The importance of narrative in business

We've talked about the importance of a simple and easy to communicate story in politics. Today, the New York Post notes that Microsoft's lack of a similar easy-to-repeat narrative for their business at their analyst day last week is leaving their stock price stagnant. No surprise, but interesting to see the Post observe the effect.

Technorati Tags: Marketing, Microsoft, Stories

Who is more efficient, Apple or Dell?

I asked the question yesterday, "Who will be the new tech leaders as the old ones fade?" Well, we didn't get a lot of answers from the market today we hadn't already noted. But we did get confirmation of one we already knew: new leader Apple's market capitalization of about $56 billion eclipsed old guard Dell's $50 billion for the second time.

Google Finance and Reuters provided me with a bit of insight in that comparison that I hadn't realized though. Guess which company is more efficient as measured by revenue per employee? If you guessed Dell because of their efficient manufacturing model, you'd be wrong. Dell makes only about $870K per employee, whereas Apple is up around $1.3 million per employee. And in terms of net income, Apple is about double the efficiency of Dell. No wonder their market cap is bigger.

I'll dive into the details of why this is so next week if readers are interested; leave a comment if you are.

And by the way, don't feel bad if you guessed wrong. Dell marketed its efficiency for years as part of its corporate story. Apple doesn't do that as much. Your impressions of a company are molded more by narrative the company tells than by most detailed analyses. Why? Because it's easier to tell a quick story at a party than to pull out a spreadsheet full of numbers. Stories get passed on and remembered better than the numbers. And no one goes back to check the numbers they heard at a cocktail party; they just remember what they heard. Call it cocktail buzz marketing, if you'd like, but it definitely works.

Full disclosure: I own some Apple stock.

Technorati Tags: Analysis, Apple, Business, Dell, Financial analysis, Stocks

Microsoft notes Zune's red ink to come

Microsoft just opened its analyst conference today, and the Wall Street Journal notes that the company will spend hundreds of millions of dollars on its Zune line of products in coming years. We'd noted the same when we got wind of Zune last week, but now it's from the horse's mouth. Oh well. It's just the shareholders' money. Which, of course, they just wasted some of by pre-announcing the product.

Technorati Tags: Marketing, Microsoft, Zune

WSJ notes slow tech growth

After my article yesterday about Microsoft's stagnation, today's Wall Street Journal article about the largest technology companies resigning themselves to slow growth seemed to reinforce the point. It notes that Oracle, Dell, HP, Intel, and Amazon are seeing similar slowing in their growth and profits. It also observes that when the giants slow down, it makes room for other companies to shine:

The current downturn, like past ones, is likely to produce a new set of winners. The success of consumer products such as cellphones and digital music players has already helped companies like Apple Computer Inc. and chip maker Qualcomm Inc.

That's two leaders. My big question is, what others?

Technorati Tags: Amazon, Business, Dell, Hewlett Packard, Intel, Oracle, Technology

Why both The Long Tail and The Wall Street Journal are right

Lee Gomes at the Wall Street Journal today writes that Chris Anderson's Long Tail effect isn't as big as he claims.

Let's start this discussion where Mr. Anderson starts his book, with his discovery of what he calls a paradigm-changing statistic. In the introduction, he tells how he learns from Ecast, a music-streaming company, that 98% of its catalog gets played at least once a quarter -- much more than most would predict.

This "98 Percent Rule," as Mr. Anderson names it, suggests the remarkable prospect that no matter how much inventory you put online, someone, somewhere will show up to buy it. He writes, "Everywhere I looked the story was the same. ... The 98 Percent Rule turned out to be nearly universal."

Except it's not. Ecast told me that now, with a much bigger inventory than when Mr. Anderson spoke to them two years ago, the quarterly no-play rate has risen from 2% to 12%. March data for the 1.1 million songs of Rhapsody, another streamer, shows a 22% no-play rate; another 19% got just one or two plays.

Chris as refuted the article's statistics on his blog. However, I think there is actually some value to Lee's observations because of what I call the excess choice rule:

Long Tail effects are directly proportional to how much help the user gets in overcoming the tyranny of too much choice.

This makes perfect sense if we think about the challenge of finding what we want in Amazon's 1.5 million book selection. No one is going to browse through that collection in any meaningful way -- there are just too many choices. That's why even small book shops have displays and end caps to promote various books; they help direct readers to books they want to promote. It makes choice easier.

So what does Amazon do to avoid tyranny of too much effects? It uses several tools. One is promoting books on its home page. But another is its powerful collaborative filter recommendation engine that links up related books right on the shopping page. And it hits consumers again with recommendations based upon their shopping carts. Those recommendations drive long-tail consumption.

So why isn't Rhapsody seeing these types of effects? Take a look at its home page, and it's easy to see why. Most of the space on the home page is hits-based. Top artists, top radio picks, most popular lists dominate the space. Guess what -- they see a hits-based distribution. And by the way, iTunes isn't much better in this regard, so I would expect a fairly hits-based distribution there as well. In fact, it is only this year that iTunes introduced its own collaborative filtering system to recommend songs based upon what you've bought.

So is the Long Tail true or not? Just as with many technologies, it depends on how well it is marketed to its users. Companies that use technology to drive long-tail consumption will reap long-tail profits. Those that pretend a big catalog is just fodder for a top 10 or top 100-based list won't. Even in a long tail world, the key is helping consumers cope with a tyranny of too much choice. And whether you use technology or top 40 lists, that's marketing.

Technorati Tags: Amazon, Business, Consumers, iTunes, Marketing, Music, Rhapsody, The Long Tail

The attack of the unstoppable toys -- and why Microsoft won't bounce back

A flurry of stories about Microsoft recently got me thinking today about computer history. First was the story today in the Wall Street Journal about Is It Time to Dump Your Desktop?. Another was the recent revelation that Microsoft is developing its own Zune music player and is creating yet another music store to compete with iTunes. Another was about how Google's new spreadsheet service could ultimately dent Microsoft's Office business. And then there was this compendium of articles about Bill Gates stepping down and another marketing executive leaving. These stories seemed to be saying something, but no one told the whole story. And then it hit me.


Microsoft is about to lose the software business the same way that IBM lost the PC business in the 1980s.


Now for those of you who didn't live through it, a quick refresher. In the 1980s, it wasn't Microsoft who dominated PCs, it was IBM. The IBM PC was the fastest selling product IBM ever had, and it was the gold standard for desktop machines. But even so, MIS departments (Management Information Systems organizations, what IT was called in those days) still called PCs "toys" and snidely thought that they would never be able to handle "real" work like their IBM mainframes and minicomputers, IBM planned to change all that with OS/2, which would be its best and most compatible system. And best of all, it would work seemlessly with the rest of IBM's systems and be supported by the IT department. It was complex and needed the latest and greatest hardware (the IBM PS/2) to run, but it worked.


Trouble was, OS/2 was too late. The PC "toys" powered by Microsoft software took over they could be bought off the shelf and snuck into the business without the approval of MIS. And despite the fact they were less capable, no one except MIS cared; they did the job for people who wanted to do a few simple things and who couldn't wait for MIS. And the PCs got better and better until they MIS had to embrace them or become irrelevant.


That same process is happening right now, except this time, it's Microsoft and Microsoft-centric IT departments calling Internet services and non-Windows PCs toys. They call Google's spreadsheet a toy that is nowhere as powerful as Microsoft Excel. They insist Apple's Macs will never be accepted in corporations. And they insist Linux is just too difficult to work for real business. And besides, Windows Vista and the new Microsoft Office -- complete with a completely new interface designed to befuddle users used to the old one -- will work so much better and more seamlessly with all other things Redmond. Everyone just has to upgrade, and life will be grand.

The only problem with Microsoft's story is that just as with IBM's story in the 1980s, there's now competition from "toys". The "toys" made by competitors just do stuff that users want. And they do it fast. And the users vote with their dollars.

Look at Apple. In the time since Windows XP was released, Apple has released five versions of its Mac OS X operating system, which, of course, run on Macintoshes, computers IT considers toys. Each one has gotten better than the last. Today, if you go to a developer's conference, the cool kids have Mac OS X laptops. Why? They evolved faster than Microsoft-powered laptops, to the point where both the laptops and the OS are fashion statements.

Or look at Google. Last week, it reported that it doubled profits this week to more than $700 million for the quarter, most of it from advertising on search results and its ad network. Microsoft keeps saying, "we'll be there with a better search and ad network soon, despite the fact that it is more than five years behind Google with customer experience. How many iterations has Google's Adsense been through in the meantime? A lot. How many people are waiting for Microsoft and expecting it will hit it out of the park with its first try? Not a lot.

The reality of Microsoft is that only two products, Office and Windows, bring in 90% of its revenue and all of its profits. And the toys are slowly destroying the monopolies and value of both those franchises. You don't need Windows or Office to build a spreadsheet with Google Spreadsheets, edit a document with Writely, build a Web page with Google Pages, or collaborate online with Skype or Gizmo. Nor do you have to pay for any of them. Which means that Microsoft's revenue is under attack.

With toys attacking its cash cows of Windows and Office, what is Microsoft doing? It me-toing the toy companies. The XBox 360 is attempting to catch up to Sony, the company that launched 100 million Playstation 2 consoles; XBox 360 has shipped five million in eight months. Today, Microsoft confirmed that it will build it's own Zune music player, in an attempt to catch up with Apple's nearly 60 million iPods. And both businesses will lose money for years, depending on the Windows and Office cash cows -- yes the same cash cows being attacked by the toys -- to support them. Just this quarter alone, the home entertainment business unit at Microsoft -- home of both XBox 1 and Xbox 360 -- lost nearly half a billion dollars.. On a yearly basis, that division has never made money.

Think Microsoft has something in the labs that will pull it through? Here's a test: name three technologies that Microsoft has deployed and profited from in the last five years, when it has invested more than $20 billion in research and development. For $20 billion, you'd think at least one of those toys would have made it to market.

Now some have said that Microsoft can always buy its way into a market with its billions of dollars in cash. That sounds possible, but history doesn't support that theory. IBM wasn't able to buy its way to being competitive in minicomputers. Microsoft hasn't been shy about throwing money at AOL-killers (MSN), iTunes-killers (URGE, MSN Music, and countless others), and Yahoo Mail-killers (HotMail). None of the Microsoft efforts have yielded profitable businesses, despite multi-billion dollars investments over time. In fact, it's hard to find any example of buying into a market yielding a profitable long-term business. Subsidies kill innovation.

Microsoft suffers from a classic case of American obesity. It is too rich and comfortable to move quickly and win in new markets without its monopoly to prop it up. The two monopoly products that fund Microsoft's are falling subject to David Pogue's software paradox: "if you upgrade software enough times, you eventually ruin it." Meanwhile, the hungry toy makers are running fast to deliver new solutions, make profits, and steal Microsoft's customers.

Microsoft is not alone in seeing its business hurt by more nimble competitors. Just last week, the stock market bruised Intel, Dell, and Yahoo for similar reasons. But Microsoft is alone in not employing the billions of dollars in its cash horde to create new profitable business value. It even admitted as much by announcing a stock buy-back program. You only buy back stock when you can't earn more using that money in the business. And with 10 billion shares outstanding -- one and a half or every man, woman, and child on earth -- even the $20 billion allocated to the stock buyback will only delay an inevitable decline.

The Bill and Melinda Gates Foundation will spend billions this year to cure disease throughout the world. It's a tragedy that the company that created those billions can't cure the disease within itself.

Update: This article is now featured on SeekingAlpha.com, and just hit TechMeme.com. Now the question is whether it will hit the front page of Digg.com -- so far it only has 10 diggs. And by the way, in the interest of full disclosure, I do hold a small long position in Apple stock, but otherwise have no positions in any of the companies mentioned in this article.

Technorati Tags: Apple, Google, IBM, Microsoft, PCs, Toys, URGE, XBox 360

Sony ramps up new 1080p LCDs as well as new ads

[Sony KDL46XBR3 Bravia LCD television]



We noted Pioneer's new 50" 1080p plasma last week. So it's only appropriate that we also note that Sony now is allowing pre-orders of its new XBR2 and XBR3 film-definition (1080p) LCDs at its SonyStyle store. Further, Sony is ramping up production of a new ad series involving paint, just as last year's Sony ads involved bouncing colorful super-balls down the streets of San Francisco.

Now purists will argue that plasma produces a better picture than LCDs, but all it takes is a quick look at the picture above to see that these are going to be desirable products. And the fact that Sony is selling custom bezel colors for the series indicates that it understands that flat-screen TV is as much a fashion statement as technology. That's marketing: finding the hidden consumer need and fulfilling it.

Finally, is it just me, or does the picture above look remarkably like Apple's current Cinema display series? Coincidence?



[Apple 30-inch Cinema Display]

Technorati Tags: 1080p, Advertising, Apple, Bravia, Flat Panels, HDTV, LCD, Marketing, Plasma, Sony

The irony of The Long Tail Hit

We previously noted that The Long Tail mania began last week, with the publication of Chris Anderson's book of the same name.
The Long Tail. Well, the Long Tail debuted on the New York Times best seller list at #13, and it is already #14 on the Wall Street Journal one (and has moved to #6 as I write this).

So a book about the demise of hit movies, songs, and books, appears to be, well, a hit. Just shows that even business books can have their own ironies.

And by the way, it's well written and worth reading as well.

Technorati Tags: Books, Business, Marketing, The Long Tail, Tyranny of too much

Coming Zune: Microsoft's xPod

[Image from comingzune.com viral marketing Web site]



BillBoard magazine has the scoop, but it's covered in the Wall Street Journal late on a Friday evening too. Microsoft will launch a digital music service, player, and brand called Zune. You can see a viral marketing site at ComingZune.com, but all you'll see is a cartoon and some music. The initial device won't be PlaysForSure compatible in favor of creating a more seamless consumer experience.

Michael Gartenberg of Jupiter Research notes:

Bottom line, when Microsoft decides to enter a market, you can't ignore the impact they will make. It's likely that by force of will and spending lots of money on marketing with a high cost of acquisition on new users, they will can capture some market share.

Ummm. Right. Microsoft spent in excess of $10 billion on MSN, and it hasn't really made a dent in Yahoo or AOL. And it's working on similar results in XBox 360 land, where it lost $1.3 billion last year promoting a platform on which it loses more money the more units it sells.

And the marketing thing? Credit where credit is due, the concept of buying out people's iTunes music collections certainly will certainly reduce consumer reluctance to switch. But pre-announcing the product two months ahead of introduction is never a sign of a good marketing plan. That's strike one against the program, and it isn't even up at bat yet.

If you want more details, Engadget, which is rapidly turning into the all-Zune channel, has more data than most.

All I can say is, now we know why Microsoft notified Wall Street that it was going to be spending more money this year. This program has red ink written all over it. Just do the math: how many songs does Microsoft have to sell to make up for the R&D, marketing, and launch costs when it is fighting an entrenched competitor that has 70% market share?

Full disclosure: I have a small position in Apple stock, but that doesn't change the math or the marketing blunder.

Technorati Tags: Apple, iPod, iTunes, Marketing, Microsoft, Music, Zune

Apple beats even our projection on earnings

As I noted earlier, Apple's business performance was bound to exceed Wall Street expectations. But more impressively, it exceeded even mine. I had predicted Apple would earn $0.48 per diluted share on $4.4 billion in revenue. The company actually earned $0.54 per diluted share on $4.37 billion in revenue.

Where did I go underestimate Apple's performance? I hadn't expected Apple to dramatically improve its gross margins to more than 30%, given that it already boasts some of the highest gross margins in the computer business. Also, the company sold even more computers than I'd modeled.

All that said, I'm still expecting Apple to earn about $2.19 for its fiscal year. That feels pretty solid since Fiscal 2006 doesn't include the Christmas selling season. And I expect Apple to have a very merry Christmas indeed.

Technorati Tags: Analysis, Apple, Finance, Financial analysis, Marketing, Stocks

Sony's Playstation 3 starts production

[Sony's Playstation 3 conceptual designs shown at the 2006 Consumer Electronics Show]


According to Forbes, Taiwan's Asustek Computer is delivering the first Sony Playstation 3 consoles to Sony this month. Initial production goals are about 200,000 per month. The contract is for four million units, of which two million are expected by October. If you do the math, that is an extremely aggressive ramp-up. Hon Hai is also expected to begin production as well, and rumor has it Foxconn will be pulled in as well.

Readers will remember that last year at this time, developers were just getting their first beta units of Microsoft's XBox 360. If these units being delivered to Sony are in fact production units (something we don't actually know), Sony is far ahead of where Microsoft was last year in its production curve for Christmas 2006. If these units are simply production prototypes, Sony may be in about the same shape as Microsoft.

All this said, Sony faces the same issue that Microsoft did last year: IBM's production capacity and yields. However, IBM has been making the Cell chip far longer than it had Microsoft's chip last year. That should help with the yield problem.

Our prediction: Sony will enter the Christmas selling season with about two million Playstation 3 units to sell, and, just as with Microsoft, they will sell out even at its higher price of $599. The open question is the quality of the Sony Playstation experience delivered, both by the platform and by the initial launch titles. Despite Microsoft's hopes for a flop, our bet is that Sony's marketing will be fairly conservative and polished, resulting in a good but not crazed launch. And the higher price will boost demand for both Sony's XBox 360 and Nintendo's Wii platforms, both of which will be in the market as well. As we noted last year, first place will go to the company that markets and executes on its plan with the fewest errors. Our money is on Sony to do exactly that.

Full disclosure: I have no positions in any of the companies mentioned in this posting.

Technorati Tags: Games, Gaming, Marketing, Microsoft, Nintendo, Playstation 3, Sony, XBox 360

Expect some upside on Apple earnings today

Apple Computer reports earnings at the close of business today. Overall consensus analyst estimates are for the company to earn about $0.44 a share on revenue of $4.4 billion for its fiscal Q3. However, when we plug the numbers into our financial model, we see pretty different numbers. I come up with the same $4.4 billion, but I believe that Apple will earn about $422 million in profits, putting basic earnings at $0.50 a share, and diluted earnings at $0.48.

Why so optimistic? The numbers I have are driven not by iPod sales, but by Intel-based Macintosh sales, specifically MacBooks and MacBook Pros. Go to any software developer conference nowadays, and MacBooks and Powerbooks are rampant; some have even gone as far as to say that Apple laptops now are the platform of choice for developers. This will be the first full quarter of MacBook Pro sales, and the MacBooks were available for about half the quarter. I expect those sales to come in above most analyst expectations.

One other factor we shouldn't overlook is the power of Apple's retail channel now. Apple's showcase store on Fifth Avenue in the midst of names such as Tiffany's and Bergdorf's defines how the company has become a fashion icon as much as a technology company. The company invested in those stores when everyone said that it was the dumbest move in the world. Why? Because it allowed Apple to market itself in ways no partner ever could. Today earnings will allow Apple to demonstrate the hard business results shareholders get for those marketing investments.

Technorati Tags: Analysis, Apple, Financial analysis, Marketing, Stocks

Pioneer ships first 1080p 50-inch plasma

[Pioneer's 50-inch 1080p plasma display]]


I4U News claims that Pioneer has begun shipping its
PRO-FHD1 50 in. Plasma Television, and at least one New Jersey retailer appears to be willing to sell you one for a cool eight grand. Now our prior coverage of this product said that these were only going to Europe; perhaps marketers at Pioneer saw an opportunity to sell more in the US while Europe is on vacation in August.

While we'd be the first to say that competitive differentiation through geeky specifications is a poor marketing strategy, this panel does have a very impressive data sheet. The press release states that the panel's image is made of up the smallest pixels -- only 0.576 millimeters -- ever created on a plasma display. But we have to give credit where credit is due: the press release does try to translate these specs into real life with this quote:

"Some say it makes it easier to tell when the lead actor takes a break and lets the stunt double take over."

I'm not sure it's worth four grand, but it is at least an attempt at differentiation in the user's context. Now all we need is some 1080p content for viewers to look at.

Technorati Tags: Flat Panels, HDTV, Marketing, Panasonic, Pioneer, Plasma, 1080p, TV

Dude, Dell's dumping the rebates

Dell announced yesterday that it will sharply cut rebate promotions after its customers complained about them. The story tells it all:

Dell said it expected to reduce the number of promotions for U.S. consumers and small businesses by about 70 percent per product line. Promotions tied to a single product would fall by 80 percent, it said.

The reductions will be implemented over 12-to-18-months, beginning in August with the Inspiron notebook computers and Dell televisions.

"People hate rebates," said Cindy Shaw, an analyst at Moors & Cabot Capital Markets who has a "sell" rating on Dell stock. "This is a good move for Dell."

Dell is following the lead of other companies like Best Buy and OfficeMax in ditching the rebate. And for good reason. While rebates often appear to boost revenue for vendors because many consumers never bother to redeem them, they are actually bad marketing. Why? Because consumers have figured out that they border on a scam (particularly those companies that require you to submit receipts, call multiple times and wait six weeks to six months for the rebate), and they transfer that opinion to the brand. The result: short term profits followed by long-term brand decline. Not exactly the way you want to spend your marketing dollars in today's economy.

So kudos to Dell for getting on board with eliminating rebates (although taking twelve to eighteen months to do so feels like they are not exactly embracing this as an urgent initiative). Now if they can just fix their appalling consumer customer service, they might start to reverse their brand erosion. But never fear. Once Dell stops being the most hated tech company for its rebate policies and lousy customer service, we can always start in on the cell phone companies.

Technorati Tags: Customer service, Dell, Marketing, Rebates

There is such a thing as too much choice

Today, Fortune magazines notes the tyranny of too much with an article titled, "There is such a thing as too much choice". And of course, they use Chris Anderson's new book, The Long Tail: Why the Future of Business Is Selling Less of More, as their jumping off point to claim that we have devolved into a "mass of niches." However, Fortune, like Publish.com, also uses the success of Pirates Of The Caribbean to attempt to disprove the long tail theory, which, as we pointed out, is the result of the studios artificially constraining consumer choice through restrictions on movie distribution. Oh well.

Technorati Tags: Audiences, Business, Choice, Consumers, Marketing, Movies, Pirates Of The Caribbean, The Long Tail, Tyranny of too much

The new old differentiator: customer service

We've been doing some research here lately on various eCommerce experiences, and we've been appalled by what passes for customer service today. Well, IBM's Irving Wladawsky-Berger put many of our complaints into words with his posting, The Critical Importance of Customer Service.

My analysis: companies that have terrible customer service look at it the wrong way. They view it as a cost and try to make that cost as low as possible. It isn't. Done right, customer service is marketing and sales with a quantifiable return. The more you spend on it (assuming you spend it wisely), the more money you make.

Dell is currently seeing the destructive results of trying to do customer service on the cheap. You'd think more high tech companies would figure this out.

Technorati Tags: Differentiation, IBM, Marketing, Customer service

Why is Pirates of the Caribbean a hit in a long tail economy?

Stephen Bryant over at Publish.com asks the question of whether the stunning box office success of the latest Pirates of the Carribean movie disproves the thesis of Chris Andersen's book released yesterday, The Long Tail: Why the Future of Business Is Selling Less of More. He particularly notes John Cassidy's review at the New Yorker where he calls the long tail theory into some question.

Cassidy notes that unlike the music industry, where none of the top 25 albums in American history have been released since 2000, seven of the ten all-time top-grossing films worldwide have come out since that year: three "Lord of the Rings" movies, three "Harry Potter" movies, and "Shrek 2." Both the "Da Vinci Code" and X-Men III" did well despite bad reviews. Movie blockbusters seem to be increasing in frequency, not decreasing.

So which is it? Do American consumer dollars votes for a hit-driven economy or a long-tail world of choice?

The key to the answer is how any particular market deals with what Blackfriars callsthe tyranny of too much -- the paradox of overwhelming choice actually reducing purchases and commitments.

One point that was missed in both Cassidy's review and Bryant's critique is that the commercial movie theater industry doesn't really give you enough choice to drive the tyranny of too much and the resulting long tail effect. It's a physical market. When you go your local multiplex, you can choose from 15-20 movies to see, but you can't see the latest from your favorite Chinese director. Studios and distribution have reduced the number of choices available to you to only a few. Since you only a handful to choose from, you get smash hits. No long tail exists at your local multiplex, since choices are limited. And that's no accident -- the movie studios constrain and manage their release schedules to guarantee that there aren't too many choices for you on any given weekend.

But that all changes when you get to DVD releases available at Amazon or NetFlix. There, there are roughly 60,000 titles available. And while blockbuster titles do well, the long tail effect becomes significant, because people aren't constrained to just a handful of titles. Suddenly, there's big money to be made on the 1952 Complete Adventures of Superman as well as the latest theatrical release.

But what about the tyranny of too much? Doesn't that have an effect too?

Absolutely. If Amazon or NetFlix gave you 100,000 titles to browse through without any guidance, you would never see Pirates Of The Carribean-like hits. Even with great products in the list, most people would never bother to wade through them. They'd be overwhelmed.

The big difference in today's new eCommerce solutions is that we have both marketing and technology that helps us manage the tyranny of too much. Amazon, for example, regularly updates its best-selling list, which many people use as a recommendation for which products to buy. It also makes recommendations about what other customers also bought when you buy one. Similarly, it encourages customers to write their own recommendation lists for others to browse through. In short, they have created diverse social networks to navigate the tyranny of too much choice and make it manageable. But the fact these networks are diverse and not controlled by a few movie studios means that you get a sales list with a very long tail.

So the next time someone tells you the blockbuster hit is dead, you can point them at Pirates of the Carribean. But at the same time, note that the movie industry has been one of the biggest opponents to digital distribution of their movies. And the reason for that opposition is clear: The moment they embrace unrestricted digital distribution, the blockbuster hit is dead, and the long tail will rule their market.

Technorati Tags: DVD, eCommerce, Marketing, Movies, The Long Tail, Tyranny of too much

The Wall Street Journal notices the tyranny of too much

Monday's Wall Street Journal (don't you love the fact that Monday happens on Sunday night on the Web) notices that marketing mixes are changing. My favorite quote:

Complicating matters is that people have become inured to hard-sell marketing after years of messages blasting out of the TV screen. "People are just tired of being yelled at," says James Hering, executive vice president and director of integrated marketing at TM Advertising, a Dallas ad firm that's part of Interpublic Group of Cos. "There are just thousands of messages being pelted at us, and consumers are proactively filtering it. We're putting up mental blinders to get this stuff out of our heads."

We couldn't have said it better ourselves. Now if we can just get Jim to say "it's just the tyranny of too much."

Technorati Tags: Advertising, Marketing, Tyranny of too much

The power of pictures

[Graphic of US government spending by Jesse Bachman; click here for a very large version]


I wrote recently about the wonderful presentation done by Hans Rosling at the Technology, Entertainment, and Design (TED) conference last February in Monterey, California (if you haven't seen it, you can watch it here). His presentation allowed me to grasp and understand several facets of world health I hadn't known about in 18 minutes. Such is the power of great visuals.


Today, I saw a similarly powerful static image, a small version of which is at the top of this post. This one, noted by Occam’s Razor's Avinash Kaushik, is a visualization of the US Federal Budget, which apparently was posted and created by Jesse Bachman from Texas (at least, that's who claims the copyright). There is amazing detail in the larger 1.8 Mbyte version, but overall, it does a terrific job of communicating where the money goes and the relationships among different parts of the budget. It doesn't matter what your political affiliation is. This graphic tells a financial story in ways that numbers and bar charts just can't.

Technorati Tags: Communication, User experience, Visuals

Long-tail mania arrives

We have written quite a bit in this blog about Chris Andersen's upcoming book, The Long Tail: Why the Future of Business Is Selling Less of More. Well, the book will be out Tuesday, and it is getting noticed everywhere now. In my reading of today's newspapers, I spotted no fewer than three citations: one in the business section of the New York Times, and both an article and a review in the Wall Street Journal. If the pre-publication buzz is any indication, this is going to be a very hot book; they've already printed 150,000 copies, and it isn't even out yet. I predict this is going to be the business book on airplanes (and on workaholic-populated beaches) for the next few months. Of course, from a marketing point of view, it doesn't hurt to have both a long Wired magazine article and a Web site talking about the book for two years before it hits bookshelves.

Technorati Tags: Books, Media, Publishing, The Long Tail

Faking big bang growth with GDP statistics

I don't often wade into the current political fray because I don't feel it productive. However, when I saw this posting by Lawrence Kudlow, claiming $2.2 trillion in US Gross Domestic Product growth was attributable to the Bush tax cuts, I thought some analysis with real numbers might be illuminating. After all, I'm a quantitative marketer; I know how numbers can be used to both make and break an argument.

At issue is the opening paragraphs:

Did you know that just over the past 11 quarters, dating back to the June 2003 Bush tax cuts, America has increased the size of its entire economy by 20 percent? In less than three years, the U.S. economic pie has expanded by $2.2 trillion, an output add-on that is roughly the same size as the total Chinese economy, and much larger than the total economic size of nations like India, Mexico, Ireland, and Belgium.

This is an extraordinary fact, although you may be reading it here first. Most in the mainstream media would rather tout the faults of American capitalism than sing its praises. And of course, the media will almost always discuss supply-side tax cuts in negative terms, such as big budget deficits and static revenue losses. But here's another suppressed fact: Since the 2003 tax cuts, tax-revenue collections from the expanding economy have been surging at double-digit rates while the deficit is constantly being revised downward.

The $2.2 trillion growth number is correct, and is verifiable at the Bureau of Economic Activity, a source we use all the time for our Sizing US Marketing research. But the second paragraph is a bit misleading, since the deficits mentioned are only projections, not actual results. If we look at the GDP, minus the national debt, we end up with a very interesting table of data shown here.

What was missing from Mr. Ludlow's analysis was the fact that the national debt grew by $1.9 trillion over the period of that $2.2 trillion GDP growth. Traditionally, we subtract debt when calculating net worth and growth (Can you imagine saying to your spouse, "Honey, we grew our income by $50,000 with that loan we took out!"). So if we do that, we discover that the actual growth minus debt for the period was about $300 billion.

But is that so bad? After all, debt can be useful in growing a business. Why not a country? Sadly, there are some pretty good benchmarks out there to beat, and this one comes nowhere close. Look at the second table in the graphic looking at the same numbers for 1997-2000. There, you'll discover that we had $1.6 trillion in growth over 11 quarters for only $250 billion in debt increase, resulting in net growth of $1.2 trillion over the same period. Suddenly the argument that the Bush tax cuts stimulated growth falls apart, since we had $1.2 trillion in growth during the period before those tax cuts were enacted (i.e., during the period with those awful "high" taxes that were inhibiting growth).

The bottom line: promoting a product or position with statistics can be quite persuasive. But if you're going to do that today, you want to use data that isn't easily refuted by a vast population of savvy online readers with a free hour or two, because they will check your work. One of these days, the politicians will figure that out; marketers already are.

Now back to our normal business topics.

Technorati Tags: Analysis, Financial analysis, GDP, Marketing, Polictics, Growth, Tax cuts

The new democracy: innovation

Irving Wladawsky-Berger, Vice President, Technical Strategy and Innovation at IBM, wrote recently about Eric von Hippel's book and lecture on Democratizing Innovation. Irving himself is a terrific thinker, having been intimately involved in crafting some of IBM's Internet strategy, promoting open source software, and evangelizing grid computing. His ringing endorsement of user-created innovation is in many ways a continuation of those positions.


I haven't read the book yet, so I can't comment on it intelligently. However, I think the thrust of this argument fits in nicely with the whole idea of user-generated content, which has become a driving force in today's Web 2.0 boom. And with Internet-based tools like Google to organize and manage a possible tyranny of too much innovation, the concept feels strong.


All this said, I think the best part of the article was discovering that Irving is writing a blog. I've always found his insights sage and valuable. He is one of the few people on my RSS subscription list; I'll be checking back regularly.

Technorati Tags: Democratizing Innovation, IBM, Irving Wladawsky-Berger, Tyranny Of Too Much

Microsoft's worst kept secret

Today's New York Times has YAMIKR -- yet another Microsoft iPod-killer rumor. This has got to be the world's worst kept secret. For the record, we noted rumors of Microsoft's iTunes-killer music store, only a month or so after its prior iTunes-killer URGE was launched with MTV. And the rumors of Microsoft's xPod go back more than a year to when Robbie Bach was tapped to do something in the digital music space after his success at launching the stand-alone XBox.

All we can say is that with the frequency of rumors and leaks we get around this secret, unannounced product, should we be surprised that Windows security is full of holes?

Technorati Tags: iPod, iTunes, Marketing, Microsoft, Music, Secrecy, Security, URGE

Communication in "Good Night And Good Luck"

Over the Fourth of July holiday weekend, my wife and I rented a copy of the recent George Clooney movie, "Good Night, and Good Luck". It was a truly fine and moving film, and given that it was nominated for six Academy Awards and was made for only $7 million, pays tribute to George Clooney's skills as a director.

But even more interesting to me was the striking character of Edward R. Murrow's monologues. They were very formal, yet extremely understandable and accessible. The sentences were short and powerful. They moved the listener.

To add some analysis to my gut feeling, I calculated the Flesch readability score for this wrap-up of Murrow's for one of his shows:

No one familiar with the history of his country, can deny that congressional committees are useful. It is necessary to investigate before legislating. But the line between investigating and persecuting is a very fine one, and the Junior Senator from Wisconsin has stepped over it repeatedly. His primary achievement has been confusing the public mind as between the internal and the external threats of communism. We must not confuse dissent from disloyalty. We must remember always, that accusation is not proof, and that conviction depends upon evidence and due process of law. We will not walk in fear, one of another, we will not be driven by fear into an age of unreason. If we dig deep into our history and our doctrine, we will remember we are not descendant from fearful men. Not from men who dared to write, to speak, to associate, and to defend causes that were for the moment unpopular. This is no time for men who oppose Sen. McCarthy's methods to keep silent or for those who approve. We can deny our heritage and our history but we cannot escape responsibility for the result. There is no way for a citizen of the republic to abdicate his responsibilities. As a nation we have come into our full inheritance at a tender age. We proclaim ourselves as indeed we are, the defenders of freedom where ever it still exists in the world. But we cannot defend freedom abroad by deserting it at home. The actions of the Junior Senator from Wisconsin have caused alarm and dismay amongst our allies abroad and given considerable comfort to our enemies. And who's fault is that? Not really his, he didn't create this situation of fear he merely exploited it, and rather successfully. Cassius was right, the fault dear Brutus is not in our stars, but in ourselves. Good night, and good luck.

The readability of this passage is 57. To put this in perspective, People Magazine is typically in the 60s and Sports Illustrated is often in the 50s. The New York Times has a Flesch score of around 34, an insurance policy about 10, and the US Tax Code is about -16. By any objective measure, despite the serious and formal nature of his material, Murrow communicated ideas simply and accessibly.

This thought struck me this morning as I was reading a Boston Globe article interviewing Geoffrey Nunberg, where he talked about who in the Democratic party is capable of creating a narrative everyone can understand (bold emphasis is mine).

I would say that John Edwards, whatever other shortcomings he has a candidate, has an intuitive understanding of this. Hillary Clinton certainly doesn't get it the way Bill did, though she's trying. Wesley Clark and Mark Warner don't seem to have a natural gift for this stuff. But the crucial thing is to have an overriding narrative that even people who aren't gifted storytellers can recount. For the Republicans, it isn't Reagan's success at being able to tell this story that matters; it's the fact that Sam Brownback and Bill Frist , who are not particularly gifted storytellers, can communicate this narrative.

The identification of John Edwards is no surprise. When we assessed the clarity and effectiveness of the 10 presidential candidates in 2004, Edwards was one of the top three communicators in the pack (as a side note, the democratic candidate, John Kerry, lagged George Bush in clarity of his message, which came back to haunt him in the election). But the key concept is having a simple enough message that others can repeat without extensive coaching. This is good advice for political campaigns, for corporate communications, for bloggers, and for anyone trying to influence a large number of people. This is why buzz-marketed ideas like "the death tax" have such power: anyone can tell their stories.

The bottom line: Good Night, and Good Luck is not only a great movie, but also instructs us to project and debate ideas powerfully and timelessly. It is ninety minutes well-spent.

Technorati Tags: Communication, Edward R. Murrow, Flesch, George Clooney, Good Night and Good Luck, Political Communication, Readability, Research