Quantcast had a very interesting recent post on their blog outlining how Apple, despite the amazing success of the iPhone 4, is losing share every month to Google’s Android smartphone operating system.
In fact, the trend is clear. It is just a matter of time until Android overtakes iOS (Apple’s operating system) in usage. If the iPhone 4 can’t hold off the charging masses of the HTC Incredible, Sprint Evo 4G (also by HTC) and the Motorola Droid X is it time to panic in Cupertino? Not quite. Just look at recent history – in fact – look at Apple’s recent history.
Here are two companies, Google and Apple, lead by some very smart people, falling into the same patterns that we saw in the mid ‘90s with the rise of the PC. Not that I need to remind most people, but when PCs went mainstream, Microsoft Windows won the battle. They went with a more open infrastructure, providing a cheap, inter-operable system for any PC manufacturer to adopt. With an aggressive pricing strategy and a developer-friendly focus, they quickly dominated the entire PC operating system market. Today, there are around 1 billion PCs running Microsoft Windows. It was a business success not seen since the time of the Gettys, Carnegies and Morgans. Sound familiar? That is Android’s business plan, only they are giving it away for free so Google can own the app store and keep the search traffic in network.
It is largely forgotten, but Apple was much more prominent than Microsoft when they started their PC ascendency. It was said that Apple could have owned the PC. But they chose not to. And it looks like they are going to make that choice again with smart phones. For all the smoke, an expansion of the iPhone to Verizon has been just that. Smoke. I have no doubt that Apple will expand carrier partnerships someday, but that will never be their focus. Their focus will be crazy tight integration of software and hardware with a best in class approach to smartphones, share be damned – just like they did with PCs. Why? To protect margin. Despite having a massively smaller user base than Microsoft, Apple is making a higher profit than Microsoft these days. And organizationally were ready for the next wave in MP3s and now Phones.
What do I take away from this? There are always multiple ways to “win” for our clients. Sometimes you grab the profits sitting right in front of you. But sometimes you need to look down the path and strategically give up near term “wins” for long term brand health (and profits). At times, business objectives need to look beyond this quarter or even year. Think about what success looks like before you make your first move. Until you do that you will rarely get there.
-- Chris Wexler, VP/director of digital media, smartphone addict, Compass Point Media
…not directly, but they are recommending an internet regulatory scheme that amounts to that. If you are a marketer and you haven’t read about the ongoing debate about Net Neutrality, it’s time to get acquainted with debate that is going on in D.C. right now. The NY Times has a good primer on the issue as it stands (http://nyti.ms/bITJ52).
The nickel tour of the debate is this: Should internet providers (e.g. Time Warner, Comcast etc.) be allowed to charge content providers (e.g. YouTube, Pandora, etc.) for using bandwidth of their networks in addition to charging consumers (e.g. you and me) to access the internet. Can the backbone networks charge for preferential content while relegating other content to the back of the line? To date, the corporate allegiances in this debate have been predictable – the big cable companies say they can regulate traffic (and charge for access) however they see fit, and the web-based services say no way. In fact, Google has led the charge of the freedom/net neutrality crowd. Until now.
On Monday Google and Verizon announced an agreement essentially cutting up territory like they were FDR and Stalin at Malta after WWII. The internet as we know it will remain free to all content equally (following the guidelines of Net Neutrality) but the mobile web and “new special services” such as internet-delivered TV would not be free and can be regulated by the network “owners.” On the surface this looks like a win for the cable companies since their biggest and most moneyed adversary has essentially waved the white flag on the future. And that is true, but Google has seceded the mobile internet, which many experts expect to be bigger than the current wired internet in terms of traffic by the end of the decade.
In my opinion, Google has flipped Net Neutrality and essentially said that new internet technologies will be controlled by the cable companies and other access providers more than ever before, but has protected the public internet as a fig leaf covering their corporate ambitions.
If this recommendation is accepted by the FCC, the future is a bifurcated world of a public internet that is free, relatively slow, and devoid of major investments in innovation and a series of private networks (like AT&T mobile, AT&T cable, Verizon Mobile, Comcast Cable, etc.) that will preselect which pieces of content flow fast and seamlessly into your life. Those private networks will have higher-income users and bring content that is pre-curated via corporate checkbooks. Do you think NBC might have an easier time getting streams into Comcast households? I’m guessing they will. YouTube might pay the way for the 10% of their content that they can monetize into the private channels and mobile and leave the other User Generated Content to load slowly on the ghetto public network.
“So what?” you say. Guess what, we as advertisers will have to be on those private networks – and all of a sudden our marketing budgets will have another mouth to feed – not just the content creators and distributors, but now the digital backbone that our brand messages have to travel across. The privilege of access to users will have just gotten higher for every CMO. Want to get on the iPhone? Pay your AT&T tax. Want to be on Hulu? Pay your Comcast tax. Slotting fees will move from the grocery store to phones and laptops. And we will have no choice but to pay up. Our marketing budgets easily get 10% less efficient if not more, just to be seen without interruption or at high quality. And don’t think this is just an “internet” thing – TV will be delivered this way and the tax will be there also.
The ambush of Net Neutrality is a blatant grab at the budgets of those of us who fund content that is delivered digitally. And that is all of us who do marketing. Really.
One other thing: this also signals that that Google is no longer as “Googley” in their view of the world. The Paid Search market is no longer growing leaps and bounds in the US and Europe and the fact of the matter is that paid search market simply isn’t as profitable for Google in El Salvador as it is in El Segundo, CA – the US and Western Europe drives their profits. Now that Google’s cash cow isn’t growing like it used to and they have struggled to make money with their other products (just how profitable is Google Docs?), they are turning to other tactics to protect their market position. In the end, Google is maturing as a company and they have done the calculus that it is better for them that eventual competitors have a barrier to entry than the even playing field that Google enjoyed when they started up and competed against Alta Vista. The cash generated by paid search today can protect YouTube, Android, and Google search from innovation not coming from Google in the future. Google gets the fig leaf of “saving” the public internet, but the truth is that net neutrality will reign on what will essentially become a later day AOL dial-up network. And Google is betting that the lack of Net Neutrality can be overcome with their bankroll and this will help ensure that they don’t go the way of AOL circa 1999.
Google has famously stated that part of their mission is “don’t be evil.” Is abandoning Net Neutrality evil? I’m not sure, but it looks like Eric Schmidt and Google’s investors seem to have drawn that line a bit differently than Paul Bucheit and Amit Patel initially intended. Eric Schmidt’s “Evil Scale” (http://bit.ly/cbCc1d) has tipped a bit further to the realm of traditional corporation and further from the rebel outsider position Google has fought for over the years. This is yet another sign that Google has been forced to grow up due to their status as a public company. It is just too bad for us as marketers, because it is our pound of flesh that they need to help protect their profits.
-- Chris Wexler, VP/director of digital media, Compass Point Media
Facebook’s takeover of the internet is good news…
…for brands with great products. In recent weeks, Facebook was integrated into their 250,000th site (http://bit.ly/aLimdo) . What does this mean? That ideas now have a nearly omnipresent channel to spread among friends. Now you will be able to see what Washington Post articles your friends are reading or what they are buying at Adidas.com. Why do we as marketers care? Because peer-to-peer endorsement is about to go to scale.
Remember the old joke “the best way to kill a bad product is advertising?” Facebook integration being ubiquitous means that our “targets” will constantly be in touch with their peers. If we create a great digital experience, there will be channels EVERYWHERE for people to find it. And even better, we aren’t interrupting, but their friends are introducing us. The flip side is that if we produce bad products and ads, their friends are going to bury us.
This is the challenge to all ad agencies and our clients: How do we change what we do to make it more socially viscous? We need to adjust how we think about talking about brands/products. Do we focus on providing utility? Value? Entertainment? Just blasting product attributes won’t get social magnification. And building our messaging without “social spread” eventually will be viewed as fiscally irresponsible. The interruption model is breaking down (showing its age for sure) – Facebook Connect and feature embeds are the first opportunity to communicate on a different level of scale.
I, for one, am excited.
-- Chris Wexler, vice president, digital media strategy, Campbell Mithun’s Compass Point Media unit
Today Compass Point Media served up a junk-free lunch on 27 websites nationwide. How? We secured an “ad-free lunch” (sponsored by Chipotle) on websites across the country today from 12-1 pm (local-market time) in order to reinforce Chipotle’s junk-free brand position. Tomorrow (4/23) websites TMZ.com and USMagazine.com will again be ad-free over the lunch hour nationwide.
Chipotle is striving to get Middle America to consider where their food comes from and how it is produced. In a High Fructose Corn Syrup world, Chipotle provides Food With Integrity. Whenever possible Chipotle serves naturally raised meats and locally sourced produce. They don’t even have freezers in any of their restaurants. Bet you didn’t know that. In fact, they have some of the highest food costs in the industry because of their principled, and delicious, stand on ingredients. This campaign literally is fighting the good fight on how America eats.
Nationally, we bought out all ad inventory on USMagazine.com and TMZ.com as well as 25 local sites in key Chipotle markets, including the Twin Cites’ own StarTribune.com. Blank boxes appear where the ads typically sit; they sport a small link to Chipotle’s Facebook page which, if you click, greets you with a message saying “We wanted to give you a break from junky advertising…”
Great example of how a strategic media buy can support a brand’s position.
