Tag: marketing

When business models die

The motor vehicle industry has a twentieth century distribution model, changing that could be its biggest challenge

To say the motor industry is facing disruption on multiple fronts is an understatement.

A global glut of motor vehicles is depressing the world market, a range of emerging manufacturers from China and India are challenging incumbents and a new breed of electric, autonomous vehicles designed by tech companies are arriving on the market.

To cap it all off, today’s young adults in western markets aren’t too interested in buying cars reversing the consumer attitudes which had made the motor industry among the world’s most powerful.

Exacerbating the motor industry’s woes are its antiquated business models, particularly the dealership networks that lock both franchisees and manufacturers into expensive relationships that increase costs, reduce flexibility and do little to add value.

The tale of Australia’s General Motors Holden is a good example, as sales stagnate and the company winds up its Australian manufacturing operations its rationalising its national dealer network.

Unsurprisingly the dealers being axed are less than happy as Wheels Magazine reports.

What’s notable about the story is the level of control the manufacturers have over their franchisees.

Hoffman said Holden had even contacted him to say that once the contract expires, the car maker would send someone to take down $30,000 worth of signage. He will also lose the right to service Holden-badged cars under its capped-price servicing scheme – any cars he sells between now and the day the signs come down, he’s unlikely to see again when service time rolls around. Holden will also buy back any unsold new cars, parts and specialist tools.

That absolute model of franchising had value when the manufacturers’ brands were strong and consumers were born into a ‘Ford’, ‘General Motors’ or ‘Chrysler’ family. Today, the brands are largely interchangeable outside the premium or luxury markets and attempting to lock-in customers is increasingly difficult.

More telling is the inflexibility of pushing stock out to the dealers which may or may not get sold while centralising marketing. The resulting disconnect between consumers and supplier means increased costs and a slow response to changing market conditions.

The motor industry was one of the defining businesses of the Twentieth Century, affordable motor cars changed every society and transformed the cultures of affluent nations.

Now that influence is waning and it remains to be seen how today’s incumbent manufacturers will evolve, if they survive at all, in today’s very different society.

One thing is for sure – the existing dealership structure won’t be around for much longer.

Counting the digital pennies

The hopes of media companies that Facebook and Google could provide new income streams appears to have been stymied.

With media companies around the world struggling to make money, the publishing platforms on Facebook and Google promised to bring in much needed income streams. They appear not to have worked.

Business Insider reports how US based premium publisher trade body Digital Content Next surveyed its members on their online platform income and discovered some disappointing answers.

On average, premium publishing companies generated $773,567 in the first half of 2016 by distributing their content on YouTube. Content published to Facebook earned an average of $560,144 in the period, Twitter generated an average of $482,788, and Snapchat generated $192,819 for each publisher in the sample.

To call these returns derisory is an understatement and it illustrates how the current media model is unsustainable as it’s impossible to sustain a basic newsroom, let alone produce investigative features with those sort of budgets.

It isn’t just the media model that’s unsustainable, Business Insider cites the CEO of Digital Content Next, Jason Klint, who flagged in a blog post last year that all the growth in digital advertising is being accounted for by Facebook and Google – the rest of the industry is shrinking.

 

Even Facebook and Google aren’t immune from the unsustainable model that’s currently in place, Klint points out that fraud and intermediaries further skew the model which undermines advertisers’ confidence in the platforms and online media in general.

For the moment though, the intermediaries seem to be doing okay. Klint cites IAB research which claims AdTech companies are making 55% of the online advertising industry’s revenues while publishers are only getting half.

That illustrates how the tail is currently wagging the dog with publishers and content creators losing out while middlemen who add little in the way of value get the bulk of the revenue. That too is not sustainable.

We’re still in early days for online media and the models are still being worked out. While we wait for the 21st Century’s David Sarnoff many sectors are threatened including the advertising, marketing and PR industries. At least the publishers aren’t alone.

The rise and fall of a social media influencer

The story of one Tumblr influencer illustrates much that is wrong with the social media industry.

Jess Miller from suburban Melbourne was a social media star. Two years ago at the age of sixteen she was earning $10,000 a week as ‘Pizza’ on Tumblr.

Miller was a classic social media influencer, with 700 thousand young followers she was popular with advertisers then along came the payday of reposting fake diet pill testimonials.

Miller started to make serious money. She’d already been able to make a little cash: fashion companies and some small Etsy stores paid her to post pictures of clothing on her blog, with a nudge to her followers to check out their sales. She’d earned about $4000 in this way.

But then the big one came along. Two 18-year-old American social media entrepreneurs, Zach Lilley and Jeremy Greenfield – fans and friends of Pizza – approached Jess Miller and other top-performing Tumblr bloggers in April 2014 with a proposition for a money-making scheme. It used a decidedly old-school lure: diet pills.

Lilley, Greenfield and their associate Dennis Hegstad ran a website called Exposely, which connected brands to people with strong followings on social media. Lilley and Greenfield used their social media skills to create diet pill ads that masqueraded as Tumblr posts, essentially fake testimonials from women talking about their weight-loss journey. Miller would re-blog these posts, and get a small payment if the user clicked on the link. If the user bought the pills, Miller would get $23 and Exposely would get $26. She watched the money roll in – to her mother’s PayPal account.

 

Eventually the breaches their terms of service, not to mention ethics, became too much for Tumblr’s management and they deleted Miller’s blog along with a group of others in the scheme.

Miller’s story illustrates the manipulation that is a big part of the social media influencer industry with behaviour that’s almost certainly illegal and most definitely unethical. It also illustrates the risks of basing an income or business on service where you can be closed down any time.

For Miller, she seems relieved her time of fame is over. Those building their businesses around these platforms may not be so philosophical.

Happy shiny people

Social media influencer campaigns are too focused on happy, positive messages and that is their fatal weakness.

“If you have anything negative to say, please don’t use the hashtag” implored the organiser to her stable of ‘influencers’ ahead of a recent social media campaign.

Like everyone in the PR, marketing and advertising industries, that organiser was desperately keeping a shiny patina on their clients’ brands at a time where they are one tweet away from disaster in today’s world of message obsessed management.

With influencer programs those risks are magnified as marketers co-opt amateurs to promote their clients in return for access and freebies*. Those unpaid posters on Instagram, Twitter and Facebook may be happy to give a positive view to everything but their fans may not be so kind.

Given their clients’ aversion to risk, it’s not unusual to see marketers setting out terms to ‘influencers’ demanding the brand has the right to vet posts – as one telco requested to this site last year – or outright prohibiting anything negative being said about their client.

Happy Shiny People

Perversely, selecting happy shiny people to promote brands on social media while suppressing critical thinking could actually create distrust of brands argues communications consultant Joanne Jacobs who states “this distrust is caused by campaigns of undifferentiated positivity and uncritical thinking.”

A good example of this potential damage is a recent influencer campaign by Chinese telecommunications Huawei where a group of influencers were flown to the 2016 Mobile World Congress to post about their experiences with the brand.

The Facebook post below shows the influencers enjoying the vendor’s hospitality but it also illustrates the lack of diversity in the group, something that was quickly called out in the comments.

huawei-men

For the Huawei influencers who had spent the previous week gushing about the vendor’s products and events this was an opportunity to provide leadership on the lack of diversity in the tech and telco industries..

Instead the critics – some of whom had more influential online audiences than the ‘influencers’ – were dismissed with the passive aggressive accusation of being ‘negative’, the cardinal sin of social media marketing.

For Huawei, there was a real risk their happy shiny influencers clumsy attempts to protect the brand would damage for the company and it was unsurprising the company’s professional PR managers stepped in to defuse the situation which in the hands of amateur ‘brand ambassadors’ threatened to become a self inflicted disaster.

Brittle brands of happiness

Huawei’s experience illustrates a key problem with the happy shiny influencer campaigns in their brittleness when faced with genuine criticism. The happy consumerist gleefully liking Instagram photos of shoes or hamburgers will quickly abandon the product should the brand be perceived as acting dishonestly or unethically.

For those influencers who’ve tied themselves too closely to brands, such a scandal could find their own names tarnished and their hard won audiences and reputation deserting them.

In an age of conversation where critical voices can be heard, the nice shiny facades can easily collapse. The days when the tobacco industry or brands like Coca-Cola could drown out critical voices simply by the weight of their advertising campaigns are long gone.

Struggles with a fragmented media

The struggles for the PR and marketing industries in dealing with today’s fragmented world are not to be underestimated – the old models of broadcast advertising and engaging with journalists and celebrities have lost their effectiveness and the industry is grappling with what works with the new channels.

In a building a brand that will last in today’s media landscape, pandering to shallow thinking consumerists is at best going to be a short term fix. To succeed, building a believable trustworthy name that tolerates dissent, allows complaints and acknowledges informed criticism is much more important and exponentially more valuable.

Shallow thinking and shiny people might have worked for Coca-Cola selling to young baby boomers in 1965 but fifty years later things the critics and deeper thinkers have a voice to. Co-opting those voices will only strengthen the brand.

*Disclaimer: This writer has been on a number of influencer programs and received various degrees of corporate largess including a Huawei smartphone.

When startup growth pains prove fatal

The startup investment model can work against building a sustainable business

One of the most dangerous things for a startup business is trying to grow too quickly.  In his blog, Jun Loayza describes how RewardMe, one of the startups he was involved in, failed after it tried to scale to fast.

In his list of factors that led to RewardMe’s demise Loayza cites an undue focus on customer acquisition, however this is a fundamental part of the current Silicon Valley greater fool model.

As the exit strategy is to sell the business, whether it’s to a trade buyer or through an IPO,  the aim is to maximise the value of the operation ahead of that sale. Boosting the numbers of users is a key task for management.

Loayza says in retrospect he would have liked to focus on product development rather than user acquisition, but that’s a luxury not available when you’ve taken venture capital funding.

Apple opens the kimono

Apple’s new openness is part of a shift to a new business model

Something strange is happening at Apple, the once secretive company is now becoming far more open in its plans and relations with the media.

The latest example is the company inviting Sixty Minutes and Charlie Rose into its inner circles to interview CEO Tim Cook and go on tour of a future concept store with retail chief Angela Ahrendts.

Apple’s media friendliness marks a big change for the company that’s reflected in its markets as engaging with other partners becomes critical for future success. Successfully achieving this will mean another fundamental shift in the organisation’s management.

 

Building the world’s biggest small software company

Blown away by the internet, Meltwater founder Jørn Lyseggen planned to build the world’s smallest software company. Fate had different plans

“The next day I quit my job. I remember walking home that night and thinking I felt incredibly privileged to be living right at this point and I was going to see how the internet would unfold.”

Jørn Lyseggen, the founder and CEO of media monitoring service Meltwater, was describing his first encounter with Netscape 2.0 in 1995 while working on artificial intelligence at the Norwegian Computer Centre.

Today, Meltwater has 1,100 employees in 41 cities across 21 counties and Jørn spoke to Decoding the New Economy in the company’s San Francisco head office last week.

Having quit his job as a researcher, Jørn became what he describes as ‘an Internet evangelist’ in the early days of the Norwegian web and founded a series of online businesses including Norway’s first web mall.

The fourth business Jørn set up was Meltwater which they originally operated out of a shed in a disused shipyard, Shack 15. “We got free office space from one of my former clients,” he recalls. The old customer also gave them 25 old computers which they patched together to become the company’s first server farm.

Building the world’s smallest software company

“Our aspiration originally was to create the world’s smallest software company,” recalls Jørn. “We wanted to be four engineers creating the most sophisticated technology in our industry then we would sign up resellers then sit back and watch our revenue go through the roof.”

At the time media monitoring was largely made up of clipping services that would hire armies of contractor to physically cut and paste newspaper articles.

“What we wanted to do was build software that could keep track of everything that was published online,” Jørn explains. “When news started to come onto the internet then you could start to analysie it automatically. We thought there would be a better way to do this with algorithms and software.”

The best laid plans

It turned out however the plans to have a small software company didn’t work out. “We poured our heart into our technology for the first year and then we got really excited when we signed up two really respected resellers in the Norwegian market.

“They presented to 1500 companies, which is a really big number in Norway, and the results were devastating with 1499 ‘no’s and one maybe.”

For Meltwater’s founders it was a time for re-evaluating the idea. “That was a pivotal point in the company as we had to ask ‘is this a business?’. What we realised was that we were too focused on the technology and what clients are really worried about at the end of the day are the pain points.”

“Once we did that switch we started to get business and then we grew very quickly so instead of being the smallest software company in the world we set out to become the biggest in our industry.”

Going global

From there the spread across Northern Europe and the UK, “every time you start up in a new country it’s like starting a new company.” Jørn ruminates. Strangely it was Germany that proved to be the most difficult to break into. “It’s counterintuitive, you’d think the shared culture would make it easy for a Norwegian company. It wasn’t.”

The big move though was the United States, on the basis that any company with global aspirations has to be in the world’s biggest market. “Norway is a small country, we used to joke there are bus stops in New York with a bigger population than Norway.”

Jørn was surprised to find the US was an easy market to break into than the United Kingdom or Germany, “I love their open mindedness and the welcoming factor of the US culture,” he smiles.

“They are very open minded in the US, it’s a strength in their culture. In the US if you present something interesting to them they’ll accept it. The flip side is if they are open minded to you then they’ll be open minded to your competitors.”

Hiring as a key factor

Choosing the right people is the key to business success Jørn believes, with local hires being essential when expanding into foreign markets, “You need some local credibility.”

More importantly though is the importance of getting the right people early in the life of a startup business, “It’s all about culture.” He states, “make the first five to ten people the base for your platform.”

Having the right people also made it easier for his management team to delegate as executives focused on the international expansion. “We’ve got really smart young people working here, they don’t miss me when I’m not around,” he smiles.

Romanticising startups

“Back in the day it was considered you started a company because you couldn’t get a job,” Jørn laughs. “I’m the first to encourage entrepreneurship but it worries me when it becomes trendy.”

“It’s important that entrepreneurship doesn’t become too romanticised. Because it’s really hard work and most startups fail and most people have to work for years while barely getting by financially and it’s high stress”

“I never saw myself as a business person,” Jørn remembers. “I had a healthy scepticism to the commercial world, that’s why I became a research scientist because I thought it was a better use of my time.”

Becoming an entrepreneur

However the revelation of Netscape 2.0 changed all that, “it really blew my mind,” he grins as he recalls how he decided “the best way to be part of this was to be in my own business.”

Building your own business though is not an easy process and there’s tough decisions to be made. Jørn though believes that the hardest times running your own business are not when cash is tight but when the tough decisions have to be made, “sometimes you have to make calles that are challenging.”

For Jørn, he only sees more exciting times ahead as the internet evolves, “social is still in its early stage. A lot of companies struggle and worry that they haven’t figured it out, but the truth is most people haven’t figured it out.”

Paul travelled to San Francisco as a guest of Oracle

 

 

Can PCs claw back their sales volumes?

The PC industry launches a marketing campaign. It’s unlikely to win any converts

PCs can do what? Is the question being asked in a new campaign being run by Intel, Microsoft, Lenovo and Dell.

Judging from the reaction to the companies’ effort whatever PCs can do, it’s unlikely to help their at best stagnant market share.

 

Amazon and the customer focus

The old model of seeing your customer as being a milk cow is dying. Today’s business needs a lot more focus on treating the customer with respect.

I’m currently attending the Amazon Web Service Re:Invent conference in Las Vegas.

One of the constant themes in writings about Amazon is founder Jeff Bezos’ focus on delivering the best service and cheapest prices to the customer, even if it does sometimes rely on some less savoury tactics to chase out smaller competitors.

That ethos is on show at this convention with AWS Senior Vice President, Andy Jassy saying at the post opening keynote press conference,  “our strategy is to be customer focused, not only do all of our strategies and tactics work backwards from what our customers want but ninety percent of our roadmap is driven by what customers tell us matters to them.”

He did however fall for the temptation of dissing some of his competitors in the IT market saying, “most technology companies, particularly old guard companies, have lost their will and the DNA to invent. They acquire most of their invention that’s expensive and it really doesn’t fit that well together.”

“We’re extremely long term orientated,” Jassy continued. “We don’t call you on the last day of the quarter and say ‘boy, have we got a deal for you’. You won’t see us auditing our customers and fining them. We’re trying to build relationships with our customers that will outlast everyone in this room.”

Jassy’s points are pertinent to the current business world, the old model of seeing your customer as being a milk cow – something the older software companies were terribly guilty of – is dying. The future needs a lot more focus on treating the customer with respect.

Rethinking customer service in the connected age

Businesses would be wise to stop telling people what they should want and let customers tell them what want says Shel Israel in his book Lethal Generosity.

Businesses would be wise to stop telling people what they should want and let customers tell them what want says Shel Israel in his latest book, Lethal Generosity.

In this book, Israel’s previous works include Naked Conversations and Age of Context which were both written in collaboration with Robert Scoble, he looks at the technological and social changes affecting business and how they can adapt to a rapidly evolving marketplace.

Key to that evolving marketplace is the explosion of data offering businesses deep insight into their customers. as Scoble describes in Lethal Generosity’s introduction in talking about social analytics service Vintank;

VinTank was acquired by a big PR agency that wants VinTank to do for all sorts of industries what it has done for the wine industry. Are you a restaurant or a winery ignoring that data? Go ahead and keep doing that for a decade. Your competition won’t.

Israel illustrates the need to watch the marketplace in citing a campaign where Canadian brewer Molsons completely wrong footed an oblivious competitor, something similar to how one bank discovered a rival’s successful marketing campaign through real time bank deposits data described  at the recent Splunk conference.

Focusing on the customers

A customer centric outlook, not looking at competitors but focusing on what consumers want is key to success in the new economy, Israel believes. This is enhanced by technologies that allow both products and marketing to be personalised as shown in the chapter detailing how retailers and airports are using beacons and data analytics in their operations.

One good example is AirBnB, while Israel trots out the ‘biggest hotel chain’ in the world fallacy that’s pervasive among commentators, its effects on the established industry has been profound and have forced hospitality operators around the world to re-evaluate their business models.

Israel suggests the best response for businesses affected by the ‘Uberization’ of their industries is to adopt the social and analytic tools and strategies being used the upstart businesses and he provides a wealth of examples.

Seamless sales

Tapingo, the food ordering service for US college students, illustrates the seamless experience that consumers are increasingly demanding in their shopping, business and leisure activities. Israel cites how Tapingo’s merchant partners are seeing an in-store traffic boost of 7 percent and a gross profit rise of 11 percent as a result of using the service.

Shel also illustrates some of the failures in deploying new technologies, specifically London’s Regent Street Alliance that failed due to poor execution and a failure to engage the marketplace.

One of the weakness in the book – which Israel acknowledges – is its focus on US, and specifically Bay Area, case studies. While there are some non-North American examples such as Australia’s Telstra and China’s Alipay, most of the examples cited are of companies based in or around San Francisco and Silicon Valley.

Focus on Millennials

Another weakness of the book is the over-focus on Millennials or Digital Natives. While this group is important that obsession risks Israel’s message being pigeonholed amongst the noise of poorly thought out pop demographics and poor analysis that marks much of the discussion around changing tastes and habits between generations.

Israel’s point that the post 1982 generation will soon outnumber older cohorts in both the workforce and the marketplace in the near future though is an important aspect for businesses to keep in mind with the safe certainties and predictable customer behaviour of the baby boom era being long gone.

However the shift in consumer and workplace behaviour is just as pronounced among all the post World War II generations as technology and the economy evolves in the early 21st Century. Focusing on the younger groups risks missing similar shifts among older members of the community.

The value of customer service

Ultimately though, Israel’s message is about customer service. Shel himself flags this is not new, in describing the competition between hiking goods suppliers The North Face and Sierra Designs in 1970s Berkeley.

What is different between today’s businesses and those of forty years ago is technology now allows companies to deeply understand their customers and provide customised marketing, products and experiences to the connected consumer.

For the business owner, manager or entrepreneur, Lethal Generosity is a good starting point to understand the forces changing today’s marketplace. The case studies alone are worth considering for how an organisation can adapt to a rapidly evolving world with radically shifting customer behaviour.

Dealing with an app driven world

The challenge of dealing with a app driven, mobile workforce isn’t just one for technology companies.

“It isn’t easy to create apps for the real world,” is the opening line of this morning’s VM World conference in San Francisco.

That line encapsulates the challenge facing almost every company, not just tech companies like VMWare, in the face of shifting marketplaces and technologies.

One of the biggest business shifts is the move to mobile technologies. This isn’t just changing marketing and user experiences but also changing companies’ operations as staff increasingly use their own smartphones and tablets to work.

Managing a shifting market

That shift though is not simple, as ZD Net reports Facebook’s move to ‘mobile first’ was a tough path in the words of the company’s senior engineer Adam Wolff.

“I think everyone would say it was worth it, but it was extremely painful,” Wolff admitted, explaining each sub-team was building in their own ways because there was no one to crossover with necessary knowledge.

Facebook has probably been the most successful company is dealing with the mobile shift and their difficulties despite their massive resources show just how difficult it is for companies to change not just their technology, but their business processes and in many cases the entire mindset of the organisation.

Those pain points in transitioning between ways of doing business is where opportunities lie, for VMWare they are seeing IT departments struggling with the development and deployment of apps along with the security risks of staff bringing their own mobile devices.

Happy coincidences

For VMWare, this is a happy coincidence in that their main business of computer virtualisation is as much at risk from the shift to cloud computing and mobile applications as any other business. By offering the tools for companies to manage that shift, they can retain their place in the market.

The threat though is this space has many other contenders – not least Facebook itself with its open source React platform the company developed out of its experiences in developing its mobile product.

One of the strengths VMWare has is being an incumbent, which is why they are pushing their ‘hybrid cloud’ offerings where companies use both their own data centres along with the public cloud providers such as Amazon and Microsoft.

Stuck with sunk costs

For large corporates with huge sunk costs in their own infrastructure and those with security or operational reasons for keeping some of their functions in house that hybrid strategy makes sense as it’s unlikely any board or CIO is going to happily burn their existing systems and process down and go to a ‘pure cloud’ or mobile strategy.

While catering to that market is lucrative for the moment, the longer term risk is that the next wave of large corporations – and today’s high growth businesses – are pure cloud companies.

For the companies catering to the old ways of doing business, for the short term there’s profits to be made in the pain points from an evolving marketplace but in the long term it’s how well businesses are placed for the world the end of that transition that will guarantee their survival.

The process facing software companies like VMWin dealing with as business shifts is a challenge faced by almost all industries, the question is how to adapt to a very changed way of working.

Marketing and the Internet of Things

We’re only just beginning to understand the marketing potential of the Internet of Things says Bosch’s Jim Fish

“There is no perfect product,” says Jim Fish, “but the Internet of Things makes it possible to deliver a close to perfect message.”

Fish, the Chief Innovation Officer & VP Global Automotive Diagnostics at Bosch North America, was speaking to Decoding the New Economy ahead of his visit to Sydney to speak at the 2015 ADMA Global Forum.

For marketers, the connected car and the Internet of Things presents a unique set of opportunities, particularly when overlaid with today’s social media tools.

“If you think about your ability to message with today’s Facebook and the ability for marketers to micro-target messages so you could push a message to people according to things they’ve shown preference for or things that they have liked.”

“The next leap frog ahead from an automotive perspective is in vehicle advertising specific to vehicle and location,” says Fish. “There is a battle for the real estate in vehicle’s infotainment systems. The automakers are placing a lot of effort in delivering the experience the mobile user desires.”

In the auto industry this has seen a battle between software vendors to stake a position on the smartcar’s dashboard. Fish sees Google with its mapping, search and advertising technologies as being the best placed in that field but doesn’t think there will be one single winner in the automobile space.

Smart Connected Living

One of the biggest opportunities beyond marketi Fish sees is in combining the smarthome with the connected car. “We see this exploding,” he says of Bosch’s future plans. “We see it as perfectly integrating,”

Fish sees how the connected home integrates with other technologies to provide seamless connectivity for people. Even if people lose their smartphones the smart house will be able to inform and communicate with them.

Again, combining the information gathered by social media and other services presents opportunities for businesses and governments.

Networking the smart city

For the smart city, Fish sees connected cars providing a key part in managing and planning the towns of the future citing how the Michigan Department of Transportation sees how equipping vehicles with road monitoring sensors could save the state 11 million dollars a year in inspection costs.

Fish also cites how cities are experimenting with monitoring how taxis and public vehicles are using their windshield wipers to determine weather conditions. The US Department of Transportation flags the smartcar as the mobile weather station.

Again Fish sees Google as having an advantage in applying these technologies with their acquisition of Israeli traffic crowdsourcing service Wayze.

“Crowdsourcing is in its infancy. There are many things computers can do but there are some things they will never be able to do. There are some human elements still required.”

Fish sees much of our understanding of what we can do with the internet of things and the data we generate from it as being in its infancy. The real value lies in extracting the value from it. For marketers the journey is only just beginning.