Apple's peer-to-peer film downloads will eclipse both Wal-Mart's and BitTorrent's movie downloads

Today's New York Times combines two interesting news stories about movie downloads into one. First, it describe's Wal-Mart's plans to provide digital movie downloads for an add-on fee to DVD sales, beginning first with Superman Returns this week. Then, it contrasts this effort with the news that BitTorrent is striking deals with studios to offer their movies using its peer-to-peer (P2P for short) technology. The article gives the impression that one of those two deals should really get movie downloads going.

My view: both efforts are not going to get significant traction. They both have fatal flaws.

Let's start with Wal-Mart. That's the easy one to dismiss.

Wal-Mart's offer is to allow customers to buy a digital download for their portable music player or PC as an add-on purchase to a DVD. Cool, huh?

OK, so let's say that I'm planning a trip to California, and I decide I'd like to take a copy of Superman Returns along with me. First, I have to buy the DVD at Wal-Mart. Seems silly to run out to the store to do this, but I'll do it a few days ahead and buy the DVD online. Ok, done.

Now if I have a DVD, there's an interesting question: why do I need to download anything? Wal-Mart just shipped me this nice shiny disk. If I want to view that on my laptop, why not just put it in my laptop and watch it? Strike one.

Oh, but perhaps I want to watch it on my iPod video. Well, that's not going to happen unless Wal-Mart has struck a deal with Apple -- the movie would have to be FairPlay encoded, and last I knew, Apple wasn't licensing FairPlay. Strike two.

And wait a minute. Why should I have to download anything even to watch it on a non-iPod media player. That eight gigabytes of DVD Wal-Mart just shipped to me has plenty of room for a low-res version for my Zune or other device. Why should I tie up my Internet connection for an hour (or witnessing Amazon's and Microsoft's challenges in getting downloading services right, probably more like five or six hours) when I should be able to just pull the bits off the disk? Strike three.

Wal-Mart's plan is just a silly offer, and my prediction is that it will suffer a quick and well-deserved death due to lack of consumer interest.

The BitTorrent deal is similarly flawed, but for a more traditional reason: they haven't thought out the user experience properly. Just read the Times description:

In the new service, BitTorrent’s partners will upload authorized versions of their TV shows and films onto the network. No pricing details have yet been announced. Files will be protected by Microsoft’s content management system, and files will play right inside the user’s Web browser. Users who buy content will have to enter a special encryption key before watching the movie, and they will only be able to view it on two computers — say, a desktop and a laptop they might bring with them on a business trip.

Mike Goodman, an analyst at the Yankee Group, says networks like BitTorrent shift bandwidth costs to users. “You can argue that peer-to-peer will ultimately be the cheapest way to distribute this content,” he said.

Studio executives agree, and think BitTorrent will take its place alongside the giants like Wal-Mart in the emerging digital download world.

“I think everyone is going to do a BitTorrent deal,” said Thomas Lesinski, president of Paramount Pictures Digital Entertainment. “You have to be in a position where you make your content available everywhere the consumer is interested in downloading it.”

The problems with this offer are more about how many hoops you make the user jump through to watch a movie. Enter encryption keys? That's ridiculous -- I don't have to enter an encryption key to watch a DVD; why should I do so to watch a movie I downloaded? Play in my browser? Just what I wanted -- lots of distracting buttons and logos to ruin the viewing experience. And, of course, since the system uses Microsoft's content management, it won't play on iPods -- or Zunes either.

So is movie downloading hopeless? No, and actually the idea of using a peer-to-peer protocol to do it is exactly the right one. But the experience can't be so geeky as to require users to enter 50-digit encryption keys and watch the resulting movie in their browser. Instead, a successful movie downloading service will

1. Have a critical mass of users,


2. Be dead simple to use,


3. Work with TVs and portable devices as well as PCs,


4. Provide user accountability and billing.

There's a really nice package that does all this: it's called iTunes. I predict it will simply grow encrypted peer-to-peer downloading capabilities.

This fits perfectly into what we already know about Apple's media plans. Apple is already rumored to be building a peer-to-peer protocol into Leopard. We also know Apple is very interested in moving around very large high-definition files to use with its iTV box. And it fits the criteria defined above nicely because:

1. iTunes already has 200 million users. Peer-to-peer networks only work if you have a critical mass of peers to share bandwidth with. Apple's existing network of iTunes users satisfies this need -- and is hard to replicate.


2. iTunes has proven its usability. Five years of deployments have gotten people used to the iTunes user interface, and everyone from five-year-olds to grandpas use the program every day.


3. Apple dominates music and video players. With the iPod occupying nearly 80% market share now, and with the iTV on its way next year, consumers will be able to enjoy their content in situations ranging from their living room couch to airplanes.


4. Financial accountability is already in place. Almost every iTunes Store customer has a credit card on file. Apple has proven mechanisms for charging those accounts for downloads -- as well as for crediting users for providing copies of movies to other users!

If Apple integrates peer-to-peer sharing into iTunes AND provides studios a revenue stream for the sharing of movies, it has the potential to dominate the digital movie business in the same way it has dominated digital music. And best of all, it will have cracked the technical problems necessary to make high-definition movie downloads actually competitive with a NetFlix delivery. And once that happens, there are going to be a lot of studio corporate jets returning to Cupertino.

Full disclosure: I do own a small amount of Apple stock.

Technorati Tags: Apple, Apple Movies, Apple TV, BitTorrent, DVD, HDTV, iTunes, iTV, Marketing, Movies, Opinion, Wal-Mart, Zune

Scientific proof that brands excite brains

Ever wonder if all those investments in your brand are worth it? Wonder no more. Today's Wall Street Journal reports on research being presented at the Radiological Society of North America today that shows that strong brands excite parts of the brain in a significant and positive way.

They selected 20 adult men and women who had a mean age of 28 and a high level of education, and placed them one at a time inside an MRI machine that had been rigged with a small video screen. The logo of Volkswagen flashed across the screen for three seconds, followed by the logo of a lesser-known European brand called Seat (also owned by Volkswagen).

Film of their brains during that sequence found that the Volkswagen logo produced a strong pattern of activity in the part of the brain associated with positive emotions, self-identification and rewards. By contrast, the Seat logo provoked activity in the parts of the brain associated with negative emotion as well as memory -- suggesting that the brain had to work for a response.

What surprised Dr. Born is how little either logo activated the decision-making part of the brain, even though the subjects were required -- purely for purposes of ensuring concentration -- to answer a question about each image.

But the bigger surprise was that under examination by MRI, brains respond just as powerfully to strong insurance brands as to strong automotive brands, says Dr. Born. The result surprised her, she adds, because "cars are a status symbol. Insurance is an abstraction."

Branding. It's not just for orange juice or automobiles any more. Now if we could just get similar neurological data for marketing in general, a marketer's life would be so much easier.

Technorati Tags: Brain science, Branding, Marketing, Neurology

Microsoft's high-def movie downloads aren't quite ready for prime time

The issues we had predicted would occur with Microsoft's high-definition movie download service for XBox 360 seem to be hitting it hard. Gizmodo started noting the issues with its article about How Long to Download a Movie?. Ars Technica has picked up the meme with its article positing that Microsoft is in the process of adding servers to pick up the slack.

The good news: Microsoft is offering refunds for broken or incomplete downloads if customers call into the support line. But based upon the anecdotal data, Microsoft's download system is mostly breaking on standard-definition movies. And we suspect with only a little tongue in cheek that that's because the high-definition movies haven't finished downloading yet.

Technorati Tags: Downloads, HDTV, Internet, Microsoft, Movies, XBox 360

iPods dominate Amazon.com's best-seller list

We predicted that Apple will sell 20 million iPods this holiday selling season before Black Friday. Well, preliminary results from the weekend on Amazon appear to bear out the interest in all things iPod. As of this moment, iPods occupy 5 of the top 10 best-selling electronics products of any kind on Amazon. If we look at either MP3 players or portable audio/video categories, iPods occupy 8 out of the top 10 spots. What's #1? The 2 Gigabyte iPod nano, which coincidentally, is the cheapest of the iPods with screens.

Oh, by the way, where's Zune? Actually, it is doing better than I would have expected. It's number 18 on the list. And all the music players above the Zune that aren't iPods are made by SanDisk. Interesting. I did see a Zune over the weekend at Staples, and I came away with the same impression nearly everyone else had: not a bad product, but it isn't differentiated or unique enough to change the market in the way it must to succeed. Of course, the scathing review in the Chicago Sun-Times over the weekend didn't help.

The Wall Street Journal featured a special section headlined, "Can Anyone Catch iTunes?" A better question might be, "Can anyone catch the iPod?"

Technorati Tags: Amazon, Apple, iPod, Marketing, Microsoft, Music, Wall Street Journal, WSJ.com, Zune

Blackfriars does MacWorld in January

As regular readers know, I have covered the Consumer Electronics Show for the last several years to check out what's happening in consumer electronics technology and marketing. Well, this year, I'm skipping it. Why? Because it's the same week as MacWorld, and my bet is that there will actually be more news of interest to readers at MacWorld this year than CES. Besides, I'm tired of Las Vegas.

So look forward to in-person blogging from San Francisco in January, as we hear what Apple has up its sleeve this year. And if anyone would like to meet up in person while the show is on, let me know.

Technorati Tags: Apple, , Marketing, MacWorld, CES

Freeconomics? It's just a shell game

Chris Anderson of The Long Tail fame, noted recently that the cost of a million instructions per second of computing has fallen below one cent:

Intel's Core Duo running at 2.13 GHz now costs around $200 at retail (it's around $180 at volume), but can do about 20,000 MIPS. I remember my first 6 MHz 286 PC in 1982 that did 0.9 MIPS. I have no idea what the CPU cost then, but the PC it came in cost nearly $3,000 so it couldn't have been cheap. Say it was around $1,000/MIPS back then. Now it's $0.01/MIPS. I know I shouldn't be astounded by Moore's Law anymore, but that really is something.

If I've done my math right, the decline in price/performance (please note: that's price divided by performance; most people incorrectly use the term price/performance to indicate performance divided by price) is about a factor of 100,000 over 24 years, and that averages out to a decline of 38% per year.

In the process, he's coined a lovely new term to describe businesses that thrive on this type of abundance: Freeconomics. But despite the cute name, all these free services are anything but free -- they are supported by what Michael Schrage at the Financial Times calls "creative subsidies" that pose serious regulatory and oversight conundrums for those who need to follow the money for tax or other regulatory purposes. And while Freeconomics is a terrific sound bite, an economy of abundance still has real costs and money changing hands. Advertising on Google is practically free -- but Google pulls in nearly a billion dollars a quarter by adding up a lot of "practically free" fees. Similarly, The Core Duo that Chris notes in his example still costs about a tenth of what that 80286 in his PC 24 years ago, and that's why Intel receives revenue of $3 billion a month instead of becoming a Web 2.0 company looking for venture backing.

There's one other cost buried in here that isn't immediately evident: the time required to choose among the zillions of choices created by free products. With 70 million blogs online today and growing, no one has time to look through them all. And while services like Google are a big help, they have limitations; for example, have you ever tried to find a specific blog written by John Smith? Good luck. Google creates its own form of scarcity through its search algorithms. After all, only ten sites can be listed on the first page of results, and we now have an entire industry of Search Engine Marketers who make quite a lot of money trying to get you to the top of that free service.

Bottom line: I'm as big a fan of cool, new business models as the next analyst. But we've heard this Freeconomics story before, except last time it was George Gilder claiming that the bandwidth glut would cause broadband to be free; I think that will be news to both Comcast and Verizon who are investing billions in networks to deliver that "free" broadband, and will spend millions to preserve their customer's monthly fees.

I always say it's easy to give away product, but hard to sell one. Businesses that last are those that make customers eager to give them money, and do so at a profit. Businesses that pretend that everything is free usually have trouble with the second half of that equation. And when the shell game stops, their creditors rarely are quite so free thinking.

Technorati Tags: Business, Chris Anderson, Freeconomics, George Gilder, Long tail

Black Friday circular ads jump 50% over last year

I just finished my annual count of the advertising circulars in today's West edition of the Boston Globe newspaper. The tally this year: 636 pages. That's about 50% more than last year's 412 pages.

Just for clarity, my count is of one-sided pages of approximately 8.5 x 11 size. So if someone prints a double-sided portrait layout that's 17 inches tall by 11 inches wide, that counts as four pages -- that is, two 8.5 x 11 pages on each side times two sides.

As is typical in these counts, the department stores make up the majority of the count, with 322 pages. Electronics comes in second with 116 pages (and would be more if we included office supply stores like Staples and OfficeMax, since much of what they sell on Black Friday is electronics). Hardware stores like Home Depot were a surprising third.

And unlike last year, $999 and less flat screen TVs are being offered by many stores, from Best Buy to Wal-Mart. As we've noted in other postings, that magic price point will make flat panels hot commodities for holiday cocooning.

Conclusions? Our data shows that marketing spending has been declining this year in pretty much all categories with the exception of offline advertising. What this jump in ad circular spending says to me is that retailers have seen the early push for holiday shopping by Wal-Mart, and want to make sure they get their share of traffic. As we noted in that prior article, this increased competition for shoppers tends to more price-cutting, driving down profits. In other words, this boost in ad spending probably indicates a tough Christmas selling season, with sales up 3% of less over last year (which itself was somewhat weak).

Of course, this is just one measurement in one locale. But while you're waiting for your turkey to get done and the football games to start, why don't you take a few minutes and count the number of advertising pages in your local newspaper? Post the results in the comments and we'll see if we can get some consensus about how Black Friday is shaping up this year.

Technorati Tags: Advertising, Advertising spending, Best Buy, Black Friday, Circulars, Flat Panels, Marketing, Newspapers, Plasma, Retail, Wal-Mart

Market capping the tech market today

[SmartMoney market map showing Google's gains since the beginning of the year]

After Google broke the $500 mark yesterday, Paul Kedrosky has put up a very interesting chart of how Google's market capitalization has grown versus Microsoft's. Google currently is hovering around 50% of Microsoft, and has been in the 50% to 60% range for about a year. Not bad for a company that started in 2004 with a market cap of 8% of Microsoft's.

So just for fun, I thought I would play a more limited game with a few other tech stocks. Unfortunately, I don't have the graph of market caps for all these companies, but I can compute their percentages of Microsoft's cap today along with their year-over-year growth in earnings and revenues. The data here is intraday from Yahoo Finance as of about 10 am today.

Stock	Market cap (billion $)	Percent MSFT cap	Year-over-year revenue growth	Year-over-year earnings growth
Microsoft	$294.6	100%	11.0%	10.7%
Cisco	$163.3	55%	24.9%	27.5%
Google	$155.8	53%	70.4%	92.47%
Intel	$125.2	42%	-12.3%	-34.8%
Hewlett Packard	$109.1	37%	7.2%	307.9%
Apple	$75.7	26%	31.5%	27.0%
Dell	$62.5	21%	5.0%	-50.8%

Look at the numbers for Google, and it's pretty evident why we can expect its market cap to keep growing for a while; any company growing at nearly 100% a year is one where a lot of investors like to have a position. And while Cisco is still a larger company than Google at present, I wouldn't expect that to last long with one quarter the growth rate.

I'd argue the growth shift we're seeing here is actually a more profound one than the numbers suggest. What we're seeing is the gradual collapse of the old personal computer titans who believed that user marketing was a nuisance that got in the way of the grand old business technology sale. The companies that are adding significantly to their market caps -- Google and Apple -- have built strong consumer brands that actually eclipse the technology that they are selling at any given instant. And Cisco -- another company with consistent growth lately -- has begun a branding effort to make its own name a household word in the digital home. Compare their branding initiatives with those of companies like Microsoft, who doesn't even put its name on its latest Zune music player.

The map of the technology market is changing, and investors are placing their bets on where the growth will be. Google breaking the $500 a share barrier was just one of the milestones that got people's attention. But the increasing power of their brand and marketing is another. With Google already a verb, it isn't going to be worth half as much as Microsoft for long. And when we start measuring companies as percentages of the market capitalization of Google, we'll know that the technology-is-all PC era has come to an end.

Technorati Tags: Apple, Brand, Cisco, Dell, Financial analysis, Google, Hewlett Packard, Intel, Market capitalization, Marketing, Microsoft, PCs, Paul Kedrosky, Stocks

Vermillion: a great new printing vendor

Blackfriars publishes market research, not only on the Web, but also on good old fashioned paper. But lately, we've been struggling to find a good printing vendor who can handle our quirky printing jobs. We tend to do short runs, but nonetheless require very high quality four-color digital printing and binding on heavy paper stock. We also have some graphics that some of our printing vendors have found to be very tricky to print well.

Well, recently, we got wonderfully colorful, personalized direct mail piece from Vermillion, and that piece implored us to give them a try. We did, we were impressed, and we therefore printed our latest report Sizing US Marketing 2006 with them. Everything came out beautifully, and we finally FedEx'ed out those reports yesterday.

Not only have we been impressed with Vermillion's printing, but yesterday, I spend a half-hour on the phone with Vermillion's CEO, Bob Stuart, talking about marketing strategy and requirements. He didn't just want our business; he wanted to know how his business could help our business grow. We had a great chat, and we'll certainly be doing more business in the future.

In passing, I did manage to ask Bob how they'd managed to do such a good job on our research reports. He noted they were run on a Xerox iGen3 as shown above. No wonder our reports look good; they are being printed on machines that start at a half million each. But as with most things, including marketing, you get what you pay and work for.

Technorati Tags: Blackfriars, Printing

The marketing opportunity around sub-$1,000 Black Friday flat panels

One of the specials to get people into Best Buy stores early on Friday morning this week is Panasonic's TH-42PX60U, a very highly regarded 42-inch HDTV plasma TV, for $999. Similarly, Micro Center is offering no-brand 42-inch LCD HDTVs for $999 with a $200 mail-in rebate. Wal-Mart similarly has a Viore 42-inch plasma for $988.

So what? Well, people forget that PCs didn't really become common household items until they got below $1,000 in price. We might argue the same is true for flat-panel TVs. As 42-inch HDTV prices decline into three instead of four digit prices, we will undoubtedly see more consumers adopting them and pitching their older CRTs.

So who benefits from this shift? We've already seen that Best Buy, Circuit City, and other big box retailers have seen larger profits created by the consumer's love for all TVs flat. But cable, telephone, and satellite companies like Comcast, Verizon, and DirectTV who provide HDTV service should also see a bump in their service revenues, since they currently are the only providers of significant amounts of HDTV content.

My big question: why aren't Comcast, Time Warner, and Verizon striking bundled coupon deals with the HDTV manufacturers and big electronics retailers? No one wants an HDTV without HDTV signals to watch, yet when you look around your local Best Buy, offers for HDTV service are nowhere to be found (unless you count DirectTV). This is despite the fact that Best Buy does offer Comcast self-install high speed Internet service, for example.

Consumers want one-stop shopping, and hardware/service bundles are powerful marketing tools; just ask the cell phone providers. The HDTV service companies that create HDTV bundles have an opportunity to reshape this business as pricing becomes more and more cut-throat to capture consumer attention. The only question is who will step up to the opportunity first.

Technorati Tags: Best Buy, Black Friday, Comcast, Flat Panels, HDTV, LCD, Micro Center, Plasma, Verizon, Wal-Mart

Print media leaps to the battle of the brands

Two big media stories broke today. One was heralded in the Business section of the New York Times noting that 176 newspapers are partnering with Yahoo.com around online ads and content.. No financial details were disclosed, but the overall concept is to provide online exposure for newspaper content and advertising, and conversely to provide more localized content and advertising for Yahoo. The deal is almost certainly a response to Google's plans to extend its ad network to print advertising in 50 newspapers around the US.

In that same Business section, though, another print publication noted its own reshaping of its business model, also in response to the erosion of its traditional business by the Internet. Time magazine ran three full-page ads in the section with just the trademark red cover boarder of Time, surrounding a single word such as Bold or Leap, and simply provided an Internet URL address to go to. All of those addresses take you to this announcement by the publisher that changed its publication time to Fridays from Mondays, reduced its advertising rates, and guaranteed a minimum domestic audience of 19.5 million to advertisers.

Our take? This is the end of a nearly 50-year media cycle where there are too many producers of content chasing a fixed amount of consumer attention. Because of that overproduction, prices will fall, and economics will force media companies to consolidate around a few essential brands.

The companies that survive this consolidating media landscape will be those that do two things well:

1. attracting and retaining viewers and


2. building both brand that advertisers will flock to
.

Google has figured out how to do both activities well. Yahoo has a lot of work to do on the second half of that equation. Time Inc. is struggling on both counts. But with consumers facing an ongoing tyranny of too much media, companies that do half the job won't be around much longer. May the best brands win.

Technorati Tags: Advertising, Attention Economy, Branding, Google, Marketing, Print, Publishing, Time, Yahoo

Playstation 3s already selling for $3,000 on eBay

Just in case readers have been trying to escape the tyranny of too much media by hiding out in cabins without newspapers or media coverage, hundreds of people camped out to buy Sony's Playstation 3 at midnight last night. Kotaku documents a whole bunch of these events; here's one in Colorado), and surprise, surprise, the initial shipments have sold out. That's news on the par with dog bites man -- or using a more modern meme, there's corruption in politics.

But did you ever wonder why those people were waiting in lines at Best Buys and Circuit Citys last night to get their hands on Playstation 3s? No, it's not because they want to play the games. It's because these people already have listed the consoles they are buying for sale on eBay. Many of those auctions will end this morning, and the sellers will be shipping out their consoles this afternoon for about a 10x profit.

What does this say about marketing? It says that these people are actually pretty good marketers. They realized that creating and capturing market demand can be a parallel activity to actually producing the product. And with today's electronic markets and eBay, one person can do both at the same time.

Let's just hope the people who bribe politicians don't find out about eBay. If they do, Jack Abramoff will be out of a job. Oh wait....

Technorati Tags: Advertising, eBay, Marketing, Playstation 3, Sony

Henry Blodgett joins our chorus of skeptics on Microsoft Live/MSN

One of my compatriot writers on Seeking Alpha, Henry Blodgett, says that MSN is still going nowhere fast.

It is worth noting that Microsoft (MSFT) still hasn't made any headway in the search-and-portal game and, in fact, is falling farther and farther behind. As a result, it is not surprising that Steve Ballmer is now warning media companies that Google (GOOG) is the Evil Empire -- because no other competitive tactic has worked.
....
Microsoft is cranking up the R&D and marketing spending to try to compete with Google, but thanks to Google's now 4X revenue advantage (ex TAC), this is a losing battle. Google spent more than $300 million on R&D in the quarter, about half of MSN/Live's total expenses for the period, and it still generated a massive profit. As Google continues to grow, this disparity (or MSN/Live's losses) is only going to become greater.

Well, apparently Microsoft agrees. Today's Wall Street Journal has a front page story saying that executive Joanne Bradford, who brought measurement and advertising skills to Microsoft's advertising sales, will soon head up its MSN online group. But the story articulates the reason why Google has been cleaning Microsoft's clock in online advertising:

Ms. Bradford had run afoul of a Microsoft corporate culture that elevated technology above all else. The bias would soon haunt the company as it struggled to compete with Google Inc., a company that rose to prominence through the power of online advertising. For Microsoft, says company Vice President Yusuf Mehdi, "advertising was a bad word."
....
For years, Microsoft's culture equated smarts with pure technical brainpower. The company's internal systems, from hiring to strategic planning, were structured around building and licensing software, notably Microsoft's core Windows and Office products, which are still responsible for most of its revenue and profit. Engineering talent gravitated toward those businesses. Most of Microsoft's sales efforts revolved around managing large corporate buyers of software.

So how did Ms. Bradford convince Microsoft technocrats that advertising should matter to them? She used their own language to convince them: she used measurements.

She ordered a survey of the entire sales force, collecting details on how every member spent each day, from routine administrative tasks to meeting with customers. For any given revenue projection, it listed the number of staff needed. For the first time, she was able to put numbers into the art of ad sales. She offered a deal -- provide the people, and she'd guarantee the revenue.

We wish Ms. Bradford much luck with MSN, because she's clearly fighting an uphill battle. Turning technology snobs into marketers is not exactly turning sow's ears into purses, but it is a pretty unnatural act. And while Ms. Bradford has her hands full teaching Advertising 101 to Microsoft, Google's lead with advertisers -- and with Wall Street -- will only get bigger.

Full disclosure: I have no positions in Microsoft or Google.

Technorati Tags: Advertising, Google, Marketing, Microsoft, Henry Blodgett

Welcome Digg.com readers!

When I wrote my post about Apple's deal with Hon Hai yesterday, I had no idea it would end up on the front page of Digg.com this morning. As of this moment, we've had more than 12,000 visitors since last night, and I'm sure the tally will rise today. This is our first digg deluge, so we don't really know how our Web servers at Earthlink will deal with this. But regardless, welcome to all the new visitors to Blackfriars Marketing, and we hope you'll read some of our other popular stories from the last several years.

Carl

Technorati Tags: Digg.com

Apple thinks different about marketing iPhones

[Photoshopped mockups of iPod phones, courtesy of a user at www.ipodlounge.com]

Bloomberg.com reports today that Apple has signed with contract manufacturer Hon Hai to make 12 million iPhones next year. Given that this is a product untested in the market, if this is true, it would certainly demonstrate how serious Apple is in attacking the phone market.

One of the rather interesting marketing aspects I've read about is the idea that the iPhone won't be tied to any specific carrier. Instead, it will be sold "unlocked", requiring you to insert a GSM subscriber identity (SIM) card. The downside: Apple won't get any subsidies or special deals from working with the likes of Cingular or T-Mobile. The upside: such an approach opens up most of the world as the target market instead of just the US. This approach would prove that Apple is thinking globally with its next product segment -- and that phone market could bring literally hundreds of millions of new prospects to Apple.

Who knows: that 12 million unit phone contact could be too small.

UPDATE: Other sources such as CNN attribute the contract to Foxconn, not Hon Hai. Could Apple possibly have let two different contracts for 12 million each? More likely, this just means that our translations of the original Chinese source, Commercial Times, aren't what they should be.

UPDATE 2: A reader notes that FoxConn is the registered trade name for Hon Hai, so there's no confusion above. They are one and the same company. Thanks, Jersey Guy!

Technorati Tags: Apple, Hon Hai, iPhone, Marketing, Mobile phone, Music

Internet advertising passes $4 billion for Q3 -- but growth has stalled

The Interactive Advertising Bureau noted yesterday that online advertising passed $4 billion in the third calendar quarter of 2006. Commentators like AOL's Jason Calcanis are trumpeting this as the harbinger of 20 years of growing advertising support for Web 2.0 business models.

Well, I'm a big fan of online advertising, but I'm skeptical of this point of view of 20 years of continuous growth. We don't yet have Blackfriars' actual numbers for Q3 yet; the fourth quarter survey is currently in the field. But what I found most interesting were not the absolute value (we project online advertising budgets for the year to be $38 billion due to methodology differences), but the growth figures:

The 2006 third quarter revenues represent a 33 percent increase over $3.1 billion in Q3 2005 and a 2 percent increase over the Q2 2006 total of nearly $4.1 billion.

A two percent gain over the previous quarter is about as tepid growth as you can get. And Blackfriars' numbers for Q3 budgets -- not actual spending, but what companies planned to spend -- actually shows online advertising falling from Q2.

The bottom line: online advertising will be a useful marketing tool, but no trend goes in a straight line for twenty years. Online advertising will grow by leaps and bounds so long as it delivers commensurate results for businesses in the midst of today's tyranny of too much. But just as with email advertising, its growth carries the seeds of its own destruction. And when online advertising overwhelms viewers to the same degree as today's spam-filled inboxes, marketers will move on to the next technique that gets results.

Technorati Tags: Advertising, Blackfriars, Internet, Marketing

Looking past death by PowerPoint

Jared Sandberg of the Wall Street Journal published a complaint today about the ongoing torture of audiences by PowerPoint. And why not:

Over the years, the software has been blamed for boring people senseless. The phrase "Death by PowerPoint" is common corporate parlance. Some companies and conference organizers have prohibited PowerPoint, and the press perennially skewers it as a thought-free plague. One legal scholar, tongue-in-cheek, proposed a constitutional amendment banning its use.

Now Blackfriars must insist on our Second Amendment rights to bear bullets, if for no other reason that we teach executives how to use them properly. And as part of our courses, we often present our Hall of Shame slides, meaningless and confusing PowerPoint slides collected over many years to illustrate just how many ways executives can go wrong with PowerPoint slides. However, despite our defense of PowerPoint in the right hands, we have to agree with Mr. Sandberg that most PowerPoint presentations are dreadful to the point of ridicule. And over the last three or four years, we've come to an somewhat contrary conclusion:

Microsoft's PowerPoint program is part of the problem.

See, we're a Mac-based company, so we're not stuck with PowerPoint. And over the years, we've used a variety of presentation programs ranging from AppleWorks to OpenOffice. And in the last three years, we've been using Apple's Keynote software, which is bundled as part of its iWorks package. And quite honestly, it puts PowerPoint to shame.

Why do I say this? Because I did hundreds of presentations using PowerPoint as an analyst and always dreaded the experience of creating the slides. And Keynote removes that dread and makes us look better because it:

• Renders slides for maximum impact.. The whole idea behind slides is that they should be visual aids to the presentation, not the presentation itself. With your eyes providing the highest bandwidth path to your brain, those visuals make a huge impression on the audience. PowerPoint slides tend to look pixelated and blocky when blown up to full screen, and the animations tend to stutter or jerk. Keynote slides boast fully anti-aliased typography to remove jaggies, and the animations render smoothly. Most audience members couldn't tell you why Keynote slides look more professional, but they will tell you they like them better.


• Makes it easy to do common things. One of the most common activities for a presenter is to step through a table or graph one element at a time. Yet, because PowerPoint builds its tables in Word and its graphs in Excel, it's nearly impossible to display a table one column at a time or build a graph one element at a time. Both of those functions are built into Keynote because good presenters don't want to overload their audiences with too much information at once.


• Avoids needless clutter. Even when the presenter is creating the slides, PowerPoint tends to clutter the screen with a zillion Office buttons and menubars. And most PowerPoint color themes and templates tend to pull focus to the template, not to the content. Apple's built-in Keynote templates offer minimalist alternatives (such as the black gradient background that has become a hallmark of Steve Jobs keynote speeches) that allow the content to shine. And Keynote has a single menu bar and devotes most of the screen to the slides, encouraging the presenter to focus on making the slide great.


• Helps presenters present well. One of the most important techniques for a presenter is to be able to introduce the next slide before they click to it. Using PowerPoint, that's a technique that requires a second computer and display. Keynote on a Powerbook or Macbook Pro puts your preview slide on your laptop (along with your notes, if you like) while your current slide is up on the screen. Just this one feature allows most presenters to focus more on what they are saying rather than trying to remember what comes next -- and thereby makes them more compelling.

We're not the first people to observe the Keynote effect. Les Posen at Cyberpsych has a terrific blog article titled, "Just what is it about Keynote that is changing the way people present?", where he cites a number of famous presenters who have been won over to Keynote because it allows them to be more creative. And of course, Al Gore did the visuals for his groundbreaking film, An Inconvenient Truth in Keynote. And Garr Reynolds at the site PresentationZen.com notes how the Zen esthetic embodied in Keynote allows Steve Jobs' presentations to have much more power and impact than similar presentations by Bill Gates.

The bottom line: Good marketing demands good presentations. No professional marketer would publish a print ad in Microsoft Word because the quality would be too poor to be taken seriously, yet the CEOs of their companies continue to do presentations the ways they have for the last two decades. If major newspapers are going to bemoan the tragedy of corporate presentations today, perhaps they should start noting that there are alternatives to death by PowerPoint.

Full disclosure: I do own some Apple stock.

Technorati Tags: Apple, Keynote, Marketing, Microsoft, PowerPoint, Presentations, Public speaking

Engadget captures the Zen of the Zune install

Engadget has captured the true essence of the Zune experience. To describe it would be to spoil it. Read the entire article; trust me -- it's worth it.

Technorati Tags: Microsoft, Zune

Electronics retailers predict hot iPod sales for Christmas

I posted our prediction on Friday that Apple would sell 20 million iPods this Christmas. Some might be skeptical about such a prediction with new products such as the Sony Playstation 3 and the Nintendo Wii being launched this week. Well, here's some data that should erase a bit of that skepticism: Channel Checkers' survey of electronics retailers reports that among electronics retailers in the US and Western Europe, the iPod was the product most cited as being the product they expect to be hottest this holiday season. Twenty-eight percent of respondents cited the iPod overall and the iPod nano specifically as being the hottest product. Sony's Playstation 3 and Nintendo Wii tied for second place with 20% of mentions each. Microsoft XBox 360 came in a 15% of mentions. Interestingly, Microsoft's Zune didn't seem to be on anyone's radar. Hmmm.

I don't know what Channel Checker's sample size was or how it was selected, but given what I've seen of the Black Friday ads, iPods do seem to be just as hot this Christmas as they were last. And the Consumer Electronics Association's predictions for Christmas show MP3 players (of which iPods comprise 80% of units) topping both the adult and teenager wish lists, and ranking #3 on gift giver lists after digital cameras and cell phones.

So here's the question for readers: what do you think? I've asked the same question that Channel Checkers asked below. I won't try to define hottest product, since as far as I know, Channel Checkers didn't either. I apologize that there aren't more than five choices, but that's all the polling widget can handle. But if you think I've missed the boat entirely, please leave your suggestion in the comments, and if there are enough votes for another product, I'll do another poll.

Technorati Tags: Apple, Consumer Electronics, Hot products, iPod, Marketing, Nintendo, Playstation 3, Poll, Retail, Wii, XBox 360, Zune

Disassembling the Playstation 3: the movie

No more than 48 hours after Sony's Playstation 3 has gone on sale in Japan YouTube already has videos of one being taken apart. Take a look at this second video of the four, and be sure you listen to the comments from five minutes on to the end. You don't have to know Japanese to understand that the engineers present were quite impressed the fan you need to keep a PS3 cool while only emitting 22 decibels of noise. Hint: it's big.

As an electrical engineer myself, I had to say, I was very impressed with the engineering and design in this machine. It was quite clear from the movie that every piece of the Playstation 3 is designed to fit just so into a single, integrated whole. Compared with PS3s, most other computers appear haphazard and thrown together. Who knows? Sony might give Apple a run for its money at next year's design awards.

Technorati Tags: Engineering, Playstation 3, Sony

Rocketboom ditches Zume promo because of Microsoft restrictions

Drew over Rocketboom just cancelled their promo gig for Zune because of Microsoft's restrictive terms for showing the Zune logo. The terms that were giving him heartburn:

... the logo was sent with a use contract that stated as one of the clauses:

"You may not display the Logo(s) on any site that disparages Microsoft or its products or services, infringes any Microsoft intellectual property or other rights, or violates any state, federal or international law."

Come on, guys. An End User Licensing Agreement for a logo? I thought Microsoft wanted publicity for Zune.

Props to Drew for recognizing an attempt to gag bad reviews in advance. Those efforts always backfire, and this one appears to be proving that rule. And given that Engadget's latest screenshot of Zune installation errors are reinforcing Microsoft's reputation for buggy software, Drew seems to have been appropriately leary of being able to say only good things about the Zune experience.

Technorati Tags: Logo, Marketing, Rocketboom, Zune

Sony's Playstation 3 launches in Japan

Kokatu has pictures and notes from the Playstation 3 launch in Japan. While Japan only got about 80,000 units, their availability per store has been quite good, apparently. One store in Osaka claimed to have gotten an allocation of 600 PS3s, and the claim is that that wasn't terribly unusual. Of course, they probably could have had 6,000, and it wouldn't have mattered; they still would have been sold out before the day ended.

For anyone considering lining up now for this Friday's PS3 launch here in the US, where about 400,000 units will be available, forget it. While about 20 people had been lined up for about four days already at the Best Buy in Burbank, CA, Kokatu documents that Best Buy dispersed them today, and won't allow anyone to line up prior to the day before launch. In truth, that actually makes a lot of sense. Having customers sleeping in your parking lot for a couple weeks just to buy a product probably presents liability concerns that most corporate lawyers would be uncomfortable with. A far better marketing plan is to have a rigorous and fair pre-order process and let people stay home.

For anyone interested, the PS3 launch isn't the only one coming up this week. Microsoft's Zune music player goes on sale on Tuesday, November 14. I don't expect to see people sleeping in parking lots for that launch because Microsoft's marketing program took all the excitement out of the actual release. But hey, it's their money.

And let's not forget that there's one more game system launching soon: Nintendo's Wii will launch Sunday, November 19, and it has a lot of potential to be one of the best selling game platforms this Christmas. There's no word from Best Buy about whether they'll let people who camp out the night before the Playstation launch keep their campsites until Sunday.

Technorati Tags: Best Buy, Microsoft, Nintendo, Playstation 3, Sony, Wii, Zune

Time to plan that Black Friday shopping tour

In just under two weeks, most of us will be trying to recover from too much turkey, stuffing, and pecan pie. But many of us -- usually the more hardy females of our species -- will be hitting the stores early in the morning for the best deals of the season. Yes, two weeks from today is (ominous music goes here) Black Friday, typically the biggest shopping day of the year.

Now you could wait until the Thanksgiving newspaper arrives to to do your Black Friday planning, but that would put a serious crimp in your football watching. And besides, newspapers are so twentieth century.

The twenty-first century solution is, of course, to use the Internet to do your Black Friday planning. And the place to begin is at Black Friday Ads - The OFFICIAL Site for the Hottest Day of the Year. Yes, this site actually posts scans of all the Black Friday advertisements that have been purloined fallen off a truck on their ways to the printers.

And a quick glance through the Best Buy circular does show some pretty interesting deals, such as a 42-inch LCD TV for $999 and a Toshiba 50-inch plasma TV for $1699. Both of these prices are exceptional for their sizes of flat panels, and both deals are only good until noon Friday (i.e., they are loss leaders to get people into the store ASAP), but those are the deals everyone wants to know about to do their planning. And the $15 Motorola Bluetooth headset isn't a bad deal either.

And by the way, today's New York Times notes that Today's New York Times notes that bfads.net isn't the only deal in town for planning your Black Friday shopping:

...There are a number of Web sites that troll online stores checking prices. Sometimes called shopbots, these sites are a necessary tool if you are trying to find the lowest prices.

The best of them allow you to rank the prices, give ratings on the stores and compute what the real cost will be after shipping and taxes. Some of the more popular bots are shopper.cnet.com, nextag.com, pricefish.com or shopping.com. Others, like Edeals.com, fatwallet.com, bensbargains.net, retailmenot.com and mybargainbuddy.com try to find temporary promotions that knock down the price.

Do not forget Gottadeal.com’s Black Friday list. It is back again this year scooping the retailers on the deals they will be offering the day after Thanksgiving by obtaining advance copies of the preprinted Sunday newspaper advertising circulars. You can find it at www.blackfriday.gottadeal.com where it has already posted information on the discounts at BestBuy, Circuit City, KB Toys, Sears and OfficeMax.

Technorati Tags: Advertising, Black Friday, Flat Panels, LCD, Marketing, Plasma, Retail

Apple's upcoming $7 billion Christmas

Yesterday, I noted that Microsoft's agreement with Universal was really a way to tax Apple's massive iPod sales this holiday quarter. But I was a bit coy on the details of what I think that quarter is going to look like. Today, I thought I'd flesh out those details.

The top line: I predict Apple's sales this quarter will break $7 billion. That total will break down as follows:

Category	Units (in thousands)	Revenue (in millions)
Desktops	700	$976
Portables	1,200	$1,637
iPods	20,000	$3,300
Other (Software/iTunes/Periphs)	N/A	$1,102
Total	N/A	$7,015

The eye-catching number, of course, is the number of iPods: 20 million, worth roughly about $3.3 billion in revenue. Why those numbers? Because:

• Apple shipped 14 million last Q4. The last holiday season, Apple shipped more than double the number of iPods it has shipped the calendar third quarter of 2005. Similarly, my estimate here is slightly more than double the nearly 9 million Apple shipped in Q3 2006.


• iPod pricing now addresses more market segments. Last Christmas, the cheapest iPods were the newly released iPod shuffles, at price points of $99 and $129 for 120 and 250 song capacities. The hot product was the nano, but that started at $199 and traditional iPods started at $299. This year, iPod shuffles are available for $79, nanos for $149, and iPod videos for $249. Moving the price points down addresses a consumer segment who previously had considered iPods out of reach -- and it boosts demand among the existing customer segments. Yes, these lower prices decrease the average selling price, and that's reflected in our modest estimate of $3.3 billion in iPod revenue. But Apple will make up for those lower prices in higher sales volumes.


• Consumers now have more reasons to choose the market leader. Last year, the iPod was still all about music, with a little TV thrown in. This year, iPods address consumer interests from downloadable movies to jogging enthusiasts, all while not compromising the primary music function. And with thousands of iPod accessories and car integration kits available, Apple has moved to selling complete music solutions to fit a wider variety of needs.


• Apple retail stores will drive iPod demand. With more than 150 stores open, Apple has made it easy for people to buy iPods. And high-end environments such as New York's Fifth Avenue store, Tokyo's Ginza store, and London's Regent Street store now provide high-end consumers with a fashionable shopping experience unmatched by your local Best Buy. Retail is driven by proximity to consumers with money to spend, and Apple has positioned its stores and its iPods close to the majority of people for whom an iPod costs less than their average lunch.

Yes, the iPod is a mature product, and I'm sure we'll see new refreshes of both the product and the consumer experience next year. But mature products are the ones that make big dollars. Apple is well on its way to reaping the profits from five years of investments in music and retail. And because few other companies have invested as much for as long, it will also take years for anyone to dislodge it from its now dominant position.

I'll talk more about other aspects of my projection such as projected earnings next week. Meanwhile, I hope people with different or better data will share their insights in the comments. But from where I sit, Apple's iPod juggernaut is just looking better and harder to beat.

Full disclosure: I own some Apple stock.

Technorati Tags: Apple, Finance, Financial analysis, iPod, iTunes, Marketing, Opinion, Projections, Stocks, Stores, Zune

Microsoft tries to derail the iPod juggernaut with Universal deal

Today's New York Times notes that Microsoft has agreed to share some of the revenues from its upcoming Zune music player sales and services to Universal Music:

Universal Music, a unit of Vivendi, will receive a royalty on the Zune player in exchange for licensing its recordings for Microsoft’s new digital music service, the companies said.

Universal, which releases recordings from acts like U2 and Jay-Z, said it would pay half of what it receives on the device to its artists. The company is expected to receive more than $1 for each $250 device, according to executives who were briefed on the pact.

The deal represents a big departure from the standard set by Apple Computer, which pays record companies for songs sold through its iTunes service but does not give them a cut of the sales of its hugely successful iPod.

Under the deal, Universal, the world’s largest music corporation, will receive a percentage of both download revenue and digital player sales when the Zune and its related service are introduced next week.

While this sounds like a simple "we wanted to get a major music label on board deal", it's really an attempt to poison next year's licensing contract renewal between Universal and Apple. After all, Microsoft is unlikely to sell more than two million Zunes in the next six months to a year, so this costs them little. But I estimate that Apple will sell nearly 20 million iPods just this quarter (more about that tomorrow), and hundreds of millions of songs as well. And if Apple has to forfeit a dollar of every $79 iPod shuffle sale to Universal (and presumably to Sony, Warner, and EMI as well), well, that's a nice way to make Apple pay for Microsoft entering this market.

This is classic Microsoft: crafting deals to attack competitors instead of spending the time and energy to positively market the product uniquely and powerfully. The problem: Apple already pays Universal millions of dollars in licensing fees for music it sells, so it has huge leverage with the labels that Microsoft just doesn't have. Unlike Microsoft, Apple is a proven distributor of music, and the digital distribution fees it pays to the record labels is the main reasons Universal is still in business. And don't forget, Apple negotiated to buy Universal back in 2003, so it has a pretty good idea of the pressure points to use to get the deal done. I don't rule out Apple negotiating a device/song revenue split, but let's just say that Jobs knows he has invested a lot more in digital music than Universal has, and fully expects to keep most of the profits from creating that market.

We've said it before, and we'll say it again: Zune is just the last in many attempts for Microsoft to buy its way into the music market without doing the hard work of creating a unique and defensible niche. But until they figure out that good marketing is as important as the technology and deals behind the product, Microsoft won't succeed.

One final note to illustrate Zune's limp marketing: what is up with the Zune Web site? Strike one: it's not Zune.com, but Zune.net; a lot of people aren't going to find it easily because of that. Strike two: if you do a Google or a Live.com (Microsoft's own search engine) search for Zune, you don't get Zune.net as a response until way down the page (it's not even on the first page of Live.com's results). Strike three: are those Zune commercials lame or what? Free advice: ditch the puppy dogs; they aren't helping.

UPDATE: Over at the Channel9 forums at Microsoft, a reader has posted the 13 things that have put him off the Zune. Most of them are illustrative of the marketing challenge facing Zune: the features and benefits they are announcing are reminiscent of where the iPod was five years ago when it was launched, not where the market is now. For Zune to be successful, it would have be be pretty much at consumer benefit parity with iPods with additional differentiation. The fact that they are launching with a benefit deficit compared with the iPod and promising to reach parity later is the reason we can expect poor consumer acceptance. The consumer value proposition just isn't compelling enough to overcome the consumer downsides of not buying the market-leading product.

UPDATE 2: David Pogue of the New York Times and Walt Mossberg of the Wall Street Journal also have Zune articles today. Both reach similar conclusions that Zune is a tepid value proposition for different and more technical reasons.

Technorati Tags: Advertising, Apple, Gadgets, iPod, iTunes, Marketing, Media, Microsoft, Music, Opinion, Steve Jobs, Zune

Digital Equipment's old mill bears SiCortex, a new computer company

Blackfriars is located in Clock Tower Place, which once was the headquarters for mini-computer giant, Digital Equipment. Today, that company is no more, having been absorbed into the depths of Hewlett Packard. But for New England residents, many of us think of the mill as home to "our" computer company, Digital.

Today, the Wall Street Journal published an article about a company here in the mill called SiCortex that boasts a new low-power twist on supercomputing:

SiCortex licensed a microprocessor design from MIPS Technologies Inc., and packed the equivalent of six such electronic brains and communications circuitry on a single piece of silicon. One of those chips, combined with a set of memory chips, draws about 15 watts of power, compared with 250 watts for a computing element in a standard cluster, the company says.

The company's top-of-the-line supercomputer has 972 such chips -- or 5,832 processors in all -- in a cabinet a little less than six feet tall. A cluster with comparable performance might need eight to 10 cabinets, and would draw about 10 times more power than SiCortex's machine, Mr. Mucci said.

Looked at another way, SiCortex estimates that one of its $1.5 million machines delivers three to 10 times the computing performance of a cluster at the same price. The company is also offering a smaller system -- with 108 chips, containing 648 processors -- for $200,000. Each system has a single power cord; clusters may have dozens.

SiCortex promises the end of do-it-yourself Linux supercomputer clusters, and more importantly, promises that its clusters will consume an order of magnitude less power than one you build yourself. And the people behind the company aren't lightweights. Most of them are 20- and 30-year veterans of parallel processing and supercomputing, ranging from Thinking Machines to Bolt Beranek and Newman. And their product promises to take supercomputers out of their glass houses and put them in places that ordinary people can use them. After all, they were born in a 150-year-old New England mill.

Technorati Tags: Blackfriars, Computers, Parallel processor, SiCortex, Supercomputer

Building Positive Brands in Politics

I made a shocking discovery on the editorial page of the Wall Street Journal today: I found an article I agreed with. That isn't very common for me, a quite liberal independent. But John Ellis, former columnist for the Boston Globe hit the nail on the head about why American voters are turned off by today's political campaigns:

According to Advertising Age magazine, the total amount spent this year on political advertising will reach $2 billion, a hefty increase over 2004. If one conservatively estimates that at least half of all political advertising can be fairly described as "negative," then 2006 will be the first year that negative political advertising expenditures reached the $1 billion mark. That's a dollar amount greater than all of the television, radio and print advertising buys done by Anheuser-Busch (estimated by Ad Age to be $919 million) in 2005.

Imagine, if you will, what your taste for Miller beer would be if Anheuser-Busch spent half of its annual advertising budget describing all of the various Miller brands in the most unsavory terms. Or, what your taste for a Budweiser would be if the lads at Miller unleashed a $500 million negative ad campaign against "the King of Beers." Imagine both at the same time and you get some idea of what domestic politics is like for most Americans.

Look through the list of the major advertisers in the U.S. and what strikes you is that all of them spend vast sums of money building and strengthening brands. The nation's leading advertiser, Procter & Gamble, spends over $4.5 billion annually doing just that. P&G spends not one dime on negative advertising because they understand that it is ultimately self-destructive.

Yup, that's the problem all right. And then John talks about what this could lead to.

Ultimately, the reaction to this ceaseless negative barrage, if it continues unchecked, will be the rejection of both major political parties. As more and more people are repulsed by the political process, their number will at some point reach a critical mass. Americans share two overriding beliefs: Tomorrow will be a better day and the idea of America is fundamentally important. That critical mass will eventually embrace a party of hope and mission. The alternative, after all, is a new record every two years -- $2 billion of negative advertising, then $4 billion, then $8 billion. All slander all the time eventually collapses of its own foul weight.

Despite John's painting both parties with this foul brush, we have seen in the last six weeks or so two examples of actual politicians rejecting this path and trying to do honest-to-goodness positive brand-building. One is Barack Obama, who has done so much personal positive brand-building, there's now a name for it: Obama-mania. That landed him on the cover of Time magazine. Positive branding works.

The other example is right here in Massachusetts: Deval Patrick. Here's a man who rejected negative campaigning done by his opponent in favor of campaigning on a platform of hope and community. Did the voters go for it? Well, he got a fair amount of complaining by political veterans that his was a "Barney" campaign: all love and no hard issue campaigning. Yet despite a fairly tough negative campaign barrage from his opponent, he won in a landslide. Positive branding works.

There are a lot of marketing techniques that political candidates can use, such as micro-targeting, differentiation, and countless others. But the best way to win real people over is to give them an emotional benefit, a positive reason to vote for you. For Senator Obama, it's The Audacity Of Hope. For Deval Patrick, it's his grandmother's message of, "Hope for the best, and then go work for it." But both men touch the emotions of listeners with their honesty and positive views. And in today's political world, that brand-building sets them apart from their opponents more than any amount of negative campaigning could ever do.

Technorati Tags: Barack Obama, Branding, Deval Patrick, Marketing, Political Communication

Marketing how to vote

Another election, another disaster for electronic voting systems. As Engadget notes, electronic voting machines continued to rack up problems from failures to start to improper recording of votes in numerous battleground states in yesterday's election. And in Pennsylvania, one voter was so frustrated with a voting machine that he smashed it with his cat paperweight, leaving election officials with the interesting problem of figuring out how to get the votes that had already been cast off the now-broken machine.

This is going to be fodder for late-night comedians for years to come. And that means a serious marketing and communications issue for voting machine manufacturers Diebold, Sequoia, and ESS: unless they take serious and clear action to re-establish voter trust, their role in helping America vote is about to end. Anyone suggesting that their community or state buy their machines today would be laughed out of office.

So what can these companies do? Unfortunately, trust once lost is not easily regained. No flood of press releases is going to fix this problem. These companies are going to have to retool both their product lines and marketing processes to gain that trust.

How can they possibly do that in the face of lawsuits, conspiracy theories, and a new political customer base? Building trust will require at least four steps:

1. Publicly admit that the current approach isn't working. Given the coverage of voting machine problems in the last three elections, fighting public perception that these system is flawed is a losing battle. The only way to make progress on trust is to admit that the voters are right. the alternative is going out of business altogether, so there really is nothing to lose by doing this.


2. Focus on paper. Everyone understands paper ballots and how they work. If voting machine products focused on keeping those paper ballots sacrosanct and simply making them easier to count and record, voters will immediately understand the process and how it works. Further, the paper ballots will provide an verifiable audit trail and a way for people to vote in the face of power failures and other natural disasters. And all voting machines should produce paper results summaries for audits and comparisons with the actual ballots.


3. Adopt an open development process with the participation of independent third parties. Given the poor track record that voting machine companies have had to date, the only way the public will ever trust these systems is to have third parties understand them, vouch for them, and certify that they work properly. And that means involving them in the actual development process. If voting machine companies involved representatives from the Europe and Asia in their development, they would expand their target market -- and their potential profits -- while building trust that the systems weren't built to favor anyone.


4. Develop an iron-clad audit process for third party observation and proof of results. We have independent auditors for financial records; we should have similar capabilities built into the voting processes and machines so that anyone from KPMG to international election monitors can validate that the final tally is correct. Certifying an election should be a process that can be done by ordinary accountants and politicians, not something that requires an advanced degree in computer science.

Here in Massachusetts, most of us already vote with optical scanning systems that allow sampling and auditing of results. While this system also has vulnerabilities and flaws, voters trust it because it's obvious that the paper ballots can be counted by ordinary people to get a result. Diebold, ESS, and Sequoia need to market products that have similar benefits and transparency. Because, quite frankly, if they don't, they're going out of business. Voting really can be that simple.

Technorati Tags: e-Voting, Marketing, Elections, Voting, Voting Machines

If you're a US citizen, vote today

In case you've been locked in a cave for the last year, today is election day here in the US. If you are able, go vote for the candidates and issues of your choice.

I voted at 7:30 am, and the polls in my town, Stow, MA, were very busy. I would estimate turnout in the morning was comparable to a presidential election year. For the first time in more than a decade, I'd say that voters were actually excited, eager, and determined to make their voices heard. Make yours count today too.

Move over Apple iTV: XBox 360 high-def movies are coming

Engadget claims on November 22, Microsoft will announce the ability to download high-definition movies and TV shows to XBox 360 systems. Check out the article for the details, but the files are quite huge -- 5-6 Gigabytes for high-def movies, and 2.2 gigabytes for high-def TV shows. Given that the XBox 360s only have 20 gigabyte hard drives, that says to me that despite claims that TV shows are purchased, this is an attack on NetFlix rentals, not on TiVO or other HD digital video recorders, nor on the iTunes Movie store. And of course, you won't be able to use your credit card to buy these movies; the service only accepts Microsoft points.

The launch titles are fairly lame (do we really need Breaking Bonaduce and Jackass: The Movie in HD?), undoubtedly constrained by studio contracts and restrictions. But the concept is comparable to what we might expect from Apple's iTV device. And it sounds like Microsoft will be there first. Kudos to the XBox 360 team for an impressive technology first.

However, as regular readers know, technology rarely creates commercial success without smart marketing, and some of the marketing positioning of this service seems flawed. My bet is that the XBox hard drive size is a near fatal constraint on the popularity of the service, since it can only store 10 TV shows or three movies at a time. Since movies will take anywhere from four to six hours to download, yet can only be viewed for 24 hours, NetFlix probably doesn't have much to worry about. And if real appeal is high-definition movies, why would a viewer wait four to six hours to download it when they could watch it immediately using a service like Comcast On-Demand?

As we found out with Amazon's Unbox Movie download service, the devil of movie downloading is in the marketing details. But my call is that the awkward constraints imposed will confine this download service to a curiosity for at least the next year, if not permanently. Meanwhile, you can be sure Apple, NetFlix, and TiVO will be taking copious notes.

Technorati Tags: Apple, Comcast, DVR, HDTV, Internet, iTunes, iTV, Marketing, Microsoft, NetFlix, On Demand, TiVO, TV, XBox 360