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Archive for May, 2010

PostHeaderIcon Google TV: TV Advertisers Should Be Mad as Hell

The big announcement at Google I/O last week was the release of details about Google TV.  And it should make TV advertisers of all stripes angry and concerned.  VERY concerned.  So much so, in fact, that they should be actively seeking technologies and business models to deflect/prevent what is effectively an advertising power play by Google.

Google TV is the latest attempt to merge the television experience with a web-based TV (also called IPTV) experience on the television set (as compared to bringing TV to the web, as say a SlingBox does).  There have been numerous attempts to bring the Web to the television, going back all the way to 1996 when Steve Perlman, Bruce Leak and Phil Goldman brought to market the WebTV set-top box, marketed by both Sony and Phillips.  (Find a list of TV/Internet hybrids in the next post).  None of these has been particularly successful, for numerous reasons:

  • Most require an extra set-top box that is expensive (Google is no different.  As an example of technology that uses the consumer’s  computer or laptop as the interface to the TV, see Kylo).
  • The experience doesn’t truly integrate.  You either watch the web-based offerings or Live TV, but not both at the same time.  In many cases, the box is meant for the delivery of movies or TV shows on-demand, as compared to being broadcast in real-time.  The Roku/Netflix platform is an example of this.  PopBox is another example, but they also deliver more content – websites, social media experiences from Facebook and Twitter, images, YouTube videos, games, and music from sources like Photobucket and Pandora.
  • The interface requires a separate remote control, which adds another layer of complexity to the consumer experience.

None of these really impacts the effectiveness of a “single” broadcast TV advertisement in any meaningful way.  They are separate experiences from broadcast television and, as a rule, they do not take away from live TV viewership.  Some amount of consumers’ time is given to the Internet and movies on-demand nowadays.  Whether I interface with that experience through my computer screen or TV screen doesn’t change the amount of time I spend in an “online” mode versus a TV viewing mode, and it does not impact my current behavior around the TV ads themselves.

Google TV has come up with a different approach which, at least during an initial search, overlays the Internet on top of the television experience (see first image).  When it overlays, the interface is transparent so you can see your TV behind the browser interface that lets you search for the shows and information you want.

Google TV transparent interface

There are other times when the interface switches completely and the TV experience is put on hold while the viewer interacts with Web content (see second image), which is more like the experiences of the current generation of web-to-TV offerings.  But the difference here is how easy and seamless Google TV makes it to switch between all three of these user experiences – live TV, TV in the background, and Internet-only.  The other difference, and one of critical import for this article, is that Google intends to sell advertising within the Google TV platform.  Where, how, and how much are still to be determined.

Google TV solid menu interface

Google has definitely come up with something unique that I believe will be very compelling to television viewers as it now truly integrates the television and web experiences for the first time.

But if the consumer loves this, traditional TV advertisers should hate it.

Today, television advertising is a $70B market versus $25B for Internet and mobile search advertising.

US Advertising Market Revenues 2009

In 2010, TV advertising is projected to grow 4.3%, or $3 billion on a base of $70.2 billion. This compares to non-search on-line advertising which is projected to grow 12.9% or $1.6 billion on a base of $12.2 billion during this period.   So even though Internet advertising is growing at a faster rate, television advertising real-dollar growth is twice that of Internet advertising.

Google knows this.  Rishi Chandra, the  product manager for Google TV, mentioned the $70B factoid at Google’s I/O conference last week.  Moreover, Google also gets that despite the fact consumers are spending an increasing number of hours per day online,  television viewership is at an all-time high, with 180mm US consumers watching TV for over 5 hours/day on average.  Rishi mentioned this, as well. The guys at the Googleplex are no dummies. As the old saying goes, they can see a mountain in time. In this case, the mountain they want to cash in on is TV advertising.

What both Google and the advertisers also know is that television advertising is broken.  In 1987 an advertiser could reach 80% of viewers by airing a 30-second spot only three times. Today, that same commercial would have to air 150 times to reach 80% of viewers.[1] The rapid decline of TV ad viewership is due to the “TiVo” effect and today’s viewers’ multi-tasking habits – texting, phoning, emailing and web surfing while watching TV.  Brands are urgently seeking a solution to reengage viewers of their TV commercials as brand expenditures on television dwarf what they spend on all other ad mediums.

Now Google would argue that it has found the solution, and from its perspective I truly think they believe this.  The Google culture is driven by data and metrics.  Current television advertising with its lack of performance measurement is anathema to a Googler’s mindset.   If you are a fanatic about data-driven marketing, Google TV “solves” this problem because of its ability to bring CPC and other easily measurable formats into the web-based part of the new integrated television experience.

Interesting and correct as far as it goes.  But wrong – and I mean dead wrong – from the perspective of television advertisers who focus 3x of their dollars on television versus online advertising because it is still the most potent means of getting a message to the consumer.  Moreover, it is a power play by Google to disconnect the brand advertisers from their traditional advertising providers and drive them, willingly and like lemmings, onto the Google platform(s), thus providing Google an even stronger power position relative to advertisers.

Let’s think about this.  Television advertising is already much less effective than it used to be.  Now along comes Google TV with its overlay and ability to seamlessly move away from the live television experience.  Let’s say you are a viewer watching Lost, that you are using Google TV, and you have left your laptop in the other room because – heck – you don’t need a two-screen solution to access the Internet during live television now that you have Google TV.  Something on the show triggers you to want to look up some factoid on the web at a Lost fan site.  You plan to type in “Lost fan site.”

When are you going to type this in?  During the time the episode is airing?  Absolutely not.  You’re not going to want to miss one minute because Hurley is about to tell Jack his real name.    Or take another example – a sports case.  Are you going to put the potential touchdown play in background mode while you look up Brett Favre’s completion percentage in third down and long situations?  Absolutely, positively not, to the extent that the sports fan is thinking “don’t you dare touch the remote or there will be one less thumb in this family.”

No.  You are going to switch to the Internet experience when the television ads come on and you can safely move away from the live broadcast to find what you need before your show comes back on.

There is another interesting fact that only makes this seem a more likely behavior on the part of cross-platform TV viewers, at least the early adopters of Google TV.  In a recent study of US Online TV Viewership by Comscore involving 1,800 subjects, a majority (67 percent) of cross-platform (TV and online) viewers preferred online TV viewing because it has less interference from commercials[2].  Since these folks are the likely early adopters of Google TV, the tendency to move away from live TV during commercials will be very strong.

So what does Google TV do?  It makes the television ad spend of the major brands even less effective than currentlyBecause Google TV still provides an interruptive experience, it actually encourages cross-platform viewers who wish to increase the “information content” of their viewing experience from web-based channels to do so at the exact time that advertisers least want them to do so.

There is an even bigger implication of this for brand advertisers.  In order to keep the cross-platform consumer’s attention as they move away from viewing television ads, the brand advertisers will be forced to place their ads on the web-based portion of the Google TV interface.  And to a certain extent this makes sense going back to our previous point about measurability of TV advertising.  The Google platform is measurable and consumers more and more are becoming habituated to interacting with web-based CPC or banner advertising.  So the TV advertiser keeps the attention of the cross-platform viewer during the commercial break in the show and gets better metrics.  It’s an obvious win-win for both Google and the advertiser, and a very seductive business proposition to marketing executives looking for better measurability around TV advertising.

But for TV advertisers, Google TV is the equivalent of the poison apple given to Sleeping Beauty.  As Google TV penetrates households, more and more TV viewers will become habituated to the dual-use experience and will spend more and more time on the Google platform during broadcast television advertising pods.  And despite the fact I haven’t said much about mobile in this article until now, Google TV will also move onto the mobile platform and will provide an even more integrated experience for the consumer across the two screens, with a whole host of implications for the two-screen experience that I won’t discuss here.  Given the timing of historical consumer behavior transitions in the television market, this could take ten years. But over that time, Google will take a larger and larger share of the currently $70B TV advertising and the $2.7B mobile advertising markets.  This means that as much as an advertiser is currently dependent on Google for web advertising, they will become even more dependent on the single provider that is Google because of its reach in these other channels.

If you as an advertiser aren’t concerned about the implications of this for your business, where Google can set effectively monopoly prices you pay for ads across every major advertising platform you have, you should be.  You should be very concerned and mad as hell at this attempt to manipulate your advertising dollars even further into the maw of the machine that Google has become.

If I were a brand advertiser right now, I would be talking to my peers and looking for a second-platform solution from someone that can constrain this power play by Google before it becomes a fait accomplice.  If I were Yahoo or Microsoft, I’d be developing or investing in a prototype of something I could show to brand advertisers today and get them to invest strategically in order to prevent Google from locking up this market before it is too late.


[1] “Advertising is Dead, Long Live Advertising” Himpe, 2008

[2] Yuki, Tania “Comscore Study of US Online TV Viewership.” http://www.comscore.com/Press_Events/Press_Releases/2010/4/Viewers_Indicate_Higher_Tolerance_for_Advertising_Messaging_while_Watching_Online_TV_Episodes

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PostHeaderIcon The End of The Chasm and the Beginning of The Rapids

I’m back at it after travel to SMX Advanced London, where I had my first speaking opportunity as the CEO of OnlineMatters.  Now that I’m clear from that presentation, it’s time to get back to the topic of my prior post (not) crossing The Chasm.

In my last post, I posited that The Chasm, as far as Internet-based businesses are concerned, is quickly disappearing.  Let me explain why and why The Chasm has now been replaced by what I call The Rapids.

The Chasm exists because of the disconnect between

  • The time/resources needed to evolve both a high-tech product and business model from meeting the needs of early adopters to support the larger market segment – the early majority.
  • The money available to fund this transition, which is limited by the size of the early adopter market.  The available funds are not likely to grow until the early majority purchases the product en masse, for two reasons. First, because sales generate cash.  Second, because sales validate that the business model and product features are now positioned for scale, thus increasing the company valuation and ability to attract new third-party capital needed for growth.

Voila – A Catch 22 and birth of The Chasm.

But today’s Internet-based business startups work differently.  Thanks to new technologies and approaches to IP (open APIs, open source licensing, crowdsourcing, cloud computing, mashups), software products that used to take months and years to conceive and develop using a large number of engineering and marketing resources, can now be brought to market in a few weeks by two-three people in a condo (Sad to say, the garage crowd went upscale in the late 90s in Silicon Valley and have never really returned to their roots in the humble garage).  Without a lot of effort, they use word-of-mouth and viral techniques, as well as search engine optimization and perhaps a little PR, to acquire an initial set of customers who hopefully like the product and tell their friends.  If they are smart, they add a customer feedback tool like getsatisfaction or uservoice to their sites and begin collecting immediate, extensive, and continuous feedback from customers.  They plow this feedback into the product using daily or even hourly code pushes.

The difference in speed of product evolution between traditional high tech startups and Internet-based business startups is like the difference between the gestational period of an elephant and a virus. And that difference is one of two reasons The Chasm is quickly shrinking, and ultimately disappearing, for Internet-based business startups.

While products in both cases evolve in discrete steps, the size of the steps in the case of an Internet-based business are relatively small and from day to day customers do not see huge changes in the product they are already familiar with.  However, they get to use the product even as it is evolving, unlike the case in more traditional hardware or software businesses where customers can only engage with a new set of features when they are released in large, discrete “chunks” and not before.  As a result the early adopters are brought along even as new customers try the product.  Each step involves a group that more and more reflects the larger majority of customers until at some point the product meets the needs of the earliest of what would have been called the early majority –  who also happen to be the latest of the early adopters.  There is no ability in this case to find a demarcation between these two groups.  Customers’ perceptions of the product and their needs from the product change as the product itself changes because they experience those changes in small steps as they occur.  Obviously some early customers will chose to leave the product as it evolves, but that is true of any product at all times as customer attrition is a fact of life.  Rather, the customer need and product feature evolve in tandem in a virtuous cycle, removing any need to leap between one set of customer expectations/needs and another.

So on the one hand, the capital requirements for an Internet-based business startup have declined (and continue to decline) substantially, while the time required to evolve the product and engage customers in its evolution continues to shrink.  As a result, the challenge for Internet businesses is not The Chasm, because it effectively doesn’t exist any longer.

The new strategic challenge for Internet-based startups is sifting through the reams of data available – customer feedback, site analytics, Twitter feeds, Facebook fan pages, competitive data (of which there is much more today than ever) –  in near real-time and clearly identifying the critical strategic requirements for the business and product requirements needed to serve the core customer segments.  Whereas the traditional high tech startup has difficulty getting enough feedback and making enough changes in a short enough time to perfect the product and business model, the Internet-based business startup faces the problem of determining the key insights from a plethora of data (“the rocks”) and making those insights actionable in time frames that are more logical for a supercomputer than a human being.    More importantly, they need to have the discipline to avoid taking on too many strategic imperatives (“oversteering”) and not over-evolving the product because…well…because it is relatively easy to do.    The Internet startup isn’t crossing a chasm.  They are trying to avoid the rocks and not oversteer their course.  They are navigating The Rapids.

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PostHeaderIcon The End of The Chasm Is Nigh – Intro

Many years ago at Stanford, I had the opportunity to work with a team of researchers related to Everett Rogers, who wrote the book Diffusion of Innovations.  That book has had huge influence in high tech, because it was the first accessible, mass-market publication to provide a working model of how new technologies achieve market acceptance.  The most famous image is the Adoption Curve (see below), which defined 5 categories of technology adopters: innovators, early adopters, early majority, late majority, and laggards.  These terms have become fundamental in high tech marketing, and you will often hear phrases like “Our initial target market are the early adopters” in marketing planning sessions.

Everett Rogers Original Adoption Curve

Since I was involved with the team that developed the Adoption Curve, it became a standard part of my repertoire as a marketer.  Like most others, it structured my views on how to approach any market for a new product innovation.

Then in 1991, along came Geoffrey Moore, a consultant with the McKenna Group, who published Crossing the Chasm. Crossing the Chasm expanded on Roger’s diffusion of innovation model.  Moore argued that there is a chasm between the early adopters of the product (the “innovators”, or technology enthusiasts and visionaries) and the early majority, who while appreciating a new technology tend to be more pragmatic about its application.  As a result, the needs and purchasing decision-making of these two groups are quite different.  Since effective marketing requires selling to the needs of a specific segment, there comes a time when young companies face a “chasm” where the features and marketing that helped them gain their early followers will not work, and thus they need to adapt their business to a new set of customers and expectations.  It takes time, energy, and a lot of experimentation to find the right new model.  But in high tech businesses,  especially prior to the Web, sales cycles tend to be relatively long (12 -18 months is not unusual).  Given that most small companies have limited resources, the number of experimental cycles they can undertake to discover the correct new model is thus limited.  This makes the transition extremely hard – limited resources, limited time and a lot of spinning of wheels until the right model is discovered.  Requires a lot of heavy lifting and long hours – and if you’ve ever been through this, you’ll know why Moore chose to call it  “a chasm.”   It feels like a huge, almost overwhelming leap from where you are today to where you need to be tomorrow.  Even with a running start, when you take the leap to grow your company to the next level, it’s easy to miss and “fall into the chasm.”

Everett Rogers Technology Adoption Curve Adapted with The Chasm

I had been working with the technology adoption model visually in my head for almost 10 years at the time Moore published his book.  And when I saw his curve, I realized that we tend to see only what we have modeled (or had modeled by others) in our minds about how the world works.  I had been struggling with the chasm for all that time, and never saw it, even though it was staring me in the face.  I swore that the next time I had an opportunity to experience something that was at odds with my internal models of reality, I wouldn’t ‘ignore the data’ and make a concerted effort to see past the limitations of my own mind.

So Geoff.  I have one for you.  For web-based businesses, the chasm is closing and I can already see a time in the near future when it no longer becomes a barrier to a company’s transition from a customer base mainly made up of innovators to a customer base of early adopters.  The End of “The Chasm” Is Nigh.  Darwin – and the real-time web – are dealing with it.

The detailed rationale in my next post.  Right now, I need to get onto my day job.

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