Impact of Economics on Online Advertising

The Economist states in "Not Ye Olde Banners" here:

"Mary Meeker, an internet analyst at Morgan Stanley, ... estimates, if the economy stops growing, ad spending is likely to fall by 4%. If the economy shrinks by 2%, overall ad spending may fall by 10%."

The fantastic thing about online advertising is that with the change in available technology come shifts in the marketing methods... hence, one does not have to wait 25 years to become old school that can happen in 25 weeks.

Here is an example of how online advertising can connect the analogue marketing's serialization of consumer engagement into multi-point choice for the consumer, as stated in the article:

"Mr Rothenberg (Interactive Advertising Bureau) gives the example of a rich-media ad for Kraft, a food company, in which a yummy image raises brand awareness, a click reveals a recipe that increases consideration, another click provides coupons and yet another click initiates a game that can be shared with friends. Marketing managers can therefore defend their online budgets as being both above (awareness or consideration) and below (preference or loyalty) the line."

I believe the economics of today will drive what I have hoped for - innovation leading towards affective online advertising delivering results that can be measured i.e. (and as Ted McConnell puts it) Performance-Based Advertising. The pressure will be on all - the brand manager, the creative/agency, the inventory holder/distributor.

See my previous blog "Social Networks & Advertisement" here.

Consumer Pricing and Service Growth

Many a times high service prices quelch the possibilities of growth that may have tangential ramifications on the consumer market. An example is the cost of text messages dropping substantially and being capped in Europe as discussed in BBC's article "Europe Backs Mobile Roaming Cap" here.

Olfactory Route to the Consumer's Heart

The Economist predicts that in 2009 the world will see the sense of smell integrated into the browsing and buying experiences for consumers. See the article "Led by the Nose" here. The article quotes:

"Simon Harrop, chief executive of BRAND sense agency, reckons the power of scents comes from their close association with emotion and memory. Get the smell right and you can bypass rational thought."

I believe perhaps for the first time purchase the average buyer "may" go for an evaluation that involves obvious or discrete methods of olfactory indulgence (or insurgency) yet the mainstream consumer, for example a mother does not on average have the time for extrapolation or exploration unless it comes in the form of a free trial, coupon, etc. and is usually a repeat buyer of tried and proven products.

The article ends with:

"But retailers and their marketers are treading a path full of pitfalls. What are the ethics, for instance, of enticing obese people to buy snacks by wafting the smell of popcorn at them?"

Social Networks & Advertisement

I recently attended the Internet Summit in Chapel Hill, NC - see details here. Social networks and advertisement / marketing in Web 2.0 world were the main topics of the panels.

Having had the excellent opportunity to lead technology development on the world's first and leading word of mouth / viral marketing brands PG-Tremor and PG-Vocalpoint: I found myself grasping (during the panel on "Marketing in a 2.0 World") at anything that spoke of web marketing delivering anything beyond amplification in their discussion. And so, I asked if the panel could give tangible example, just one, of advocacy i.e. purchase intent converted and realized, from their social network(s) focused program or campaign.

I am sorry to report the excellent panel representing Vitrue, Lenovo, Microsoft and Digitalsmiths had to submit that they mostly have examples of increased awareness.

As such, please see superb insights from my friend and colleague Mr. Ted McConnell, P&G's Leader of Interactive Marketing and Innovation here. To social network sites that leverage media for ads, Ted stated:

""I have a reaction to that as a consumer advocate and an advertiser," he said. "What in heaven's name made you think you could monetize the real estate in which somebody is breaking up with their girlfriend?""

On consumer engaged media generation, Ted stated:

""I think when we call it 'consumer-generated media,' we're being predatory," he said. "Who said this is media? Media is something you can buy and sell [...] We hijack their own conversations, their own thoughts and feelings, and try to monetize it.""

I believe Ted represents leading thought and execution on interactive (media) and advertisement leveraging leading technologies - as such his personal preferences may be something to pay heed to:

"I really don't want to buy any more banner ads on Facebook."

Finally, I am happy to hear Ted predict and see the following in the market place:

""'Spray and pray' is a little harder to do when you're under economic pressure," he said. "So performance-based advertising will gain share over CPM.""

Ford - An Analysis

A good friend of mine Mr. Rachit Shukla conducted an evaluation of Ford in Nov 2006 while at the Wharton School of University of Pennsylvania. Rachit and his team provide great insights that are validating themselves within a matter of couple years. The report provides a good analysis of Ford's third restructuring effort (in five years) called the "Way Forward".

On Ford's recent history from the report:

(click for larger view)

The above can be stated of the US automotive industry in general. Being close to the performance automotive industry personally, I have been amazed at the most recent Detroit Automotive show... I was terribly curious as to who was planning to purchase most of the new cars and trucks being showcased by Ford and GM?

On the topic of consumer focus, the report states:

"Currently, Ford lacks product differentiation between the three brands sold by the North American division – Ford, Lincoln, and Mercury. As a result, the divisions are cannibalizing each other’s sales. As a Merrill Lynch analyst remarked: “[Mercury and Lincoln] are mostly dressed-up versions of mass-market Fords.” "

Please see the detailed report here.

Country Branding

I just read the "Country Brand Index 2008: Insights, Findings & Country Rankings" - download PDF here, from the FutureBrand folks. I found their study great for taking on such a challenge - I found their methodology exceptional in taking complex topics as culture, environment, destination, etc. and rinsing them through the qualitative parts such as emotions, perceptions, etc.

FutureBrand's Country Brand Platform - Sec 1:1 of the report

(click for a larger view)

The CBI-08 report has snippets of treats for the visualization of data and information - Tufte would be proud.

At the same time I felt a touch of bias simply due to the heavily Western panel of experts (see page 14 & 15 in the report) and the same for the sources (see page 61).

Even though an article on the above report in the Economist states:

"As someone with a non-marketing background, I find the notion of branding an entire country rather reductive. You end up talking in such broad terms (viz. the view of Australia in the first paragraph) that the themes tend towards the stereotypical or even the meaningless."

I believe the buzz, or marketing hype associated with brands does impact consumer decisions that are meaningful to economic development. An example not to be overlooked is UAE, with approximately 12% or less original Emirati populace, massive investment in second and vacation homes from Europeans, South Asians, Australians and South East Asians (Singapore, Honk Kong), it is but one example of what a brand can do.

Two more points from the report that I found insightful:

(1) "Countries in Momentum" (see page 26) provides a clear indication of the developing countries (with two exceptions from developed countries) gaining momentum under the headings of Emerging, In Vogue and Rising while the developed countries with two exceptions falling under the headings of Declining and Maintaining. I believe this provides a glimpse of the future of these countries for the 21st century.

(2) "Country Branded Products" (see page 32) shows the reinforcement received by product brands due to their country's brand. A realization must not be lost here that country brands can cause havoc on product brands - see the Middle East boycott of Arla as a recent example here.

In summary, I found the report with great mechanics while emphasizing and leveraging the positive. For an astute mind, this report offers great data to digest. I caution against the overly optimistic tone of some of the conclusions (see (2) above). Reality on the ground can be a surprise.

Brand "Image" Impacts Consumers - Literally

Marketing laterally, subliminally, subconsciously, through adjacency - just a few of the names to find a way to have the consumer "choose" your product. Results of a recent study regarding TV ads published in the Economist "Watching the watchers" here shows through research and analysis that a brand's image (on screen) can impact choice decisions. It further showed that sound perhaps was not as impactful as the advertisement was being viewed at fast forward speeds on TV.

Talent Warming

I thought I will deliver a new buzzword for the web world to distribute and evolve:

Talent Warming - The unfulfilled and desperate yet growing need for masses of educated and preferably experienced knowledge workers to create value for corporations, governments and non-profits.

Raymond Loewy - Father of 20th Century Design Innovation

If you don't know of Raymond Loewy then he is one of the two or three individuals from the 20th century in America who have made design the impactful reality in products - from maximizing on revenue to the consumer feeling the "need" to "must have" a particular brand.

Wired magazine online profiled Raymond Loewy in November here. Also, I visited an informative exhibition on Raymond Loewy chronicling his design through the decades including family and commercial videos in Bozeman, Montana called "Raymond Loewy:Designs for a Consumer Culture". See details here.

For me there is no getting away from the fact that Raymond Loewy brought together the initial principles of Industrial Design, perhaps not all of them yet the most important ones, including that it begins and ends with the consumer, in delighting the consumer through design and the experience that design imparts for the consumer of the product.

See a photo gallery of Raymond Loewy's designs here on Wired online.

Innovation Index Team on Procter & Gamble's Innovation and Profitability

The Innovation Index folks have published an article sharing some of why they believe are the reasons for continued success of P&G here.The article states:

"Why is P&G doing so well? One answer: Innovation. Innovation driving new business, innovation driving growth, innovative leadership by the CEO of P&G A.G. Lafley."

The IDSA said about the above article in their newsletter called designbytes:

"This report about Procter & Gamble ... borders on the breathless and gushing, but it does contain some solid insight..."

Procter & Gamble - "Innovate How We Innovate"

See Franz Dill's blog on Procter & Gamble's CEO - A. G. Lafley's video on Innovation here.

World Perspective / Photo - 4 [Automotive Disruption]

When the above commercial launched in India for theFrench manufactured Peugeot 206 for $19,900 a few years back, I do not think the automotive industry of the world had any idea what was to come from India's domestic automotive manufacturers:

Tata Nano - $2,500

The reader may want to consider that the dollar's value is comparatively less rather than being more since the launch of the Peugeot while the PPP of India has increased.

Dear Businessman: How Do You Get Consumer Insights?

I believe in having the "consumer in the loop" of any new and existing business that delivers a product or a service to a user. The ones who do, mostly/generically do so through focus groups and online/offline surveys. I was engaged in consumer innovation at Procter & Gamble at the company's Innovation Centers where we used immersive and experiential environments to obtain consumer insights. Innovation Centers remain one of the best ways to have "consumer in the loop". My feelings on the subject are echoed in Steve Jobs' statement back in 1998:

"It's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them."

Statistical analysis is driving small to large to massive decisions (with economic and social impact) in all spheres of commerce and government. Below are two examples of caution:

First, I like to share the results of an in-depth study on the threat to human health from mobile phones. The Economist publihed an evaluation of this study conducted by Interphone started in 2000 and ending in 2006 costing $30m with 50 scientists engaged in 13 countries working with 14,000 people. The article "Mobile Madness" here states:

" “LONG-TERM mobile-phone use increases risk of benign tumours!” “Clean bill of health for the mobile!” “Mobile phone-cancer link not proven!” [...] even by the standards of modern news, it is unusual to see such contradictory headlines about the same piece of research."

My goal is to highlight the fact that translating qualitative information to quatitative data for making decisions remains a difficult place.

Second, to make it even more obvious see yet another article from the Economist "Mind Your Phone" here. The article discusses people's "electrosensitivity" or physical response to the electromagnetic fields that surround phones. What is interesting is (as the articles states):

"Dr Landgrebe and Dr Frick used a body scanner called a functional magnetic-resonance imager to see how people’s brains react to two different kinds of stimulus. Thirty participants, half of whom described themselves as electrosensitive, were put in the imager and told that they would undergo a series of trials in which they would be exposed either to an active mobile phone or to a heating device called a thermode, whose temperature would be varied between the trials. The thermode was real. The mobile phone, however, was a dummy."

The article concludes:

"The paradoxical upshot [...] is that mobile phones do indeed inflict real suffering on some unfortunate individuals. It is just that the electromagnetic radiation they emit has nothing whatsoever to do with it."

The above example shows that simple surveys and focus groups would have yielded results that may not provide the correct insights to base decisions on. Yet, an example of impact such evaluations as I stated before is:

"Sweden, has recognised such sensitivity as a disability, and will pay for the dwellings of sufferers to be screened from the world’s electronic smog."

So, how do you choose to make decisions for your business?

Fundamental Breakthroughs - Fractals

It is a human characteristic to organize chaos of all that life represents. Yet, it is this drive that unfortunately drives us farther away from the true breakthroughs dependent on not following form and structure -  breakthroughs at a fundamental level. The best example of this is Albert Einstein, the famous patent clerk.

A similar case is Benoit Mandelbrot, the inventor of fractal geometry - "a rough or fragmented geometric shape that can be split into parts, each of which is (at least approximately) a reduced-size copy of the whole". See what is a fractal here.

Or further simplified... Fractals are mathematical representations of geometric shapes that are "rough" or "complex".

See an excellent interview with Benoit Mandelbrot here.

See the Public Broadcasting Service's program Nova on fractals called "Hunting the Hidden Dimension" online here.

In our education systems to teach geometry, we have simplified it and described it with clearly defined and recognizable shapes like circle, triangles, etc. With fractals comes understanding existing and development of new shapes both physical and virtual that mimic nature. Rather then my listing the large number of applications of fractals, see this site for fractal use. For a little more in depth mathematical understanding, see here.

What has driven me to write about fractals after having studied them for couple of decades is the application in the form of fractal antennas. See a company solely dedicated to selling fractal antennas here.See a bit more detail here.

I believe, the combination of fractal antennas and the substantial drop in manufacturing prices of RFIDs due to discoveries in cellulose based dielectric, the future is all about any and all objects being tagged, tracked and data based.

As my good friend Mr. Chris Downs of LiveWork (see my blog here) states, "It is all about the new oil called data".

USA: Political Changes Impact Science

Here are a few articles that share the extent of funding cuts on education and scientific research in the US in the past few years:

• "Federal budget impact on Fermilab"
• "Cutbacks Impede Climate Studies"
• "Nuclear Waste Funding Slashed..."
• "House Budget Committee" - Report

With the change in the political landscape in the USA, the Science Magazine published an article stating that there is good news for research in science, see here.

World's Largest Retail Space - Dubai Mall (The Consumer Heaven)

"Of the total indoor floorspace of 5.9 million square feet, a massive 3.77 million square feet is the gross leasable area."

States an article in the Gulf News here regarding the newly opened Dubai Mall. During my evaluation of retail markets of Abu Dhabi, Dubai and Ras Al Khaimah in early 2006, it was obvious that Dubai was redefining how one looks at the concept of "shopping". Again, as I have discussed in my previous posts regarding design and experience (see "It is all about Design and Experience?" here) - the design of these retail spaces are associated with functionality of being able to purchase products / services of choice while enjoying a unique experience whether it is  sking the 1.5 kilometer slope at the Mall of the Emirates (see here) or the aquarium at the new Dubai Mall (see here).

Back in early 2006 during my analysis, it was clear that foot falls were the measure more so than for example adjacency of complimentary sale opportunity, ex: outside a niche, high-end watch shop a cheap children's toy cart was parked. It had not improved tremendously till this past summer when I was there. Many other retail space use and growth principles were missing. Another reason I discovered was the space's owner has to contend with a globally diverse population.

Dubai to me is an ideal place for using immersive and experiential environments to understand the consumer and uniquely deliver to them what they desire. For now, it is big, bigger to huge! In a little rewording per Mr. Abed Bibi a marketing executive and friend of mine - "Please come and Do-Buy".

RFID ubiquity - Around the corner

"Silicon’s other role, when it is pure, is as a dielectric—a material that can be penetrated by an electric field, but not an electric current. It is silicon’s role as a dielectric that Dr Fortunato and Dr Martins propose to replace."

Recent breakthrough in utilizing paper (cellulose) to replace silicon: see the Economist's article "Looks Good on Paper" here. Now, this could see RFID become pervasive... I predict that the RFIDs will make entry through consumer product goods and use by consumers for their daily use. Hand in hand will be the privacy concerns. How have such concerns been resolved in history? Well, we know the answer!

See Franz Dill's compendium of blogs on RFID here.

(we)Blogs are over (per Wired)

"Thinking about launching your own blog? Here's some friendly advice: Don't. And if you've already got one, pull the plug."

A statement from the Wired article "Twitter, Flickr, Facebook Make Blogs Look So 2004" here.

1988... A computer lab at Georgia Institute of Technology... I had just finished typing up a Usenet article on a recent trip (on a Sun station) while a small window scrolled on the side showing what people were doing... what class rocked, what professor was pure pain, where was the Thursday night party going to start, insight on the mid-term coming up and so on... and at the same time I had couple of private chat windows going on.

Fast forward to just about 2008... has anything changed, not really. The only thing that has changed is "hype-cycling"!!! I like Wired, it provides, insight and foresight simultaneously while at times stating the obvious...!

Blogs have a place, like Twitter, Facebook, etc. I believe knowledge rinsed through experience consolidated into blogs will remain the main stay for finding vetted results to one's search for information. Blogs are what Wikipedia can never be... experience added to the product, i.e. Wikipedia is the product for gathering knowledge, everyone loves it and uses it... yet to engage in experiences associated with the "use" of the product, we will go to blogs that challenge, enhance, counter, evaluate, etc. the common wisdom within the product (Wikipedia) through the experiential results of humans.

Twitter has its place... and so do blogs. They will coexist.