Buyeyeglassesnow: why internet marketing

Editor’s note: Brand dollars are still the biggest unclaimed prize on the interent. Guest author Steven Carpenter handicaps the players who are most likely to get them.

One of the biggest business opportunities in the consumer Internet space is to create products and services that attract a share of the billions of dollars in held-up brand marketing that has yet to find its way onto the web. With the explosion of various kinds of content and the innovative ways advertisers can segment and track users, why are marketers so reluctant to open up the floodgates? Quite simply, because the current online solutions—search, lead generation, display, video—do not provide a high enough return for these kinds of categories and are not consistent with the image these brands have invested so heavily to achieve.

Commensurate with the potential riches, there is an enormous amount of startup energy and experimentation going on in this area. In this installment of the TechCrunch Teardown, I will look at the four leaders—Facebook, Twitter, Foursquare, and Groupon—and how their new interactions—“like”, “follow”, “friend/check-in”, “group coupon”—are fairing with brand advertisers.

The $20 Billion Opportunity

According to Ad Age, the Top 100 Global Advertisers spent over $100 billion in 2009 across the various print, television, radio, outdoor, and Internet channels; based on data from the previous year, 39 of the 100 had budgets of $1 billion or more (see table 1, click to enlarge). Procter & Gamble, manufacturer of 50 leading brands (such as Tide, Dawn, Pampers, Gillette, and Crest), of which 23 generate $1 billion or more in sales, is the world’s largest advertiser, spending close to $9 billion annually. It should follow, then, that the Internet economy as a whole is effected by how the brand managers at these companies decide to allocate their funds online.

As you can see from the last column in the table at right, the leading marketers are only spending $1.8 billion, or 2.6% of their total budgets, online, despite the fact that consumers are spending close to 30% of their time on the Internet. Of the top marketers, only General Motors, Disney, Bank of America, and News Corp. allocated more than $100 million to the web.

So who has found the best marketing value online? Companies that market and sell financial services, insurance, automotive, communications and media, and consumer technology. It makes sense: these are companies with products that can be found easily using search, and whose customers are most likely to be acquired online because they can transact online. To date, Google and vertical content sites such as Yahoo! Finance and Bankrate have been the largest benefactors of these re-allocated dollars.

New Kleiner Perkins partner, and former Morgan Stanley analyst, Mary Meeker, estimates that closing the gap between consumer attention and ad dollars spent on the Internet to be a $50 billion global opportunity. If the Top 100 marketers bring their marketing budgets in alignment with 30% of time spent, I estimate online brand marketing to be a $30 billion global opportunity and $20 billion in the U.S. As evidenced by Google’s recent pursuit of Groupon, its traditional CPC and display advertising may not be sufficient enough to meet these marketers’ needs.

The Four Horsemen

There are four Internet companies currently best positioned to work with brands to create innovative marketing solutions that will appeal to millions of consumers—Facebook, Twitter, Foursquare, and Groupon. I acknowledge it is not exactly a fair comparison for two main reasons: 1) Facebook has enjoyed a 3-4 year head start on the field and 2) each product has a different use case and thus attracts a different audience with distinct revenue opportunities. Each company, though, has found its way into the mainstream and now finds itself with an attractive platform for brand experimentation.

I see the four product experiences these companies offer on a continuum of online-to-offline interaction on one axis, and requiring passive-to-active behavior on the other. The Facebook experience, for example, is largely an online one where a user can say something about herself by associating with a particular brand by “liking” it. This is an incredibly passive expression that requires a split-second action with little to no long-term repercussions. She can choose to visit the brand page and see the news feed at her convenience.

Twitter, on the other hand, is a personal tool for gathering realtime information—no one knows which feeds the consumer decides to consume or to ignore. While Twitter is similar to Facebook in its largely online-focused consumption, it is a much more “active” medium. Users are constantly reminded when they are following a brands’ information stream. As soon as the information becomes unimportant, too frequent, or spammy, she will simply cut off the connection.

Groupon (which I wrote about in an earlier teardown) is the lightest application, ironically, even though it is the only one of the four that requires a user to make a purchasing decision. Transactions occur easily online and the offline experience of presenting a coupon is consistent with decades of proven user behavior.

As of now, Foursquare asks the most of its users in relation to branded campaigns, but it is also the closest of the four to placing customers in the physical proximity of brands and retailers.

How They Are Doing

You can see how the four different interactions 1) naturally lend themselves to different brands and 2) exhibit a large disparity in terms of the sheer number of participants. And this is not necessarily a bad thing: 44,000 passionate luxury fashionistas at NY Fashion Week may be more valuable to Yves Saint Laurent than 5 million fans on Facebook.

It should come as no surprise that the biggest brand in the entire social ecosystem is Coca-Cola with 20 million Facebook Fans. Whole Foods is the biggest brand on Twitter with 1.8 million followers and the Gap, having sold 440,000 half-off coupons using Groupon, is that startup’s largest brand experiment.

Of the top 50 pages on Facebook, 8 of them are leading advertisers and brands, compared to Twitter which doesn’t have a single brand in its top 50 users. Of Facebook’s top 50 brand pages, 31 of them are food and beverage companies, while 11 are consumer products such as Converse All-Stars and Victoria’s Secret. The most important takeaway is that brands have a far greater following on Facebook than they do on their own sites. Facebook’s best move has been to convince brands to market their Facebook pages rather than driving traffic to their own websites.

The most interesting finding is that what seems to be popular on Facebook is not so on Twitter. If you click on the table at right an dlook at the top 50 brands on Facebook, the “Follower/Fan Ratio” (the result of dividing the number of Twitter followers to Facebook fans) does not get higher than 8% (Disney). This indicates that Twitter might have a more difficult time than Facebook in attracting overall brand dollars with its current product feature set.

This is evident when you look in detail at one CPG company and its portfolio of brands. I did a comparison of the differing success of P&G’s top brands using the two platforms (click on table at right to enlarge). In every case except one (Dawn), the branded experience on Facebook is more popular in terms of numbers than on Twitter. In a few cases, there does not appear to be a reason for even having a Twitter presence. It is interesting to note that the most followed P&G Twitter account is the company’s own corporate PR team.

Facebook still has a lot of work to do and it is far from a foregone conclusion that it has won. While the lightness of its interaction makes getting to scale easier, maintaining enough valuable interactions on the branded pages and engaging long-term customer interest is a huge challenge. For example, according to eMarketer, nearly 1/3 of Facebook users who unsubscribed from a branded page simply were no longer interested in it. And, more to the point, simply because Coke has 20 million Fans does not necessarily mean Coke will pay for the privilege to advertise on Facebook if it cannot see a return.

So what brands seem to be working well on Twitter and far better than on Facebook? Daily deals, such as Dell Outlet, Amazon, and Woot, and companies that place customer service and community at the heart of the brand experience, like Zappos and Etsy, exhibit the most lopsided Follower/Friend ratio. It is important to note that two companies that had horrific customer service challenges over the past few years—JetBlue and Toyota—have fully embraced Twitter as a direct communications channel. The biggest driver of Twitter success as compared to Facebook is the timeliness of the information.

Twitter, then, is well positioned to capture marketing dollars from companies optimizing for deals, retailers that have frequent specials, ticketing and events, movie studios, television shows, last minute deals, airlines, and hotels.

It is still early days for both Foursquare and Groupon in terms of working with big brands. Foursquare has seen traction with high-end luxury and media brands, likely as a result of its headquarters being located in New York and early media partnerships. Of course, Foursquare’s long-term viability as a stand-alone “check-in” company is still an open question with Facebook Places breathing down its neck. This is a strategic move on Facebook’s part to get closer to offline actions, transactions, and local commerce.

While Groupon is the defining company of next-generation e-commerce, it has a tougher road in terms of working with brands and large retailers. These companies tend to be more sensitive to heavy discounting as they don’t want to train their customers to wait for 50%-off coupons. And, they don’t like to be so indiscriminate with their offers.

Overall Assessment

I evaluated the four companies along the six different types of offers and campaigns that I can see consumer brands wanting to engage in:

Coupons: Simple discount off purchases

Location: Physical check-in or product scan

Loyalty: Frequency, “Mayorship

Time-based

Special Events: VIP’s

Inventory Close-Outs

Based on my research, while Facebook, Twitter, Foursquare, and Groupon are the best positioned to capture the estimated $20 billion in pent-up consumer marketing dollars, none of the four are currently optimized to execute along all of the necessary dimensions. There are considerable opportunities for startups to innovate and capture share. I look for this to be one of the most attractive areas for entrepreneurs in the consumer internet for years to come.

Bugatti teardown photo credit: Flickr/David Villarreal Fernández

You missed two that became somewhat successful due to the web and more specifically filesharing.

http://www.imdb.com/title/tt1071804/

Ink

http://www.p2pon.com/2010/02/07/ink-the-proof-that-bittorrent-can-help-m...

“Ink”: The Proof that BitTorrent Can Help Movie Makers

Responsible for boosting the popularity and, implicitly, the earnings of independent movie “Ink”(a film P2PON has recommended when it first hit the p2p networks), online piracy is once again into the spotlight; this time, however, for the completely different reasons.

The creators behind the film production admitted in an interview that the unexpected success achieved by the initially unpresuming project is primarily owed to the intensive download activity registered on BitTorrent networks, which propelled the title into the top 20 movies on iMDb, despite all expectations.

Invited by the press to comment on the recently achieved success, Jamin and Kiowa Winans, the creators of Ink, didn’t hesitate to praise the BitTorrent download community for increasing the film’s exposure, as well as DVD and Blu-ray sales. Later statements from the two revealed the same initial enthusiasm regarding their new conquered “pirate fans”.

When asked to translate the hundreds of thousands of downloads into effective sales, Kiowa said it was difficult to quantify the financial gain generated by the activity on BitTorrent trackers, but admitted that DVD and Blu-ray sales have definitely gone up.

The unexpected financial success enjoyed by the production also came from other sources. Thanks to its popularity on BitTorrent, members of the downloading community supported the idea that fans should donate money via the film’s official website. Kiowa complemented on the generosity of German fans, who she claimed to have been twice as benevolent as fans from the US.

Asked if she considered the film to be a victim to piracy, Kiowa responded: “I think to say victim is to characterize piracy as an all-together awful thing. The piracy of Ink is unquestionably responsible for its popularity around the world. Sure our trailers have been out for over a year and have had plenty of views outside the US, but we think that 70% of the illegal downloads are coming from outside of the US and we do get a good number of international buyers at our online store every day.”

Kiowa suggested that the movie industry needed to change and adopt an effective strategy to ensure the deserved revenue for filmmakers, and satisfy film enthusiasts’ needs in terms of availability and affordability at the same time. As for online piracy,
Kiowa explained that it would be best to focus on exploiting the phenomenon for producing positive effects, pointing out once again to the success of the film Ink, owed to the thousands of downloaders on BitTorrent.

http://www.imdb.com/title/tt0756683/

The Man from Earth

http://moreintelligentlife.com/story/internet-piracy-is-good-for-films-1

INTERNET PIRACY IS GOOD FOR FILMS

FOR "MAN FROM EARTH", AT ANY RATE

Can internet piracy result in more and better movies? "Of course, not!" is probably our stock reaction. By illegally downloading and sharing films, pirates steal the revenue that would otherwise reward and encourage film-makers--or so we are told by lawyers, economists, and lobbyists for Hollywood studios.

But we may have plenty to learn yet about the possible impact of file-sharing and other online distribution methods on the quantity and quality of films we watch. The story of Jerome Bixby's "The Man from Earth", a small-budget science fiction movie released on DVD in November, shows how piracy can help salvage, not sink, high-quality cinema.

Shot on digital video with a budget of less than $200,000, the film features a bookish debate among academics who get together for a farewell party for John Oldman, a college professor, who, for no obvious reason, wants to quit his tenure-track job and hit the road. As the party unfolds, Oldman makes a surprising emotional confessession: he is 14,000 years old, doesn't really age, and has 10 doctorates--making him both the oldest and the smartest man on Earth.

What follows is an intense intellectual drilling by his colleagues--professors of anthropology, biology, archeology, psychology, and Christian literature--who try hard to spot inconsistencies in Oldman's account of the world, based on what they know from their own disciplines.

Their passionate debate is heavy on both science and humanities and makes "The Man from Earth" a very appealing movie to smart--yes, nerdy--audiences. Even if you don't learn anything new (which is unlikely), there is a good chance you will be asking yourself a lot of questions afterwards. It's nerdy enough to get the sci-fi geeks to watch it, while its interdisciplinarity makes it accessible to general public as well.

But what is truly unique about the film is not just the controversial story of John Oldman. It's the fact that the film producers have embraced internet piracy and thanked illegal downloaders for helping to spread the buzz about the movie.

In early November Releaselog, a popular blog that regularly posts links to movies, music, and software (most of which is copyrighted), ran a review (with accompanying download links) of "The Man from Earth". The review generated a flood of comments. The movie obviously struck a chord with the geeky and anti-establishment community at Releaselog and prompted many (illegal) downloads.

Most crews would have wanted to sue every downloader. Eric Wilkinson, the producer of "The Man from Earth" turned out to be much more new-media-savvy. He thanked the Releaselog community for piracy and said they were helping sales.

According to Wilkinson, in two weeks that passed after Releaselog wrote about the movie, it rose from the 11,235th to the 5th most popular movie among visitors to IMDB, a popular online movie database featuring user-generated reviews and rankings (the movie was the #1 independent film and #1 science fiction film on IMDB). Most of the traffic to the film's web-site came from Releaselog. The pirates were definitely to thank for the publicity that ensued.

This was enough to make the file-sharing community fall in love with Wilkinson and the film (later on, the director of the movie also wrote a big thank-you note on Releaselog), propelling it even further up the IMDB charts and securing shelf-life in WalMart. That was just the right time for Wilkinson to provide directions on how to send him money via PayPal for copies shared online; sure thing, many people did.

For marketing, this is a sea change, akin to Radiohead's giveaway album. Instead of courting movie critics and studio bosses, directors and producers can reach out directly to the blogging public, stirring up attention there as best they can. To prove his authenticity, Wilkinson went as far as to post a picture of himself next to his monitor with the blog screen open: some commenters first took him for a PayPal-abusing scammer.

Why did the crew behind "The Man from Earth" decide to pursue this route? Because the traditional distribution model for small-budget indie movies seems broken. Even if such movies do secure funding to release a DVD in their country of origin, they rarely if ever break out internationally.

If you are in Norway or UK it may be impossible to find a movie like "The Man from Earth" in your local DVD store for the next few years--even if you are willing to pay a premium. (As Wilkinson pointed out, at the time of his blog comment, all international rights to "The Man from Earth" were still available, meaning that the chance of seeing it legally outside the US was still minuscule). All those whose movie tastes are to the far-right end of the long tail have little alternative to piracy or abstinence.

The emergence of online payments makes a different model possible. If only a limited few can ever go and out buy a DVD of a movie they have shared online, anyone can now contribute money. What would be the pricing point? It could be the Radiohead route: pay what you think it's worth. It could be "match the rental or a cinema ticket" model: pay what you would normally pay for renting it a DVD store or watching it in a cinema theater.

In stark contrast to the traditional restrictive model of film distribution, the new model seeks as many ways of content distribution as possible: peer-to-peer file-sharing is the tip of the iceberg. More advanced users would know about Usenet, various online file storage services like Rapidshare, and plain solutions such as FTP servers. If this sounds a bit too geeky, you are probably are still a few years (and a few laws) away from downloading the entire Woody Allen collection (available at more than a few file-sharing sites at the time of writing).

This explains why producers like Wilkinson place such a premimum value on online buzz: it can push a movie to the top of user-generated charts and listings, giving producers a chance to tap online fans for cash.

In this "networked moviesphere", the movie experience never really ends, even after the movie is over. You can (some would say "should") go vote for the movie on sites like IMDB, post a review on Amazon, wire a donation via PayPal, add the director to your list of virtual friends on MySpaces and Facebooks of this world, post to Digg, and blog it to death on LiveJournal. And that's not to mention editing Wikipedia pages. When combined, all these activities create a publicity machine that marginalises mainstream critics.

In the case of "The Man from Earth", 2,000 people who downloaded it encouraged 20,000 more to go and check it out in cinemas and WalMarts by giving it a top IMDB rating. By losing money on 2,000 viewers, the film made money on 20,000 more.

Some in the movie business are already asking the obvious question: should big studios offer screener-like copies to the file-sharing community, to preview and blog about film before it goes into distribution? My answer: there are screener copies of all major Hollywood movies available on the Internet anyway, so the studios may as well do that proactively.

"When I make my next picture, I just may upload the movie on the net myself!", said Wilkinson in another blog comment. However, as of now, despite the producer and the director's support, any downloads of "The Man from Earth" are still illegal: it still bears that "All Rights Reserved" mark. (There is always an option of releasing it under Creative Commons, Larry Lessig's child that is celebrating its fifth anniversary this month, but CC still hasn't enjoyed the universal adoption it deserves, particularly among film studios.)

All legal issues aside, it must become a question soon, even for established producers, whether they can capture buzz-momentum to "crowd-fund" their next movie. Why bother with a traditional model if your fans can contribute money and just wait for the next release?

Some experiments with this model are already under way. "A Swarm of Angels", which describes itself as "open source film-making venture that aims to create a £1 million movie with the help of 50,000 participants around the globe", promises its "swarm of subscribers" input into the entire movie-making process in exchange for a subscription of £25.

This seems like a promising model, as long as the fans don't have absolute control over what comes out: there have been quite a few terrible examples of fan-directed movies that are completely impossible to watch. "Snakes On a Plane", which took a Wiki-like approach to the plot, is one failed and overhyped blockbuster. There could be many more. Sometimes, it pays to be a dictator--at least, artistically.

As for the big studios, expect them to hold out the longest against a more decentralised and buzz-focused approach to movie distribution. Their model is in danger, in all sorts of ways. A comment on a blog thread about "The Man from Earth" puts it best: "Only bad movies have to fear piracy". And, given how many bad movies studios continue to produce, they have plenty to fear.

bench craft company scam

Tuesday, December 28, 2010

why internet marketing

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