The fight is on for your entertainment dollars. What's the impact of the Web though?

Photo Courtesy Duncan 

It's the weekend of September 8-9, 2012 and I have had a chance to catch-up in some detail on technology news this past week. In addition, I had a chance to review my weekend entertainment choices. Despite my bias (of being in the consumer internet space), I thought the impact of the Web was an undercurrent in the expanding entertainment choices competing for our time and dollars. Consider the happenings just this past week....

TV

Jay Leno took a 50% pay cut as part of the 20% belt-tightening at NBC's "The Tonight Show". Looking deeper into the market dynamics behind these austerity measures, most late-night shows on TV saw viewership shrink by 5% from the previous year. Not surprisingly, advertising dropped as well to the tune of more than 25% across Leno and Letterman's late night shows. Why? While cable-TV shows and the DVR viewer habit increasingly have had an impact, it's clear that viewers are voting with some of their time on Web programming and online channels.

TV Comedy of a different kind....Viacom's cable channels that include Nickelodeon and Comedy Central have seen viewership drop by 29% at Nickelodeon. To maintain ad revenue, Viacom is increasing the advertising time by over 9% over a year ago. This is a established yet controversial short term adjustment technique in this industry. The difference now though is the growing availability of internet video. Should viewers get impatient with ads, they can turn off their TV and turn to the web. For example, Nickelodeon's "SpongeBob SquarePants" can be watched commercial-free on Netflix.

On a slightly different but TV related note, investors are buying small, struggling TV stations in major markets for the value of airwaves or spectrum. Two impacts of the internet playing out here. One, the strategic acquisition of airwaves are targeted towards addressing the bottomless demand for wireless broadband services. Two, competition from the Web is one of the primary reasons cited for the struggles and often demise of the small TV stations.

Movies

Turns out, the summer box office was less than spectacular with a movie "The Oogieloves in the Big Balloon Adventure" having an all time worst opening in 2000-plus theatres, attendance being the worst since 1993 in North America and overall a summer box office down 2.8% from last year. The speculation is many factors contributed to this decline including the Olympics, the economy, the Aurora, Colorado tragedy but no doubt, newer online channels and web programs had an impact.

In the movie streaming business, this past week, Amazon bolstered its movie streaming offering through a multiyear licensing deal with cable channel, Epix. This deal will bring a set of popular films like "Iron Man 2" and "The Hunger Games" from several major studios like Lions Gate Entertainment, Paramount Pictures, MGM Studios. How big is video-streaming? According to the Wall Street Journal, Amazon subscribers have access to 25,000 TV shows and movies, Netflix about 50,000, Hulu more than 58,400. Is that enough entertainment for you?

(Streaming) Music

Apple is reportedly jumping into Radio and it looks like iTunes users will be able to create their own virtual 'radio stations' along the lines of the Pandora, Spotify etc. Regardless of the consolidation and competitive battles ahead, and the problem of the high music licensing costs, one thing is clear. Online music services are here to stay and serve as an increasingly valuable revenue source for record companies. And here is the challenge to terrestrial radio (traditional radio). If as reported, Apple is successful in negotiating past restrictions to online radio such as a current ban on playing a given song too frequently, online radio will become more of a direct competitor to terrestrial radio.

Multi-Screen

I am a big believer in the potential of the 'Second Screen' products/emerging segment. A decent explanation by wikipedia can be found here. In essence, we are increasingly watching TV with an accompanying 'second screen' device mostly a tablet or smartphone thus increasing our social engagement (Tweeting, FB posts etc.) and deeper consumption of the content - "What song was that?" "What location was that?" "What shoes is she wearing?" "I have to share this play with my buddies" etc. etc. This past thursday, MTV introduced a new type of multiplatform ad service called Reverb whereby a Pepsi commercial will appear simultaneously on TV, MTV's website, or an MTV mobile app. No escaping! While the "Second Screen" is largely a social media phenomenon, the increasing impact of the online world on the traditional media of TV is compelling.


Books

A new e-book pricing landscape is on the way and if you are a consumer, it's the good kind. E-book price cuts from three leading publishers are only a month to three months away. How low are we talking about? One past indicator, Amazon had priced e-book best-sellers at $9.99 before 2010. Not an internet phenomenon per se but definitely e-commerce impact.


There you have it. All within the past week. What's ahead of us?

• Second Screen Growth. More interaction with TV content through your tablet or smartphone by apps and more context-based advertising. Not just subtle product placements like Cameron Diaz's Christian Louboutin red-soled shoes in the movie "Bad Teacher" or Daniel Craig's Omega Seamaster watch in his James Bond portrayals. But increasingly, through your second screen, this is the model he/she is wearing in this scene and here is a pointer to merchants where you can get one of your own.

• More lobbying and court-room drama. Expect players like Pandora and now a heavy-weight like Apple to aggressively seek assistance to solve the high royalty costs that are weighing on the net radio business model. 

• The exclusivity of ESPN or HBO as a cable only offering will crack under market pressure. Alternate offerings will evolve for streaming services especially for the newer generation that grew up without ESPN. 

• Entertainment coverage such as listings will evolve to include original web programs. For example, this friday's Wall Street Journal covered the 2012 fall season from a traditional media/entertainment standpoint i.e. theatre, movies, TV, Art, Books and Music. Some day soon - a listing of upcoming web offerings in articles such as the before-mentioned WSJ article.

Want to make your App Sticky? Look no further than yourself. Nine traits that drive app engagement.

Be engaging! This is often the stated criteria for apps. Easier said than done. Actually, if you are looking to build or grow a business, the bar is even higher. A few weeks ago, in my Twitter feed, I saw a reference to a Fast Company article that described John Lilly's "first filter" investment criteria. John Lilly is the former Mozilla CEO who joined the prominent VC firm Greylock in 2010. The article described his guiding principle as "Lately I obsess about whether a product can be one of the 20 icons on my iPhone homescreen," he says. "That's my essential question right now." 

Utility and relevance are the table stakes component of an app-based business model. If I look at the current list of Top 25 apps in my smartphone app store, beyond the game apps, SMS-alternative apps, organizer apps, flashlight app etc. are some of the top apps. Clearly, utility and relevance play a big role. But beyond the app providing utility to us, what drives us to return to our apps? Think about it. You are standing in the line at an amusement park ride, at the DMV etc., you are bored or even panicky about unexpected 'empty' downtime, so you pull out your mobile device... What top 2-3 apps do you visit? In this scenario, utility is not the factor in your choice. Stickiness is. Successful apps are sticky, they engage users and this engagement is deeply rooted in our traits. And by appealing to our inherent traits, apps can compel us to keep us coming back. Let's take a look at nine traits that drive app engagement.

Serendipity - We love desirable discoveries by accident. My personal examples are discovering long lost high school classmates through Facebook's " People You May Know" feature or getting back in touch with former colleagues through LinkedIn's "People You May Know' feature. Or the more exciting nature of discovery through Twitter's public conversations and hashtags. In reality, serendipity in apps is not really an accident. By sharing our address books, educational and employment information and in general declaring our interests, this sort of discovery is expected and only a matter of time. In this Tech Crunch article, Henry Nothhaft, Jr. provides a discussion of the dimensions of serendipity and argues that serendipity is not really accidental. But, again, even if anticipated, these desirable discoveries are fun and keep bringing us back.

Personalization - Me, me and more me.  Whether the Pandora model of providing the name of an artist, genre or song and enjoying the personalized radio station or actually the ability to set up multiple personalized stations. Or the recommendation engines that Amazon and Netflix offer such as It's "Your-Name-Here's Amazon". Or personalized news/content apps or declared preference-based news discovery apps. There is a reason why people love to hear the sound of their own name. Apps that target this gratification are sticky.

The effect of Social Proof. The obvious phenomenon of the social network and the outstanding success of engagement of social media apps is well understood. Instead, I will attempt to offer how an app can tap into emerging themes or consumer preferences derived from social influence. For example, there is increasing comfort with location services such as social check-in found in social media products like Foursquare, Facebook etc. As individuals, we are nervous about declaring our location because privacy and security considerations are in the back of our minds. However, since there is a trend in increasing user comfort around declaring location, I believe we are relying on social proof and are influenced by those we consider similar to ourselves. Tap into the trait of social influence to determine influence trends and drive app engagement.

Reputation Scores and Gamification.  Gamification here does not refer to apps of the enraged feathered animals variety. Rather it refers to the application of game design techniques and game mechanics to a non-game context such as in this case, business. If winning doesn't matter, why do they keep score? This quote is attributed to the football coaching legend, Vince Lombardi. We are inherently competitive in nature and the social effect draws out this trait even more. For example, apps like Klout generate engagement by providing changing social media impact scores, the encouragement to share these scores and a view into the scoreboard that includes people in our network. Like us on Facebook. Really? Engage users by having them participate, leverage their expertise, provide them reputation platforms for their achievements and make them the hero.

Aesthetics - Looks Matter. Apps that are visually appealing and a delight to use are sticky. Since beauty lies in the eye of the beholder, I won't cite a specific example. However, I will suggest that the evolution and competitive dynamics of map apps are a good example of how visual dimensions of realism, the excitement of viewing places/roads less traveled, delightful performance etc. can make the difference between active engagement and simple utility. Mapping apps are thus increasing engagement on top of the utility they already provide. 

Out of Sight, Out of Mind. Push notifications, intriguing updates, well timed digests bring users back. Even inactive users (termed lurkers) on Facebook will act on a birthday notification. If you learn through a LinkedIn digest that a colleague changed a job, you are tempted to go back to the product to learn more about her new company. Breaking News on Twitter is another example. The 2012 Olympics will be underway soon and real-time updates are what we will consume versus the primetime television based consumption patterns of the past. Give your users the opportunity to set preferences and you have an endorsed mechanism to engage with your users!

Our Stuff i.e. Data. Apps that provide utility by storing our data such as cloud apps are also naturally sticky.  At one level, social media apps are a rolodex and address books in the cloud. When we need to reach someone in our network, we are drawn to engage with our social media app. File sharing apps like Dropbox is another example of utility apps that drive engagement through providing a home for one of our key possessions i.e. our data. Provide your users with a 'locker' and they will come back to check in on their 'stuff'.

Scarcity - There is a human desirability associated with scarcity. As Groucho Marx said, "I don't care to belong to any club that will have me as a member". Whether is an invitation only membership mechanism of Pinterest or a LinkedIn group that will have a maximum capacity/membership limit or providing early access to new releases for a sub-set of users. If it is scarce, we want it! By promoting the relative scarcity of elements of your app and business offering, you can enhance its desirability.

Sense of Community which often translates into the business model of crowdsourcing. Beyond the social connections of our private social circles of friends and colleagues, a bond that unites us is a sense of community based on shared interests and emotions. Find the community's common denominator. Build your business around concepts that people already care about emotionally. An app like Waze draws upon this sense of community to unite strangers with common interests. I also believe there is an undercurrent of anti-establishment/rebellious trait that drives people to contribute information on speed-traps to the community.

There you have it.  The above is not intended to be a top ten list. Nor is it intended to be a comprehensive list of all traits that drive app engagement. Rather, the traits I described above are influences that I am intrigued by and believe can be leveraged as marketing practices to drive higher app engagement.

Is the era of the bag-carrying sales rep over? The future of sales in the technology industry

A couple of weeks ago, I attended the annual TieCon 2012 event - a technology oriented conference in the Bay Area which saw many distinguished speakers and up-and-coming leaders offer thought and opinion on the latest trends and what's ahead in technology. During this two day event, I observed that a panelist made a statement to the effect that the era of the bag carrying sales rep was over. I believe his reference was to the growing trend of the freemium  model whereby a product is given away for free with the potential to upsell follow-on premium services. The assumption is that customer acquisition costs are reduced because of the experiential component and the associated advantages of word of mouth, social and referral networks, viral marketing etc. What role then would sales play in the future if we were to gravitate to this business model? While the success of many companies at the conference and at large e.g. LinkedIn, Yammer, Box and even my children's Angry Birds and other game freemium apps lend credence to the panelist's statement, I thought of the major technology trends and market inflection points underway and how they would impact the Sales function overall.

First, the trends of the Freemium model and online marketing - let me address both together since they are related. The freemium model simply means that the evaluation phase of the sales cycle is accelerated and the salesperson is liberated to focus on the other components of the sales cycle like purchase and post-purchase. If the online marketing channel were to obviate the need for sales, the assumption then is that the sale is solely a transactional sale with no consultative component. In many ways, the sales effort or role is about creating extrinsic value for customers i.e. creating value beyond the product value alone. Even before the advent of online marketing, sales personnel had little role to play in a purely transactional sale, so how does online marketing now obviate the need for the sales component? I would actually expect the sales function to evolve to take advantage of the accelerated sales cycle and the opportunity to focus on the consultative component of the sale. Why? Because of the 'timeless' concept of the 'whole product' in technology, there will always be a need to help customers acquire and complete the remaining components of the 'whole product' that complete the freemium, online offering, base functionality product. Partnerships will need to be developed, knowledge needs to be added, services need to be assembled etc. Sales can continue to play a big role if they focus on the 'whole product' sale.

Second, the trend towards the simplification of IT - the premise that we have gone overboard in a bewildering array of features, tools and functionality at the expense of ease-of-use, usability and simplicity. Regardless of the target market segment, it seems that we offer a Swiss army like spread of tools to address a single specific need. This is manifesting itself in the increasing demand for the elegance of self-service applications and the demand for the simplicity of consumer apps like Facebook in the enterprise. On the trend towards simplicity, the development of base functionality by cloud providers to address a broad user base, the trend towards faster development cycles and iteration based on user experience and feedback etc., what might be the impact to the sales function? I would anticipate that the role of the sales function around customer engagement and customer intimacy would increase significantly given the ongoing need for customization and the feedback that would result from the iterative nature of this model. Again, the thinking I applied above to 'whole product' applies to this trend of the simplification of IT as well. Simplification will enable business agility but the demands of customization, iteration and solution completeness will engage sales deeply.

Third, the consumerization of the enterprise. The most evident impact of consumerization of IT is in the phenomenal popularity of consumer-centric mobile devices like the iPad and how users have brought their personal/consumer devices into the workplace and influenced IT to support and address this need. This is not a trend anymore but a reality! Self-service app stores in the enterprise is another trend. This is a broad topic so I'll address the trend of social media in the Enterprise. To the sales function, this manifests itself in three ways; (a) Building a social media reputation and presence proactively; (b) Seeking out social media forums to build 'social intelligence' on customers and establish newer touchpoints with customers and (c) Using social tools built for the enterprise to collaborate at new levels with colleagues/partners and accelerate knowledge sharing. This area of social media is probably the best impact to the sales function in terms of change and opportunity. I would expect the sales function to evolve and for successful sales personnel to quickly embrace these forums and tools because sales folks have long understood and used the power of leverage. Second, in published analysis of the profile of successful sales person, being 'social' is a key attribute - Why would successful sales people be behind in embracing social media?

Fourth, not the trend but the established momentum of cloud computing which refers to the momentum in the delivery of IT as a service leveraging resource sharing to achieve economies of scale. To the end user, the key promises are business agility and cost structure benefits. If you are in sales working for a service provider, your challenge is only how to maximize your time to take advantage of the massive opportunity. Of course, there is some change and education that needs to be done to win over skeptics but the market momentum is in your favor. If you are in sales selling traditional on-premise IT solutions to customers, then much change is to be expected. You will have a new channel to market - the service provider.

Fifth, Big Data. It looks like data got very big over the past year! I speak with humor because having worked in the storage industry for multiple years, the volume effect of data explosion is not new and was never looking small. However, what is new is the recognition of the other dimensions of big data such as data diversity and the promise of harnessing data to drive new business insights. When I worked in the storage industry, our top sales personnel took it upon themselves to monitor and understand the machine data that was generated by 'call-home' technology because they wanted to understand the impact to their customer's systems especially problem detection, resolution and account intelligence. What a concept! Big Data will be no different. Overall, the implication is Big impact to Sales. Sales personnel will need to accelerate their education on the newer insights into their customers and newer sales analytics tools that will shape salesforce structure, design and strategy.

The more things change, the more they stay the same. Sales has been about people selling to people - in past studies, trust and problem solving are cited among the top three factors of value that customers attribute to sales. There will be newer complimentary forums to build trust such as LinkedIn Groups but the golf course (or in my case, the squash courts) won't go away. Similarly, successful sales personnel have long understood the power of leverage. A top performing sales rep once told me that EVERYONE in the company worked for his account. This was not an arrogant view. Rather, my sales colleague understood the power of leveraging the entire company not just his immediate circle. So, good sales personnel will understand and add social selling tools to their arsenal. Remember, consultative selling? Before we move on to Sales 3.0, there will be newer and more bewildering options available to customers through online channels and newer business models. This means that sales will (continue to) have a big role to play in consultative selling and adding value beyond the base product value available in freemium format, online channels and base functionality.

What will then be transformational changes? For one, the number of touch-points to the customer will increase dramatically. Furthermore, the touch-points to the customers will exist in multiple functions across the  selling company and will include partner touch-points such as cloud service providers. Therefore, the notion of sales having 'full customer ownership' will be flawed. Sales personnel who continue to prescribe to 'account ownership' will be challenged. There will be transformational change, for the better, to the sales-marketing traditional silos and misalignment. Through Big Data advancements, sales will have democratic access to market intelligence and will play a bigger role in strategy. Marketing will have much  more and direct access to the customer and previous inefficiencies in the customer information flow between sales and marketing will be much improved. Finally, much is being written about this but there is compelling evidence of the shift of power to the customer through social media and unprecedent access to information. I prescribe to the more balanced view that the era of sales-customer joint destinies is almost certainly upon us.