Month: April 2009

It seems to be a universal mantra of Social Networking websites: “We’re more interested in growth than making money.” This is great in theory. The thought process is logical: 1) Don’t worry about money 2) Become the “next big thing” 3) Then figure out how to make money (or in the vernacular: “Monetize the offering”). However, there is a flaw. While these Social Networking sites (Facebook, Twitter, YouTube, etc…) are gaining popularity and amassing user base, they are operating at a loss (Twitter hasn’t tried to make a profit yet, Facebook continues to operate in the red, and YouTube is expected to lose up to $470 Million in 2009).

Looking at the broader value equation, Social Networking websites are providing value to users by streaming content to them. However, the users are not providing enough value (in the form of advertising revenue) to the Social Networking websites. The equation doesn’t balance – see the chart below.

In order to balance the equation (or even flip the equation and start making a profit) Social Networking websites have to find a way to get more value from users. The catch is that they have to find a way to get more value from users (e.g. more ad revenue) without lowering the value that they are providing to users (user experience, bandwidth). Attempts to increase ad revenue at the expense of user experience have been met with outrage from the user base (see Facebook’s Beacon). The challenge is to simultaneously grow value on both sides of the equation (e.g. by offering advertisements that enhance user experience). The concern is this may not be possible and if the above diagram is indeed a zero sum game, Social Networking websites will be the next bubble.… Read more

The concept is basic. A prediction made by aggregating the opinions of a large group will be more accurate than the prediction made by any one member of that group. A guy named James Surowiecki wrote a book about this concept- you can read about it here: http://tinyurl.com/mbmnb.

I think about this concept frequently when I’m waiting for the subway in the morning. Coming from Williamsburg I take the L train into Manhattan and transfer to the NQRW line uptown to my office at 33^rd Street. When waiting on the NQRW platform the Local trains run on the right side of the platform and the express trains run on the left side. The express train is faster, but only by a few minutes, so if the local train pulls up before the express train this prediction has to be made: Do you think an express train is going to arrive in the next 3 minutes? When this dilemma arises there are usually 100-300 people waiting on the platform contemplating the same question. I make my decision based on the wisdom of the crowd. By watching what everyone else does I can leverage the collective knowledge of the group (for instance maybe they can see a train coming by peering down the tunnel, or maybe they’ve been waiting there for 10 minutes already and know that an express train will surely be coming soon) to ensure the quickest route to work.

This concept works very easily on a subway platform where you can observe everyone’s actions first hand, but it can be harder to implement on a larger scale (e.g. for decisions that actually matter…). One side effect of social networking technology is that it empowers individuals to share their ideas (and collective wisdom) publicly with a large audience. By monitoring the social chatter, businesses and marketers can make informed decisions leveraging the wisdom of an enormous crowd. It’s as if everyone in the social networking community is standing on the same subway platform.

There is, of course, the potential for getting incorrect cues from the social web. Some thought should be given to whether or not the social networking community is a representative sample of your desired audience (I would suspect to rarely be the case). Also, just like on the subway platform, the people who are making the most noise are either trying to make money or are completely insane.… Read more

One of the most significant forces driving change in the Advertising and Media industry is the empowerment of the individual to broadcast message to a mass audience. It used to be a real privilege to be “published”. Being a “published author” carried a certain clout signifying that you had been deemed worthy to influence others by presenting your ideas on a mass stage. Over the past ten years, piece by piece, the barriers that stood in between “the individual” and “the masses” have deteriorated. Blogs, Twitter, YouTube, Craigslist, Facebook, LinkedIn, MySpace (etc…) are all tools that give the individual the power to reach a limitless audience (for free). This has been extremely positive and empowering for individuals who can now share their talent with the world by posting videos on YouTube or keeping a blog. However, this has been somewhat bad news for advertisers. Because there are so many more people broadcasting messages through social media, and advertiser, who used to only have a few choices for how to reach consumers (a handful of popular magazines and 3 television networks), now has to deal with a much more fragmented media landscape.

When Elvis went on the Ed Sullivan show for the first time in 1956, 82.6% of US households tuned in to watch the show – there just weren’t that many choices, everyone was watching and advertisers only had to be in one place to reach a mass audience. Now, even the most popular TV broadcast (the Super Bowl) only draws around 40% of US households. Technology, and the proliferation of advanced ways for individuals to communicate has made life better for individuals, but much more challenging for advertisers who now have to use a larger quantity and greater variety of media vehicles to reach their desired audience.… Read more

This post brings me back to high school sports. Some of you, who may have actually played high school sports with me, may remember the theme: “Know when to turn it on”. The basis of this theme is good – it basically states you should always recognize when it’s time to perform at the highest level (e.g. for competitions). Frequently this “sound bytable” fragment of motivational speech would be tossed around during practice time when people were not performing well. It’s as if to say “It’s ok if we fool around now, because we know when to ‘turn it on’.” At first I was tacitly compliant with this mentality, but before long I realized that while some people could ‘flick a switch’ and perform at a high level, others could not (important to note, I was a member of the latter cohort). Several years later I came to my own conclusion. The secret to success isn’t knowing when to turn it on, but rather it’s learning to never turn it off.… Read more

When I was a teenager I was up to date on all of the most current technology. I could maneuver via basic commands in DOS, I could network Windows 98 PC’s, I could partition a hard drive, etc… It wasn’t that I was some super-computer nerd (I would have considered myself just slightly above average in technological know-how), but rather I feel that kids back then just knew how to do that stuff. When I was a teenager kids took to technology very quickly. We tinkered with it. We played with it in our free time.

This blog entry stems from an observation I made when guest-speaking at a Skidmore class earlier this month. I figured I would do my best to teach the students about Advertising and Media, and they would teach me all about the new ways they use technology (I pictured it would be a fair trade). I was impressed by my classes in many ways (most notably that they were able to identify almost all of the popular theories pertaining to the future of advertising), however I was not impressed by their usage of technology. Not one student I talked to (out of ~60) had their own blog. Not one student used Twitter. Only a very small minority of students had profiles on LinkedIn (I was actually asked to explain to the class what LinkedIn was…).

Based on these observations I postulate that in the lives of young people, technology is playing a different role than it played when I was young. Now that technology is more mainstream, it’s just another product.

Part of this change I feel is due to the nature of technology itself. Back in the 1990’s technology was less complicated. A teenager could teach herself how to use it (MS-DOS, basic HTML, etc…). Now that technology has advanced it’s gotten prohibitively complicated and intimidating. For example: Windows 98 (which was essentially operated using a program some high-school dropout made in his garage) has turned into super advanced operating systems like Windows XP and VISTA. These new user friendly – no maintenance required programs are not something that can be tinkered with in the same way as the old programs.

This is not to say that new programs are all bad—it has opened up a lot of good things for a lot of people. However, in this case, as in all cases when something that requires tinkering becomes something that is automated, values are lost. I fear that the values of inventiveness and technological wizardry that have defined Generation Y will not be passed down to future generations. Thoughts?… Read more

Blog Created 4-19-09.  Thank you to Jordan Taler for creating this site for me!  – http://jhtaler.com/… Read more