broadstuff

STL Partners, who we worked with in writing the Telcos in Advertising report, have written up the notes of the day 's session held at the end of the Telco 2.0 Brainstorm. I sadly couldn't be there due to our work at the BBC Innovation Lab, so the next best thing is a link and a quick summary of the day.

Here are the main narratives from the presentations of the day.

Recurring themes throughout the day

1. Standardise. Need to develop a standard approach to content and ad delivery (standard formats, business models, metrics, campaign management, customer profiles)

2. Metrics/Measurement. These are a critical differentiator for mobile (and on-line) advertising and go hand-in-hand with the ability to use the mobile as a tool for responding to advertising.

3. Broaden the Ad Platform. Operators underestimate the value they can offer in this area (and the threat the represent to the internet search engines) owing to the breadth of their assets. They need to develop a ‘platform’ that encompasses ALL their assets if they are to take full advantage of the advertising opportunity.

4. Technical. For mobile, need sufficient bandwidth (and guaranteed connectivity) to deliver content and advertising and, for fixed and mobile, effective (federated) identity management capability to orchestrate the sharing of customer data (profiles, entitlements and analytics).

5. Usability. The end-user experience remains paramount. For mobile, content (including advertising-related content) needs to be ‘made-for-mobile’ (with a 3-clicks-to-find rule) and, for fixed and mobile, demonstrably safe and private for end-users.

6. Industry Collaboration. A go-it-alone strategy is doomed to fail. The industry needs to work together to grow the advertising cake. This does not preclude strong competition and individual company activity but this must complement the wider issue of building something of value to the new customer - the advertisers.

7. Innovation. Operators are (often unfairly) criticised for their inability to innovate. The advertising opportunity will be a test of their capabilities in this area since it will require delivery of new services to new customers with new business models. Now is the time for operators to develop robust processes to manage the innovation process for advertising and other new business opportunities.

Most of this came up in our research, but its useful to have it corroborated. Points 6 and 7 are about execution, and both pose very significant issues for Telcos.

The Big Issues for Telcos though, in our view, is that the Convergence is not just about technologies, its about business models, and the Media's Ad supported model is vying with the Telcos subscription based model (and the Web 2.0 Media's "dotcom 2.0" models) - and Free is a very attractive proposition.

Although the overall Ad market is a fraction of the overall Telco market (about an order of magnitude) it is big enough to cause major disruption, especially in consumer based data services.

For Individual Operators therefore, there is therefore a need to understand how best to deal with Advertising as it moves into the comms arena. Conclusions from that the day were that the core areas to address for individual Telcos were:

1. Rigorous analysis of real addressable market(s), cutting across not only mobile, but also cable, ISP and TV (if a converged operator).

2. Develop a ‘flexible strategy’ (based on a start-up mentality) that enables changes of direction as opportunity becomes clearer supported by a ‘best-efforts’ business case.

3. Create a dedicated and flexible organisation which operates outside the structured processes and culture of the core business.

4. Continue partnerships and trials to develop understanding of customer experience and operator/partner roles and business models.

5. More creative customer segmentation - micro-segmentation to establish framework for targeting and personalisation of content and advertising.

6. Define rules for automating the CRM processes and systems required to support a data-driven advertising platform.

A number of these points represent significant challenges for any Telco that is organised along stovepipes and traditional subscription based business models.

Interesting times.....

Just finished writing up my impressions of the Digital Home stream we helped run at Telco 2.0 Brainstorm to go up on the Telco 2.0 blog (link over here ) about the Telcos role in the emerging Digital Home

The title of this post was one of the comments made on the interactive backchannel used in the event, and really struck a chord with me.

Richard Beddard emailed this post to us as a comment, but it is such a good example of people using the Twitter system in interesting new ways that it deserves to be a post in its own right:

I'd noticed you blogging about Twitter and as I'm not going to blog on Twitter and have given up doing battle with your comments system I thought I'd send you my Twitter experience!

We must apologise about the comments system.....every so often Serendipity seems to take umbrage at a particular IP address/computer/whatever and refuse to let it comment past the captchas....however switching off these exposes us to a welter of viagra posts in minutes - Spam 2.0

Anyway, re Twitter:

For years I've been a sporadic journal writer.
Then I came across Twitter.
The premise of Twitter is ridiculous. It's like a realtime blog. You're supposed to type or SMS everything you are doing and thinking.

I signed up last Monday, but couldn't get the SMS to work.

So I gave up on it and 'twittered' into a Word document instead. (Actually A Google Documents and Spreadsheets document)

Now I 'twitter' all the time! And it's been very productive in terms of writing a journal.
The trick is to have the document open the whole time while you are working
And jot things down on a pad if you haven't got your laptop running - but transcribe them as soon as possible before it goes stale. And of course it is completely private.

The real benefit is that you are writing up ideas as they are fresh, which helps in the development of them. It becomes a crucial part of life and not just a record (how many people re-read their journals anyway).

As we wrote some time ago (here) we felt that the original Twitter idea (a River of Drivel) was a waste of time and space - but as a Unified Messaging system put to other uses it was very interesting proposition.

So...Google stretched its reach across the value chain and bought DoubleClick this weekend. There has been so much written already - a good writeup at GigaOm here..

Three things about all this interest us though:

Firstly, the above article makes reference to something we noted in our research for our report just published on Telcos in Advertising - the Return of the Banner.

We had opined last year (to a bit of derision in some quarters I may add) that there is a limit to click through classifieds, as we had picked up increasing rumbles that Brands can't really build up mindshare this way and that they needed the broad e-Canvas of banners for this role.

Secondly, this is Microsoft level of concentration of market power - as the Wall Street Journal notes:

“Google’s purchase of DoubleClick combines the two largest providers of online advertising delivery and is going to reduce substantially the market competition on which Web sites rely on to provide advertising,” said Brad Smith, Microsoft’s general counsel. He said that, taken together, Google and DoubleClick would handle more than 80% of the advertisements served up to third-party Web sites when a user pulls up a page."

Possibly a bunch of non-sweet grapes from said Microsoft, but considering the power of the Online Ad market it's a worrying trend - maybe one for regulators to consider?

(update 23/04 - GigaOm has picked up this angle as well)

More worrying still (for competitors) is that there is quite a lot of chatter about Google/Doubliclick setting up an Ad Exchange (AdBay?) - with that amout of market power plus the 'Net's first mover advantage rules that's scary for other players.

Thirdly, the potential corollary trend is that Google is clearly not a pure Search Engine business anymore, its an Ad Company - so does this imply that it will be spending less and less of its time / resources / focus on good old Search.

Maybe its just us, maybe it's the New Net, but in our experience Google search is not quite what it used to be - (be interested in other people's views).

If so, the interesting (hypothetical) question then becomes...what happens to a Net Ad Co if its Search is no longer seen as the best search destination - can you run the prime AdCo without being the prime SearchCo?

Hah...seems like others are finally tumbling this one too

(This was the Friday the 13th post, and true to form it didn't paste up initially....here it is now)

Went to the Open Coffee morning in London yesterday (was in the area, where better to have a coffee). Had no agenda as such except for neeeeding a coffee, but turned out to be a great time in itself - where else would you get, in an hour:

- a long chat about the latest in Podcasting (we wrote a report on this 18 months ago, great to get an update on the Biz)

- ditto about the joys of setting up an online dating business for the creative classes

- discourse on the mainstreaming of the New New media into the mainstream with two very sharp guys from London Business School's Sloan Fellowship program.

All for the price of a cup of coffee.................

After we co-wrote the ‘Telcos Role in Advertising Value Chain’ report with Chris Barraclough of STL Partners, a 3rd day workshop was held after the Telco 2.0 brainstorm to take people through our work. I couldn't make it as we were at the BBC Innovations Lab, but The Economist Intelligence Unit's Damian Green was the analyst in residence and his thoughts are noted in a thoughtpiece on the Telco 2.0 blog here.

To summarise, he notes that:

Mobile advertising networks such as Admob, Third Screen Media and Nokia’s recently launched Ad Service are predicated on large-scale media consumption on mobile devices. Whether or not this transpires, I believe media-hosted mobile advertising will prove to be a sideshow to the main event.

(I have snipped some of the text here and there to tell the story)

The rise of the online ad networks has been driven by the explosion of blogs, niche interest sites and other long-tail web content, coupled with a homogenous delivery platform (the web browser) that permits audiences to be tracked and ads served across a diverse range of properties.

However, two conditions make mobile advertising very different to the on-line world:

1. Media ownership is likely to be more concentrated on mobile… Greater resources are needed to produce content that works across a range of devices, creating significant barriers to mobile publishers. In addition, recent research and analysis reveals a strong bias among mobile internet users towards messaging applications, maps and social media - services that have favoured the emergence of a handful of dominant destinations on the fixed web.

2. …but the delivery platform is more fragmented. With mobile internet users focusing their attention on a relatively small number of properties, and accessing these via a proliferating range of devices and networks, mobile advertisers are more likely to be impacted by the fragmented delivery platform than by fragmentation of the media landscape (the issue addressed by advertising networks). At the same time, the bigger mobile media owners have little incentive to cede control of ad sales to third parties (Third Screen Media recently acknowledged it is seeing a trend of mobile media owners choosing to stay outside its ad network and rent its ad serving technology instead, as Fox News has done).

I agree with this analysis totally (well, it was the essence of our thinking in the report as well)...I'd add that the "2 billion mobile users" are broken up into a plethora of different walled garden service stacks, using a huge range types of device and O/S etc. Its like the pre- internet of the early 1990's using PC based standards pre Microsoft. Mobile Web 1.0 isn't really here yet, never mind Mobile Web 2.0.

He goes on to note that:

While displaying ads on mobile websites may initially be an effective brand awareness tactic, this is likely to be largely due to novelty, rather than the limited impact of a 150×20 pixel banner. Mobile marketers point out that the key purpose of mobile ads is to drive interaction with the brand - yet what will mobile users be interacting with? Only a small number of brands currently have a dedicated mobile internet presence; even fewer can justifiably claim to offer a compelling mobile experience.

To this I'd add that previous Internet ad technologies (Banners, popups, 2nd Life plays even ppc classified) all initially had a high novelty takeup and then start to fade in impact.

He then makes the interesting point that

A more fundamental hurdle to the mobile ad networks - and indeed to traditional advertising being transferred successfully to mobile at all - is that advertisers do not know mobile users sufficiently well to understand what they are likely to find interesting, useful or valuable.

Now this is an interesting assertion, not sure I'd agree with it in theory - they certainly have the potential to do so - but whether they are analysing the data is far from clear (something that seems to be true of all Telcos if comments from the rest of the Telco brainstorm are valid).

To be fair Damian later notes that:

The only entity in a position to achieve this level of understanding of a mobile user is their mobile service provider. Mobile operators are (or soon will be) the gatekeepers to such key enablers of advanced mobile advertising as customers’ identity, presence and location information. Moreover, they are the only companies with a sufficient level of trust to make credible claims about protecting such extremely sensitive data (their customers may complain about high bills and poor customer service, but rarely dispute call charges).

Ah yes....Trust. All the evidence is pointing to Trust being a (if not the) key factor to allowing "personalised" Ad based plays to work, because they need the user to share a lot of personal identity / intimacy data. And part of that tradeoff is making advertising user pull, not advertiser or operator push.

Damian then notes:

This turns the notion of targeting on its head. Traditionally, advertisers are the ones who deem which kinds of consumers should receive their messages; in the coming era of advanced mobile advertising, operators will make the call about which messages to send to their customers.

More than that...as we imply above, users, not operators will make the call about what sort of advertising to receive. It may be a lot (if for e.g. they get free telephony as a result, i.e. the Blyk model) or a little (useful info for a small deduction in price).

Now there is a lot of interesting content in the piece and I recommend you all read it, (and buy our report of course) but I think its worth quoting his end thoughts as well....

If advertisers can no longer dictate who their ads are seen by, what incentive will they have to provide their ads to a third party aggregator with no inventory or eyeballs to their name? In a word, results. This kind of advertising will simply work. Ultimately it comes down to people knowing themselves better than advertisers do, and choosing to share aspects of their identities and lifestyles with one, trusted service provider.

This last point resonates with some work we did a while ago, the idea of the "Customer NPV". We believe people will increasingly start to know their value to advertisers and barter this value for levels of access to their identities. Why? Because they can, using the 'net. At present people don't really know their value (see the tiny amounts paid by storecards) but as they become more digitally literate (digerate?) this will change.

Damian's post is titled "Mobile ad networks are a stop-gap: the real opportunity is elsewhere"

So where is this "elsewhere"

As we noted in the report and on this blog, the total size of the global Ad industry is an order of magnitude smaller than the total Telecoms industry, the % online is an order of magnitude less than that, and the % of Mobile Advertising is much smaller than that (1 -2 orders of magnitude less).

Damian notes that:

Rather than aggregating inventory or “eyeballs”, the greater opportunity for mobile advertising networks is in aggregating advertising content. The most successful ad networks will be the ones who provide the most contextually rich offers for mobile operators (and eventually web media owners and IPTV service providers) to deliver to their customers. There will also be an opportunity for niche players to specialise in helping advertisers enrich the metadata associated with digital ads.

Now we go into this thought far more in the report, digging down into the specific aspects that Telcos and Advertisers can partner, go it alone etc, but this is broadly correct.

However....

Its not just advertising content in our view - for this sort of play to make sense it has to deal with the relevance of all the media shipped, not just the relevance of the Ads served.

And the Big Question is how flexible the Operators can be in dealing with this unfamiliar emerging industry, where its not just the technologies that are converging but the business models and cultures. One of the things that hits you in the Convergence is the huge difference in culture between Telcos, CableCo's, MediaCo's, Dot.Co's - even though they are offering essentially teh same services to the same customers. And one of the strong pieces of feedback in the Telco 2.0 sessions (of which more anon) were the concerns about the speed and agility of the Operators.

Trying out a service called Twitterfeed to automate Broadstuff's twitter updates.

This is a Test Message

Well, its up and running and it works....

This post was prompted by two recent ones, on GigaOm and Tara Hunt's blog. First GigaOm, in an article called Web 2.0 & Death of the Network Engineer written by Allan Leinwand

I was recently meeting with a Web 2.0 company discussing their network infrastructure plans. As I started asking questions about their racks of servers, their storage area network (SAN), their plans for routing, load-balancing and network security, the CTO of the company stopped me and made a bold statement.

He said, “The Internet is like electricity. We plug into it and all of the things that you mention are already there for us. We don’t spend any time at all on network or server infrastructure plans.”

To this CTO, knowing the details of his network and server infrastructure was like knowing the details of the local utility electricity grid – not required. Is this a bad thing, or proof that networking technologies have succeeded?

Next Tara Hunt, in a case study (Twitter) of using onramps:

Things were pretty slow those days and a few of us dedicated exhibitionists would send the occasional message, but mostly, as Narendra aptly put it, Ev was our Tamagotchi. Lucky for all of us, Ev has an insanely interesting life.

If things would have stayed that way, I hardly think Twitter would have lasted very long. Now we know, it didn’t and what they did next is the most interesting part of the story…as well as a lesson for people building web apps everywhere.

It is at this point that most companies make one of a couple of mistakes:

1. They throw in the towel, scrap what they are doing and build something entirely different, usually using the same technology. Riya did this. Goowy did this. This can be met with great success, of course, like in the example of Flickr’s directional change. But I would also caution that these types of changes mid-stream can be the lack of deeper thinking about the real problem.

[Lucky for us, Twitter was an interesting enough concept to realize it’s potential. It had a small following, but you could see the love already.]
2. They try to build in more features…more “reasons for people to stay”. I’ve seen this a number of times and it usually follows this conversation:

Bob: “We have high traffic, but nobody is sticking around.”

Alice: “I keep hearing the same thing. They just don’t have enough to do.”

Bob: “Well, then we should build in more things for people to do.”

Then the fortress continues to grow and, in consequence, it becomes less and less attractive for a person to sign up.

Twitter could have done this. They could have built in groups or additional short codes or created all sorts of ways for people to use their SMS. But they didn’t.

Instead, they followed a THIRD option: they built more onramps.

They added Jabber integration for sending/receiving messages, and added sending messages to the web interface. They also allowed you to keep track of just your friends in the web interface. They also released an API, allowing for others to build many more onramps.

The problem with the Onramp approach is the same issue as alluded to in the first post - ie scalability!

We've noticed this with Web 2.0 startups in general, they talk about applications and presentation without really understanding the infrastructure issues. As one of the commentators (Jake McKee) on Tara's blog puts it:

1. When an onramp shuts down due to technical problems, you lose users who have become dependent on those onramps. For instance, the only way I typically use Twitter is via the AIM bot. AIM bot is broken, no clue when they’re fixing it, so I’ve largely stopped using Twitter. Adding onramps without fully developing them to last, stay robust is no different than adding a bunch of new features, and then you’re back to your point about feature addition.

2. Onramps = usage = scalability issues. Twitter, at least to me, has basically suffered the Friendster Folly - successful to a point of a nearly uselessly slow site. I can’t believe this didn’t have something to do with the fact that there were so many onramps for users to submit overwhelming amounts of content.

Couldn't have said it better myself - so I didn't

We've also noticed this in chatting to entrepreneurs in the London scene (see our note here for example). We think they just don't know what they don't know. Unless they were there in Web 1.0, or have a Telco/ISP background (or were ever dugg) they probably have never seen the impact of poor scalability.

And its not as if the Amazon Grid or a Web Hoster / ASP will save them, it was made fairly clear in questions after Amazon CTO Werner Vogel's talk at FOWA 07 that even on the Amazon service there is a layer of user management (aka "knife and forking") required between any one application and the webservice infrastructure.

It was ever thus!!

No sooner has the "viral marketing / cashola / PR whatever" taken root, and the users beat a path to your door, then your service falters, sputters and falls over. Grumpy users go away, egg is on face, service reputation is shot and cost of getting back into the game is a lot higher than first time round.

So, what to do?

Well, start by getting help from people who know what they are doing - like us

But the most critical thing to do is just to realise that Scalability will be an issue, and one can't magic it away by assuming its like electricity. Once that is understood, then planning for it can begin.

(An Ad aside - In our previous lives we have been involved in the OSS and other infrastructures behind ISPs, ASP/web hosting, cable triple plays and "Web 1.0" services, and getting scaling wrong is what can kill a business completely. At Broadsight we have done quite a bit of work helping various "Web 1.0" and Cable / DTV companies transform into Web 2.0 - and scaling is always an issue)

But, I'd rather let one of the commenters on GigaOm close - Ed Byrne:

Coming from a company that hosts many web 2.0 and SaaS applications, I know all to well the CTO that thinks hosting is a utility like electricity.

I believe that statement is true at the low end - but not when hosting a serious application. An example that comes to mind is when a client wanted full redundancy in their architecture and it all fully load balanced. Sounds standard - we will spec and build. Of course our network engineering team asked all the usual questions - but when it came down to going live - we discovered the application needed layer 7 load balancing, not layer 4 - which our devices provide. A layer 7 load balancing is at least 4 times more expensive.

This is clearly a case where the client’s lack of understanding is going to have an impact on their deployment time as well as a financial impact.

The issue is further complicated if one is using higher bandwidth media, especially video, as the rate of bandwidth, disk, and processing scale can raise far more rapidly than just serving webpages will.

I can't reiterate this too strongly - anyone who thinks the Web of today is just like electricity is probably in for a nasty shock!

At ETech on Tuesday 27th March, the BBC's Tom Loosemore talked a bit about BBC trials using various "Virtual" TV media servers (more about this on GigaOm NewTeeVee) and about his vision of the DVR as a P2P WebService

Tom is quoted as saying:

..the BBC is merely trying to explore ideas for the long term future of the medium. Trying to find out “how to cede control more gracefully,” as he likes to put it. “We don’t want to get caught blindsided.”

From the point of view of the Web TV endgame, this is a very interesting development. It is hugely inefficient to have a plethora of various stand alone devices (STBs etc) in the home providing access to various bits of content when a PC (or somesuch) with a few bits added can do it all linked to a web based service.

We have wondered why a DVR Webservice - a "Virtual TiVo" - has not yet been tried. Not a VoD service, but one where you simply have all your personal DVR functions but as a Web Service. There are a few issues around bandwidth but these are not particularly intractable.

No, turns out that its all about the legal issues around rights, copying and safe harbours, i.e its ok under (most) Safe Harbour caselaw to be a conduit to help people copy stuff onto their disks at home (and even to sell the gear to do so), but its not ok to sell you that same functionality as a web service.

Do this and the rightsholder will then be able to come after the service with big lawsuits.

It also remains to be seen if Safe Harbour law will be changed when huge volume players (eg YouTube) find that stuff is being re-posted as fast as they take it down.

However, what happens if the rightsholder IS the video webservice? Most would balk at the idea at present, as they are still structurally (and culturally?) designed to pursue more traditional models. This may change in future of course, but (if history is any guide) these companies will need to be brought to their knees first before they will be motivated to restructure so radically.

However, one of the few enterprises on the planet that is structured in such a way as to be able to run a TV Webservice in this way is the BBC. As a licence fee payer I for one would be delighted to have part of that fee fund my virtual DVR! I want their content when its convenient for me, the medium used is far less relevant - and I don't want Yet Another Set Top Box.

Imagine what would happen if an organisation of the BBC's scale did put up such a system? The mere act of trialling it brings it into being, and the implications are enormous.

Interesting (TV) Times......