Posts Tagged 'Digital'

Online magazines, content and big things

I have every admiration for a media publisher that is pioneering its ‘engagement formats’, fully rounded on print, events, online… Perhaps this is an ‘of course’ moment to say that they track the film industry… and therefore are first-hand witness to the transformation of media into digital.

C-21 Media aren’t just innovative with their format, they are absolutely first class with their news angles and content. This is a ‘no mean feat’ thing. So much of blogging tools or self-publishing of music is shockingly bad and just gives the masses the capacity to bore and bug us. Not C-21.

I’ve just been blown away by the line-up of their latest conference on marketing. It ain’t a line-up that is purely film focused, though there’s a slant. It looks like a must-attend event for anyone in digital and media.

Check out the agenda here – http://www.c21media.net/shop/detail.asp?article=55800&area=109:

Dynamite. Well, and here I must declare an interest, it was until I got asked to be a compere to help host the event. But, that aside, the speakers speak for themselves.

Next big thing: paying for content

Rupert Murdoch is encouraging newspaper proprietors to charge for content. Chinwag has held a debate on Freeconomics. It stands to reason that, with the death of easy money, people will have to start making their own money when they deliver ‘stuff’ on the web. Digital isn’t a no-cost business… it has scaleability, but with scale comes marginal cost too.

The argument is very well put by blogger Benjamin Ellis here:

http://redcatco.com/blog/marketing/three-reasons-free-will-eat-itself/

You’d do well to click thru to the fella, but in case not:

Three Reasons Free Will Eat Itself

Chinwag Live Freeconomics PanelIt’s the meme that wouldn’t die, but die it should… Last week I attended the Chinwag Live ‘Freeconomics’ session in London, and not long before that I listened to Guy Kawasaki interviewing Chris Anderson at South by South West. While Chris dodged Guy’s low-ball questions out at SXSWi, and focussed on promoting his new book (which may or may not be free), the Chinwag Live panel got a bit more stuck in.

The whole ‘free’ thing is worth wrapping your head around. It is probably worth starting with Chris Anderson’s article from last year, but then reversing out a bit with Alan Patricks two great posts on Freeconomics: FREECONOMICS PART I and FREECONOMICS PART II. (and Alan’s notes from the panel: CHINWAGGING ABOUT FREECONOMICS). You can read a journal of the panel session on the Bluedoor blog, where Abigail has blogged her tweetage, as it were, and there is a full write up at Brandrepublic

guykawasakichrislongYou see, ‘free’ isn’t really free at all. It’s been funded by the VCs and selling data, and the VCs aren’t playing anymore. The concept of Anderson’s free is that transactional costs (the price of ‘doing things’) tends to zero on-line and at scale. However, transactional costs tending to zero is very different then them being zero see… Someone’s got to pick up the tab, see Nic Brisbourne’s post, and I quote:

 

The other takeaway that I hadn’t considered fully is that for many services in reality the marginal cost of delivery is not zero.  This was made most forcefully by panelist Alan Patrick, but also by panelist Bruce Daisely of YouTube who made the point that the worlds favourite video service now accounts for 10% of total bandwidth consumption – which I’m sure costs Google a lot of money.  This point knocks a sizeable whole in the ‘free’ argument, although ‘free’ fans would argue that these costs are going down all the time.

 

So, I threw in a question at the end, on the basis of these three forces “Won’t free end up eating itself?”

1. Free Attracts The Freeloaders.

If you advertise your service as free, hoping to up sell people to a paying service later (the freemium model), you may well be attracting the wrong crowd. I don’t mean in the sense of bad people, but rather the people that want something for free. That leaves those who want to pay as potential customers for a competitor. More importantly, you have probably attracted ‘customers’ that choose on price (free), rather than features. I put the word customers in quotes there very deliberately. Since they aren’t paying you anything, they aren’t really customers. They are prospects. And that is where ‘free’ is interesting: As a marketing ploy. It is a good one. But wait up…

2. Free Drives Value Out of the Market.

Imagine there’s a nice bar. A really nice bar. They charge £10 per drink, but it’s nice and you like it there, so you pay your £10. Now, someone opens up a bar next door. The drinks are free. I mean £0 free. You’re going to check it out aren’t you? Seriously. At least once? The £10 bar is going to loose at least some revenue, if not customers. You’re running the £10 bar. What will you do? Drop prices? A buy-one-get-one-free offer?

Markets are elastic. If someone enters the market with a lower priced offer, it drags prices down. It’s called competition, and it’s generally a good thing. As customers, we like it. However, when someone enters the market at ‘free’ it isn’t the usual ‘more efficient competitor’ entering. No, it’s a value destroying monster. Value will disappear from the market. That inevitably means that companies will too, which will reduce competition in the long run – and that isn’t good. And the competition that’s left? Oh, it’s bad…

3. Free Spreads Across Markets.

Traditional competition focusses on price. As marketers, we try and combat price competition by introducing features that (in our minds at least) create value and preserve the price. Some choose to build more efficient businesses, so that they can compete on price, but maintain margins. In the world of ‘free’ you can’t compete on price. You have to compete on features (or quality, which I’d argue is a feature anyway). That means wherever two players are in the same market with a ‘free’ offer, the temptation, if not the action, will be to gradually add more and more features. Think about the value for the market. More and more of what was revenue, ends up as ‘free’. Remember those ‘freemium’ businesses, giving you free stuff, hoping to upgrade you? There is less and less to upgrade you to that isn’t free.

Free is a Short-Term Win and a Long-Term Lose

‘Free’ feels good, but it is really an inevitable race to the bottom, ensuring that markets are destroyed by low price expectations and poor (service) quality. Watch the providers of ‘free’ – as advertising revenues (and tolerance for advertising) falls, and VC money dries up, expect them to come asking for money or to start selling your data to the highest bidder. The end of ‘free’ might well come from the strangest of places: mobile e-commerce. The latest iPhone software let’s you make payments within iPhone apps themselves. That’s iPhone apps that you probably paid for in the first place too! Nokia, Microsoft and a host of others are planning similar offers.

The Way out of Free is Utility

As much as product marketers bang on about the latest much have feature, one thing that we do pay for is utility. I can make a local phone call very cheaply, if not for free – depending on where I am. That same phone call costs significantly more on a mobile/cell phone, and yet the technology took off. People were paying for utility: being able to make calls from anywhere, not just when they were stuck in the house or the office. It made great sense as people became more and more mobile. And, as the technology took off, people got more and more mobile in their work and social lives, driving the technology even faster.

So far, the Internet is just catching up with the whole mobility thing. Web browsers are improving in leaps and bounds, as is the provision of mobile-friendly websites and improved screens on phones. Mobile Internet is taking off. And do you know what? It probably isn’t going to be ‘free’.

Microsoft investment in Facebook begins to pay?

http://www.readwriteweb.com/archives/microsoft_stake_in_facebook_be.php

Sorry. Shameless rip from ReadWriteWeb…

Google – global first movers still a thorn to ambition

Interesting FT piece on how Google’s global ambitions are thwarted by several key markets where they have not managed to take market leadership positions.

For instance, in Czech Republic Seznam has 62.5% share to Google’s 24.8%

Russia, Yandex has 45.9% to Google 33%

China, Baidu.com has 66.5% to Google 11.3%

South Korea, Naver 57.7%, Lycos 18.4%, Google 8.5%

Japan Yahoo 51%, Google 39.5%

 

As with all markets… there’s opportunity. And, there will be a niching process that evolves so that even these shares get eroded as people switch to niche search firms or bespoke search tools.

LloydsTSB-HBOS – jumble sales and bottom fishing

So, my blog has gloriously covered the new-new opportunities in digital and media. I break into this editorial line with a comment on ‘other stuff that’s going to be big’.

Clearly, we are seeing tectonic shifts in the world markets – and this will impact the local economy and enterprise opportunities.

What do they say? When everyone else says ‘take cover’, it’s time to ‘take risk’. I bought Lloyds shares this morning at 265p, now standing at 290p. I had a long conversation with my stockbroker about the characteristics for calling the bottom of the market… kitchen-sinking, corporate failures, bad news epidemic… then a platform for returning stability. The market will react before the economy and may bounce.

So, 2009 looks to be a very tough year ahead – but with the re-rating of prices, labour forces and froth… there will also be great opportunities for the fleet of foot.

Boring ol’ Lloyds has just hit payback for years of caution while others have hit stella growth and over-reached themselves. Three cheers for the snails and not the hares, this week.

The digital economy is not in reverse either – it’s seeing switching from ‘old media’ and still some pretty tight labour constraints. How long this can continue? Who knows. Keep digging!

O3b Networks – African Safari

It looks like philanthropy to invest millions in Africa. But, it could also be one of those amazingly far-sighted early-stage investments.

A bunch of entrepreneurs is backing O3b networks to put up 16 satellites to provide a wireless backbone for Africa. That’s Google, John Malone of Liberty Global, HSBC, Allen & Company… on the road to $750m in spend.

This could be a path for linking up with consumers in a host of other emerging markets. Hence the name of the firm… which stands for ‘Other 3 billion’… the half of the world that’s not currently within reach of Wikipedia and Facebook…

http://www.o3bnetworks.com/

And, for more links to Google’s multifarious ambitions, check out this blog from Unstung.

Widgets, applets, snippets, games – the future for Apple iPhone

Apple took $1m per day in sales of apps at its Appstore on iTunes since launching the new 3G iPhone. Steve Jobs says it’s going to create a $1billion business… well, he said it’d ‘crest at half a billion soon’, which is a nice way to describe the run-rate of takings…

What is significant about this new marketplace isn’t just the valuation positive for Apple, it’s the way it gives a new lease of life to a whole load of entrepreneurs. Last.fm looked to be killing Pandora (which drew its horns in and went US-only). But, there’ve been a million downloads of Pandora’s iPhone radio station stuff. It’s mentioned by the FT’s tech correspondent here.

 

ReadWriteWeb put it like this:

The App Store: Soon To Be A Billion Dollar Marketplace?

Anyone who has the iPhone or iPod Touch can tell you that one of the best things about owning the device is the ability to add apps from iTunes App Store. Although many of the apps that we talk about here are the free ones like the social networking appsthe instant messaging apps, and the blogging apps, it’s the paid apps that are making the store a financial success.

According to today’s Wall Street Journal, in the month since the Apple App Store opened, users have downloaded over 60 million programs for their iPhone or iPod Touch. Out of those that were downloaded, Apple sold an average of $1 million per day in paid applications, which brought in around $30 million over the course of the month.

If they stay the course, the App Store will make at least $360 million a year, but Steve Jobs isn’t setting for that:

“This thing’s going to crest a half a billion, soon,” he told the WSJ reporter. “Who knows, maybe it will be a $1 billion marketplace at some point in time.”

However, it’s worth noting that Apple won’t be raking in those millions just for themselves – they only keep 30% of the proceeds, a good portion of which go to cover the costs of credit card transactions and help keep the App Store up-and-running. It’s really the apps’ creators who stand to gain, as they keep 70% of the proceeds.

What sort of paid apps are doing well? A quick glance at the App Store reveals that answer: games. Sega can back that up, too. They sold more than 300,000 copies of their Super Monkeyball game ($9.99) in only 20 days. According to Simon Jeffery, president of Sega’s U.S. division: “It gives iPhone a justifiable claim to being a viable gaming platform.”

But with numbers like these, we would argue that the iPhone goes beyond just being a gaming platform – they’re a computing platform now…and a profitable one at that.


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