Digital Talent Agency

Youtube: Flawed Business Model?

While its staggering popularity is without question – some 345 million visitors worldwide descend upon the website every month – it is hemorrhaging cash. The question of exactly how unprofitable it is continues to be the source of fierce debate online; back in April, analysts at Credit Suisse estimated that its operating losses for this year would reach $470m, while San Francisco-based IT consultants RampRate were more optimistic, but still put the figure at just over $174m. Google aren't rushing to put an end to speculation over the scale of the debt. One thing is abundantly clear from both studies: Google isn't making money by letting everyone and their aunt share videos with each other for free.

Music, television, sport, gaming: the flow of free entertainment to our computer screens seems almost the result of a magical process, and there's been little need for us to consider the costs that might have been incurred by those making it all happen. It's broadly accepted that YouTube will receive around $240m of revenue from advertising this year, but that sum doesn't even cover their general overheads and the cost of acquiring premium video content (such as TV shows) from copyright holders. In addition, there are the huge fixed costs from the supply side – data centres, hardware, software and bandwidth – that have to cope with the 20 hours of video clips that we upload to YouTube every minute of every day. Again, no-one knows the true total of these costs – the Credit Suisse and RampRate reports put it between $83m and $380m this year – but Google's Chief Financial Officer, Patrick Pichette, would only reveal one thing: "We know our cost position, but nobody else does." Or, in other words, we're not telling you.

This typifies the slightly secretive but ultimately sanguine position of Google even as phrases like "financial folly" are bandied about to describe the YouTube business model. With Google's overall profits reaching some $1.42bn for the first quarter of this year alone, the king of online search is certainly a position to support a loss-making venture that also happens to be the third-most-popular website on the internet. (Google, naturally, is the first.) But Keith McMahon, senior analyst for the Telco 2.0 Initiative, a research group that studies business models in the digital economy, believes that YouTube is not the albatross around Google's neck that it's widely imagined to be. He sees the search company as deriving massive indirect benefits from operating YouTube and believes that estimates of its losses obscure the true picture.

"There are many urban myths surrounding the way that companies extract value from the internet," he says. "Google's spin-off benefits from owning YouTube include the accumulation of our data and strengthening of their network design – and the more time people spend watching online video, the more advertisers will pour into marketing on the internet as a whole. There's no doubt that Google can afford YouTube."

McMahon also believes that by keeping quiet about YouTube's hidden benefits and by allowing the misconception of it as a deeply unprofitable business to circulate, things work very nicely in Google's favour when it comes to negotiating with copyright holders in the world of TV, movies and music. Copyright holders can't demand money that isn't there, and it would certainly take no more than a hint of profitability at YouTube for lawyers to descend, threatening court cases and demanding higher royalties. In the new, topsy-turvy world of online economics, it seems astonishing that losses on paper have actually made YouTube a more powerful online force.

Here's the complete article.

"Spent: Sex, Evolution, and Consumer Behavior"

Dr. Miller's New Book: "Spent: Sex, Evolution, and Consumer Behavior"   

"Why does a diploma from Harvard cost $100,000 more than a similar piece of paper from City College? Why might a BMW cost $25,000 more than a Subaru WRX with equally fast acceleration? Why do “sophisticated” consumers demand 16-gigabyte iPhones and “fair trade” coffee from Starbucks?

If you ask market researchers or advertising executives, you might hear about the difference between “rational” and “emotional” buying decisions, or about products falling into categories like “hedonic” or “utilitarian” or “positional.” But Geoffrey Miller, an evolutionary psychologist at the University of New Mexico, says that even the slickest minds on Madison Avenue are still in the prescientific dark ages.

“Evolution is good at getting us to avoid death, desperation and celibacy, but it’s not that good at getting us to feel happy,” he says, calling our desire to impress strangers a quirky evolutionary byproduct of a smaller social world.

"If marketers (or their customers) understood biologists’ new calculations about animals’ “costly signaling,” Dr. Miller says, they’d see that Harvard diplomas and iPhones send the same kind of signal as the ornate tail of a peacock."

“We evolved as social primates who hardly ever encountered strangers in prehistory,” Dr. Miller says. “So we instinctively treat all strangers as if they’re potential mates or friends or enemies. But your happiness and survival today don’t depend on your relationships with strangers. It doesn’t matter whether you get a nanosecond of deference from a shopkeeper or a stranger in an airport.”

Here's the complete article.

Older Generations Embracing Social Networks

"While online social networks like Facebook, Twitter and MySpace are known hang-outs for younger adults and teenagers, older generations in recent months have been taking to the medium at a faster rate than any other age group, according to industry reports.

But Facebook  popularity is growing most quickly among women older than 55, according to a site called Inside Facebook, which tracks Facebook's growth.

There are now about 1.5 million female users older than 55 on the site, the group says -- roughly a 550 percent increase over six months ago. By comparison, membership among people younger than 25 grew by less than 20 percent over the same period, Inside Facebook says.

Facebook now says it has 200 million users, making its user base larger than the populations of all the world's countries except China, India, the United States and Indonesia. Such a vast presence, coupled with news media buzz about all social media, has pushed online social networking to a "tipping point," said Amanda Lenhart, a senior research specialist at the Pew Internet & American Life Project.

Here's the complete article.

How Coke Became the Most Popular Facebook Page - after Obama.

"The Coke page, which totals 3.3 million "fans," wasn't even created by Coca-Cola, but by a pair of Los Angelenos who just love Coke.

"We've discussed a dozen hypotheses about why it took off," said Michael Donnelly, director of worldwide interactive marketing at Coca-Cola Co. One theory the company keeps coming back to, he said, was the quality of the photo -- a crisp, high-resolution image of a Coke can covered with a thin layer of condensation. "For us as marketers, luckily it was exactly right -- the can we had in the marketplace. ... It grabs you." He said another theory is that Messrs. Sorg and Jedrzejewski had very active, expressive "social graphs," i.e., their network of Facebook friends. But "we can't measure that," he said.

Now normally when a giant multinational company calls a consumer about something the consumer has created in that company's brand name or image, it's not a good sign. And initially Mr. Jedrzejewski said he was worried about it.

"Everyone has this vision that if something like this happens, the big company will send you off to Guantanamo," he said. "This was exactly the opposite."

Coke instead flew the guys down to Atlanta for a few days of meetings, a tour of the World of Coke museum and a visit to the company's legendary archives. It was a friendly, not heavy-handed approach, Mr. Jedrzejewski said.

"We talked openly about ideas, the future of the fan page," he said.

Coke's actions in sharing the page are indicative of not only the lessons the beverage giant has learned in the social-media space but also proof that big brands can tread gracefully in social media.

 

Excerpts taken from an Adage article by Abbey Klaassen.  Complete article here.

Facebook pages are becoming one of the most important social networking tools on the internet.  Mashable has a recent article on success with Facebook Fan Pages here.

Mashable also reviews the new changes to Facebook from a Social Network Marketing POV here.

    

MySpace Founders on Charlie Rose

Discussions on China, Facebook, Mobile Devices, and Future Revenue.

Charlie Rose - Chris DeWolfe and Tom Anderson


Techcrunch has the complete transcript here.

Virtual Currencies 411

by Anu Shukla for Mashable

The word on the street is that social networks, as popular as they are, can’t make any real money. After all, who’s going to click on an ad while they’re in the midst of socializing with their friends?

While there’s a grain of truth to this rumor, it’s fast becoming an out-of-date perception. What’s changed? A new economy based on social web properties that use virtual currency to capture users’ imaginations.

By creating a demand for premium content such as virtual gifts or upgraded features, savvy social publishers are finding that at least a portion of their users will gladly fork over real cash in order to pay for, say, a pretend peony on (Lil) Green Patch or to buy the latest toys for their virtual babies on Make A Baby. Even better, plenty are willing to wade into the world of online surveys and advertising offers in exchange for these “must have” items in their games.

Though no one knows yet the exact size or potential of the market for virtual goods and services, conservative estimates put it at over $2 billion for this year alone. Not bad for a marketplace that barely existed a couple years ago. Even better, all signs indicate that the growth is just beginning.

As more and more social web publishers catch on to virtual currency as an incredibly effective way to not only monetize their traffic but also engage and motivate their users, the trend will only pick up steam. And as advertisers understand the channel better and realize that it is ideal for both performance-based campaigns as well as branding efforts, don’t be surprised if virtual currency becomes the most sought-after ad channel on the web.

 

Ever noticed the little gift icons on Facebook lately that urge you to send a present to a friend? Virtual gifting is a reportedly $50 - $60 million a year business for the company, and that doesn’t include any of the gifting that takes place on third party applications. But beyond Facebook’s own virtual gifting, it’s also built into a number of applications, offering revenue opportunities for the developers of these games.

irtual worlds and avatar-based communities have been charging people for decorative types of goods like fancy upgrades for their avatars or special backgrounds for their profile pages for some time now. AtWeeWorld, for example, where you can create your own personalized WeeMee and take it with you around the web, you can spend WeePoints to pimp out your avatar with just the right hair, right clothes and right accessories.

Virtual goods can also be more functional than decorative, such as the case when virtual currency is redeemed to unlock hidden features or advance within a gaming scenario. This type of virtual good is especially prevalent in MMOGs or other types of social games. For example, at Mobsters, the number one app on MySpace, users can redeem virtual currency to help them grow their mob and level up faster towards the top of this underground world.

By tapping into the user’s social activities and motivations—in this case, sending a virtual gift—advertisers’ offers essentially provide the fuel that enables consumers to interact with each other within an application. The key to success, from the advertiser’s point of view, is using all of the juicy demographic and behavioral data on hand in order to target their audience strategically. Do that, and they will generate new customers far more effectively than through any other channel

Here's the link.

Brands face challenges advertising in social networks.

by Randall Stross for the New York Times.

The core of social networks' success: friend referrals and introductions -- doesn't translate easily to traditional online marketing tactics.

"And when they try to take advantage of new “social advertising,” extending their commercial message to a member’s friends, their ads will be noticed, all right, but not necessarily favorably. Members are understandably reluctant to become shills. IDC, the technology research firm, published a study last month that reported that just 3 percent of Internet users in the United States would willingly let publishers use their friends for advertising."

It's hard to think users would become fans or join groups to products that aren't cult status
(i.e. vitamin water, mini cooper. etc).  In cases where they do, usually there is some sort of coercion
involved.

Here's the complete article.

 

Widgets: big marketing potential

by Bob Garfield for Ad Age

"Branded widgets are the refrigerator magnets of the Brave New World. These compact, portable little software apps -- from video players to countdown clocks to makeup simulators -- are inexpensive to distribute, free to the user and (often enough) distinctly useful. At a minimum, they carry an ad message wherever they go.

That's at a minimum. At a maximum, the widget is something like the magical connection between marketers and consumers, not only replacing the one-way messaging long dominated by media advertising but vastly outperforming it. Because online the link is literal and direct, and along its path, data of behavior, preference and intention are left at every step. "

"According to Alexa, Apple.com's page views per user are down 9%; Comcast.net is down 1%; Dell.com, down 22%; AT&T.com, down 18%; Xbox.com, down 9% and so on as corporate e-bastions begin to experience the same audience fragmentation that is killing old media. "As popular as your site may be," says Kennedy, the reality is that people are actually visiting Yahoo, MySpace, Google and Facebook thousands of times more than they're visiting you."

Tony Zito of MediaForge, which handles Steep and Cheap, calls this "the slow death of the destination website."

Full story here.

Twilight's Online Marketing Success

by Cyndy Aleo-Carreira for the Standard

"The online marketing for the film has been astounding. It's a complex, multifaceted outreach effort to fans and new customers, comparable with what the Obama campaign did online before the election. The online campaign has generated a huge amount of buzz for the movie, and a surge in online sales for tickets, books, and the upcoming film soundtrack.

In fact, if you need proof that the Web can encourage young people to buy music, look no further than the soundtrack sales data. Billboard announced yesterday that the soundtrack had reached the number one spot on the charts, selling 165,000 copies in its first week of release, 29% of which (48,000) were digital copies, making it the second highest for online sales since the company began tracking them. The soundtrack marketing effort has been highly successful, ranging from videos released on author Stephenie Meyer's site to exclusives available for fans depending on format and place of purchase: iTunes has a digital booklet and three additional songs, while the physical CD contains a poster from the movie, with several different posters randomly placed in the CD cases. In addition to the Billboard ranking, the soundtrack currently sits at the top of the iTunes chart, as well as #4 on Amazon's MP3 Albums chart, and #3 on Amazon's music chart for the physical CD. Amazon is also seeing huge sales for the books, with Twilight: The Complete Illustrated Movie Companion at #37, and the book the movie is based on at #5 two years after its original release."

from an online survey of Fandango ticket buyers:

"Fandango has an informal survey the site is taking of users indicating interest in purchasing pre-sale tickets for Twilight. Over 2000 have responded, and the results show some interesting trends. Of those who completed the survey, 41% say they are online all the time, and another 34% say they are online several hours a day, and 4% have their own Twilight fan site or series-related blog. They are also social media-savvy, with 20% saying they "always check" MySpace and 23% "always check" Facebook. The age spans also seem to indicate that the book and film have a wider appeal than the "young adult" audience they are geared for; 41% of intersted ticket buyers are 25 years and older, and 29% couldn't think of another film that appealed to the whole family as they believe Twilight will."

Here's the complete article.

Repurposing Archival Footage

Here's the original.

Here's the VW re-appropriation.