaction fees, Tencent allows users to play music in the backgrounds of their profile pages or dedicate music to each other. It has been estimated that they make between $30-40 million a year alone on these music based services.

Virtual merchandise and the commercial integration of music into social platforms is a lesson that the West could well learn from countries like China and Korea. While platforms like Myspace Music, Last.FM and iMeem do a great job at supporting music discovery - their advertising dependent business models are still only half formed.

4. Bundling Music with Everyone Else
Finally, it is worth thinking about the potential impact of offering consumers access to large music libraries as part of bundled subscription services. Telco operators have started to pay attention to music for two reasons - ARPU and churn. But do consumers care? Denmark is an interesting case study. Under Danish law, Telcos can only bind their customers to six month contracts - making renewals a serious issue. TDC, Denmark's major carrier launched a service in March 2008 which gives their mobile and broadband customers unlimited access to music downloads for free. Of course, if you cancel your subscription, you also lose access to the music. So far, their plan seems to be working - churn is down 60%. But as a consumer model, it is still less than ideal.

Danish telcos are not the only ones looking to use music to bind consumers more tightly to their services. Even handset manufacturers like Nokia are offering unlimited music downloads to consumers who buy certain models of their phones. Music subscription services are a double edged sword for consumers. They offer infinite choice, but often lack the community infrastructure to aid music discovery. Further, the looming threat of cancelled access provides little incentive for consumers to invest time in curating a collection.

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Taken together, all of these four trends are examples of businesses adjusting to the new ways that audiences are consuming digital music. The longer term structure of the music industry is still far from certain. Things are moving fast, and the worst possible mistake is to focus on fading metrics. The top line retail sales look bad, but they only tell part of the story. At the current rate of change, in five years time - measuring the quarterly drop in CD sales may be about as useful as tracking the current decline of cassette tapes. It's time to start watching the new sources of growth and leave dying formats in the grave.

After all, the first thing you need when the world changes is a new set of maps.

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What do you think? As always - I welcome your thoughts and feedback through the community forum. Click here to comment.

The Future of Finance

2009-03-16T14:49:03+11:00

Disaster tends to breed a touch of schadenfreude in all of us. As a new generation of Gorden Gecko’s burn under the blowtorch of angry shareholders and world leaders brace themselves for the bill from mass bailouts – it’s easy to answer the question ‘what is the future of finance?’, by simply asking another; ‘is there a future for finance?’.

As it happens, the answer to that question is yes, but not as you knew it. How the consumer experience of finance is set to change is something that I have been thinking about lately for some of my clients. Here are a few of my observations:

1. Mobile Will Become The Primary Transaction Channel
Mobile banking has been talked about for a while, but things are finally speeding up. Interestingly, the catalyst for innovation is not smart phones but dumb ones. In the same way that creating a $100 laptop for the Third World, led to the development of the netbook for everyone else – mobile banking is taking off fastest in developing countries like Kenya and South Africa. For example, Absa Bank in South Africa have now reached a million mobile banking accounts, close to a quarter of their customers base and more than twice the number of their customers accessing from the web.

From Indian workers using SMS to send money back to relatives to Japanese consumers using contactless Felica chips in their phones to pay for just about anything – mobiles will increasingly become both a primary originator of transactions and, with integrated biometrics, an important link in the identity authentication chain.

2. Personal Finance Management Moves to the Cloud
Quicken might have been the state of the art in personal finance in the nineties, but these days, money management tools are moving rapidly online. - or as they are calling these days - ‘the Cloud’. Cloud based upstarts like Mint.com and Wesabe not only offer consumers the ability to track their expenditures, they also draw on their networked data sets to offer intelligent suggestions for saving money, comparing financial products and even alerting users to credit card scams.

Mint.com, for example, has quadrupled their registered users since the financial crisis hit in September. With over 900,000 members, close to 1% of US households, they are able to use their sample data to let you know whether you spend more or less on coffee than the average user, or whether your average purchase price and purchase frequency at Amazon.com, Starbucks, and JetBlue is radically different from someone else with your earning profile. Data is a powerful incentive to share information, particularly for younger demographics. More importantly, these tools are exactly the kinds of features that will need to be rapidly replicated or integrated in the online channels of more traditional financial product companies.

3. Physical Outlets Will Become More Important
Given the growth of online and mobile channels, investing in branch networks may seem counterintuitive. But curiously, as branches become less important for transactions, they will become more important as branding and consumer engagement channels.

In retail circles, the Apple store has become a cliché for design innovation but the Finance sector is catching on. ING Direct were early pioneers with their café branch concept, while more recently Barclays have piloted Microsoft Surface technology in their redesigned UK flagship. Barclay’s Surface program allows customers to manipulate digital content with their hands and access information about banking products with simple gestures.

4. Social Lending Moves Mainstream
If one thing is certain over the next few years – it will become harder for many people to obtain access to personal loans. Interestingly enough, that is exactly the kind of environment under which social or P2P lending players like Zopa, Prosper and Kiva may begin to flourish. Social lending sites work like an online money exchange, allowing people who have money to lend to offer it to those who wish to borrow.

Although micro-credit really began as an innovation to help entrepreneurs in the poor countries to access funding, there is a broader niche in the rest of the world for consumers who might have never used a pawn shop, but still want to access alternative sources of cash finance.

5. Credits Ratings Go The Way of Ebay
For something that is so essential to calculation of consumer risk profiles – it is astonishing how arcane and inefficient the system of credit ratings is. In the US for example, you can arrive in town with a million dollars in the bank and still struggle to get a mobile phone on contract because you have no prior credit history. For inspiration, financial institutions would do well to observe how reputation is recorded and shared online.

From consumers trading with each other on eBay to more subtle attention filters like Slashdot or Twitter – the Web has come up with a variety of ways to manage and mitigate issues of trust. Repayment histories are not the sole determinant of future behaviour. Interestingly, as consumer financial products evolve other factors such as social capital may become more influential.

A recent MIT study of social lending on Prosper.com found that social features such group affiliations and endorsements significantly impacted the chance of a consumer getting funding for a loan request. Such social factors not only doubled the probability of getting a loan request fully funded, but made it possible for a borrower with a priori non-bankable profile to get a loan with reasonable rates.

None of these trends are a panacea for the current Credit Crisis, but in a way that is also the point. The problems facing the finance industry are more complex than the loss of liquidity.

There is a growing disconnect between retail consumers and financial institutions. In the same way the Web changed the dynamics of the music industry – the risk for major players is that others will innovate faster at the consumer level, leaving them the unglamorous role of backend factories of commoditised financial products.

This isn’t great news in a time of generally bad news. But then again, there is probably no better time to stop and re-imagine exactly what the future of finance might look like.

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