The Internet - a 2006 view
INTRODUCTION:
FROM CART TRACK TO SUPERHIGHWAY
BACK IN THE 1980s, the notion of an Information Superhighway was promoted in the mainstream media. Over the next few years, this mind-boggling notion went from science fiction scenario to clunky but functioning reality.
A few farsighted businesses installed fast, always-on connections and some created Web sites, although most of them were little more than online brochures. A few saw the benefits of e-mail but most dismissed the Internet as irrelevant to their business. Even Microsoft seemed to regard the Internet as a sideshow: it allowed Netscape to become the dominant Internet browser of the early Internet and well into the mid-1990s before realizing it was missing a trick.
Consumers were quicker than businesses to see the potential of the Internet in their lives, especially in regard to e-mail-although with slow dial-up lines, the World Wide Web was often referred to as the World Wide Wait.
In 1990 there were around 2.6 million Internet users, of which 2 million were in the United States. By the end of 1997, the Computer Industry Almanac reckoned there were close to 100 million Internet users worldwide. By the end of 1999, there were 280 million worldwide, and that number almost doubled to 530 million during 2001, with 16 percent of those accessing the Internet wirelessly. In 2005 global Internet users tipped over the magic billion mark to reach 1.08 billion users.
Now, industry interest is shifting from the raw numbers of Internet users to those with broadband and those with wireless access. The Computer Industry Almanac put the worldwide number of broadband subscribers at more than 215 million in 2005 (as compared with under 5 million in 1999 and 67 million by 2002). The U.S. had the most, with nearly 47 million by the end of 2005, with China in second place and set to challenge for the lead in a few years. Worldwide, broadband subscribers are expected to number 500 million by the end of 2010.
More and more Internet users will use wireless devices such as cell phones and PDAs to go online. In developed countries, these devices will supplement Internet access from desktop computers: in less developed countries, wireless devices will be the sole means of access for many.
---
AN INSPIRING AND SALUTARY TALE
IN 1997, WHEN IT WAS ALREADY CLEAR that the Internet was here to stay, Wired magazine ran a cover story about Apple Corporation, with the injunction, "Pray," and the headline, "101 Ways to Save Apple: An Assessment of What Can Be Done to Fix a Once-Great Company." One way or another, Apple had gone from trailblazer and standard-setter in the computer world to a marginal player used largely by just a core of die-hard fans.
Click forward to 2006, about eight years after the call to rally around the iconic company, and Apple is alive and very well. Its amazing recovery owes a lot to its out-of-the-blue dominance of portable digital music players, a category that didn't even exist in 1997. (That year marked the creation of the first non-mechanical digital audio player, which wasn't available on the American market: the Rio, the first mass-market player, launched in 1998.)
Apple also dominates another category that didn't exist in 1997: downloadable music. Internet users worldwide are now spending more than $1 billion a year on song downloads. Apple has sold more than 1 billion songs in the three-plus years since iTunes launched, and in the U.S. the site ranks as one of the leading music stores alongside major bricks-and-mortar retailers.
iPod and iTunes have not only added to Apple's bottom line, they have given a significant boost to the brand. In short, Apple's fortunes have been turned around by music, yet music wasn't among the 101 ways to save Apple in 1997. Wired is pretty switched on and future-oriented, but nobody there suggested music as a route to salvation.
Before iPod and iTunes, the music industry had been fighting a rearguard action against illegal file-sharing-millions of people copying each other's music for free through peer-to-peer systems such as Napster and Kazaa. Just as the music industry got serious about tracking down file sharers, iTunes became the first site to offer a wide range of legal music downloads.
---
SO WHAT?
THE IPOD-MP3 CASE HISTORY holds some vital pointers for the future: both opportunities and warnings.
At the heart of the story are two new technologies: the MP3 file (or similar music-compression systems) and broadband Internet—without them, none of it would have happened. The iPod itself just needs a "mother" computer to function, but it works much better with broadband Internet—downloading song information for "ripped" CDs, downloading software updates for the iPod itself and downloading purchased songs, which takes just a few seconds per track.
Broadband and the MP3 format enabled Apple to go from nowhere in the music industry to a highly influential industry player in a few short years. The underlying technologies have existed for some time—high-speed Internet, file-compression codecs and ever-higher-capacity, smaller data-storage systems. Yet any industry analyst forecasting this scenario back in the late 1990s would have been dismissed as a dotcom-crazy fantasist.
For decades big record companies were responsible for promoting artists and their music, and distributing their LPs and later their CDs. It was only through them that artists could reach large audiences. But once the Internet was established and illegal file-sharing was flourishing, music companies could see their grip on music distribution slipping.
Apple has shifted the process along by making CDs and their packaging less relevant. It makes no sense to have a bulky stack of CDs when you can carry hundreds of hours of music in one handy MP3 player. And it makes no sense to go out and buy a whole CD of music if you can instantly download just the one or two songs you want. As for the cover art and lyrics of CD inserts, both are readily available online.
All this has serious implications for all the traditional players standing between the artists who create products and their audiences. And beyond the music business, it has serious implications for any business. The iPod/iTunes case history shows there are likely existing technologies waiting to be configured and combined by smart entrepreneurs in such a way as to side-swipe current business models. And it's absolutely certain that soon-to-be-invented new technologies will leverage the Internet in ways that defy prediction.
When it comes to predicting what lies ahead, Apple and its founder and CEO, Steve Jobs, are arguably much better placed than most to foresee the future. And Wired makes a business of thinking ahead of the curve. Yet in 1997 none of them had an inkling of what was to happen just a few years into the future.
We now know for certain that the Internet and interactive technology turbo-charge the pace of change. And as the Apple case history demonstrates, some businesses and industries have so much vested in the old order that they focus all their attention on defending the status quo. Which leaves the field wide open for bold new players who aren't mired down in old business models.
---
DISTRIBUTION REVOLUTION
THIS IS ARGUABLY THE MOST FUNDAMENTAL and important of the 10 items covered in this paper. Business is ultimately about transactions of value, and distribution is all about enabling the value items (goods/services and payment) to change hands as efficiently and widely as possible. All new product ideas and business models are based on this.
THE PREVIOUS DISTRIBUTION REVOLUTION
TO UNDERSTAND THE EFFECTS of a distribution revolution, just look back 50 years. According to The Economist, in 1956 it cost $5.83 a ton to load loose cargo onto a ship in the United States. Today it costs 16 cents—that's 36 times less expensive.
According to one piece of research by the Matson Navigation Company, in 1959 the traditional port industry was loading and unloading 0.627 tons per man hour. By 1976, with container shipping well established, the figure was 4,234 tons per man hour—6,752 times more than in 1959. A ship's time in port shrank from three weeks to 18 hours.
Containerization not only made shipping much cheaper and faster, it also completely changed the whole structure and mind-set of distribution. Established ports and their workforces declined and new ports with good road/rail links and space for thousands of containers flourished. "Multi-modal" centers grew up, where containers could be switched between road and rail. The shipping industry built completely different ships to accommodate containers.
Containerization has been the key logistical factor enabling globalization to proceed so fast. Without containers, China may not have become the world's workshop, manufacturing goods for pennies and then shipping them halfway around the world for pennies, too. Containers have enabled businesses to get established and connected in lower-cost parts of the developed world and in the low-cost developing world.
The container revolution started by giving businesses a way to distribute existing products faster and cheaper, and over time it allowed business to make and distribute new products and develop new business models. The Internet is having a similar effect—giving people an alternative way of distributing some existing products (non-physical products) and enabling businesses to create and distribute new products and develop new business models.
THE DIGITAL DISTRIBUTION REVOLUTION
THE CONTAINER REVOLUTION is an interesting precedent for the Internet. For example, it brought trade to previously out-of-the-way places where space was plentiful and costs were low. Similarly, the Internet has made it possible for work to be distributed to teleworkers and outsourced labor thousands of miles away.
It's an interesting precedent, but it's not the whole story.
The container revolution, and previous business and distribution revolutions, involved physical products and took place in a world where almost all traded value was in physical goods—food, raw materials, textiles, machinery and other finished products. By contrast, the Internet revolution is occurring at a time when a growing proportion of transactions are in non-physical products or "intangibles."
Since 1971 there has been a vast electronic trade in assets such as stocks, bonds and foreign exchange, and now there's the growing gamut of intellectual property assets in digital form: software, written documents, designs, voice, music, pictures and, increasingly, moving pictures.
Online stores offering products that are shipped directly from warehouse to consumer are just the first step. The more the products themselves are digitized, the more easily they can be distributed through the Internet. Music is increasingly going that way, movies are next, and as digital book/magazine technologies such as the Sony Reader spread, printed content will go the same way.
As more entrepreneurs develop products with value that can be delivered without physical media, the Internet will grab an even larger share of distribution dollars. As the Internet becomes faster and higher capacity, it is going to disrupt and revolutionize not only the distribution process but also the types of products that are distributed.
---
THINK: VALUE ON THE MOVE
THE ESSENCE OF DISTRIBUTION is enabling value transactions to happen as cheaply and efficiently as possible. When it comes to software, music and video content, it's hard to imagine distribution becoming much more efficient than it is right now—point, click, pay, download from anywhere in the world, and enjoy—all in the space of a few minutes. But beyond merely moving value from seller to buyer, the Internet provides scope for adding value to the distribution process itself.
Courier services such as UPS and FedEx let customers track the progress of physical goods from dispatch to delivery. Retailers such as Argos in the U.K. let customers buy online from a central point and then track down the location from where the product can be dispatched.
When it comes to travel, we don't yet have the Star Trek technology that can "teleport" a person from one place to another, so what scope is there for the Internet to add value? Well, airlines have been able to eliminate delivery of the old "certificate of value" (the ticket): all the passenger needs now is a printout of the booking reference, which is automatically e-mailed. Photographic services have been able to add value using the Internet: Customers can choose whether to get prints and how to get them. They can take a digital camera or storage media (CD-ROM, SD card, etc.) to a store and get their images printed there. Or they can upload digital images to a Web site and receive prints back by mail (a.k.a. snail-mail).
---
SPEED AND CAPACITY CHANGE THE GAME
POPULAR WISDOM SAYS a chain is only as strong as its weakest link. In the early days of the Internet, users' dial-up access was probably the weakest link of the system and certainly the single biggest constraining factor: even with a "blistering fast" 56 kbps, anything more than text files moved very slowly. What's more, dial-up connections tied up the phone line, so people were often reluctant to keep the connection open for too long.
Things changed substantially when high-speed, high-capacity Internet access became widely available. Large volumes of data could be downloaded faster, opening the way to big multimedia files—sound and images. What's more, users are connected to the Web as long as their computers are on, and broadband connections don't interfere with use of the telephone line. What's more, multiple people can use the same connection.
This has an impact on media consumption. Households with broadband connections watch less TV than those without. They spend more time online, and they do more online.
Nevertheless, there are constraints. DSL upload speeds are far slower than download speeds. Overall speeds are often lower than advertised because of "contention"—other subscribers sharing the same node. Many service providers place a limit on the volume of a subscriber's monthly traffic, and some charge extra for high volume.
As the Internet infrastructure improves and speed/volume constraints are reduced, many more things are becoming possible.
---
GLOBALIZED COMMERCE
IT'S OFTEN SAID THAT THE DEVELOPMENT of the Internet owes a lot to pornography sites and their eager customers. It's certainly true that a major attraction of the Internet is its ability to connect sellers and buyers, and allow buyers to find what they want quickly and conveniently at the best possible price. That's clearly the case with online retailers, and especially with auction sites such as eBay.
The Internet's early adopters and evangelists tended to emphasize its academic and nonprofit origins. After all, the Internet as most people know it came out of ARPANET (the Advanced Research Projects Agency of the U.S. Department of Defense) and further developed as a system of links between American universities. But commerce has always been on the radar.
Through the 1970s and into the 1980s, something comparable to the Internet was being developed privately by Reuters. The Videomaster displayed stock and commodity prices. Reuters introduced it in 1970, and three years later launched the Monitor Money Rates service, enabling traders to see up-to-date currency rates onscreen, instead of depending on telephone and Telex. In 1981 the Monitor Dealing Service was launched, allowing trade in foreign currencies to be conducted over video terminals. This cut the time of an average transaction from 40 seconds to 2 seconds.
The underlying goal pursued by Reuters and its competitors and clients was to give buyers and sellers in any location the means to conduct transactions extremely fast and securely. The speed and reach of these electronic trading services allowed financial houses to profit from arbitrage, which is essentially trading on differences in price for the same thing in different places.
---
ARBITRAGE FOR ALL
GLOBALIZED ARBITRAGE WAS A WINNING PROPOSITION for financial institutions, and it has become a winning proposition for the world at large. The Internet allows ordinary businesses and individuals to find suppliers and buyers of same products or services in different locations, anywhere in the world.
With sites in different countries, brands such as Amazon and eBay enable consumers to buy products where supplies and exchange rates make them affordable and/or sell them where they command the best price.
In the business-to-business realm, suppliers can operate from low-cost locations to supply high-cost end-users. This is the principle that has allowed the tech wizards of India and Eastern Europe to service customers in locations with developed-world budgets. In the advertising business, smart agencies can (and do) reduce costs by sending out labor-intensive tasks such as graphic design and production to low-cost parts of the agency and its suppliers.
Indeed, for any products with high information content, such as software, music, movies, books, product designs, engineering blueprints and medical analysis, the Internet is a crucial "leveler" in creating the "flat world" described by Thomas Friedman in The World Is Flat: A Brief History of the Twenty-First Century.
---
USER-GENERATED CONTENT
ASSUME FOR A MOMENT that the Internet is primarily a medium for distributing value. What is the value it distributes? For the moment, what's known as "content" is the prime form of value that's distributed through the Internet. What exactly constitutes content may well seem obvious at first, but it's worth making some distinctions.
Arguably, anything that's conveyed by a medium—the Internet, in this case—qualifies as content. But when people talk about content in this context, they usually mean "created content"—material that people have put together. So that excludes machine-generated and pro-forma information such as pages that handle e-commerce, Internet banking and shipment-tracking.
In the early days of the Internet, before broadband connections were widely available, most of the created content on the Internet was generated by relatively few professionals working for commercial or official organizations—newspapers, magazines, radio and TV stations, corporations and advertising agencies. They and their organizations regarded the Internet as just another medium for pumping out their words, sounds or images to the market. In fact, it seems that many still think that way, in which case they are missing an important point: that low-cost, powerful digital technology has broken the corporate stranglehold on content creation.
It no longer costs a stack of money to create and distribute interesting, compelling, high-quality content through the Internet. The output of newspapers, magazines, radio and TV stations, corporations and advertising agencies is now sharing space with content created by millions of ordinary people. Brand owners and corporations who think of the Internet as a broadcast medium that's "like TV but a bit hipper" are looking increasingly so last century. The Internet is accessed through screens, for sure, but unlike TV it's highly interactive—it demands and rewards a high degree of user activity. And it encourages mental activity, whereas watching TV and listening to the radio encourages passivity.
Brand owners and corporations need to understand that the Internet is rapidly becoming a participatory medium in which the line between users and content creators is blurring. In the words of the media guru Marshall McLuhan, "The medium is the message," and the message of the Internet is user-controlled interactivity.
It doesn't take much money or equipment to write, although just a couple of years ago it wasn't so easy for ordinary people to create their own website. Not many people had the time, money or inclination. But now there are plenty of ready-to-run, professional-looking options. Someone who wants to sound off to the world at large just has to sign up to a blogging site and go at it.
Sound and vision cost a little more than words, but not much, and there are plenty of cheap and easy technologies to handle them. With a microphone and a sound card, users can speak to each other with voice-over IP (VoIP) services such as Skype, and they can record their thoughts in sound files and upload them as podcasts.
Many new cell phones incorporate a camera as well as a video camera, so even absolute beginners can upload photos or short videos for others to see. In fact, there have already been incidents (such as the bombing in the London Underground) where cell phone cameras provided the earliest images of the scene. And the cost of relatively high-quality digital cameras and camcorders is constantly dropping.
REAL PEOPLE MAKING THE MEDIA
"WAYNE'S WORLD" AND ITS SEQUEL were a foretaste of user-generated content to come. They featured a pair of ordinary guys with their own public-access TV show. Back in the early 1990s, when the first movie was released, user-generated content was a novel idea, limited to public-access channels. Now it's mainstream.
User-generated content might be regarded as the equivalent of reality TV: It's the antics of ordinary people. With user-generated content, users themselves entertain and engage each other. Like reality TV, this can be very compelling, even addictive. That means there is less consumer time and attention available for brand-generated content. It takes a high degree of brand loyalty—or stellar creative work—to make users turn their attention from a "flame war" in an Internet forum or an instant chat session to catch the latest "brand X" ad or click on a banner ad.
For traditional media owners, the good news about user-generated content is that it doesn't necessarily push their content aside—in fact, user-generated content often feeds off professionally generated content. Cult media products such as TV shows, movies and music, are ideal rallying points for user-generated content. They offer community-building common points of interest for users to discuss, knowing that others who come there to post and read are interested in the same things.
MOVING INTERNET CONTENT TO THE NEXT LEVEL
TO UNDERSTAND WHERE the Internet has come from and where it's going, it's helpful to think of the process of building a bridge across a chasm. The first stage is sending a relatively light rope across and securing it to either side. The bridge-builders then use the rope to maneuver more heavy-duty supports into place, and those in turn allow a load-bearing structure to be erected. And, finally, the bridge has the capacity to hold serious traffic.
The Internet is now developing beyond the first "rope across the chasm" stage. For the first decade of its life, the Internet was mainly dominated by the written word. The few pictures and cute graphics thrown in to liven things up mostly had the effect of slowing things down, because bandwidth was limited and many users had dial-up access. The capacity limitations of the Internet dictated its contents.
With broadband connections spreading in leaps and bounds and soon to become the norm in many developed markets, new forms of content well beyond the written word are flourishing—bandwidth-hungry content that takes hundreds and thousands of megabytes. Corporate content providers are pumping out audio, music, photos, videos and even entire movies, which Internet users are downloading with gusto.
But unlike traditional media, the Internet is interactive, and its users don't want to sit back passively as all those bits and bytes come pouring in. They don't want to just download and consume, they want to create and upload too.
Now broadband is rolling out in the developed markets, and service providers are finding that consumers want more—a lot more. Those who were thrilled to get DSL are realizing that their connection downloads much faster than it uploads: now they're keen to get services that upload as fast as they download so they can share their own audio, music, photo and video with the wide world.
---
PODCASTING BASICS
UNTIL VERY RECENTLY broadcasting sound to the public required a significant investment in radio equipment and more difficult to obtain a broadcasting license. This limited the number of organizations that could distribute sound content, and the nature of radio waves themselves limited the range of the broadcast.
Broadband Internet has effectively abolished the limitations of cost, equipment, authorization and reach. Internet radio stations streaming in real time (i.e., live) may be the online version of licensed airwave broadcasters, but they can equally well be small-scale operations run from someone's bedroom in the middle of nowhere. But there's a problem.
In today's world of "on-demand" everything, listeners don't want to tune in or log on at a specific time to hear a show. They want to be able to listen to the show however, wherever and whenever takes their fancy, which isn't possible with a live show. And even if a show is stored on a website for "listen again" streaming, the listener still has to be connected to the Internet to hear it.
But now, no more.
PODCASTING TO THE RESCUE
IF YOU RETHINK RADIO as audio content distributed with no limitations on schedule, reach or license to broadcast, you have the basics of podcasting. Podcasts are downloadable audio files; a listener's computer can download them automatically whenever new content is available, and files are then available offline. Podcasting means being able to listen to Internet-broadcast audio wherever and whenever you want.
Podcasting allows established broadcasters such as Britain's BBC or NPR in the United States to package their broadcast shows and deliver them worldwide through the Internet to anyone who subscribes: in effect, it's radio on demand. But it's more than that. Podcasting lets print media deliver some of their content in audio form, a practice now followed by august papers such as the New York Times and the Financial Times, specialist magazines such as Nature and Scientific American, and glossies such as Wired.
And it's more than that. Podcasting enables private individuals to create audio blogs. As with so much on the Internet, podcasting was taken up and developed by individuals well before established broadcasters and corporations recognized its potential. Much of the credit for that goes to former MTV VJ Adam Curry, who connected the dots of the available technology in late 2003, encouraged the creation of more and is, in effect, the godfather of podcasting.
It's a tribute to Apple's marketing clout and digital-media stature that the term "podcasting" has stuck. Its market-leading iPod digital media player is not needed either to create or to play podcasts—any digital recording device and any digital media player will do. One of Apple's competitors is pushing the notion that "pod" actually stands for "personal on demand," but it's unlikely too many people will bother with that definition. Consumers link podcasting with the iPod, and Apple probably won't be suing anyone about it anytime soon.
SO WHAT'S NEW?
FOR USERS, PODCASTS ARE A WINNING COMBINATION of freedom, convenience and choice—and many are free as well. After the initial one-click sign-up to a particular podcaster, new podcasts download automatically and can then be automatically transferred to the user's mobile player for listening at home, the office, while exercising or through the car's sound system.
But isn't it all just for the geeks and gadget freaks? A recent Pew Internet & American Life Project survey estimated that more than 22 million Americans 18 and older have iPods or MP3 players, including 24 percent of those earning $75,000 a year or more. Feedburner, a website that provides support for bloggers, podcasters and commercial publishers, says it currently manages 38,000 audio and video podcasts.
Inevitably, podcasting hasn't limited itself to audio content—there are growing numbers of video podcasts, also known as vodcasts (for video on demand). The same logic driving audio podcasting is driving vodcasting, except that it ideally requires higher broadband speeds and video-capable portable players.
It's very tempting territory for brands and marketers.
General Motors may be struggling to maintain its global No. 1 position, but it's not behind the times on podcasting. Its Fastlane blog has extended into audio and video podcast feeds. "We were looking for a direct line to consumers and people on the Internet," says Michael Wiley, director of new media at GM. "In the past we communicated either via ads or press releases, and there was no feedback loop. This allows us to hear back from our enthusiasts, potential customers and detractors. It's grassroots communication vs. a mass communication."
GM is not alone—BMW and Mercedes-Benz have their own podcasts, while Volvo sponsors an auto blog.
---
THE FUTURE OF NEWSPAPERS
In the year 2014 people have access to a breadth and depth of information unimaginable in an earlier age. Everyone contributes in some way, participating to create a living, breathing mediascape. However, the press as you know it has ceased to exist. The Fourth Estate's fortunes have waned. 20th century news organizations are an afterthought, a lonely remnant of a not-too-distant past.
These words are the opening of a short animation called "EPIC 2014," created in 2004 by Robin Sloan, a producer at Poynter's News University, and Matt Thompson, a reporter at Poynter Online. The themes of the movie were developed through dialogue, put into a PowerPoint presentation and animated in Flash. Then Sloan and Thompson posted links to the short on three sites, and from there it spread virally through the Internet. By July 2005 "EPIC 2014" had been seen by over a million people online. It's been screened at conferences of journalists, marketers and librarians. And it seems Rupert Murdoch has watched it.
"EPIC 2014" charts the Internet from the creation of the World Wide Web in 1989. It plots key events such as the founding of Amazon in 1994, the creation of Google in 1998, TiVo and Blogger in 1999, Friendster in 2002 and so forth, turning increasingly futuristic. It describes a world in which Google and Amazon join forces to create "Googlezon" and unleash a titanic battle with Microsoft, which Googlezon wins.
In 2011, the slumbering Fourth Estate awakes to make its first and final stand. The New York Times Company sues Googlezon, claiming that the company's fact-stripping robots are a violation of copyright law. The case goes all the way to the Supreme Court, which on August 4, 2011, decides in favor of Googlezon.
On Sunday, March 9, 2014, Googlezon unleashes "EPIC." Welcome to our world.
The "Evolving Personalized Information Construct" is the system by which our sprawling, chaotic mediascape is filtered, ordered and delivered. Everyone contributes now—from blog entries to phone-cam images to video reports to full investigations. Many people get paid, too—with a tiny cut of Googlezon's immense advertising revenue, proportional to the popularity of their contributions.
"EPIC" produces a custom contents package for each user, using his choices, his consumption habits, his interests, his demographics, and his social network to shape the product.
"EPIC" goes on to describe how the New York Times becomes a print-only newsletter read by the elite and the elderly.
Of course, the creators of "EPIC" don't have a privileged view into the future, which they made a point of mentioning last year: "Visions of the future tend to age poorly. Over a year old now, 'EPIC' has been patched up once, but time keeps pecking at it. Still, people from all over the world contact Robin and me to say how much they dig our little vision. And there's a common thread in all of their messages. The prophecies aren't, by and large, what interests them. They don't focus on what's going to happen. They talk about what's happening. They connect our narrative to theirs—what's going on in their lives, countries and hard drives. And they remix 'EPIC' as well, translating it into different languages, weaving it into their own stories, drawing connections we never imagined."
It's clear from the popularity of "EPIC 2014" and the discussions it has prompted that the scenarios it describes are plausible. By exploring the nature of "news" in the 21st century, and the way technology and business are evolving, it is ideal fodder for any discussion about the news media's future.
A CHILL WIND ACROSS THE BALANCE SHEET
IN PARTICULAR, "EPIC 2014" CHALLENGES THE IDEA that news is something produced exclusively—or even mainly by news organizations. And indeed, of all the established or "traditional" media, newspapers were probably the first to feel the chill wind of the Internet blowing across their balance sheets. In terms of content and function, newspapers may well be the most vulnerable to the Internet, both on the editorial and the advertising fronts.
The core competence of newspapers is arguably to report news, yet by the time readers get the physical product in their hands, the news is old yesterday's news. It's an ephemeral product.
Even before the Internet, breaking news was covered by TV and radio, so newspapers have long gone beyond straight reporting to provide content that is either "juicier" or less perishable than breaking news. The higher-quality newspapers give their readers context and analysis in feature pieces and comment. These take time to think through and write. And over the years, extensive feature pieces have come to fill the ever-fatter newspapers and their various sections—real estate, finance, entertainment, lifestyle, technology, etc. All this editorial material, which is expensive to produce day in/day out, is still readable days or even weeks after publication.
One of the staple income earners for newspapers, especially local and regional papers, has been classified advertising. Those ads take time to arrange and get into print. And for readers used to the search functions found online, printed classifieds are laborious to scan. These newspaper ads are caught between the low-cost, hyper-local power of bulletin boards in one's community and the low-cost, wide-reach, instant-feedback power of Internet classified sites such as Craigslist.
DIGITALLY UNBUNDLING THE VALUE OF NEWSPAPERS
LIKE OTHER TRADITIONAL INDUSTRIES such as the music industry, newspapers are saddled with the legacy of an inflexible, costly delivery format. New printing technology has reduced costs and the break-even points—but the process remains cumbersome and slow by the standards of the Internet.
The essential value of the newspaper is the editorial and advertising content. Yet, after the newspaper has been written, edited and compiled, it still takes several hours of printing and physical distribution before it lands in readers' hands. But the same readers can read the same content minutes after it's written and edited if it's posted online.
It's strange, in a way, that such high-cost content is still delivered in the same disposable format, together with a stack of sections that few readers read in their entirety. Newspapers are facing a crucial question: What value does the ink-on-paper delivery format add to the value of the content?
A lot of diehard newsprint lovers cite the fact that they can read their newspaper anywhere—at the kitchen table, on public transport, in restaurants and, of course, in the bathroom. Reading the same material digitally is nowhere near as easy. A desktop computer is tethered to one place, a laptop is portable but bulky and often heavy, and a PDA/hand-held computer screen is too small for reading large amounts of text comfortably. So, for long-standing newspaper readers, the ink-on-paper format is hard to beat. But many young people who have grown up with the Internet haven't gotten into the newsprint habit, and they're much less inclined to hanker for the handiness of a newspaper and the pleasure of ink-smudged fingers. That's certainly the case in the United States, but not only there.
For example, Hong Kong's South China Morning Post reports that in China, the proportion of newspaper readers younger than 34 dropped by 1.7 percent between 2003 and 2005. At the same time, the readers over 45 years increased by 1.5 percent. The younger people are going online, and they're getting their news from sources other than established news organizations. The number of Chinese bloggers is expected to reach 60 million by the end of 2006.
If newspaper industry organizations are to be believed, the industry has seen the writing on the wall and is making the transition to digital delivery. Despite (or perhaps because of) the dire views in "EPIC 2014," the New York Times has the largest Web audience of any newspaper, and its online readership grew by 15 percent in the year ended November 2005. Other papers are seeing even larger increases: According to Nielsen//NetRatings, the Washington Post and the Los Angeles Times racked up readership growth of more than 20 percent.
In the U.K., News Corp.'s websites for the Sun, Times and News of the World together attracted 6.1 million unique visitors in April 2006. Overshadowing that was the BBC's news site, which attracted 10.5 million. The crusty old "auntie" of British broadcasting actually serves up a feast of print, as well as live audio and video content, podcasts and archived audio content. With its vast archives, it's awash with possible content, including TV—and all of it free, because the BBC is a publicly funded corporation.
According to Martin Dickson, deputy editor of the Financial Times, offering news content online can do great things for the brand but doesn't do much for cash flow: "Our relationship with customers and our community should become richer and deeper. ...What is not clear is how you make decent money from this at a time when most people expect content to be free. That's the conundrum."
The omens are scary for big news-media owners, whose business model is essentially about selling readers' attention to advertisers. Their de facto monopoly on news gathering, news processing and news delivery is being eroded.
The scenario of non-professional news and opinion writers collecting micro-payments is already being played out in South Korea, a digital pioneer that's one of the most wired societies in the world. Ohmy News is a lively news site with a real difference—its articles are all written by "citizen journalists," also known as readers or users. Once would-be journalists have registered with the site, they can submit articles for publication. Articles are reviewed by editors before they get published. Readers can show their appreciation for good articles by leaving a tip via their mobile phone or credit card. There is also an English-language edition of Ohmy for world audiences, Ohmy News International of OMNI.
Regardless of whether and when other sites adopt the sort of model being pioneered by Ohmy, news organizations are realizing that it's not enough to just post articles online. Many people using the Internet expect interaction, they expect to respond to what they read. The ultimate direction may not be totally aligned with Ohmy and "EPIC's" notion of news as conversations, but it is certainly moving toward news as a catalyst for interaction.
---
CUSTOMIZATION AND PERSONALIZATION
FOR CORPORATIONS, THE BLESSING AND THE CURSE of the Internet is that it's interactive. Even the most passive use of the Internet involves far more minute-by-minute interactivity than offline media (Internet users can't get far without using their keyboard or mouse to move around, for one thing). So the Internet trains users to be more interactive, and hence to expect interactivity from their media.
In previous eras, only a few, highly motivated consumers bothered to share their views with companies by picking up the telephone or writing a letter. Now, growing numbers of them are accepting the invitation that many companies have on their website: "Contact us."
For corporations stuck in 20th century thinking, or for those running pared-to-the-bone operations, interacting with the great buying public is a burden. But for corporations committed to adapting to their markets, the ability to interact easily with consumers is a blessing.
IT CREATES THE EXPECTATIONS
IN PRE-INDUSTRIAL TIMES, virtually everything was custom-made, because there was no other option. Then machines ushered in the era of mass production, turning out large volumes of identical products at relatively low cost. The limitations of mass production kept customization well out of the picture. As Henry Ford supposedly said, "People can have the Model T in any color—so long as it's black."
Choice just wasn't built into the system, and for years car companies pretty much kept it that way, apart from adding a few color options. But by the last decade of the 20th century, thanks in part to computer-assisted manufacturing, car buyers could choose from a bewildering range of options, picking out their interior colors and fabrics, wheel trims and in-car entertainment options. What started as a premium service has gradually spread down the price range, and now an increasing percentage of cars are built to order: in effect, they are custom-built to customers' preferences.
Option-driven building to order predated the Internet, but the trend has been accentuated by the Web and by the use of clever website programming. Many car companies allow prospective buyers to run through the options and see exactly what the car will look like. Companies selling accessories do the same, combining interactivity and customization. And beyond cars, industries such as apparel, interior design and computing have all built interactivity and customization into their offerings.
MAKING IT PERSONAL
TO BE RECOGNIZED AND ACKNOWLEDGED as a unique individual is one of the most basic human needs, along with the desire to be accepted as part of a community. In a world of over 6 billion people, filled with anonymous interactions in crowded public spaces, where global brands sell millions of the same products across the world, life can feel very impersonal. So the notion of personalized products and services really resonates, especially among younger people who are still forming their sense of identity.
In the area of physical products, customization through the Internet helps shoppers connect more closely with brands. In particular, it helps companies attract fickle but acquisitive young consumers by giving them the power to put their personal stamp on items such as sneakers, jeans and digital music players. Whether it's a ring tone, a faux fur for an iPod or a pair of pink and black Nikes, young shoppers jump at customization as a way to express themselves and build on what they like about certain brands.
Even a few customization options can generate hundreds of permutations. And Internet ordering combined with cheap and/or just-in-time manufacturing means it doesn't take much for brands to custom-make products. In fact, an increasing number of products are manufactured to customers' requirements, to the extent that unique combinations of features are pretty standard. The options for truly personalizing a physical product, however, are limited to emblazoning it with the consumer's name, monogram or logo, or some other form of ownership identification.
With intangible, virtual products, there is much greater scope for personalization. At the very basic level, sites that require you to log in greet you by name every time you visit. Beyond that, retail sites such as Amazon "learn" about users' interests by tracking their purchasing patterns. By comparing the patterns of thousands of users, the site can then make personalized recommendations on the basis that "others who bought X have also bought Y and Z." This process, dubbed "collaborative filtering," is an IT way of bringing likeminded people together and has become the means whereby many sites personalize the shopping experience.
Collaborative filtering leverages the ability of interactive technology to track the choices a user makes. These may be actual purchases, they may be the selections users make in their profiles, they may be the links users click on, and they may be the ratings or votes users give. For example, Last.FM is a kind of personalized music center built around the Audioscrobbler system, described as "a music engine based on a massive collection of music profiles." Last.FM uses these profiles to make personalized recommendations, match up people with similar tastes, and generate what it calls "custom radio stations" for users.
In a similar vein, stumbleupon.com applies the principle of collaborative filtering to Web surfing. Subscribers select any number of areas that interest them, the stumbleupon engine navigates them to a random selection of websites, they rate the sites "I like it" or "no more like this" and can optionally add a review of the site. Gradually, by comparing users' preferences, stumbleupon's selection of websites becomes less random and more personalized to each subscriber.
The use of collaborative filtering to generate personalized offerings can be applied to any area where people frequently exercise choice. That leaves plenty of scope.
---
MARKET RESEARCH AND MARKET FEEDBACK
IN THE DIM AND DISTANT PAST of small communities, local stores and stable markets, storekeepers knew their customers personally, and over time they learned what each one wanted. The salespeople who supplied the storekeepers chatted with them to find out what the customers were looking for. The salespeople in turn reported back to the manufacturers and brand owners. And sometimes, smart brand owners went out and chatted to end users themselves. Indeed, some still do.
This informal person-to-person system wasn't exactly market research as much as market feedback. It was slow, unstructured, haphazard and dependent on the quality of the people relaying the information. But that didn't matter so much when there was little product innovation in the market and choice was limited, along with competition.
As innovation, choice and competition increased, the system of market feedback was found to be too slow, too unscientific and too passive. In the 1980s, the era of the market research industry was born. It not only provided market feedback—meaning information about what people consumed as well as why, when, where and how—but also opened up the area of exploratory research, finding out about new markets and gathering information on what people might consume.
This form of market research has typically involved brands and corporations engaging third parties—market research organizations—to find out what consumers are doing and why. It started out as a very long-winded process but has gradually been accelerated as corporations demand faster information. Even so, the process of collecting and collating the data makes virtually all of it historical, rather than recent or real-time. Before the Internet and interactive technology became widespread, market information wasn't exactly in short supply, but the cost of collection imposed limits on the amounts that could be collected.
FEEDBACK AT WARP SPEED
ALL THAT HAS CHANGED. The Internet and interactive technology in general remove many of the limitations on the amount of data that can be gathered and the speed at which it can be done.
In the late 1980s and early 1990s, Italian apparel brand Benetton was famed for its retail feedback system. Sales registers at every Benetton store recorded the type, size and color of every item sold and sent the information back to headquarters, enabling the factory to respond quickly to shifts in demand. What was revolutionary back then is now standard practice. Barcodes and stock management systems allow virtually any retailer to collect this sort of information in real time. Supermarkets can monitor the progress of a promotion or a shift in shelf positions moment by moment.
On the Internet, response measurement is virtually built into the system. Websites can tweak content and layout all the time, at low cost, and monitor how responses change.
As more transactions go online, market feedback and market research can show what consumers are really doing rather than—as with most traditional research—what they say they've done. Brands can find out in real time which parts of their mix get more responses. Provided the technology is properly designed, the speed and accuracy of available numerical data is unprecedented. Interactive technologies let brands construct real-time models of what's moving, when and where and how much. And as the Internet goes mobile and penny microchips get embedded even in low-price products, information will flow even more freely—marketers will be able to construct ever-more sophisticated, dynamic models of consumer behavior, not just online but offline too, in real time.
GETTING BOTH THE WHAT AND THE WHY
UNDERSTANDING THE "WHAT" SIDE of consumer behavior is essentially a data-driven undertaking. It requires instruments and metrics to track what people are doing—what they're buying, at what price, in what formats, at what time, in what place. As long as the right instruments are in place to gather the information, it's possible to build up detailed, accurate "what" data about consumer behavior without asking consumers themselves. And for many marketing purposes, accurate "what" data is good enough.
Sometimes, however, marketers need good "why" data too, and that's a lot harder to elicit, to collate and to evaluate. The "why" side of consumer behavior is all about need states, psychological triggers, tradeoffs and a host of other hard-to-measure factors that motivate people to buy a product or not. It's possible to speculate about their motivations just by observing their behavior, but that's hypothesis. And it's possible to check those hypotheses and ask people about their behavior, which can fill in missing information. But very often people don't consciously know why they do something, so it's hard for them to discuss it or to admit their real motivations. The decision to buy, or not to buy, often comes down to a few small but crucial impulses.
It's not hard to imagine a world in which interactive technologies instantly provide all the "what" data that brands and marketers could dream of. But it's not so easy to imagine similar levels of information about the "whys" that drive consumer behavior.
To be sure, plenty of the more assertive consumers are happily sharing their opinions with the world on sites like Epinions, in blogs and on special interests forums. And smart brands are enlisting customer feedback to help improve their products and the user experience. For example, Adobe's photographic workflow software, Lightroom, is being released free for anyone to download—and Adobe is systematically integrating the resulting feedback into development of the program.
"What" data is numerical and can be processed with machines, fast and cheaply. For the moment, "why" data isn't numerical and requires a lot of time and effort from highly skilled humans to make sense of it and integrate it.
Finding ways to gather "why" information faster and more effectively for actionable insights is one of the next big challenges for market research.
---
HYPER-INFORMED CONSUMERS TAKE CONTROL OF INFORMATION
IN ORDER TO MAKE SALES, corporations and brands need to ensure that potential buyers have essentially two classes of information.
FACTUAL INFORMATION ESSENTIALS
POTENTIAL BUYERS NEED ACCESS to facts and figures about the brand and its products. This is the sort of information that can be communicated in plain words and numbers, even by a robot voice. It's the sort of information that can be measured—dimensions, weight, performance attributes, price, etc.—and hence the sort of information that can be compared.
Brands long to share this information with consumers because they put so much effort into making the numbers competitive—better fuel consumption, deeper cleaning power, longer battery life, faster focusing, bigger memory, lower percentage of saturated fats, etc. And consumers often feel they need this information in order to make informed decisions.
The problem is that there are vastly more products and product types than ever, and many of them are more complex, with many dimensions of complexity that may change fast. Take cameras. Before digital there were simple point-and-shoot and more complex SLR cameras, but both typically used the same 35mm film. With digital cameras, there are many more factors to weigh, such as the number of megapixels, the storage medium and storage format options, optical and digital zoom, the frame size, the design of the LCD screen, battery life and so on.
In short, there's much more complex information to consider, especially for purchases involving any technology. But it's not just gadgets. Even simple products have become more complex. Bread comes in many varieties—white, wheat, rye, sourdough, etc.—and each now includes extensive nutritional information.
Factual information can be communicated perfectly well by the written word alone, in printed format or on the Internet.
EMOTIONAL INFORMATION ESSENTIALS
COMPARED WITH FACTUAL INFORMATION, this is a big mixed bag. It's hard to measure, and by definition it's subjective and spontaneous. Some people might not even consider it information at all. Yet it's crucial in creating the context in which rational information is sought and evaluated.
People are not computers that coldly gather data and compare it dispassionately to come to a purely rational decision about what to buy and where to buy it. In making purchase decisions, our evaluation of the facts is colored by emotional factors such as packaging, design, brand associations, user imagery, and what other people say and the way they say it. This is what some call neuroeconomics.
In the developed world and the more affluent parts of the developing world, most purchases aren't made purely or even primarily to satisfy rational needs, they are largely made to satisfy emotional wants. Whether they are aware of it or not, consumers are motivated by the desire to feel whatever it is that they expect to feel as a result of purchasing something.
Consumer motivations to purchase are always emotional.
Professionals such as insurance assessors or real estate agents need a good camera to take pictures for their work. For everyone else, a higher-performance camera is not a need—it provides the pleasure of a picture with high resolution and truer colors, as well as a measure of prestige.
Many consumers, especially no-nonsense types, may believe they approach their decision making and purchasing rationally and dispassionately. But if they are members of the human race, then the processes will certainly be influenced by how they feel along the way.
Some of the emotional information about a product or service is in the product or service itself—the design, the look and feel—but a lot of it is built around the product or service through marketing communication.
RATIONAL + EMOTIONAL PURCHASING THEN AND NOW
THE INTERNET HAS GIVEN CONSUMERS the means to seek their own factual information and to create emotional information independently of brand owners and their partners. The Internet is changing the way consumers gather the information that motivates them to purchase or not. And it's changing the way they decide what to purchase and where.
Before the Internet, brands controlled consumers' access to factual information about products. Consumers who wanted information had to get a brochure, a spec sheet, a catalogue, etc. Advertising agencies controlled the creation and spread of emotional information through limited media channels (TV, radio and print, maybe billboards). Brands and their partners called the shots. Consumers had little choice but to take or leave what was being fed to them.
Before the Internet, the only players apart from brands and their partners with serious access to factual information were consumer advocacy groups. They had the means to gather information about products and make comparisons, and they had access to the media to publicize their findings.
With powerful search engines and fast, high-capacity connections, the Internet makes factual information easily available to everybody. Consumers can check out a brand's site in their country and in other countries too. They can also easily find product reviews and comparisons in the online versions of traditional media and in online-only comparison sites run by professionals. These sources tend to focus on factual information—like the benchmark tests run in PC Magazine. Consumers can find out where to get the best prices for the best performance, and they may find it's through non-mainstream channels (such as eBay) or from other countries.
There is also a great deal of factual and emotional information to be found in places where consumers give their own opinions and discuss products without intervention from professionals. They can check out what others have to say on sites like Amazon, where consumers can write reviews. They can check out newsgroups dedicated to specific subjects (digital cameras, fashion, etc.), and they can read—or start—blogs and forums.
BRAND OWNERS BEWARE
ALL THIS IS WORRYING ENOUGH for brand owners. Now all they can do is provide information about their products, chat up industry journalists and keep an eye on what consumers are saying about them online. They no longer control all the rational information that reaches consumers, so consumers no longer have to rely on them for their facts. They can check third parties to find out for themselves whether the fuel consumption is as good as the brand claims, whether the room service is really available 24/7 or whether the cream really does reduce cellulite.
This makes it increasingly hard, and risky, for brand owners to make inflated claims about their products. Through the Internet, the truth will out. The brand's website may be packed with information about its products for consumers, as well as corporate information for journalists, analysts and investors. But what's on the brand site will inevitably be the brand's version of things. Smart consumers want a more well-rounded picture.
ADVERTISING AGENCIES BE WORRIED
THE INTERNET SHOULD BE TROUBLING advertising and marketing agencies even more than brand owners. They are in the business of getting brands noticed and providing emotional information about the brand (that is, branding).
Awareness and attention: The first big worry for advertising agencies is that in households with broadband access, consumers spend more time on the Internet. TV viewing and consumption of other media suffer as a result. (As Pew Internet and American Life research confirms, it's always-on broadband that makes the difference.) This should worry agencies because on the Internet, consumers control what they see, which makes it much harder for advertisers to catch their attention. On the Internet, consumers don't just passively let things come at them (as with TV or magazines), they actively seek specific content and navigate where they want to go. They like intrusive advertising on the Internet even less than they do on TV, and browser technology allows them to block some of it.
About the most tolerable form of uninvited online ads are the sponsored links on Google—bare-bones ads with zero advertising agency input, driven by algorithms and payable on results only.
The Internet makes it much, much harder for advertising agencies to claim they are specialists in catching consumers' attention and creating brand awareness. That may have been true when consumers had a limited selection of media and no control over content. Now they have a huge selection of media and increasing control over the content they consume.
Emotional information: Because of the Internet, advertising agencies are losing their role as the primary creators of emotional information about brands. The Internet is eroding their claim as the ones best placed to oversee branding.
As consumers spend less time with traditional media (especially TV) and more time with the Internet, advertising agencies have fewer opportunities to package and deliver emotional information in the traditional way, through commercials. Consumers who are online rather than watching TV are missing at least five minutes of broadcast advertising every hour. And they won't be spending five minutes or even one minute watching animated ads on the Internet. Those minutes of consumer attention are completely lost to the agency.
As the Internet goes mobile, onto hand-held devices, billboard and other outdoor advertising will also struggle for consumer attention. Already people moving through city streets are increasingly engaged in phone conversations, making them oblivious to ads they're passing, while those on public transport are chatting, texting or playing games on their phones. Consumer attention is becoming unavailable to brands and their advertisers.
One role of advertising agencies is to create awareness of brands and their products. The Internet is eroding that role, too. People who are interested in the brand and its products find out what's next through the Internet: they don't wait for advertising to tell them. Advertising agencies don't work at Internet speed: by the time the agency has taken the brief, figured out the creative work, produced it and placed it, consumers have moved on to the next thing. The Internet not only delivers information fast, it also creates the expectation of fast delivery and rapid innovation.
One of the strengths of classic advertising is building campaigns with emotional punch. But now, rather than getting big, crafted chunks of coherent emotional information about brands from traditional ad campaigns, consumers are using the Internet to pick up snippets of emotional information here and there and piecing it together themselves—an interview with the brand owner here, a product trial from an influential reviewer there, a heated debate about the product among people who use it somewhere else.
Brand owners still have a role, because they are the ones selling the products and services. They are the ones creating the value that the consumers buy. But the role of marketing communication agencies is in great jeopardy. Their traditional skills seem to have little relevance in the online world, and the Internet is undermining both their job and their business models. Of course TV, print, billboards and other media will continue to exist and will continue to require advertising agency skills. But as the Internet claims more of people's time and attention, and as more value is found in the Internet and transacted through it, advertising agencies will find themselves irrelevant to these transactions of value.
The Internet is shaping up to be a dominant—and possibly the dominant—medium in the 21st century. A crucial message from this medium is that the consumer calls the shots. And if consumers find no value in what agencies do, then brands will increasingly call agencies to account.
---
MARKETING AND MANAGING CUSTOMER RELATIONSHIPS
FOR ALMOST AS LONG AS THE TERM "MARKETING" HAS EXISTED, it has involved a hands-off, virtual relationship with the mass of customers.
To borrow a military metaphor, brands have engaged in battles to improve penetration into markets and to gain ground in market share. Their adversaries have been other brands (competing for the same business) and those consumers who are reluctant to buy, want more for their money or want to pay less. Brands' salespeople have served as the frontline infantry who engage eyeball-to-eyeball with the adversaries, slugging it out customer by customer. Marketing people, meanwhile, have been like the Air Force, going on reconnaissance missions, analyzing movements and delivering messages from a distance without directly engaging the "adversary."
As we settle into the Internet-everywhere environment of the 21st century, that military mind-set is becoming less apt. Marketing isn't about softening up customers in preparation for selling them things—although that view will continue as long as "old school" marketers are active. For Internet-savvy thinkers, marketing isn't about campaigns and battles and wars, it's about managing the relationship between a brand and its customers.
As that relationship comes to the fore, the virtual aspect of marketing is getting much more relevant. When so much happens through the Internet and the telephone, brand-customer relationships become virtual in nature. Both marketers and salespeople are being forced to get smart about key-words in communication and about search engine optimization.
SALES AND MARKETING GET BLURRED
ON THE SALES SIDE OF THE BUSINESS, interactive technology is making it possible for entire transactions to take place electronically without any direct human intervention. The most obvious examples are big online retailers such as Amazon, which has no consumer salespeople at all. Computer giant Dell all but eliminated offline sales, doing everything through the Internet or over the phone instead (notably, Dell is opening two retail stores in the U.S. this year, but they won't actually carry inventory—rather, customers will be able to interact with the products and ask questions). Airlines and hotels are increasingly switching to online sales, with customers printing out their own tickets or vouchers.
Such pioneering retailing puts a question mark over the whole notion of "sales" and the traditional image of the salesperson talking up customers, swatting away their objections and closing the deal. But the most successful Internet brands haven't just rethought sales, they've reconsidered marketing as well.
These brands do relatively little of what would previously have been regarded as marketing—certainly in relation to their size and speed of growth. While they do make use of some traditional marketing techniques such as mailings and promotional gifts and gadgets, much of their marketing happens in the same place as their sales. The distinction between marketing and sales has become far less clear-cut.
Their sales is their marketing, and their marketing is their sales. Arguably this is easiest for brands with products that live only on the Internet, or at least live through the Internet and technology. Not everyone is a Dell or an Amazon or an Orbitz or a Match.com. But that doesn't mean more traditional brands in more traditional markets can disregard the fundamental questions that are implicitly posed by the pioneering corporations:
* What's the value being traded?
* How much cost does sales and marketing add?
* What value does sales and marketing add?
* What added value can we bring to the customer experience?
By offering an alternative to traditional business models, the Internet makes it possible to challenge decades of unquestioned habit and to strip things back to essentials. Given that everything in business is ultimately about transacting value between a seller and a buyer, then what is the sales process and what value does a salesperson add to the process in the Internet age?
Some businesses, which sell relatively low-value items with few technical complications, have concluded that the sales process is not actually about selling things to customers. For them, it's more about enabling customers to buy easily, with confidence. This approach works well for things such as books, music, apparel and personal care products. For many products, the reviews of other customers offer more worthwhile information than the commission-chasing push or the platitudes of salespeople.
Where higher-value or more complex products are involved, salespeople can add value by helping customers make good choices. The website can handle most of the standard transactions, while salespeople are available to handle more difficult questions. This means the salesperson has to have real product knowledge and some transaction skills that go beyond running a credit card. When it's done properly, this means added value for both the customers and the brand: customers who get their queries handled effectively will have a positive reference for the brand.
MANAGING RELATIONSHIPS ELECTRONICALLY
Say the words "customer," "relationship" and "management" in proximity to each other and the immediate association is CRM (Customer Relationship Management), the class of software designed to log interactions with customers and track their preferences. Certainly, managing relationships with customers can take a lot more than an off-the-shelf software suite.
Clearly it's not possible for every type of business to manage all customer relationships electronically. But the example of Amazon shows that it is possible for some businesses to manage the vast bulk of customer relationships electronically, from marketing to acquisition to customer support and service.
As electronic, interactive, Internet-mediated customer relationship management grows in importance, and communications shifts from direct mail to online messaging, brands are learning new and more complicated ways to interact with customers.
The objective of CRM is to make interactions with customers easier and more coherent, but it also raises customer expectations. It should all be seamless, but all too often customers find they've fallen between the cracks: "What do you mean I'm not in the system? I must be. I called last week, twice, in response to your e-mail." It's frustrating for customers that so many brands just haven't figured out how to put it all together consistently. But it's good news for brands with a system that works and customer service personnel who do their jobs well and products that meet customer needs. They are superbly placed to wow customers.
With the Internet, brands increasingly have the tools to cultivate qualified, interested customers who don't need anyone to sell to them but rather someone to help them buy. The Internet rewards brands that master the art of the soft sell—being in the right place at the right time with the right words and the right attitude.
---
MOBILE PHONES, QR CODES AND BEYOND
For the last decade or so, the Internet has been frontier territory for a lot of corporations and consumers. But that's no longer the case. It's mainstream. Whether or not they engage in online transactions, people "get" the idea of buying online, reading newspapers online and downloading music and video online.
THE FRONTIER TERRITORY NOW IS MOBILE CONNECTIVITY.
It's tempting to talk about it as mobile telephony, but the word "telephony" doesn't do it justice. That little piece of gadgetry is commonly called a cell phone (or mobile phone), but "phone" is just one of a burgeoning range of functions packed in. It's a sad phone that just makes calls. Many can send and receive text (SMS), take digital photos and video, record voice notes, download ring tones, hold a few hours of MP3 music, send and receive e-mail, and browse the Internet.
They're still called phones, but they are actually handy, go-anywhere digital platforms. In effect, they are mini computers. Their size means they aren't suitable for some of the things computers are used for, such as putting together PowerPoint presentations or editing Web pages. But by the same token, their small size and weight, and relatively low cost, makes them suitable for functions that are beyond even the handiest of laptop computers. The constraints of mobiles are defined by their size, not their processing power—indeed, mobiles are increasingly loaded with high-power functions and massive memory.
Some corporations hope to generate serious money and recoup their investments in the technology by harnessing cell phones' Web-browsing capabilities in effect, using them as pocket computers to display Web pages and video content. And while such applications may turn into money-spinners, they aren't the only business models that can make use of cell phones. For technology companies, brands and marketers, phones have some distinctive attributes that make them different from computers:
* More people own a cell phone than own a computer
* Cell phones are almost always with their owners, wherever and whenever
* Cell phones can connect in far more places than wireless-enabled computers
* People generally have their cell phones on all the time
The "back to first principles" question that technology companies, brands and marketers need to ask in this frontier area is: "How can we leverage high processing power and ubiquitous connectivity for our business objectives?"
LEVERAGING UBIQUITOUS CONNECTIVITY
ONE SMART APPLICATION goes by the name of QR (Quick Response) codes, which are basically bar codes.
The size of cell phones is a limitation if you want to input a lot of text. QR codes overcome the need to input text manually by using the "eye" of the phone—its camera function. Developed in Japan in the 1990s, the technology for reading QR codes is now being built into cell phones and the potential applications are limited only by old thinking.
The QR code is potentially a Holy Grail for marketers and advertisers. It's a great way of closing the crucial gap between awareness and action. In the past, consumers viewed most advertisements in situations where they weren't in a position to act on the ad. Now, portable interactive technology makes see-ask-buy much easier to achieve.
In pre-connected times, the height of quick-response marketing was a free telephone number ("Don't delay—call now for your special offer"), but most marketing relied on consumers to notice the message and remember it at the appropriate time. The Internet has sped things up by backing up marketing messages with hyperlinks ("Click here to find out more"). That's great, but it doesn't reach consumers walking along the street or riding the subway or reading a magazine in a waiting room. Now the QR code system enables consumers to respond immediately to messages they find interesting.
The QR code is a thumb-sized square, like a bar code, that's printed on advertisements and marketing literature, and even on business cards. Users just have to scan it with their Internet-enabled camera phones to connect to the relevant website.
LEVERAGING LOCALIZED RELEVANCE
IN THIS GLOBALIZED WORLD, it's not unusual for a person to be absorbed in coverage of an event taking place on another continent or to be communicating with someone hundreds of miles away while something dramatic is happening just a short walk away. Hyperconnected interactive technology has been great at abolishing distance and connecting people in faraway places, but arguably at the expense of local connectedness.
Re-establishing local connectedness—or localized connectedness—is shaping up to be a powerful effect of the mobile Internet. An updated version of the short film "EPIC 2014" ("EPIC 2015") concludes with a scenario where consumers broadcast messages to others in their immediate vicinity whose mobile devices are equipped with GPS sensors that pinpoint their location. Certainly some mobile devices are already GPS-enabled, but even without GPS, cell phones have the technology to enable localization—the device just has to triangulate its position in relation to the base stations.
Even with current technology, it would be possible—in theory—for a cell phone subscriber in an unfamiliar location to log on to a localized information service and find out which stores and services are nearby and which have special offers. This is desirable for all parties—local businesses, service providers and consumers. But as is so often the case with leading-edge technology, there are patchworks of conflicting interests. Agreeing on standards and coordinating efforts between service providers can be bigger barriers than the underlying technologies.
The example of the Internet and the music industry is instructive here. For several years it was clear that music could be shifted around over the Internet and that millions of people wanted to download music. But it took an industry outsider—Apple—to put together the technologies and licensing agreements to make it happen. Which begs the question: Will corporate players come up with a wide-scale solution for localized mobile services, or will it take hackers, geeks and fringe players to make it happen?