Digital Hollywood | The Global Human Capital Journal

11 August 2007

Delivering Telecom’s Converged Network and Entertainment Experience

Converged Experience Presages Telecoms Transformation—Reexamining the Value Proposition

CTOs Chris Rice (AT&T), Pieter Poll (Qwest), Mark Wegleitner (Verizon) and Matt Bross (BT) agreed that the discrete services that telecoms now offer would morph into a seamless, hyperavailable cloud of communications services. The converged experience will be seamless, feature-rich and accessible when, how and where consumers want. Telecoms’ ability to deliver will drive their stock prices in the near term and was the focus of the discussion.

From an operational perspective, telecoms have been too focused on product/service P&L. Now they have to eliminate barriers between products, so the customer can have a context-appropriate, seamless experience. The first phase of this transformation is bundling existing services; however, the real value will come from innovating new services. All applications will be unified around an IP (Internet Protocol) infrastructure. Telecoms don’t need to integrate networks; they need to build networks that interoperate.

Between the lines and longer term, telecoms must reexamine their value propositions because we are coming to the end of the era in which custom applications and proprietary interfaces were necessary to integrate networks’ “islands of automation.” Network-centric software and distributed applications increasingly interoperate natively.

Panelists

Chris Rice, Chief Technology Officer, AT&T—Chris Rice oversees the Network Planning and Engineering Group for the new AT&T Inc. His responsibilities also include overseeing the development and deployment of advanced access, switching, and routing technologies for the company. Prior to being appointed to his current position in March 2004, he was responsible for SBC Communications’ enterprise-wide technology direction, new technology introduction, platform development and network regulatory.
Pieter Poll, Chief Technology Officer, Qwest—Pieter Poll facilitates the strategic technology direction of the company. In addition, he directs network planning and engineering functions. Dr. Poll started his career at AT&T Bell Laboratories where he contributed to the architecture and evolution path of the 5ESS Digital Switch. He helped develop network evolution plans for the AT&T long distance network and product requirements for that network. He was a strategic and portfolio planner for what is now Lucent Technologies. Pieter joined the former U S WEST Advanced Technologies organization in 1994 to develop switching and network intelligence evolution plans for Qwest.
Mark Wegleitner, Chief Technology Officer, Verizon—Mark Wegleitner directs technology assessment, network architecture, platform development and laboratory testing for the local and long distance wireline communications businesses, as well as network planning for local wireline communications. His organization supports all wireline business units in the management of technology and network matters. Formerly, Wegleitner served as vice president, Technology & Engineering at Bell Atlantic Network Services, where he handled all technology and engineering functions, as well as CTO at Bell Atlantic Network Services.
Matt Bross, Group Technology Officer, British Telecom—As BT Group CTO, Matt directs technology strategy, vision and innovation across BT. He is the leading force behind BT’s 21st Century Network transformation program, and he heads up a global BT technology, research and development organisation that spans the US, Europe and Asia-Pacific. Matt has had a long and distinguished career in communications and innovation, including senior positions at ConTel, MasterCard and Williams.
Moderator: Susan M. Miller, President & CEO, Alliance for Telecommunications Industry Solutions—Susan Miller leads ATIS, a leading standards development and technical planning organization committed to rapidly developing and promoting technical and operations standards for the communications and related information technologies industry worldwide using a pragmatic, flexible and open approach. Participants from more than 300 communications companies are active in ATIS’ 22 industry committees, Incubator Solutions Programs, and other activities.

The Converged Experience

Consumers will experience content from any screen, and it will be device-appropriate and seamless.
All applications will be unified around an IP (Internet Protocol) infrastructure. Much content will be video. Think way beyond wireless vs. wireline.
Telecoms have been too fragmented and too focused on product (service) P&L. Now they have to eliminate barriers between products, so the customer can have a context-appropriate, seamless experience.
The first phase of this transformation is bundling existing services; however, the real value will come from innovating new services. One example is having one voicemail for all devices.
It will be essential to adopt open architectures. Telecoms don’t need to integrate networks; they need to build networks that interoperate.
IMS (Infrastructure Managed Services) will be a stepping-stone, not a big bang. Operators will move toward IMS compliance gradually.
Web 2.0 services will be strong drivers of innovation. CTOs’ challenge is enabling connectivity and collaboration across the enterprise boundary.

IPTV

IPTV will take us into a new era, “more than TV.” Text search will make content more accessible, and electronic program guides will be drastically improved.
People will be able to access and share video via any broadband connection, including mobile devices (integrating the third screen), the same way they do now via their computers and Slingbox.
Customers want flexibility—access and choice of content—not more linear broadband channels.
With IPTV, consumers can interact with each other while they are experiencing the game, and time shifting will be routine.
TV will integrate “web widgets” for content like weather, traffic and time (an example of external, Web 2.0 content?).

Managing Consumers’ Home Networks

The home network is the final frontier (in owning the customer relationship because a lot of content will reside there, and helping the customer to access it will be key).
It’s imperative to make all this technology available to consumers without creating frustration. In effect, consumers are running fairly complex home networks, and that brings up the question of who is responsible for devices, network services and content interoperating. Telecoms don’t control consumer networks and infrastructure, but the ability to deliver services is affected by the home network.
Currently, home network operation is a gray area. DSL providers service their routers but not PCs. Cable operators service their set-top boxes, but when these become interactive, complexity will increase.

Innovation

One billion new people will be on the Internet by 2011, and most will be in “emerging” economies. This will drive new thinking and unprecedented innovation. Telecoms will be challenged to scale networks to handle the increased activity.
Telecoms can add value by collaborating with ISVs. They also need to target offerings for SMBs (small/medium businesses). Optical switching should help.
Taking complexity out of services is critical to preventing adoption.
Content will come from everywhere, and carriers’ value is to distribute it, make it available in as many places and formats as customers want.
However, telecoms’ biggest challenge is their immense barriers to collaborating with external parties.

Analysis and Conclusions

The phrase “Converged Network and Entertainment Experience” epitomizes the crisis in telecoms’ value proposition. As we wrote in AT&T CEO Unveils Telecoms Vision, we predict that technology maturation will increasingly enable network components to interoperate natively, which will remove a large portion of telecoms’ value add, which is assuring the delivery of data and services. In the medium term, this will be taken for granted.
In our opinion, this is the real message behind Randall Stephenson’s assertion that telecoms need to reflect on the definition of “a communications company.” AT&T is aggressively moving into content to maintain margins.
The last mile will provide extensive opportunity for new services that help customers manage their networks. People make fun of setting the VCR and other gadgets. They are so complex that people don’t use the features. This also holds true for smartphones, whose advanced features are used by fewer than 90% of customers.
Telecoms are going to have difficulty breaking out of their role as purveyors of “dumb pipes.” Their processes and infrastructures are tightly coupled and inflexible. Panelists’ remarks about IMS and its difficulty interfacing with Web 2.0 do not bode well.
The same inflexibility prevents telecoms from external collaboration and innovation.
Telecoms will have their hands full just coping with doubling the size of their networks to accommodate one billion new users.
Because the bulk of new users will come from emerging markets, which often have vastly different usage contexts (from mature markets), innovation will be far more varied than in the past.
Question: if the goal is to standardize on Internet Protocol networks, that will mature the technology and remove much of its current “value subtraction” character. Currently, telecoms are focused on evolving their networks to interoperate seamlessly. That is how they define value. Medium- to long-term, however, they may have to shift their business model to content.
IPTV converges watching with gaming, one of the most rapidly growing areas of activity among younger demographics.

10 August 2007

Advertising NEXT: Social Networks, User Generated Video, Blogs, IMs, Podcasts, Broadband and Mobile

The Rise of the Niche Will Transform the Mass Model—The UGM Threat Is the Opportunity

The advertising industry is at a crossroads. It came of age during the Industrial Economy, and explosive growth coincided with the development of the mass media and the focus on “brand” TV and print advertising. Big media and advertising reflect Industrial Economy values and sensibilities: produce big numbers efficiently and innovate when necessary. Amortize existing investments. The problem is, Knowledge Economy customers want to be communicated with as individuals. Since advertising’s processes have been built with big numbers in mind, they are expensive, and the numbers don’t work when agencies try to address niches.

Efficiency in advertising has given rise to a value chain that is as heavy with inflexible infrastructure as the airlines’ hub and spoke system. Advertisers remain focused on “reach,” the number of eyeballs that view their messages (and respond when it’s measurable). That’s how advertising effectiveness is measured. Advertisers are resistant to changing this system, and that makes emerging technologies like mobile video and social networks of secondary interest to them. Meanwhile, innovators are developing technology and offerings to help early adopters to take advantage of the emerging media.

User-Generated Media (UGM) is a quintessential opportunity/threat. Although amateurs do not produce comparable quality as professionals, they can afford to address niches since their production costs are lower. We predict that they will increasingly disintermediate professional marketers: their relevance is often high because amateurs are focused on what interests them, while professionals are drafting communications to appeal to big numbers but to few people in particular. Astute agencies will explore collaborating with individuals to bring down production costs and increase relevance.

Panelists

Lon Otremba, CEO, Access 360 Media—Lon Otremba manages Access 360 Media’s day-to-day activities and develops the company’s overall strategic direction. A well-known interactive media pioneer, Otremba is a veteran operating executive and advisor in the Internet publishing, print, television and broadcast music industries. Otremba currently sits on the board of EEI Communications, a leading provider of outsourced new media, print publishing and staffing services. He has also served on the executive board of the Interactive Advertising Bureau. Prior to joining Access 360 Media, Otremba was CEO of Muzak, LLC, the world’s largest provider of commercial music services.
Nir Shimoni, VP Product Planning & Business Development, Eyeblaster—Nir Shimoni oversees key aspects of product planning at Eyeblaster. Mr. Shimoni came to Eyeblaster from RADVISION, where he served as the director of business development and product marketing. An expert in videoconferencing and multimedia communications product development and network architectures, Mr. Shimoni was a lead member of the RADVISION team responsible for architecting the company’s enterprise videoconferencing and multimedia communications solutions, strategies and opportunities.
Frank Nein, Senior Analyst, OrionsWave—Nein serves as SVP of Strategic & Business Development for OrionsWave, which provides next generation interactive video & digital media gateway solutions, transcoding, middleware, P2P & (CDN) content delivery networks over IPTV infrastructures allowing all/any set-top boxes the ability to seamlessly merge conventional H.323 & H.264/MPEG-4 with all other AV media codecs for cross-platform video broadcasting & video conferencing over multiple web based & portable wireless devices such as mobile/cell, PDA’s & SmartPhones, etc. Formerly, Nein held senior consulting positions with Verizon and Bell Atlantic.
Brian Knapp, VP Corporate Affairs, Loopt—Brian oversees loopt’s privacy matters, regulatory and policy efforts, corporate development, and legal affairs. Previously an associate with Wilson Sonsini Goodrich & Rosati with a focus on intellectual property technology transactions, Brian held senior positions in business development and marketing with such companies as Dun & Bradstreet, Barnes & Noble.com, and AllBusiness.com.
Allan Linden, Senior Director Marketing, Kasenna—Allan Linden directs marketing for Kasenna, a leading provider of video-on-demand (VOD) content and MPEG-4-ready IPTV applications for triple-play services over broadband networks. Their solutions enable telecom service providers and cable operators to generate additional revenue by delivering advanced television services. Moreover, through its ViewNow subsidiary, Kasenna offers a turnkey IPTV solution that includes scalable IP video infrastructure, subscriber applications, and VOD programming.
Moderator: Michael J. Pinto, Managing Principal, mCapital—Mike Pinto leads the growth of the mCapital’s investment portfolio. Prior to mCapital, Mike was the CEO of mobZilla, a dual platform mobile and PC music service provider, and he held managing director positions with two European wireless application service providers. Working mostly in the Spanish market, both companies specialized in delivering premium content to mobile consumers through relationships with major and local TV channels, magazines, newspapers, and retail shops. He also led a team that aggregated premium SMS billing with 23 operators in 6 countries, and formed strategic revenue partnerships with over 50 media and content companies.

Key Trends

There is a seismic shift away from broadcast TV—toward non-traditional advertising vehicles like social networks and digital signage. Younger generations have little or no experience with “legacy” media like broadcast TV, and advertisers need to create engagement.
Agency visionaries are focused on (adding value by) creating precise, relevant messages that are integrated into content so that content and advertising are indistinguishable.
Today, $9.5 billion is spend on mobile advertising globally. Most is coupons and brand advertising.
Mobile is fundamentally different (because context is constantly changing around the person). Direct marketing is precise, and so is mobile, since each number is tied to a person. However, consumers don’t trust advertisers, and resistance to geo-tracking is widespread.
It is difficult to do brand advertising on mobile because the medium is so different. Currently mobile is primarily a communications device, not entertainment. The second screen, the computer, has strong associations with work and search. Mobile will be a force in search.
IPTV will transform the first screen (TV), which will become more interactive and will provide more granular information about viewing and content consumption. This information, combined with emerging ad insertion techniques will give advertisers new tools to target messages to viewers. To take advantage of it, they will have to change their thinking.
Content and advertising will converge.
When money moves, applications will follow.

Convincing Advertisers to Invest in Emerging Opportunities

Know your customer. Advertisers are organized around advertising types, and their processes and organizations are siloed. This is a major problem because it prevents cross-boundary communication and collaboration. It’s difficult for them to assimilate new information and opportunities. No one is dedicated to cross-boundary initiatives.
It is very difficult to sell new techniques to agencies. Google’s $6 billion AdWords business took everyone by surprise. Like all new things, it started small.
Advertisers are limited in how they can deliver targeted ads on mobile devices; there is a lack of software on devices to help manage content.
Know your customers and show how they will be of value to the advertiser. Mobile enables very targeted messaging. IPTV enables carriers to understand what content the customer is watching as well as when and how.
Figure out how to optimize local (mobile) and national and optimize buys.
Messaging is the medium. American Idol is all about voting via SMS. ESPN failed because it didn’t understand how to advertise.
From an advertising perspective, P2P virtual marketing and community building are expensive, as is “permission” marketing. There is uncertainty around monetizing communities.

Advertising on Mobile

The third screen is an emerging window into the consumer, but it has many unique characteristics that advertisers must invest in to understand.
With mobile, obtaining consent is more difficult than it is on the Web (people are more intolerant?).
Media are shifting away from one-to-many to many-to-many.
Carriers need to create opt-in communities. Advertisers want to know how they can become relevant in the mobile video context.
Video is different from music because people listen to music repeatedly, but they will watch a film 2-3 times on average (isn’t this assuming that people will watch films on their mobiles?).
Younger generations value the advice of their friends, not adverts.
User-generated advertising has real potential; the 13-second Doritos ad during the 2007 (U.S.) Superbowl was a hit. However, GM’s Chevy Tahoe experiment is considered by many a failure (users generated a high portion of negative ads). To succeed, advertisers must establish “guard rails” but still enable users to have considerable creative license.
MySpace has a lower CPM (cost per thousand) than AOL.
People will endure adverts to get free mobile video—in certain situations. Advertisers have to experiment to learn what works.
Results will dictate what advertisers can get away with. The “I.P. generation” knows that they are in control; they will desert any content that displeases them. They expect things to be free, but many are virulently intolerant of advertising.
Emerging ad insertion technologies currently offer much more specific and timely ways to reach consumers. This is key to delivering relevant messages based on geo or activity.
Carriers will not give free service.
ViewNow offers advertisers the ability to track what home viewers (first screen) are watching, and they will have a similar solution for mobile video viewing.
Mobile gaming has considerable promise, and it is a way to reach the I.P. generation.
Analytics are critical for measuring the impact of advertising on mobile. Some metrics are length of exposure, time of exposure and reach. (These sound familiar; it would seem that mobile would offer direct response across a greater spectrum.)
Network capabilities for delivering mobile video advertising are spotty, and this is a major barrier to adoption.
Most media is still one-to-many.

Holistic Advertising and Experience

To learn how to integrate campaigns, observe how people currently multitask while viewing content. It’s quite common for first screen viewers to research/interact via the second screen (computer) and third screen. IMing, chatting, calling all coexist with first and second screen viewing.
Companies need to build resident knowledge networks to understand these phenomena (don’t depend on agencies, who are often not much more knowledgeable than their clients at emerging phenomena).
Coupons can be extremely effective at tying (mobile) campaigns together (and measuring effectiveness). However, many companies have not even successfully created online and offline processes (“clicks and bricks”) yet.
Retailers have numerous opportunities to leverage technology. For example, music retailers FYE has kiosks at which to listen to music. These can collect information on who listens to what (listening patterns) and can target advertising. 15,000 viewing stations at 800 stores are all connected via a WAN. If effect, they are a TV network.
However, many retailers have avoided implementing new technology. They successfully ducked investing during Web 1.0 (the Internet). There are offline, and they will become decreasingly relevant.
On MySpace, members are creating their own advertising to support their favorite products and services, and they deploy these UGC adverts on their MySpace pages.

Analysis and Conclusions

The Transformation of Advertising

Advertising is a professional services business with high people and process costs. Like other vestiges of the Industrial Economy, it is oriented toward products, which have decreasing relevance to consumers. An increasing portion of products is commoditized.
Brand advertising has always had difficulty measuring results, and it represents a majority of advertising expenditure in many categories. To compensate, agencies and their clients have developed systems that try to measure impact but do not come close to the measurability of direct marketing.
Advertising used to create a large portion of companies’ voices in communicating with customers. Now consumers are growing their own voices via Web 2.0 and social networks, and these will increasingly disintermediate advertisers. Advertising as an industry has a lot to lose.
Despite these significant disadvantages, agencies that learn how to engage emerging consumer voices can produce unprecedented results. This will require rethinking their roles in light of “the conversation” in which the consumer will play an increasing part.
Advertising executives as a group have a lack of experience with technology adoption, and vendors should make client education a key goal. They should prioritize business development by realizing that many advertising executives do not want to be educated.
One of the biggest barriers to creating new offerings is that telecoms and cable operator billing systems are not capable of recognizing and charging for new services. They are very inflexible; they were designed to charge for services with very narrow parameters.
Overall, telecoms and operator business systems stifle innovation considerably; they should consider outsourcing backend systems to gain agility; the pressure will only increase to offer new, granular services; this means defining granular services and charging for them—or not charging if the customer chooses to view adverts. Customers will insist on tweaking billing plans on a highly granular basis (i.e. “I want to pay for ad-free Wimbledon, but I’ll endure advertising to get Oprah for free”).
The mass advertising experience has left consumers wary of advertisers at best. “Commercials” are widely regarded as an irrelevant nuisance. Few people trust advertisers to offer messages on mobile.
Relevant advertising will add value and lose the stigma of stupid mass advertising. However, advertisers must expect to win trust—and permission—slowly.
Devices are constantly gaining functionality and creating opportunities, but specialist value chain players are necessary to make it work. This creates complexity and detracts from adoption.
Advertisers are biased toward reach—and away from the niche. Self-organizing social networks are often niche-y, so providers will have to show how their demographics are of value. Advertisers won’t do the work.

Capitalizing on the User-Generated Media Opportunity

Web 2.0 and social networks digitize word of mouth (WOM) marketing. Proponents argue that WOM has driven the majority of sales results compared to all other forms of marketing. However, because WOM was never purchased, it was never measured. Therefore, it was invisible. This is all changing because digitalization enables much better measurement.
Although it may should preposterous, agencies should take note of the fact that individuals are creating their own advertisements for their favorite brands. They should lose the “us and them” mentality and remain alert for opportunities to collaborate with consumers who have increasing media production skills.
Agencies should abstract away from whether a creator is professional or amateur. Agencies and individuals are communicating, and individuals’ skills are increasing while tools get more powerful. At the end of the day, agencies who are able to weave their professional expertise together with individuals’ creativity and insights will produce unprecedented results.

9 August 2007

All Video-All the Time: Next Generation in Media Technologies and Mobility

Content Providers Hobbled by Conventional Thinking—UGC May Fill Content Vacuum in Plum Mobile Video Market

At Digital Hollywood Chicago, speakers held that video would grow significantly as a portion of content experienced on the three screens. However, no panelist gave a compelling reason that video would grow—and there are many problems that will dampen adoption in the short- to medium-term. I question whether they are just trying to drive demand to drive their businesses. Don’t forget that this conference is digital Hollywood.

Myopia is content owners’ biggest problem: they seek to repurpose existing content for the mobile screen to amortize past investments. This logic permeates their thinking and prevents innovation. Meanwhile, consumers are awakening to the excitement of consumer-produced content, the prices of software tools are falling, and skills are increasing. True, the production quality is usually amateurish, but UGC (user-generated content) is usually free, fresh and relevant—to niches, which is where the action is. Users produce content for fun, and they can afford to address topics that “professional” content cannot. Mass-produced vapid content will still have a place in the consumer entertainment universe, but it will decreasingly be the default.

Mobile video may be especially well suited to UGC: attention spans are short, so relevant short videos, created by other consumers, may be most relevant because they may be “about” the situations in which viewers find themselves. Professional content providers could not afford to make videos of bank bloopers, rude bus drivers, or comical playground incidents. In addition, telecoms’ networks won’t be ready to carry high production value video for several years, so UGC production quality may be suitable.

If Hollywood doesn’t wake up to the opportunity within the next 2-4 years—when mobile video will be at an inflection point—they will have difficulty recovering.

Panelists

Rahul Sonnad, VP Business Development, The Platform—Rahul Sonnad co-founded thePlatform with solid experience in digital media services. He managed some of the first backend solutions for digital media delivery and commerce integration while with Microsoft’s Digital Media Division’s Research and Development, and later joined WindowsMedia.com developing digital media strategies. Rahul’s background includes managing Asian versions of MS Office, innovating Microsoft Word tools, and engineering at Adobe Systems.
Ted Mendelsohn, Director Business Development, AP Digital—Ted Mendelsohn is responsible for expanding AP’s commercial opportunities in the interactive media by identifying new markets and new revenue opportunities. Based at the news cooperative’s international headquarters in New York, he has negotiated licensing arrangements with AP Digital’s largest clients.
Mark Pascarella, President, Gotuit Media Corp—As one of Gotuit’s founding investors, Mark has been a member of the company’s Board of Directors since inception and joined Gotuit full-time in 2001. Under Pascarella’s direction, Gotuit has pioneered video search / navigation and has become the leading provider of on demand video products for multiple platforms including cable, broadband and mobile.
Maha Ibrahim, General Partner, Canaan Partners—Maha Ibrahim joined Canaan’s Menlo Park office in 2000 and focuses on Internet, networking and wireless investments. She is also an active speaker at wireless industry conferences. At Canaan, Maha helped to negotiate and manage a partnership between Tacit Networks and Brocade, and established Canaan as the first investor in Blue Frog Mobile, one of the largest US-based direct-to-consumer mobile content companies. Prior to joining Canaan, Maha held numerous roles at Qwest Communications including Vice President of Business Development and Vice President of eBusiness and Internet Operations. While at Qwest she was instrumental in forging the company’s relationships with Netscape and Microsoft as well as several other private Internet companies.
Moderator:
Antonette Goroch, Senior Analyst, Digital Tech Consulting—Goroch has been an analyst and executive in the media industry for over 10 years, covering areas including cable, digital satellite, consumer electronics, Internet, IPTV, digital video and music. She has authored expert analyses focusing on digital media entertainment and technology, and her work has appeared in The New York Times, The Wall Street Journal, Broadband Week, Satellite Communications and Broadcasting & Cable.

Customer Experience: The Three Screens

The first screen is TV, and several generations of viewing have set strong precedents. Most viewers of TV content are passive. This has reached such a point that many “viewers” do not watch TV; they just have it on in the background, and they often do other things.
The computer monitor is the second screen. Here, people are far more active. The computer first assumed a work context, but entertainment has increasingly grown, so that the second screen has a balance of work and entertainment today. People are interactive at the computer. People increasingly watch entertainment at the computer, but TV is the ultimate “watching” context.
The mobile experience is emerging. It is more driven by impulse, and mobile entertainment happens when people are in-between doing other things, when they are commuting or waiting for something.

Adoption Factors

Currently, each of the three screens has different content creators and distributors, and this serves to keep each in its own channel.
Customers will insist on convergence, but it will happen gradually due to technology constraints and the lack of business models.
Mobile (the third screen) is slow, and picture quality is poor, and this will prevent content sharing with the other two screens in the near- to medium-term.
The broadcast model will not work for mobile: neither its content, nor its business models.
The customer base for mobile video is broad, but myriad providers and business models prevent adoption. Mobile has to have a YouTube offering.
The mobile video value chain is complex; on the Internet (second screen), ad models work, as well as search and recommendations (like amazon.com).
There isn’t yet a business model for user-generated content (UGC).
There was a consensus that advertising-sponsored free content for mobile would have a limited appeal; both content and advertising would have to be carefully targeted in order to avoid annoying customers.

Content Protection

Video content incorporates film and audio, and each has potentially numerous content owners.
YouTube content is unprotected, but it is monetized, so that makes it acceptable to many industry executives. However, everyone is painfully aware that the misuse of content is growing, and the lack of control is too obvious.
For many situations, enabling consumers to stream content (without downloading) is sufficient protection (however, there will always be people who find workarounds and share). Digital fingerprinting and embedded players are other tools. YouTube is developing its system to detect unauthorized content and may innovate for the industry.
Apple is a heavyweight with its proprietary system, Fairplay. They are trying to take advantage of the content protection problem to further their own business model. Apple has a lot of influence right now.
Standards bodies must play a key role; however, there is no imminent solution. No one has enough power to enforce content protection; Apple probably has the most influence currently. The lack of standards adds significant cost to content.
The goal is to make it inconvenient enough to prevent most people from abusing it while not detracting from user experience.
Content owners have a clear risk/reward: if content is too protected, they lose exposure; if it’s too loose, they suffer brand compromises.

Business Models for Mobile Video

Two models to start with: pay for content and free content supported by advertising. People subscribe to cable (first screen) and numerous Internet (second screen) offers; why not the third screen?
A key challenge is that there are many value chain players, and each must be paid, which makes content more expensive. Video content owners want their pound of flesh, and this stifles innovation. The mold must be broken.
Business models are currently channel-specific, and that’s a problem (i.e. TV, Internet and mobile). They work very differently, and this makes sharing content among channels difficult. Internet is largely free content with ad support, while TV is subscriber and ad support.
However, mobile delivery costs are going down, and this will continue and increase options in the medium term.
In 2007, mobile providers supply content via their marketing budgets; they are trying to attract new subscribers. This isn’t sustainable long-term. In addition, mobile networks can’t deliver extensive video content; they aren’t robust enough. It’s a classic case; they are trying to grow subscribers and make new infrastructure investments in alternating cycles.
Close networks (walled gardens) aren’t viable long-term.
IPTV will add significant interactivity to the first screen, which will be transformed as nodes on IP (Internet Protocol) networks as IP-enabled set-top boxes diffuse into the market.
There is a significant opportunity for carriers that can deliver content to all three screens. However, consumers will be most happy when content is simpler to access. It has to just work. The “connected home” is quite a long way from reality.
UGC thrives best when it is shared within a community. Threadless is a useful example.
WAP with short codes offers interesting possibilities.
Mobile TV is growing fast in Italy and Korea, where the infrastructure is more robust than in the U.S. However, many people in those markets are more oriented to mobiles than computers, the opposite of the U.S.
Pay for content is too expensive for mobile. Using ringtones as an example, out of every dollar sold, the content owner gets 40 cents, the carrier 30 cents. The aggregator and the delivery company must split the crumbs. It’s very difficult to make money on ringtones; some have had success with subscriptions.

Analysis and Conclusions

Mobile video is clearly an emerging market, and value chain players see as many difficulties as opportunities. Many people will try to exploit it, but to succeed, players will have to understand the delivery realities of mobile in the U.S., where it is far weaker than Europe or Asia.
Existing value chain players do face technology and business constraints, but their greatest limitation is their lack of imagination. They want to push high-production video content to mobile. They see mobile as another consumption opportunity, but they are missing the point.
UGC does have a business model. Look at Threadless: community members create designs and vote on them, and winners are honored by having their designs used on clothing. YouTube for mobile could be viable; imagine a mobile site that features “goofy commuting videos” that are ranked by other users, and winners get recognized by the community and prizes. Mobile phones increasingly have video creation and playback capabilities.
Existing value chain players don’t see UGC models because they don’t see how they can make money by reusing existing content. They are focused on themselves, not customers.
UGC might be ideal for mobile’s limited quality and infrastructure because of its low production value. However, the context would be perfect: the site asks users to create content for each other.
Video content poses significant copyright issues. This is becoming an increasing problem because the Zeitgeist is mashing things up. DJs mash up music, blogs mash up writing, digital illustrations mash up other illustrations.
“Brand compromises”: content owners need to rethink “brand experience.” Being open and embracing collaboration will trump controlled brand experience in many situations, but most marketers do not understand that.
Value chain players: look at music: it costs $4.00 to download a song from a mobile provider, and the same song costs $0.99 on iTunes. In the U.S., it is too expensive to deliver video content via the mobile infrastructure.
Content owners will eventually have to realize that they will have to collaborate with customers to have their content discovered and shared. Many will not understand this and will become irrelevant in the long-term.

9 August 2007

Advertising and Technology: Emerging Capabilities in Interactive TV, Broadband, UGM & Mobile

But Legacy Thinking Makes Agency Ecosystem Vulnerable to Disruptive Change—Who Will Be Their Southwest?

Technology is remaking the advertising business because it is beginning to enable individualized targeting via automated tools. It is not a moment too soon.

The ultimate context for this session is that technologies are driving interactivity, which is becoming the default for marketing communications. Legacy players in the marcom value chain have mixed feelings: they want to leverage their investments in legacy processes, people and relationships, and many of their clients are not pushing for interactive or its latest incarnation, digital video.

Thought leaders and visionaries are frustrated by their colleagues’ reticence because they perceive that marketers’ worst fear—irrelevance—will soon ensue unless they begin to make serious investments in digital video and Web 2.0, which highlights peer-to-peer interactivity.

When it burst into public view with the growing popularity of the Internet (“Web 1.0″), “interactivity” represented new capabilities and sensibilities. Viewers of marcom messages could react to the messages by clicking, and these clicks could be tracked very economically.

However, this was merely a brief overture to a long opera: Web 2.0 represents interactivity on steroids because consumers are originating content and constantly interacting via the proverbial “three screens” (TV, computer and mobile).

Panelists

Tim Hanlon, SVP Ventures, Denuo—Tim Hanlon is chiefly responsible for all US client activity and agency initiatives in the field of emerging media technologies, including the firm’s ground-breaking TV 2.0 Practice, centered around evolutionary television platforms such as interactive/enhanced television, on-demand video, digital video recording, interactive program guide navigation, addressable advertising, and digital broadcasting/datacasting.
Nash Parker, Director Strategic Alliances, Alcatel-Lucent—As Alcatel-Lucent Director of Strategic Alliances, Nash Parker leads the company’s North American Strategic Solutions Group in supporting the group’s IPTV and Mobile TV initiatives. In this position, Mr. Parker is engaged in strategic partner development activities, analyst relations, and also serves as Alcatel-Lucent’s primary liaison with the content and advertising community – including film, television, and gaming.
John Hoctor, VP Business Development, Navic Networks—John Hoctor has been with Navic for over five years, and he has had a key role in growing the company. Currently John sets Navic’s strategic direction and executes on a number of Navic’s strategic initiatives. He develops partnerships with programmers, distributors, and national advertisers and oversees all of Navic’s marketing activities. Through its on-demand content navigation and set-top box monitoring tools, Navic enables the next-generation services that have come to be expected by programmers and advertisers, including targeting, telescoping to VOD content, audience measurement and more.
Brian Shin, CEO VisibleMeasures—Brian is a startup veteran who has co-founded four software companies and was an early member of two other startups, Allaire Corp. and Medsite, Inc. Two of the companies he helped found, Creative Aspects and The Cambridge Intelligence Agency, were acquired for positive returns. Allaire Corp. went public in 1999 and was subsequently acquired by Macromedia for $310 million. VisibleMeasures enables self-service for ad insertion in video, which shrinks the advertising value chain. (Clients can disintermediate ad agencies by bidding, buying and inserting messages via VM’s website).
Michael Shehan, CEO Booyah Networks—Michael founded Booyah Networks in 2001 as a self-service paid search network. Under his leadership, Booyah ranked 23rd on the 2006 Inc. 500 list of fastest growing private U.S. companies; Booyah was the top advertising/marketing company on the list. The Booyah Networks portfolio also includes The Booyah Agency, a boutique-style online marketing agency that Michael opened in 2005. Booyah’s next division was SpotXchange, a solution that incorporates the company’s successful self-service paid search network into a similar platform for online video ad serving.
Moderator: Christopher Stasi, SVP Operations & Development, TVN Entertainment—Chris Stasi is in charge of all technical aspects of the company’s on-demand products and services, including day-to-day operations, engineering, platform development and content distribution throughout TVN, the largest distributor of video on demand content in the United States. He also manages the design and implementation of ADONISS, TVN’s revolutionary asset management system. Stasi’s leadership on the project led to his being named the principal inventor on eight patent applications.

Reportage and Analysis

Technologies and Networks

All flavors of TV (cable, broadcast, mobile) are becoming digital, which is transforming the first screen. It means that metadata about their content can make it discoverable like never before. It can be chunked into smaller bits, which can be shared more easily. The quality of the video is increasing. Viewers have increasing choices about how they view the content (sports viewed from different angles). At the same time, digital technologies enable content providers to see who is consuming the chucks of data, and they can target advertising much better, significantly boosting its relevance and value. However, emerging (digital) content is still in its infancy, and agencies are loath to invest in it because it does not have the established metrics by which they are currently measured and paid.

Technology is changing advertising profoundly. We increasingly have granular, real-time response data, and this is increasing the sophistication of the business. It is more data-driven; response data enables targeting and changes creative. This trend will drive an explosion of creativity, but it will be multidimensional and incorporate delivery, technology and content format as well as what is regarded at traditional “creative.” The new generation (of consumers) gets it, but too many marketers and agencies do not.
Agencies remain preoccupied with reach (the number of people who see their messages). The reach model is increasingly outmoded in the emerging environment, which is a cloud that contains myriad communications from innumerable parties (individuals). Advertising itself is democratizing: many things can affect the impact of advertising, as consumers contribute their messages and comment on everything. Consumers are increasingly involved in the communication process.
Looking at it another way, ad owners have assets (creative) that they want to “leverage” by repurposing as much as possible—with the fewest changes possible. This impulse to amortize through reusing content is an opposite force to individualized communications, as far as creative goes. Two innovative ways to do this: having coupons “follow” consumers. For example, a woman is looking for a dry cleaner on her smartphone, and she receives a coupon on the phone. The coupon is subsequently delivered to her computer via email, where she prints it out and redeems two days later. Another example is geographically- and incident-based ad insertion.
National advertisers are interested in advanced interactive advertising, but they will not buy until the ad buying process is aggregated. The advertising enabled by emerging technology is niche-y and technical.
Legacy set-top boxes represent a huge bottleneck to enabling interactivity; most of them are too limited. They need to be able to capture viewer data and share with advertisers to enable more targeting, which will drive advertising value.
Some helpful technologies for modernizing advertising would be:
- Much better metrics and information about who is consuming advertising. The Web has wrought a sea change on the business because it generates highly granular feedback quickly.
- Better video search capabilities. Metainformation is currently far too subjective (there’s a lack of standards).
- Cross-operator management systems to enable easy cross-platform ad buys. Currently local advertisers buy most interactive advertising, which differentiates cable from broadcast.
- The technology value chain is far too complex, and technologies are not integrated well. It is necessary to assimilate technologies; too many (value chain players) need to access the inventory, which drives the need for options and technology complexity.

Content and Creative

Most agencies still feel that they add the most unique value through content, their “creative.” However, panelists argued that, increasingly, the delivery was as important—or more so—than the message. Technology is enabling people to bundle content themselves, which is pressuring all content creators to unbundle content (the most common example is music: increasingly people buy songs and bundle them into playlists; the “album” is dying). Digital content enables unbundling and more interactivity. Another prescient example: advertising that enables “viewers” to drill down and find more information before returning to the “program” in which the ad spot appeared. This is also blurring brand and direct response marketing.

The choices for delivering advertising are exploding. It is increasingly possible to develop and deliver messaging on the fly (for example, ad insertion based on local conditions or response). It is possible to configure video messages dynamically. Users self-select video and SMS.
Content is continuing to fragment. There are already hundreds of high definition TV channels, and their numbers are increasing rapidly. However, the “one on one” (ad to consumer) concept is a fallacy because the infrastructure cannot deliver it without massive rebuilds, and the industry is already struggling to recoup standard definition investments. The nirvana is not practical in the near future.
Video is often the best medium to communicate the message, and agencies are experimenting, but slowly. Witness video resumes and the YouTube phenomenon.
Video and advertising are converging: many of the most effective ads are targeted and provide relevant information (not so much a mass selling message), but to make ads more effective, advertisers need to infer preference based on imperfect information. One example of convergence: consumer-generated video that shares consumers’ excitement and use of the products/services. They create excitement like ads, but they often provide entertainment value and insight into customer experience like video.
Newspapers and TV still represent the bulk of advertising volume and revenue, which is too easy to forget. It is the reality. The 30-second spot may be on the wane, but it still generates a lot of revenue today.
Brand and direct response marketing have traditionally been bought separately, but they are beginning to fuse due to interactive advertising. People want a seamless experience; for example, if they see a brand-oriented message that interests them, they often want more information on the spot (to “drill down”), and advertising needs to anticipate that. Note that providing drill-down information about the offering requires a completely different skill set than traditional creative; agencies are going to have to take wrecking balls to their silos and take a cross-boundary approach.
TV must strive to become relevant in the new environment (note panelists said “become” relevant; it is not relevant right now). For example, NBC is inserting its “NBC tones” into shows purchased on iTunes. Networks have no brand awareness with the new generation, who have largely grown up with no TV or with cable. They are experimenting with reality shows and shows in which viewers rate competitors; some examples are Top Chef and The Last Comic Standing.
Broadband video is far more granular, but broadcast TV is too general: no one knows who is watching. (In an interactive world, Nielsen’s system is increasingly unacceptable.) It is possible to poll viewers, which enables telescoping (information drill-down in which the viewer requests and views additional information before returning to the show).
It is hard to discover video, and this diminishes its network effect.
Direct response ads are a way to measure the effectiveness of interactive and video ads.

Legacy Agency Issues

Although they are service businesses, agency responses to these trends are dangerously reminiscent of the airlines in 2000 because their processes are too brittle to respond to the market. They are open to a player like Southwest Airlines, who will change the model. Panelist remarks reflected that agencies are too focused on efficiency, and they give innovation short shrift. Their ad buying and insertion processes are tuned to aggregated buys and efficiency, so they curtail serious experimentation with emerging digital media. Worse, they are alienated from the accelerating explosion of niches, which demand individualized communications. Niches mean “higher cost communications” to conventional wisdom, but business models that prove that narrow targeting actually gets much better results are only emerging. UGM (user generated media) only accelerates the trend because users are often more relevant to other users, especially in light of the vacuum that traditional marcom provides.

The status quo is biased toward the past, and risks increase with time. Only 12% of senior marketers think that Web 2.0 is important to their overall message. They are missing the whole generation: the zeitgeist is mashing up everything. Agencies are still too TV-centric. There is a huge CPG (consumer packaged goods) generation gap (and it is getting worse). This is partly reflected by the short average tenure of CMOs (chief marketing officers), which is currently 21 months. CMO churn also drives unprecedented change in agency selection. Agencies are now hired by professional procurement organizations, which have little understanding of advertising and marketing.
Many traditional marketers are having conniptions: they do not know what to do. The attitude toward emerging media is too often, “We’ll buy it when it gets big enough.” Too many people still do not appreciate digital, and they risk fading into irrelevance. Agencies cannot buy digital; they have to do it. (In the medium-long term) innovators will be rewarded and laggards damaged. Emerging media vendors struggle with how limited agencies and their clients are.
MBNA’s strategy and operations are illustrative of where most agencies should go in the short to medium term: MBNA specializes in creating credit cards for affinity groups, which desire highly individualized card terms and conditions for their members. MBNA customizes the front end of its offerings and aggregates/leverages its back office to create scale for its clients. Agencies should look to follow a similar strategy.
Nielsen (and IRI) measurement systems do not address HD-TV because adoption is yet insufficient. But HD-TV is where extensive innovation will happen.
Advertising is still hung up on broad categories, like “males 18-49.” This has very limited relevance; consumers want to interact with more relevant (i.e. targeted) information.
SEO/SEM and search represent a precursor to thinking beyond marketing push strategies. Search enables advertisers to pull people with highly individualized to them.

8 August 2007

Cisco CEO Shares Impressive M&A Collaboration Story and Video-Centric Network Vision

Pervasive Consumer Connectivity Vision Upstaged by Enterprise Web 2.0 Collaboration

Cisco’s John Chambers is a master technology marketer who quickens your pulse with technology fire and brimstone. However, as the long-time CEO of Cisco, which epitomized the rise of the (Silicon) Valley when it was briefly the most valuable company in the U.S. in 2000, he has seen the company through the tech bust and proven that he has substance and staying power. Although a hypemeister extraordinaire, he may have crystallized the promise of the Enterprise Web 2.0 better than any other speaker at Digital Hollywood Chicago.

Chambers’ demos of whiz-bang consumer entertainment scenarios were intriguing but far less interesting to an enterprise-focused audience than his accounts of how Cisco had drastically increased its already-leading efficiency in mergers and acquisitions by collaborating with Web 2.0 tools like wikis. We anticipate that his consumer-focused vision will be consummated far in the future, but his message about enterprise collaboration is achievable this year—for those who are looking for it.

Chambers described an emerging future of networks and communication that revolved around pervasive video, which will drive customer experience, collaboration and value. The world is entering a fundamentally new era in which communication is morphing from one-to-many to many-to-many. This will drive a new degree of collaboration and innovation, and it will change business models. Telecoms are not “coming back,” and there will be significant consolidation. Video will rise to prominence and will be created and experienced on any machine or device.

Network-Focused Vision and Business Models

Web 2.0 is not new; it is like the Internet was in the 1990s. Telecom is old; the new focus must be Internet (digital) video, which will drive business process change. Video, voice, text, telepresence, blogging all drive more broadband; we have to redefine broadband; we must remove barriers. We estimate that this message is primarily to his clients, telecoms and global enterprises. The latest Cisco routers aim to intelligently deliver the right content to the right (user-operated) device, according to individual preferences, automatically.
In the 1990s, we put orders online and outsourced manufacturing. We gave customers input into product development. In 2006, value and product development have slowed (we’ve pateaued). We have to take it to the next level.
At Cisco, collaboration is producing incredible value, and we’re able to work must faster. For example, we acquired Scientific-Atlantic in 2005, and the transaction took 45 days to close. In February 2007, we closed the Webex acquisition in 8 days. We do most of the work on the Cisco wiki, and employees, partners and customers have appropriate access.
Another proof point: Cisco’s innovation pipeline model (circa 2000) took thousands of innovation ideas and vetted the total down to about 250. We then eliminated all but three, and we acted on those. This year, through our Web 2.0 technology-enabled collaboration, we are doing 18 innovation projects. We have checked our command and control methods at the door. It increases scale and speed, and we feel that it will be sustainable. We are changing our business models to leverage these new capabilities.
Cisco’s vision is that the network is becoming intelligent—from technology and human perspectives. Web 2.0 collaboration is making the Web intelligent. When you add unified communications (integrated video, text, audio, graphic), telepresence and open architectures, you realize that resources are available anytime, anywhere anyhow, and the network can infer your preferences based on where you are and what you’re doing and history.
From a technology perspective, numerous “resources” that are contained by applications will leach into the network. Examples are security and quality of service.
From an enterprise operations perspective, we can tap global services and virtual relationships worldwide (as new resources come on line in India, China and elsewhere).
We can get it right by listening to customers. Virtualization is key on the business side; everything has to be online.
Voice and video are the future, not text. (Interaction with devices) must be simple; people must get what they want in one click. Each subsequent required click loses customers.
Proprietary technology and solutions are over. Everything must be open, must be architected like the human body: get anything anywhere, anytime you want.
For example, we will change the experience within the stadium. HDTV offers the ability to see a game from any angle; currently you can choose from 30 angles (and they are not mutually exclusive). People will pay a premium for this.
(demo with Hotel California) Listening in your car. You turn off your car and it resumes playing on your smartphone. Once you are in your house, the handheld hands off the song to your home stereo, but it fires up a music video. H-D pictures will drive additional demand.
(demo with fantasy baseball) In fantasy baseball, you can pick plays (and presumably knit them together into a game; the plays are the building blocks to the game). You can purchase tickets on the device and receive the receipt, which you show to the ticket taker to gain admittance at the stadium.
Three screens: content will be (created and) viewable on any device; we will have anytime calendars, and open architecture, which will provide additional revenue. Consumers will drive change. Everyone and everything will be connected.
Telepresence (and video) will drive demand for our business. Video routers will be a huge growth area.
Japan is experiencing 3-500% annual network growth.
We will change the definition of broadband and set-top boxes (which are dumb catchers of data today; they will become far more interactive). People will pay for experience and guaranteed quality of service.

Analysis and Conclusions

Chambers’ speech had a technology context, but the most important message was that Cisco was demonstrably accelerating innovation by adopting a collaborative model. Closing corporate transactions like acquisitions far more quickly is proof of an enterprise-scale reduction of transaction costs. That enables Cisco to undertake more transactions and to therefore be more responsive and adaptive. Growing their innovation pipeline six-fold is another huge advantage.
Few people in the (communications) business would dispute the content of Chambers’ vision, but the big question is timing. It may take a couple of generations to be comfortable with being online and reachable from anywhere, anytime. It’s too Big Brotherish. But privacy is already shifting significantly, and this shift will continue. This uneven comfort level with the loss of privacy will serve to dampen adoption.
Network operators (Cisco’s clients) like video because it is the most resource-intensive content we have and therefore drives utilization of network resources the most. Let’s not forget that Cisco is hawking video routers. Abstracting up a level, however, video is scalable, rich communication, and it is a closer facsimile of face-to-face communication than print. Humans’ first scalable communication was pictures, then writing. Of course, video incorporates audio and therefore stimulates vision and hearing. It does not yet incorporate touch, smell or taste.
The network is becoming more intelligent, and this is a natural progression of the ongoing revolution in computing. Computers used to be islands of automation. Then they were connected, and connections served to make their computational power available to more people. Distributed computing and pervasive networks have diminished the relative importance of “computers” because software and hardware resources and services exist within the network, and abstracting out services makes sense in many situations.
For most of humans’ existence, we have not had writing, and perhaps writing as a means of communication will diminish. However, for most cultures, writing is a key developmental activity that helps to develop analytical thinking. If it diminishes, how will its disappearance affect humankind’s analytical abilities?

8 August 2007

Personalized Mobile Experience & Social Networking: Messaging, Music & Video Trends

Consumer Mistrust Will Slow the Reality of Mobile Personalization Vision

Panelists at Digital Hollywood Chicago constantly spoke about mobile as the most “personal” of the three screens—for several reasons. The phone number is individual, so all the device’s activity can be attributed to a person, whose preferences and needs can be deduced from the activity. In addition, the mobile (phone) accompanies the individual almost everywhere, so it offers a wide scope of visibility into his/her activities, location and interactions.

The mobile device will soon lose the “phone” moniker because the device morphing into a portable digital hub. “Smartphones” have seen much slower adoption than hoped, but functionality, power and capability are steadily increasing while prices fall. Apple’s iPhone was constantly mentioned as the promising breakthrough device.

Mobile devices will change relationships far more than the first screen (TV) or the second screen (computer) because they will touch everyone, their capabilities will rival laptops’ within 2-3 years, and they are inherently social. Social networking via video sharing, Web browsing, email, SMS, IM, music sharing and voice calling is on tap in the latest smartphones. The problem is, their features are so difficult to access that 90% of them are not used. The iPhone, leveraging Apple’s legendary design and software prowess, may blaze the trail.

There are myriad server-side offerings that enable people to connect and communicate with their mobiles. Think of Amazon.com’s collaborative filtering (based on what I buy, Amazon can suggest things to me based on what others buy) as well as deep, real-time data mining and social network software that assist people across all modes of communication. Moreover, mobile increases the power of the collaborative filtering idea by triangulating IP (Internet protocol), geography, time (when calls are placed, Web sites browsed, financial transactions executed, coupons redeemed) to provide the ultimate insight into what consumers are doing (and therefore what they may want to do). In theory, providers can gather and use this information to help individuals connect with each other, and they can use it to help advertisers to understand consumers and ostensibly to serve them relevant and helpful messages.

Panelists

Collin Bruce, Director of Marketing, Hitachi Embedded Business Group—director of marketing with the Embedded Business Group of Hitachi America Ltd., leads the company’s marketing efforts for the Hitachi Entier embedded database product in North America.
Scott Driggers, CEO and co-founder, Gemini Mobile—With deep connections into the global wireless industry, Scott Driggers excels at building and growing international teams. Driggers has been instrumental in guiding the development of Gemini Mobile’s Japan, U.S. and China operations and customer base. Prior to Gemini, Driggers was based in Japan for Vodafone AirTouch, where he held various line management positions in marketing, planning, strategy, and business development.
Dharma Kuthanur, VP Strategic Accounts, July Systems—Dharma manages strategic relationships for July Systems, a provider of integrated solutions for mobile content retailing. He has over 16 years of experience in high technology, having held senior positions in marketing, business development, software development and management consulting with Lucent Technologies and Veraz Networks, among others.
Bill Godwin, Vice President, Business Development Strategy, Zannel—Bill Godwin is responsible for creating and driving Zannel’s business development strategy and establishing new partnerships with content companies and network operators. A seasoned entertainment industry executive, Godwin comes to Zannel from Warner Bros., where he managed partnerships and product launches with Verizon, Qualcomm, Sprint, Cingular, T-Mobile, Alltel, Amp’d and Rogers, among others.
Joe Sipher, Co-Founder and Chief Product and Marketing Officer, Pinger—Sipher co-founded Pinger in 2005 with the goal of creating an innovative service for voice. Before Pinger, Joe and Greg started Virgin Electronics, the consumer electronics arm of Richard Branson’s Virgin Group where Joe served as SVP Marketing and Development. Joe previously served as the worldwide vice president of marketing at Handspring and before that was Palm’s first and only Palm Fellow.
Stephen Venute, Vice President, Strategic Alliances, MyStrands—Venute spent 8 years at AOL, where he was responsible for directing complex global marketing alliances with some of AOL’s largest and most strategic partnerships. He helped pioneer numerous successful online ROI initiatives and launched several Internet-first programs. Prior to joining AOL, Stephen spent several years with McCann-Erickson, based in Prague, the Czech Republic, where he managed a portfolio multinational and local advertising partnerships.
Moderator: Ranjan Mishra, Senior Partner, Oliver Wyman—Primarily focusing on wireless and convergence sectors, Mishra has worked extensively with senior telecom industry executives. He has established wireless carriers and new entrants such as MVNOs and ASPs. He is known for pioneering work in market-level strategy, reinventing business design for wireless players (including MVNO strategy development), and helping clients achieve higher productivity from their capital assets.

“Personal Mobile Experience” Adoption Factors

Personalization will drive value in every aspect of the mobile experience: content, features, and advertising. Personalization is organic, as it changes over time.
Mobile will morph into a kind of “Second Life” community worlds that cross boundaries with the “first life” world. People will have avatars, personalized views, built in social players and alerts for everything.
Sports will play a prominent role in connecting people due to the importance of time-based events and collective experience as well as the inherent focus on information.
Mobile is analogous to on-the-go snacking and communicating, not full meals. Experience will be governed by short attention spans.
Services will become increasingly sophisticated; they will consider activity, geographical space, time of day, response and myriad other information-based details that algorithms will hammer into preferences. They will compare these “profiles” and draw collective conclusions (akin to collaborative filtering).
“Generation Y” (born 1985-2001) prizes immediate availability and real-time response, and they often have numerous threads going—across several modes of communication. This trend will impact demand for mobile.
Carriers that invest time and resources into gathering and synthesizing the data will create significant opportunities for themselves.
Mobile devices will go through growing pains. As devices gain in capabilities, users will increasingly download/install applications to enable further customization (much as people “customize” their PCs today by installing additional software). However, customization will also bring viruses and other nuisances. Having viruses disable mobile phones will pose a significant problem for mainstream consumers, who do not relish playing technologist with their phones. This will significantly dampen the adoption of mobile software.
Mobile social networking will focus on extending existing capabilities. LBS (location-based services) will increasingly enable people to find each other based on geography. Generation Y watches TV on mobile phones, and interacting with shows will be popular with them.
Mobile operators, having to justify (and leverage) their massive infrastructure investments, stifle innovation. They are focused on amortizing infrastructure, not where the customer is going. This is a reality, especially in the U.S., where device makers do not reach customers directly, but through carriers, who subsidize devices and lock in customers.
Mobile advertising will play an important roll in bringing new elements to the mobile experience.

Analysis and Conclusions

Personalization will happen far more slowly than anyone hopes due to customers’ lack of trust in providers and numerous systemic limitations of value chain players—even though personalization can be a win-win for customers and providers. The transformation of mobile will unfold slowly.
Advertisers have engendered a profound mistrust in consumers, and many panelists mentioned customers’ intolerance of ads on their mobile phones.
The word “commercial” (“advert” in the UK, “la pub” in France) elicits a distasteful reaction in customers because many are inane and irrelevant.
Adoption patterns differ widely for various niches of customer groups, but most advertisers are accustomed to large segments. Their business models are predicated on reaching big numbers. This doesn’t map to the emerging reality.
Sellers will have to earn trust of buyers (customers) so that they give up privacy to enable more personalization. This will be a slow process for many.
Relevance requires the seller to have some true insight into the individual with whom they are trying to communicate. Mobile offers mechanical (read “economical”) data capture, digital analysis and conclusion-drawing via software.
To reflect on the opportunity for carriers, think about how Amazon.com delivers its value proposition. In effect, it offers elements of social networking via reviews and profiles and mechanical personalization via collaborative filtering. Mobile will offer a far richer data set from which to deduce customers’ desires.
To work economically for carriers or other players, personalization will be mechanized. Providers will draw conclusions from digital communications and mash them up into preferences via algorithms. However, from a customer perspective, the bar will keep getting higher, and providers will have to fine-tune a bevy of inputs. That will be the art. As Stephen Venute pointed out, people and their preferences are constantly changing. It will probably be useful to consider usage profiles as life cycles.

7 August 2007

Reinventing Advertising: Broadcast vs. the New Platforms: VOD, PVR, Broadband & Mobile

The Challenge of Consumer/Advertising Misalignment: How to Finance Free Content

At Digital Hollywood Chicago, few disputed that broadcast TV and mass advertising's golden age had passed and that several technologies and cultural shifts were pressuring senior marketers to change. To fully appreciate this challenge, one has to consider the three screens through which most consumers experience “content. ” What consumers do with the changing capabilities of each screen changes their expectations and behaviors about their experience with all three screens, dramatically increasing opportunities and threats. Interactivity is increasingly available for TV (video). Convergence among the three screens is another important thread. Younger generations of consumers have little tolerance for the concept of mass advertising.

The most rapacious symptom of the weakness of the mass broadcast advertising model is the widespread adoption of the PVR (personal video recorder), which enables (home) viewers to record TV programs—and to skip advertisements. A couple of eye-opening facts: 1) on average, TV programming contains 8.5 minutes of advertisements during each 30 minute segment of programming and 2) 70% of adverts are fast-forwarded through or eliminated. And these numbers pertain to (mostly) non-digital (analog) content; digital, with its omnipresent metadata, will undoubtedly offer more options for avoiding advertising. The model is clearly broken.

The alternative is far from clear. In much of the world, “free” content is made possible by commercial advertising, so if that model is to survive, a solution must be found. Moreover, mobile video is in its infancy, and advertising on “the Internet”—the computer being “second screen”—is still immature. The “first screen” is ailing.

The emergence of digital content is transformational due to metadata and its myriad uses. For example, data can be “aware” of how people are interacting with it, and it can inform content owners/distributors, with viewer consent. Data can be chunked and mashed up more easily (think of songs in a playlist, or chapters on a DVD). Data—and its components—are far more searchable (find chapters of DVDs, not only the whole unit). Of particular interest to advertisers is the ability to be aware of what content (“data”) people are consuming, and when. They yearn to deliver targeted advertising.

Panelists

Mark Renshaw, SVP One-to-One Marketing Solutions, Arc Worldwide—Mark transferred in May 2006 to Arc Worldwide’s Chicago office from Singapore, where he directed Arc’s digital marketing efforts across Asia-Pacific. As SVP of one-to-one marketing solutions in the US, he will oversee teams in Chicago, New York and San Francisco as they respond to clients’ increasing needs for digital marketing solutions.
Ed Forman, EVP ICTV—Ed rejoined ICTV in 2006 with the goal of combining the choice and control of the Internet with the responsiveness and video quality of television. Ed returned to the company after co-founding and serving as CEO of Switched Media, a developer of solutions for mass customization of live video streams that merged with ICTV.
Juli Black, Central Region Sales, Tivo—Juli has been on the cutting edge of technology, marketing and advertising for over a decade. In the early to mid 1990s, GPS was an emerging technology in the civilian marketplace, and Juli managed marketing and sales efforts in several wireless and GPS ventures.
Tom Rosenstein, VP Business Development, SeaChange International—SeaChange provides digital video systems that are changing television. Its powerful server and software systems enable television operators to provide new on-demand services and to gain greater efficiencies in advertising and content delivery. With its Emmy-winning MediaCluster technology, SeaChange has thousands of systems that are helping broadband, broadcast and satellite television companies to streamline operations, expand services and increase revenues.
Brian August, SVP Corporate Development, TitanTV—Brian August serves as Senior Vice President of Business Affairs and General Counsel for Titan TV. Most recently, August served as a digital media attorney in NBC Universal’s corporate transactions group. Prior to that, he was Senior Vice President for Legal Affairs and Corporate Secretary at Send Word Now. August is responsible for building the relationships and brokering the deals with major broadcast groups and television affiliates needed to bring TitanTV Media's vision for a web-based TV network to life.
Jeffrey A. Dachis, CEO & Senior Partner at Bond Art and Science—Jeff is the CEO and a Senior Partner at Bond Art and Science, an interaction design firm that specializes in cross platform information systems. Bond's strategy, design and technology capabilities focus on simplifying complex interactions. Bond was founded in 2006 by five veterans of the digital interactive industry. Bond is made up of colleagues from Razorfish, with deep expertise in web strategy, technology, interaction design, visual design, and systems development.
Moderator: Terry S. Bienstock, CEO, MobilActive—former EVP & General Counsel, Comcast Cable: Terry Bienstock is currently CEO of World Extend, LLC. a New Jersey-based distributor of managed application publishing and secure remote access solutions for business and consumer markets. WorldExtend has revolutionary products to deliver to a business a low cost software-based VPN, and has developed a virtual computer on a TV set to bridge the Digital Divide. He also manages and advises other ventures relating to new media platforms, such as Video-on-Demand, digital video recorders, broadband and mobile services.

Symptoms of Advertising's Malaise

The majority of ads are being skipped, which undermines advertising. The advertising ecosystem monetizes the universe of free content. It is a tectonic shift.
Advertisers need to “buy the individual,” not the station. They have depended on network stations to “know” their geographical audiences and determine advertising mix, but this does not work as well as it once did (the mass market is splintering).
Advertisers have been experimenting with making shorter ads that are less likely to be skipped, and placing the ads in different places. Cox is offering VOD (video on demand) after ads have been viewed.
Agencies have experimented with one second and five second advertisements.
Will brands begin to create content instead of advertisements? Thus far, the single-sponsor model has been a failure.
VOD is four times the normal CPM in hyperlocal markets (presumably because the viewer must “order” it, thereby issuing a trackable action; in broadcast, people accept programming, but operators or advertisers do not know if they are really watching).
Advertisers are also experimenting with paying people to watch adverts.
Everyone is somewhere all the time; location is a powerful context for advertising, and it is trackable. The geographical dimension can increase relevance of advertising, but people must give permission to be tracked.
Direct response is a powerful way to understand consumers and increase relevance.

Infrastructure Constraints

The operators' infrastructure significantly limits what advertisers can do. It is a “dumb pipe” that is largely unable to capture interaction; it delivers content. Most old STBs (set-top boxes) are likewise unable to capture what content is being watched. New STBs have greater capabilities.
STB manufacturers want to retain the walled garden. Many STBs do not interface easily with home networks. Manufacturers want to understand what viewers are doing because advertisers pay well for this information. Viewers, however, have other ideas. They want to control their content, move it around and view it when and how they want.
The television advertising-content-distribution ecosystem prevents innovation because it is so inflexible and constrained. Content is immobile due to licensing restrictions (rights to music, scripts, video, etc. are all separate). Television produces far more content than any other source, yet very little is reused (other than reruns).
Operators and advertisers are constrained by their antiquated billing processes. They are designed to bill for subscription services. On demand will require many more granular billing capabilities.

Disruptive Developments

Tivo revolutionized the first screen by enabling consumers to record programs, delete adverts and have much more control over viewing. It also was one of the first DVRs to capture viewing data. Tivo is paid extra when viewers record advertisements.
TV, with Tivo or not, remains entertainment-focused and engenders passive behavior. It is difficult to encourage interactivity with television viewers. This will be difficult to change.
However, some (younger) viewers multitask, searching for information related to programs, IMing their friends or gaming. This can cloud the picture for advertisers, but it offers new opportunities, too. The picture is becoming more complex.
User-generated advertisements are a potential disruptive force. Major advertisers are experimenting with letting consumers mash up segments of ad content, and many are holding advertising contests. Superbowl 2007 featured two consumer-created ads.
Will television advertising adopt a Google model (in which consumers create and place ads and are paid when other consumers buy something off one of their ads)?
The impact that mobile video and advertising will have on the industry in general is uncertain. It will add to advertisers' insight into what advertisements are effective and what content people are watching, when and how. Mobile is individual, and preferences and movement can be tracked on an individual level.
The IP (Internet Protocol) world will disrupt everything because it will enable extensive calls to action and interactivity. More interactivity will enable advertisers to be more relevant.
SMS shortcodes (on signage or print adverts; when sent via SMS they generate a coupon or other offer) have potential.
Mobile will see “long form” advertising as soon as network speeds increase. It's already there in Korea and Japan.

Analysis and Conclusions

One of the most intractable problems facing advertisers was not mentioned, probably because advertising executives do not know how to deal with it: consumers' profound mistrust of advertisers. Viewers loathe advertisements, and many find them demeaning. However, a root cause is that advertisements are mass messages, and they are often designed to appeal to the lowest common denominator. If advertisers had more information about individuals' interests, they could theoretically show more relevant messages. Before they can track viewers' habits, however, they must ask permission, and mistrust will prove to be a formidable barrier to overcome.
Another challenge: every element of the advertising business is predicated on large numbers, and viewership is splintering, which is exacerbating the misalignment of advertisers and viewers. Technology enables new ad insertion techniques, but advertisers must think beyond large numbers and retool its buying processes to enable targeted niche buys. This will be extremely difficult. Clients will have to be convinced first.
Panelists' angst at the inflexibility of the television content ecosystem was palpable. They are frustrated because technology is enabling new possibilities, and viewers' expectations are changing, but they are in multiple straight jackets: legal, infrastructure cost and uncertainty. They agreed with GHCJ's suggestion that their inflexibility was analogous to the airlines'. What will prove to be their Southwest Airlines?
However, what was most interesting was what was not discussed: how to create advertising that would make people want to watch it. This idea is far more transformational than trying to target the same inventory of commercials more sharply. Advertisers have failed to create advertising that people want to watch. If 70% of commercials are rejected, one can assume that the remaining 30% are not eagerly experienced. This signifies a severe misalignment problem. It is the root cause.
Advertisers are receiving less return from their investments; the only reason they don't reduce investments is that there are few alternatives.
No one mentioned product placement as an alternative to “product/brand advertising.”
When people execute purchases from the first and second screens, they provide trackable transactions. The first screen is trackable to the family but not the individual. The second screen can be more specific because computers are IP devices and they are shared less often than TVs, but the third screen (mobile) is most specific since most people do not share mobile devices.

7 August 2007

Mobile Video & TV: Content, Advertising and Technology Strategies

Mobile Video: A Perfect Storm for User-Generated Content?

At Digital Hollywood Chicago, mobile was constantly heralded as the emerging “third screen” because it would enable content consumption regardless of time or place, and most speakers posited that video would grow significantly as a portion of all content. However, there is little video content available for mobile viewing, so why should consumers get excited about it? Will mobile shine as the most personal view into the consumer, or will it turn out to be the third wheel?

All mobile value chain players are frenetically trying to build a new digital world around the mobile device, and this world will be comprised of the familiar triad: devices, networks and content, much of which will be video. Currently, video is the highest value content medium. This session examined the current stage of development to technology and business models.

Internet pioneers who remember the thrill of squealing modems connecting in the early days have a useful metaphor with which to regard video on mobile. We are very much in the early days: networks in most geos are inconsistent, and their ability to deliver high quality video is spotty. On the devices front, screens are growing, but battery life is a difficult problem to overcome, especially where video is concerned, and device capabilities often depend on network operators’ dictates.

In our opinion, the mobile entertainment experience is unique because the viewer’s attention span is subject to interruption—by definition—so the most relevant content needs to be enjoyable with interruptions. Moreover, device and network limitations change expectations about “quality.” Can user-generated content fill part of the content void? Think about on-site customer reviews of stores, hotels and restaurants, commuting snafus and airport horror stories. For certain mobile entertainment, context may be more important than “quality.”

Panelists

Peter Linder, Director End-to-End Network Solutions, Ericsson AB—Mr. Linder’s role covers Broadband Access, IP Softswitching for Telephony and Multimedia applications as well as the installed base of AXE. Prior to his current position he was Technical Director for Broadband access, when Ericsson re-positioned towards Public Ethernet and introduced Ethernet DSL access, the most powerful IPDSLAM in the market to date.
Roger Wood, SVP & GM Americas, Amobee Media Systems—Roger Wood is responsible for Amobee’s dealings with wireless companies, mobile entertainment publishers and advertisers in the Americas. Prior, he served as General Manager of the international business for the consortium of start-up mobile operators which became T-Mobile USA.
A. Pierre Yurow, Director Business Development, Bling Mobile—Pierre has spent the last ten years initiating and maintaining agreements with mobile carriers, MVNO’s, content providers, ODM’s; system integrators and enterprise partners
worldwide and worked previously for Cellfire, Proteus, Wcities and Cellular One (now AT&T).
Nicholas Reichenbach, VP Bplay—Nicholas Reichenbach has over ten years of experience in the music, media, technology, games and entertainment industries. He has successfully brokered international partnerships with companies such as MTV, Universal Music, Sony/BMG, THQ wireless, Hands On Mobile (Mforma), Glu Mobile and Nokia through various projects.
James Bruce, Mobile Products North America, ARM Semiconductor—James Bruce is ARM’s North American segment manager for mobile products and has 10 years marketing and business development experience in mobile and consumer electronics technologies, both from the device and the network perspective. James has extensive experience dealing with handset manufacturers in Asia and Mobile Operators both in the US and Europe.
Brett Azuma, Head of Ovum North America, SVP of Ovum RHK—James Bruce is the Head of Ovum in North America. In this role, he is responsible for Ovum’s business in North America including Advisory Services and Sales. Brett has 20 years of experience in marketing, engineering, sales and operations.
DeWayne Nelon, CEO Ortiva Wireless—With more than twenty years of telecommunications industry experience, Nelon is a recognized expert in the delivery of mobile video over highly variable wireless networks.
Moderator: Antonio Atwater, President SN Holdings—SN Holdings was originally called SourceNet which was a startup ISP launched in 1995. SourceNet later became a CLEC, developed a unique voice, data and video services offering and IPTV middleware, converged over DSL, that was later spun off and is now known as Myrio Corporation.

Key Video-on-Mobile Trends

The video experience on the mobile device must be constant and consistent; the viewer will not endure stops, stalls or rebuffering. This requirement is a challenge for most network operators, who still struggle with dropped voice calls in most geos. Video is that much more demanding.
Content owners want to look at the third screen as another outlet for their content (most of which has not been created for mobile). Reformatting content for the small screen can destroy most of the economic incentive to reuse content; however, companies such as Ortiva are fielding tools to automate that process. For example, their algorithms edit according to human viewing behavior, focusing on faces rather than ancillary objects.
In the U.S. and select other developed countries, mobile devices depend on the second screen (computer) to manage content, but as networks’ speed increases, the link between mobile and computer will be broken. Within two years, network speeds and mobile devices’ graphics and processors will put mobile device performance on par with computers.

Key Mobile Advertising Trends

Advertising will support content in some situations, but a prolonged experimental period will ensue before advertisers get it right. In Norway, initial studies indicate that consumers actually like ads, and viewership increased (they must have better adverts than the rest of us ,^).
Emerging solutions will make adverts more relevant so that they add value in themselves. Software can track consumption and location, and compare these actions against sophisticated databases. Some clickthroughs are 30%.
Other advances are emerging in advertising insertion; in the future, software will detect the device and send the right version of the content, with the appropriate adverts.
There is a shift away from CPM (cost per thousand views) measurement and pricing—toward CPA (cost per acquisition) because mobile is often closer to the sale. Advertisers are even starting to do revenue sharing deals.
Despite these developments, consumers often flatly reject advertising, especially younger customers who have limited/no experience with TV. We are in the last generation that will tolerate adverts. Note that this demographic tests as having the highest propensity to watch mobile video.
Four- and five-year-olds expect free content, but content owners will require payment somehow. Youth will drive mobile video. This generation is constantly connected, and the multifunctional mobile device will enable them to remain connected everywhere.
Advertisers want banner advertising.

Business Model Trends

The subscription model is a possible alternative to advertising.
Currently, carriers subsidize content to change consumers’ habits and increase their need for bandwidth, but they will not be willing to do that forever.
It will not be easy to convince consumers to accept geographic tracking. All mobile devices are trackable. Advertisers would love it. One possible solution is to track people to glean their responses and activities while abstracting the data so that it is not attached to the person. This approach is employed by many websites now.
Instead of channels (by which we distribute content), we should focus on the individual (and let him/her pull content from the carrier or third party).
As content owners develop sophisticated tools to automatically format content appropriately, we will have content that is not created for any particular device.
The small screen captures 100% of the viewer’s attention.
Disruption in adjacent entertainment areas suggests the risks of complacency: Tower Records and Blockbuster. Broadcast TV may suffer a similar plight.

Analysis and Conclusions

Video on mobile is an emerging medium, and no one knows how it will play out, and the transformation of mobile will unfold slowly. Very little content exists, so consumers have little choice. Focus groups may indicate that people will not tolerate advertising to receive free video, but in fact, there is little content available. Only when consumers are faced with desirable content and the concrete choice of either monthly charges or advertising to pay for it will we know their real feelings.
The mobile experience is unlike any other “content consuming” experience because people are moving through space and interacting with the world. The attention span is different; the small screen captivates because people entertain themselves during windows of “dead time” (waiting in line, etc.), but it is fleeting, dependent on the conditions of alternative, real world that surround the customer. For customers in this situation, having smaller chunks of content will probably provide better experience.
To encourage adoption of mobile video, device makers, carriers and content providers have to focus on the big problems, the customer experience. It has to be easy and seamless. The iPhone has promise for breaking through. Widespread adoption will occur when the customer does not have to play technologist to make things work.
Buying video should be easy, especially since consumers are by definition on the go when they use their mobiles as entertainment devices. It will often be an impulse buy.
Billing systems are out of alignment with these trends. Carriers’ billing systems are a gold mine in Europe, where people buy a wide range of products and services through them. Enabling consumers to have advertising for one type of content and pay-per-content for another would add significant value. This audience expects choice.
Business models are uncertain; consumers are not accustomed to seeing ads on their mobiles, where many customers still pay by the byte for content. It is uncertain under what conditions consumers will accept advertising to enable “free” video.
The killer app here may be consumer-generated media, as virtually all mobiles now have video cameras, and the YouTube phenomenon has millions making and sharing video.
With a little imagination, we can see that consumer-generated video can add richness to customer ratings of retailers. E-Commerce mavens live and die by their 1-5 star rating. Now, Google maps is serving as a platform for numerous brands of customer reviews of retailers, professional services providers and any seller of goods and services. These reviews are currently mostly text, but pictures and video can turn any customer into a newscaster. Google is the ultimate intermediary that enables other customers to find the store and the reviews.

6 August 2007

User-Generated Media, Social Networks and Traditional Media

Now Everyone Is a Producer—How Will User-Generated Content Affect Traditional Media?

User-generated media (UGM) represents a poignant dichotomy within the context of Digital Hollywood Chicago: panelists and speakers represented a full spectrum of players that provide the capability for people to communicate, work and entertain themselves, but they have in common that they represent business interests. These players are in the business of commercializing communication. Consumers (aka “users,” “people”) represent personal interests: they communicate because they want to; they have little commercial interest in most of their communication.

Panelists grappled with this reality but did not address it directly. They explored business models for UGM—and mostly came up empty. The problem that UGM poses to providers is two-fold: UGM costs providers money in terms of bandwidth and other resources. It also carries a considerable opportunity cost, which is hard to measure but palpable: it crowds out commercial content by occupying customers in two ways: creating UGM and experiencing others’ UGM.

UGM is also difficult to compete against because its producers play by much different rules: they usually produce for free, while commercial producers have high costs. UGM producers look at situations in different ways: since their goal is to communicate and gain attention, they have fewer constraints than commercial players, who strive to make a profit True, UGM producers have fewer resources and skills, so they lose in almost any bake-off with commercial producers. Except relevance, credibility and trust.

Panelists

Venu Vasudevan, Ph.D., Director, Mobile Platforms, Applications Research Center, Motorola Labs—Venu Vasudevan oversees Mobile Platforms research at Motorola Labs developing next generation platforms and services for Motorola’s vision of Seamless Mobility.
Kristin L. Holland, Partner, Katten Muchin Rosenman—Kristin L. Holland helps clients resolve business disputes. She maintains a diverse civil trial practice and has significant experience with intellectual property, fiduciary duty and real estate claims.
Mark Renshaw, SVP One-to-One Marketing Solutions, Arc Worldwide—Mark transferred in May 2006 to Arc Worldwide’s Chicago office from Singapore, where he directed Arc’s digital marketing efforts across Asia-Pacific. As SVP of one-to-one marketing solutions in the US, he will oversee teams in Chicago, New York and San Francisco as they respond to clients’ increasing needs for digital marketing solutions.
Terry S. Bienstock, CEO, MobilActive—former EVP & General Counsel, Comcast Cable: Terry Bienstock is currently CEO of World Extend, LLC. a New Jersey-based distributor of managed application publishing and secure remote access solutions for business and consumer markets. WorldExtend has revolutionary products to deliver to a business a low cost software-based VPN, and has developed a virtual computer on a TV set to bridge the Digital Divide. He also manages and advises other ventures relating to new media platforms, such as Video-on-Demand, digital video recorders, broadband and mobile ser vices..
John Furrier, CEO PodTech.Network—PodTech is the leading online video network featuring original technology and digital entertainment programming. PodTech’s media platform allows professional content producers to deliver their content to millions of people who can easily find, share, and interact with it.
Moderator: Scott Cohen, Partner, Red Tie Media (VideoADGames)—Cohen rejoined Red Tie Media as a full-time partner and consultant to interactive businesses in May 2006. In addition, he presently serves on the Board of Directors and/or Board of Advisors for several Internet and technology companies, after serving as President of Game Trust, Inc. from 2004-2006.

General Observations

The Web is an open platform, while TV is closed.
Procter and Gamble offered consumers to be part of an online community, and five percent of customers provided content.
Operators and providers have viewer information; they know what you’re watching, while Google is pushing the envelope with satellite. Influence is being redistributed. Look at Al Jazeera.
Privacy is always an issue: data drives experience, but operators/carriers and advertisers must ask permission to gather personal data in order to suggest content and target advertising.
Facebook integrates on- and off-line; MySpace doesn’t; they are both havens of UGM.
Narrowcasting is critical to responding to niches.

User-distributed Content

The litigation between YouTube and Viacom will have major repercussions for how content is used (YouTube users record content and post on YouTube for others to view without paying).
Content owners have lost control over distribution. Films, for example, appear on the Internet before their premiers. the Internet is unforgiving; one copy out there gets replicated innumerable times.
UGM has seen some recent successes like Fatrant and Lazy Sunday; however, when users reuse copyrighted content, they are at risk of being sued.
Realistically, content owners are not going to sue individuals, except under unusual circumstances because they could face extensive negative publicity.
Content owners are very leery of VOD (video on demand). They don’t want to be perceived as losing control of content.
All content owners want to control their content. There are two key aspects of control: what is published and how it is used and manipulated. Watermarking can be an effective tool.

User-created Content

Brands are losing control over their content and brands, and agencies need to think beyond old assumptions to advise clients appropriately. Coca-Cola came close to issuing a cease and desist to the men that did the Diet Coke-Mentos videos on YouTube.
Content owners need to be paid. Is the old model dead?
New mobile devices have more features that enable self-expression.
User-generated advertising? People are creating their own advertisements for their favorite products and companies for their MySpace pages. These can conceivably gain widespread attention.
YouTube is like a big nightclub; you can find anything there. The scarcity is attention. It’s the endorsement model that creates popularity.
People consistently respond to good content, no matter the source.

Business Models

It’s a perfect storm: Creative Commons (broadly, “use with attribution”) and open source principles will drive the growth of UGM. The question is how and where will the industry make money on it?
Why isn’t UGM of higher value? For one thing, it has no commercial value because no one paid to produce it, so its value is unknown.
Why does content have to be free, subsidized by advertising? The subscription model definitely works, although not in every situation. Offer free and “premium” services concurrently. People do spend money; look at the prices of rock concert tickets, and how people take pictures and make recordings with their phones.
Yahoo is broken, and its founder has returned. The value now is in data (not content?).
Will advertisers go to the one-on-one model, or will they continue to deal with distributors?
The Internet has profoundly affected advertising because it enabled digitally trackable interaction to advertising. It set the bar, and broadcast advertising is struggling to move in that direction. Integrating the two can provide more value, for example, by distributing (TV) shows on the Internet the day after they air.
Sports have a special dynamic because very few people want to watch after the outcome is decided. That increases the value of real-time viewing.
Will the Internet compete with TV, or will they converge? YouTube shows video. But there is a chasm between them: TV is largely a passive activity while people interact more with computers.
The long form will emerge on YouTube (TV length video). But the UGM requires extensive infrastructure, and who will pay? (servers to store it, bandwidth to distribute it).
From the mobile perspective, devices are increasingly multimedia, which enables rich citizen journalism.
To develop business models, executives have to think beyond lead generation; content can lead viewers to websites, where they can interact more and buy something.
The industry needs new talent to take advantage of new rules and emerging opportunities. The industry needs to develop new metrics and business models.

Analysis and Conclusions

Video content creation used to be a specialty practiced by very few highly trained people. It is rapidly going mainstream. Increasingly mobile phones contain video cameras for recording video and sound, and ubiquitous PC programs make editing far easier than ever. “Viewers” are now producers as well, and this fact is disconcerting to the industry.
Two control issues emerge here: brand control and content control. Coke lost brand control with the Mentos incident, but the instigators created their own content. YouTube members who post the latest episode are not creating content; they are distributing it.
No one is suggesting that the professional content business is going away; however, its role as the exclusive purveyor of video, audio and print content has ended. The most successful business models will feature collaboration (explicit or implicit) among customers and producers.
UGM has significant competitive advantage over “professional” media. It is relevant, free and passionate. Because it has no commercial requirement, it exists for passion, and people respond to passion. Professional content is too often comprised of ideas in a blender: it serves no one in particular; it was designed for mass appeal. On the other hand, production costs preclude professionals from making content for highly specific audiences.
One way to increase relevance is to bring production and distribution costs down. Collaborating with customers is an obvious solution—even though it will have to be discovered.
One of the professional media’s toughest problems is dismantling itself while carrying on its business. All of its costs and processes were designed for the mass advertising market. High production and distribution (network affiliates) costs necessitate vacuous programming and extensive advertising.
However, if content creators and advertisers do not respond, people will increasingly forsake them for alternatives, including UGM.
UGM will only increase over time, and the industry needs to accept this fact. Then it can experiment aggressively with how to help customers to create, distribute and enjoy their content—in a way that increases the value of professional content.

3 August 2007

AT&T CEO Unveils Telecoms Vision at Convergence Conference

Redefining the Industry to Remain Relevant—The Significance of AT&T’s Big Bet on Mobile

At Digital Hollywood Chicago, AT&T was busy redefining itself as a 21st century communications provider, and we believe that will increasingly mean focusing on content to provide profits. An AT&T veteran but new in 2007 as CEO, Randall Stephenson keynoted the conference by sharing his vision for AT&T and the future of the industry.

Telecoms provide the network infrastructure of distributed computing and global communications, but infrastructure is a tough business with thin margins and high capital requirements. All telecoms are trying to move up the value chain to escape commoditization pressure and relentless price competition. For example, Sprint is betting heavily on WiMAX to redefine itself as the enabler of digital relationships.

In the context of telecoms redefinition, AT&T’s alliance with Apple could be very strategic for each company, as AT&T can use Apple’s design excellence to increase subscribers and push advanced network services while Apple needs a telecom partner to drive its relevance in the growing third screen market with the iPhone. According to Stephenson, the industry must ask itself, “What is a communications company?” to take advantage of consumer empowerment (although he didn’t call it that). As usual, we will outline his comments before turning to our analysis and conclusions.

Redefining Telecoms for the 21st Century

Stephenson sees five key transformational forces at work in the market:

The transition from wireline to wireless is accelerating, and the notion of mobility is critical to creating value for today’s (and tomorrow’s) customer.
Mobility combined with IP (Internet Protocol)-based services is the context for creating value. Mobility refers to the customer’s experiencing content on the “three screens”: home entertainment (TV), computer and mobile (phone). IP can deliver services on any device.
Entertainment is an integral part of the offering, and this holds true for wireless as well. Wireless is rapidly becoming the default. We will soon have multidimensional mobility.
Subscription and advertising models will play key roles in bringing content to people.
The customer is in charge: s/he is driving what is delivered, when, why, where and how.

Telecoms Insights and Opportunities

Wireless is the common link, but providing seamless experience requires an advanced (expensive) network.
Wireless is a far more personal way to communicate because it is with people everywhere they go.
The decision of buying wireless service drives numerous (downstream) decisions (what network and device type determines features, what kind of content can be experienced and how it can be experienced).
Carriers need to become wireless-centric as soon as possible. They also have to become innovation-focused to create excitement and demand. This is the context of AT&T’s partnership with Apple and its iPhone.
The customer experience must be superb from the first day. AT&T is striving to get new subscribers through the iPhone, but they realize that experience must be excellent. As of 19 June 2007, 1.1 million customers had inquired about the iPhone, and 40% were not AT&T customers.
The network must deliver what customers want, when they want it, and how they want it. It must be ubiquitous, with GSM coverage worldwide. AT&T also has 50,000 hotspots.
Stephenson demonstrated a new service in which a customer, while talking on the phone, shot a video and “shared” it, real-time, with another customer.
Another technology-led transformation is the move toward IP networks, which integrate voice and data. IPTV is the future of TV: it has more channels and far better picture clarity. Moreover, it points to the convergence of the three screens: digital “TV,” the computer and the mobile (phone).
For B2B markets, wireless is also key, as is integrating global operations around GSM. The SMB market closely mirrors B2C.
All services must be integrated and attached to the same account, whether wireline, wireless, content (“cable”) or mobile. It is a single sale and revenue commitment.

Analysis and Conclusions

What Stephenson did not say was even more interesting than what he did.

The telecoms industry challenges that were mentioned at the conference kept reminding me of airlines, another capital-intensive infrastructure business. Capital concentration has played a big part of driving competitiveness, but it is extremely difficult for all players to make money. Moreover, big infrastructure businesses tend to be inflexible, and they get into trouble when the assumptions on which the are based shift. People inherently don’t value infrastructure very highly; it is too quickly taken for granted. When too many customer expectations change and the players can’t respond, they become vulnerable to new entrants like Southwest Airlines.
AT&T’s relationship with Apple seems to be a case of coopitition: AT&T has an explicit three-screen strategy around which it hopes to deliver content seamlessly, but we think that Apple has a stealthy three-screen strategy as well. Telecoms always have the problem of moving up the value chain because their core competencies are network management, not customer experience and content.
Stephenson’s point about entertainment was significant, and it was corroborated throughout the conference. People will not readily pay for infrastructure, but they will pay for content. AT&T is moving heavily into the content business, and they dream about leveraging a content model into the mobile phone as well.
AT&T is betting big on the iPhone to create demand for its “advanced” network services. “Innovation,” real-time video sharing (takes the most bandwidth). Telecoms have been frustrated at the slow rate of adoption for their advanced services. (They should try cutting prices—significantly.)
Mobility is so important because it provides a continuous consumption opportunity, and AT&T is attempting to add value with content. With its three-screen strategy, AT&T is competing in the first screen (cable) and also trying to distribute content to the other screens. Consumers can’t consume content when they are away from the “first screen” (TV) or the “second screen.” (office/computer). Now they can, via the advertising model. I’m not sure Stephenson did his homework here, though: as revealed in numerous other sessions, the ad model is broken, and it’s less tolerated by younger audiences.
IP is the means to move content around. It may serve a role analogous to Java’s for IBM (Java—as an interface to object-oriented development—saved IBM’s un-integrated software and hardware offerings by enabling a robust integration platform and approach).
There is a huge gap between AT&T’s vision and its ability to deliver. Personally, I have become an AT&T customer across most of its service spectrum (AT&T Wireless became Cingular became AT&T; SBC was my ISP and became AT&T; SBC wireline became AT&T). Their online account management is abysmal. To whit, I have a GSM mobile phone, but AT&T has no decent international rate plan. For my DSL service, AT&T has no access (even dailup) outside the USA.
As is the case with other rollups, AT&T is trying to stitch together numerous un-integrated resources on the fly. From past experience, we can be safe in assuming that they will not be seamless and consistent for many years.

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