Does Microsoft hold the key to the future of advertising?

In recent months there has been a flurry of activity in the advertising technology space, not least the Microsoft bid for Yahoo. What is going on?

As the GigOM post "Who will control advertising on the web" asks:

The anticipated $80 billion in online ad spending cited by Microsoft as the rationale behind its bid for Yahoo is a big number, but how that spending will be apportioned isn’t clear.

What is clear to me is that advertising is changing but more slowly than it ought. Engagement is the new mantra as wonderfully articulated by Dan Belmont on Brandweek in his article "Define Points of Engagement". Dan cites two memorable quotes

"Today, the customer is in charge, and whoever is best at putting the customer in charge makes all the money."(Wal-Mart CMO Stephen Quinn)

"Allow consumers to help you shape the brand experience. . . . Content is no longer something you push out. Content is an invitation to engage."(Cammie Dunaway, CMO of Yahoo!)

This is a great article and well worth a read. Of course creating an engagement model assumes intimate knowledge of your audience which is the adtech companies' hunting ground. But to date the output of web reporting outfits such as Comscore, Hitwise and even DoubleClick are still fairly basic and unready for an engagement world. I was very interested to hear of the success Phorm has achieved in recent months. It's technology tracks clickstream data from ISP networks and repackages this data as business information to aid better targeting of ads. Phorm appears to have solved the critical step of forging partnerships with key ISPs and can now leverage its deep knowledge and relationships with the advertising industry to grow its business.

Keeping track of all these developments and building a picture of medium term trends and implications for changing industry structure is difficult in this dynamic space. The video below is an excellent description of the changes taking place in the market and some proposed outcomes. Pause the Sonific SongSpot in the panel on the left, and enjoy Eric Picard from Microsoft taking you through the Future of Advertising Technology.

Is Archos TV Plus the Apple TV killer?

Deciding to do what I preach, I recently acquired an Archos TV Plus and installed it in my home network. Having initially placed an order for the TV Plus before Christmas, it finally arrived courtesy of Dabs.com at the end of February. I'm not sure if that's a sign of strong demand or poor supply. Having seen so little written about the product so far, I veer towards the latter opinion.

It is interesting that so little has been written. For those people who envision a digital media world on an open gardens basis, the Archos is one of a few next generation products which support this. By open garden, I of course mean the antithesis of the walled garden approach created by the Pay-TV broadcast world and extended into the broadband domain by ISP delivered IPTV. There are strong arguments to support this walled garden approach, mostly related to quality of user experience which is owned end to end by the IPTV platform provider (unlike the open garden approach where user experience can be subject to the vagaries of the internet). The walled garden approach implies however that subscriber (NB) can only access content which the IPTV operator has chosen and published in his platform.

An open garden approach, on the other hand, implies a consumer pull model as opposed to a publisher push. In this paradigm, consumers choose from which sources to receive their content. The natural extension of this is where consumers select the specific content they want to watch from multiple sources, increasingly by establishing preferences or perhaps publishing their profile data to allow an intermediary engine to personalise "channels" of content them. The former model is much more prescriptive, the latter characterised by much greater choice and increasingly intelligent search and discovery algorithms.

I find that most media models are designed from the publisher perspective (using publisher in the broad sense to include broadcasters, movie distributors and music labels etc) rather than trying to understand how consumers behave. When I look at consumers behaviour I see, for sure, a percentage of time spent watching new productions - either first-to-air broadcast or newly released DVD. But significant proportion is spent watching older movies, or older episodes of TV shows previously recorded.

Similarly technology companies appear to have taken a one dimensional view of consumer need. Just about every media server box on the market today is built around a paradigm that all my content is on a PC somewhere and needs to be streamed to my TV in the living room. Where has this idea come from? All my content is on PVR's connected to my TV set and loaded with content recorded from broadcast channels. Yes I have DVD's, but I don't think I'm supposed to be ripping them to my hard drive. So how is all that content on my PC supposed to have got there?

These boxes from Netgear, D-Link, and also Apple don't solve my problem. A quick look at the back of one them illustrates the problem. Video out connections only. The only way for content into this box is via a USB or WiFi or Ethernet IP connection - ie a computer. It won't surprise you to know that my PVRs don't have such a connection. The Archos solves this problem in a remarkably simple way - it provides video in connections!

This uniquely allows connection of a satellite, cable or DTT receiver to the Archos meaning I can both record off air TV into the Archos, and also I can still use my PVRs and transfer (OK via analogue) onto the TV Plus. The key feature of the Archos TV Plus is that it acts as a networked hard drive in your home network. So once content is on the Archos TV Plus, I can transfer it to any other device in my home network. I can now interconnect my existing consumer electronics investment into my home network system to enable me to access any of content anywhere in my home. This is convergence ... and that's the critical difference.

But let's have a look at the experience of installing and using the Archos. Unlike Apple TV, the Archos TV Plus comes with a comprehensive selection of cables for connecting to your Consumer Electronics (CE) equipment. In and Out cables for component and composite video as well as stereo audio covered most options. If you want SPDIF to feed Dolby 5.1/7.1 into your home theatre system or HDMI to connect to you HD screen you would have to provide these cables yourself. Unlike the Apple TV, the Archos supports component, composite and HDMI connection to your TV set.

Plugging in, powering up and configuring the TV out settings was a breeze. Once you have on screen display you can start setting up network connections and connecting to your PVR. I connected to my Sony Freeview/DVD Recorder which will enable me to record off-air programs (eg Film 4) straight into the Archos from where I can access from my home network. The Archos is itself a DVR with its own EPG and timer and allows you to set a remote control code to turn on and select channel on your set-top box. Sadly the Archos does not have the IR code for my Sony which is irritating but not insurmountable - I just leave it switched on to the channel I want to record.

Now to the network. I wanted to use WiFi as I don't have Ethernet in my living room. The set-up was fairly simple and without issue. I was quickly able to see the computers and network drives on my home network and to select files to play and move. The small 2dBi aerial on my Netgear WiFi router proved inadequate to establish a good enough connection to stream video. I also started with the Archos inside my TV cabinet. Not a good idea. Moving this out on top of the cabinet and replacing the Netgear aerial with a 10dBi Sitecom Omni Antenna (a rather inelegant 14" beanstalk) solved the problem. I can sense I am working at the edge of performance here especially for MPEG2 files at 2500Kbps encoding. The DivX files recorded by the Archos play much better over the network. At some point I'll need to upgrade to a MIMO or N WiFi router, but that's for the future.

I have installed a Western Digital MyBookWorld 1TB network drive where I am building a library of material I have recorded or acquired. This is why I only bought the 80GB Archos TV Plus. I move all recorded material onto the MyBookWorld device. I can stream it to my Archos in the living room for viewing on the TV, or to my PC screen in the Kitchen. This is a really neat solution and the family can finally access and view all recorded content on any device in the house. Perfect!

So, to the key question. Do we have a challenger to the Apple TV offer?

The strengths of the Apple TV offer can be summarised as (i) a simple and elegant user interface making it easy to use and to catalogue and find your content; and (ii) if you have a video iPod, you get a very elegant ecosystem of devices which all work well together.

On the downside, (i) you are locked into the iTunes application for your content management and for acquiring commercial content; (ii) if you have a portable device other than an iPod you won't be able to share your content across your devices; (iii) you can't link your Apple TV into your existing PVR - it only works for content stored on or acquired through your computer; (iv) it only works with component or HDMI output; (v) Your ability to acquire new premium content is limited to what Apple iTunes can negotiate with rights holders and currently this is a limited catalogue compared to what is available from other retailers eg LoveFilm or CinemaNow.

The strengths of the Archos TV Plus are (i) it's open approach both as a UPnP home network device and also in supporting most video websites for acquiring or downloading content; (ii) because of this open standards based approach the Archos will work seamlessly with any open standards based portable devices you may have; (iii) The Archos allows you to record from/through your PVR or Pay-TV set top box; (iv) the Archos supports component, composite and HDMI outputs; (v) the Archos allows you (via its optional add-on web interface) to access any web store, or to acquire content via your PC from any web store and synchronize through your Archos, and additionally, via the Archos Content Portal, the Archos allows you to buy content directly into your Archos from selected content stores, avoiding the need for a PC at all; (vi) you can switch the Archos TV to file server mode making it appear as a network drive on your home network and allowing you to easily transfer media files to/from the Archos device from any PC on your network.

The downsides are (i) the user interface and user manual could be improved to make it more intuitive for non technical users; (ii) particularly the method of categorising and finding video content on your hard drive could be improved using tagging, playlists etc; (iii) it would be very cool to be able to access the Archos remotely from a PC or mobile.

So I believe the Archos TV Plus represents the first in a next generation of open IP set top boxes which require neither subscription to a walled garden IPTV service, nor locking oneself into a hardware platform like Apple. I personally wouldn't give Apple TV houseroom. Not because I believe it isn't great at what it does. I'm sure it is. It just doesn't do what I need and locks me into a platform I don't want.

This is a slam dunk for the Archos TV Plus (IMHO!)

The collapse of segmentation

David Cushman has sparked an interesting debate on his Faster Future blog. His post discusses the future of advertising and marketing and is worth a read.

I added my own thoughts as follows:
We need to view the digital advertising universe under its primary headings of search, classifieds, response and brand advertising.
Search marketing is at the beginning of its life cycle and we should anticipate increasing sophistication in this pull-marketing model where brands can monetise this "database of intentions".
Classifieds are already moving to the world you describe, they are fundamentally p-p marketing and we are seeing blurring with C2C marketing and "the consumer as a channel". This is a really interesting space to watch and an illustration of how old business models are being intermediated by new players like Craigslist and Ebay.
Display advertising (which on the web is primarily intended as response advertising) is where we are going to see massive change. However hard the industry attempts to create increasingly targeted, personalised ads, this is still 1.x media. It is still interuptive. Dave Morgan's piece "Outing Heavy Clickers" sums this up for me. Most web users ignore ads. Audiences are becoming more and more sophisticated web users and either psychologically or physically block out ads - we just don't see them any more. This can only be countered in the 1.x model by being more and more intrusive (eg pop-ups), but it's a pointless battle. It may take time. but for Media1.0 time is up, and this may be the Achilles heal for Google and the ad-tech industry.
So I'm with David that engagement marketing is what it's all about, and Mark Kingdon's piece referenced below is a good read. 1-1 marketing was a Media1.0 myth. We don't make choices as individuals, we make choices through interaction with our peer group, through our communities. Marketers want me to spend quality time with their brand, they want a slice of my attention. But my attention is a scarce and highly valuable asset - if I am to share it with a brand I want engagement that is relevant and of high value to me and my community. That's the Media2.0 challenge.

I was interested by a follow-on comment here which argued from a different perspective the evolution of marketing as we know it today from the start of the industrial age. He cites Marx's thesis that early 19th century mass production disconnected the consumer from production and in doing so destroyed the social relationship between consumer and product.

'Marketing' was the ersatz replacement for that once real relationship. Engagement marketing is the recreation of it via digital technology.

I think this is a very powerful concept which has got me thinking. I recently came across an post in Advertising Age which touches on the same issue. Patricia Martin argues that the convergence of art, technology, business and education is empowering the "cultured consumer". Indeed it is this phenomena that is driving UGC.

For years, marketers viewed the cultural consumer as an elite market segment, estimated to represent 2% of the overall population.

But statistics and empirical evidence of pro-sumer publishing show a very different picture. Marketing1.0 was about the segmenting and dividing of people and products. But ..

The old rules of marketing by age, sex, income and similar attributes no longer work. The legion of cultural consumers is a behavioral cohort that forms around experiences and genres

These new behaviours and the rise of vastly better informed and self-assured consumers changes the face of marketing as it changes the face of publishing. The consumer in the post industrial age is informed, connected, has his own opinions, reflects and influences his own community, and can/will respond to new information stimuli. This is not the uninformed, easily pigeon-holed, easily influenced consumer of the post-war era.


Demographic segmentation as a core marketing tool is in its twilight.

But Patricia Martin and the commentators on FasterFuture believe that the future of marketing, of bringing consumers closer to production, will signal the end of a century long era of marketing created by the industrial era. I don't believe it.

Increasingly sophisticated consumers, as well as being able to see through and reject the crass representation of 1.0 advertising, are also increasingly demanding and ruthlessly selective of the infotainment they choose to receive - including brand communication. This is mediation as discussed by Thomas de Zengotita in his masterpiece book Mediated.

If consumers demand goods and services which appear more "real", more "homemade", then big brands will respond and create the perception, through representation, of products in this way. Stone washed or pe-torn jeans from Levi are just the beginning.

This is not a phenomena on which we can turn back the clock. Representation is a drug to which all developed society is addicted. It is inexorable and cannot be reversed.

In stream advertising by BT

As reported in the Guardian, BT has announced an intriguing new service as an extension to its BT Vision offer launched almost exactly a year ago.

By teaming up with Hiro Media, BT is offering mainstream movies free at the point of consumption by integrating adverts in the stream which cannot be skipped.

There are a number of innovative elements to this offer

1. You don't need to be a BT Broadband subscriber to benefit from the service

2. You can share movies online via eg file sharing P2P services

3. As long as you are online when viewing, the ads will change each time you view. This could presumably lead to more personalised ads in the future.

This is a significant break from the vanilla Vision offering which is targeted exclusively at BT Broadband subscribers and a key component of BT's offer in the quad-play market.

This is an initiative worth keeping an eye on. Market research indicates that free online content will outstrip paid for content in the online market by a factor of at least 6. This new service by BT is well placed to exploit this market segment.

Opening up the distribution to the whole market, as opposed to limiting it to just BT Retail's 3m broadband base, is also an interesting move and appears to indicate that this initiative is less about defending BT's customer base from the likes of Sky and NTL, and more about a viable market play in its own right. It also appears to recognize the power of network effects and the criticality of establishing an open platform to benefit from them.

What remains to be seen is the acceptability of un-skippable ads. I suspect in the short term this will be a successful move (and I have no doubt BT has market tested this through focus groups).

Longer term threats to this will come from 2 quarters. Firstly the threat of competing offers undermining BTVision's position - especially from Freeview itself as announced in Broadband TV News. It does seem rather strange that Freeview might want to invest in the platform to establish a VoD service rather than collaborate with BT who have done all the hard work.

The second threat is that consumers will over the longer term reject services that force them to watch adverts. Pre/post-roll ads are very TV1.0 - they merely replicate the commercial TV experience we had before PVRs. Time will tell, but in the face of alternative sources of free entertainment, the BTVision content line-up is going to have to be pretty good to attract large volumes to this model - and without mass volume the personalisation of ads will need to be very sophisticated to drive the kind of yield necessary to make this commercially viable.

This is definitely one to watch, and Hiro Media are definitely on my start-up watch list.

Silver surfers cannot be ignored

Research published by Ofcom (the UK regulator) and recently corroborated by Hitwise shows that surfers over the age of 50 now account for almost 30% of all time spent on the internet. Hitwise's analysis of online visits to shopping and classifieds categories from the 4 weeks ending November 3rd shows that over 55's represent 22.5% of traffic.

This is thought provoking stuff - and furthermore, according to Hitwise Silver Surfers' share of traffic is growing at the expense of all other demographics, especially the 25-34 age group. We can probably put this down to the impact of the latter phases of broadband roll out now beginning to bring the older demographics into play.

Given the cultural and behavioural transformation we are projecting in the digital media economy, understanding shifts in demographics is a key issue. The chart alongside taken from UK government actuarial data shows the projected growth of each demographic over the next 20 years. The over 65s are projected to grow by 45% whereas the under 25 group is projected to remain unchanged. This has a profound effect on long term digital media strategies, especially given the increased affluence and disposable income of this demographic.

In the UK Guardian newspaper recently and article titled "Download dads lead the iPod generation" cited evidence from leading UK download music providers that the typical user of paid music download services is a 34 year old male. Much older than is everyone thinks.

The impact of this on eCommerce and on brand strategies for maximising return on communications spend is huge. A recent article from eMarketer re-enforces this point.

"To focus on younger demographics at the exclusion of boomers and over-60s, as some marketers have done, is to miss a potentially huge opportunity to tap into a large, vibrant, diverse and fast-growing segment of the US Internet population."

The eMarketer report shows that the number of internet users above 62 or from the Baby Boomer generation will increase from 75m in 2006 to almost 90m in 2011 - ie 20%. Faster growth than any other segment.

More critically, those over 62 represent 20% of disposable income, while the baby boomer generation represent around 50%. Those under the age of 25 represent just 2% of disposable income.

The C-generation may dominate the digital media economy 20 years from now, but for brands looking at a 5 year planning horizon, the answer is obvious - isn't it?

BBC, ITV, and C4 ride Kangaroo

As the Register posted last week, news about the long rumoured Kangaroo tie up between the BBC, ITV and Channel4 is becoming clearer.

The UK's top broadcasters have 'fessed up' to working together on a single system for distributing TV online

There are a number of angles behind Kangaroo which look worthy of note.


Firstly, as The Register reports, the likelihood of a single integrated player. This is important because, as those of us who have started experimenting with iPlayer, Bablegum, Joost etc we end up with a plethora of proprietary players on our computers. There is a real need to mediate these offers onto a common platform (of course web based players offer a good answer).


Secondly, as paidContent reports, Kangaroo is designed to monetise TV shows outside of the existing free-to-online window. Last year broadcasters reached an agreement with the independent producers body PACT that shows could be delivered free to consumers for a period of 30 days. After that they must be offered commercially. Kangaroo offers the opportunity for consumers to buy programs from the long tail .... at last!


And thirdly Kangaroo looks to be addressing the challenge of content delivery. Some months ago I posted "The true costs of delivering a quality entertainment experience" and just recently highlighted this issue as a major inhibitor to the success of new P2P players like Joost and Bablegum. Securing deals with ISPs to allow traffic through their increasingly sophisticated traffic shapers is going to be key to the online content industry. Kangaroo look well placed to establish precedent.

The content experience is king!

As Techcrunch recently reported, Joost have announced a tie up with Meebo to integrate instant messaging into the Joost experience. This is a very exciting development I have not seen picked up elsewhere.

Meebo has created a "virtual interconnect" between the major instant messaging platforms - Yahoo, Google, MSN and AIM - so that by logging into Meebo you get the experience of being able to chat to your buddies even if they are on a different IM platform from you.

I've been watching these guys for a couple of years and this is very cool. We have to assume that if Meebo gets very successful, it will force the consumer nirvana - formalised interconnect between the IM platforms; but that is some way off yet. The tie up with Joost though could be the kick start this vision needs.

With the beta launch of Hulu, comments are being made that lack of mainstream content on Joost will inhibit mass adoption. I actually think that lack of carriage deals with ISPs is more likely to be Joost's immediate problem (see Kangaroo post).

But Joost people are smart. They know that content is no longer king. It is the content experience that is king - as YouTube has proved indisputably. Even mediocre content is a lot more fun if you can share the experience with someone else. And long tail theory suggests that what is mediocre for one person can be great entertainment for someone else. And chat is a great application for finding some buddies who like the same things that you do.

I think this is a key move in the social entertainment revolution. Good one Joost!