Andrew Frank
Research VP 5 years at Gartner 30 years IT industry
Andrew Frank covers marketing and advertising technology trends as a research vice president with Gartner Research's media team. His research has focused on new opportunities in search engine marketing, viral marketing and social media, online video and consumer…Read Full Bio
It’s no surprise to see Google buy a DSP, as it was one of the few links in the online display advertising value chain in which Google didn’t already have a dominant presence (the other would be supply-side yield optimizers, which have had strained relationships with Google). But it does rekindle the issue of whether an entity such as Google, which happens to be the largest seller of online advertising, can continue to provide both media and the platforms for trading media in a neutral way.
Google now counts among its display ad assets the dominant buy-side ad server (DFA), the dominant ad exchange (AdX), and the dominant sell-side ad server (DFP). Threading these together is the ubiquitous DoubleClick cookie, which, with the inclusion of the vast AdSense network, is evolving into a kind of Rosetta Stone for user data in the display targeting world. As tactics like Real-Time Bidding (RTB) become more prevalent, Google is now well positioned to parlay its search success to drain the clutter out of the display advertising ecosystem and permanently lay to rest the “one trick pony” charge.
But the issue of neutrality won’t go away. As noted by Allthingsd, Invite counts among its clients Vivaki, one of the largest digital ad buyers, which must maintain its ability to buy ads from Google’s competitors on an equal footing with Google. As Google seeks advantage by integrating Invite with DFA and AdX in subtle and attractive ways, pressure for neutral solutions will build, and Google’s competitors are likely to start to find sympathetic ears among anti-trust regulators for whom the analogy of a bulge-bracket brokerage house owning a major stock exchange and the trading systems it supports won’t seem like too much of a stretch. And privacy is already on the minds of politicians who are likely to see the ubiquity of Google’s cookie-based targeting technologies as a target of opportunity themselves.
Media agencies, nostalgic for the 15% commission days of yore, are already looking at Google’s 32% “commission” on AdSense ads with envy and contempt. (Although Apple iAds’ 40% may make this look like a bargain.) And publishers…well, we don’t need to go there. Suffice it to say that the path to seamless integration for Google across its chain of display assets is full of hazards. But then again, in the pursuit of ad businesses, they haven’t tripped up yet, and I wouldn’t bet against them. But a strategic spin-off of AdX – down the road, once all the tools integration is complete and mobile and TV have been added to the mix – may yet produce the ultimate winning end-game.
In case you missed this, Google wants you to know that, even though the official HTML5 standard may be years away, HTML and Javascript today are capable of some pretty sophisticated interactive animation. Apple, Adobe, and Flash developers, take note. In a clever demonstration disguised as a tribute to the 30th anniversary of PacMan, Google coded the game (or a facsimile, anyway) in cross-browser Javascript – which I noted runs just fine on all my Apple i-* devices – and sent a message, which I interpreted as follows:
Adobe: time to give developers a way to convert SWF to Javascript/HTML5. No excuses.
Flash Developers: until Adobe gets to this, better brush up on CSS and Javascript (or find a coder to work with if you’re more of a designer).
Apple: Glad to hear you’re committed to supporting HTML5, because that’s what we plan to use and promote for simple cross-platform interactive apps.
I found this demo pretty distracting, and more than little nostalgic for me: I was a video game designer back in 1980, and I spent quite a while in those days reverse engineering the behaviors of Blinky, Pinky, Inky and Clyde, which I’m sorry to say I’m not convinced Google rendered faithfully.
As expected, Google announced Google TV at its Google I/O conference today, with the tagline “TV MEETS WEB. WEB MEETS TV.”
Now, these two have met before, and they didn’t exactly hit it off. In the pile of failed consumer tech gear lays a device called WebTV, which launched in 1996. Microsoft later rebranded it MSN TV, but all the king’s horses couldn’t make consumers buy it.
Fast forward to the present. Now there are a lot of IP-enabled set-tops and broadband-connected TVs, but these are generally walled-garden type services, not the open (both in terms of content and source) system Google and its partners, Sony, Intel and Logitech have announced (showcasing Google’s Android OS running on Intel’s Atom processor). Google pointed out the four billion TV users around the world, as compared with two billion mobile and one billion PC users. So if Google can be as successful with ads on TV as they are on the PC-based web, well, you get the idea.
How big an “if” is that? At this point, there are too many unknowns to say, but it certainly needs to be considered a long-shot. There are basically four big wildcards:
Consumers. Obviously there is not a great deal of pent-up demand to surf the web on TV or we’d all be doing it by now. Can Google create a compelling enough platform to override the passive “lean-back” instinct that seems ingrained in the TV-watching experience? Very hard to say. Apple has dabbled here with indecisive results.
Manufacturers. Can Google get more TV-makers than Sony to embrace its platform and make it universal? Today, large manufacturers like Samsung and LG are pushing their own proprietary notions of connected TVs. Yahoo! attempted to unify them with its TV-Connected Widgets platform but this appears to be struggling. Although Samsung has experience with Android, one must imagine that manufacturers would be reluctant to line up behind brands like Google and Sony to support this. And even if they did, the replacement cycle is daunting and all the bets right now appear to be on 3D.
The Media Business. The $70 billion that Google attributed to TV ad spending in the U.S. supports a massive value chain of content providers, broadcasters and distributors who are not necessarily ready to roll out the welcome wagon for Google. Google’s strategy appears to bring its search-style of getting between consumers and content to the “10-foot experience” but the broadcast industry is wise to this strategy and has seen its effect on the publishing industry. Industry groups like NAB, NCTA, SCTE and CableLabs have historically been effective at taming manufacturers with standards that keep the TV environment closed, interoperable, and regulated. To open this up more than a crack means creating extreme disruption in a highly entrenched system. It’s also worth noting that most of the language around net neutrality to which service providers such as AT&T have agreed carve a broad and clear exception for HD video content.
Government. The FCC is perhaps the biggest wildcard of all, in the sense that it’s the most unpredictable. The US National Broadband Plan suggests a favorable climate for the principle of opening TV to broadband distribution and open set-top boxes, and the FCC has tried in the past to weaken the hold of distributors over set-tops with its unsuccessful CableCARD initiative. But Google has also come under scrutiny over anti-trust concerns and the FTC has suggested it might block its acquisition of mobile ad network AdMob. Having an opaque proprietary search engine at the public’s entryway to TV programming is likely to strike some activists as an alarming idea. It’s also clear that adding web content, apps, and social features to TV challenges a principle mission of the FCC to enforce “contemporary community standards” in TV programming. This suggests that opening TV has implications well beyond technology and business.
Two things are certain: 1. We’ll be glued to the edge of our seats as this accelerates the arms race between Google, Apple, and industry players like Canoe Ventures to invent the next generation of television. And 2. whatever that looks like, it will largely be brought to you by Advertising.
“Most mobile advertising really sucks,” declared Steve Jobs in his preamble to the iAds unveiling. Sure enough, the demonstration iAds drew a sharp and heady contrast with the incumbent WAP banner model, combining, as Jobs pointed out, the emotional impact of television with the rich functionality and transactional possibilities of a native application. Much was made of the idea that these apps could appear within other apps, take over the screen and be explored by users without leaving the original app or losing context, which would be restored when the advert-app was done.
While being hailed as a breakthrough, for anyone who’s been in interactive advertising for any length of time, this articulation of the desire to combine the emotion – and, hopefully as a result, the spending levels – of television with the interactivity – and, hopefully as a result, the accountability – of Internet, will no doubt bring back memories of a great many pitches that launched a great many campaigns and companies over the years, some successful, others less so. Apple and its creative partners at Chiat Day are to be credited with identifying the right long-standing problem and envisioning what the solution might finally look like that inspires brands to shift large budgets in earnest toward a medium they’ve long resisted.
But alas, there’s more to the ad business than killer creative – there’s the business of media, which demands our messages not only be inspiring but also reach a big audience and thus forces upon us the notorious limitations of standard formats and dubious metrics. To answer this, Jobs declared the platform could offer as many as a billion impressions per day. That’s one ad every three minutes across an average app usage time of 30 minutes per day, multiplied by 100 million devices. I’ll leave it to others to debate the details behind these assumptions as there’s another point I’m anxious to get to. I’ll just mention, for comparison, that Google’s ad exchange is estimated to handle about 10 billion impressions per day on the Internet.
Anyway, accepting for a moment the overall reach is there, along with the oft-repeated invocation of “attractive demographics,” the question remains: will the ad network model that Apple inherits from its acquisition of Quattro Wireless fit this new medium? Or is the format, compelling as it may be, somehow ill-suited to the ad network mechanics of long-tail pricing models, contextual and segmentation targeting, real-time arbitrage, measurement and transparency issues and all the rest? Yes, I know, Apple’s will be a “new kind of ad network,” but it will still have to answer all the questions and do the things that other ad networks do, some better than others.
First, recall what gave rise to ad networks in the first place: the search-driven fragmentation of the online audience across millions of web sites that each had too little traffic to contribute to a significant media buy. It’s worth considering that the universe of App Store apps (185,000 apps and growing) is orders of magnitude smaller than the number of web sites, greatly diminishing the fragmentation problem and the corresponding number of successful ad networks. Remember, really popular apps are more likely to be able to sell directly to advertisers and avoid the middle-man.
With this in mind, a critical and somewhat obscure factor in establishing the viability of Apple’s ad network in this context is the shape of the power curve of app usage.
If the curve is steep, that would mean that a strong majority of app usage is concentrated among a relatively small number of apps, while the long tail majority gets little. (Sound familiar?) This would undercut the need for an ad network, as top developers could deal directly with select advertisers (who of course are eager to create ads like the ones Jobs showed) and keep 100% of the revenue rather than the 60% proffered by Apple – unless, of course, they were required to pay Apple or use its network to gain access to critical OS features such as reliable app suspension, or approval.
On the other hand, if the curve is too flat, then other problems appear: the revenue that developers earn will depend crucially on liquidity and the strength of the demand side of the network, giving the advantage to Google (whose pending acquisition of AdMob now looks less likely to be derailed by the FTC) and Yahoo and simpler formats that are likely to appear in far higher volumes than custom apps (especially if they can’t be produced in Flash – more on this shortly). A flat curve also puts more pressure on targeting and matching algorithms and independent metrics and transparency requirements from brand advertisers who do not want to see their ads appear in apps like this.
(What determines the shape of the curve? In addition to natural user behavior, there’s the App Store search and browse experience. But this seems a perilous thing to try to engineer, especially as demand for transparency grows with the market.)
In the Goldilocks scenario where there’s a narrow yet substantial enough segment of apps and brands that Apple can play an efficient matching game that works for everyone, we then confront the question of control and competition. Last year, Apple filed a patent for “Advertisement in Operating System,” foreshadowing its plans to use its OS to power a new format. This surely means Apple intends to make it difficult for competitors to duplicate its innovations in this domain, and also gives Apple some potential options to charge for OS-based advertising capabilities even if the network concept doesn’t play so well. That Apple feels emboldened by its position of control is evident in its declaration in section 3.3.1 of iPhone OS 4.0 SDK that it will evidently no longer tolerate apps developed with anything other (read:Flash) than Apple tools and Apple-approved languages. Will ad agencies flock en masse to Objective-C and HTML5? Not anytime soon. But maybe Apple figures time and momentum are on its side. After all, if the ads lift brands, then won’t clients demand them?
The good news is, starting this summer, everyone can try something new. The bad news is, the garden walls appear to be getting higher. And I think I see a glint of razor wire on top.
Patent fever has gripped the blogosphere as, on the heals of Facebook’s News Feed patent, Google won a broad patent for, “Determining and/or using location information in an ad system.” (The story appears to have been broken by VentureBeat, which discusses it here.) Much of the chatter is focused on the question of whether Google (or Facebook) will begin using patents to chill innovation among potentially competitive start-ups, a possibility I find unlikely given both companies’ vulnerability to – and penchant for attracting – negative publicity. The story worth watching, however, is the effects on the Google-vs.-Apple mobile advertising conflict, which is now taking on dimensions of MAD.
If your app uses location-based information primarily to enable mobile advertisers to deliver targeted ads based on a user’s location, your app will be returned to you by the App Store Review Team for modification before it can be posted to the App Store.
It’s easy to see Google’s Location-Based Advertising (LBA) patent in this context as a strong deterrent to any designs Apple might have to use its app store approval process to squash LBA competition on Apple devices; in such an event, Google could use its patent to add friction and pressure to Apple’s aspirations, while positioning itself to win the PR-war by using its patent to protect the “freedom to innovate” on behalf of developers and LBA start-ups.
It’s also worth remembering that Apple is also no stranger to broad, ad-related patents, with potential competitive implications. For example: Advertisement in an Operating System claims a method of disabling an operating system in a device while displaying an ad, and re-enabling it when the user responds; techniques to monetize an OS with ads sounds more like Google than Apple.
Microsoft, as well, has staked a broad claim in computer-based advertising: Advertising Services Architecture (not yet issued) broadly describes “A computer-readable medium having computer executable instructions for implementing a method of targeting and delivering advertising on an electronic device.” Nor is Google the first to target LBA in a patent: last year Palm filed System and Method for Providing Advertisement Data to a Mobile Computing Device, which claims “A mobile device, comprising: a processor; and a memory coupled to the processor and configured to store user-specific data; wherein the processor is configured to access data indicating a position of the mobile device and provide advertisement data based upon the position of the mobile device and the user-specific data.” (italics added.)
While excessively broad patents (and companies that abuse them) have been a perennial threat to innovation, there are at least three positive aspects to this state of affairs: first, the balance of power appears to be creating beneficial competition; second, the social internet is as sharp as ever at smoking out and socializing threats to innovation, which were once invisible until it was too late; and third, let’s not forget all the lawyers and clerks for whom such a climate provides steady employment.
Defying its numerous obituaries, broadcast television set a new world’s record last night as Super Bowl 44 attracted more viewers than any TV show in history – 106.5 million according to Nielsen – beating the previous record of just under 106 million for the series finale of M*A*S*H which aired on Feb. 28, 1983. This triumph also clearly showed how new media needn’t displace old media, as millions of viewers tweeted their way through the game, commenting on everything from plays to commercials in a virtual party that spanned the nation. Web sites may have superior reach, but there’s nothing on the planet that can focus the simultaneous attention of so many rapt consumers on a screen and deliver it to advertisers.
The 2010 BrandBowl, a Twitter-based ad competition produced by the Mullen Ad Agency and Radian6, a social media measurement company, declared Doritos and Google the winning advertisers, and I was not alone in feeling gratified that Google chose to open its coffers to CBS on this occasion, and produced an ad that not only effectively romanced its search product, but also (as David Card pointed out in a tweet) gave new hope to copywriters all over the world.
Last year I wrote about how advertisers like E*Trade had fumbled keywords like shankapotamus, turning over their traffic to folks like me. This year E*Trade got the message and bought milkaholic, and a number of other advertisers followed suit.
But the spot I want to talk about didn’t even make the #brandbowl top 10, despite featuring Beyonce, the Twitter Bird, and a host of other online icons. Unless I miss my mark, most of America had no idea what to make of it. Here it is:
It’s tempting to enumerate the many reasons why this ad is a failure from a creative standpoint – basically, it’s a cacophony of clashing and contradictory metaphors and idioms with no clear brand promise or value proposition – but it’s nonetheless noteworthy in its attempt to go mainstream with the message of Internet on your TV. And therein lies a tale of interest.
We are reminded that, a year ago, Yahoo! made headlines announcing its platform for TV widgets, called Yahoo! Connected TV, at CES2009, to be supported by four major TV manufacturers (Samsung, Sony, LG, and Visio). Yesterday, Yahoo was featured on the Vizio widget bar, but like all of the other manufacturers, Vizio has chosen to brand its own widget platform – VIZIO Internet Apps (VIA) – and give Yahoo tenant status. This is rapidly leading to a condition where each manufacturer has its own proprietary widget platform, which, needless to say, is a path to doom for the whole idea.
Meanwhile, Canoe Ventures (remember them?) and CableLabs announced the completion of a new (yet-to-be-fully-revealed) standard called EBIF IO6 (“IO6” for short) which extends the original EBIF specification to cover widget-like applications that are delivered outside the context of an individual show or channel (“unbound” in industry parlance). That puts the standard on an apparent collision course with the manufacturer’s Internet-connected TV aspirations, and is sure to make for an interesting race to critical mass.
This appears to be a good-news, bad-news story. The bad news is that developers and content providers will not have a single platform to target with applications for some time. The good news, however, is that the race is (back) on, and that the service providers and manufacturers have little choice but to accelerate their efforts if they’re to have any chance at achieving critical mass in the marketplace before their opponents. Nothing like competition to bring out the in us.
The big question, of course, remains: what are these magical TV widgets that are going to engage consumer interest in new sets and services? After all, tweeting on a smartphone during the game didn’t seem so bad. Oops, there’s the whistle, seems like we’re out of time….
Big industry changes are often best captured in the smallest exchanges. Case in point: during a Congressional hearing to investigate the proposed acquisition of NBCU by Comcast, Jeff Zucker, the embattled CEO of NBCU, was asked by Representative Rick Boucher about the company’s prevention of Boxee users from accessing Hulu content. (Boxee is a service that can display Internet content on TV, and Hulu is a service, part-owned by NBCU, that distributes TV programs over the Internet. Those unfamiliar with this dispute can read about it here.)
Zucker’s response:
“This was a decision made by the Hulu management to, uh, what Boxee was doing was illegally taking the content that was on Hulu without any business deal. And, you know, all, all the, we have several distributors, actually many distributors of the Hulu content that we have legal distribution deals with so we don’t preclude distribution deals. What we preclude are those who illegally take that content.”
Boxee’s vocal CEO Avner Ronen responds in a blog post with a logic that is difficult to dispute: Boxee provides a web browser to access Hulu, and browsers as a rule do not need distribution deals to display content from the web, regardless of what device they display it on. In fact, this principle lies at the heart of the Internet, just as the principle that TV manufacturers don’t need licenses to display broadcast content lies at the heart of the TV business. The internet has simply extended this open interoperability principle one level from hardware to software. Ironically, for the TV business, this is actually a step backwards, to the pre-cable days when access to broadcast signals was open to anyone who could receive them. Even more ironic is that broadcasters, then as now, felt a strong need to defend themselves against the incursion of cable into their business models, while today companies like NBCU make more from their cable programming than free-to-air broadcasting.
Boxee and others have made the point that Internet distribution has the capacity to support the same types of monetization as cable and broadcast: advertising and subscription fees, and that conditional access is certainly feasible on the Internet. This argument is not lost on broadcasters, but it’s safe to assume they’ve done the math and concluded that they can’t afford a full embrace of Internet distribution to TV sets, at least until a good deal more technical and legal infrastructure is in place to protect these new models. Thus they’ve adopted the untenable position that “online” content can’t legally be displayed on TV, despite the obvious point that technology is making it easier than ever for consumers to do so.
Zucker’s testimony is a clear indication that these companies probably have less time than they think. Although the Comcast/NBCU merger is largely seen as a way to preserve the existing cable carriage model by aligning the interests of (traditional) content with (traditional) distribution, the process has also had the effect of shining a light on these issues. The more they are illuminated, the clearer it becomes that the status quo is profoundly unstable, and that the public is best served when its media institutions embrace new models mandated by the course of technology, rather than clinging to the past and declaring the future “illegal.”
(This post was co-authored by Allen Weiner and Mike McGuire)
Rumors being what they are, much of what Steve Jobs announced at the iPad launch event didn’t come as a surprise to the overload crowd at the Yerba Buena Center insane Francisco. The iPad is a “tweener” that fits nicely between an iPhone/iTouch and netbook computer. With a 9.7-inch screen weighing in at 1.5 pounds, sporting battery life claims of 10 hours, the iPad could be ideal as a prototypical interactive content consumption device…but a few unanswered questions challenge its viability for media companies.
For book publishers, some of whom were waiting for signs of wide-scale acceptance of the universal e-publishing standard, ePub, the iPad came through…sort of. Although the device supports ePub, Apple is believed to be planning to implement its own DRM (Fairplay) to secure the ePub files, which could presumably then be distributed only through iTunes (that is, iBooks). If that is the case, Apple’s book efforts puts it in the came category as Amazon which utilizes a proprietary DRM that ties Kindle books Amazon.com. Hence any e-book purchased from Barnes & Noble, Sony or any of the countless e-book retailers will not work on the iPad. In addition, e-books from libraries, which are powered by Overdrive who uses Adobe’s DRM, also would not work on the iPad.
For both newspapers and magazines, the iPad remains a mystery. The demo of The New York Times, which was created in a compressed timeframe, is not much indication of what potential newspapers have on the iPad. Those are questions that can only be answered by developers who are busily downloading the new SDK and attempting to devise compelling paid or ad-supported content applications. The initial focus is on paid applications (and again, there is no evidence that consumers will pay for digital newspaper content) as there was no mention of advertising support from Apple, which many were expecting following Apple’s recent acquisition of Quattro, a mobile ad network. The same goes for magazine publishers who now have the color device they have asked for but will need to experiment with varied content applications and business models, while scrambling to source enough video to do justice to consumer expectations raised in demos.
The iPad launch will create ripples throughout the publishing industry: supply chain providers who digitize and format content as well as develop applications will thrive; standalone e-reader device manufacturers will have to re-price their devices now knowing that the WiFi-only 16G iPad can function as a high-end e-reader. Plastic Logic’s Que, the Alex and Entourage Edge may be forced to revisit their announced retail prices.
For video content such as TV and movies, a similar catch was apparent. While the iPad can clearly render beautiful hi-def full screen video, its lack of support for Flash was evident in the tiny blue cubes that appeared on web pages during the demos. This means that TV-friendly web distribution platforms like Hulu are unlikely to work on the iPad. (A Hulu app for the iPhone/Touch has been rumored for some time but has yet to materialize.) Here, too, Apple appears to have reserved the distribution of TV and movies for its device for iTunes, although YouTube remains a wildcard if it should release a sound model for content owners to monetize through rentals or sell-through. Also unexplored was the possible connection between the iPad and Apple TV, which have clearly enticing possibilities.
Then there’s the mysterious absence of any mention or demonstration of the device’s advertising potential, or Apple’s apparent newfound interest in participating in the business. With iTunes emerging as the sole channel for monetizing content of any kind on the iPad, advertising remains a critical source of revenue to publishers and video providers alike, and one on which Apple’s chief emerging rival, Google, is laser-focused with innovations like Google Goggles and QR barcodes readable by Android devices, and distributed to 100,000 businesses. Of course, these ideas require a camera, which the iPad lacks.
Still, Apple did not fail to push the envelope and generate enthusiasm for its latest creation. Now, with Apple setting the standard for content consumption devices, other manufacturers—most notably PC OEMs, will begin to launch their tablets and will look to Android and possibly Windows as device platform. In particular, Android will thrive with Google deploying its Google Editions and YouTube strategies to offer cloud-based delivery of all content to the universe of Android devices, with a well-proven advertising component.
And let’s not leave communications service providers out of the mix. Whether Apple’s choice of AT&T is one consumers find popular, it leaves Verizon and Sprint as ready partners for HP, Dell, and others whose tablets are in queue.
All that said, content companies of all kinds need to examine the iPad and the new version of the iPhone OS with a few things in mind. First, Steve Jobs is without peer in his ability to provide a vision of the future through the medium of the product he happens to be introducing at the time. In the case of the iPad, he described the magic of having the “…Internet in your hand.” True that, but for a lot of us, that came with the iPhone, the Touch and the AppStore. And as revolutionary as those products have proven themselves to be, the real magic has come from the integration of all those elements into a set of compelling content experiences. Second, the iPad extends by one the form factors those kinds of experiences can be delivered through. Third, and this is really important, we’re still talking about the “Internet” as defined by Apple. The potential for game-changing killer apps to come for the iPad is not in question. And the potential power of content experiences Apple can enable is not in question. But the handle on that potential is being controlled by one entity.
In that regard, we remain puzzled at the continued estrangement between the iPhone OS-based product line – iPhone, Touch and now iPad – and Adobe, especially Flash. Do the power-management issues cited by Apple as reasons for the iPhone’s persistent lack of Flash support? We think lack of Flash support still causes many, many media and content companies, and their developers, a great deal of strategic angst.
The iPad is not the iPod for publishing. Music was a ready and waiting asset that needed little “post-production” work to be suited for a portable device, and, when the iPod arrived, the industry had already been badly disrupted. Hence the iTunes store was quickly filled with both quantity and quality. But other forms of content are not so enthusiastic to commit to a closed channel platform that controls both device and distribution, and the next 60 days will be crucial as Apple hopes to load its electronic storefront with a selection of content that will encourage consumers beyond the “fanboy” crowd to be iPad lovers.
CES2010 was packed with innovation – from 3D TVs to myriad e-readers and mobile computing devices of every shape and size. No one stole the show, but almost every vendor I saw put something impressive on the table.
In the end I couldn’t fully escape the wistful sentiment, “if only the world economy would start growing fast enough to allow consumers to buy all this cool stuff.” But this is a short-sighted view. The longer-term vision is that the consumer electronics industry appears on the brink of converging with – and rescuing – its two beleaguered sister industries, telecommunications and media.
First, the convergence of CE and telecom is evident in almost every device, which now not only contains a digital radio chipset but also comes bundled with some kind of telecom service and/or platform. This creates vast new opportunities for telecom companies to partner with manufacturers to become content distributors, with many potential new revenue models, from service provisioning to ecommerce. This is one of the cornerstones of the emerging electronic publishing model.
Second, CE appears ready to lead media – especially publishers and video producers – into a new market landscape where they might recover their status as privileged providers of valued content to consumers, a status that the internet for all its ubiquity has significantly eroded. Inspired by the vision and success of Apple (which predictably managed to play a starring role at CES despite being absent), CE companies now all recognize the need to bundle content platforms and services with devices. And media companies, also learning from Apple (and Amazon), for their part recognize the critical need to create and enforce standards on those platforms to assure interoperability and openness and avoid lock-in, concepts that the IT world has recognized for some time. While “interoperability” defies the Apple approach to differentiation and control, most manufacturers are learning the subtleties of how to differentiate while adhering to content standards that maximize consumer value in the new landscape of digital media.
So the stage is set for a new golden age, supported by a potential virtuous cycle roughly like this:
Innovations like 3D video content, internet-connected TVs and components, electronic paper, and new portable device form-factors will drive consumer demand for new devices (economy permitting);
As devices come bundled with data comm. services (both open internet-based, as in most connected TVs and Blu-ray players, and closed mobile-based, as in most e-readers and netbooks), demand for telecom will rise and new service bundling models will replace or supplement current obsolescence cycles of CE;
These innovations will also increasingly be supported by open standards like the MVC standard for 3D video and the EPUB and PDF standards for electronic publishing, creating new more-secure global content distribution platforms with better monetization capabilities;
As content becomes more monetizable on these platforms, high-value content will shift to these channels, creating new creative possibilities and more demand for premium content experiences that require the latest upgrades, etc.
Of course, such a utopian outcome is far from assured. Any number of macroeconomic factors, regulatory factors, and competitive instincts that favor extreme disruption, could easily derail this fragile new “experience economy.” But this is perhaps the first CES I can remember that demonstrated how the long-oversold concept of “convergence” might actually work.
Let’s take a moment to appreciate the prescience of futurist Alvin Toffler, who coined the phrase “information overload” in the late 1960s. While some predictions, like human cloning and genetic architecture, are still way out there, IO is arguably the defining quality of our current culture.
The most recent exhibit comes from Google, which just announced real-time search, that promises to “bring your search results to life with a dynamic stream of real-time content from across the web.”
“Now, immediately after conducting a search, you can see live updates from people on popular sites like Twitter and FriendFeed, as well as headlines from news and blog posts published just seconds before. When they are relevant, we’ll rank these latest results to show the freshest information right on the search results page.”
Microsoft’s Bing already integrates real-time Twitter and Facebook results, although, unlike Google, has yet to integrate them directly into the main search results pages. And, in a clue to the economics behind all of this, Yahoo! has also introduced Ad Interest Manager, a tool that allows Yahoo! users to “assert even greater control over their online experience” by selecting categories of interest to be used in targeting ads.
Tempting as it is, I’ll refrain from launching into a diatribe about the deleterious social effects of our growing addiction to (the illusion of) “instant knowledge” delivered in a stream of constant interruptions – if you’re in the mood for this sort of thing, I enjoyed Simon Dumenco’s nice little summary on AdAge. Instead, I’ll just try to make a point about the economic trends that underpin this immediacy arms race and the implications for technology and marketing.
The point is this: search as we’ve known it has been pretty much a context-free, anonymous experience and, while this has created some relevancy issues, these were tolerable in exchange for the convenience and security that anonymity provides. As we get hooked on the firehose of real-time and take it mobile, this trade-off starts to fail, and relevancy filtering becomes a necessity. So search will increasingly need to be personalized. This in turn will increase its efficacy to advertisers, widening the gap between search engines and untargeted media.
This escalation doesn’t just apply to consumers. Advertisers and publishers, who also need to chase relevancy, will increasingly be dependent real-time data to recognize patterns and trends that they need to address. The challenge will be to build systems and organizations that are capable of processing the accelerated pace of information with the stability of a long-term brand.
The contrarian view on real-time is that it will lead, in time, to a widespread craving for a return to some form of permanence and pacing in our relationships. In marketing, this translates into a resurgence of thoughtful branding over targeted promotion. On the other hand, it’s always important not confuse a clear view with a short distance, so for now, it’s time to tune in, open the information flood-gates, and get your tweets to those in-market consumers.
Andrew Frank
