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Media predictions for the far-forward future

woman hologram

Put down your smartphone app and think far, far ahead. Media prognosticators rarely do this, perhaps because advertising clients and digi-journalists gain more from toying with the latest Twitter group chat update than they do by conceptualizing the state of media 100 years from now … but a far-forward forecast could be worth the effort.

So let’s play the prediction game.

Before we start, here is our inspiration: the brilliant book “The Next 100 Years,” in which George Friedman examines the macro trends of history in attempt to predict world events through the coming century. It’s an amazing feat, reeking of intellectual arrogance, to try to foresee 100 years of future events … until the reader discovers that Friedman has a solid methodology.

Friedman bases far-forecasts on geopolitics — the combination of national resources, locations on the globe, culture, and economics — which has ongoing patterns that make shocking events, such as World War II or the terrorist attacks of 9/11, predictable. Individual players on the planet, even presidents or kings, typically have far less power than we imagine, and must play upon a chess board that is already set. The future, it seems, can be predicted, if you really examine the macro trends. For instance, looking backward, Friedman argues:

  • It was inevitable Europe would become a global power in the 1800s, because it needed supplies from Asia, and after Turkey cut supply routes over land Europe sought a route west to India by sea and thus learned to manage the oceans — controlling global commerce.
  • It was inevitable that the United States would win the cold war over Russia in the late 1900s, because allies to the United States could “sell in” to its vast consumer demand set, making U.S. friends rich, while Russian allies might get weapons but end up impoverished. 

And, looking forward, he suggests:

  • The United States will remain the leading world power in the 21st century, because it controls the world’s oceans, due to its fortuitous placement between both the Pacific and Atlantic oceans, thus controlling trade.
  • There will undoubtably be another horrible global war in the 21st century, given the tensions between the rich and poor and the continued belief of humans in their personal nation states.
  • And this war, like all others, will eventually end, and generate new technology systems from the wartime investment that lead to sources of clean power and communications we today can barely imagine, such as microwave energy beamed down from outer space — the most efficient way to capture energy from the battery in the center of our solar system, the sun.

Oceans, human antagonism, and sunlight are all constants, and they will define our future.

So what is the real far-future of media?

Here are our predictions: (1) Environment monitoring, driven by sensors around us; (2) virtual visual overlays that are constantly on, created by the inevitable shrinking of screens until they fit in your contacts; (3) ambient personalization, as you control what you see everywhere; and (4) societal upheaval as we relearn how to interact with other humans in a virtual world.

1. Sensors everywhere — Behind all the Nielsen updates on multiscreen use or Pew reports on social media fads, the truth is information flows only two ways — to us or from us. While media writers remain fascinated with toys, the biggest trend in information flow is the spread of connected sensors in all devices. The iPhone 6 has six sensors built into it — including proximity, motion sensor/accelerometer, ambient light, moisture, compass, and a gyroscope — coupled with GPS features that pinpoint the phone’s location. The Disney Research lab has created a Touche interface that can turn the surface of any object, such as a table or couch, into an input sensor by monitoring vibrations created by human contact. Philips has launched “design probes” that explore tattoos with sensors that disappear based on touch, and clothing that changes color based on your mood.

With sensors everywhere, you will be tracked. Tracking will require control, so humans will use that to personalize their environments (a benefit) while suppressing unwanted third-party oversight (a cost).

When you walk into a room in 2070, the room will know who you are.

2. Screens everywhere — Concurrently, the spread of screens is obvious. At SXSW Interactive last spring, the head of the Consumer Electronics Association, Gary Shapiro, said that within 10 years consumers will buy wall TVs — or whatever we will call high-resolution digital screens that fill an entire wall. Apple has a patent for holographic wall screens that project 3D images to both eyes of each user in the room, without them wearing googles, by monitoring the location of their heads. And Microsoft has just launched a HoloLens goggle prototype that overlays 3D images on reality with a wider field of vision than the (recently aborted) Google Glass. As big TVs grow into walls, little visual screens will also shrink into contacts.

With screens everywhere, you will see whatever image you wish to pull up.

3. A personalized universe — The great media prediction for the next 100 years is that humans will be able to retreat into completely personalized bubbles of vision, overlaying data about others in their contact lens, porting their images into virtual meeting rooms thousands of miles away, and pulling entertainment into the real world around them. Because if everything (from couch to table) senses you, things will recognize your preferences, creating demand for automated content that overlays your reality to meet your unique needs.

From a content creation perspective, this will unlock a gold mine of opportunity for film (hologram) producers, game designers, social media entrants, work/office productivity software, pornographers (always the earliest refiners of visual technology), religions (where belief systems could now be “seen” as reality), and yes, marketers (who will find a way to support this content with some form of advertising over there on the side). This information rush will become fuel for economic growth, with visual services an entire new platform for monetization.

4. Societal unrest — These media trends are our predictions, not Friedman’s, but he has a point that may refine ours: Every evolution in society comes with unintended consequences. The vast rise of visual screens and the concurrent measurement of human personal preferences on every surface device may unearth new social dynamics we cannot anticipate. Will people become more gregarious as they seamlessly are able to beam their avatars into the world? Or will humans retreat into dream bubbles, like those poor enclosed battery souls in the Neo Matrix, asleep in cocoons while they envision a fantasy of greatness?

We cannot predict that. But one thing is certain: The far-forward future contains much more than an iPhone.

Why Google beats Facebook in mobile conversions

facebook mobile

Adweek seemed surprised this week to report two findings — a whopping share of Facebook and Google ads are now being served on mobile, and yet for some reason, both lag behind desktop ads in conversion rates (the % of people who click on an ad who end up completing the desired action, such as filling out a lead form). So let’s break this down:

1. First, both Google and Facebook have much lower conversion rates on mobile than on desktops. Marin Software monitored $6 billion in ads, or about 3 billion ad clicks, and found that while Facebook received 63% of all ad clicks on smartphones and tablets, only 34% of its conversions happened there. Google did a little better, with 39% of all paid search clicks being on mobile and 31% of all purchases made there.

2. Should mobile marketers panic? Well, no. Duh. Mobile devices have small screens and awkward touch keypads, so conversion will be lower, of course. Have you ever tried filling out a web lead form or typing in credit card information on an iPhone? So the overall trend will be for consumers to explore ad information, if interested, on mobile, but then convert on desktops (or even by telephone or physical store) later. This explains why Facebook mobile ads have only a 0.3% conversion rate vs. its desktop ads converting on average at 1.1%.

3. Now, within this race, why did Google still outperform Facebook on mobile conversions? Modality. Google search ads are triggered by consumers who instigate a search for a particular product, so they are already leaning toward conversion. If you punch in “airline tickets to Florida” on your iPhone, odds are you may be thinking of making a travel purchase. Facebook ads, instead, are pushed out to target consumers who have expressed no immediate interest in buying the product — so even if they click, their mode may be one of cursory exploration vs. immediate consumption.

All of this is to say that mobile ads can work very well in reaching audiences with information about a product; marketers should also take heart that most conversions happen subsequently across different channels. 100% of television ads, for instance, have conversions elsewhere — web, phone, retail store visit — because no one buys anything by clicking on a TV ad. (You can’t.) Imagine the histrionic Adweek headline: “U.S. marketers spend $70 billion annually on TV with a 0% response rate! Why aren’t there conversions?” Um, yeah.

Break out the regression analysis

The real solution to cross-channel mobile is to use multichannel measurement, evaluating the responses from a cumulative mix of digital or traditional advertising media. (We do this for clients with a mix of software and statistical regression analysis*; it’s quite fun.) The real story may be those early ads on Facebook spark interest that bring people in to Google search later, just as a TV campaign can build lift across physical stores. All ads are connected. The data trails between them are complex, but can be measured.

So keep making mobile impressions, marketers. Your spouse didn’t marry you after your first impression. This is not to say that first impressions don’t count.

* If you are new to stats, “regression analysis” sounds complicated but the concept is simple: It models relationships between variables, such as X television schedule and Y Google searches, to find with relative certainty how they are connected. (Imagine you go out partying and the next morning have a wicked headache. If you model this with enough parties over a year,  you could say with relative certainty: partying in fact does cause headaches.) Regression analysis is useful in evaluating how different, unconnected media tactics — and outside events, such as major winter storms or competitor behavior — work together to influence responses to ad campaigns. Without this type of analysis, you might make a mistake of shutting off one media channel, such as TV, which in reality could be driving thousands of customers in elsewhere in your marketing ecosystem.

 

Understanding multiple device use: Meshing, shifting and stacking

woman smartphone 2

A young woman plops on the couch, turns on the TV, and as her favorite reality show casts a blue glow across the living room … she also boots up her smartphone to check on her friends in Facebook and … also swipes open her iPad to play Words with Friends.

All at the same time.

Marketers who want to reach a consumer on all devices concurrently often struggle with understanding how these touchpoints interconnect. The biggest challenge is consumers often use all these devices for different things. While TV is on for video entertainment, mobile devices are used more often for playing games or participating in social media.

Behind this is the fast-growing trend of, yes, people using mobile gadgets plus TV at exactly the same time. BI Intelligence just reported that 45% of all smartphone use by U.S. consumers age 16-44 is done with the TV on, as well as 37% of laptop use and 55% of tablet use. If mobile is ascendent, TV seems to be its constant companion.

To address this puzzle, we’ve searched for frameworks on how people actually use different screens at the same time — and found the best from Monique Leech, an analyst at global research firm Millward Brown. With a hat tip to Leech, here’s our own interpretation of her findings: there are three core ways people use multiple devices and each requires a unique marketing strategy.

Meshing: ‘Hey look, tennis is on ESPN. Let’s read tennis.com too!’

“Meshing” is when people use two or more devices to watch directly related content. For instance, when Jane Smith was watching the Super Bowl on TV a few years ago, she was surprised by a blackout in the stadium lights, and turned to Twitter on her handset to chat about it. Oreo famously leaped on this moment by tweeting “You can still dunk in the dark,” and Jane would have laughed. Marketers who want to leverage “meshing” behavior can either target integrated advertising content, such as a buy on a weekend sports event and a concurrent media buy on ESPN.com, or deploy “real-time marketing” responses on social media during major awards shows or sports events.

Alas, meshing is only part of the story, and typically not the dominant form of concurrent media use. Putting an ad on Tennis.com to match a pro tennis tournament on TV at the same time may not always be the best approach. The next behavior, “stacking,” explains why.

Stacking: ‘Hey look, Walking Dead is on TV. But let’s chat on Facebook too!’

“Stacking” behavior is different, and more common, in which, say, James Smith is watching “The Walking Dead” on television while simultaneously chatting with buddies on Facebook via his iPhone. Stacking means adding different content from one device to unrelated content on another media device, all at the same time. Numerous studies show this is the dominant form of concurrent device usage. Salesforce.com recently monitored 470 consumers for a month and found they spent an average of 3.3 hours on smartphones per day with the top activities being emailing, searching the Internet, or social networking. Tablet behavior was similar, with social networking and reading at top. What’s most interesting is so few reported watching TV-related content simultaneously on mobile gadgets, it didn’t make the list.

For marketers, this means you can’t just buy ads on CNN.com to align with viewers watching CNN on TV. Instead, you must explore audience targeting across content platforms at simultaneous times, to reach consumers on Facebook or in a game while they watch a show on television.

Shifting: ‘This content is fun, but I’ll pause now and continue it later.’

The third form of multiple device usage, “shifting,” is one of shifting from one gadget to another while pursuing related content. This could be as direct as watching part of a Netflix movie on a tablet and finishing it on TV, or more nuanced such as researching a trip to Italy on a smartphone and then completing the reservation via a computer browser window.

This “shifting” device behavior poses two challenges for marketers, in targeting and measurement. For targeting, it requires understanding how different media touchpoints may be used in sequence for a consumer to learn about, explore, consider, and then consummate a desired action — and for measurement, it means the combined impact of all these channels must be evaluated not in silos, but by their cumulative lift in results.

Three puzzles, not one

The punchline is each type of behavior poses unique challenges. You can try to intercept consumers who mesh their related content, but be aware they may actually be using different content at the same time. You can also try to reach consumers as they stack different content on different devices, but to do so you’ll need to be more clever in how you coordinate your ad messages. And for consumers who shift across devices pursing related content, you’ll need expert measurement systems to understand this pathway and how to influence it.

After mobile: The looming future of screens everywhere

Screen Shot 2014-11-30 at 8.59.43 AM

Everyone is rushing to mobile and marketers want in. Facebook will clear $8 billion in mobile ad revenue this year, and Google will make $12 billion. Both have more than 1 billion users with access via mobile gadgets. Mobile, for a decade the Great Pumpkin of advertising, always unseen but about to arrive, seems to have finally emerged from Linus’s pumpkin patch.

But what if something bigger is looming behind today’s small-gadget lovefest?

That bigger thing may be digital screens, projecting images from any angle, wall or tabletop. At SXSW Interactive this spring, on a panel where Robert Scoble was still wearing his soon-to-be-discarded Google Glass, Gary Shapiro, chief executive of the Consumer Electronics Association, made a bold pronouncement: In a few years, he said, television screens will be as big as walls. Flat-panels will be everywhere. The corporate big-wigs will no longer be the woman or guy in the corner office with a window view, Shapiro said — instead, they will clamor for an office with a huge wall to install a massive digital screen.

Shapiro should know; his association is charged with researching consumer electronics trends and manufacturers’ product pipelines, so he skates to where the puck is going. First, the price of screen technology is falling. A 40-inch flat-panel TV cost $3,000 in 2003; the tag fell to $1,600 in 2007 and today, the same screen costs $330 at Best Buy. And second, screens are getting larger. This holiday season Vizio is selling an 80-inch TV for $2,499, the same cost of a panel half its size in 2005. Follow the trend line, toss in a bit of Moore’s law accelerating production, and if we can buy a digital screen that is 6-feet-8-inches diagonally wide today, by 2022 we’ll have screens that fill a living room wall.

But there is more here than just bigger TVs. The big story is the proliferation of screens and their corresponding input devices: the technology for making objects glow is spreading fast, and soon turning surfaces into screens may be as easy as painting an object. The image above shows glowing paper recently invented by Rohinni of Austin, Texas. Sony is testing watches made from flexible e-Ink paper. The gym I go to has a television image embedded behind the locker room mirror. And Disney’s research division has tested a Touche system that can turn any physical object — a tabletop or your sofa — into an input sensor that could control screens. Soon, fall asleep on your coach, and when your head hits the pillow your furniture could communicate to your home electronics to turn down the TV volume and dim the lights.

If the idea of paint that turns an object into a display screen seems science fiction, consider Chamtech Enterprises recently invented spray paint that turns surfaces into Wi-Fi antennas.

What this means is advertising communications in the near future will have far more screen options than the TV, PC or mobile gadgets most marketers are so obsessed with today. The myth of TV dying is just that. Mobile is rising fast, yes; Business Insider just published a fascinating report forecasting that mobile advertising dollars will make up more than half all digital marketing spending within four years, and noted that this year for the first time the number of minutes a typical consumer spends per day on mobile has finally eclipsed TV. (Note, television still captures more than 4 hours of viewing per person per day; the mobile devices are additive, not subtractive, in how people take in information as you “stack” your inputs between the big TV screen far away and gadgets nearby in your lap.)

Large screens offer a different experience than mobile, one more conducive to marketing. They tie into the third sphere of human psychological personal space, the distance  of 4 to 12 feet used for millennia as the story-telling field, the news your ancestors received from a campfire, a relaxing lean-back intake that we still enjoy in movie theaters or in front of basement TV sets. Personal space, as we’ve noted before, actually has three spheres of distance; intimate, up to 18 inches away; personal or working, 18 inches to 4 feet, the distance from our eyes to the tools in our hands; and social or news gathering, from 4 to 12 feet away. Mobile gadgets fit into the closest intimate field; laptops and computers and tablets the second working sphere; and large-panel TVs the third social sphere. For marketers, the larger screens in fields 2 and 3 provide much more room for exposition and storytelling, and consumers are more comfortable with unexpected ad intrusions in those social fields since they are not as close as our most intimate space. This core psychology is why ads don’t work well in mobile handsets but still do well in TV and computer browsers.

Take the long view, and mobile and its social halo could be a passing fad with a finite shelf life. Consumers have been mesmerized by such communication glitter before — telegrams, CB radio, long-distance telephone calls (remember them?), Second Life — only to see such manias fade. We already have glimmers that certain aspects of mobile may be declining, as tablet sales growth has stalled within only a few years of the iPad launch. Social networking, the communications bubble of the past five years, was recently dismissed by a Forrester report as a lousy form of marketing now being displaced by plain old banner advertising on Facebook and Twitter. Smartphones have turned into Star Trek communicators that do everything. But at some point, people may look up and see a new world of larger, proliferating screens.

When digital screen technology becomes so cheap that any object can be transformed into a glowing video image, the world of communications and advertising will unfold into a realm of infinite possibility. The challenge for marketers then may not be how to intercept consumers, but rather, how not to interrupt them too much.

What the Uber-BuzzFeed fight tells us about location data

Uber hero shot

Why is your location more necessarily a secret than your financial records, past purchases, or the name of whom you married? We don’t freak out when a direct-mail catalog arrives for winter jackets three weeks after we bought a similar coat in a store, somehow cool with one retail chain selling our buying habits to another, but if a company tries to follow where we are in space and time, we go ballistic. To understand this paradoxical conundrum, let’s visit the current fistfight erupting between ride-sharing service Uber and tech’s leading journalist gossip site BuzzFeed.

How Uber works

If ever a flashy tech upstart seemed ripe for a backlash, it was Uber. Uber’s business model is brilliant: it has upended the taxi and limo business with a clever app that creates a multi-sided market between people who seek a car service and drivers willing to pick them up. If you need a ride, click on the Uber mobile app and you can select luxury cars in your area (Uber works with Google Maps location data); if instead you want to make money, buy or lease a nice car and Uber will beam you customers ready to go.

Uber sets prices for fares and extracts a 20% cut, but the cost of the ride is often well below that of car services. Perhaps because Uber launched near the peak of global recession in 2009, and helped riders save money while anyone could use it to bootstrap a job, it’s scaled rapidly to $18 billion in valuation and into 45 countries. Google has invested $258 million. Uber is testing new courier services and may soon compete with FedEx. Business Insider reports Uber is now taking in $1.5 billion a year in revenue. What’s not to like?

Well, first the name — Uber does sound like a douchey private-school kid’s idea of a travel service for rich people. Second, the top execs often act like bad boys in the press — Uber’s CEO cracked a joke to a GQ reporter that the service was so good at picking up women, he calls it Boob-er. And third, Uber’s head of business development recently got in a verbal fight with Silicon Valley reporter Sarah Lacy that has led to claims he planned to spend $1 million to hire opposition research teams to dig into Lacy’s personal life and spread dirt to discredit her.

A reporter got mad, then Scoble did too

We admit, that last claim was a doozy. That fight went like this: Lacy, a sometimes caustic reporter who rose to tech fame after repeatedly interrupting Mark Zuckerberg in a 2008 stage interview at SXSW, wrote a scathing piece calling Uber a bunch of asses for running ads in France promoting sexy, barely clothed women drivers (apparently unaware that sex is the basis for much of the advertising in France). Uber executive Emil Michael, incensed at what he perceived to be unfair journalism, vented about Lacy’s report at an off-the-record dinner event to BuzzFeed’s editor Ben Smith, and, perhaps fueled by a little wine, suggested that he would spend money to get back at Lacy’s reputation. Smith, who said he was unaware that dinner conversation was supposed to be off the record, immediately ran a story portraying Uber’s Michael as plotting dirty tricks against reporters. USA Today reporter Michael Wolff, the guy who got BuzzFeed into the dinner event, was there and believes Michael was just venting after a glass of vino, wrote an objective piece trying to calm everybody down … but nobody listened.

Silicon Valley and Twitter went ballistic in disgust, starting a drive telling people to delete their phone’s Uber apps; and tech guru Robert Scoble then posted on Facebook that Uber’s CEO should now resign.

Within this bouncing ball of scandal was the little-known news that investors in Lacy’s PandoDaily and Smith’s BuzzFeed are also apparently investors in Uber’s main ride-sharing competitor, Lyft. But never mind. Uber, a service designed by allegedly crass Silicon Valley boys to give the tech elite rides in fancy cars, has entered a PR nightmare realm where it is allegedly trying to crush a caustic reporter.

Expect the David Fincher film adaptation to win the Oscar in 2017.

The more interesting Uber location-tracking story

Behind all this back-and-forth over unfair sexism vs. bad reporting, Uber also has been criticized for a data-tracking feature in which its management can “spy” on the location of any rider. This story, also from BuzzFeed, tells of a reporter taking an Uber car to meet an Uber executive, who looked up from his phone when she arrived and said he could tell when she was coming by watching her on a map. (With Uber-esque hyperbole, the tracking feature is called internally “God View.”) “There you are,” he reportedly said. “I was tracking you.” BuzzFeed suggested this was a critical abuse of consumer privacy.

Now this is interesting. What are we to make of an app company based entirely on geo-location data about cars and riders tracking, well, where those riders in cars go?

We pose this question seriously, because if you think about it for a moment, location data is just another point tied to a consumer profile similar to his or her payment history or product purchases or interests. Imagine if a company executive in charge of finance about to meet a business customer looked up that customer’s track record of paying bills on time, to see if he faced another credit risk. Would that be a breach of privacy?

Or, what if you keep a file of your business partners’ interests to remind yourself how to act more personable in your next meeting (“Hey, Jane, great to see you again — how are those golf lessons you told me about?”)? Are you breaking a rule of privacy?

Have you ever snuck a peek at someone’s LinkedIn profile? Is that a bad thing?

Even Steve Jobs apologized about location

Information about human geography just feels different, and when companies play with it, they often get burned. In 2006, Google launched its Street View feature that shows photographs from the road level in its Maps program, and consumers freaked out; one Google photo caught a poor man leaving a strip club, and the rest of the online world wondered, what if that were me? And in 2011, no lesser an entity than Steve Jobs was forced to apologize publicly for an Apple iPhone feature that kept a 12-month history of a user’s locations. Apple said the tracking feature was used to more rapidly pinpoint location than GPS, thus making all those iPhone apps work more quickly, but consumers fretted the data stream could be assessed to learn dark things about anyone’s whereabouts.

The irony about such concerns is location data may eventually become the most useful thing you can give away to get better service, deals, or predictive offers. Sales of tablets, hot just two years ago, are plummeting while smartphones — the smaller devices you carry on your body always — continue to skyrocket. iPhone’s move to larger screens shows that true, single-device mobile functionality is what people wish to have on them, and for future communications to work, those devices will need to track where you are. If you don’t want your mobile screen filled with unwanted messages, location data could provide you with offers tied to your exact location in the mall during holiday shopping — a useful feature, but only if you give that data away. If you don’t want to be stuck in traffic, you have to give an app permission to ping your phone when the highway ahead shuts down in time for you make a quick exit — again, requiring location data be monitored for you to access that powerful utility.

For some reason, information about where we go or where we went just seems more personal. Perhaps giving away the interests that lie within our mind seems abstract and somehow unthreatening, while telling the world where our body resides brings up atavistic fears that our flesh might be destroyed.

But the future of technology is mobile. If we want to catch that ride, we’ll have to give away our location.

Apple Watch isn’t a gadget. It’s a desperate loyalty program.

iPhone iPad unit sales trendsb

The most unremarked thing about Apple’s launch of its new Watch and larger iPhone 6 models is how these devices were required to save Steve Job’s company from the train wreck it approached in sales. Unit sales growth, as measured year over year, was plateauing for both the iPhone and the iPad — creating an enormously dangerous position for Apple as investors began sizing up Google, Samsung and even Microsoft mobile device alternatives. Investors want annual growth — because if you can’t beat 8% or 10% growth year over year, you might as well put your funds in a Vanguard index — and Apple was not delivering.

Yes, both the iPhone and iPad were smash hits, and total sales were inching upward. iPhone sales skyrocketed from 270,000 in the first quarter of shipment (3rd quarter calendar year 2007) to 35.2 million in the April-June period of 2014. But iPhone global unit sales growth, measured as units bought in one year over the prior year, had plummeted from 268% in 2008 to a measly 13% in 2013. iPad sales growth cooled even more rapidly, from 174% in 2011 over year prior to only 13% in 2013 — basically following the same  stall of the iPhone, but in only three years instead of the iPhone’s five.

Did you catch that? iPad sales growth stalled in almost half the time as that of the iPhone, despite the numerous tablet design upgrades. Growth was getting dangerously close to the 10% threshold where you might push your investment over to … anything. Yikes.

The scary thing for Apple is all of this was driven by a basic form fact: glass tablets are  becoming commodities, making the brand that designs them less meaningful. The iPhone had a good head start in the mobile-glass-pane business; the first iPhone model officially went on sale in June 2007, two full years before similar touchscreen Android-based  HTC (Hero) and Samsung (Moment) went to market. That explains why the iPhone held on for so long, because for the first two years no one was there to challenge it. But today, screens are everywhere. Amazon is practically giving away its Fire phone.

So, will the iWatch and larger iPhone 6 screens save Apple from stalling in a glass panel world? If design alone were its strategy, absolutely not. No matter how much we love Jony Ive, his miracles of design tend to fade quickly (Are you still enraptured by the parallax features of the iPhone 5 operating system? Didn’t think so.). So Apple is shifting strategy to one of multi-device and information-platform entanglement. The vectors of desire connecting you to your future Apple Watch (you won’t buy one now, but you know maybe you want one next year), the mobile systems’ new health and home control centers, and the larger units of the iPhone 6 models will accelerate Apple sales of commodity flat touchscreens in the near future. Apple wants you to regret leaving any one shiny piece of its ecosystem, and by combining the pieces together more tightly, your switching costs (what you give up if you leave) go up. The Apple Watch, really, is a simple loyalty strategy.

But only for the near future. The competitive cycle is accelerating. Smart watches can also be emulated, Samsung is good with glass, and Google has an advance on both map locations (required to make wrist devices most useful) and home intelligence systems (having already bought Nest, the innovative thermostat/alarm/home monitoring company).

The tagline for the first Apple iPhone was “this is just the beginning.” We wonder if Apple was referring to its competition.

Amazon’s product recognition kicks Apple’s glass

amazon fire phone

 

What are we to make of the Amazon Fire Phone? Forget the design. It holds the killer marketing app — impulse-tapping product recognition.

The constant story of invention is when the Big New Idea comes along, at first nobody knows what to do with it. When Lord Kelvin heard of Guglielmo Marconi’s wireless telegraphy, a device to send signals magically through the “ether” via “waves,” he said, “wireless is all very well but I’d rather send a message by a boy on a pony.” Second, once the invention is established as useful, people invest wildly in the inventors. Third, and finally, the invention becomes a platform that morphs into a commodity that induces yawns.

Nobody today is rushing out to invest in radio towers.

Which brings us to modern mobile phones and tablets. Apple made us gaze in wonder at the first iPhone in 2007, when Robert Scoble emerged from the store with two (the limit then!) boxes in his hands. Now, shiny pretty screens are commodities, and soon will be ubiquitous. The new Amazon phone has a 13 megapixel camera and hi-def screen, but who cares? So does every other phone. Frankly, Amazon, your phone design is a yawn.

But. Oh, man. Amazon’s phone has a killer feature — product recognition. Wisely, the retailer giant is betting far beyond a  hardware design to a new, revolutionary system that connects you instantly to any product you capture via the phone’s camera or audio. The Amazon Fire phone uses a “Firefly” app that can recognize in a second more than 70 million products, or listen in on audio to pick out 240,000 movies or 160 television shows. Whatever is around you, if you like it, you can instantly bookmark it or buy it.

Miss, I like your dress. Snap. I just bought it for my wife.

Dude, great shoes! Snap. Now on order to my home.

That YouTube trailer looks like a great flick! Snap. Downloading to watch this weekend.

More than a simple dongle tying you to Amazon’s ginormous product ecosystem, this Fire phone is a new way to tap the Holy Grail of marketing, influencing consumers at the impulsive point of purchase. Amazon could seriously cannibalize other retailers — say, Walmart or Target or Macy’s or Nordstrom — by allowing you to quickly and easily price-shop by snapping a picture of any product on any shelf. Amazon, which has learned to thrive on razor-thin product margins, will undercut other retailers too keen on inflating price with rapid delivery of the same product.

Meanwhile, as Amazon makes purchasing easier than ever, it will collect an entire new ecosystem of data about you. It already knows your shopping habits and can infer from them deep data on your personal psychographics and behavior. But an Amazon phone will collect your location as you search for items, and can pinpoint how consumers are changing gears while at competitor locations. Imagine a heat-map of every consumer ordering shoes from inside every shoe store in the world, and then parsing which stores have the highest conversion rates or shopping-cart abandonments so Amazon marketers could adjust  pricing and product selection accordingly to compete more deeply with Dick’s Sporting Goods. As the data accumulates from consumer real-time, location-based, in-competitor-store transactions, Amazon will gain a data edge that no other retailer could match.

Or a final idea — we’ll give this one to you for free, Amazon marketers — is tying location to variable pricing. If Amazon were really clever/evil, it could adjust pricing from any phone inquiry to nudge you to buy from Amazon instead of the store you’re walking in, by slightly undercutting any store’s individual product price and using higher margins elsewhere to offset it. Say, you find shoes you like at Dick’s for $95, so Amazon could offer them to you as you check on your Fire phone for $90 instantly — and only you — while charging  other consumers who blindly click to the main Amazon.com website $97. If only 1 in 5 shoppers needs the price break, Amazon would still come out ahead.

It feels like a chess move that Garry Kasparov might make. Well, at least Amazon can’t get products to you in just a few hours. Something that crazy might require shipment by drones.

 

 

The 7 levels of loyalty programs (why emotion trumps logic)

strangersontrain

One of the great ironies of marketing is that while organizations worry continually about customer loyalty, economists provide scant help in thinking through the levers of a loyalty program. The presumption of economic theory is that people conduct transactions rationally to maximum perceived value (profit) and minimize perceived pain (loss). So most marketers try to build loyalty by giving what they think is economic value (say, coupons or points programs) or using subscription agreements that maximize the pain of leaving.

But people aren’t purely rational. “Loyalty” goes far, far beyond the silly points programs or contractual switching costs that most marketers deploy. To understand the real levers, first consider that loyalty has two fundamental psychological levers: rationality and perceived fairness.

When faced with a decision, human beings logically seek to gain value and avoid pain; however, we are also emotional creatures worrying about fairness, attachment, and obligation. As behavioral economist Richard Thaler has noted, if pure economic incentives were all that mattered, no one would ever leave a good tip for a waiter or return a lost wallet found on the street. At many levels, we see fairness as a currency overlay, flowing outward to make others feel good if we think they deserve it and flowing in because, well, we demand it.

Fairness influences corporate behavior as well. Grocery chains, for example, often face surges in demand when bad winter storms approach and could easily charge $100 for the last roll of toilet paper or bottled water on the shelves; but they don’t, because such gouging just doesn’t seem fair. Businesspeople also react emotionally to perceptions of unfairness; a vendor proposal that could make you money might still be rejected if you thought the deal wasn’t “fair,” when in reality, the ROI on the potential investment is what really matters.

The root of fairness is a concept called “ethical altruism,” a dynamic in which humans are guided by their impact on others and not just themselves. But altruism isn’t all, either; you don’t have to be Ayn Rand to recognize that not everyone returns the wallet … especially if we saw the person dropping it was the same one who flipped us off in traffic 10 minutes before. Economic rationality and emotional fairness sit on either side of a loyalty scale.

So let us propose a simple hierarchy of loyalty program concepts that balance both logic and emotion, starting from least to most effective:

Level 7: Discounting. This includes coupons, savings, price framing, and price obscurity. This is the lowest form of loyalty inducement because (a) discounts are easily replicated and (b) by nature they erode the other perceived values of your service. In 2011 we predicted in Digiday that Groupon, a hyped social business that focuses on coupon marketing, would falter because aggressive discounting is not a sustainable model … and today its stock price, once $26, is languishing at $8 a share.

Level 6: Accrual of value-oriented benefits: This includes common points programs, such as airlines or hotel points, that are built up over time in exchange for repeat transactions. This is the second-lowest form of loyalty program because in reality, it’s just another method of price competition. Give away 10,000 hotel points and your customer at first may feel loyal; but your competitor can match those points, and it all becomes a pricing game. If your lover only stays because you buy her expensive jewelry every week, at some point, you might wonder what happens when another guy goes to a jewelry store too.

Level 5: Accrual of psychologically oriented benefits: This approach is similar to value accrual, but plays to the human ego with points or status measures that are purely mental. Today this is most common in social media. Twitter follower counts, Likes on Facebook, Klout influence scores, Boy Scout and military merit badges, certificates of diploma are all psychologically staged levels of perceived accomplishment that have no real value other than the fiction of stature they put in your head. This is why the Facebook layout has a little red button at top telling you how many friends recently commented about you — ping, your brain just got a mental high score, and in two hours, you’ll come back to check again.

Level 4: Entanglement for negative switching costs: Here, someone leaving has to incur a cost. If you break a cell phone contract, you pay money. If you fire your ad agency, you pay a kill fee. If you leave your spouse, you end up sleeping in a cheap motel. Making the switch costs you some pain. These switching costs are usually quietly established in the early stage of a customer relationship, and are triggered only when the customer decides to leave.

Level 3: Entanglement for positive switching costs: This, the positive twist on negative switching costs,  was the focus on Don Peppers’ 1990s “1to1 marketing” methodology, in which leaving means you give up something good that you can not find easily somewhere else. Peppers suggested that “personalization” of services to anticipate customers’ needs could create a new barrier to exit, since a consumer who spent time training a company to meet his or her expectations would not find the same value elsewhere. Examples include Netflix movie personalization that makes it easier to find a good film; teaching Pandora music channels that anticipate your preferences; and a personal accountant who recalls exactly how to expedite your taxes based on your prior years’ history.

Level 2: Complacency. Yet a higher form of loyalty inducement is to encourage customers to stop thinking about you altogether, since change requires a mental action. This doesn’t mean ambivalence, but rather, assurance so sound you don’t even come to mind. Complacency is the sleepy self-satisfaction that customers feel when they (rarely) think about your service, because they know they’ve made the right choice. Utilities, insurance providers and cable companies often focus on “unfocusing” their customers, since if a customer goes to sleep he or she will never switch to a competitor. While powerful, this is challenging to manage because it requires  (a) removing any disruption points in customer interactions with your organization, (b) having a surrounding competitive environment where no triggers for disloyalty emerge, and (c) deliberately walking away from a strong brand position in the customer’s mind. The risk is the ecosystem can change, and new competitors may enter to wake up your sleeping loyalists.

Level 1: Advocacy. Emotion almost always trumps logic in human decisions, and emotional feelings of unfairness about a product (“that bill was too high”) or lust toward a competitor’s product (“that new holographic iPhone looks so sexy”) can unravel any of the loyalty programs above. The solution is to remove the psychological space for unfairness or lust by filling the customer with a desire to be part of your brand. For example, a regional hospital in Connecticut has engaged hundreds of local cyclists to raise funds in an annual 100-mile “century ride” to support its cancer research; there is little chance any of those athletes or their friends will go to a competing hospital if they need cancer treatment, because they have become engaged as part of the brand mission. Building such advocacy requires brands to move beyond their core product or service to what consultant Scott Henderson calls “adjacency marketing,” or marketing to a popular, emotionally compelling issue adjacent to your brand proposition. This issue pulls customers forward, and your service by association becomes uncontested.

All of these levels of loyalty programs face challenges. Service disruptions, market entrants, new product designs, changes in consumer life stages, social persuasion, and the human desire to partake in novelty are all triggers that can make a loyalty program fall apart. But if you can combine emotional attachment and feelings of obligation with the perceived switching costs in your loyalty program, all adding more economic value than cost, then we might consider sticking around.

Nice native ad, Samsung. Samsung? Are you there?

ellen-oscar-selfie

Before we discuss the wrinkles of native advertising and why Samsung slipped up in this now-famous Oscar shot, let’s drink a cup of Postum.

In 1895 a man named C.W. Post roasted some grain, ran hot water through it, and dubbed the resulting 10-calorie drink “Postum.” Post began an aggressive print campaign to convince the American public that coffee was sickening, causing everything from nervous jitters to poor athleticism, while Postum, by comparison, was “free from the evil effect of caffeine — the habit-forming drug.” Physicians or scientists didn’t write that editorial-sounding copy; the Postum Cereal Company did; but oh, how the public was convinced. By World War II, when coffee became rationed, sales were through the roof.

The Postum ads were a prescient taste of today’s hottest marketing trend — to disguise the source of a piece of advertising in a manner that tricks consumers into believing it has editorial value. U.S. marketers spent $1.5 billion on native advertising in 2012 and $1.9 billion in 2013 — a tiny fraction of the $74 billion spent annually on television spots, but rapidly eclipsing mobile. Going native with messaging can be done well, as Quartz shows with its high standards for sponsored content, or poorly, as The Atlantic found out when its readers rebelled against a barely-disguised Scientology advertorial. Dunkin Donuts pays to have its sign appear over the shoulder of a politician in Netflix’s “House of Cards.” The New York Times launched a sponsored content section with technology pieces paid for by Dell. Everyone is jumping in.

Why is native advertising suddenly popular? Advertorial has been reborn as a solution to falling CPMs in digital publishing, where programmatic media buying and vastly increasing ad inventory has killed publishers’ ability to make a profit from marketers. So-called “native advertising” can be sold by a website at a premium, because there are no standards for pricing editorial integration. Television, looking over its shoulder at digital, is ramping up native, too, especially in live events such as the Academy Awards that attract enthralled audiences willing to retweet the breaking fun. Marketers are willing to pay more for embedded ads, because they’re taking a bet “native” will grab more attention, and more hopefully, will be shared among the masses. And consumers seem to be taking it all in.

So what are the risks? We count three.

1. The mask can work too well. If you build a good-enough mask for your ad message, consumers won’t recognize your face. Samsung found this out when it spent a reported $20 million to integrate its mobile devices into the recent Oscar presentations. Ellen DeGeneres took a selfie with the Samsung phone, creating what may be the most retweeted image ever on Twitter — and yet Samsung is nowhere in the photo. It’s a wonderful shot of A-list celebrities. But if you ask 1,000 people what brand made that snap happen, we bet the majority would guess Apple.

2. The investment doesn’t work enough. The ROI calculation on native advertising is wildly volatile and often negative. For every Samsung selfie hit (provided people did know the product that made the content happen), there are thousands of sponsored posts that get minimal page views and are never propagated. The effective CPMs on such buys are difficult to calculate in advance, because the “viralness” of each attempt is a crapshoot. If you need evidence native advertising may be an inefficient marketing play, ask — why are publishers so intent on pushing this new format? Because they make more money from you when you buy it, that’s why.

3. The platform becomes too polluted. Finally, like town sheep overgrazing a commons until all the grass is dead, native advertising can despoil an ecosystem. In the 2000s, spam did this to email marketing. In the 1990s, telemarketing died due to consumer rebellion against too many 6 p.m. sales calls. When marketers intrude too far into any communications platform, the platform often wilts.

The great online encyclopedia Wikipedia is now worried about this third threat. This month Wikipedia ran banners asking its users to provide feedback on a proposed new rule that would require paid authors to disclose that their Wikipedia edits are, well, paid for. While this seems obvious, Wikipedia is addressing an epidemic in which authors are manipulating content to make their client organizations look better than hard facts might dictate. Manipulated content is by nature less accurate; this diminishes the utility of Wikipedia; and if false or fuzzied content spreads, could damage the site enough that users start to bail.

The crux of the ethical problem is that native advertising seeks to misrepresent the source of the ad message. Yes, most native ads are “disclosed,” but the very act of making content look like real entertainment or editorial is a disguise. If you show up at a party wearing a mask with the words “this is a mask” typed on top … it’s still a mask. The Scientology article that upset The Atlantic’s readers was clearly marked as sponsored content, but readers became confused — the advertorial mask worked too well — and rebelled thinking The Atlantic was endorsing the religion.

This confusion of source breaks a core human logic, because people make decisions based not only on data we receive but also on the reputation of who we believe sent it. There is simply too much information in the world for us to digest all inputs each day; but if our spouse yells “the house is on fire,” we will run for the extinguisher or the door. Sources matter in human communications because they are the core filters by which we judge value.

Native advertising misrepresents the source.

So is native all bad? Well, no. As marketers, we can only point out the risks vs. benefits of native. Yes, you might cause confusion, or mask your message so well your Samsung phone disappears in the “ad,” or even pollute an entire communications platform. (Facebook and Twitter, y’all be careful, you hear?) But you could also reach millions of people in a new way and jack up your sales. Native could work superbly, so why not test it? The upside evaluation should include the efficiency of the buy on a per-thousand basis, the potential passalong, and the likely greater recall of a persuasive concept that is digested as quasi-real.

So is native all good? Well, no. As consumers, we miss the days when marketers admitted they were just trying to sell us something.

Does native work? Let us know if you buy a Samsung phone.

Drunken tweets and Barbie covers: It’s all a meme game

meme seeding

A casual observer might think Western culture is going nuts. JC Penney tweets typos drunkenly during the Super Bowl. Actor Shia LaBeauf walks out of a film festival with a paper bag on his head. Miley Cyrus gives America erotic dancing on a major awards show and starts sticking her tongue out in every photo. And Sports Illustrated puts a Barbie doll on its annual swimsuit cover.

Yet this is all sanity. These are all careful attempts to game the limited attention span of consumers by seeding provocative memes. You’re being played, people.

A meme is a concept by evolutionary biologist Richard Dawkins that information passes through society similar to genes or viruses — evolving, striving to thrive and spread, but often failing. When memes succeed, millions of people change their behavior: Handshakes become fist bumps, baseball caps get worn backward instead of forwards, men begin pairing blue jeans with blazers, women begin wearing knee-high boots in winter. At a certain point, like an epidemic of the flu, the information “tips” into mass adoption. Marketers love this concept, of course, because it requires zero advertising budget — and the Holy Grail of any campaign is to get the world to buy your product out of simple collective desire.

The challenge for meme adoption, like the spread of anything, is physics. Friction slows momentum. There is a basic formula for how information goes viral, and for when it slows down, which is:

Viral spread = (Message generation rate – Absorption rate) * Cycle time

or more succinctly

V = (M-A) * C

As I wrote back in 2010, computer security companies such as Symantec use this formula to predict when a computer virus will spread or fade. In simple terms, if the message generation rate from node to node, or person to person, exceeds the absorption rate, the message will spread. But if the “absorption rate,” or percent of people in the passalong chain who get bored and stop sharing the message, exceeds those who do pass the message, the viral idea will stall. And cycle time, of course, is simply the speed of passage. Tweets that get buzz during the Super Bowl have a fast cycle time because millions of people are scanning Twitter for a fun idea at the same time; religion, one of the most successful memes in history, has a slower cycle time but is comparatively more stable.

Nice cuffed jeans, champ

Oh how marketers want to become the next meme. Do you wear a tie to business meetings? That’s a meme that’s stuck in your head, men. Women, do you wear eyeliner? Meme. Hipsters, have you started cuffing the bottoms of your jeans? Welcome to an emerging meme. Have you noticed that eyeglass frames are getting much bigger in the past two years, approaching 1950s plastic dimensions? Uh-huh. The pressure of collective adoption is changing your behavior without you even realizing it.

You, dear consumer, are a meme sucker.

The trouble that marketers face in trying to push their next product through this meme cycle is the absorption rate in society today is huge, and rises quickly as attention moves on to the next news item. There are simply too many messages competing for our attention for us to adopt and pass along every one. So the best way to get buzz is to create a message so shocking that it will jack up the message generation rate rapidly. And ideally, you’d do this during an event where mass attention is heightened — which will boost cycle time as well.

This is why JC Penney tweeted drunkenly during the Super Bowl (in what turned out to be a promotion for mittens). This is why Miley Cyrus shook her booty in a skin-toned suit to recast her persona during the MTV Video Music Awards. Shock + major period of mass attention = high potential for meme success.

These were not crazy mistakes of judgment, but calculated attempts to boost the meme propagation rate of a brand, to get everyone in society talking about an issue, with the frosting of controversy spread over the deep cake of commerce.

It works sometimes, but with so much meme competition, marketers will have to continue to raise the shock value.

Here’s to seeing Barbie next year covered only in body paint.