Video Content in a Mobile World: Diet-Sized and Distributed

100 Calorie Snacks

While the tech industry was buzzing over Facebook’s $19 billion acquisition of WhatsApp, the social network’s original blockbuster deal, Instagram, was quietly making some interesting news of its own. Action-sport channel Network A, a property of next-generation media start-up Bedrocket, announced the launch of a first-of-its-kind video series called ‘#goodstuff’. The lifestyle series, which focuses on event and product reviews in its first installment, will be exclusively distributed on Instagram over the course of ten, 15-second episodes.

Instagram Video, which only launched this past June, has had a couple of other ‘firsts’ on the branded, short-form content front in recent months. In December Mass Appeal launched the first animated video series on the app followed by the launch of Instafax, a news-clip series from BBC, in January. While watching videos over the internet has become commonplace thanks to YouTube, Netflix and others, these three video series are the first to be created specifically for a mobile-first social networking audience. The combination of Instagram’s photo/video sharing experience with user engagement and growth figures that exceed those of Facebook, as well as those of rival mobile social networking apps, makes the company and it’s 150 million-plus user platform a logical place to experiment with new forms of atomized content creation and distribution.

The typical process for distributing video content online usually includes developing a branded destination website and accompanying YouTube channel to garner views. That won’t work in mobile, where apps are preferred by users and competing for attention is further challenged by siloed experiences and navigation constraints relative to the web. Instead of introducing yet another app for consumers to hopefully download, content creators have the opportunity to leverage the popularity of the most engaged social apps to efficiently reach their intended audiences.

In a day an age where smartphones have enabled content consumption to proliferated (just look at music video site Vevo’s recently revealed 2013 viewership stats), some mobile applications have imposed functional constraints (Twitter’s 140-characters, Instagram’s 15-second videos, SnapChat’s disappearing content, etc.) to create unique, and successful, user experiences. Without these limitations on the web, content creators have never had to consider developing stories to fit this new mode. While Netflix has shown us that a full season of House of Cards (about 13 hours) might be the upper-limit for online video storytelling, consuming this type of content is still best suited for TVs and laptops. Mobile devices, with their smaller screens, slower data connections and app-centric usage already lend themselves to content ‘snacking’- so why not experiment with optimizing production for these mobile confines.

The onslaught of webisodic content during the aughts, which launched such companies as Blip.tv and EQAL, eventually proved to be overly optimistic. But the issue might have been one of timing more so than anything else. The social-mobile generation is more likely to trade quality for content brevity and platform convenience in a world of streaming digital distractions.  Recasting webisodes to fit the realities of mobile could enable such experiments as lonelygirl15 to succeed longer-term. If the right content experience can be created for audiences, the quality will follow. If ESPN’s SVP of Product Ryan Spoon comments are any indication, users are willing and ready. The question is- can you successfully condense something like Modern Family into 3-minute seasons?

Time will tell if the ‘mobisode’ makes its way into your stream.

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If PCs Are Becoming Trucks Then What Will Wearable Computing Be?

Wearable_ComputingOne of the many prescient observations made by Steve Jobs during his lifetime came while being interviewed at the All Things D conference in 2010:

When we were an agrarian nation, all cars were trucks, because that’s what you needed on the farm. But as vehicles started to be used in the urban centers, cars got more popular. Innovations like automatic transmission and power steering and things that you didn’t care about in a truck as much started to become paramount in cars. … PCs are going to be like trucks. They’re still going to be around, they’re still going to have a lot of value, but they’re going to be used by one out of X people. … I think that we’re embarked on that. Is the next step the iPad? Who knows? Will it happen next year or five years from now or seven years from now? Who knows? But I think we’re headed in that direction.

Headed “in that direction” indeed, as worldwide smartphone shipments passed personal computers in 2011 and tablets are expected to do the same to portable PCs this year and all PCs in 2015. But as Android and iOS-based devices start relegating Windows-based PCs to specific tasks, is the same phenomenon about to happen to these mobile technologies thanks to wearable computing?

Wearable devices, which includes health trackers (i.e. Jawbone Up, Fitbit Flex, Nike+ FuelBand), smart watches (i.e. Pebble and many more expected from major consumer tech companies) and smart glasses (i.e. Google Glass), are projected to be a $50 billion business in 3 to 5 years according to Credit Suisse. But in order to reach that potential, wearable technologies need help from, coincidentally enough, the smartphone. That’s because wearable electronics lack the processing power and internet connectivity necessary to run their own native apps. So instead, these devices must leverage the latest Bluetooth technology in order to access existing mobile phone applications and wireless networks. This allows otherwise passive wearable interfaces to actively control the information being displayed on the device (i.e. YouTube videos on Google Glass or RunKeeper activity stats on a Pebble watch) or synched with the phone (i.e. steps tracked by Fitbit). Over time hardware technology improvements and more robust software will allow wearable computers to become their own app platforms, and in the process, relegate the smartphone to a subset of activities.

Which activities the smartphone focuses on going forward will depend on how consumers’ use of computing technology evolves. In keeping with Jobs’ analogy, if the personal computer is becoming the truck, then its primary purpose will be to enhance user productivity related to process-heavy tasks such as data extraction and manipulation, media editing and creation and software development. In turn tablets, because of their size and portability, are quickly becoming the device of choice when it comes to commerce, content, casual gaming and media consumption. This makes the tablet’s role more like that of an SUV rather than a truck. Even though smartphones will be used a lot like tablets when it comes to consumption activities, it will do so in shorter bursts of time and with specific intent (i.e. comparing product prices, looking up directions and movie times). Where the device will excel is in providing mobile connectivity akin to a MiFi device but programmed to route information in specific ways. Since smartphones will be used in the most variety of ways it should be considered the traditional car in the computing line up.

Smart_Car

So where does that leave wearable computing? With a focus on specific activities per device type and efficiencies gained from not having to constantly interact with our smartphones, wearables might turn out to be the smart cars of the computing world.

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

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.

Automobiles: The Ultimate App Machine?

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.

Twitter’s Evolving Broadcast Network

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.

Android: Winning the Smartphone Battle, But Losing the Mobile OS War

Earlier this week I received a long-awaited text message from Verizon Wireless notifying me of a credit I had available towards a new phone if I renewed my contract for another two years. After 9 ½ years of BlackBerry devices (my first BlackBerry actually ran on the Mobitex network, for the old-school mobile-types out there) I’m ready for a change. With a relatively paltry selection of native apps and a mobile web surfing experience reminiscent of dial-up internet access circa 2000 the question I’m left with is which smartphone do I go with- one from Android or Apple?

With the Android-based Motorola Bionic delayed until the second half of the year and rumors of the iPhone 5 shipping anywhere between September and the next year, the immediate decision seems to come down to whether I should get the 4G LTE network-enabled HTC Thunderbolt or iPhone 4. But is this the real question I should be asking myself?

The speed of Android’s rise to prominence in the U.S. smartphone market has been nothing short of amazing, growing from a 9% market share in February 2010 to 33% in February 2011, vaulting Android’s operating system from 4th to 1st place in the process according to comScore. Over that same period of time Apple’s U.S. smartphone market share has stayed flat at 25%. This had led to people like venture capitalist Fred Wilson of Union Square Ventures to suggest that developers should build for the Android operating system first.

What Fred’s analysis, this market share data and my question fail to address though is the broader market dynamics of mobile. The battle everyone is focusing on is Android versus iOS smartphones- and why not? With 70% of the U.S. still using feature phones, according to the same comScore data, the market opportunity for smartphones remains massive. Even so, the war between Apple and Google is actually taking place at a much broader level, as decisions made by consumers like myself and developers alike will decide who the eventual market leader will be for the entire mobile operating system (OS) market- not just smartphones.

While Android might be winning the smartphone market share battle, it’s at the mobile OS level that iOS holds the advantage over Android. Google’s primary market for distributing its mobile OS is the smartphone via HTC, Motorola, Samsung and other handset manufacturers. Apple on the other hand distributes iOS across three markets through its own devices- handheld entertainment devices (via the iPod Touch), smartphones (iPhone) and tablets (iPad). Because of this Apple’s outlook is much broader in scope- to get its other iOS devices into the hands of the 80% of the market (70% of the feature phone users in the U.S. plus the 1/3rd of the smartphone market not on Android or Apple smartphone) not using an Android or iOS smartphone. By getting consumers to purchase an iPad or iPod Touch, Apple can create a barrier to entry for Google through high switching costs.

With every app install, especially paid ones and those that can be used across device types, consumers increase their switching costs for leaving Apple’s ecosystem. So when the time comes for iPad and iPod owners to upgrade their mobile phones, the iPhone is the natural choice since these users are already familiar with Apple’s App Store and iOS user experience. With the iPod’s market share pegged at 70% of the digital music market last year according to NPD and iPad’s at 85% of the tablet market in 2010 according to ABI Research, Apple has a huge advantage over Google in getting consumers onto its mobile OS platform through these types of devices. As iPod sales begin to decline though, the growth in iPad sales will be the key complimentary product in Apple’s effort to gain market share in the smartphone market.

According to a different study released by comScore earlier this week, there is evidence to corroborate iOS’ network effect for Apple in the U.S. iOS’ reach is 59% greater than that of Android when you combine iPad, iPhone and iPod users. This translates into approximately 38 million iOS users overall in the U.S. versus nearly 24 million Android users. More importantly though, in looking at iPad sales specifically, BlackBerry users account for the second highest percentage of iPad owners, behind iPhone customers, followed closely by Samsung and LG. This represents a great opportunity for Apple to convert these users into iPhone customers once their contracts are up or they ready to switch to an advanced smartphone. Update: comScore just released a similar study for the European market showing Apple’s reach being 116% greater than Android in France, Germany, Italy Spain and the UK- albeit on a smaller user base (29 million consumers) than in the U.S. As it relates to iPad adoption, Nokia users closely follow iPhone users in iPad ownership, providing Apple with a huge opportunity to take market share from the largest mobile handset manufacturer in the world.

So how can Android better compete with iOS at the mobile OS level?

  • First, Google needs to nail down agreements with the music industry’s four main record labels in order to launch its cloud-based music competitor to iTunes. This will allow manufacturers to create devices that can finally compete with the iPod and eliminate the biggest feature advantage of the iOS platform.
  • Second, Android tablets need to be synched with the smartphone’s OS platform. The Motorola XOOM, which launched with much fanfare towards the end of February as the first real competitive threat to the iPad (after winning Best of Show at CES in January), seems to have come up short. Sales of the tablet have been estimated at 100,000 devices in its first 5 weeks on the market compared to the iPad which sold 300,000 devices its very first day and nearly 5 million devices in the just announced second quarter. By running a newer and completely different version of Android than its smartphone siblings (Honeycomb 3.0 versus Android 2.0 thru 2.3.3) the device hasn’t been able to leverage apps from the smartphone Android Marketplace. According to Apple’s COO Tim Cook a fragmented ecosystem where Android tablets have less than 100 apps to choose from while iPad customers have 65,000. Without a cohesive OS platform across device types, Android will lack the switching costs afforded to Apple’s OS ecosystem.

For developers, the 189 million cumulative iOS devices sold through the end of March 2011 represents a huge market opportunity. Add in ease of monetization and payment mechanisms in addition to a formal app discovery process that is still lacking in Android’s marketplace, you can see why companies like Color and Instagram chose to launch in the iOS App Store first and why there continues to be more apps available for iOS than Android even though Apple has a more stringent app vetting process.

As for myself, the decision was easy once I took a step back and looked at the broader mobile OS ecosystem options. Even though I already owned an iPod Touch, I’ve decided to go with iOS primarily because I was planning on picking up a new iPad in the first place. So by default, the iPhone it is for me. With three different types of devices being tied to iOS when it’s all said and done I will be Apple’s ideal customer. The only question I have left? Do I wait for the white iPhone.

Game Time for Foursquare

When Facebook Places launched in August, the media wasted little time in calling game, set and match on Foursquare and its location-based social network (LBSN) brethren. With over 500 million users, the theory went, Facebook would become the most popular check-in service due to its sheer size alone. While Facebook hasn’t released any initial stats regarding the number of users or check-ins being generated through Places thus far, personal and anecdotal experiences from early tech adopters suggests the uptake hasn’t been significant. Having survived the unveiling of Places by growing its own user base from 3 to 4 million users in less than 2 months, and with plenty of money in the bank, Foursquare has a shot at growing beyond its early-adopter community and becoming a mainstream network. So how does Foursquare become the next Twitter and not end up like Friendster?

Make A Few Enemies (If You Want 500 Million Friends)

The launch of Places was a direct shot at Foursquare by Facebook. To return the favor Foursquare should go after Facebook’s core audience of college students (something I suggested to Foursquare CEO Dennis Crowley in a conversation last year). Beyond revenge, this actually makes a lot of sense if you remember that Facebook’s success was built on its ability to capture the college crowd before opening up to other audiences.

Considering that (1) with 165 million Facebook users in the U.S. alone there is bound to be some backlash by young adults against parental “friending” as well as overall loss of interest in the platform and (2) Foursquare’s raison d’etre is to help people find new things to do in cities, Foursquare can offer college users a unique experience. Students who already use Facebook now have the chance to create a new, curated social graph based on people they want to interact with socially- and one that doesn’t include their parents. By leveraging Foursquare’s discovery element, which the company has started rolling out across several campuses with the launch of Foursquare for Universities, students can develop relationships based on sharing new experiences.

The result is the creation of a real social network- one that occurs in the real world and not just online or through social games. Facebook is accurate in not calling itself a social network as it operates more like an ambient network- one that allows people to communicate and interact with their accumulated social graph from afar. Because Foursquare’s purpose is to enable face-to-face social interaction it has the opportunity to become the place where your real friends are- i.e. people who you’d actually want to grab a drink or hang out with if you knew they were nearby. This statement can’t honestly be made by anyone trying to socialize beyond Dunbar’s number on Facebook. Time will tell if Facebook’s just announced Groups rectifies this situation or is too cumbersome for average users to implement. If not, they can resort to playing dirty by enforcing their newly granted LBSN patents.

Show Me The Money (Or At Least a Discount)

Not to be lost in the social aspect of Foursquare’s service is the underlying business opportunity. While Mayor-ships and virtual badges have been the drivers of Foursquare’s early successes, to a maniacal level in some instances, I agree with early stage investor Dave McClure, though not in such eloquent terms, that game mechanics will only take LBSN’s so far and that tangible financial rewards are how these networks can turn into more mainstream services.

That’s not to say that Foursquare should abandon its game mechanics. In fact the social activity driven through these features of Foursquare’s service should be leveraged by local businesses because these mechanics can create the right type of incentive structure. Local merchants are eager to tap into in-discretionary spending habits (especially those of college kids), but in a cost efficient manner that creates loyalty beyond just the initial lead generation. In the same breadth, consumers are interested in deals at local establishments- especially promotions they can opt-in to. That’s where leveraging Foursquare’s Swarm Badge to drive group participation makes sense.

The concept around Swarm Parties, in which businesses offer discounts to customers once a minimum number of users have checked-in on Foursquare in a given time period, has proven to be effective in increasing sales for local businesses in both the U.S. and overseas. This hasn’t been lost on the likes of recently launched GroupTabs which is looking to provide group discounts for local merchants by combining the check-in features of Foursquare with the deal incentives of Groupon. While Groupn itself has shown how effective it can be in driving one-time sales for local businesses it does also have its drawbacks. Foursquare can help businesses foster the long-term loyalty with consumers that is missing from Groupon-type offerings by helping merchants create incentives that can exist beyond virtual badges. This could include leveraging relationships merchants already have with consumers through loyalty cards, which CardStar is already doing by integrating Foursquare into its service, or creating new reward structures based on check-in frequency.

Find Other Ways to Help Users Grab Life… (And Experience New Places)

Beyond group incentives, Foursquare needs to find other ways to be useful to users and businesses in discovering one another. The recently launched “Add to My Foursquare” button is a great way to transfer an individual’s web-based interest in a venue, by adding it to their Foursquare To-Do list, into an actual visit to the physical store when they check-in nearby that business. Beyond web surfing, Foursquare’s recommendation engine, which is still being tested, could offer search engine-like opportunities for users to find, and merchants to pay to promote, businesses based on matching users’ check-in activity with potential interests. Combined these capabilities can not only enable better discovery and thus socialization opportunities for current users but also act as a starting point for new users who don’t have a check-in history but want to benefit from the wisdom of the local crowd.

Foursquare’s ultimate success, in addition to keeping the service up-and-running, will depend on its ability to create tangible benefits for its current users, before they start losing interest, while simplifying the value proposition for mainstream Facebook users to understand and start using Foursquare. If not, companies like Google Ventures-backed SCVNGR, which now has 500,000 users of its own, has the pieces in place to compete with Foursquare through its own brand relationships, university outreach program and group-buying functionality, are waiting in the wings to take on Facebook Places.

Ball’s in your court Foursquare. I’m rooting for you.

Photo credits: Dunny/WeeklyShot, The Social Network/Columbia Pictures, Jerry Maguire/TriStar Pictures and DodgeBall/20th Century Fox Film

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How Online Advertising Ecosystems Evolve and the Death of the Ad Salesman

 

Last week Clearspring Technologies [disclosure: I used to work there] publicly announced its new direction as an audience buying platform, leveraging the widespread distribution of its AddThis social sharing tool (which I include at the end of each of my blog posts) to aggregate intent-oriented data from keyword searches performed by web users (AddThis accomplishes this by capturing search query information contained in the referring URL string when a visitor lands on a web page where the tool is embedded). Search re-targeting has become a big driver in the growth of data-augmented display ad campaigns this year as advertisers look to find consumers that exhibit particular characteristics across the web versus targeting visitors to a particular website based on traditional geographic and demographic parameters. The incorporation of data into online advertising has been greatly aided by the creation of self-service platforms that allow advertisers and their agencies to define their audiences and buy access to these users, as well as the accompanying ad inventory, in the process.

These platforms are able to bring efficiencies to the demand side of the of the equation by automating components of the online display advertising ecosystem, something that wouldn’t have been possible without the standardization of display advertising units (which the IAB has achieved by defining such things as ad unit pixel dimensions, file weight and animation length). Without this type of inventory standardization neither the evolution of ad networks, ad exchanges and now demand side platforms (DSPs) would have never occurred, nor the ability to leverage data sources like Clearspring when buying online ad impressions.

This type of evolution hasn’t only been limited to the online display market though.  The IAB began the process of standardizing video advertising in online video players two years ago, creating guidelines that enabled online video ad networks to emerge. These specifications have matured enough to enable the likes of Adap.tv and BrightRoll, who coincidentally enough is a major video ad network itself, to launch video ad exchanges in an effort to bring efficiencies to the scale already available through these video ad networks. On the heels of launching BrightRoll Exchange (BRX) last week, BrightRoll announced this week that it will be leveraging search data from Magnetic to allow video advertisers to re-target audiences across the BrightRoll Video Network as well as BRX in the same manner they do with display advertising today.

As you can see the online video advertising market is following a very similar path as online display advertising has in its maturation- leveraging ad unit standardization to bring scale to the industry, which in turn has led to platforms being launched in order to bring efficiencies into the marketplace and incorporate data to enable audience targeting at scale- albeit in a much more condensed time line. Where online video advertising trails display advertising in delivery effectiveness is in the nascent state of its exchange marketplaces and integrations with DSPs and data sources, which should both evolve rapidly over the course of the next 12 months.

Based on this pattern, mobile applications should be the next advertising segment to follow this evolution as mobile ad networks focusing on the Android and iPhone platforms have proliferated. The biggest thing holding back the mobile application advertising industry from further efficiencies is ad unit standardization as the IAB is not yet willing to go down that path, only providing best practices as of yet.

This automation and scale being brought into buying online advertising inventory has started coming at the expense of ad sales people. Case in point, in June the Fox Audience Network disclosed that it would be laying off 5% of its staff, all from direct online ad sales, as a result of the success the company was seeing from the self-service display advertising part of its ad network business. So is there a future for ad sales people in online advertising or will they be a casualty of efficiency like blue-collar line workers of the industrial age?

To survive and thrive, ad sales people need to re-orient their thinking from selling impressions to creating experiences for brands and advertisers that focus on two core concepts: integration and social. Integrated campaigns enable advertisers to achieve higher engagement and mind share than through individual ad placements. In traditional display advertising this can be accomplished by implementing branded skins into websites or sponsoring sections of content. In video this might mean product placement in episodes or storylines and for mobile it might involve sponsoring the give-away of previously paid apps or premium features. The key is subtly associating the advertiser with the site and content so as to create a positive connection versus an annoying one elicited by standard display and pre-roll video ads.

In terms of social, I’ve previously written about the lack of innovation in online advertising since its advent 15 years ago and that the focus should be on creating socially-oriented ads (since social networking is what most web users are spending their time doing online these days). Developing ways for users to interact with and provide feedback on ads in real-time as well as leveraging a web property’s user base to collaborate in the creation of campaigns, which I’ve also written about, creates engagement because the users who participate have a vested interest in the outcome- just ask the Old Spice Guy.

Regardless of finding the right experiences to drive success for advertisers, ad sales people need to evolve ahead of these online advertising ecosystems or they will end up like Willy Loman.

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Where Does Online Video Go From Here?

Google’s acquisition of YouTube in October 2006 was supposed to usher in a new era of opportunity for video creation, distribution and monetization that leveraged the power of the internet. Now, three and a half years later, the biggest benefactors of the boom in online video consumption have primarily been YouTube’s founders and investors as profitability still eludes YouTube and revenues are scant in comparison for most others in the online video ecosystem. With webisode creators closing up shop or changing business models, television networks removing or withholding their content from partners and distribution channels, and well-funded online video aggregators Joost and Veoh shuttering their businesses, what role will the internet play in the video content experience going forward?

Here are today’s realities:

  • Television will not go the way of the newspaper industry. Clay Shirky, an internet and media consultant and professor at NYU, recently suggested that the television industry faced the same disruption in its business models as newspapers are experiencing today. What he failed to acknowledge was that the production value of video content creation cannot be commoditized in the same manner written content can (Avatar didn’t become the highest grossing movie of all-time by cutting corners on cost). In fact the cable industry seems to be strengthening its position with consumers- delivering record audiences for sports leagues, including the largest audience for a single cable network event (last year’s Vikings vs. Packers game on ESPN) and the signing of Conan O’Brien to host his new later night show on TBS. This performance is leading advertisers to commit an even greater share of their television ad budgets to cable networks in the coming upfront season.
  • There are no free lunches for online video consumers. Cord-cutting is somewhat of a fallacy. While a lot has been written about the growing minority of consumers who have given up their cable subscriptions in favor of accessing video content over the web from the likes of Hulu and Netflix, the fact of the matter is that consumers are still paying their cable or phone company to access this video content over their networks. Though monthly internet access can cost a quarter of the price of a monthly cable subscription bill, as they say, you get what you pay for. Without the ability to watch live events (American Idol, Super Bowl, etc.), or specific content from cable networks (Mad Men on AMC, It’s Always Sunny in Philadelphia on FX, etc.), in addition to no quality of service considerations for video playback on the web (when was the last time you experienced buffering while watching television through your cable service provider?), we are starting to see stories about consumers who have given up on the internet-only video experience.
  • The internet will be one of several distribution channels, not a panacea. While many consumers expect to find all content online, and for free, these people tend to forget that television’s economics continue to drive the decision-making process for broadcasters. It’s for this reason I’ve previously suggested companies such as Blip.tv should look to traditional television networks to extend the distribution and reach for their clients’ webisodic content. With the launch of the iPad and associated apps from video providers, and discussions around broadcasters working together to build a mobile television network, the number of ways consumers will be able to access movies and TV shows will continue to proliferate. While this should drive additional content consumption opportunities for consumers, it will be done so on the television industry’s terms.

And tomorrow’s opportunities:

  • Delivering “DVR economics” will bring more premium video online. For television networks to get comfortable with making more of their content available online after its original broadcast, the revenue opportunity needs to be comparable to what broadcasters are generating from their DVR-viewing audience. This makes sense since watching video online and via DVR are both non-linear viewing experiences intended for consumers to catch-up on missed shows. This will be an important metric for online video services to achieve in order to be considered distribution partners for broadcasters and networks going forward. With online consumers showing a willingness to sit through additional advertisements and both Hulu and TV Everywhere expected to charge for certain content, achieving parity with DVR economics seems to be an achievable goal as the dual revenue model  employed by the television industry (users paying for access to programming in addition to being presented with commercials while watching that programming) proliferates into new channels. This could become a recipe for enabling virtual MSOs like Apple TV and others to gain access to television shows that haven’t been previously made available online. Over time a bifurcated business model could emerge between real-time and time-shifted viewing with different price points for each experience.
  • Social TV will be the key to enhancing the video viewing experiences. Because the internet is a proactive, lean-forward experience most of the time, it is best leveraged as a companion to live event broadcasts to create a social television experience. With more and more people spending time online while watching television there’s an opportunity for programmers to engage audiences by allowing viewers to share their experience with friends or other fans in a meaningful way, creating larger and more loyal audiences. Events such as the Grammys and Oscars have benefited greatly by combining the social features of Facebook and Twitter with live broadcasts. Apps such as Hot Potato and Miso have been launched to aggregate these types of experiences on behalf of viewers, though broadcasters are now developing these services on their own as well. Regardless of the social network or app being leveraged, these services should be incorporated into devices such as mobile phones and tablets, and not necessarily directly into the television set via TV widget platforms, to not inhibit either experience individually and allow any service to compete for audience attention.
  • Unified audience measurement will be paramount. While video ad networks have probably been the greatest benefactors of the growing online video ecosystem, with over $90 million invested between BrightRoll, TidalTV and YuMe in Q1 of this year and Tremor Media earlier this week, until there is a way to merge audiences across different platforms (television, laptop, mobile phone, etc.) online video revenues will remain insignificant in comparison to broadcast television. Nielsen announced a solution to address this problem earlier this year that is expected to be rolled out for the fall television season. Looking to make buying video inventory online comparable to traditional television, two different online video ad networks have partnered with third-parties to create  an online equivalent to Gross Rating Points, called iGRP, which is used to sell prime-time ad inventory, to match online audiences with that of traditional television. As agencies and advertisers get more comfortable with quantifying users online in a similar manner as is currently being done through traditional television broadcasting more ad dollars will continue to flow to online video. This will allow online ad networks to compete for even more upfront ad dollars during TV’s traditional outlay season.
  • Opportunities exist for online video technology providers- to an extent. Brightcove, founded before YouTube ever existed, is arguably the most well know enterprise technology provider to the online video industry. In raising a fourth round of funding recently, the company disclosed it expected worldwide revenues of $50 million this year. Considering the company already works with most major media companies, what does this tell us about the market opportunity for the most important component of the online video ecosystem? If you concur with Frost & Sullivan analyst Dan Rayburn’s estimate of $300 million in total revenues for online video platforms this year, then it’s not that significant. It doesn’t mean that Brightcove won’t have a successful IPO, it’s just that for the amount of capital the company has raised ($100 million) the revenue potential ought to be 10 times Frost & Sullivan’s estimates. That being said, companies that can automate content encoding (i.e. Elemental Technologies) and distribution (i.e. TubeMogul) across disparate platforms and formats, provide rights management (i.e. Widevine) across access points and deliver aggregated audiences and reporting for advertisers will have the best chance for success, though primarily through acquisition. Companies such as Akamai will be the biggest benefactors as they can leverage their public currency to add these services to their CDN delivery business, allowing them to move further up the value chain with clients.

Add it all together and where do we end up? Most consumers don’t differentiate between what content they are accessing, broadcast network television (ABC, CBS, Fox and NBC) or cable networks (Discovery, ESPN, MTV, etc.), since in today’s digital environment you need a set-top box from a cable, satellite or telecom company to access any television programming. The same will hold true for how consumers access programming tomorrow, be it over dedicated coaxial cables, wireless carrier networks or over the public internet. As such, consumers will have tiered pricing (as either a bundle, how monthly subscriptions are currently provided, or a la carte as Apple is attempting to do) that incorporates how content is being accessed (real-time or on-demand) and from where (television, laptop or mobile phone). Whatever the model, viewers will be able to interact with audiences around the content, creating a more fulfilling experience. Advertisers will benefit from better audience targeting capabilities already being used on the web today across all these viewing outlets with the added value of unified reporting.

While the nirvana of free access to all video content over the internet will probably never be realized (except for one-off cases like YouTube’s wildly successful live streaming of a cricket tournament) the internet will play a major role in improving the online video experience from both a consumption and monetization perspective.

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It’s the End of Viral Sharing Tools for Widgets. And I Feel Fine.

Last month Joe Marchese, President of SocialVibe, authored a guest article on MediaPost entitled The Widget is Dead. Then earlier this month Clearspring announced that it was deprecating Launchpad, its original widget sharing platform [disclosure: the company pays my bills], adding fuel to the question- have widgets become relics of the Web 2.0 era?

The answer to that question is: not exactly.

To completely answer this question it’s worth defining what widgets are and are not first.

  • Widgets are typically described as portable chunks of code that can be installed and executed across third-party websites. The most well-known widget out there is YouTube’s video player that has enabled videos to be embedded and played across social networks, blogs and a multitude of other websites.
  • Widgets are not applications, like those found on Facebook, as they do not leverage the native functionalities of social app platforms, such as a user’s social graph, which ties these application’s capabilities and usefulness to one particular website.
  • Widgets do come in two distinct types based on their execution: content and utility widgets.

Content widgets (flash games, video players, etc.) provide the same functionality and end-user value, regardless of where they are embedded. Utility widgets on the other hand, are configured to each user’s identity or website’s needs. Some examples of these include Facebook Badges, MyBlogLog and SocialVibe widgets.

This difference in functionality between these widget types impacts their virality though not necessarily their adoption. Utility widgets are not viral by nature because each instance is unique, so there is little value for someone besides the owner to embed that specific version of the widget. These widgets gain adoption through a hub-and-spoke model where anyone who wants their own version must go to the widget providers’ website to create a new, tailored one to embed on a third-party page or site.

Content widgets on the other hand are predisposed to be viral because they do not require any configuration. If someone finds a widget embedded on a site they can directly share that instance of the widget to the destination of their choice. Services like Clearspring’s Launchpad and Gigya’s Wildfire were created to enable this sharing process to be more automated for users across social media destinations such as blogs, social networks and start-pages in an effort to enhance their viral adoption.

Since Newsweek declared 2007 The Year of the Widget a lot has changed in the social media landscape. MySpace, the most popular destination for widgets back then, has seen its user growth stall while Facebook and Twitter have experienced explosive growth around their platforms which have redefined content discovery and distribution. Widget sharing services have also been redefined in the process around the hub-and-spoke model, even for content widgets, as Facebook and Twitter have enabled virality to occur natively with their platforms with the introduction of activity streams.

As actions are taken by a user, such as sharing a video into these platforms, their social graph is notified of the activity. If any member of that user’s social graph plays (in the case of Facebook) or forwards (in Twitter’s use case) the video, this action is broadcast to that member’s own unique social graph which in turn enables the widget’s content to be perpetuated virally across other users’ social graphs based on their actions. If a widget becomes popular enough, the virality can reintroduce the widget several times  into a  person’s activity stream over a period of time.

Even the notion of a widget is being redefined as advertisers and publishers do not necessarily have to create a new, standalone Flash asset to enable their content to be distributed. With the sharing of links becoming a standard activity within Facebook and Twitter the need for widgets has taken a back seat to links that drive users back to a web page that contains the appropriate content or provides the ability for users to pull pictures and videos directly into these platforms or associated applications.

This evolution is actually good news for the widget ecosystem, especially content widgets, as costly projects that repackage content into widget form will give way to driving value for existing assets and web pages through link sharing. The sharing experience also becomes more standardized for users across different sharing services as the onus for generating virality shifts to the platforms themselves. As for utility widgets will be the least affected by these changes but will continue to be an important component of websites, blogs, start-page and even television experiences as these platforms try to extend their capabilities across the web. Finally, services like Clearspring’s AddThis that aggregate the various social media destinations for sharing as well as analytics into one service will become even more of a standard feature across websites as everyone looks to participate in the activity stream.

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