Curated by Stuart Fogarty stuart@admaticallycom for AFAO'Meara Advertising, Streamabout The Video Agency and Admatic Ireland.
All comments will be posted - promise!
Google shares dropped 6% yesterday, a fall of $22 billion in value in a day. Largely because investors were concerned at Google's inability to maintain advertising prices. In their own reported numbers, one critical measure is their 'cost per click' which fell -9% and this caused concern - notably on mobile devices where advertisers seem to want to pay less than the norm. Largely, this is because of a perception that the mobile screen is half the size of a PC/Desktop so they'll only pay, half. The sale of Motorola Mobility to Lenovo at a discounted price, also caused worry. They sold is at 3 billion usd having paid over 12 bn. All that said, the underlying performance of the company is still strong with Q1 revenues up +20% to over 15 billion usd and profits up +3% to over 3 billion usd. Although investors did expect more. But one big, huge elephant in the room here, is the size of Google's market cap - a widely huge valuation. At circa 400 billion usd, a 6% slides wipes out a lot of value (circa 22 billion). It is the second highest market cap in America. And frankly bears no resemblance to the level of profitability it's making although it has large cash reserves. There are growing concerns about the high values of tech stocks so even when the core business delivers great results, any shakiness, causes a major investor outflow. This seems to sum it up.
What makes a video go viral? Absolutely no idea but have a look at this selection of the highest virals so far in 2014 and you might get an idea. And look at the Fox clip numbers. Nearly 300 million? So it's almost impossible to know. But we do know that if you don't do online digital video, it'll never go viral!
Twitter and Facebook are ramping up their proposition as TV's "second screen" social media in order to get some of those TV Ad budgets...but they've a good bit to go. They're not getting traction. 16% of online Americans use second screens when watching TV prime time says Nielsen. Only half of them then use their Social networks to talk about TV shows - so that's all pretty low numbers. A big jump perhaps, but still in its infancy and becoming a struggle. Consequently, Social Media isn't yet the way to use product promotion in relation to TV advertising. And this game might be up for Twitter/Facebook, or at least, be a much longer term play than they anticipate. The problem here is that Social Media is an alternative to TV not an add-on. Relating them together under the "second screen" proposition, isn't effective.... rather than, what they should be doing, is driving Twitter/Facebook as being different and offering other choices to TV. But Twitter/Facebook want to get their hands on TV advertising spend now to show revenue potential because of share price issues...they'll be waiting. The fact is that traditional TV broadcasting is dying, nothing surer, as audiences get fed up with scheduling of content at times that don't suit them and see better alternative content through either online broadcasts (Hulu, Love Film, Netflix) or online video (YouTube, Vimeo). TV audiences are in terminal decline and TV stations are compensating that loss of viewers by increasing their rates to compensate. So advertisers are paying more for lower views and that simply won't stand. They are diametrically opposed. So in time, advertising budgets on TV will switch to online. They've been slow to thus far, but like big ships, they take time and they will. Basic inertia, largely on the part of their Media Agencies, coupled with a generational belief in the power of TV advertising, means it will take time. A lack too of new digital media understanding and confusion about formats, still gives digital media a "fog" over it. But that will clear. Already there is an understanding amongst large brands, the traditional TV advocates, that they "need to do more online", but they're just not clear about what. Social Media second screen offerings from Twitter and Facebookare not it. Social Media alternatives to TV, such as broadcasting their own content, are it. In other words, they should be taking TV on and not be part of it. Twitter TV? Facebook TV? online newspaper TV? What Twitter/Facebook are currently doing is seeking short term revenues, whilst at the same time, being deflected from where they should be long term. They should be content providers onto huge platforms which they already have with massive subscribers. Traditional TV is over as broadcasters and the TV stations need to realise that their long term play is as content providers into Social media platforms. And not, as Nielsen shows, the other way around.
US tech stocks are taking a bit of a hammering from US investors this month. A 275 billion usd hammering. About 14 companies have lost about 20% of their stock market values which brings us back to the crashing sound of 2008. Business Software companies like Workday, Fireye and Splunk have been hit hardest down -30/40%. Biotech is down but Facebook has fallen -22% from its March highs (having spent 19 billion on What's App). Twitter and LinkedIn are down circa -40% from highs and even Google is down -12%. Netflix too are feeling the draught. Of course, this comes on foot of a flood of tech IPO's which in itself, creates a supply and demand issue (too much supply potential) and indeed, reflects a correction on the initial high levels of capital raised. Temporary? perhaps but these rallies tend to naturally gather momentum and continue to slide as nervous investors get cold feet and exit. It may affect the Alibaba float with a value of 200 Billion usd which is quite extraordinary. Although there could also be a view that these downward corrections actually bring realism to the market and is better for forthcoming IPO's. In other words, lower valuations are more realistic. But other issues could be at play too - the Russian/Crimean problem is not helping, growth bringing interest rate rises, and general economic matters. It could also be the first sign of another Internet bubble and crash as I know well from 2000. Hopes then were dashed because of the optimism on future earnings didn't materialise (and nor too, did investors know what they were buying into). If you want a view, it's that it's a correction on insanely high valuations based on unachievable revenues. And investors who got in for a quick bullish gain are realising that. So they're offloading long term...they'll tend not to come back. A market correction alright, but nothing temporary about it. Planet Earth.
Tesla, the new electric flash car that the world is talking about, is also going to be a digital first and shows the opportunity for in-car tech which will have issues for things such as radio listenership. (I should point out too, that Dermot Hanrahan, no stranger to radio and indeed, Electric Media, pointed out to me that Tesla was the name of a hungarian inventor who is largely credited with inventing radio for Marconi and not Marconi himself). Tesla will have a 17 inch touchscreen display and in trials it revealed that during commuting times (peak airtime drivetime) that news accounted for 54% of usage. With 26% of sites visited being local news sites and 13% being financial related. After news, restaurants/travel/auto related sites accounted for 15%, entertainment 14% and lifestyle 12%. Californians were the highest users of the screens by a mile but legislation in states regarding in-car screen restrictions (such as Washington + New York) meant lower opportunities to view. Web video is not there yet but getting there and this will of course, bring online digital video into a new market. News for example, will need to be more video driven to reach this audience - an issue for online newspaper publishers. The massive opportunity for in-car media is only at its infancy but it is something we should be aware of and react to. All cars will have web enabled screens as a standard and we the opportunity to deliver news/entertainment in a visual context, it may override audio radio listening.
But perhaps that's an opportunity rather than a threat. Radio Stations need to move into online video programming anyway, to reach the online user and indeed, to generate higher revenues from online TV. With established presenters doing established shows, there's no reason to move that type of programming online. Unless of course, the presenter only has a face for radio.....
Disney is buying Marker Studios for a rumoured 950 m usd, which in itself isn't unusual except that Marker is probably the largest supplier of short-form video content on YouTube. So here is the established brand Disney, recognising that it too needs to be in digital online video. Marker started only in 2009, but today has about 380 million subscribers with 55,000 youtube channels and wait for it, 5.5 Billion views a month....around 4% of youtube's monthly output. And of course, Disney wants to reach out to those active subscribers. It also will change future online video consumption and production - but in a real positive way. Notably too, these subscribers will be young adults, right smack into Disney's market. Disney already own 'Club Penguin'. It's a real shot in the arm too for youtube being able to up their game with rich Disney content and further proof, if it was needed, of the bright future of online video. A 950 million bright future.
PepsiMax have quite a clever Bus Shelter Video stunt - real digital ooh (out of home) making the side panel of a 4 sheet poster, interactive. It is done extremely cleverly using CGI, on London's Oxford Street and then recording the reactions for online viral video. The link to Pepsi is that it's "unbelievable" (like the stunt geddit?) but that's tenuous at best. More likely someone had a good idea and is trying to make it work.
But these things work great largely because they create talkability and moreover, generate a video which can then be shared (already nearly 2m times). Like I just have.
You may or may not, like Walmart. But you'll find it hard not to like them when you see this online video. Because it's storytelling - the best way to use digital video - and because it's real. Nobody is trying to sell you anything here except to feel good. About jobs. About American products. About Walmart. People might say that it's using people with Special Needs to promote Walmart. Exploiting them. We have Special Needs in our family and I can assure you it's the opposite - people want their voices heard and for so, so long we refused to use them in Advertising. Now we can and now they can be heard with online digital video. Good on you Walmart. And with 1.3 million views already, you're going viral which you could never do on TV. Deservedly.
Telsa, the new electric car that's creating a stir by founder Elon Musk, have a new video Ad online. For 1,500 dollars. Here it is (sorry you have to copy the link).... https://www.youtube.com/watch?v=-fvfiYi7uUE Produced by college graduates and titled 'Modern Spaceship', the college kids have gone on to create a video unit called, 'Everdream Pictures'. I predict their prices will increase though... Already with 14 staffers, the 25 year olds see a future in online video. Pretty good looking electric car if you ask me and pretty good looking digital video. The after affects are very 'Star Wars' and no harm in that, but it does show what can be achieved online albeit if 1,500 dollars is understating it a bit. But online video is inexpensive. And it's not a million miles away price-wise, from can be done. As well as reaching that bigger and bigger online viewer who's not watching TV without the big TV budgets. All it needs is a good idea.
Google Glass has a new application - Google Soldiers. US Soldiers (and I guess, others) are looking at equipping troops in the field with Google glasses. What it will allow them to see, is video. Perhaps video of soldier positions from over a hill from drone sky footage; perhaps a close look at a house or enemy position; perhaps better live maps of terrain; all in full colour and possibly in 3D. Developed in the UK by BAE, in a secure network, it will be a huge military advance. But it does also open the possibility of other applications that may be extremely useful. We've already seen leisure applications such as video of yourself, skiing. But Rescuers, such as lifeboats, being another one. Clear views of a distressed ship status by sending out a video drone in advance and beaming back to a lifeboat member. Or Police drone footage relayed to pursuing vehicles in a car chase saves the cost of helicopters as well as, making that information more readily available. Every police station could have a video drone. Or Medical applications through live video links to a hospital as a doctor tries to help someone off-site. Australia's bush doctors would be glad of them! Or Traffic drones, helping cars see traffic blocks ahead so as to avoid them. Google Glasses might just be becoming more than just smart leisure wear. And perhaps, helping develop business opportunities.
Simple piece of video, nothing too complicated here to shoot and no massive budgets - but powerful? Is it ever. Online video when it tells a story can really reach out and in this case, for "good". Over 10.5 MILLION views since March 5 (3 days) giving it a reach no Advertising campaign could without spending literally, millions. And it will get results. It already has. Brilliant concept, superb copyline (which I'll leave you to work out). You'll note too, some touches such as the Dad's newspaper headline, "Government declares martial law" and so on. 10,000 children have died in Syria alone. 5 million have been "displaced" in tents. Ours, sleep happily tonight. And you can click the video to help. So there's your call to action. It's all round, a great piece of work and thanks to 'Mashable' for pointing it out. It shows the power of what online video can do. What we do.
'Millennials' are often referred to as 'Generation Y', the generation born after 'Generation X', probably born from the 1980's. So they're 20-30's year old. In a way, they are now the Internet generation and this is an interesting study from 'BusinessInsider' and 'Youme' which looks at their habits. They're watching less TV. In fact, their constant decline in TV viewing means they're switching online to watch content. No great surprise there....to some of us....but it does re-enforce the ongoing collapse of traditional TV globally. They are though, high viewers of all content. They like to go online and are prepared to watch. Whether that's long form video or short form, they are there and they are watching. The favoured device is of course, mobile (smartphone) which means they're watching content when they can be distracted. Importantly too they're using video whilst their shopping (13%). So clearly looking at products and product reviews as they purchase. So they multi-task. Their "Ad" recall is low - I think probably because they're not bothered by it and want to get onto the real reason they're watching video. A pre-roll just gets in their way and it also shows (I think), that simply replicating a TV commercial as an online duplicate, is not working. Online Video is way better, so online deserves, a different version of the TV Commercial - especially when you can skip it. You need to get your message across now, in 10 seconds before the skipping begins! They also see brands that are using video online as being 'modern' and therefore, more applicable to them. The medium is the message. All of this means that to attract this audience, TV is no longer the answer. You need online video that works across all devices, notably smartphones. We are saying it a long time, but this is not a trend, it's where the future lies.
What is The Suzuki Jimny pulling? This was posted 2 days ago and nearly a million views. Which just shows ya, the power of online video! (Hard to beat with an Advertising campaign, isn't it?)
Bitcoin, the fledgling but becoming more popular, Internet currency, took a leap forward yesterday, with the introduction of a vending machine, the first in the USA. A sort of, kind of, ATM but it doesn't dispense cash although you can put cash in and get a Bitcoin out. Although real, full, normal ATM's are on the way this month in fact. Installed in a cigar shop in New Mexico (honestly), in order to avail of less strict financial rules and notably those affecting money laundering. Problems which have been persecuting Bitcoin following the revelations about 'Silk Road', the drug dealing site. But this vending machine makes Bitcoin more real and more mainstream which is a leap in itself. Mind you, the currency has and continues to suffer wild fluctuations from highs of over a 1,000 usd to just 50 usd. And that in the last 6 weeks. But these fluctuations are fuelled by technology glitches and more over, speculators. Stability is key to the future of a currency. Although in time, I've no doubt Bitcoin will get there. It only "started" in 2009 and really came to notice in 2012. More and more "bricks and mortar" merchants are accepting them and there's a huge number of online businesses/exchanges that do. It's growing. The presence of Bitcoin machines on the 'high street' (or in cigar shops) will also put people more at ease. It has a long way to go but I think, it will be a strong global currency of the future which in turn, will turn the financial world of Governments, unable to control their own currency, on its head.
Nearly 73 Million views of the very excellent 'dumb ways to die' rail safety campaign. Superb. So here's their Valentine's message about well, eat your heart out. Bizarre romance but another extension of a great digital video campaign. Oh the original? Here you go....
Well, well, online video just gets better and better. This excellent work by Camp4Collective is Alex Honnold in a free solo climb in Mexico. Importantly, it's ultimately a trailer for the full version to appear on The North Face YouTube channel. So talk about making high quality, engaging digital video! 350,000 views in 5 days also gives you a good sense of how really interesting online video is working. If it's good, it's shared and it's blogged like this. And it's commercial, presumably North Face are paying for this. Really strong online video is really strong advertising and really useful in building a brand. The association of this video by North Face, is brand engagement of the best kind. You couldn't create a TV Commercial that does as much. The web of course, has allowed people like Camp4Collective and indeed, Streamabout, do quality work without being at the behest of big TV corporations. We've moved a long way too from online video being about the cat falling off the ladder.... Good stuff.
It's been a tough old week for Twitter. In its first filings to Wall Street since their IPO, things have gone downhill. Investors are worried. Twitter's US growth has largely stagnated and international growth is up 8 million users on the same yoy period. Small enough. Now with 187 m users internationally and 54m in the US, giving it 241m overall in Quarter 4 2013. In Quarter 3, that was 232m, so that's the worry because it's a small increase and USA stagnated. US Advertisers account for over 70% of Twitters revenue. And it's all impacting on the share price. Early stage poor growth like this, is really considered badly with the shares down circa -25% on the week. That's a massive offload. It is only one quarter of data, and revenue in 2013 was 665 million usd, up from 317 million or +110% and EBITDA was up +256%. But these numbers never got a look in, so in some ways, the dissemination of information didn't help. Twitter still has a large advertising reach and it's still growing its users and its revenue. But the fluid typical ipo investors, may continue to depart and that's a problem. IPO investors tend to be more 'punters' and get frightened easily. That's not good news for Twitter but it's likely that some maturity will come into the market in time....if that is, investors are prepared to wait.
Superbowl commercials cost an average of 4 million usd for 30 seconds. But of course, the build-up on Social media and the 'excitement' that a new commercial brings, means that these Ads get a reach far beyond the showing on the night. This year the controversy around Scarlett Johansson's commercial for Sodastream, shows how that impact can be extended. It made the front pages of a lot of newspapers and TV/Social media comment. Most advertisers release ads, about the ads, as previews to gain Social Media traction. Doritos of course, get fans to write their Superbowl commercials, giving the campaign "legs" before airing. Justifying the return is tough without that level of cut-through because the spots are expensive (Budweiser took 2 x 60 second spots this year = circa 16 million usd) so you have to grab the opportunity as Apple did in 1984. Newcastle Brown Ale (you'll see it on this blog below) actually captured the Superbowl hype without having a commercial in the game. Real guerrilla tactics. The top 5 Advertisers in the last 5 years are Budweiser, Pepsi, Hyundai,Chrysler and Coke in that order by expenditure. Interesting data from The Financial Times which shows that in order to get a return on that investment, Coke would need to sell 5.7m cans...but I think there's a point too about brand. They need to be seen as having a presence at The Superbowl in order to be quintessentially, pro-American. Can the heritage of Budweiser for example, not be in The Superbowl? It's a brand that's all part of Americana. But is it worth it? You better believe it when it's done cleverly. In some ways, The Superbowl is a must have for brands that need the endorsement of American culture. It's more than just spot-buying, rather, an involvement in American society.
The best Superbowl commercial I've seen this year that isn't in fact, a Superbowl commercial. In fact it isn't even a commercial. Great little ambush though....and a great Anna Kendrick performance. Good work Newcastle.
Superbowl Sunday. The annual feast of new specially created TV Commercials. A time to remember the greatest of them all and I was reminded of this one by a post by Ultan Bannon on LinkedIn. Chiat Day's, Ridley Scott's '1984' Apple Mac commercial. It actually annoyed George Orwell's family so much for copyright, they went legal with a 'cease and desist letter'. Apple sales increased by 50% in the days after it aired in the third quarter on Jan 22, 1984. Hated by the Apple Board, it was pushed through by Steve Jobs and Woz. Woz even offered to pay half of the airtime costs. It flagged the introduction of the Mac on Jan 24 that year. The greatest of them all? Yep, for sure.
There's a lot of talk about Facebook and its popularity brought on by some Princeton University research which suggests it's about to plummet. It's got far more coverage than it deserves and is of course headline-grabbing, rather than solidly thought through. Their "research" is based on the number of times 'Facebook' appears in Google Search and as to how that's declining and therefore (huge leap of faith required here) that Facebook will lose "80% of its users by 2017". It is, as Facebook describe it, "utter nonsense". The reason why Google search of the word 'Facebook' is declining is the growth of mobile. When you have the Facebook App on your phone, you don't have to Search. Donkeys. 78% of Facebook users are on mobile (870 million people a month) so desktop users are declining. So is desktop. It's like saying 'Twitter' search is down and therefore Twitter is collapsing. Oh dear. A Facebook data scientist went on to do the same exercise on Google Search for Princeton to prove there would be no students in Princeton by 2021 and no 'air' in the atmosphere by 2060. Facebook has competition no doubt, from niche social sharing sites but Facebook is not, MySpace. It's share price reached a high this month - £85 billion stg high. And the real loser in this? Princeton University.
For the first time since Apple opened its Itunes music store in 2003, US digital music sales have fallen last year. Interesting data from the reputable Financial Times. Why? They've dropped by about -6%, and downloads account for about 70% of that market (which shows you how much record shops have suffered) to well over a billion units. Of which Apple now controls about 70%. The reason why is streaming - music rental. Itunes Radio is one reason where people hear songs in a radio playlist supported by advertising. So if they switch to Itunes Radio, they are less likely to buy from ITunes. Might be a case of shooting yourself in the foot? We will see. Spotify also people to choose the songs they want to hear for a monthly fee. Deezer similarly. Monthly fees might stabilise the market but it will defeat downloads. I don't necessarily need to buy the song, just listen to it. But artists and music company revenue is worse in monthly streaming.... generating licence fees of circa 7,000 usd which is equivalent to about 12,000 bought downloads. Only. Beyonce's latest album had about 830,000 downloads in three days. And of course, there's the monthly free streaming options out there which don't generate hard core revenue but rather a share in advertising. Worse again if you're a record label. It's a sea change in the manner in which music is distributed and hence the impact on downloads. Will people want to just rent an album rather than buy it? If they do, there's a long hard road ahead. However, it's hard to feel sorry for record labels. They spent years fighting it instead of embracing it and now find themselves dictated to by the market. For once.
After all the talk, interesting to see Amazon's announcement this weekend that it will launch a Sunday delivery service. Starting in 7 areas in the UK but becoming the norm, it's about getting deliveries to people who might miss them (or not be around to get them) during the week. It will be a permanent feature in London from the get go. They've already tested them in December and they are free to members of Amazon's 'Prime' Service. This is nothing whatsoever to do with digital. Simply, it's just better business that happens to come from a digital business. If people want Sunday deliveries (and clearly Amazon's test show they do), then give it to them. There is no reason why existing traditional retail couldn't have done it and yet because they haven't, they'll now scramble to keep up. Online sales already account for about £1 in every £5 spent. Better customer service through Sunday delivery, will grow that. Traditional retailers have been dealt another blow. Hard to think of an excuse for them though. This is just, Better Business.
Ad men and Advertising is driven by Brands. Marketeers are driven by brands. Company Balance sheets are driven by the values of those brands. And yet, we may be seeing the end of them. A brand is something a consumer is prepared to pay more for, a premium price. "Prepared" is the key word. Largely, how Brands started, was with Sugar believe it or not when it was a hugely valuable commodity. In the old days...you went into a grocer's store and asked for sugar which he kept in a large, open, hessian sack, behind the counter. If you had a jar, the grocer filled it, weighed it and handed it back to you and you paid him. If not, the grocer had some sort of a container that he'd fill and sell to you. But there were problems. The amount of sugar you got every time you went in, was different. The hessian sack wasn't always clean and the sugar not always hygienic, as flies circled it. The quality was different because the grocer bought it in bulk from different suppliers so it was never consistent. The taste varied. And so on. So the grocer decided to bag the sugar. In doing so, standardising the weight, the quality, the hygiene and the named it something - they branded it. What that meant was the customers knew what they were buying consistently and they were prepared more for it in return. That's the essence of a brand. When I go into McDonald's for example, I get the same burger in Dublin as I do in LA. Or Coke tastes exactly the same in Jamaica as in Norway. That's a brand. However, because of all that preparation in developing consistency as well as the advertising costs, brands demand a premium price. You trust it more than the hessian sack of sugar and so you pay more for it. Straightforward. Also, you'll develop loyalty to that brand for one reason or another. Maybe it makes you feel better buying a branded coat. Or perhaps you like the taste of a brand of sausages and are loyal for that. Or the packaging you feel, makes you look cool. And so on. Loyalty to brands is a cornerstone of marketing because advertising can only get you to try a brand once. And if you like it having seen the Ad and tried it, you'll stay with it and so hence the long return on that advertising/marketing investment. All good. Until that is, a recession hits. What we're seeing now in Ireland and the UK certainly, is a pull back on brands. A major break in that loyalty. The main reason is of course affordability but what's totally shocking is the quick reaction of consumers to switch to lower cost products. They're leaving established life-long brands and buying products they know nothing about, because they're cheaper. They're doing so without as much as a thought. In retail for example, they're flocking to the discounters and buying products that they're unfamiliar with. In a lot of cases, brand names they've never heard of nor know nothing about that brand's heritage. It could have been produced in a shed. In other retail, they're opting for lower cost products rather than the brand they trust and buying 'off deal'. Bogof and twofors (Buy one get one free, two for the price of one). They're not prepared to pay the premium. And it's obvious even in my fridge. Established brands are reacting by reducing their prices, reducing in other words, their 'premium'. It's understandable - they have to sell - but it will kill them ultimately. How many years did friends of mine develop Sony as the top end brand? How much money was spent on building that premium brand? And then I walk into Tesco on Saturday and lo and behold, there's Sony on the shelves. Any wonder Sony shares are graded at 'junk status'? You see, as I said, if a company loses the value of their brands, they lose the Balance Sheet. As they trade their brands down in price, their brands have lower sale value should anyone want to buy them. And consequently, the company who owns the brand, eventually has a lower sale value in turn. I looked after BMW when it had exclusive brand status. Now I see the BMWOne series cheap version, at every traffic light. My 3 year old BMW car was then 80,000 euro new, and it's now 45,000 euro new. I do understand the short term gain in reducing prices, but understand too, the long term brand loss. I won't buy BMW or Sony again.... and I was a long term brand loyalist. Consumers ultimately decide whether a brand survives. And right now I get a sense, they don't want them anymore. Shocking but we need to get our heads around it. Brands aren't dead. But they might be dying.
The well publicised vital Christmas retail sales figures have been a double-edged sword but perhaps, a lesson. Whilst trading was down for familiar names such as M+S and Tesco, in turn causing drops in their share prices, online retailers such as Asos (online fashion), Ocado (online grocery), Argos, Dixons have done well. Dixons/Currys will have done well too, through the sales of technology products such as the Kindle, Ipad, games consoles and Phones. They are replacing traditional toys as gifts. John Lewis is saying it sold an Ipad every 10 seconds in the Christmas run-up. Indeed Tesco showed +10% growth in their online business but it didn't compensate enough, for the decline in their shop sales. Morrisons which is considered to be a big Christmas loser, have only just launched their online shopping site in January. There is a marked contrast between offline/online and further signifies the consumer switch, both to online shopping and to discounters such as Aldi, Primark and Lidl (up circa +20% in the UK). Asos (online fashion) showed growth of a staggering +30% in the UK in Q4. White Stuff, a clothing retailer showed +50% growth online. KPMG reported that online non-food sales at Christmas were up by a fifth. That's +20%! In grocery alone, they report 15% of all sales are online and a value of £900 million sold online between December 20th and 23rd (3 days). A third of Tesco's online grocery sales were by mobile at Christmas and 'click and collect' being a big feature all around. Apart from convenience of being able to shop whilst watching TV for example, in a recession, the cost of petrol and car-parking is an issue. Equally too, there remains an over-riding view that online is cheaper (and in some ways it should be, cutting out middle-man margins). Of course too, online shopping is now so easy and intuitive, that it's considered an easy option for most. It's not as technologically daunting as perhaps it once was. There can be little doubt left, I think, that online shopping has exploded and these Christmas UK numbers illustrate it clearly. The proliferation of devices too, make it even more convenient and the 'same day delivery' issues as promoted by Amazon, bring it into a new phase. If you're in retail, the value of your brand is now in what you do with it online. The need for large, traditional retailers to start investing in their online brand, is almost past. It's now a must or they will suffer. Hard to see it any other way.
In fact it's 7 years old. Steve Jobs presented his great new idea for the phone market and everybody thought, What? A phone? And it brought the whole concept of touchscreen, firmly to the market. Today it accounts for over half of Apple's total revenue with about 450 million units sold. Of course, the revenue isn't just in the expensive handsets but rather in the applications through ITunes, App Store sales and so on. The Apple Store alone, generated 10 Billion usd in 2013 with over 50 BILLION Apps being downloaded since the start. 50 Billion! The Iphone 5S by the way, is 20% lighter than the original Iphone but 40 times faster. The Iphone now makes more money than all of Disney and all of Coca-Cola. It makes more money than all of Microsoft! It's pretty impressive for a 7 year old idea don't you think? And a helluva tribute to Steve Jobs.
Interesting idea from one of America's oldest newspapers, The San FranciscoChronicle. It's 149 years old and owned by Hearst. Audrey Cooper, the new Managing Editor appointed in May 2013 and only 37, has started a digital incubator or 'boot camp'. She is making all staff, notably reporters, to go through this incubator and understand more about digital publishing, for training. It is to give a better understanding of clicks, metrics and referral sites (like Reddit, LinkedIn, Pinterest) to bring better insights into how stories get pushed out there. And to understand reader habits better. They have had declines in their printed circulation to now, 300,000 readers only, but their website is picking up readers, although not fast enough to compensate for the printed readership decline. So it's a mindset change to put digital first, something I've spoken about before. It's new young publishers that have the digital savvy to embrace online and this scheme seems a good way to start. For a lot of traditional newspaper people, they simply don't understand digital and frankly, most of us are embarrassed to ask when we don't. Absolutely understandable and reflects the general populus. But this is charming way of enlightening them all, without that embarrassment and in a way, motivating them. When you talk about the digital world, it tends to become exciting and opportunistic, rather than threatening. She's on Twitter (@audreycoopersf) and LinkedIn (http://www.linkedin.com/pub/audrey-cooper/40/a71/17) and I've no doubt all other Social Media. A lesson there too for publishers - if you're not online, you'll never understand how it works. But let's hope it all works out and proves to be a business success. It's certainly to be applauded.
Interesting retail data from The Financial Times. Best Buy, an electronics chain, saw a 15% rise in online sales in Q4 to 499m usd. Home Depot, the DIY stores, online rose by 50% to 600m. Walmart online sales expected at 13 billion for 2014. Very strong rates of growth but ecommerce is still low in their overall sales. Only 6% at Best Buy, 3% at Home Depot and less than 3% at Walmart. Whereas generally, online now accounts for an average of about 11% of all retail sales. Consequently in fact, these traditional 'bricks and mortar' retailers have a lot of catching up to do. In particular, they need to win against pure online retailers (such as Amazon) who are offering better shipping times and better customer service. Amazon will do 75 billion online this year. The view is to be able to offer both experiences (online and offline) is the ideal notably at stores (like Home Depot) where customers feel they need to have the advice of a sales person. Indeed, 'click and collect' is seen as a classic example as to how to compete with Amazon's same-day delivery. I'm not sure they're right. Online is the new way to shop and will eventually overtake bricks + mortar. Consequently, these retailers need to focus on their online shops and start thinking like tech companies, not as pure retailers. Online is cheaper to provide (fewer staff, no high street rents/overheads) and it's better margin being direct. It's also global so provides the opportunity to sell into a new customer base, previously limited by store location. Online media is also cheaper, targeted and more effective in promoting online shopping and reduces the big advertising overhead that these large retailers hold. The switch from high street shopping to online is now well upon us and growing fast. That means that new retail ventures are starting online every day and chipping away at traditional customers of the large retailers. It has to be the focus now, instead of shops. And not a bit of both. It's what the customer wants.
Mashable, the probably best regarded technology blog, has named its breakthrough brand of 2013 as Netflix. Right too. Two years ago Netflix was dead and it's a real lesson how a bricks + mortar business embraced online. You might not know, but Netflix then, was a DVD seller sending them to you by post. When they opened their online streaming business, they offered both (online or by post) but increased their price by 60% causing outrage on social Media (and a mass customer exodus). CEO Reed Hastings was named the worst CEO by The New York Times and the shares went into freefall. Then. It was only a new focus on their online business that brought back customers and early in 2013, their first real good performance with a 7m usd profit on the last quarter of 2012. And a big growth in subscribers, eating Blockbuster along the way who didn't react. They ploughed money back into the service with more content and international roll-outs. They used their money to build their business with a clear identification of low cost movies aimed at families with kids. No porn here and possibly no blockbusters, but good solid family stuff at 7 dollars a month. They released 'House of Cards' in February and it all started to come right topping 40 million subscribers now. Stunning. It was the top performing share early in 2013, up 300% year-on-year (YOY). The future could not look brighter. Better content supported by their cashpile, with an opportunity to enter new markets and with business acumen to keep at their brand, couldn't be better. They are already the new TV. Advertising money, if they decide to take it (they may not since it's not conducive to their brand offering) awaits in the billions. Subscribers looking for additional premium services like live sports, await on the sofas. It's a great digital story. The new Apple one.
Original online programming moves on. Netflix now move into the Documentary space with the announcement of 'Mitt', a documentary following Mitt Romney's bid for the US Presidency. It starts in 2006 and goes to the loss in 2012 but what's interesting is that this is typical of "digital" film making. Not the sort of thing that would end up on TV but it can end up on Netflix. TV stations are no longer the arbiters of content, thankfully. Because Netflix want new and interesting, exclusive content and this is a classic example of that. They should be thanked. It airs Jan 24.
TV is actually on a tipping point. A lot of us take the view that traditional TV is dying at a rapid pace but Saturday's story in the illustrious 'Financial Times' will only hasten things. It's a paper well read, by CEO's and Marketing Directors. The story is based around new Advertising spend data which shows, that after three consecutive decades of growth, it has finally peaked this year and now starting to decline - the tipping point. TV should capture 40% of the global 532 billion usd ad market in 2013 and then start falling. That data came from none other than Publicis ZenithOptimedia, reliable a source as you'll find. That 40% share will now go into steep decline. This is of course due to the rise of digital. The explosion of digital across multi-screens, was going to hit TV hardest always and in particular, the reluctance (ongoing reluctance) of TV stations to get involved with digital, has further accelerated their demise. A new breed of marketers too, has brought an opportunity to change and online video is also now a far sexier media buy, than traditional TV. For example, YouTube is surging + 50% with 66 billion usd in revenue this year. Google is also powering ahead on their GDN network. It is good news for digital providers and another breakthrough in their fight with TV stations who went to lengths initially, to try and put them out of business. But like a lot of businesses that simply refuse to accept digital as even an option, they lose out. And TV is digital's biggest scalp.
Music streaming just got shot. Spotify announced that its music streaming service will be free (yep, free) to mobile users. Now that's a real shot at Itunes Radio (which is free) as they prepare to launch fully. Other services will be really hit because you can't compete with free - only match it. Spotify was previously 9.99 a month (spotify premium) but they did have a free version for desktop and laptop. And they also announced to get more publicity, that they now had a whole lotta Led Zep online. For free. (Led Zep 4, cover above, is always thought to be their best moment btw). The service will be supported by Advertising for revenue. This will concern local radio stations with a music bias, who'll have difficulty in retaining online listeners too. Of course, Spotify will try to upsell you to ad-free versions and indeed other services such as 'on-demand'. But this is a breakthrough in the fight for listeners however, it's also a sign of a race to the bottom for all subscription services. What's happening is, people are able or prepared to pay less so they're moving. If Spotify's subscription model was a roaring success, they wouldn't be doing this, trust me. And will advertising pay for the music copyright fees and run the business? Difficult to see, but it is a model working for Facebook and starting to work for Twitter. One thing for sure though, it has killed the market.
