We've been saying for a while now -- based on the evidence we've seen in certain European markets -- that online video viewers are happy to watch a significant number of in-stream ads in exchange for access to high-quality content. Today, we found yet more evidence of the same from a study conducted by Turner Broadcasting. Today, many of Turner's TV shows only run two or three in-stream ads each (generally less than 2 minutes of advertising per episode); but the broadcaster found that if it increased the ad load to the same volumes the shows feature on TV (as much as 20 minutes per episode) the number of users who dropped off was shockingly low. The CW network found the same in its own tests.
The bottom line: Get ready for more online video ads. Inventory will grow, prices will fall (at least somewhat), and overall online video ad spending will grow dramatically.
(As a side note, The New York Times' article in which this research is published takes aim at Hulu for hoping to "lighten up" the amount of advertising users see and repeats Hulu's accurate claim that it has less than half as much advertising as the same shows on TV -- which is ironic, given that in my anecdotal experience Hulu has been more aggressive than any other US online video site in pushing more ads into its content; most of the ad breaks I see on Hulu these days contain two ads.)
Amazon today launched a localized site for Italy, its first new international offering since acquiring Joyo back in 2004 (Amazon’s UK and Germany sites were launched in 1998, France and Japan in 2000 -- the Canada site came in 2002. Full timeline available here). According to today's press release, the new offering has more categories than any new Amazon Web site has ever launched with -- not surprising given the six years that have elapsed since the last international launch.
As part of its new offering, Amazon is pushing its selection of “hard-to-find Italian language items” to cater to local consumer needs -- indeed, Amazon has tended to excel in its localized offerings, ranging from its varied payment methods by country to its semi-localized categories (note the “Auto and Motorcycle” category on the German Web site or the “DIY” link on the UK one).
Amazon’s choice of European markets mirrors many US online retailers’ expansion into Europe. Of the top 50 online retailers in the US, some 19 operate dedicated transactional Web sites for the UK, 14 operate sites for Germany, 12 for France and 14 in Italy. Less than 10 operate eCommerce sites localized for Spain. See the graphic from our recently published Establishing A Global Online Retail Footprint below.
Two weeks ago marked the annual IIR Market Research Event. TMRE, as it’s fondly called, has been my favorite MR event for a few years now, and this sentiment was echoed by almost every attendee I spoke with on-site and off. If you haven’t attended this event in the past, you should put it on your radar for next year (which happens to be at Disney World). Not only are there great presentations (like my own on aligning segmentations with newer research methodologies : )) but also tons of great people attend. My favorite part of the conference is sitting down with vendors and client-side MR professionals alike and hearing what’s on their minds at the moment. In fact, a lot of these conversations have served as great fodder for our annual MR predictions doc, which will be released next month; for last year’s, clients can click here. My only regret is not having enough time to connect with everyone! If you missed any of the content or goings-on of the event, TMRE has posted links to all the great blogging that was done over the course of the event.
Overall, I left with a few major impressions:
We are a great group of professionals! Everyone at the conference was so passionate about MR, its current state, and what lies ahead. Every conversation I had was infused with excitement about the possibilities for MR and MR professionals in the near future. Whether it was those of you excited for the additional research you’ll be doing with new DIY tools or those of you embarking in startups for new methodologies, everyone is eagerly awaiting 2011.
Spotify has proven that free music products are hugely popular and are the route to mass-market music customers. But Spotify’s experience has also shown us that you can’t make free music pay. The ad revenues just don’t cover the rights owners’ license fees.
And bear in mind that 2009 was Spotify’s first full year open for business. Total free users averaged 780,000 in 2009. The average for 2010 (up to September) is over 8 million. So the costs will be much higher. On the other side of the equation, paying subscribers averaged 140,000 in 2009 but grew to an average of 430,000 in 2010.
Though the premium numbers are much smaller, they have a disproportionately large impact on Spotify’s bottom line. Based on the 2009 costs of £27.7 million and the 780,000 average user number, each free customer cost Spotify in the region of £30 (or £20 based solely on cost of sales). But a premium subscriber, subscribing for an entire year, brings in £120. Even if they just subscribe for six months, a premium customer still brings in £60. (And yes, for the purposes of this blog post, I have heavily simplified the maths!)
Which all brings me back to my starting premise: these numbers don’t tell us anything new. They confirm that the economics of free don’t add up, but that free music in the context of a freemium model can work: that as a driver of premium revenue, free music services don’t need to convert anything close to a majority of their free customers to paying in order to push towards a profitable business model.
No, I’m not Australian . . . at Forrester, "boomerangs" are analysts that, after leaving the research team for a stint in the "real world," have decided to re-join. Clients and fellow analysts value the experience we "boomerangs" have built as marketers and the pragmatic outlook we always bring to the table. As for me, I am a bit of an anomaly, as this is the second time that I am back at Forrester. My 20-year career as a marketer can be roughly split in two phases: first, the CPG marketing and strategy roles for brands like Ferrero, L’Oreal, and Johnson&Johnson; then, my digital marketing phase, which recently closed with more than four years at Google.
I would like to think that I am now entering a new phase by helping organizations understand the key role that marketing can play in shaping the way they navigate markets and customers that are constantly affected by the adoption of new technologies. Quite an ambitious scope, so to make sure that I stay relevant and deliver actionable research and advice, I have decided to launch this blog to start a dialogue with CMOs and Marketing Leaders on what’s keeping them up at night and how we can help them.
Coverage areas and topics I’m interested in.
As I type this, I am in the process of writing research on the following areas (please note that links are to reports that are only accessible by clients):
I’ll primarily focus on helping marketers redefine brand loyalty and the role that it plays in the Customer Life Cycle.
For the past few years, we've updated a report called, "Where To Find Help For Web Design Projects." It's a survey of interactive marketing agencies — one that can be fairly complicated to fill out. Hopefully, the report serves as one of the first stops for companies looking for agency help for online design projects because it seeks to compare some basic capabilities and focus areas of as many firms as are willing to fill it out.
Because it's difficult to fact-check every detail reported with every agency, sometimes the data by the time we publish the report is already out of date. And sometimes (hopefully less often), there are minor mistakes that everybody misses before the report gets published. This time, it was that the name of the agency Direct Partners was listed as Skip Reed — the name of the member of the executive management team who filled it out. So, if you're interested in an agency in the report called Skip Reed, you'll find it at DirectPartners.com. Sorry about the error!
Target was just named the "2010 Mobile Retailer of the Year" by Mobile Commerce Daily (see article). Hard to believe eBay wasn't in the top three with their anticipated $1.5B revenue on the mobile channel this year, but they won last year. This speaks to the fact that it isn't just about revenue. In fact, among companies we've surveyed, offering convenient services to customers to engage them more, improve satisfaction and loyalty, etc. top the list of near-term objectives. If the services aren't convenient (see research), consumers will not adopt and use the services. If this doesn't happen, companies won't see the revenue growth or cost savings they are anticipating.
One of the top questions I get from clients is, "Who is best in class?" Any of these three retailers could take that honor. What really impresses me about Target is their breadth of innovative services, the quality of the experience, and to top it off . . . they sell to mainstream America. My favorite service: building a shopping list with the bar-code-scanning technology. Remember that example we've all heard about the smart refrigerator? You remove and throw the empty milk carton out, and "milk" is automatically added to your shopping list. This doesn't do that exactly, but it comes closer than any other application I know. There is also tremendous consistency in experience from online to mobile Web to the applications -- at times, it is so good that it's indistinguishable.
On the surface, this argument pits agency against agency. But I think the issue goes much deeper: the growing intersection — and tension — between customer experience and marketing. Here’s how I see the landscape:
Neither customer experience nor marketing are going away. Customer experience is gaining importance in companies — we can see this in the rise of the chief customer officer (CCO) role, which several years ago was virtually nonexistent. But the rise of one discipline doesn’t mean the complete and utter downfall of the other. Even companies like Apple and Zappos — the poster children for great customer experiences — advertise.
Most companies have the intention of providing excellent customer experiences. However, most find it difficult to translate those intentions into the cultural fabric of their companies. I like to give companies feedback on how they’re doing — and to see how customer service people deal with feedback. Three recent incidents with employees made me question how well these firms were making this translation:
Suits sitting on the floor. Finding an available electrical outlet in O’Hare Airport is a hassle. While looking, I couldn’t help but notice the number of United Airlines customers sitting on the floor, because the outlets in the main thoroughfare were the only ones available . . . some of those people were even in suits. One would imagine that an employee in a truly customer-centric company would be mortified by seeing their customers sitting on the floor like that. When I approached the United Airlines customer service employee to pass a message on to her superiors about it, instead of seeing the problem, she merely gave me a litany of reasons why it wasn’t United’s issue.
Social media adoption has grown in leaps and bounds over the past few years, and not just in North America. Did you know that Italian and South Korean online users are more likely to engage with social media than American online users? Likewise, most of the European countries we study have a higher percentage of Conversationalists than we find in the US.
Despite this, most industry conversation around social media tends to focus on the US — and over the past few years nearly all of the entries we’ve received for the Forrester Groundswell Awards have talked about US-focused social media programs. To help recognize the companies that are pioneering the use of social media outside the US, this year we introduced an international category to the awards.
This week at Forrester's Marketing and Strategy Forum EMEA 2010, I was proud to present the winners of the inaugural Forrester International Groundswell Awards, which you’ll see listed below. I was thrilled with the entries we received. We saw dozens of quality entries from around the world, and in the end recognized finalists and winners from four continents, as well as a number of global efforts. I hope that other companies learn from — and rise to the standard of — the entries we saw this year; and I hope that our 2011 international category sees even more — and even better — entries.