Google Firestarters: The New Operating System For Agencies

Firestarters #3, hosted by Google and curated by Neil Perkin, featured three fascinating and provocative presentations from Mel Exon, Martin Bailie  and James Caig on “The New Operating System For Agencies”

Each of the three talks had slightly different emphases:
• Mel posited that brands need to be useful, entertaining and epic, and so should its marketing. To the point that the marketing and product is indistinguishable – the marketing singularity
• Martin argued that agencies should decide whether they are interested in outputs or outcomes, and indeed whether they are serving the right master – should agencies be dealing with consumers rather than clients?
• James talked in favour of open ideas and innovation so that agencies can diversify their revenue streams. Experimentation and sharing in the short-term pays off in the long-term

However, what I found surprising was the level of agreement , both among the speakers and in the audience, with some of the more disruptive suggestions. While there are the odd exceptions – Zag, Victors and Spoils etc – most agencies still seem to represent fairly traditional models.

Why is this? A few suggestions
• Semantically, the agency of the future doesn’t exist yet
• The status quo is difficult to change, and progress tends to be slow, phased and invisible
• John V. Willshire makes the excellent point of the Prisoner’s Dilemma here
• Particularly in a recession, it takes a brave company to emphasise long-term strategic development (and investment) over the short-term cash-flow required to keep the business running
• Start-up culture might accelerate innovation, but start-ups motivate its staff members to bear the long hours and high risk due to the potential of a vast reward. Agency contracts tend to stipulate that all ideas generated are agency property
• Marketing agencies are generally unknown at the company level and distrusted at the industry level so becoming consumer-facing is a big challenge
• With brands increasingly present across multiple sectors and disciplines, it might be hard for an agency’s own product to offer credible independence

These are all obstacles, but none are insurmountable. Things can and will change. Hence the excitement in the room.

So, synthesising the views of the speakers (and casually ignoring the slight disagreements) with a couple of my own, the agency of the future will
• Be more strategic and focused on the long-term. This requires investment to slowly change the core but to quickly innovate around the edges.
• Meditate on strategic decisions before acting. Martin’s advocacy of real-time insights is one of the few things I (partially) disagree with – the filter challenges make it very easy for a small tail to wag a very large dog. (SIDENOTE: This isn’t a reaction to his jibe that “research agencies are shit” because they don’t do real-time, though that opinion is as reductive as me saying digital agencies are shit because they don’t create banner ads I want to click on)
• Focus relentlessly on the public as people rather than consumers of a particular product, brand or industry. True cultural understanding means engaging with people as peers, whether through traditional market research, observation or hiring spokespeople
• Prioritise the opinions of the target audience over the opinions of the client, since no client other than Apple can dictate what people want and can have
• Widen teams to encompass a variety of generalists and specialists required for the situation.

Taking these points to an extreme, one example of an agency of the future could be an incorporated joint venture between a brand and various specialists (client marketers, strategists, creatives, PRs, researchers, designers etc), where everyone is a partner with a financial stake in the long-term success of that brand. Even more extreme, agencies could engage in multiple JVs, acting as the pivotal node between brands in different industries, with complete autonomy in how ideas are distributed between brands or kept for themselves. In some ways, they become mini Unilevers – a holding company bringing together disparate, individual brands. This would enable
• Greater integration between the brand’s desires and the actions of the “agency”
• More potential reward for the team members
• Reduced dependence on account managers to mediate between the two (sorry, account managers)
• Greater agency synergies in creativity and ideas, in addition to the bargaining power from media buys
• Reduced duplication between different stakeholders e.g. social media can be concentrated with one person rather than spread across multiple agencies or client departments
• More control over which ideas are invested where – they could be kept for the JV themselves, or even shared across multiple brands

Of course, this proposal has a ton of holes in it (can holes have weight?) and is pretty impractical. Nevertheless, the first two bullet points should be critical for any future agency. There should be no cross-purposes – is the desire to generate profits or to make a great campaign? And there should be more reward for success. Steven Spielberg was paid $250m for Jurassic Park yet Universal Studios didn’t moan (loudly) because it was only a pre-agreed cut from enormous profits. It is better to work together for a big win, than to antagonise and penny pinch for the sake of “fairness” with others.

While failure can be random and out of the hands of the individual; shared reward should be a priority for the agencies of the future.

sk

NB: Slides and notes from the talks are available from James here, from Mel here and from Martin here

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Overhauling the agency pricing model

Agencies are potentially losing out on beneficial and worthwhile commissions due to a fundamentally flawed approach to pricing their work.

(Note: My experience with pricing is almost exclusively tied to research agencies but I think this is broadly applicable to all industries).

Projects are commissioned when there is agreement between what an agency is willing to offer, and what a client is willing to pay.

My issue is that both of these components are based on cost.

Instead, they should be based on value.

The agency side

The current model

Looking at the agency side first, it is clear that the focus upon cost makes the process far more transactional than it should be.

Using a dodgy equation (channelling John. V Willshire, who does this sort of thing far better).

P = d + αi + βt + p where P =< B

In English, Price =direct costs + a proportion of indirect costs/overheads + an estimate of the time spent + profit, where price is less than or equal to the client budget

(The alpha sign has arbitrarily been assigned to meaning a proportion, and beta an estimate)

d + αi + βt can be simplified to C for costs. Thus:

P = C + p where P =< B

Explaining the equation (this can be skipped if you trust me)

Of course, this is an oversimplification (though if agencies don’t use timesheets then the equation will lose the time segment and become even simpler) but it does explain the majority of the considerations.

Competitor pricing will be a factor. Market rates are to an extent set by those that have offered the service – an agency will seek to match, undercut or add to a premium to this depending on the relative positioning. This is reflected in the equation through time (premium agencies will generally spend longer on the delivery) and in desired profit.

An agency’s price will miraculously match the stated client budget (or in some instances, come in £500 under which I don’t understand since a) I thought psychological pricing had been phased out b) that spare £500 is not going to be able to cover any contingencies, expenses or VAT that aren’t included in the cost).

However, there are (at least) two things that aren’t yet factored in:

• Opportunity cost – the cost in terms of alternatives foregone. This isn’t included since the only time you can really be sure that new requests for proposals appear is at the end of the financial year. Otherwise – for ad-hoc project work at least – there is no way to accurately predict the flow of work.
• Competitive bidding – where profit is multiplied with expected success rate to give expected profit. While guesses can be informed by previous success rates, I don’t rate it as a) closed bidding processes mean competitor bidding strategies are unknown and b) perceived favourites are just that – perceptions (for instance, an incumbent may be secretly detested)

So what does this mean?

Ultimately, an agency will only submit a proposal if they think the profit they will make is worthwhile. The above equation can be reframed to reflect this:

p = P – C where P =< B

Or profit is price minus cost.

And this is where my main problem is with agency pricing. Profit is expressed purely financially.

Undoubtedly, finance is crucial. An agency requires cashflow to operate, it cannot survive solely on kudos. But it shouldn’t be the sole consideration

What I think should be included

Value should be added to the equation.

An agency should think not only about the financial margin, but about the business margin.

In addition to revenue, an agency can receive:

• Knowledge – will the project increase knowledge of markets, industries, processes or methodologies that can be applied to other projects in future? This can be used to improve the relevance of business proposals, or be incorporated into frameworks of implementation
• Skills – is the process repeatable, which can create future efficiencies? Does the project offer opportunities for junior staff to train on the job? If so, savings in training and innovation can be made
• Reputation – will the results of the project be shared publicly – in testimonials, trade press, conference circuit or otherwise. If the agency is fully credited, there is PR value in terms of profile and attracting new business
• Follow-up sales – will the project lead to additional work, either repeating the process for another aspect of the business or in up-selling follow-on work? Again, this can save on business development and can offer some future financial assurances (which will influence the amount of money borrowed and subsequent interest paid)
• Social good – perhaps not as relevant for those in commercial sectors, but will the project create real and tangible benefits for a community – referencing Michael Porter’s concept of shared value

Thus, project gains are far more than financial. These intangible benefits should be applied as a discount to financial profit

Dodgy algebra (this can be skipped unless you want to pick holes in my logic)

Because while net gain would be:

N = p + β(k+s+r+f+g)

The net gains from a project are profit plus estimated gains in knowledge, skills, reputation, follow-up sales and social good (note that these factors can be negative or zero as well as positive). These can be simplified as intangibles:

N = p + I

These intangibles offer alternatives to financial profit. Increasing the amount can be gained effectively increases the budget:

P = C + p where P =< B + I

Assuming that an agency won’t offer psychological pricing, we can assume that P = B. This makes the equation

B + I = C + p

Substituting budget back in for price, and rearranging gives:

P = C + p – I

However, this assumes that the entire surplus is passed onto the client. Obviously, this shouldn’t be the case but equally the agency shouldn’t keep all of this surplus. Instead, I propose a proportion of the benefit is passed onto the client via a discount (in order to make the agency more competitive and improve chances of success).

Value is therefore a function of profit and discounted intangible gain:

V = fn(p – ɣI) where gamma is a discounted proportion

What this means – the conclusions bit

All of this long-winded (and probably incorrect) algebra effectively changes to equation

P = C + p

becomes

P = C + V

Financial profit is substituted for value.

I believe that the price an agency charges should be a reflection of their costs and the overall value that is received from the profit – both in tangible revenue and intangible benefits. Some of these benefits should be passed on to the client in the form of a price reduction, in order to make the bid more competitive and improve chances of success.

This also works in the converse. If there is a project that an agency isn’t enthusiastic about – it might be laborious or for an undesirable client – then the intangibles are negative and so profit needs to increase in order to make the project worth undertaking (in a purely financial equation, this means costs will need to fall within a fixed price/budget).

I should also make it explicit that I am not advocating a purely price-driven approach to bidding. Other factors – communicable skills and expertise, vision and so forth – are still vital. The reality is that markets are highly competitive, and price (or more accurately, the volume of work that can be delivered within a fixed budget) will be a large factor on scorecards used to rate bids.

The client side

This section doesn’t require algebra (fortunately).

My main issue with client budgeting is that it only concentrates on purchasing outputs. While these are tangible, these outputs (at least in research) are a means to an end. A client may want eight groups and transcripts, or a survey and a set of data tables, but the client doesn’t want these for the sake of it. They are purchased to provide evidence to validate or iterate a business process.

Therefore, I believe the client budget should be split into two.

• The project budget – the amount that a client is willing to pay for the tangibles – the process required to complete the delivery of the project. These outputs are outcome-independent.
• The implementation budget – which is outcome-dependent. The complexity or implications of a project are often unknown until completion. A project could close immediately, or it could impact critical business decisions in nuanced ways. If the latter, additional resource should be assigned to ensure the business can best face any challenges identified.

The majority of costs are incurred in the project, but the real value to the client comes in the implementation. This needs to be properly reflected; it currently isn’t.

Effectively, I propose a client should commission an “agency” to manage the project and a “consultancy” to manage the implementation. These could be the same organisation, they could not.

Wrapping up

There are undoubtedly things I have overlooked, and I’m pretty sure my algebra is faulty.

However, I believe my underlying hypothesis is valid. The current agency pricing model is flawed and needs overhauling because

• Agencies ignore non-financial benefits
• Clients ignore implementation requirements

Both of these are easily correctable, and these corrections can only improve the process.

sk

Image credit: http://www.flickr.com/photos/chrisinplymouth/3222190781

Direct marketing among local restauranters

I get a lot of junk mail through my door. A lot. They span multiple product verticals and initiatives (not to mention religious or political groups), but the majority are food-related. And given that I live in South East London, most of those tend to be fast-food.

So I thought I’d do a little experiment. Rather than immediately throw them away, I’d keep every leaflet or flyer and see if there were any discernible patterns to the madness.

I intended to do this for three months. But I’ve had a rather busy year and by the time I’d managed to put some time in thinking about it, it had been eight months. You can see the results of my hoarding in the picture at the top of this post.

Numbers

I was surprised I hadn’t received more mail than I actually did, but the numbers break down as

• 71 – pieces of direct mail from food outlets received over a 35 week period
• 30 – the number of different companies that sent me direct mail
• 7 – the number of communications I received from the most active
• 1 – mailshots from a company I’d previously heard of (Domino)
• 45 – number of leaflets from pizza companies
• 14 – number of different pizza companies that sent me direct mail
• 10 – number of different pizza companies that sent multiple mailshots
• 5 – number of different Indian restaurants that sent me direct mail
• 0 – number of different Indian restaurants that sent me multiple mail
• 11 – remaining outlets (5 Chinese, 3 Kebab, 2 Thai, 1 Lebanese)
• 63 – number of mailshots for outlets in either SE16 or SE1 (the others were E14, SE8, SE10 and SE14) – the two furthest away from me were both Indian restaurants

(Note: I’ve seen plenty of quant presentations where there’d be happy to break down figures for a sample of 71 into percentages – I’ve even seen one presentation breaking down a sample of around 50 into tenths of a percentage – but this is indicative and so numbers are fine)

Observations

Other observations I made include:

• The only recognised company (Domino) were the only ones not to explicitly mention free delivery. They did, however, specify, that all homes placing an order would be placed on their database, unless they actively opted-out.
• The minimum size of order for free delivery varied considerably – the highest was the Lebanese restaurant at £15; the lowest was a pizza shop at £6 (though it rose to £8 if you weren’t ordering a pizza)
• The Indian restaurants tended to specify a radius or a list of postcode sectors that they would deliver to – none of the pizza or kebab places did this
• All but one pizza outlet mentioned a special offer (in addition to meal deals), but few Chinese and Indian outlets did
• Special offers would tend to be free side orders or drinks (the kebab places offered non-alcoholic drinks), though a couple of the pizza outlets had BOGOF offers or similar
• One pizza outlet had a special offer whereby you could win a PS3 with FIFA 10. The leaflet had the official World Cup logo on. As the company is a single outlet in SE London, I doubt this is an official endorsement
• The pizza outlets mostly mentioned in the small print that any offers had to be explicitly mentioned in the order, though a couple had this information next to the deal itself. No non-pizza outlet said the special offers had to be mentioned
• Few offers mentioned had closing dates – perhaps because many are continuous or also available in-store. The 5 companies that did have were all pizza companies – Dominos and 4 of the more frequent distributors of flyers
• None of the Chinese restaurants had a website; only one of the Kebab places did. Conversely, all pizza companies had a web presence.
• Asian food door drops tended to be slight embellishments on menus, while the other food types tended to highlight the special offers more than the depth of the offering
• Many of the pizza outlets may have had the same owner, or were part of the same franchise/business network. The designs of their flyers (from A5 to long A4)  and the nature of the special offers (from free muffins to money off) tended to change in line with each other

Rationale

Smith and Taylor (2004) identified six factors fueling growth in direct marketing

• Market fragmentation
• Tailor-made technology
• The list explosion
• Sophisticated software
• Hybrid marketing systems
• The constant search for cost effectiveness

Of these “rational” reasons, I suspect only the first applies here (with the second a factor only so much as it lowers the cost of executing). Clearly, I live in an area saturated with different options for the avoidance of cooking. Word of mouth will be a difficult thing to achieve, particularly if there is little differentiating the outlets. DM is a cheap way of letting people know your name, location and offering. But with the volume, perhaps outlets are engaging in DM just to avoid losing ground, rather than actively gain it.

With this in mind, I wonder if the main reasons for the volume are “irrational” – copying others as it is perceived to be the thing to do. Not wanting to be left out, despite not really appreciating the nuances of what they’re engaging in.

While there is something to be said of the convenience of having a menu to hand if you spontaneously decide to order takeaway, the DM I’ve collected holds little evidence of a quest to understand ROI. Thus, while there should be a constant search for cost effectiveness, it doesn’t appear to be happening. Admittedly, some flyers do specify that offers should be made explicit, and these could be tied to the postcode of the delivery. I wonder if this happens, and whether different campaigns are compared to one another in terms of effectiveness. It would be nice if they were.

Improvements

Having not spoken to any of these outlets, this is entirely conjecture. But since many local restaurants – particularly (it seems) Asian ones are local and family-run, it may be the case that there is a business and marketing knowledge gap that could be recognised. Obviously, things like Business Link exist but that and initiatives such as Ogilvy’s Idea Shop (which is a great concept) should be more active in promoting advice.

The strengths of DM are in its accountability and integration with CRM databases. DM allows business owners to understand their audiences and the effectiveness of offers through things such as

• Comparing different offers in different areas, along with a control group
• Including overt calls to action, with closing dates
• Explicitly tying back revenues changes to marketing spend through different offer codes
• Combining with in-store surveys for those that pick up the food/eat at the outlet themselves

The more effective DM is, the less wastage. Less wastage means fewer leaflets through my door. Which means fewer irrelevant things I have to throw away. Irrespective of my feelings, it also reduces the environmental footprint of a method of marketing that to be seems extremely ineffective and inefficient.

sk

Workshops as inception

I spent the first two days of this week on a course. The course was run in the style of a workshop – no lectures, no learning materials, no rigid structure. Just discussions and exercises that ebbed and flowed as questions arose.

This is quite liberating, particularly for a person such as myself who is primarily a quantitative researcher. But it also makes it quite difficult to evaluate how useful the workshop was.

On the one hand, I enjoyed it and I remember thinking at the time how some things could be useful.

But I didn’t take many notes and thinking back, I can’t spontaneously recall a lot of the things we covered.

But that’s because I’m sitting at my desk writing in my blog. I’m not in a situation that requires me to utilise the skills or techniques we discussed.

Perhaps it is wishful thinking, but if I were in a situation that required me to act in a way that was discussed, I’m pretty confident I would act in a manner approximating the things we discussed.

The discussed is lodged somewhere in my subconscious. The workshop moderators planted ideas in my head regarding how to act in certain situations. I may not be able to recall them now, but in future I may well act on the advice when the right context arises.

This information influences my intuitive behaviour. As it occurs on a deeper level, it makes it hard to evaluate. So how can I?

Perhaps I can’t. Though proponents of advertising research would claim to be able to.

I remain quite sceptical regarding advertising research – pre-testing more so than evaluation. It is not enough to test whether an idea is “taken”, since one may not know it is “taken” until the right circumstances or situation or position on the purchase journey/funnel/prism/metaphor of choice is reached.

People far brighter than me have given pre-testing a great deal more thought than I have, so I will leave the subject at that.

It also makes a sort of logical sense to leave thoughts on a blog post about the gestation of ideas half-formed.

Going back to my workshop, if I were asked to assess whether my attendance had been a valuable experience – not just in the things I’ve gained but balanced against the time spent away from work (which also paid for the course), I’m not sure I could give an accurate answer.

Is the power of positive thinking enough? Is the hope that germs of ideas have been planted in my subconscious enough? Time may tell, but I as a subjective viewer probably won’t be able to see it.

sk

NB: You might need to click on the image to read the text in the first panel. Which may only make sense to viewers of Inception, Pimp My Ride and Know Your Meme.

Google’s Think Video event

Yesterday, I attended the Google/Youtube hosted event “Think Video”. It was an event primarily aimed at marketers (research seminars tend not to have goodie bags), but I found it an interesting – if not groundbreaking – session.

Below are some of the notes I scribbled down during the talks. I’ve linked or embedded the presentations, where they are available.

Quantitative overview of the market

After an introduction from Dara Nasr, Dan Cryan of Screen Digest gave the first talk with a speedy overview of the current state of the online video market, and where it is heading.

Some statistics and projections I noted include (note that I was having to write quickly to keep up with Dan, and so there may be some errors in the below)

• 90% of online views will be user-generated content in 2014 – about 2.5bn viewing hours
• In 2014, ad-supported revenues will be around £180m, transactional VOD £40m and download to own £10m.
• At this time, online TV will still only be 2% of the total TV market
• Currently, 67% of online video viewing is short form, since “work time is prime time”
• At the moment, 80% of the UK online video revenues are with the broadcasters. In the US, it is only 57% but Hulu represents the majority of the difference (Hulu looks like it is losing a lot of money at the moment, since 70% of its revenues goes to the broadcasters.

I found the most interesting part of the talk to be about distribution strategies, and whether to affiliate and syndicate or not. It would appear to be a good move, given the increases in reach that such a tactic produces. Quoting Comscore figures, Dan showed that in the US

• ABC has 4.7m monthly site users but 9.9m monthly video viewers
• Youtube has 98.2m visitors but 120m viewers
• Hulu has 8.4m visitors but 38.1m viewers

Within this distributed model, there are two main options. Hulu operates the “player as the platform” strategy, where it allows its player to be embedded on sites such as MSN and Yahoo!, enabling it to retain control over advertising sales revenue. The alternative – which Channel 4 and Five appear to be pursuing, is “content as the platform”, where they licence their content to other video sites to include in their players.

The power of social

Neil Perkin of Only Dead Fish followed this talk with his keynote on the importance of social and data in online video. The presentation can be seen below (RSS viewers may need to click through)

Some of the key points I took from the presentation were:

• Businesses should get their hands dirty – Neil has learned about the space by participating in it
• Cisco say that in 2013 90% of data will be video, while 70% of data will be created by individuals. For businesses to succeed, they need to derive value from data – of which metadata is the fastest growing category. I’m a big believer in this.
• However, businesses also need to understand social. Media brands are now less defined by the platform and more by their community (I think this is true, and we are increasingly seeing companies seeking to “own” a particular audience – whether the Guardian, Channel 4 or NME)
• Attention is no longer the only key metric – we also need to consider participation, content and interaction
• Distribution should be wide, with content scalable and portable. Slippy, not sticky
• Companies need to loosen their grip on the creation process and let the community interact in pre-production, actual production or post-production.
• Ultimately, convergence is about content flowing across channels.

Youtube’s development

The final presentation came from Bruce Daisley of Youtube, who coped admirably with technical issues that prevented his presentation being visible for the first five minutes of his talk. His presentation can be viewed via Google Documents here.

He mentioned how Youtube are looking to reinvent the experience for premium long-form content on their site. They want Youtube to be seen as a revenue opportunity by content owners, not a threat. He believes Youtube’s strengths come from 4 R’s.

• Reach – it’s not necessarily as big as TV, but it can help build audiences. He cited Britain’s Got Talent audience figures rising from 8m in episode 1 to 12m in episode 2, fuelled by SuBo fever (of course, this can’t be blamed solely on Youtube)
• Rights – he used Monty Python as an example of how content owners were licencing their material, and creating a viable business model
• Research – Youtube can be seen as a virtual research community (Bruce called it an online focus group), with different creatives compared in terms of views or ratings
• Revenue – whether through pre-rolls, in-video adverts or the front-page masthead video ad. He showed that searches for Avatar on Youtube actually peaked during the masthead campaign, and not when the film opened a few months later.These can also be integrated with Facebook, so that you can “like” an ad within Youtube.

He then quoted a range of research and statistics to highlight some of Youtube’s strengths

• Social – Two thirds of users say they’ve sent a clip onto someone else. 10% of video views are from embedded clips on social media websites
• Reach – a medium weight TV campaign of 160 GRPs aiming for 1+ cover among adults would reach 54% of the audience on TV. On Youtube it would reach 9% – 2% being incremental reach. This figure is higher among younger and more affluent audiences.
• Mobile – Although mobile and TV only represent 2% of total views, iPhone users will look at an average of 3-4 clips per day, and Android users will look at 10.
• Engagement – Ipsos have created an engagement metric across different media channels, accumulated from “around 50 metrics” (I’d be interested in hearing more about this). Of the channels shown, Youtube had the highest proportion within the high engagement band, and the least in the low (followed by BBC brands, then Channel 4, Five and ITV).

Youtube are now working with more content owners and broadcasters, with material ranging from films to the Indian Premier League. Bruce mentioned that the first company they negotiated with – the BBC – were very cautious and were arguing for removing comments, ratings and ability to embed, but gradually companies are warming to them.

He closed by talking about Youtube Bubble – a Youtube channel accumulating the best of advertising on the site. I would imagine the Evian babies dancing to Rapper’s Delight (with over 58m video views worldwide) heavily features.

Panel discussion

A Q&A session was chaired by Matt Brittin – the Managing Director of Google in the UK – who was very engaging (and puntastic). The speakers were joined by someone from Channel 4’s sales side (Ed someone, I believe) and Ben Chesters from Mediavest.

Some disjointed points I noted down during the session were:

• Channel 4 were wary about giving specific figures in viewing across different channels, but did say that the total reach was more important than what individual channels made, since they controlled the advertising across each.
• Ben Chesters mentioned that advertisers default to BARB for cover and frequency metrics, and that an incremental reach figure would be the killer feature needed for advertisers to trust online video
• The first TV ads were like display advertising but with a voiceover. Currently, online video adverts are mainly repurposed 30 second spots. Gradually, this should change.
• Neil Perkin talked about how transmedia storytelling across platforms should be emphasised. Content shouldn’t be copied onto different platforms, but should be unique to take advantage of different strengths.
• Neil Perkin also mentioned that a big challenge for online is that it lasts forever – it is not campaign based and you can’t control who sees your spot when and how.
• Channel 4 are trialing teaser 2-3 minute clips of forthcoming comedies to gauge reaction.
• Answering a question from the audience, Dan Cryan mentioned online video was seeing a renaissance of the soap opera – particularly in the United Stated where sponsored and branded content is increasingly prevalent
• And answering a question from Nick Burcher regarding the culling of Downfall mash-ups on Youtube by the studio despite the approval of both the director and the audience, Dan Cryan said “you would have to be a brave man to bet against the anarchy of distribution”. It may not always be timely or the best quality, but people will always find a way to watch what they want.
• A final question concerned the film market online. Dan Cryan mentioned the primary barrier was the windowing of films – films make most of their money on DVD within the first 12 months. During this time, they won’t be available to view on ad-funded sites, but will gradually transfer to parallel availability on pay per view or download to own sites – though this would be more likely to be situated on a TV than a computer.

From a personal standpoint, more focus on the metrics of success would have been welcomed, but as addressed in the Q&A, this is a very thorny issue.  I would also have liked to have seen more from Youtube on how they are breaking down the distinction between TV and online and innovating in advertising formats – this Wario advert is one of my favourites – but nonetheless it was an interesting afternoon, with some useful tidbits from each of the speakers.

sk

Selective reporting

I like the IAB. They’re nice people, and do good work. I’m even a member.

But… Internet overtakes TV to become UK’s biggest ad sector ?

No.

As I pointed out this time last year, their reporting is a bit disingenuous (click through to see a nice chart – a product of my ability to devote greater time to blogging).

The headline finding this year is that online represents 23.5% of all UK spending, whereas TV represents 21.9%

However:

• Online conflates search, classified, display and email
• Press display and classified (conveniently separated) combined account for 29.5% of ad spend
• Display represents less than a fifth of all online spend
• If my mental arithmetic is performing better than it was previously (no guarantee), online video advertising is about 2/3 of a % of all online advertising
• Despite PWC auditing, the data is still ultimately self-reported. Online video spend was caveated last year because many respondents didn’t notice the change to the survey, and grouped video into display (as they had done in previous years)

There are still plenty of good stories within the data – online advertising is the only growing medium (though this is driven entirely by search).

But why let the truth get in the way of a good story.

sk

Image credit: http://www.flickr.com/photos/expressmonorail/

Perspective bias and the anchoring effect

Anchoring is a cognitive trait that causes us to rely too heavily on certain pieces of information when making a decision, such as an up-until-then trusted brand name selling us a lemon.

Perspective bias is a form of subjectivity or self-selection where we are unable to divorce our own prejudices and experiences from a decision.

Both exist. Both are prevalent. And both cause problems.

When you are a researcher, you need to ensure all information is communicated clearly. This could be rewording technical jargon, removing colloquialisms or introducing cultural as well as literal translation for foreign language work. For instance, if you want to know about the video on demand market and the effects of Hulu among US residents then you shouldn’t use the phrase video on demand. That’s pay per view. Hulu is online video.

When you are a design engineer, you need to realise that someones opinion of your new product is going to be rooted in what they already know. While this new flat-screen TV may be twice the size of my old CRT, it takes a bit longer to start. This new laptop may have high-speed wi-fi and bluetooth, but the keys are a bit harder to type on. This car has great handling, but where is the cup holder?

When you are a metropolitan advertising buyer looking after a mass market brand, you need to consider that while you may hate that prime time “drama” on ITV1, it appears that 7m of your potential customers don’t.

When you are a social media expert/rockstar/heavyweight champion of the world (delete as appropriate), you may think that your actions cause ruptures into the fabric of society. But do they? Motrin don’t think so.

When you pontificate that a brand is dying, have you taken a health check out of your immediate eyeline?

Incidentally, I like that tech companies are based in a valley – it acts as a nice metaphor for the echo chamber and short-sightedness of so many of the “end is nigh” kool-aid drinkers that seem to have a voice disproportionately larger than the size of their other senses.

Anyway, I think that is enough snark for one post. The point I want to make is that we should do our best to identify a frame of reference – it could be a good thing in the case of designers trying to improve their product or a bad thing when a researcher is trying to design a survey for a country that they have never visited, but it should be sought.

Some in advertising may disagree as it promotes the rational over the emotional – it suggests we methodically compare products rather than be captured by a glass and a half full of joy. My subjective opinion is that emotional advertising works only when we are overfamiliar with a product. I know what a chocolate bar is, and I know what Dairy Milk tastes like and the ad does a good job at reminding me of these facts.

But when it is a new product, that emotion isn’t enough. The ad wouldn’t have had the same impact if it were advertising an everlasting gobstopper. I need to know the functional benefits – why should I change my behaviour? What do I get out of it? The reason is the key.

Of course, the best campaigns can combine both the functional and the emotional. “1,000 songs in your pocket” tells me why an iPod is an improvement on a walkman in a memorable soundbite.

To use an old cliche, we need to walk a mile in other people’s shoes. Look through someone else’s eyes. To take a recent example, a few of my colleagues recently held a session where they showed people who had never before used a computer how they worked. Can you conceive of that? I can’t. These people had never picked up a mouse. Seeing how they interacted with it, and how they overcame the initial trepidation to complete a few simple tasks would have been a fascinating reminder into how what we take for granted is completely alien to another group of people.

Ultimately, it is the little things that matter. Just because we think something is fine doesn’t make it fine. Second, third and fourth opinions should be canvassed. Different perspectives sought. New angles explored.

We shouldn’t be complacent.

sk

Image credit: http://www.flickr.com/photos/ranopamas/

Green button advertising approaching launch

Channel 4 have announced that they are going to be marketing upcoming shows through the green button service on Sky. Sky’s own forays into green button – originally planned to launch last summer – are imminent.

The green button service is an interactive feature whereby viewers can bookmark content as they view (in real time or recorded). An advert that is interacted with – along with associated content (extended cuts, behind the scenes etc) – is downloaded onto the DTR hard-drive to be watched at a later date. It is effectively advertising on demand. This differs from red button services, which immediately transport you from the content you are watching to the interactive area.

Will it work? The idea is initially counter-intuitive. People choosing to watch more advertising? But we know from the viral/spreadable media successes that viewers can choose to watch adverts.

That is online, where people can remix and repurpose content. Will viewers interact to the same degree on TV? An article in the New York Times says that the market isn’t yet ready for internet TV due to cost, reliability and questionable demand.

But interactive services aren’t the same as having full internet capability, and viewers do seem willing to experiment. Figures from Sky show that more than 93% of digital satellite households pressed red to interact with their TV in 2007 – 16% interacting with adverts.

Although the most viewed interactive advert in 2007 was Cadbury’s Gorilla the campaigns using red button tend to be response-led, with relative success measured by requests for vouchers or for further information. Sky said that 40% of its interactive campaigns are from car manufacturers, who are able to measure sales conversion from the ads.

The appeal of green button appears less about direct response and more about branding. It is essentially viewing advertising as content consumed for entertainment. This is not going to be suitable for all brands or categories, but offers an interesting challenge to companies seeking to broaden their involvement in content marketing and storytelling.

Not only will advertisers have to convince viewers that their content is worth watching and interacting with, but with an on-demand service they also have to move from impulsive to considered consumption. I may see a potentially interesting ad and bookmark it, but will I choose to go back and watch it later?

Downloading content also contrasts with the current trend of streaming. Whether it is putting everything in the cloud, or Spotify emerging as a potential challenger to iTunes’ dominance, owning is partially being supplanted by streaming/renting. Unless I can actively edit or mash-up an advert, is there any benefit to having it stored on my hard drive?

Green button appears to be in direct competition with the Youtubes and microsites that facilitate streaming. Youtube already offers advertising-on-demand, with people able to interact with, share and comment upon advertising. The environment may not be suitable for all brands, but it is cheap. Microsites and branded areas aren’t’ so cheap, but the entire experience can be micromanaged. Green button services are going to have to find a USP that differentiates them and justifies a price premium.

That function may be targeting. I’ve already covered targeted advertising in detail but demographic information could be the pull. If Sky are able to integrate their Skyview panel information with green button, advertisers will know exactly who is viewing and interacting with their content. And that information is valuable.

It remains to be seen whether green button services can make an impact in the period before television and the internet fully integrate, but I anticipate some innovative case studies emerging in the field over the next couple of years.

And not just those looking to prove their environmentally friendly credentials by using “green” advertising.

sk

Image credit: http://www.flickr.com/photos/barbietron/

Is TV advertising responsible for Apple’s success?

I was in a meeting a few days ago where Apple was described as a company that had retreated from large-scale TV advertising, despite TV advertising being responsible for its success.

I disagreed at the time, and remain pretty sure that this is a fallacy. Am I right?

Buttressed by Wikipedia and recent “25 year of Mac” posts, my broad perception of the history of Apple runs like this

• Set up in the 1970s to moderate success
• Macintosh launched with ads in cinema and during the 1984 Superbowl (watched by 97m) – initially sells well and ad is regularly cited as one of the best of all time
• Computer market slumps and Steve Jobs is fired in May 1985
• Incremental success for the rest of the 1980s
• Windows 3.1 and – more importantly – Windows 95 take the PC to the next level and nearly kill Apple
• Jobs comes back in, ends most of the product developments and places his faith in the iMac
• iMac becomes a success and a design classic
• iPod launched – the aesthetic of white earbuds and “1,000 songs in your pocket” become ubiquitous
• iTunes overhauls an outdated music distribution system
• iPhone brings touchscreen technology and simple web surfing to the masses
• Halo effect of the Apple range boosts the computers – Apple is currently the number 4 computer manufacturer in the US
• Jobs’ ill health and the rise of netbooks raise questions over Apple’s continuing success in the computer market

To my mind, TV advertising doesn’t play a particular big role in this rise, fall and rise of Apple. There have been iconic campaigns – 1984, Think Different, the dancing silhouette – which have contributed to the success. But they have not driven it.

That is the Cult of Mac.

The iPod may be mainstream, and the iPhone may be getting there. But Apple is not traditionally a mass market company. Their computers appeal to a niche audience. They may be the no.4 manufacturer, but the choice is PC or Sony. It is not Dell, Acer or Mac.

However this niche audience is passionate. They follow. They promote. They evangelise. They attend(ed) Macworld every year and hang on Steve Jobs’ every word.

That community is what has driven Apple’s success. Apple concentrate on the product – usability, design, experience. That leaves the marketing to the community. Alan Wolk has an interesting post on this – good advertising can accelerate success, but a decent product to win over the public is vital. In the case of the iPod, the evangelism changed an industry.

TV advertising has made plenty of products successful – from Hofmeister to Barclaycard to Cillit Bang. But Apple isn’t one of them.

Unless someone like to correct me?

sk

Image credit: http://www.flickr.com/photos/sigalakos/

Could targeted ads work on TV?

I’ve been exploring the concept of targeted advertising on television. Loosely defined, it is the ability to purchase advertising space against a diverse array of groups that go beyond the traditional trading audiences.

This post accumulates the background information I’ve collected on the topic and speculation (mostly mine) on how theory may become reality.

Because it is such early days, I’d love to hear the thoughts of people (media side, client side, planners, buyers, researchers, interested parties) on the subject. Do you think it will work? What would you like to see and what would you like to avoid?

(Disclaimer: I have no involvement in targeted advertising – this is purely background research. This is preliminary work and any errors are fully attributable to myself).

1. Background

Traditionally, trading television advertising is a complicated beast, but Thinkbox have a gentle overview of the topic here. Essentially, there are several criteria that advertising can be bought against – channel, time of day, region (for analogue channels) and so on. Specific trading audiences can also be bought but unlike other criteria they can only be estimated.

To use a simple example, I may want to purchase 300 ratings against Women on ITV1. My advertising would be placed in shows that would be expected to deliver the required number of female viewers. However, only when BARB viewing figures become available do I know how many ratings were delivered. If ITV1 delivered more than 300 ratings that I am in debit; if they undelivered then I am in credit. The difference is carried over to the next advertising campaign I run.

However, as we all know, TV is changing. On-demand and IPTV, to give two examples, are changing the concept of what TV means.

The concept of targeted advertising emanates from this seachange. As it is still (largely) a concept, definitions are loose and the vague. Targets could theoretically be grouped according to demographics, lifestyle, behaviour, attitudes or a combination thereof. While an internet connection is the likeliest means of delivery, it is not the only option.

Whoever delivers effectively targeted advertising first will have a tremendous competitive advantage. The future is up for grabs.

2. The Players

In the UK, the platform providers are best positioned to introduce targeted advertising

• Sky have said that they plan to introduce targeted advertising by 2011 by storing them on the Sky+ harddrive and inserting them into programming remotely
  
• Virgin have trialled targeted advertising, though at programmes rather than specific audiences
• “Project Canvas” is in development, with BT saying that they can use broadband user information to deliver targeted advertising
• Freeview+ and BT Vision have been quiet (though they are involved in Project Canvas), as have Tiscali TV (which may be looking for a new buyer now Sky are reconsidering)
• Inuk (closed IPTV over university campuses) has trialled addressable advertising on Channel 4

In the US, Project Canoe is looking to develop consistent metrics which in theory could then lead onto targeted advertising

It is also theoretically possible for non-platform providers to offer targeted advertising. These could include

• TV manufacturers – at the recent CES there was a lot of chatter on upcoming web-enabled televisions, while Sony BRAVIA already gives access to sites such as Amazon, Youtube and Daily Motion (ad free, I think)
• Google – Google TV currently only sits on one satellite carrier, but it could theoretically expand
• Phorm – still involved in targeted advertising. Their technology could be used across multiple platforms

3. Strengths and weaknesses of targeted advertising

With the concept still fluid, it is difficult to come up with specific answers but broadly speaking: (NB: Several of these came from a Mediaweek piece by Barry Llewellyn of Packet Vision)

Strengths may include

• Ability to target a more tightly defined audience – less wastage
• Greater relevance for viewers
• If ads are interactive, there will be greater accountability for direct response
• Frequency of exposure can be capped
• Advertising watersheds could be removed in adult-only homes (e.g. alcohol advertising in the afternoons)
• May be more affordable for niche advertisers with small target audiences
• Greater flexibility in pricing options – pay by impressions or acquisitions?

Weaknesses may include

• The whole concept will succeed or fail on the quality of the information captured
• Different platforms offering different options could hugely overcomplicate matters; can a consensus model emerge?
• The current pricing model will be completely destroyed; with a near infinite number of targets a new system, such as Google style keyword auction bids, will need to be introduced and accepted
• Similarly, how will total advertising audiences be audited? Everyone could be seeing different adverts around the same programmes. BARB would also need to be overhauled
• No-compete clauses can severely inhibit the ability to target e.g. a beer brand may pay a premium to ensure it is the only beer brand in the spots they have identified as being key
• Unpopular targets may get the same few ads on continual rotation e.g. will 65+ C2DE spinsters only get ads from the COI?
• Serendipity of appealing to people outside of the perceived core audience is lost – do targeted ads have the same attraction to brand-based advertisers as direct response?

4. Potential methodologies

Largely speculation on my part, but potential ways to target ads include

• Geographic/geodemographic information – the most basic targeting option. Homes can be targeted geographically through IP address or MOSAIC/ACORN postcode information. Geo targeting may only be attractive to local advertisers, but these could make up a long tail of demand. Alas, these methods are far from flawless. I’m a male 16-34 ABC1 (highly desirable, if I do say so myself) yet live on a council estate – would I ever see Leffe, Audi or Playstation 3 adverts?

• Registration data – when homes purchase a new TV or set top box, they could be asked to register not only demographic information but also lifestyle/behavioural information (additional information would need to be opt-in). This gives a richer understanding of viewers beyond demographic profile, but there will be ambiguities over individual and household information and usage, and the data needs to be regularly refreshed in order to be useable (for instance, my cat may die and I may get a dog instead)

• Return path behaviour – Interests can be inferred from the types of programmes that are watched, or the types of website that are visited. For instance, if I watch a lot of DIY shows, an ad for Ikea may be suitable. This is achievable but it is an art rather than a science. What if it is my girlfriend watching the DIY shows, not me. I could get all the DIY ads during football, and she wouldn’t get any during Hollyoaks. This type of targeting can be quite transparent and with an uncanny valley, is the method most likely to irritate.

• Panel information – whether a panel like Skyview or an extension of BARB, a sample of viewers can be recruited, with advertising targeted around their behaviour. This could be extrapolated to all viewers through programme audience profiles or registration information. However, this would only effectively be targeting a small proportion of viewers, with the majority guesstimated. With around 35,000 Skyview homes representing over 4m households with Sky+, the level of accuracy may not be high enough.

• Opt in system – give people the choice to submit information – either through an in-depth registration or regular surveys. By communicating the benefits, people may actively choose to receive targeted ads, creating value for everyone. This could be achievable, though the proportion of those opting in may be too small to be useful. With an opt-in, several additional steps could be taken to ensure accuracy e.g. a BARB style remote control (each viewer needs to “sign in” by pressing a button) could be introduced so advertisers know exactly which members of the household are watching.

• Social profiles – Bringing social networking to TV – such as this BBC/Microsoft prototype – offer a lot of information that could be harvested. People like to communicate their favourites, and this could be utilised. And with users logged in to their profiles, advertisers will be sure of at least one viewer in the room. This could work – Joost is currently the number one contributor to Facebook Connect – but again, it would only be a limited dataset and a lack of take-up may prohibit effectiveness

5. Implementation

We should be seeing several prototypes and trials following in the wake of the Inuk experiment. Due to the difficulties of implementing targeted advertising within live broadcast, I believe targeted ads will initially concentrate on on-demand and interactive content (whether red button or the electronic programming guide).

There appears to be a first-mover advantage, and so the stakes are high. Virgin would seem the best placed to lead the way – the internet is already connected to the box and with subscription fees they are partially shielded from any effects to advertising revenues – but I wouldn’t rule out any of the other players leading the charge.

Indeed, the first implementation may not even be within advertising. What if I could let Sky know which sports I like and dislike, and then get a customised news ticker on Sky Sports News? I’d certainly opt into that.

6. Further thoughts

This is an early stage outline of how targeted ads appear from my perspective. I’m really keen to hear other people’s views on the subject. Do you think targeted ads will take off? What would you like to see? What problems do you envisage?

Any feedback would be greatly appreciated

sk

Image credits: http://www.flickr.com/photos/pbo31/ and http://www.flickr.com/photos/melilab/