That is, the ideal relationship a company should have with its customer is that it produces a great product the customer loves and talks about and thus sells; there is no need for advertising there. It’s only in the case of failing at that idea that one needs to advertise. (And by the way, I hope there’s enough failure to continue to support media!)
Jeff spoke about this at the BRITE '09 conference this spring (see 16:00 in the video)
Is advertising truly a "failure"? (even one to be hoped for, in order to fund media)
I take your fuller point to be that advertising represents a "fallen state" from the "ideal" of purely spontaneous or consumer-led conversation around the value of a product, service, or brand. (Think Eve and Adam idyllically swapping consumer reviews in Milton's Paradise… before that damn Apple and its ads arrive.)
I think it's important that some categories and products are much more likely than others to achieve this paradise of having no need for advertising.
Three criteria which are essential to going ad-free: 1. The product is easily adopted (easy trial, sharing… Everett Rogers' "attractiveness" for Diffusion of Innovation) 2. The product is at a low price point, and is a lower-involvement decision (especially with a "free" price) 3. The product has low marginal costs for the producer (all bits and no atoms is the ideal)
If you consider these, it's not surprising that we have ad-free success stories in categories like free web services (Twitter), lower-price media offerings (sleeper hit books or movies), cheap software (those $1.99 iphone apps), or modest-price fashion items (the craze for mismatched socks). All of these fit the above criteria.
But if you look at a category like cars (less easy trial, high price point and high-involvement decision, high marginal cost per product), I would argue that you will never get a product so innovative that it needs no advertising.
My Honda Fit is damn innovative and uncannily fits a host of needs that I will pay much more for than an iphone app (high mileage, great storage, parkability, etc.). Yes, I was greatly influenced by 3rd party reviews. But the costs and scale of designing and manufacturing a fleet of cars requires that automakers like Honda also invest in some high-reach advertising to build awareness and jump start the conversation. Even a consumer-crazed car brand like the Mini has found that they simply need advertising (in addition to all their grassroots buzz-making) in order to launch a product with sufficient volume.
To say that Mini's cars, or SAP's enterprise software, or Cartier's luxury watches, are "failing" to create a value offering that is as compelling as Twitter's or Tap Tap Revenge's--because they need ads to achieve scalable sales--would be an unfair comparison.
Still, I think it's a great question for every marketer to ask themselves:
How much are we relying on advertising? And how much does that reliance reflect a failure to get our customer networks to sell the product for us?
I recently had the pleasure to host a webinar for the FASTforward Blog on the subject of integrating social media into business processes and the design of customer experiences.
My panelists spoke from a wealth of experience leading major social media projects at Dell and Best Buy:
I'm still energized from last week's BRITE-Asia '09 conference at Singapore Management University. It was exciting to spend the day discussing the impact of digital media on business from an Asian perspective, and to find people grappling with many of the same challenges and questions as in the U.S.
Provost Rajendra K Srivastava started the day with an argument for the enduring value of brands. He deftly showed how stock market performance during the global crash of October 2008 demonstrated the ROI of brand building in terms of risk management. The market capitalization of high-brand-value companies fared about 5% better in the crash than that of less-branded companies (controlling for external factors like industry and size). (Raj's talk was featured in an article by Channel NewsAsia.)
Dennis P. Susay, Merrill Lynch's head of branding for the Pacific Rim, talked about the importance to brands of first-mover, highly-visible, game-changing innovation. Cases such as the iPhone, VW Touareg, and diabetes LifeScan, showed the importance of customer insight and meaning, and the power of collaborating with other companies. He stressed that while service innovation is costly, it is harder for competitors to duplicate, offering sustainable advantage. Overall, innovation offers brands a chance to make an impact when they can "prove it in a big way."
I spoke on the rising power of customer networks and their impact on brands and business models. I spoke on why I use Twitter; why even the Taliban are addicted to the Internet; and why 3 million fans "friended" a Coca-Cola page on Facebook which the company had not made. To adapt to customer networks, marketers must stop seeing themselves as the sole source of their brands. They also need to stop chasing today's latest technology fad, and focus more closely on user behavior. I showed cases of how companies such as Nike, Dell, and Procter & Gamble are using innovation to engage customer networks and energize them as advocates for brands. (My talk was covered in a ZDNet Asia article.)
Schmittspoke about the need for big thinking in business to drive innovation, and used Odysseus' Trojan Horse as a metaphor for the power of big ideas in strategy. Drawing on recent brain science, he explained how creativity arises in the mind from the synthesis of previously unconnected ideas. Business cases from Apple to Dubai to Audi to Dove illustrated various techniques for generating innovative ideas. The value of benchmarking innovations from outside your industry was explained, and the importance of leadership to sustaining Big Think, and not falling prey to the syndrome of one great idea that is never extended (the VW Beetle, or the Motorola Razr).
Kentaro Kimura, of creative agency Hakuhodo Kettle, presented his vision of how to "boil the world" for clients with media neutral, creative advertising. The key of his work lies in finding the unique + universal "moment" for brands – from a GPS device to skin care to a warm Japanese bun. Kentaro's speech was pure performance art, with wacky music, disarming examples, and a virtual dialogue with his agency back in Tokyo. To me, it showed that sometimes the great ideas you need won't come from the crowd; and even in a social media age, you still need your own vision to promote your brand.
Gavin Coombes, CEO of FutureBrand AsiaPacific, offered sage advice on "being digital by being human." In an era of increasing transparency, traditional smoke and mirrors marketing will not work. Marketers need to shift their goal from control to influence. Brands need to open, honest, and utilitarian, to engage today's connected, mobile, personalized consumers. With benchmarks such as Google, Amazon, and brand Obama, Gavin spoke about the benefits of open source beer, why social networking started before the moon landing, and why banks can't run ads with the words "trust" or "stability" anymore.
Dae Ryun Chang, director of the Center on Global Brand Leadership at Korea's Yonsei University, turned the discussion to the meaning of digital media in Asia. He detailed the three key demand-drivers of an Asian "we-me" culture that combines perfunctory collectivism with repressed individualism. He showed how company's like Tudou.com (China's YouTube), Tencent QQ (the world's biggest IM and social networking service) and India's Idea Cellular are connecting with Asian consumers. And he presented research showing that best branding impact for Asian consumers is elicited by a combination of touchpoints across both mobile and desktop Internet.
John Davis and Jin Han, directors of the Center on Global Brand Leadership at SMU led two boisterous panel discussions with the speakers and audience. Among the topics and questions:
Giving up on "controlling" your brand conversation
Social media is not just for losers
When offering customization works, and when it doesn't
Different goals and different ROI on social media
Use of social media by B2B companies, non-profits, and social enterprise
The perils of "lame innovation" (look, we added music to our phone!)
Who has delayed the convergence of TV and internet (our "Tom Cruise on Oprah" moment)
Why break-through innovation rarely comes from legacy institutions
Why social media will never capture the breadth of audience that mass media once had, but why mass media are losing more of their breadth every day as well. (In the future, will new brands just not be quite as big?)
The BRITE-Asia '09 conference was a terrific event. Many thanks to John, Jin, and Cara Toh for all their great organizing.
Today Apple offered a sneak preview of the iPhone 3.0 operating system. This will be the next mobile computing OS for over 30 millions users of the iPhone and iPod touch worldwide. (Judging by my commute, 1 million of them ride the NY subways.)
USER INTERFACE
The new OS will offer a host of improvements for user interface and the core applications that come with your iPhone:
Copy/Paste: finally! Finally!! Finally!!! (Just yesterday, a family member asked "The one thing I haven't figured out is… how do I copy and paste on this thing?") With double-tapping and dragging, users will be able to copy, paste, and cut both within, and between programs (including 3rd party apps). Read something, highlight a paragraph, copy the text, open an email, and paste it in… ouala!
Global search: search your emails, search your calendar, even use Spotlight to search all your apps
Push: for the Blackberry enviers, push notifications finally arrive. Expected to save battery life.
Landscape Mode: the widescreen keyboard layout will now be available in all app's (not just the Safari browser)
Undo: shake your iThing to retract that last hasty command
Calendar synch: will now use CalDav (a widely supported open standard useful for sharing calendars) and subscriptions support for .ics formatted calendars. Spouses with different work calendar systems can get back in synch again!
Messages: new application for MMS will allow forwarding and deleting of individual messages
Voice Memos: new app for recording audio files with the built-in microphone will allow you to edit, trim, and share audio memos
More features, including: shake to shuffle, Stereo Bluetooth support, YouTube accounts and subscriptions, synch Notes to your computer, Wi-Fi auto login (yes!), encrypted profiles, auto-fills, VPN on demand, parental controls, and more.
DEVELOPER COMMUNITY
But the real impact of the iPhone 3.0 OS will be in how the developer community uses it to create new app's for the iPhone ecosystem. They've already created 25,000 third-party applications for the iPhone App Store – with 800 million apps downloaded to date.
That open approach to innovation led the iPhone App Store to win this year's BRITE Big Think Audience Award (narrowly edging out Twitter). The online nomination read:
This storefront for third party applications turned an "MP3 player plus 2nd-tier Blackberry" into a lifestyle-altering mobile computing device. Open source developers added games, maps, productivity tools, books, RSS feeds… but also applications that never existed before, because they'd make no sense for a large computer (identify that song on the radio, get food advice while shopping in the grocery). The Google phone and Blackberry are both rushing to emulate, with their own app stores. The mobile computing revolution has begun.
The iPhone 3.0 OS brings three huge breakthrough's for developers of third party apps: 1. New open APIs 2. Work with other devices 3. New business model for apps
OPEN APIs
The new version of the iPhone software development kit (SDK) will provide developers over 1000 new APIs. (Those who heard Aaron Cohen and Yaron Samid's talk at BRITE '09 this month understand the importance of open API's as catalysts for innovation.)
These open APIs include access to the iPod Library, proximity sensor, audio recorder, the battery, data detectors, text-selection, and more. The countless possible innovations include:
customizing music: e.g. game can also play music from the user's iPod library (choose your own soundtrack for Sims 3.0)
scaling video: an ESPN native app will automatically scale video quality to provide users with the best quality for their connection
embed maps in app's: the heart of the Maps application is being turned into an API so that developers can embed Maps into their applications
Bluetooth p2p location: will allow auto-location of devices in the same general area without having to use WiFi
WORK WITH OTHER DEVICES
IPhones communicate synch with your computer, but so far not with much else. The Nike Plus platform (linking a joggers iPod to their running shoe and to an online community) has shown the exciting potential of building a bridge from your mobile computing device to other devices. But that was developed as part of a special partnership between Nike and Apple.
Now, third party developers will be able to create applications that work directly with other accessories, and can "talk" to them through the iPhone dock.
This could include a digital equalizer app for a stereo, a channel-changer app for your television, or even an app to communicate with medical devices.
Anita Mathew of LifeScan showed off an application for diabetes management – which would allow users to check their blood sugar and transmit the data from their insulin meter to the iPhone (via the iPhone Dock Connector or BlueTooth). Gizmodo reported how she described
"…the scenario of a 15-year old with diabetes who tests herself 6 times a day and injects insulin many times a day. The insulin meter can transmit her glucose reading to the iPhone. She can then track her diet and how much insulin she needs after a particular meal... With the iPhone app, she can then let her parents know that she’s OK by sending them a message directly through the app that has her glucose level and how she feels."
NEW BUSINESS MODEL FOR APP'S
Equally important, the iPhone 3.0 0S will open up new options for 3rd party developers to capture revenue for their innovations.
For the first time, users will be able to make app purchases from within the app itself (rather than going back to the iTunes App Store). This opens up a variety of new business models, based on selling new content within an application. Paid content subscriptions are possible. Add on selling could include a game where if you finish the first 10 levels, you can purchase the next 10 without leaving play. Content can be sold in bundles, like a City Guides app selling "City Packs" of customized cities. More business models will doubtless emerge from the developers.
START YOUR ENGINES
The new OS will be available to users in summer 2009 (free for iPhone owners, $9.95 to iTouch users). It is being released in beta to developers today, so they can start creating new app's to take advantage of the upgrade.
A big "thank you!" to all our speakers, staff, and community for making BRITE '09 such a success and such a rich conversation over the last two days.
At the end of our first day, I provided a speed-reading run through of 30-odd ideas that stood out from the handwritten notes I'd jotted throughout the day's presentations. Several people asked afterward if I would post them online, and so, in order, here they are…
1. Four T's: Trust, Transparency, Truth, and Transformation 2. Follow the model of Mint: offer valuable advice to your customers on what services they need, irrespective of which ones are offered by your own company 3. Always ask online: What are your goals? 4. Build brands without brand advertising 5. The one way you can shape word of mouth: craft a compelling story 6. 99% of people observe and 1% engage, but it's hard to show the value of the observers 7. The two goals of social networking: get laid, or get business 8. PR and customer service are now inextricably linked 9. We are in a period of media reforestation 10. Every company should be a media company now; you can be a content creator, or an aggregator for the mass of niches 11. Overheard by NYTimes "If the news is important, it will find me." – How will your news find your customer? 12. Your brand = your product + your Google juice 13. Your product has become your advertisement; your customer has become your ad agency 14. "There are in fact no masses; there are only ways of seeing people as masses.” quoting Raymond Williams in "Culture and Society" 15. Your product is never "finished," it should be a process; involve your customers. 16. Simplify and get out of the way – then let your customers take over. (quoting Craig Newmark) 17. "the people formerly known as customers" 18. a better term for "crowdsourcing" – "community production" 19. Innovation is no longer about "built to last," it is innovation as a fluid, organic, dynamic process 20. It requires cultural change to shift from "we must perfect the product before we release it" to Silicon Alley's "perpetual beta for customer input" 21. As you conceive of your community, put your customers at the center of it, not your company 22. Online communities draw vital strength from living together offline as well 23. Remember the 1/9/90 Rule for your community: 1% highly active contributors, 9% occasional contributors, 90% consumers 24. Technology is necessary, but not sufficient, to build a platform 25. The technology is not that hard to build; but a platform requires technology + content + users + activity 26. The value we have taught companies to create is inauthentic, brittle, and unsustainable. 27. We are not in a recession, or a depression, we are in a compression: the metacrisis is that industries are failing the test of thick value vs. thin value 28. Strategic behavior (maximize my benefit, and ignore yours) has led us to the zombieconomy. 29. How do we reconceive value creation – in terms of behavioral innovation? 30. Five paths to behavioral innovation: stewardship, trusteeship, guardianship, leadership, partnership. 31. Win by offering a loss advantage: the same product or service, but inflicting less loss upon the community and environment. 32. "The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man." (George Bernard Shaw) 33. Pursue the business or project that is closest to your heart – that's what innovators like Boxee have done. 34. Whatever business you are in today is going to be disrupted by somebody. 35. The #1 reason why entrepreneurs built their company: to make a difference (not to make money) 36. The heart of the thick economy is the open API – allowing others to build on your platform.
The above are all paraphrases (except for the GBShaw and RWilliams quotes). The ideas were shared by: Jeff Fleischman & Darryl Gehly (1, 2); Max Kalehoff (3); Sanjay Sood (5); Lisa Hsia (6); Avner Ronen (7); Steve Rubel (8, 9, 10, 11); Jeff Jarvis (12, 13, 14, 15, 16); Jeff Howe (17, 18); Mark Yolton (19, 20, 21, 22, 23); Adam Nash (24, 25); Umair Haque (26, 27, 28, 29, 30, 31); Aaron Cohen & Yaron Samid (32, 33, 34, 35, 36).
These are just MY take-aways that I jotted down from day 1. You can read everyone else's on Twitter: http://tinyurl.com/ab2tom It looks like the most cited meme among the crowd was the number 7 above.
On Day 2 (today), we broke out into parallel sessions, so I let the audience provide the recap at the end. We'll hopefully include that in our (eventual) video footage.
At the end of the industrial age, we were declared to have entered into an information economy. But many are wondering if that word "economy" has proven too optimistic. It's true that as physical products are increasingly commoditized, economic value resides more and more in information.
But at the same time, the Internet has brought the imperative that "information wants to be free." Today's digital networks have made distributing information incredibly easy and cheap, and restricting information incredibly difficult. From an economic viewpoint, this makes it harder and harder to charge for information. The information economy eats itself.
Exhibit A in this season of discontent: the print news industry.
The Tribune Co.'s bankruptcy filing last year started the tremors and justifiable panic that the industry is nearing collapse. The Atlantic recently published a startling piece by Michael Hirschorn on the possibility of the NY Times going under in Q2 2009. This week the owner of the SF Chronicle announced the paper would be sold or shuttered.
On his Buzzmachine blog, BRITE 09 speaker Jeff Jarvis has been covering the first wave of newspapers that are shifting to publishing only online. But the price of journalists is not dropping at the rate of web servers (Moore's Law aids Google, but not The Times). Major news organizations cannot possibly sustain their current operations with only their web ad revenue.
In response, TIME magazine ran a recent cover story by Walter Isaacson, suggesting that print journalism might survive with "micropayments." In it, he asked, can we build an iTunes for the news?
Most observers say no. Clay Shirky blogged a rebuttal, pointing out that the history of the micropayment business model has shown nothing but failure for those attempting Isaacson's remedy. (Shirky also argued that the iTunes model could never work except in a monopoly. I strongly disagree with his analysis on that, but will pick that up in a later post.)
So, is it true that legions of bloggers – amateur writers, if you will – are threatening to bring down professional journalism, whose costs cannot compete with all this free talent?
Not exactly. A bigger source of competition, often overlooked, was pointed out by Michael Kinsley in a recent op-ed in the Times. Bloggers and new voices aside, the Internet has brought newspapers into vastly greater competition with *each other.* In the old days, writes Kinsley there was "no sweeter perch [i.e. monopoly] in American capitalism than ownership of the only
newspaper in town. Now, every English-language newspaper is in direct
competition with every other." How many readers will subscribe to Denver's Rocky Mountain News (the 150-year-old newspaper closes today), when they can read the Manchester Guardian, the NY Times, the Washington Post, or countless other top-notch English-language sources just as easily?
And yet, Kinsley is optimistic that journalism and professional reporting will survive, in a smaller (and I suspect, greatly restructured) industry. I recommend his article for a bit of sober optimism.
The upheaval brought by the Internet stems from increased economic competition that is endangering formerly parochial fiefdoms. Today, the stress of global competition is hitting the newsroom, just as it hit the factory floors of Detroit a generation ago.
Let's hope the next wave of professional journalism will bring a new dynamism and energy to its vital task. Creative destruction is painful, but it usually yields benefits in the end.
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