Archive for February, 2011

Of all the industries to learn that every company has to become a media company, the fashion industry wouldn’t instinctively leap out as an early adapter. It has been built on telling the consumer what to wear and perpetuating the “art” of design. Anyone who has looked at what clothing designs will become “hot” in the new season can see that they will never fit in those designs unless they skip eating for three month and work out at their local gym daily.

But, in fact, the fashion industry has embraced digital media and is basking in its new, more direct, “relationship” with its customers. It is using digital media to tell a much more interesting story about what it is offering, to take an enhanced version of its traditional “runway” presentation directly to the public, to all their customers to experiment with and customize their products and to learn what their customers are buying and aren’t buying, and why.

Gucci began selling out of it’s own online store nine years ago, but has since make itself a presence on every possible platform, from social networks to apps. In recent years it has devoted microsites to product lines from eye wear to watches. It uses these various touch points to engage their customers in more than just buying.

Gucci began live streaming of its spring 2011 runway show. To give online viewers the full taste of the event, they were told to sign up for virtual tickets for the online even and compete for “VIP” seating through a contest on Facebook. You can even recreate the rejection of not getting great seats!

Users were encourage to upload photos of themselves wearing Gucci glasses on one site and create personalized videos on Facebook using clips of various eye wear models. More than 5,500 videos have been created on the Facebook page, which has more than 3 million friends.

But it’s not all fun and games. It’s sales. Gucci President and CEO Patrizio di Marco told Womens Wear Daily that the newly updated Gucci.com, which draws about 3 million visits a month, “willl become our highest volume store in the world”

Ralph Lauren has been another pioneer into digital media from the fashion world. From the early stages, Polo has been an aggressive player on several fronts, creating multiple sites and apps around specific products and audiences. It’s latest is its first RLX app, which features athletes wearing the RLX line and gives the user a unique understanding of what the clothing is designed to do. The free IPad app uses the device’s compass, GPS and touch screen to help the user play with the “experience” of using the clothes. “This application places the user in the driver’s seat so that they can control the technical functions of the apparel and experience the brand in a way that is visually entertaining,” Polo executive David Lauren told WWD.

Another particularly interesting, and interactive, player has been Cinique’s new IPad Skin Diagnostic Tool for the sales counter, which allows a user to test for foundation and color cosmetics while seeing product information and user reviews of the products. It answers questions individuals skin and produces a personal analysis from consumers, including product recommendations. The device has resulted in an average sales jump of 30% wherever it is installed.

The company is also using its presence in Bloomingdales in NYC to test its new “Smart Bar”, which uses Microsoft’s Surface technology and a new large touch screen embedded in a counter top to identify a product when it is waved overhead and bring up information about that product on the screen. And, Clinique has also created a virtual makeup mirror on its website that allows the user to download a picture of their face, and simulate a product demonstration on that picture. According to Clinique, 50 percent of in-store purchases are influenced by online information.

Perhaps the most interesting technology development in the fashion business comes from Google, who probably employs the least fashionable workforce in the world. Google build Boutiques.com, which tracks consumers shopping behavior. Besides attracting tens of millions of users to hundreds of thousands of online boutiques that have been set up on the site.

What Google has done for the industry is set up a digital listening post. By providing “Designer Analytics,” Google gives the boutique owners a deep dive into the habits of shoppers, telling them not just what they are buying, but why. They are given information about what specific products are “loved” or “hated”, what colors, shapes and patterns are resonating or not. Then there is a totally different, and broader, data set on the consumer trends. Here the designers learn what is happening in the aggregate to all designers, not just themselves. So industry trends in color, shapes and patterns can emerge from the general public.

Besides helping the designers find their audience, Boutiques.com is also designed to help the shopper find what he or she is looking for.

Google describes the service on the site this way:

“Boutiques.com is a personalized shopping experience, brought to you by Google, that lets you find and discover fashion goods through a collection of boutiques curated by taste-makers — celebrities, stylists, designers, and fashion bloggers. Boutiques uses visual technology to help fashionistas discover and shop their look and creates the opportunity for designers to showcase their collections and latest inspirations online.

“Boutiques.com is built on technology developed by our team of fashion experts who work with engineers to “teach” our computer systems to understand various patterns, pairings, and genre definitions. When signed into your account, Boutiques.com learns about your style and preferences and in turn, provides you better results and recommendations over time. Ultimately, Boutiques.com will provide shoppers with a much richer and interactive shopping experience and help drive traffic to retailers’ websites.”

This is a brilliant move on Google’s part to improve the experience of both sellers and buyers in a specific marketplace — fashion — and in doing so create a spot for itself, Google, to build a business as an enabler.

In all of the examples above, technological advances are enabling companies in an industry – in this case fashion — to behave more like media companies in how they communicate their message and interact with their customers. They learn to use communication skills directly instead of indirectly through media and advertising.

In the end, it can improve upon and to some extent, ultimately displace the existing marketplace and its infrastructure, including retailers and traditional marketing outlets and media. It allows the Internet to do what it does best: match buyers and sellers and squeeze middlemen.

I’ve had “The Daily” app on my IPad since the day it was launched. I couldn’t wait to get it because of my unwavering belief that the Tablet format will quickly become a significant platform for news and other timely information. I still believe that, but it’s despite The Daily and not because of it. Ironically its the apps from Rupert Murdoch’s own NY Post and other traditional publishers that still give me hope that this medium will grow quickly.

I am thrilled that Murdoch launched “The Daily.” I strongly believe success in this medium requires the creation of dedicated content products, products that are made for the tablet medium, not adapted from earlier platforms, whether print, digital or video. And I truly understand the need, at this stage, to experiment with presentation, content and format. Everything will, and should, get better.

I was particularly cheered to read about the memo Daily Editor Jesse Angelo sent out after a tough week. “We need to get out there and start finding more compelling stories from around the country– not just scraping the web and the wires, but getting out on the ground and reporting.” The news brands of the future need to provide a mix of original reporting, curation of outside voices and community. All are important, and the many new players in the news and information space are unable to create first rate original reporting because they don’t realize how hard it is to do.

So let’s assume The Daily is produced by people who do understand journalism, and Angelo’s missive is a good indication that we have that piece in place. The problem right now lies in the vision behind the art of storytelling on this new medium, and the ability to executive whatever that vision is.

What I’ve seen is very little indication that the designers are thinking about the best use of the new platform medium. The advantages of the platform are obvious:
1) It is both fast and beautiful.
2) It is interactive
3) It is real time via either wifi or 3G/4G
4) Advertising stands out
5) It can use all forms of media: text, video, audio, photography, graphics AND interactivity

But in my first few weeks of using “The Daily” I have been particularly disappointed in its design, functionality and performance. It’s been a series of crashes, bad user interface and clunky design.

More than half the time I touch the Icon to start up “The Daily”, nothing happens. Another 25% of the time, if I wait long enough, I get the intro music and the graphic shows me it’s launch sequence. Then the screen goes blank. Sometimes, after that, the new edition of the daily comes up in it’s “wheel” format, with a video opening that resembles the top of a TV news broadcast by teasing the top three or four stories. Other times, after about 15 seconds, my screen just returns to the IPad Icons and I have to start over.

Combining the slow, frequently faulty, launch sequence with the fact that when and if it does launch it brings me to a television like lead-in, followed by a visual magazine-format cover, a major frustration is how long it takes me to learn about ANYTHING going on. Nothing feels urgent or timely. It’s much more like a magazine or TV news magazine, than a newspaper, daily or otherwise. This is made worse by the fact that the content of The Daily appears to be updated only once-a-day, an odd choice for a 24/7 medium.

Perhaps this is by design. Perhaps the goal is to take advantage of how beautiful graphics and advertising are in this medium, but using a magazine model as the first foray into the newest real-time medium. And it is also certainly true that no where is it written that the tablet version of news has to resemble a newspaper. But if it is going to make the best use of this new medium, it needs to embrace the zeitgeist of the device. It needs to be fast and to give it’s users the ability to get what they want quickly and in a timely way.

Instead, this app sacrifices speed and usability for beauty. There are no real shortcuts to sections, only to the “cover” story of each section, creating the need for multiple clicks to get to anywhere. Indexing is weak, albeit non existent. These and other shortcomings seem to indicate an inability to understand why and how users use this device.

A dozen times or so I’ve been teased with an ad to designate my favorite sports teams on the App, which presumably would result in a customized page with news from the teams I selected. But despite the fact that I have tried to set this page several times, I’ve never succeeded. As soon as I finish, I try to store the page and my settings and it’s gone — never to be seen again. I tried again today, found the ad, and this time tapped it 20 times before I realized it’s not taking me anywhere to do anything.

If i step out of the room for a few minutes and come back, the app has booted me out and put me back on my home screen. I don’t know how to change that setting, and there is no way to find out.

In the end I have to say that while this is a “pretty” product its much closer to a magazine, with little or no sense of urgency and a shocking inability to address user behavior on a new medium. Shocking because even some of Murdoch’s newspapers are doing a better job on the IPad, particularly the New York Post, which at least provides a touch and feel that allows the reader to find anything that was in the paper and in the news.

I’m still pulling for the ultimate success of The Daily, and I give Murdoch huge credit for spending the money to test the tablet.

Online consumers are using the Internet to research products and make choices, feeling less loyal to single brands in most categories. In fact, according to research from AMP, a marketing agency, 43% of all consumers claim they research products before they buy. In consumer electronics, that number is actually at 64%.

Here is an interesting finding:

According to the report, “72% of respondents stated they turn most to general consumer reviews when it comes to seeking information on product performance, close to twice the importance they place on expert “durability” or “functionality” reviews, which came in at 42%.  Only 22% reported specifically seeking out information about the quality of the product.”

--From AMP Agency

Further, the report stated: “52% of respondents said online consumer reviews most influenced their purchase. 41% said feedback from a friend was important, and 37% were influenced by the number of positive reviews they read online. Only 17% stated the number of negative reviews had an effect.”

These are further indications of the growth of the power of social media in the sales process. Companies simply must pay attention to these sites and communities, and find ways to engage and follow the social networks around your business, product and industry. Clearly, these networks are working:

According to the report, 94% of consumers said that research positively influenced their decision to make a purchase, and 36% said they bought a product because of the research they found.

But there is room for improvement as 30% stated they cannot find enough of the information they are looking for and “Only 4% felt overwhelmed by the amount of research available to them in a particular category.”

Morgan Stanley issued a report on the Tablet this week, and the results are breathtaking even for the usual tech worshipers. According to Silicon Alley Insider, Morgan Stanley has upped its “best case scenario” for 2012 by predicting that 100 million tablets will be shipped next year, up from 16 million last year.

But there are other gems in the Morgan Report. Check out the charts below:

There is a chance that we may look back on the first few months of 2011 as the moment in time that things turned around for the news business. Suddenly we are seeing bold moves on several fronts. Chances are being taken again. Investments are being made, New revenue models are being implemented. Competition is heating up.

Let’s take a look at very recent developments in the massively shifting news media landscape.

–AOL bought Huffington Post for $315 million. It appears that AOL finally realized that it was missing an editorial infrastructure and personality. It certainly bought a personality in Arianna. The only question is can she extend herself and her model into a much broader arena and accelerate revenues quickly? My guess is that it will be difficult, and AOL will feel pressure for immediate profits to offset shrinking revenue streams from their dial-up business. But the important point here is the realization on AOL’s part that editorial intelligence and point of view matter. Like her methods or not, the news industry should respect the fact that Arianna Huffington has convinced people that interesting news content — created originally AND curated — is worth a lot.

–The Daily Beast merges with Newsweek. Here we have a new media company — again built on both original content AND curation — taking over an old brand and making a big bet that it can rescue the old brand with new media content. If they pull it off, it will be the first road map that much of the print media has been longing for. Tina Brown has the energy and talent and if this rebirth is possible, she’s the likely midwife. Her goals for Newsweek include bringing back the glory of it’s investigative reporting. The combined news operations of a magazine, website and their mobile outlets should be able to support a first class news operation. If they move aggressively, this can be a prototype for newsrooms of the future.

–Comcast takes over NBC Universal. A huge cable company buys content. We will see if news can benefit from a closer relationship between cable and broadcast and a more aggressive digital partnership. NBC has great news content as well as CNBC and MSNBC, but it has lagged in digital platforms and Comcast has aggressively built a digital platform that lacks powerful content. Could this be the beginning of a beautiful relationship that might lead to the development of the long-awaited multi-platform news organization?

–Both Apple AND Google unveiled their systems to allow media companies to sell subscription products using their devices or hardware using their operating systems. These are long-awaited critical steps to begin to build real revenue streams other than advertising, which has been slow to adapt to the new digital platforms. These systems each have their own advantages and disadvantages, and there are serious things the media companies don’t like about them, but two of the largest and most powerful companies on earth have finally stepped up with SOMETHING, and some magazine and newspaper companies will be trying each.

–JP Morgan announced it’s setting aside a billion dollar fund to put into digital media efforts. While $200-400 million of it may go into just Twitter, that still leaves a fair amount for new efforts in the rapidly changing digital media landscape.

–Rupert Murdoch’s New Corp. finally launched “The Daily,” the first tablet-only news publication. While it has many flaws, some technical, some on the content side, it still represents a major step forward for an industry trying to find it’s future. If you need any indication of just how important a step this is, take a look at the first USA Today, or the early broadcasts of CNN or ESPN. You will be stunned by their simplicity and lack of pzazz.

–Discovery is launching an entirely new division called “MyDiscovery” which will create non-fiction content specifically for the new digital platforms, particularly the tablet. While many companies are doing a lot for these new formats, this is the first time a major media company has assigned an entirely new division, with P&L responsibility, reporting to the top of the company. (full disclosure, I sit on the board of Discovery).

Each of these steps are significant and important. But together they represent a lot of movement in a short period of time. It could be because the economy has started to improve, or even that everyone finally believes the economy is improving, but whatever the reason I am excited that things are starting to happen. These events don’t represent the final answers to the mystery of how news companies will survive, but they do demonstrate that the industry has turned a key corner, and is willing to invest in FINDING OUT what might work. News Media companies need to be in serious experimental mode right now, which is not where they are used to spending time.

The growing use of smart phones and tablets have already begun to change peoples habits, causing a 20% drop in consumer PC usage since 2008. This chart, from a Morgan Stanley report on the tablet market, shows a drop in use of PC’s for music, communications and surfing the internet. The Silicon Alley Insider quotes the report as suggesting that as Smartphones continue to mature and offer more similar services to the PC, people will gravitate to mobile devices because of the ability to consume in a timely fashion.

The latest news that tech giants Google and Facebook are interested in Twitter and its huge audience and might be willing to pay up to $8 or $10 billion has kicked up the debate on the value of the messaging firm. Many, including CNBC commentator Herb Greenberg (on his Twitter feed!) are asking what it’s really worth.

In order to value Twitter one needs to understand it’s value to its own users and customers. On the usage side, it has proven itself extremely valuable to its users, creating a highly engaged relationship. But on the advertising side, presuming advertisers are its other customers, it hasn’t created created a large-scale platform that has given advertisers an opportunity to tell their story in an satisfying way. Unlike Facebook, which is generated revenues in the billions, Twitter’s revenue was $45 million last year and this year is said to be barely over $100 million, according to the Wall Street Journal (link to Subscription product).

What that means is that the established value of Twitter has to be based on the value it brings its users, but not necessarily its advertisers yet. That would suggest that the users may have to pay something for it to ever reach its valuation, at least until the advertising world figures out how to monetize that audience. The five-year-old Twitter has 200 million registered users.

While it is possible that many, if not most, people might be willing to spend a small amount of money each to be part of the Twitter universe, that is still a huge step that few internet businesses have been willing to take.

Where does that leave the valuation of Twitter? The answer today is in the form of another question: “To whom?”.

For Google to buy it with their stock, it could easily be worth that much, much the same way YouTube was worth the billions Google paid for it. When you have some much future growth priced into a stock, that stock can be used loosely to do things that enhance the existing platform. Like YouTube did, twitter can create an even deeper, more engaged, relationship between Google and its existing users by buying it for Google stock. Simply put, it will give Google even more time with its users, which presumes that Google will use that time and engagement to extract more from those users, either directly of through increase advertising.

In the YouTube case, in just a few days after the acquisition by Google, Google’s market cap went up by a larger amount than the entire $1.65 billion pricetag for of YouTube. At that time No one was even close to bidding what Google did for the video sharing company. And ironically, at about that same time, Twitter was just launching.

Almost no one else has that kind of currency and that ability to extract value from a service. Google is in the business of engaging customers and it is facing a possible topping out of search, which to this day is the one product that makes huge profits. Google needs to continue to diversify to protect to continue its growth.