Wednesday, October 23, 2013

The Services Race: Microsoft and Apple Target Google's Business Model

It seems like only a few months ago that major technology companies were strutting about with new proprietary operating systems in tow, confident that both enterprise and consumer customers would gladly pay the freight for superior operating systems and installed software.

And yet after the awkward introductions of Windows 8, Windows RT, Windows Surface, Windows Surface Pro, and then Windows 8.1 upgrades (withdrawn after major installation issues) - all of a sudden those cloud-based services on Google's Chromebooks are looking better and better for both work and personal use. Chrome OS, the operating system for personal computers that keeps all of your content and services in the cloud with Web-based secure offline services, turns out to have powered the hit PCs this fall for back-to-school and beyond. Chromebooks are four of the top ten best-selling laptops on Amazon, and generally the most affordable ones. So, while Windows PC sales fall and Apple Mac sales were stagnating, Chromebooks actually gained PC market share.

A good deal of the appeal of Chromebooks has to do with their low prices and cloud-based reliability, which probably wouldn't matter as much if people were getting more value from installed software. In general, though, they're not - increasingly what people value is coming from online services, be it for productivity, information or entertainment. Hence Microsoft has had to slash prices for its new PCs and rely on institutional sales wherever possible to drive up unit volumes just to keep market share losses looking less than a complete disaster. It turns out that paying hundreds of dollars for an operating system just doesn't unlock the door to either enhanced productivity and gratification. Instead, paying for Windows and other operating systems in the face of free OSes from Google and others seems like a waste of money - and time, given the complexity of many upgrades for existing PC owners.

So it should come as no surprise, then, that both Microsoft and Apple are discovering the power of "free" for their emerging and shifting market strategies. For Microsoft, its latest move to attract people to its Web-based Office 365 productivity software is making it free for students - that is, if their school has ponied up to buy it for its faculty and staff. That may not excite consumers looking at PCs online or in stores, but it's Microsoft's move to convince a generation developing job skills that Windows is essential for surviving in today's workplace. Given that enterprises are not moving away from Windows in droves, yet, that's probably a reasonable argument - if more fear-based than desire-based.

On the other hand, Apple has a line of hardware which, while remaining premium-priced, has a solid "it just works" reputation and a core of iWork productivity apps that just got upgraded. Taking advantage of Apple's shift to 64-bit processing across all of its devices, iWork offers improved performance, syncing of content into Apple's iCloud storage services and document collaboration services that roughly parallel collaborative offerings from Microsoft and Google. The price? Yep, free. Software upgrades for OS X, the operating system for Macs? That's free now, too. So while Apple has barely made a dent in enterprises with its iWork offerings, it has two positive factors to boost it forward - well-loved hardware and operating systems and free productivity tools.

So now we have both Microsoft and Apple belatedly picking up on Google's emphasis on throwing away everything except that which gets information on to their cloud Web services. What happened? Well, there were a few key factors that have finally hit home for both of these companies:
  • Google asked, "What has your installed software done for you lately?" and their customers responded, "Not much."
    For all of the ridiculing that Google took in the tech press for launching Chrome OS, it turns out that Google was on to something that the techno elites weren't quite ready to accept and everyday people were quite ready to accept - PCs just don't do as much as the Web can these days, by and large. Since Google had almost nothing invested in existing hardware in their customers' hands, they just focused on lowering its price to lower its cost of signal acquisition costs for its various services. In essence, the Web as a whole is the largest services platform possible, magnified by Google's global dominance in signals gathered from mobile phones of all kinds via its apps services. Compared to that, PCs and mobile devices are just signal gatherers and display units.
  • Microsoft and Apple asked, "You'll love this machine," and their customers responded, "I guess."
    New PCs and mobile devices from both Microsoft and Apple are both actually quite nice by today's standards in terms of hardware and look and feel. They're not clunkers performance-wise by any stretch, and in fact in some ways they're leaders. Apple especially has done a great job of launching machines that feel good, look good and do what they say they'll do. But in recent product intros, the problem for both Apple and Microsoft has been its customers saying on one level or another, "Is that it?" There are things to be said for a marketing strategy based around premium hardware, but when your hardware doesn't do much of anything notably different for the Web services that people spend most of their time with, this love affair with nifty hardware cannot last forever. Unless Apple and Microsoft can build machines with tangible benefits far beyond what a Chrome browser can deliver today on any machine, they've got problems.
  • All of them said, "It's free!" and their customers responded, "How free?"
     While there are plenty of people who are going to be product loyalists no matter what, increasingly people's brand loyalties are built up around Web experiences more than specific pieces of software or hardware. Our relationship with specific phones, tablets or PCs is measured often in months, sometimes years; software is updating constantly or fades into the background. The real lasting gold that people value the most is content and the services built on content. So when Google says "free," it's giving away things that it can afford to give away, because it build the margins of their core content businesses. When Microsoft or Apple say "free," they have to hedge it a bit, because ultimately they're protecting their margins via integrated hardware and systems sales. Take that free iWork software, for example - it gets you locked in to Apple hardware. Same for Office 365, to a lesser degree. So free isn't so free, then.
While the Google ecosystem is certainly not hook-free, it has a lot more flexibility to wiggle this way and that to make it easy for people to be bored with whatever machine on which they find Google services and to be more excited with what those services do. Google chased Web signal, Microsoft and Apple chased unit sales. Neither are perfect strategies, but in technology, a strategy based on doing things with as much signal as you can get your cloud around is for now much more marketable than a strategy that lets others do things with signal no matter what device generates them. Google is also more likely than Microsoft and Apple to build in opportunities for competitors to challenge its core services into its offerings, knowing that this provides both "don't be evil" air cover and an opportunity to make its ecosystem more robust overall.

Finally, while Microsoft and Apple provide customer logins for its core online services, Google extended those logins to become the backbone for a social media service that embraces both personal communications and business collaboration - +Google+. Collaboration for Microsoft and Apple may work fine, but with Google+ emerging now as the second-largest social network by many measurements, Google's fundamental service relationships has a social component that both Apple and Microsoft have neglected. Content just isn't in their corporate DNA, you might say, it's more something that its partners offer through their technology. Fine enough, but all of Google's account login points link you in to the world of its social network by default - and to the collaborative services drive by that social network. You might say that while Apple and Microsoft were making phones and PCs, Google was making a global communications system that told them about what the world what thinking and doing.

We're always going to be interested in the latest technology, and few things provide a confidence boost to many people than sporting it in front of others. But the truth is that the technology that Microsoft and Apple tout most is now decades old. The Web is still in its infancy, barely starting to become everything that it could be. We'll continue to see interesting and sometimes even exciting machines from Apple and Microsoft, but in their shift to Web-centric services, it's far from clear that either of them have enough distinct advantages to make a go of it in the long run. Google's strongest future competitors may not turn out to be either of these companies - at least in their current forms. In the meantime, may the best services win.

Saturday, October 19, 2013

Leak Marketing: Are Product Releases Shifting Fundamentally in the Realtime Era?

Press leaks are nothing new to marketing. Be it spy photos of automobiles on test tracks, scuttlebutt gleaned from overheard or off-the-record conversations or just plain pinching of information, people love to hear about products before they're released to the public - and the media knows that rumors are always hot news. It reminds me a bit of a rule of thumb wisdom in financial markets that drive a lot of financial information services development: buy on the rumor, sell on the fact. People love betting on the outcome of events, to the point that the final truth of the event itself becomes almost anticlimactic for many folks.

But in an era in which the broad realtime capabilities of Web publishing and social media are tipping the scales of what draws people's attention for breaking news, it seems that leaks are starting to shift the contours of how products are released in some ways that make the Wall Street model a bit more relevant. Take the recent release of Apple's new iPhones, for example. Under Steve Jobs, Apple cultivated one of the strictest approaches to product secrecy in computer technology marketing. In many instances, it appears that new employees were first assigned to fake projects, just to ensure that they were trustworthy about keeping secrets about the products that Apple was developing. Tight security and policies limited the "need to know" scope of information distribution in Apple to a degree that would make an investment bank or hedge fund proud. Yet in spite of these efforts, there was ample information about the new iPhones available prior to its September launch, including thorough glimpses into service manuals for details on specifications. By the time that the launch event came around, little was left to the imagination.

The pending release of Google's new Nexus 5 phone from LG, expected to be launched sometime in the next couple of weeks, is no exception and in fact may have raised the art (or science?) of leaks to a new level. Initially, when the traditional Android release "mascot" statue was unveiled for the new "Kit Kat" version of Google's mobile device software, someone happened to notice in an online Google video an unusual camera with a Nexus logo being used by a Google staffer taking photos of the event. Analysis of this photo was followed by analysis of other leaked photos, including a remarkably accurate 360-degree model of the expected phone. Additional videos, service manual leaks, postings of Nexus 5 cases and accessories as well as accidental (or not) postings of the actual phone on the +Google Play Store have revealed almost all of the key details of this device before a firm announcement date for the phone is even at hand.

What's different about this massive and broad generation of leaked information about new tech products is that it spreads so very quickly and organically via social media and the blog-driven tech press. There was a time when press leaks to friendly journalists could be used to provide carefully controlled views of what new products might be like - and undesired leaks were so valuable that journalists would guard them carefully as their own to ensure maximum readership. Today, in the link-driven online media, it's very hard to own the traffic generated by leaks, even when your publication may get attribution. And often via social media, it's everyday people in various product support roles that generate the core information about new products, subsequently picked up by the mainstream press but usually thoroughly analyzed online in social media before those publications have had a chance to weigh in on the leaks.

Is this a good thing or a bad thing? Well, we could debate that for a long time, but the simple truth is that it's a thing of some kind, and it's not going away. If markets are conversations, as The Cluetrain Manifesto book first advised us about Web-driven marketing nearly fourteen years ago, then the conversation about new products has shifted permanently to leak analysis as part of consumers' purchase decision process. As Google points out in its more recent Zero Moment of Truth view on marketing in an online era, these conversations have insinuated themselves into the traditional product lifecycle to the point that they have become a permanent and influential part of it. Consumers absorb data about potential purchases via trusted sources that include friends and social media connections and join in the conversation about new products well before they even approach a store shelf or online storefront. In other words, while traditional marketing is a component of a consumers' view of a branded product, the conversations about that product now affect its brand radically before it's even available for sale.

I am thinking about this especially in terms of the two-headed release of new iPhones recently. Apple had invested a great deal in the concept that slightly less expensive iPhones with colored plastic cases and warmed-over performance specs could be a big hit, along the lines of Apple's refreshing of its iMac PCs several years ago. Those iMacs were a big hit, not because they were any better than the previous Macintosh computers functionally but because the introduction of the colored and interestingly shaped units caught the public as being something new and fresh. By contrast, by the time that the colored iPhone 5c hit the market, there were widely available photos, lots of analysis of their potential pricing, specs and worthiness - and the release of a new line of Moto X phones from Motorola Mobility with twice the number of colors available on the iPhone 5c and the ability to mix and match colors on a custom basis. So not only did some of the pre-launch analysis of the 5c possibly tamp down desire for it, it also seems to have helped Google's Motorola Mobility one-up the 5c in both looks and certain features and performance.

On the other hand, leaks seemed to both help and hinder Apple for the launch of its iPhone 5s. This premium phone had plenty of accurate and near-accurate renditions beforehand, as well as fairly detailed information about its potential performance specifications. Apple's initial launch strategy was to restrict the sales of the 5s and to promote the sales of the 5c, expecting that the less expensive colored phone would have more sales. This was true for only as long as Apple kept its sales of the 5s restricted; as soon as supplies were loosened up, the 5s went on to booming sales, now twice those of the 5c model. The gambit to broaden profits and markets for iPhones via the 5c seem to have stalled, while the luxury image of iPhones have been supported better by the metal-finished iPhone 5s models.

No doubt leaks had shifted buyer opinions about the 5c more than Apple had reckoned, making their dual introduction somewhat flawed. It turned out that given the choice between several colors of an inferior model and a few simple choices of a superior model, most consumers had already made up their mind that the extra money was worth it before the phones were even rolled out. My guess is that Apple's analysis of pre-release leaks of the two new product lines may have caused Apple to restrict the 5s sales initially to create an image of greater popularity for the 5c model to get its sales going, but this strategy does not seem to have been able to overcome apparent consumer rejection of the 5c's value proposition.

So what we seem to be entering is an era in which leaks need not only to be managed, but listened to very carefully and, in effect, surfed for maximum precision in product launch. You might say that leaks are becoming free market research in a much bigger way, because the reactions to the leaks are much more quantifiable via online semantic analysis tools in a rapid fashion. This again brings us back to the Wall Street analogy: there had been real-time stock quote, news and trade information available in electronic form for decades, but it wasn't until software tools to perform analysis of that information in real-time became popular that the flow of analysis began to affect the sales, trading and marketing strategies for stocks significantly.

All of this does not mean that product development secrecy is doomed or unnecessary, but it does seem to mean that careful and timely analysis of how your markets are responding and generating product rumors and leaks is becoming as important as monitoring feedback on the products themselves. In essence that "Zero Moment of Truth" - the point at which a Web-informed consumer has made a decision about what product to buy- has shifted in many ways to a time frame that actually precedes the beginning of the classic marketing communications cycle. Consumer response to leaks and rumors now guides how we formulate those communications, both in terms of their content as well as their targeting and timing. To some degree consumer marketing has always tried to whip up a frenzy ahead of time, but now it must be analyzed much more carefully and deliberately and far earlier in the product lifecycle. As such, it turns out that properly staged and analyzed leaks can be used via Web content analytics to provide free and relatively unbiased raw data for market research that can affect product content, launch strategy and communications.

There's a risk/reward ratio in this leak management scenario that requires some careful analysis and research to substantiate its ultimate value, but this is only the quantification needed to gauge the exact details of how to manage a clear opportunity. I believe that focusing on this phenomenon and developing best practices for integrating into product and marketing lifecycle planning is going to have to be an essential tool in our management toolkits for many years to come. Glad to help you with this, as always.

Tuesday, October 15, 2013

The Burberrying of Apple Stores: Is Apple Aiming for Too High A Market Niche?

Credit Tim Cook and the Apple brass for thinking outside of the glass box when it hired Burberry's CEO Angela Ahrendts as their new SVP of retail operations. Ahrendts comes with a strong dossier of senior positions in successful upscale retail operations, and oversaw a tripling of Burberry's stock value under her leadership. That bodes well in certain ways for Apple's iconic stores, which have served Apple well in helping to create the aura of a brand that superior both in technology and social status. Ahrendts will bring with her a deep understanding of how to keep a premium brand seeming magical long after its core assets have become familiar to the public. She will also bring insights into how to make a brand that is actually fairly masculine in its core appeal a strong draw for upscale women, also.

All good stuff. However, once you get beyond those key strong points in Ahrendts' selection, things get a bit more worrisome. Apple has the strongest brand in the world right now, according to recent research, built on the aura of attainable luxury. While an iPhone or an iPad is not a trivial purchase for most folks, in spite of the temple-like atmosphere engineered by Apple for its stores in prestigious locations, ultimately you're slapping down just a few hundred bucks - if that - to get that Apple social aura. That's the sort of money that someone pays for a good but not amazing watch these days - techno-jewelry accessorizing for the socially minded striver, if you will. By contrast, the lobby of the old General Motors building in New York City behind Apple's storefront in midtown Manhattan used to show Cadillacs and the like that were worth thousands even decades ago. Apple's attainable luxury is popular, but, ultimately, built on very small sales units.

With that in mind, it's not clear that Apple has the ability to create products that can fit with the expectations of both a mass market and an upscale market on product platforms that have a lifecycle moving towards mere months of relevance. Burberry's iconic cross-hatched fabric patterns need only twitch this way and that in the hands of tailors to invent new ways of making their products appear to be fresh. For Apple, those few hundreds that they make on each unit come at the expense of massive investments in technology which is obsolete about the time that the products themselves hit the shelves in their stores. One could say that their technology is no more long-lasting than the typical fashion statement, which plays to the Burberry concept, to be sure, but Burberry's fate is not tied to armies of tech reviewers picking apart every component of a new smart phone or tablet meticulously even before it's been announced officially.

So the idea of having a Burberry-like approach to retailing and merchandizing Apple products is sound in many ways, but much more fragile than the typical Burberry worsteds. There is a razor-thin line to be walked between "predictable, but fresh" and "fresh, but predictable." In other words, You can do great merchandizing in Apple stores all you want, but the slightest shift towards seeming more like your father's Oldsmobile than the latest BMW can spell retail disaster for Apple. So they may have the right person on the case, but it may not be a problem that's really solvable any more at the retail level.

Put simply, if your kid's souped-up Chevy Corvette is blowing away your Bimmer every time on the road or in the media, you begin to have an image problem that marketing alone may not solve. The Corvette in this instance is mobile devices using Google's Android operating system, which as with the many cars of General Motors, can power just about anything from phones for people in Africa and China to top-of-the line units from Samsung, LG, HTC, Motorola and more. We're right around the corner from the introduction of Google's new Nexus phone from LG, a pure-Android phone which, by most early accounts, will equal or exceed the capabilities of the latest iPhones from Apple.

Like GM's Corvettes, Google's Nexus phones are not meant to be huge money-makers - they're image flagships sold for relatively low prices that draw people in to their brands. This is where the core strategy for Google and Apple diverge significantly. For Apple their brand is built primarily around their hardware and their in-store experience. For Google, their brand is built largely around its software and services. Apple tries to build out its services, but since they are more into seasonal launches of a handful of iconic products, it's harder for the services offerings to keep pace with Google's constant rollout of new software and cloud features. The salesroom for Google, you might say, is every device's keyboard and touch screen - including, increasingly, those found on Apple and Microsoft's devices.

So Apple may have the right strategy for marketing attainable luxury, but it's not clear that their product lifecycle matches how their competition attacks the same markets. Be it BMW or Burberry, most consumer markets work on the same calendars. For both autos and clothing, there are spring and fall introductions, and all of your competitors will be in the same mix. For technology, especially services oriented technology, you're in a 24/7/365 introduction cycle. So whatever Apple introduces has to be so worth it that your customers are willing to wait for your traditional-cycle introductions tied heavily to retail operations. And increasingly, the only thing that will make people wait is that they're loyal to the brand and its aura. That's sensible enough for many, perhaps, but for a small-unit brand based on perishable and finicky cutting-edge technology, a big gamble.

Worst of all, Apple doesn't have a lot of wiggle room on pricing. Apple CEO Tim Cook states emphatically that Apple will never make a "cheap" iPhone, but that doesn't mean that he's looking to make one that's two or three times what people pay for them today, either. So he cannot move Apple upscale into, say, a tech "Rolls Royce" territory, and slap a sign on the specifications saying "adequate," a la traditional Rolls sales methods. He has to stick on the lower end of a BMW-style image brand, yet survive when competition rolls out new models in the same general price range all year long.

Arguably Google is in an even longer lifecycle for its Nexus-branded Android devices, but it has the advantage of much more frequent software updates for those units and lots of third parties supporting the Android brand throughout the year. So not only does Google get Chevy Corvettes, they get Ford Mustangs, Toyota's Lexuses and so on - all of them equipped with constantly refreshed Google software and services. All of these third party brands have independence on their own product releases - including LG, Google's current Nexus phone partner, and even its own Motorola phone unit - and can build their own upscale strategy stories at will.

Apple may yet be able to pull all of this off as a branding and retailing play, but the combination of product lifecycles and diffuse competitors all linked by Google services will make it harder for Apple to maintain this formula. Apple's best hope in this mix is that some of Google's major Android partners are getting fidgety about having their fates tied so closely to Google's Android software. Samsung is notably trying to push its own interfaces and features aggressively, and even pushing for its own apps and operating system for its mobile devices. This sort of fragmentation is likely to play into both Apple's and Google's hands, though, as it's hard to withdraw valuable services from customers and expect to compete on hardware and software alone. So Samsung may wind up empowering Apple as a brand that never "compromised," even as Google builds up partnerships that are built around encouraging better value via Google software and services.

So there are some key opportunities for Ahrendt as she takes on her new position at Apple, but also several key challenges that may be beyond her control. She can hope that Samsung stumbles on its way to meeting Apple on its own turf, and hope that Google's Nexus brand has a harder time establishing itself as a performance value leader than Google would like. And in the short run, she may just luck out pretty well. Although the iPhone 5c is struggling in sales, the new 5s model is selling briskly, with the jewery-like allure of its new gold and silver-like finishes very popular amongst fashion-conscious Apple customers. As long as Apple is the accessory of choice amongst strivers looking to put some affordable social distance between them and its competitors, they will chug on for a good long time as a brand. But fashion comes and fashion goes, so in the long run, I would not be quite so optimistic about their products playing well as iconic retail gizmos.

Monday, October 7, 2013

Pew Data on News Consumption: Millennials Lead the Shift to Web Use

For advertisers wanting to sell products for aging "baby boomers" and "silent generation" senior citizens, there's good news: your news television audiences don't seem to be disappearing. For everyone else, there's mixed news: younger people read and view news less in general, but they're getting it from all sorts of sources on the Web, with social media consumption leading the way. So goes the story painted by recent survey data from +Pew Research Center that tracks news consumption habits. Many of the trends are not surprising, but they do show that Internet usage for news consumption has spiked amongst younger Millennials about 59% higher since the last Pew news survey in 2010.

Millennials pushing Web usage of news is significant from a couple of angles. First, the Pew data shows that in general, as people age, they tend to spend more time in consuming news generally. So, to some degree, the age range with this label has aged somewhat, but has only budged up its time spent on news consumption marginally so far.


Media industry analyst +Jeff Jarvis speculates in a recent blog post that perhaps the Web has enabled these Millennials to become more efficient news consumers, and he may have a point - you don't have to stream through endless commercials on the Web to get to the story or the video clip that's news to you. In other words, Web tools make finding the news that's of interest to you much more easier.

Thinking of the personally tailored curation tools built into a platform like +Flipboard or the automatically tailored streams in social media services like +Google+, this certainly seems to make sense generally. It also take a lot less time to scan headlines in online services of all kinds, from Twitter to Reddit to whatever streaming information service appeals to you. Yet the data also shows that for now newspaper consumption has ticked up slightly for Millenials since the 2010 survey. Again, this age bracket is somewhat older, now, and has to "speak the same language" as older bosses still tracking newspapers closely. At the same time, this bottoming out of newspaper downturn for Millennials may also indicate that as Millennials age, they're appreciating quality news sources more as they begin to need to sound more informed in professional and social settings.

The stats for television news are especially grim for Millennials, with only about a third tuning in now, representing the only medium to lose overall ground with them. By contrast, television news consumption remains a stalwart for Boomers and Silents, with a slight dip amongst the older Silents viewers but Boomers tracking strong - even as their Internet consumption of news surges and newspaper and radio consumption goes down. This seems to indicate that people in their prime earning years are well tuned in to news via mobile Web-connected devices such as smart phones and tablets as part of their routines, and still logging some TV time when they get home as part of a leanback routine. Trying in boomers on mobile devices to TV news channels would seem to be a priority - and yet TV news channels on cable and satellite are very slow to move out of those bundled services into direct streaming video delivery.

While Twitter is all the rage amongst TV new outlets wanting to amplify their stories and to draw reactions to them, the Pew data seems to show that Twitter's total influence over news consumption is marginal at best. About 3 percent of surveyed people cited getting news from Twitter in the past day, while 19 percent cited portals such as Google+ and Facebook, where there is more than just 140 characters to explain a story - as well as embeddable video and graphics. Twitter also earmarked only a one percent growth in its use for news since 2010, compared to a ten percent rise for other social networking sites. It also seems that those who tweet tend to be most interested in the news - 59 percent of polled Twitter users tweet or retweet news stories. So for reaching news hounds Twitter is a useful channel, but for average folks, perhaps not so much.

Finally an oddity from the Pew poll data on major U.S. cable news channels. MSNBC was the only news outlet in the survey not to show a decline, but the most drastic decline in the survey continues to be in viewership of CNN news. CNN plummeted after the 2008 elections, it wold appear, and continues a steady decline, while Fox News ticked down a bit. These are hard tea leaves to read, overall, but in general I'd have to assume that a younger generation of viewers that is less polarized in their politics generally is tuning out the more polarized messages from MSNBC and Fox and rejecting the CNN message altogether, perhaps opting for alternative news comedy shows like The Daily Show that helps us to laugh at both points of view from various angles, but largely turning away from opinionated news outlets in general and using the Web to draw their own conclusions more independently.

But the larger question that is not answered by the Pew survey is what people today consider to be "news" in general. When these polls started many years ago, thwere was a pretty clear roadmap for what constituted news outlets and news consumption. Today, with the Web, social media, mobile devices and an array of streaming services that can allow the Web to take over our television screens, what constitutes news and a particular style of news consumption is up for grabs more than ever. Authority in news story-telling is shifting strongly towards social media outlets, not replacing traditional journalism but providing a stream of raw facts and experiences that makes the role of journalism more one of curation and analysis than news-breaking. These were trends emerging several years ago, even as I was writing +Content Nation, but more pronounced than ever. A recent exchange of messages on Twitter between U.S. president Barack Obama and recently elected Iranian president Hassan Rouhani shows that major news figures are more in control of breaking their own news than ever before.

At the same time the shifting of news organizations into roles focused increasingly on curation, analysis and editorial opinions is creating an opening for news aggregation services that are more focused on picking the best sources of news overall. Be it a Flipboard, a Google News, a Pulse or a wide variety of other services, the ability of traditional news media organizations to act as the final arbiter of people's "front page" has largely disappeared in the online world. In the short term this seems to have pushed many news organizations into more sensational approaches to news headlines and topics to warrant scarce audience attention, but in the long run people learn about what's noise and what's signal, so these services will tend to resolve towards quality coverage over time. However, with more people able to produce news than ever before, there's no guarantee that the long-term push to quality via Web news curation tools will benefit traditional news outlets.

So this year's Pew data uncovers few new tidbits, but does underscore trends that news organizations need to embrace. The propping up of television news via the support of older viewers is tending to buffer some news organizations from the need to change their ways, but only because they long ago conceded that they were more entertainment and opinion outlets than serious news outlets. News marches on, and it marches to the beat of an online drummer, and the beat tells us that fewer people than ever will be fooled by bad news coverage over time.

Friday, October 4, 2013

Web Standards for DRM: Good for Publishers, Good for the Web

There is a fair amount of apocalyptic stirring of the pot out there on the Web in reaction to the World Wide Web Consortium's announced support for digital rights management (DRM) electronic content protection standards getting baked into Web standards. One imagines castles of protection sprouting up all over the Web, right?

Not.

Look, we've had DRM of various sorts of the Web since its inception, and it's stopped neither thieves nor people of good intent from getting good content - either from DRMed sources or free sources. But what we have had is a patchwork of seemingly endless schemes for DRM, each trying to offer some constituency a proprietary advantage over either their customers or their competitors. And in almost all cases, this has not been the case. Balkanized DRM has slowed down the growth of premium electronic content by making it harder to integrate it in with other Web-standard means of communications and content presentation. Hence, Web pioneer Tim Berners-Lee is all for the new W3C DRM plan - because a standard can allow so much better access, integration and competition.

Having social boundaries around certain communications is a long established human norm. DRM, in its best sense, helps us to enforce those boundaries, the way that social media services like Google+ and Facebook help us to define and enforce audiences for specific content. The main question is whether we have flexible social boundaries, open to the possibilities of the social context that surrounds it in a given use case, or whether we have erected inflexible stone walls around our content, insensitive to the possibility of more exposure being better in certain circumstances. As long as DRM controls were proprietary, the chances of the latter happening on a grand scale were minimal at best. With a W3C standard, it's far more likely that premium content can float at will through the Web like seeds in the wind, discovering on its own the right fertile contexts that will trigger the potential of its opening to new audiences.

And of course these controls need not be exclusionary by default. When used in a Creative Commons model, our DRMed Web content could be openly accessible as a rule, closing up only when it hits exception cases. With a Web-standard implementation of DRM, the ability to do this will be more supportable, since the security required to enforce these rules would be under constant challenge via open source coders. If it's feasible still for private DRM schemes to be shoehorned into the W3C scheme for DRM, the open-sourcers will keep the pressure on them to do better - for everyone's sake.

DRM is neither good nor evil - it's just a technology that can help us to accomplish a goal. Anything is better than the rat's nest of conflicting and productivity-reducing DRM methods that we have today, and a Web-based standard is best of all. I think that it will be great for the publishing industry on many levels. May the best tool win, and I expect that at the end of the day, Web-standard DRM will win.

Twitter IPO: Is This Another Facebook Launch - or Worse

So, at last, the little blue bird has tweeted an S-1. Twitter's IPO was announced via the 140-character real-time message board's own service, a confirmation that Twitter has become a fundamental channel for investor communications in the few scant years that it's come into existence. Twitter has seared itself into the consciousness of major media outlets and world influencers both prominent and plebeian, confirming the leveling effect of Content Nation on global news and opinion-making.

Well, good for Twitter. It's done a remarkable job of both scaling to become the world's most prominent real-time information service and in trying to rein in the messy, experimental early phases of its management into something that resembles a going concern. But when you look at the numbers coming out of Twitter's initial data from the filing, one gets concerned about how far the going will go. Twitter loses money - and lots of it - and the losses are flowing bigger than ever, thanks to falling ad rates and apparently stalling user growth. The filings show that lost $79.4 million last year on $316.9 million in revenue and has posted $69.3 million in losses on $253.6 million in sales in the first half of this year.

Both the ad rates and the user counts should be of concern to potential Twitter investors, but let's start with the user counts, since this is the core of what's going to make or break Twitter's ability to scale its revenues. Twitter is reporting 215 million monthly active users (MAUs), certainly a number that any major media property would be proud to have. But looking at indicative site traffic sampling data from Compete.com, that's not a number with a hockey stick right now. Compete's sample shows that the overall trend for Twitter is not good - and in fact has been so-so for more than a year. It appears to have strong traffic but stagnant traffic growth at best.

That would not be so great a concern if there were not the growth of the Google+ social out there as a major competitive factor for Twitter. By the same MAU metric, Google+ is now claiming more than 350 million users - with nary an ad in sight on the Google+ site. Unlike Twitter, Google has the entire Web at its disposal to monetize its ads via its AdWords search ad service and its AdSense ad service, not to mention its growing presence in broader forms of marketing via a widening range of mobile platforms, marketing services such as coupons and ecommerce transactions. So with Google+, the gathering of social signals remains largely separate from their monetization - Google+ gathers the social signals inobtrusively, triangulates them with people's broader data usage via its various platforms, and then enables marketers to fire up the right communications in a wide variety of contexts. It may turn out that Google will never have to fire up an ad in Google+ itself, because it will have provided so many other ways to help marketers elsewhere.

On the other side of the social  media spectrum for Twitter's competitive challenges is Facebook, which shows stable and gradually growing revenues and profitability. While with less overall flexibility than Google for monetization and more limited context for ad placements, its relationship-oriented data and deep timelines of relationships and behaviors provides a more rich context for advertisers than Twitter. Facebook may not shine as much as it used to, but for now it's likely to be a long-term survivor, either independently or via an acquisition should their growth hit a long, stagnant patch. Still, the untold factor for Facebook also remains Google+, which acts as a signal collection bucket stitched into the fabric of its Chrome and Android platforms that interacts with both third party apps and a wide range of Google services that provide rich context. Google+ does not have the media focus that Facebook and Twitter enjoy, but increasingly it has the everyday users' focus - and the growing focus of opinion-makers.

In my earlier post I laid out many of the pluses and minuses for Twitter, and the new data tends to confirm that analysis, but perhaps with more of a worrisome outlook. Twitter will continue to be the real-time headline champ of the Web for the foreseeable future, but increasingly it's not the place where people go to consume content - and interact with Twitter ads in the process. There were pluses and minuses to Twitter's general strategy of pulling back from third party platforms to secure those ad views, but the general problem is that Twitter does little to help people to focus on what's really important in their stream. Hashtags and top trends are generally far too coarse a set of filters for the "what's up that I care about" set that may want to spend some time there. And unlike Google+ or Facebook, value-add interactions to sustain engagment and signal-gathering are fairly limited and two-dimensional. So the problem remains for Twitter as to how to have the level of engagement that would attract both more ads and to keep users focused on content that's most relevant to them. Even if they have that information, their user profiles are very thin, so triangulating that attention with people's focus and intent is not very easy, so ad placements will continue to suffer.

None of these problems are easy to solve, but the key problem that Twitter needs to solve short-term is stronger traffic and engagement. Before these financial disclosures you could have argued that Twitter's move to cut off its feeds from realtime display in Google search was a good move, on the basis that it would make Twitter less of a commodity consumable in other places. But that's somewhat of an old media paradigm, ultimately; if your content isn't in the most valuable context that your users require, you're going to lose revenue, period. Ask German publishers who tried to boycott Google search in exchange for fees. That didn't work - and neither has Twitter's boycott of Google search. They've lost valuable traffic - and, ultimately revenues - from people searching for relevance on the key relevance machine on the Web. It's basically free advertising for portal engagement - and they threw it away about as foolishly as many news organizations have.

Twitter is and will remain indefinitely a powerful communication channel, and a great tool for spreading trends and brand value rapidly. But if I were an investor, would I jump at the chance of giving Twitter a billion dollars to sort out its future? Not so much. They're still in cash-burning mode, and not engineering a more clear path as to how to build revenues strategically over a long period of time. There are developments such as partnerships with TV program producers that could help to boost Twitter's prospects in the short term, but since many of their best hopes are with old media outlets struggling with their own audience growth and engagement issues, I am not sure that the combination of the limited context of Twitter and the even more limited context of traditional TV will attract the long tail of revenues from small and medium advertisers required to build up Twitter's revenues to the point of not being squeezed between Facebook and Google. My best guess: it has a problematic IPO, flounders a bit, bounces as TV alliances look promising and then sells out to Microsoft or perhaps even Samsung, companies in search of more mobile signals and engagement for its struggling product lines. You heard it here first.