Author Archives: Alex Calic

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TV Everywhere Already Exists…and it Has 1 Billion Users to Prove It

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TV_EverywhereThe promise of TV Everywhere is being realized, but not where you would expect it. Towards the end of March Magine announced the launch of an internet-based, cable-like offering which allows subscribers to watch television shows live or on-demand across any device without the need of a set-top box. The caveat: it’s only available in the company’s home country of Sweden.

So what about the rest of us?

With a popular slate of original programming including Boardwalk Empire and Game of Thrones, HBO has always been considered the catalyst for unlocking TV Everywhere in the U.S. This, despite fact that the only way fans can watch these shows is by first subscribing to pay television from cable or satellite service providers before signing up for HBO at an additional monthly fee. The hope has been that HBO would eventually go direct-to-consumer with its HBO GO service (like Netflix does with its streaming service), but with pay TV partners funding the marketing for HBO’s content across their platforms, the un-bundling of HBO GO into a stand-alone service won’t happen anytime soon.

With traditional media companies not in any hurry to upset these profitable distribution arrangements, a true TV Everywhere experience will need to come from outside of this framework. Fortunately there’s a company that’s been building the digital media alternative that just celebrated its 8th birthday and hit 1 billion monthly users. Yes, YouTube, the skateboarding-dog-showing, Gangnam-Style-popularizing, space-jump-live-streaming video website is consumers’ best bet for delivering TV Everywhere.

Here’s why.

Even though YouTube has become the destination for video content on the web, its evolution has followed that of traditional television in many ways. When commercial television launched in the late 1930s in the U.S., music and variety comedy were the most popular types of content. Over time, additional programming made it to the airwaves and remained free to watch, as long as you had a television with antennas, since all the content was ad-supported. Towards the end of the 1940s the first cable channels, which required consumers to pay a subscription fee to access the content, were introduced.

Now replace the word ‘antenna’ with ‘internet’ and you end up with YouTube instead of broadcast companies. And just like broadcast television, you get to watch all of the most popular content (music and funny videos) for free because they are also ad-supported. Having checked-off additional content categories since then (such as live events and movies), YouTube launched a $100 million fund to invest in 100 channels of original online programming towards the end of 2011 and followed that up with an announcement of additional funding for 30% to 40% of the most promising channels late last year to continue improving the overall content quality of YouTube. With the company now starting to talk about allowing subscription services for video producers on the site, YouTube’s content experience has nearly completed the same evolution as traditional television- and in about the same amount of time.

That’s not to say that producers of traditional media are standing by watching this happen from the sidelines. Ricky Gervais, comedian and The Office creator, announced in March that he has signed up to provide exclusive content to YouTube. This news came on the heels of Alien and Blade Runner producer Ridley Scott partnering with YouTube-hit Machinima to produce 12 short films earlier in the month. Even old media execs see the value of YouTube, investing in services like Fullscreen that help video producers manage their presence on YouTube.

YouTube_Firefox_TabletAs important as YouTube’s ability to aggregate and curate all of this content has been to its success, providing users with any-screen access by way of PC and mobile websites as well as a variety of mobile and television applications has been equally critical. This has resulted in 25% of YouTube’s global audience watching videos via mobile devices, and a remarkable 50% of Gen C visitors. These users are connected to the video platform by more than just devices though as the social engagement around sharing video links and comments truly makes YouTube the second largest social network in the world and the largest social television experience- giving the company a unique advantage in building a TV Everywhere service.

While the bite-sized entertainment offered up by YouTube might be prefect for Gen C consumers, it still doesn’t replicate the current programming available through pay television. Fortunately for YouTube, Google has started to build out the actual infrastructure necessary to bridge this gap. Google Fiber, which promises internet connection speeds up to 100 times faster than today’s broadband as well as high-definition television, recently announced the second and third cities to deploy its service as well as adding premium subscriptions from HBO and Cinemax to its channel line-up. By combining traditional media content with digital video from YouTube, Google can create the ultimate TV Everywhere experience for any audience in a Google Fiber city going forward (which could cost an estimated $11 billion to build out if Google wants to compete with other providers on a nationwide basis- well within the possibility considering Google’s capital structure).

Regardless of whether its YouTube or even Google TV (because of its ability to incorporate media-specific apps into its framework) that drives adoption, most consumers will finally get what content they want (as well as when and where they want it) either directly from Google’s combined efforts or indirectly from market rivals being pressured into providing more competitive offerings. Until then, 1 billion YouTube users will have plenty of content to keep them entertained.

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‘No Appointment Necessary’ Television

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Same_Bat-Time_Same_Bat-ChannelThe recent release of House of Cards by Netflix was as much-anticipated for its production value (starring Kevin Spacey and produced by David Fincher) as for its release strategy (all 13 episodes were made available to Netflix subscribers on the same day). While traditional media outlets have questioned Netflix’s decision to release the entire first season at once, which eliminates the water-cooler effect and anticipation build-up from episode-to-episode that traditional television show experiences have been built around, fans of the all-you-can-eat approach to serialized content can’t get enough of it. So it’s not surprising to hear that House of Cards has become Netflix’s most-watched program in terms of number of subscribers and total hours according to Chief Content Officer Ted Sarandos.

But is binge-viewing the future of television then? Not exactly, though it is part of a broader trend in how content consumption habits are evolving thanks to technology. Just look at some recent stats from two new series on FOX’s network- The Following and The Americans. The Following debuted to an audience of 10.4 million viewers on FOX who watched the premiere either live or the same-day. That audience figure doubled in size though when DVR (which contributed 23% of the audience), encore showing (14%), streaming (7%) and video-on-demand (5%) viewing was also included. Much like The Following, FX’s The Americans also showed audience growth of 44% and 58% across its first and second episodes respectively when DVR viewing data for the 3 days following the original airing (the period that encompasses the original broadcast plus DVR viewing up to 3 days afterwards is relevant because it is used determine the cumulative ratings used by advertisers to determine the size of the audience that saw their ads) was counted.

The story being told by these stats is that the appointment-based model of watching TV popularized in the 1960s by the likes of the original Batman series (remember ‘Same Bat-Time, Same Bat-Channel’?) is becoming a relic of the 20th century. But to what extent? That question will finally start to get answered this fall when Nielsen, the de facto standard in determining how the $60 billion television advertising market is allocated across television networks, will begin counting TV shows consumed via video game consoles and broadband connections in its show ratings (with an eye towards including iPad and tablet viewership in 2014).

By expanding the definition of what constitutes an addressable audience, Nielsen will be legitimizing viewers of shows that are already being quantified (as The Following data shows) but not valued from an advertiser perspective. This will give broadcasters the incentive to both expand the availability of their television content through additional channels (which both ABC and CBS seem to be set to do with the launch of new streaming mobile apps) as well as aggregate these cross-platform audiences to provide more reach and value to advertisers (as Disney’s networks are doing now).

Another potential benefit in this approach to TV content distribution and monetization will be the unification of pricing across digital screens (PC, tablet and smartphone) which have traditionally seen a wide discrepancy between PCs and their mobile counterparts (especially smartphones). While digital might not reach parity with television ad rates, the increase in revenues from parity within digital should convince broadcasters to make more content available online and with less delay from the original television airing day and time (depending on how all-encompassing Nielsen’s new ratings get).

The days when broadcasters knew what was best for audiences (which really meant what was best for their advertising clients) is coming to an end as consumers are exerting more control over the pace at which they consume content and the devices they use to watch it. This will have an interesting effect on event-based content and advertising as sports (especially football and playoffs or championship in any sports) audiences along with those watching voting-oriented reality TV (like American Idol and The Voice) and award shows (Golden Globe, Grammy’s and Oscars) will become even more valuable to time-sensitive advertisers (such as movie studios promoting a new weekend release) looking to reach large audiences in one fell swoop. Conversely, it will create opportunities for ad technology platforms, along the lines of BlackArrow and Freewheel, that can both deliver ads in different formats and dynamically synch the delivery across multiple platforms for advertisers looking to reach this newly identified ‘appointment-less’ audience.

Tune-in whenever you feel like it to see how it plays out.

Photo image source: Batman

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Automobiles: The Ultimate App Machine?

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BMW_Harman_App_PlatformThe most interesting theme to emerge from all the announcements at CES last month was that of the automobile becoming an app platform. The Big Three all released information about their respective efforts towards this, ranging from Chrysler enabling internet radio apps to stream on its Uconnect system to Ford and GM both announcing app development programs for their respective in-car software platforms. Not to be outdone some of the leading consumer mobile tech companies also provided updates on their continued integration efforts with the automobile manufacturers including: Pandora naming Chrysler as its 20th auto brand partner and Hyundia and Kia joining 3 other car companies in working with Google to integrate Maps capabilities into their respective car connectivity systems. Add to this the recent announcements regarding the incorporation of Siri Eyes Free into specific Acura, Honda and Chevrolet models following Apple’s announcement of this initiative last year, the availability of Amazon’s Cloud Player in select Ford vehicles and Facebook’s hiring of a Head of Automotive, you can see why the next great battleground for audience attention is taking place right behind the steering wheel.

And why not? The automobile is the last physical space where Americans spend an inordinate amount of time (18 ½ hours on average per week according to a 2009 Arbitron national in-car study) that hasn’t been infiltrated by the internet. With time spent in cars continuing to rise (an average increase of 31% for weekday driving since 2003 according to the same study) the opportunity to replace the current analog automobile experience with apps is only getting bigger.

The in-car digital experience will differ from how we currently interact with apps and the greater web on desktop and mobile computing devices in one dramatic way- the user interface. Since driving requires focus on the road, hands-free controls to both navigate and consume content will be the default setting in automobiles. With Apple’s Siri-based iPhones and Microsoft’s Xbox having become mainstream consumer devices at this point, the learning curve for performing voice-activated commands won’t be an issue. Instead, the limitation will be on the content side where audiobooks, internet radio, music, podcasts and voice navigation systems are the only categories already in a format that can leverage this opportunity, leaving text-based media to be adapted in order to participate. This creates a new market for speech and text conversion technologies like Nuance to be the provider of voice navigation controls at the automotive platform level or apps like iSpeech that convert articles and books from text to speech.

Not surprisingly, local radio station owners and navigation system manufacturers are the most likely to be disrupted in this evolution. Without the technical limitations of terrestrial radio signals, consumers will be able to access local programming from anywhere in the country through apps like iHeartRadio or national programming without any additional in-car hardware from SiriusXM Radio. Subscribers will also have the ability to create their own music stations via Pandora or listen to the exactly what they want using apps such as Spotify. As audio consumption continued to increase online, so to will the allocation of local ad dollars as marketers will have access to audience-related metrics that aren’t available through traditional radio including actual listener numbers, not estimates, and the ability to target ads to the zip code, not just the station.

From the perspective of navigation systems, apps like Google Maps and Waze will continue to take the place of built-in and after-market navigation devices with their ability to provide current mapping data and crowd-sourced traffic updates via their respective networks. This is a much more compelling solution than paying the auto manufacturer to send you a CD every year just to update the in-car mapping data (which is my car’s case).

Pandora Media has the potential to be a big winner in the digitalization of the automobile experience but not for the expected reasons.  Pandora’s viability as an internet radio service has been questioned because of the cost structure challenges presented by the music industry. But with more than 1,000 partner integrations, including 85 vehicle models and 175 aftermarket automotive devices, Pandora could evolve into a platform service, much like Amazon did with Web Services, that would allow other developers to leverage these automobile-related hardware integrations to allow their apps to connect with vehicles and related devices as well.

Google_Maps_MenuNo matter how the battle for the next digital screen plays out, Google is one of the best positioned companies because of its existing portfolio of technologies. With Google Maps slowly getting integrated into various vehicles experiences, Google will have its Trojan Horse for offering up services beyond just mapping and traffic data. By looking at the additional data layers offered in Google Maps you get a picture of this: Navigation provides turn-by-turn directions, Local identifies nearby retail establishments, Latitude find people you know that are physically near you and History stores information on the places you’ve been. This provides Google with contextual data around where you go and with whom which can feed newer services like Google Now, which uses machine learning to predict the information you might be interested in (like when to leave for a meeting, activities you could do nearby or sports schedules for your favorite teams), to enhance the user experience across all screens. Add to this Google’s quickly improving natural language capabilities for voice commands and Android-based in-car app platforms being developed by the likes of Harman, one of the largest suppliers of in-car technology, and you can see why Google is so well-positioned to dominate the in-car content experience going forward. Either by consumers using its apps, or better yet by automotive-related manufacturers using its mobile operating system to enable apps, Google will continue to capture an increasing amount of data on consumers, which in turn makes its services smarter and more useful to people, which brings more users to Google’s platform in a self-fulfilling cycle. If all else fails, Google could simply provide the driverless car technology it has been testing and own the entire digital automotive experience itself.

With over 105 million solo drivers on the road in the U.S. the digital dashboard opportunity goes beyond just enabling subscribers to consume more information and have access to better in-car utilities. It also creates an opportunity to give advertisers access to a very targeted, but maybe more importantly, captive audience. By marrying registration and demographic data of the driver with their current location, via GPS, along with intended destination, via maps and navigation, content providers and advertisers will be able to incorporate much better audio ads, using real-time ad-insertion technology, and digital offers than ever before. And because of the linear nature of consuming audio content, advertisers should expect a better return on their marketing expenses because drivers won’t be distracted by anything else.

It’s reasonable to believe that we will see the fruition of these early in-car efforts over the next 2 to 4 years. Now imagine 2020, when the first driver-less cars are expected to hit showrooms (although if Google had its way, it would happen sooner). The experience of driving a car will become obsolete and everyone will become a passenger so the content consumption and advertising-related opportunities will expand as former-drivers can focus on other activities in earnest turning the car into a portable living room.

Maybe then Bill Gates’ famous quote comparing the computer and auto industries, and subsequent rebuttal from GM, might actually have some truth to it.

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Why Viewable Impressions Won’t Matter

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Reading the increasing velocity of articles written on the topic over the course of last year, ‘viewable impressions’ has displaced ‘ad verification’ as the hot delivery topic in the adtech industry for 2013. But when you start to consider how the media consumption habits of internet users are changing, does trying to determine which approach is the most accurate in identifying whether ads are being served within a viewing pane really going to matter in the near future?

Consumers are spending a growing amount of time on social networks- more than any other category of sites on the web and as such are becoming accustomed to a content consumption experience that differs from typical website content management systems. The traditional web page is an adaptation of legacy print media which pieces together multiple columns of static content with blocks of ads in a portrait layout. Led by Facebook’s News Feed, social networks are popularizing a different approach that displays standardized units of content, in the form of text, links and images, from a user’s social graph in a single column that updates with new information in real-time.

Quartz_AppThe pace of adoption of mobile devices is furthering the spread of this stream-based approach to presenting content, as digital media companies attempt to package all of the information embedded on a traditional web page into a mobile app or website which is limited by the smaller screen sizes of smartphones and tablets. An early example of this has been Atlantic Media’s launch of Quartz in September, which is a digital only business media property built specifically for the mobile web that just announced that it has already reached 1.4 million unique visitors as of December.

Facebook_SponsoredStoriesThe reason the adoption of a new digital consumption experience matters to the viewable impressions conversation is in how the content and associated ads are being presented to users. Both Facebook and Twitter have shown how this combination can work in the age of social streams and mobile devices with Sponsored Stories and Promoted Tweets respectively. Both ad units are integrated into the content feed from a look and feel perspective and targets users based on their social graph relationships. The ad units themselves can be fixed in the flow of the content stream, moving down the page as the feed refreshes with new updates, or fixed at the top of the feed. In either case, since the content cascades down from the top of the app or web page the ad is always being presented, and thus seen, in the user’s viewing area.

The stream-formatted approach to content presentation is also starting to make its way on to traditional digital media websites like ESPN which launched the beta of its SportsCenter Feed in September. ESPN, which has traditionally been an early adopter of digital technologies and experiences, is taking a similar approach as Quartz in delivering a real-time, ad-supported, news feed with the added capability to consume subsets of the stream via content-specific tabs as well as the ability to add skins to the background that further promote the content sponsor.

ESPN_SportsCenterFeed

In all of these stream examples, the ad creative is muted compared to the typical bright and flashy ad unit and consists of a single advertiser. So what the advertiser loses in ‘wow’ factor (or ‘ow’ from the user perspective) with a traditional ad experience is made up for in relevance (hopefully) and singular attention by not having to compete with other advertisers on a page and by being presented front-and-center to the user- ensuring the ad is seen. As the real-time news feed approach to presenting media proliferates, it will alleviate the need to utilize delivery verification services for viewable impressions for digital media entities adopting this new approach.

Remember, it wasn’t that long ago that the adtech industry was consumed with a different delivery issue- ad verification, with the likes of AdSafe Media and DoubleVerify raising over $50 million combined over the course of 2010-2011 to build a business around solving for this issue. In 2012 both AdSafe and DoubleVerify replaced their CEOs while AdSafe also underwent a rebranding as ad verification became commoditized at the ad server level and smaller problem, especially related to premium content publishers, than the industry led everyone to believe. Let’s not go through this again with viewable impressions.

Photo image source for Quartz: @erichfranchi

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The Valuation Disconnect in Mobile

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Well before the media anointed mobile the Next Big Thing, venture capitalists saw its potential. Consumers have rewarded VCs for their foresight by how quickly they’ve adopted non-voice mobile services over these past couple of years. The result has been a number of high-profile liquidity events this year starting with mobile ad network Millennial Media’s IPO followed by Facebook’s acquisition of Instagram for an eventual price of $736 million and record levels of gaming sector acquisitions led by mobile. With all this positive momentum it’s not surprising that VCs continue to allocate an increasing share of deals and dollars to mobile startups as the overall number of investments has reached its highest levels since the dot-com days.

In contrast to this optimism in the venture community, Wall Street is down right negative towards mobile. Google’s third quarter earnings announcement was met with a 8% drop in share price in part due to the increasing number of search queries being performed on mobile devices which is causing a deceleration in the company’s revenue growth. And while Facebook’s most recent quarterly earnings report resulted in the stock rising 20%, the company’s market capitalization is still only at 60% of its peak value from its first day of trading. This is in largely due to concerns over Facebook’s ability to monetize their growing mobile audience, which now consists of 600 million users, including 126 million of which use Facebook mobile exclusively.

The Typical Relationship

So why the disconnect in how these investors value mobile? It can be partially explained by how each type of investor evaluates investment opportunities to begin with. Venture capitalists, especially early stage ones, typically look to buy private, and thus illiquid, stock in pre-revenue companies with nascent, but potentially market-disruptive, ideas. As such, these investments may take up to 10 years to realize a return for their VCs, if at all. Contrast this with public market investors, such as hedge and mutual funds, which focus on the predictability of earnings and revenue growth relative to a company’s market value and reevaluate their investments in real-time based on news and quarterly earnings reports since liquidity is readily available in these stocks.

So when VCs invest in start-ups, especially consumer-oriented ones that are ad-supported, they are betting not only on a company’s potential to execute on their business plan but also on the formation of a rapidly growing market. Due to this, the focus is usually on customer acquisition and market share growth- not revenues. As a market begins to mature in size and opportunity, monetization solutions are developed, usually by other start-ups, allowing the entire market to benefit from the creation of new revenue streams. Companies that don’t get acquired and can show they have a path to profitability have the opportunity to go public and in the process become industry bellwethers, using their new capital infusion and stock shares as currency to further enhance their market position.

Why Mobile Had Been Different

In the case of mobile, a couple of things happened that has affected the usual relationship between the private and public markets. First, the consumer adoption of mobile has outpaced any other technology in the history of the U.S.- including radio, TV and the internet. As such the native monetization solutions that were developed alongside these other technologies have been slow to scale in mobile because (1) the ad formats currently being used are largely re-purposed ad technologies from the desktop internet, such as banner and rich media ads, which were easy to launch with in an effort to capture mobile revenue early on and (2) advertisers have been slower to allocate advertising budgets to mobile than previous technologies due to this speed of growth- funds that would be used to help spur innovation in ad experiences on mobile devices.

The economic realities of increasing supply of mobile ad inventory coupled with relatively low demand for quality ad experiences thus far has resulted in effective CPMs that are 1/5th the price of desktop internet advertising. This disparity in monetization capabilities between mobile and desktop is forcing public investors to reevaluate consumer tech investments where mobile is becoming impactful enough from a usage perspective to potentially affecting earnings. With Millennial Media, a pure-play mobile ad network, and Pandora Media, whose ad-supported internet radio audience is now 75% mobile, still not profitable as publicly-traded companies, investors will continue to discount the mobile businesses of public consumer technology companies for the foreseeable future.

Without having proven their business models to Wall Street yet, Millennial and Pandora can’t be considered mobile bellwethers, which is needed to preserve the private-to-public valuation relationship. Companies such as AdMob and Instagram might have achieved bellwether status if they hadn’t been acquired before realizing their potential as stand-alone public companies. As such it might be left to existing ad-supported consumer internet tech leaders who are able to make the audience and business transition into mobile to perpetuate the ecosystem. Facebook, which has faced scrutiny over its performance as a public company in part due to mobile, has the momentum in user growth and sheer audience size to accomplish this transformation if they can prove their various mobile ad products can profitably scale. Because of this you could argue that Facebook actually went public too early, instead of too late, if you look at it as a mobile-first company. Probably the best positioned public company though is Google which acquired what is now the most popular mobile operating system in Android, largest mobile ad network in AdMob and is seeing mobile growth in its core search business as well as across YouTube.

Mobile is Really Two Different Experiences

The second part of the answer to the valuation disconnect is in the definition of mobile. When research companies forecast trends and investors talk about opportunities they always speak about mobile as if it were one cohesive distribution channel when in fact it is composed of two distinct experiences- smartphones and tablets. Being able to differentiate between the two is critical because of the activities each device is best suited for based on the physical limitations of each display as well as their monetization opportunities.

Smartphones

While Apple might be credited with ushering in the consumer mobile era with the launch of the iPhone in 2007, it was the launch of the App Store the following year that enabled smartphones to properly leverage their mobility as the physical limitations of mobile phone screens (3 to 5 inches in length) required task-specific applications be built instead of all-encompassing web experiences. Because of this, the most successful app experiences, as Benchmark Capital’s Matt Cohler eloquently describes it, mimic a remote control in that they are easy to use and provide a specific utility to consumers. In turn, advertising on mobile phones need to abide by these same principles in order to be valuable.

Rare Crowd’s Eric Picard described the current mobile ad format problem in a recent article while also presenting a possible solution for smartphones that is interruptive without being intrusive- and can be delivered at scale. For app developers that have large enough user-bases though, creating native experiences, especially ones that can leverage location, will always result in better value for both the advertiser and consumer. Expanding on sponsored ad units that Facebook (via Sponsored Stories) and Twitter (via Promoted Tweets) have popularized in the social activity stream and more recently on mobile, location-based social exploration platform Foursquare launched Promoted Updates for local merchants this past summer and crowd-sourced traffic app Waze launched its own self-service advertising platform earlier this month that focuses on solving users’ location-based needs.

Tablets

Like smartphones, Apple can also be credited with jump-starting the tablet market a mere 3 years ago. The company was prescient in introducing the iPad as a tool for consuming media as users have made watching TV shows, playing games and reading the primary uses for the device. This makes sense when you consider the screen size of tablets (ranging from 7 to 10 inches) allows consumers to replicate the offline experience of reading a magazine or watching television in a more convenient and personal format than traditional computers allow for. Because of this, advertising on mobile tablets can be interruptive like traditional media and less concerned with other vectors such as location since most people are using their tablets at home and as a second screen complement to watching television. That means online video and rich media interstitials, which are higher-valued ad units than traditional banner ads, will work with minimal refactoring compared to smartphone ad experiences. That doesn’t mean there isn’t an opportunity for companies to innovate around the ad experience as start-ups like Kiip are proving by rewarding user engagement and retention within mobile apps with real world rewards.

When It’s All Said and Done

With tablets expected to outsell PCs by next year, focusing efforts on this part of the mobile market might be the most prudent move for consumer tech companies with mobile audiences since the advertising experience most closely resembles the desktop internet from both a format and value perspective. The smartphone advertising market will take longer to scale simply because of the utility-oriented nature of the user experience.

As these advertising solutions sort themselves out though, so should the discrepancy between public and private market investor valuations around ad-supported business models. As start-ups fill these gaps in the consumer mobile space with monetization solutions that prove to be effective, so to will public investors get comfortable with the long-term value mobile users have to offer, which, at the end of the day, will benefit everyone involved in growing the value of the mobile industry.

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The 6 Letters Holding Back TV Everywhere

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TV Everywhere- the ability to watch any televised program at any time on any device- isn’t a matter of ‘if’ anymore but rather a question of ‘when’ once you consider the evolving viewing habits of US consumers and the changing dynamics of the pay television business. The ‘when’ for TV Everywhere becoming a mainstream consumer experience though will largely be determined by the letters F, G, L, N, P and R. Let me explain.

GRP: The metric used to allocate more than $60 billion in television advertising spend each year is known as Gross Ratings Points (GRPs). This figure estimates the size of the audience reached for a particular commercial during each television program over the life of the ad campaign. Unfortunately traditional online metrics like unique visitors, clicks and video starts don’t capture online audiences in a manner that can be translated into a GRP equivalent so broadcasters haven’t been able to take the credit they deserve, in the form of greater ad dollars, for delivering audiences to advertisers through their own websites and mobile apps or those provided by aggregators like Hulu. The thinking goes that if broadcasters could get compensated appropriately for aggregating consumers for advertisers, regardless of the screen through which the content is being watched, more television programming would be made available outside of the traditional TV model in hopes of capturing the broadest audience possible for ratings and advertising purposes.

The first major attempt at addressing the disparity between television and online audience measurement was introduced last week by Nielsen. Dubbed Nielsen Cross-Platform Campaign Ratings, the multi-screen ad measurement service leverages Nielsen’s Online Campaign Ratings (OCR) with their established proprietary National People Meter TV panel to provide unduplicated and incremental GRP measurement. Nielsen’s OCR has gained momentum in recent weeks having been adopted by 15 online ad platforms as well as by the CW Network to guarantee online audiences to advertisers for the recently started television season.

Regardless of whether it’s Nielsen, comScore’s vGRP, or something else, bridging the audience measurement gap across viewing screens is an important step in bringing the discrepancy between digital ‘dimes’ and analog ‘dollars’ in advertising. This effort shouldn’t siphon money away from traditional television but instead reallocate ad spending in media to reflect the actual time being spent with media across different mediums, which will benefit the internet and mobile. The result will be an increase in advertising dollars for video across all platforms and the availability of more content to support this additional spend, which can most easily be made available to consumers via TV Everywhere.

NFL: Major League Baseball (MLB) has it. The NBA has it. Even the NHL, when they decide to get back to playing, will have it. The NFL? Not so much. What I’m talking about it the ability to watch any game live, in HD quality video across any number of connected devices. The NFL only offers its subscribers the ability to buy access to replays of games only after they have been televised.

With only 1/5th the number of regular season games versus both the NBA and NHL and 1/10th that of MLB, it is much easier for the NFL to package the sale of television rights at a national level for all of their games than it is for these other professional leagues (which rely on regional sports networks and local television stations to broadcast the majority of the regular season). Football’s reining popularity combined with the scarcity of game content versus alternative sports options has enabled the NFL to command $7 billion per year in total broadcast licensing fees from CBS, DirecTV, ESPN, Fox, NBC and Verizon Wireless to broadcast each and every NFL game (in comparison MLB generates about $1.5 billion in national broadcast revenues from a combination of ESPN, Fox and Turner). In the following chart you can see exactly why the NFL commands such a premium:

As you can see, the NFL is the only television program that can concurrently deliver an audience of tens of millions to broadcasters who in turn sell this reach to advertisers for more than $4 million for a 30 second sport during the Super Bowl.

Timing

The current agreements the NFL has in place with these 6 broadcast, cable, satellite and mobile providers run through the 2021 season so it could take another decade before the most popular content on television make a full foray across viewing screens (through the licensing of full content rights, including digital). NBC’s simultaneous live broadcast of last year’s Super Bowl on TV and the internet was a starting point, but without an economic model that can simultaneously grow revenues for the League while providing fans with additional access to content, the NFL has no reason to upset the current revenue apple-cart. When the time comes, expect GRP to play an important role in enabling this.

The issues surrounding TV Everywhere aren’t limited to just these two issues of audience measurement and content accessibility, but most other items, like user and device authentication, can be solved with improvements in technology. It’s the negotiations that will take place between content owners, distributors and advertisers that will eventually determine what user experience audiences are left with, which might not necessarily in the best interest of the consumer. If these three parties can find common ground with evolving consumer consumption needs though, not only will TV Everywhere become a reality, but the groundwork will be in place for the next evolution in television: unbundled, on-demand and IP-based program delivery.

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I Spent a Few Hours in the Future and I Liked It

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Tuesday I was in New York City for the day on business. After finishing up my last meeting it was time for me to make my way to the airport to head home. The process of getting from 34th and Madison to my seat on Delta flight #6054 at LaGuardia took me through a series of events over the course of a few hours that gave me a hopeful glimpse into how we will perform everyday transactions in the near future thanks to mobile consumer technologies.

I started things off by launching Uber’s smartphone app to request a town car. With the evening taxi cab shift-change in full effect (good luck tracking down a cab that will take you out of Manhattan at that time of day) and an expiring promotion from Uber that would make the entire trip cheaper than a taxi ride anyway (thanks Ed!) I requested one of their contracted drivers pick me up through the app. With Francisca, my driver-to-be, estimated to arrive in 13 minutes (an unusually long wait for Uber by the way) I went across the street to grab an ice coffee from Starbucks for the ride. After ordering my drink I paid for it by showing the barista my phone which displayed a barcode from the downloaded Starbucks app for her to scan. The barcode contained my Starbucks card information and credit balance for her to deduct the appropriate amount from. After picking up my drink I went outside to meet Francisca who had called to confirm my location and her momentary arrival. Once we arrived at LaGuardia I thanked her and went inside Terminal D- no payment transaction required. That’s because the fare was calculated by Uber based on the time, distance and tolls incurred during the trip (which was tracked via GPS) and charged to my credit card on file with Uber, who emailed me a receipt of the transaction with all the details by the time I made my way inside Terminal D.

To get to my boarding pass I skipped the ticker counter and kiosks and headed straight to the security line where I opened up an email from Delta and launched the link to my QR code-based boarding pass. Aside from my driver’s license for identity purposes, that’s all I needed to get to my flight’s gate. Since I made it with time to spare I decided to grab some dinner at a restaurant called Bisoux. At my table, and every other seat in the restaurant for that matter, was a tethered iPad and electrical outlet. So while my phone was recharging I pulled up the restaurant’s app on the iPad to order my meal. I paid for my food, including tip, by swiping my credit card through the credit card reader attached to the outlet and had the receipt emailed to my work address. While I waited for my food to arrive (about 15 minutes), I used the iPad to catch-up on some email (and Twitter once my food had arrived). After I was done eating I got up and left without having to track someone down for a bill and payment. Heading over to the seating area at my gate I was greeted by more iPads and outlets (in fact the entire Terminal D at LaGuardia is outfitted with iPads, credit card readers and electrical outlets thanks to OTG Management, an airline food service company) to catch up on my news feeds until it was time to board my flight. One more showing of my QR code boarding pass to the gate attendant and I was off for DC.

In total, during my 2 ½ hour experience that took me from Manhattan to LaGuardia:

  • I conducted 4 transactions (buying coffee, transportation to the airport, buying dinner and boarding a flight)
  • Used 5 physical items to complete these transactions (smartphone, driver’s license, iPad, credit card and credit card reader)
  • Paid for everything using 2 mechanisms (smartphone and credit card)
  • Used 2 wireless networks (Verizon’s mobile network and LaGuardia’s WiFi network)
  • And in only 2 of these instances could I not control the timing of the entire experience (ordering at Starbucks and waiting in the security line at the airport)

With a few realistic software updates and better planning though, these four transactions could have been completed using just one device, a driver’s license and one wireless network by (1) incorporating the payment mechanism directly into the restaurant’s ordering app from OTG Management and making the app available for my smartphone, (2) enabling drinks orders through the Starbuck’s app and (3) enrolling in TSA Pre√ to avoid the traditionally slow security line experience.

Some other insights about the future I came away with from this experience:

Battery Life: This continues to be a huge issue with smartphones, which are increasingly being instrumented to perform computer-like tasks as a result of apps, GPS utilization, mobile browsing and multi-tasking (I drained half of my phone’s battery in a matter of 3 hours due to my little experiment). Without quicker improvements in battery life technology or in the development of wireless charging capabilities, which uBeam is attempting to tackle, the adoption of many of these types of consumer applications, especially those that leverage location, will be hindered. Until batteries can meet the daily demand of consumers the proliferation of charging stations at airports are an adequate solution but needs to be more broadly deployed across additional public and retail spaces (coffee shops, malls, etc.) to be truly valuable.

WiFi Networks: Connecting to publicly identifiable WiFi hotspots is unnecessarily challenging for laptops, let alone smartphones as quickly degrading connections and networks that require “additional information to log on” are a drain on productivity. Add to this the disparate WiFi policies across venues, such as WiFi being free at Washington’s Dulles airport but not at New York’s LaGuardia, consumers’ ability to enter and complete transactions is severely curtailed when a wireless carrier network isn’t available (like in a building or subway for example). Ideally the wireless carriers would take it upon themselves to aggregate various WiFi networks and offer up access as part of a mobile plan. Until there are better, more consistent solutions, companies like Connectify, which aggregates multiple broadband connections into a single high-bandwidth link, and Open Garden, which provides crowd-sourced mobile connectivity, are attempting to meet consumer demands for greater availability and throughput by leveraging the current publicly WiFi infrastructure.

Payments: Two types of mobile payment experiences are emerging in the real world depending on whether you are purchasing a product or service. When buying physical goods, like a cup of coffee, QR and barcodes are being used to facilitate digital payments at the register or provide proof of purchase. In these scenarios services like LevelUp from SCVNGR and Square, which recently announced a deal with Starbucks, are providing the underlying payment processing and generating the associated user codes. For transactions that involve purchasing a service, like a car ride, the entire payment experience can occur within the mobile app itself with companies like Braintree, which is used by Uber, and Stripe providing the transaction processing and merchant notification. At the end of the day what all these companies are vying for is a piece of the worldwide mobile payment transaction market which is expected to reach $1.3 trillion in 2017 according to Juniper Research.

Mobile Wallet: While every transaction I performed was through a specific app, the future of mobile payments is `all about the mobile wallet. Companies at every point in the mobile commerce value chain are joining forces to get their cut of the fast-growing mobile payment market by attempting to aggregate consumer activity and demand. Isis, the wireless carrier-backed initiative, is slated to debut next month on the heels of this month’s announcement from a group of brand name retailers and merchants regarding the launch of Merchant Customer Exchange, which is building its own consumer mobile payment application. Sitting between the carriers delivering the underlying mobile service and the retailers at the point of sale are mobile operating system providers Google, which provided an update on Google Wallet earlier this week, and Apple, which demoed Passbook this summer for the much rumored new iPhone, who are launching their own competitive mobile wallet initiatives. The key to the success of any of these services will be their ability to go beyond just providing a frictionless payment mechanism. The applications that seamlessly incorporate payment options, purchasing preferences, loyalty programs and promotional offers directly into the mobile app and transaction process will be the most successful wallet solutions.

Identification: While the mobile wallet has the ability to create a contact-less payment society, the one physical item it won’t eliminate any time soon is the government issued ID. A truly digital form of personal identification (be it a driver’s license or passport) would be too easy to forge or replicate by criminals and implementing fingerprint or retina scanning as an alternative form of identification is wrought with infrastructure and privacy concerns. So until biometrics can become a viable and cost-effective solution, the physical wallet is here to stay- unless you decide to use a mobile phone cases that doubles as a wallet.

It’s interesting to see how software development and hardware advancements are continually being leveraged to simplify and speed up the experience of completing transactions by challenging legacy models and removing manual steps in the process. Combined with business innovations, consumers are finally able to control when and how these activities are being executed which further enhances the overall experience. While not perfect, from what I was able to do over those few hours, I like where our future days are headed thanks to mobile.

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Not All Users Are Created Equal (For Ad-Supported Consumer Businesses)

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Facebook’s first earnings announcement as a publicly-traded company last week was not well-received by investors, as the company’s stock hit new all-time lows after only being able to meet analysts’ already lowered financial expectations.

Most of the discrepancies between Facebook’s growth trajectory and stock performance can be summed up in these two slides from the company’s earnings release:

While directionally these charts look good, going up and to the right, a closer look reveals a growing problem in the relationship between Monthly Active Users (MAUs) and Average Revenue Per User (ARPU). The MAUs chart shows quarter-over-quarter user growth in each of Facebook’s four geographic regions over the past two years. The largest of these regions, Rest of the World, is growing the fastest though (at 9% over last quarter) while US & Canada, which is the smallest region in terms of MAUs, is growing the slowest (at 2%) which is an issue since Facebook is able to monetize US & Canada users over seven times better than Rest of World users on average according to the ARPU chart. Optimizing per user monetization is further exacerbated when you consider that growth is increasingly coming from mobile-only users where advertising is still in its infancy.

Facebook’s ability to attract and monetize a large U.S. audience is what has enabled the company to go public. Whether Facebook becomes a successful publicly-traded company will rest largely on how quickly it’s able to reduce the ad monetization gap between U.S. users and every other region of the world. Until then, the financial markets will continue to recalibrate Facebook’s valuation (downward) to reflect the realities of the company’s current revenue capabilities.

This situation isn’t unique to just Facebook though. For example Twitter, the second largest social network out there, recently passed the 500 million account mark according to analyst group Semiocast, which also saw the proportion of U.S. user accounts decline relative to the rest of the world since the beginning of the year and identified Jakarta, Indonesia as the most active tweeting city- statistics that have a similar looking trend to what Facebook has experienced, growing but mostly in less mature advertising markets. As any free consumer tech services starts to grow quickly, they too will eventually face this same situation.

If you’re fortunate enough to be involved with such a consumer product that is gaining millions of users, focus on growth in countries where advertising is a mature industry so mobile will also be monetized more quickly (places like the U.S., Japan, Germany, and U.K.) and also accessible (so not China). If growth takes off in less-mature ad markets, but sizeably populated countries such as India or Indonesia, find a local advertising partner with strong ties to large conglomerates and marketers in the region before committing resources.

So when Josh Elman, venture capitalist at Greylock Partners, blogs about getting meaning from growth numbers provided by startups, we should probably add users by region to the discussion for ad-supported consumer start-ups in order to better understand the real opportunity and value being created for investors.

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Disrupting Retail Commerce and Real Estate

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At last month’s TechCrunch Disrupt the best interview of the multi-day conference was that of Chi-Hua Chien, partner at venture capital firm Kleiner Perkins Caulfield and Byers (if you haven’t seen it yet, I urge you to put aside twenty minutes to watch it here- it’s that good). In the interview Chi-Hua discussed Kleiner’s investment thesis in the context of technology’s ability to democratize industries. Previously technology had been leveraged to disrupt information (through the internet and search), distribution (through social media) and computing (through PCs and mobile devices). Now he says we’re in an era where commerce is being democratized. Through the “unwinding of that aggregation of commerce” companies such as Home Depot, Safeway and Walmart, which have succeeded historically by aggregating consumer demand through credibility and inventory, now have to compete with new demand aggregators coming from smartphone apps. The effects of this are already being felt by the retail electronics industry as Best Buy recently announced it was in the process of shrinking its physical footprint due to a drop in same-store sales which some are attributing to internet retailers benefitting from ’showrooming’. This disruption isn’t just be limited to physical commerce though, as retail financial services are also undergoing their own transformation thanks to more activities (such as depositing checks) being performed via mobile devices, which is reducing the number of transactions taking place inside bank branches across the U.S.

As a result retail real estate is becoming less important as a marketing and demand generation vehicle. So what will become of big box stores and strip malls?

Chi-Hua, during his interview, and start-up founder/angel investor Chris Dixon on his blog recently,  both alluded to the answer- companies that can create differentiated and superior customer experiences and not just compete on price will be the ones that succeed in this new retail environment. Starbucks was the first modern-day brand to successfully build a business around creating an experience for mainstream consumers (even resulting in a book being written about The Starbucks Experience). Then there’s Apple, the best example of how to build a successful retail presence. In the 11 years since the first Apple Store was launched, the company has opened up over 360 retail outlets worldwide and has become the most profitable retailer in America in the process while competing with electronic retailers such as Best Buy.

New opportunities to disrupt commerce will open up as a result of this excess capacity in real estate and Amazon might just be one of the biggest benefactors of this. As the company continues to grow its Amazon Prime subscriber base and potentially extend its Kindle line of devices this will increase Amazon’s need to grow beyond its current 34 warehouses in an effort to get the most popular inventory closer to its customers for faster delivery (for Prime subscribers), in-location pick-up (for consumer convenience) and product testing (for newly launched Kindle devices). An even more likely scenario will be an increase in temporary retail store experiences (also known as ‘pop-up shops’) where brands can leverage physical presences for short periods of time in order to support the launch or promote new products or services, which Samsung is looking to do in order to better compete with Apple for example.

The most exciting opportunity that could further transformation the physical retail experience is the democratization of manufacturing through technology. This next wave of disruption will come courtesy of 3D printing, which aims to digitize manufacturing and enable individual production quantities of many objects at massive scale. Currently 3D printers from the likes of MakerBot and Shapeways are used primarily used by hobbyists to create single-compound objects (usually plastic or metal). From this you can imagine a point in time in the future where more complex objects (made of multiple compounds, colors, etc.) are offered by developers through specialized retail store-fronts where consumers can submit orders for pre-fabricated products or design their own specifications to be printed out and picked-up. Each 3D retailer could specialize by type of product (ie plastic toys such as action figures or Legos) or production capabilities (ie motors for remote control vehicles) depending on their capabilities and demand.

The beauty in all this is that there will always be a need for retail real estate and technology will play a part in its evolution.

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Twitter’s Evolving Broadcast Network

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Last week signaled a big step in the evolution of Twitter as a broadcast medium. Starting with the announcement of a weekly email digest that summarizes the most relevant tweets from within each individual’s network, Twitter moved from being just a carrier of tweets to a curator of them as well. Combine this with the partnership announcements made at the end of the week, Twitter is starting to look less like a consumer technology platform and more like a traditional media platform. But what else does Twitter need to do to complete this evolution?

Slowing Down the Stream to Grow Faster

One of the primary challenges that Twitter needs to overcome to make this transition will be to develop a broader-based audience. Six years into its existence Twitter has reached 140 million users. But compare with Facebook which hit 500 million active users in the same time frame and Instagram, which will most likely pass 140 million downloads by the end of this year if they continue on their current growth trajectory- a mere 2 years into its own existence. So why hasn’t Twitter, which has similar brand recognition as Facebook and exceeds that of Instagram experienced similar growth? It boils down to simplicity and relevance. Facebook started out by focusing on photo-sharing and communication on the web while Instagram took photo-sharing to a new level in mobile. Both services were built in a manner that makes it easy for users to find and consume individual posts by highlighting the most relevant content in their feed based on their social graph’s interactions with it. Twitter on the other hand has always been about real-time distribution with little framework around how to use it, making it intimidating and not intuitive for newer, mainstream users. If Twitter hopes to reach 2 billion users it will need to focus less on what has made it popular to date (the real-time nature of the platform) and more on how the rest of the world consumes content (at their leisure). The new weekly digest feature, combined with the launch of the Discovery tab on Twitter’s apps at the beginning of the month should go far in simplifying the on-boarding process for new users by making the entire content experience more digestible.

The Reality of Real-Time Monetization

At the same time, Twitter needs to solve how best to monetize the real-time web experience beyond Promoted Tweets. For all the interest and excitement around real-time feeds, except for a few situations, no one has yet to prove there is a business model that can be built around it. Finance is the only traditional industry that operates in real-time to begin with, so companies like Stocktwits are in the enviable position of having already built their business around capturing the stream of stock market commentary on Twitter and providing additional analytics and services around that information that professional investors are actually willing to pay for.

The one area where Twitter seems to have identified opportunity around monetizing real-time communication is live events such as sports and award shows. The most popular events on Twitter, in terms of concurrent volume of tweets, have been sports-related, the Champions League soccer semi-final followed by the Super Bowl from this year, which had the highest tweets per second volume of any topic ever discussed on Twitter. The partnership announcement between Twitter and ESPN last week to create interactive programming around major sporting events is the first attempt to monetize this highly engaged audience on Twitter through advertising. Combined with the announcement the following day with NASCAR to curate tweets from a variety of sources around specific race events, you can see how Twitter could build a real-time business around curating the second-screen media experience.

Beyond these examples, all the other information being tweeted (except for natural or social emergencies like earthquakes and riots which cannot be monetized anytime) doesn’t require real-time distribution to be effective. The killing of Osama Bin Laden? The passing of Beastie Boy Adam Yauch? Great information to have, but isn’t any more critical or particularly more valuable when provided in real-time nor can it really be monetized appropriately. So by slowing down the stream experience, Twitter might actually be able to increase their monetization options beyond their current offering.

Continuing to Evolve Through Acquisition

Twitter’s broadening platform capabilities have benefited greatly from  acquisitions. The weekly digest looks like it is leveraging Twitter’s acquisitions of both Summify (a provider of daily summaries of the most relevant news from social networks) at the beginning of the year and RestEngine (a personalized email marketing service) earlier this month. For Twitter to continue down this path as a media broadcast network, additional acquisitions will be likely. While the biggest headlines Twitter has made on the acquisition front recently have been for the latest photo-sharing app it didn’t buy, the company should look at Pocket (formerly Read it Later) on the consumer side that allows users to save content for consumption at a later time- a sort of DVR for the real-time tweet stream- as an example of potential add-on services for its platform. On the business side, enhancing its analytics offering to compliment the tools and services it already provides to media publishers and advertisers should be Twitter’s primary focus.

From Content Carrier, to Curator, to Creator?

Ultimately, the type of broadcast network Twitter decides to evolve into will depend on whether or not the company gets into content creation. A recent job posting by Twitter aimed at journalists seems to indicate just that and may expand on the previously announced ESPN and NASCAR relationships. Luckily the evolution from carrier to curator to eventually a creator of content isn’t without precedent. Comcast was a carried content over its broadband networks until it decided to buy NBC a couple years back (after an unsuccessful attempt to acquire The Walt Disney Company years ago) to get into the curation and creation businesses. And as Matthew Ingram from GigaOM pointed out, YouTube has undergone the same progression with the announcement last fall of a $100 million fund via Google to invest in online content creators.

With each new step Twitter takes in its evolution as a broadcast network, the company exposes itself to greater business risks, but also greater financial rewards, by owning and further streamlining the process of getting content in front of consumers. Finding the intersection that optimizes the content consumption experience for users with Twitter’s own platform strengths and capabilities should be the main focus for the company going forward. If Twitter can find that optimal mix, it can become the internet’s answer to traditional media broadcasting.