Forrester Consumer Forum 2007—Web 2.0 Poised to Cross the Chasm in 2008

Case Studies Presage Imminent Adoption of Social Technologies—Emerging Markets Prize In Balance

Forrester Consumer Forum 2007 ChicagoA who’s who of global marketing executives convened on the Hilton Chicago October 11-12, 2007 for two days of cramming on social networks, emerging technology and transformation. It certainly felt like an inflection point: analysts’ insights and technology pioneers’ zeal were tempered by corporate stories in the trenches. Based on my experience with previous adoption curves, I predict a significant jump in Web 2.0 adoption by corporations next year.

Depending on your industry, the next six months will be your last chance to be early to market. As success stories become more widespread and executives realize that Web 2.0 has very low barriers to adoption due to the social Zeitgeist and a relatively low price point, the use of social technologies will rapidly become mainstream. The main barrier to adoption is cultural resistance and organizational inertia.

Although this was not a technology conference, in my conclusions, I will provide some insights about why and how Web 2.0 represents a fundamentally new technology value proposition that makes it disruptive—and imminently practical. If you don’t understand this, you may make erroneous assumptions about its applicability.

This article is Global Human Capital’s overview of and conclusions about the forum as a whole, but we will have several other in-depth articles in the days ahead. You can be notified as to their publication by subscribing to the RSS feed of our Forrester Consumer Forum tag.

Agenda

These are the tracks I covered:

Day One Day Two

Setting the Stage

The introduction by Carrie Johnson and Christine Spivey Overby suggested the fact that social computing is a global phenomenon with plenty to say to the stewards of global brands:

  • The percentage of consumers that use various social networking sites is widespread: UK 34% (Facebook), Sweden 31% (Facebook), South America (Orkut), Metropolitan India 69% (Orkut), South Korea 53% (Cyworld) and USA 20% (MySpace, Facebook). Moreover, Cyworld’s penetration among Gen Y and Gen X (broadly, 19-35) is estimated at 90%.
  • The percentage of trust (confidence) that online consumers have in four sales-influencing sources:
    • Opinion of a friend who has used the product: 83%
    • Consumer reviews on retail site: 60%
    • Consumer reviews on third party site: 52%
    • Online review by editors of third party site: 49%
  • The vaunted “marketing funnel” used by marketers for the last several decades is broken beyond repair. It held that marketers communicated with consumers, who turned into buyers along a more or less linear path of touchpoints. Today’s buying process looks more like a (networked) maze, with many unpredictable twists, turns and jumps before the customer turns into a buyer. Energizing this network is the new marketing vision, not controlling messaging and information to pull customers along a linear path.
  • The theme of the conference was “People build great brands and products.” (i.e. your customers)
  • The conference was organized to answer three key questions:
    • How are social technologies changing consumer behaviors towards brands and media?
    • Which competencies and tools will companies need to succeed in this new social structure?
    • How will Social Computing evolve over the next decade, and what are the radical implications to companies?
  • They gave a glimpse of Forrester’s approach to success: assess what your customers are doing; decide what you want to do; plan how customer relationships will change; decide what technologies to use. this is pretty fundamental, but they pointed out that too many companies approach it the other way around: “We need to be in Second Life because our competitor is.” This is a recipe for disappointment.

Your Customers Are Revolting 😉

  • Charlene Li, Vice President and Principal Analyst, Forrester Research

Charlene Li briefed the conference on the disruptive character of consumer empowerment, which she and Josh Bernoff call “groundswell.” She explained why customers were revolting, a “ladder of participation” to describe who is driving the change and some suggestions for turning revolt into reform.

Customers are revolting because marketers are “shouting at them” and not listening. Even more important, they can talk to each other now. Their conversations with each other as individuals make companies’ communications seem inane by comparison. Social technologies are tools that enable customers to act collectively.

The “ladder of participation” was useful and interesting. From least to most engaged are: Inactives, Spectators, Joiners, Collectors, Critics and Creators. Notably, 39% of youth are Creators and 43% are Critics. 58% are Joiners and 66% Spectators. She gave an excellent overview of each profile.

She succinctly explained how to turn “revolt” into “reformation”: instead of being unhappy with customers’ negative comments, enable advocates to answer them on your behalf. Don’t complain when customers magnify your shortcomings with product, service or other. Ask them how they would improve what they’re unhappy about and act on it. Perhaps the hardest for marketers: accept that they will take your ads and messages and twist them in video, pictures, audio and text. Allow them to create relevant messages for each other. Remember, their messages refer back to yours.

Read our more detailed analysis of this track.

Social Networking and User-Generated Content in Today’s Media Environment

  • Forrester-HefnerChristie Hefner, Chairman and CEO, Playboy Enterprises

Christie Hefner gave a doubly-valuable presentation because she addressed her company’s journey to online customer engagement and explained how Playboy’s transition was affecting its advertisers. It was obvious that she is a leader who rolls up her sleeves and understands her business.

Hefner’s advice for senior marketers was to remember that human beings are not fundamentally being changed, even though the way in which they relate and communicate may be changing dramatically. Our humanity, desires and impulses are a constant. Moreover, the value that your company offers to people must be focused on their humanity. The mechanics of how, where and when you deliver the value are crucial “implementation details.” If you are in touch with your customer’s human desires, you can see beyond the product and the technology.

Playboy has been transforming itself since the 1990s, when Hefner decided to embrace Web 1.0, and Playboy became the first major magazine with a Web presence. Changing or broadening your reach via different media requires rethinking what your value is and how you can deliver. Embracing cable in 1982 and online in 1994, Playboy has always had a significant social and community element. Understanding how your customers want to use emerging social technology to connect with your value proposition is what you need to understand.

Read our more detailed analysis of this track.

The New New Media: How the Rise of User-Generated Content Will Change the Way You Target Prospects and Customers

Kevin Johnson’s presentation was another reflection of the discontinuous change that Web 2.0 represents. In the Web 1.0 world and pre-Web, advertisers used a similar strategy as flowers: content drew the bees, and their ads were the spores. Advertising was passive and appeared next to the content that was of interest to the target demographic.

This truism is changing completely. With Web 2.0, Johnson urges marketers to target the customer, not the content. He zealously promoted Acxiom’s approach to targeting online customers: ask for permission to track their navigation (“volunteered” information) from one site to another. Build trust by being trustworthy. Even for surfers that don’t agree, by taking the user’s IP address (“derived” information) and quickly comparing it to usage and geographic data, Acxiom and show more relevant ads. In fact, combining demographic information with usage information is the nirvana. He credited this approach with reducing Cost Per Application from $10 to $1 and Cost Per Approved Account from $40 to $5.

UGC (User-Generate Content) is risky for advertisers because it’s unbridled and inconsistent. As its popularity grows, advertisers will feel the pressure to try it. Video will grow as a portion of all online content, and this increases complexity. User data can help.

In general, advertisers are very out of synch with users, especially CPG (consumer packaged goods) companies. Citing Forrester’s Consumer Technographics and the Internet Advertising Bureau, he compared actual advertising expenditure against the “percent of total media time U.S. households spend per media type”:

  • TV: 43% expenditure against 32% of time spent
  • Newspapers: 30% expenditure against 8% of time spent
  • Radio: 13% expenditure against 20% of time spent
  • Online: 6% expenditure against 34% of time spent

He didn’t give an historical view of this data, but we all generally know that online is growing while TV and newspapers are shrinking. This trend, along with how Web 2.0 is reforming the online world, means that there will be significant innovation and disruption.

Another key point of advice: break down silos: consumers experience and share content across the “three screens” and others. to be effective, you have to design for their experience.

Corporate Image in the Age of Social Technologies

  • Forrester-EdelmanRichard Edelman, President and CEO, Edelman

There are few industries that have been as affected by consumer empowerment as has PR (public relations). Richard Edelman, leader of one of the world’s largest independent agencies, explained the Web 2.0-driven transformation through the lens of PR. Everyone is familiar with the phrase, but it’s worth revisiting: PR has quintessentially been the spin doctor and influence peddler of institutions, the intermediary between client and “public.” It puts the best face on whatever situation is at hand and tries to pitch the media on telling certain stories, in certain ways, if possible. It studies probable impact of various scenarios and advises clients on how to act to maintain a positive image. Positive image too often has a higher priority than truth.

By now, you can see that the age of Web 2.0 represents something more than a fly in the ointment—a turkey maybe.

Edelman shared his point of view on how corporations, institutions and PR must transform. He echoed several themes and introduced others:

  • Authority is dispersing, and business has tenuous credibility; more media is shifting to aggregating content (it doesn’t only focus on creating original content).
  • Citing the Edelman Trust Barometer, he showed that “a person like me” is the most trustworthy source of information in 2007, 51%. Academics are second, at 48%, and employees are third (36%). CEOs are last (22%).
  • PR used to influence within a pyramid of influence; now its focus is shifting to participating in “the conversation” with networked individuals.
  • He introduced a framework for the new role of public relations. Implicitly, he suggested that institutions would parallel PR’s journey:
    • Get involved and have an opinion about big ideas like improving the environment, alleviating poverty, confronting the beauty industry with its use of over-thin models and dealing with obesity.
    • Showing clients how to listen to consumers. This is not trivial because enterprises are not accustomed to such “unstructured data.” Also, how to engage customers and empower employees.
    • Public advocacy will still be a major focus, although the means will change. Blogger outreach and how to manage issues honestly.
  • Edelman has had its share of gaffes: two of its employees served as “lead bloggers” with one of Wal-mart’s campaigns, which was subsequently discovered. The firm has implemented new controls to avoid this. Edelman emphasized that adequate disclosure is a must.
  • Treat bloggers as you used to treat journalists.. with respect. He pondered whether bloggers should have a “code of ethics.”
  • All companies are media companies. Everyone has a story to tell.
  • Some observations:
    • I wasn’t sure I understood his remark around the blogger code of ethics, but I found it to be curious. In the peer to peer world, one’s integrity and ethics are all one has; it’s the default setting, for all the reasons he mentioned (i.e. “Google doesn’t forget”). Transparency is only going to continue to increase, so telling the truth becomes both ethical and the only practical alternative. People will find out anyway.
    • “Public” relations as a term smacks of communicating with the minions beyond the castle walls. I can imagine that having some catharses like the Wal-mart fiasco can show PR leaders that transformation is necessary—and as quickly as possible. It could then be very difficult to advise clients, some of whom would undoubtedly want to play by the old rules. It calls for truly gutsy and persistent leaders.
    • I don’t believe that Edelman’s talk was as broadly applicable to companies as he might have thought. PR’s core function has been to make its clients look good. That looks like a buggy whip manufacturer in the era of the Model T. Institutions’ core functions are to create value for customers through products or services. Yes, they must learn how to relate to customers differently, which will affect how they conduct their businesses, but it won’t change their businesses. It will change the PR business.

How Social Computing Can Help Sell

Forrester_Con_Forum_warpSucharita Mulpuru gave a very useful summary of how executives can apply blogs, tags, wikis, customer ratings, user videos and shopping communities to aid direct and indirect sales. Moreover, she provided a framework to help think about these vehicles in terms of complexity and the degree of “directness” and “indirectness” of the sale.

  • Direct Sales: customer ratings and reviews are “point of sale” aids in which most online customers have high confidence, and they are low complexity. Recommendation engines are software solutions whose algorithms match patterns among customer behavior and purchases (amazon.com is the pioneer) to “recommend” purchases. They are high complexity. Podcasts are between the two in complexity.
  • Indirect sales: blogs are low complexity and most direct (of the indirect), and they are indirect because they usually advise on the topic area and are more unstructured and further from the sale. Highest in complexity and most indirect are virtual worlds. Social networks and wikis are in between. Having a framework like this can help you to set goals appropriately.
  • You can make reviews more useful by:
    • Instituting “reviews of reviews,” a feature that enables customers to rate reviews’ usefulness.
    • Incorporating tagging into reviews to structure the data more: rather than only giving reviewers a text box in which they provide unstructured data, also give them tags with which they can describe the item or service. More on tagging below.
    • Giving reviewers very simple, yet anonymous ways to profile themselves. For example, when rating hotel rooms, backpackers will rate hotels differently than young couples or retirees. That will allow customers to qualify ratings.
  • Executives’ fear of negative reviews is understandable, but negative reviews are crucial to credibility, and they won’t damage your franchise as much as you might think because customers are smart. Citing Forrester research of amazon.com, she showed that, only 13% of “top ten” items received negative reviews, and only 39% of customers found the negative reviews helpful. Non Top Ten products received 19% negative reviews, but 64% of customers rated these negative reviews helpful. Moreover, negative reviews often have helpful suggestions for improvement, and they can represent opportunities for you to respond and deepen customer relationships.
  • Customer-created video is an emerging possibility. You can allow customers to make their own ads, testimonials or demonstrations of your product. This can have high credibility but it can also be expensive. It’s best to consider video for high-value offerings.
  • Recommendation engines work best when you have a large product assortment. You also need to be willing to constantly tweak the algorithm.
  • Communities are indirect, brand building initiatives that can be expensive but, if done right, they can help to build fierce loyalty. She gave examples of Weber Grills, Mini and DelMonte’s pet division. Of course, one of the most innovative out there is Chicago’s own skinnyCorp, which operates several communities. The most famous is Threadless. The community submits designs and votes on them monthly. Winning designs are made into t-shirts.
  • When considering indirect efforts, realize that quantifying ROI will be difficult. Also, before implementing these, make sure that your customer service, merchandising and databases will withstand additional customer scrutiny.
  • Some observations:
    • Saying that blogs and blogs are indirect overlooks possibilities. I agree that, in practice, most wikis and blogs seek to inform, but the tools themselves could easily be used for direct sales support.
    • When you are interacting with individual customers in forums, the benefit of resolving conflicts is multiplied significantly.

Always in Beta: How big Business Can Benefit from “Little” Innovation

  • Moderator: David Armano, Vice President Experience Design, Critical Mass
  • Stan Joosten, Innovation Manager, Holistic Consumer Communication, Procter & Gamble
  • Manish Mehta, Vice President, Global online, Dell

David Armano led this high energy session on innovation in the age of social technologies. Stan Joosten and Manish Mehta have been in the innovation trenches, and their comments were extremely valuable. Manish has been in the midst of launching and growing Dell’s “Direct to Dell” customer outreach community, and he shared the personal, organizational and marketing aspects of inviting customers to be in your face while white water rafting, as Dell has been doing lately. His was an inspiring story; as you may know, Michael Dell is another “returning CEO” and has been very supportive. Listening to Manish, I really felt that Dell was going to succeed in turning difficulty into strength—by reaching out to customers.

Stan Joosten shared many insights that show how much in a class by itself P&G is in terms of innovation. Their attitude is using marketing to add value to the offering, and they are extending their focus far beyond the product. Another pearl: innovation is about (discontinuous) process, and ROI is an effective approach (and mentality) when you’re dealing with stable processes. Don’t get these confused; don’t treat one like the other.

Read our more detailed analysis of this track.

Coffee, Tea or a Blog? A Case Study on Delta Air Lines’ Use of Social Computing

  • Moderator: Henry H. Harteveldt, Vice President and Principal Analyst, Forrester Research
  • Laura R. Hunnicutt, General Manager, Customer Experience, Delta Air Lines
  • (Jacob Morris, Web Product Manager, delta.com)

This session was another inspiring story about how a company under pressure is doing the right thing by taking the risk of reaching out to customers and allowing them to share their thoughts and feelings in public. It was plain that Laura was very passionate and committed to customers and Delta, and she shared numerous insights very openly.

When you “go public,” prepare to be overwhelmed because you certainly will be. You have to make time to communicate, and it means long-term commitment, which can be difficult when you’re not sure where you’re going. Listening to her remarks, I wasn’t sure whether customers or Delta executives were more the cause of the pressure. She was very open about how difficult it has been to convince executives to take the risk of opening up to customers, and she shared what had worked for them. Two surprises: legal was one of the most supportive, and the costs have not been much thus far.

Delta’s story also showed that social computing can have a powerful strategic impact at inflection points in companies’ histories. As everyone knows, Delta is recently out of bankruptcy, and the airline business is difficult on a good day. They are in a period of high risk-high reward, and Laura Hunnicutt gave the audience a behind-the-scenes look at their Web 2.0 efforts. Part of the way through the session, she invoked Delta’s social computing guru, Jacob Morris, who added some insights.

Read our more detailed analysis of this track.

forrester-tech-altConnected Entertainment: Delivering New Ways to Bring People Together

Robbie Bach shared his insights about building a social computing business from within an established enterprise. Gaming is very social, and his insights into customers and marketing were very interesting. Given his business, he lives and breathes GenY and GenX.

  • Microsoft has made several transformations in its history, and it’s undergoing another right now: they came to rule the desktop in the 1990s, expanded to the enterprise in the 2000s, and now they are moving aggressively into consumer entertainment. Along with Apple, Google and Yahoo, Microsoft is increasingly referenced as a “media company.” He thinks explicitly about “changing Microsoft’s DNA.”
  • Bach focused his customer insights around three themes: interactivity, personalization and socialness.
  • GenY is hypersocial, and Yers are also frenetic multitaskers. He explained how his son (17) and his friends do everything in groups, even “dating.” Prom dates are often with multiple couples. They are group-oriented in everything they do. Their multimode communication habits are legendary. Homework is a multi-threaded, multimedia activity involving myriad chat windows, Facebook, IM, music. People like to comment (or razz) on how someone’s playing a game.
  • Personalization is key. Microsoft thinks about it all the time. It is easiest in services, which are most pliable. Software is somewhat more difficult, but hardware is hardest. They offer faceplates for the Xbox game console.
  • Gaming is very group-oriented. People compete, but they also collaborate in virtual environments.
  • Marketing to GenY is difficult using conventional means. This generation is the most skeptical, and they hate advertisements. They are very difficult to reach. But Microsoft learned, when its launch of “The Gears of War” took an unusual turn. Recognizing the ineffectiveness of advertising, they had no ad campaign (that might have even gained them more cred). They posted the trailer on Xbox Live. By the end of the day, it was up on YouTube and, in the following days, numerous versions, complete with different soundtracks, were everywhere. Hacking the trailer became an activity in itself. It got massive attention and was a very successful launch.
  • Part of changing Microsoft’s DNA is becoming more collaborative (laughter from audience). They realize that they must shift from domination as a goal to “facilitation.” He pointed out that everyone in the Xbox ecosystem has made money—except Microsoft, which he projects to cross into the black this year.
  • It’s a global market, he pointed out, sounding much like Christie Hefner. Content is very cultural: you can’t release games in foreign markets and expect them to catch on. Music is culture-specific, too, of course. In China, everything is different, and the regulatory environment is complex. Xbox has few games in China.
  • However, he added that socialness cuts across cultures. The way that people are social varies. Engaged communities can be extreme, so you must be prepared for that.
  • When asked which companies he admired (or feared), he mentioned Sony and Nintendo. Nintendo is executing very well in defined areas. They are very disciplined. Samsung is a partner, but their growth in quality and innovation is admirable. Apple is amazing for design. At Microsoft, they don’t fear companies, they compete.
  • Apple’s 80% market share with iPods isn’t sustainable. Microsoft is looking to find a place from which to compete. They tried the DRM (Digital Rights Management) tack, but that didn’t work because it made life difficult for consumers. Zune Social is the latest tack.
  • If you want to think about connecting with GenY, music has the broadest reach, appeal. The culture and language change, but not the appeal. You do need different music and marketing.
  • Gaming is far more widespread than many people think. More women and girls now play games than boys and men. The latter like to blow things up, while women like to figure things out and solve problems. For PC gaming (vs. game consoles), you will have older players who have shorter attention spans. Design games that are thought provoking and that can be played in 15-minute increments.
  • Observations
    • Gaming companies have an advantage because they understand interactivity from a unique perspective that marketers don’t have. In many cases, they collaborate with customers to create games (I would guess that Microsoft does not collaborate with customers in a Second Life sense, but they certainly solicit suggestions).
    • Kevin Johnson’s remarks are very applicable here. He admonishes to target the person, not the content. That makes sense because companies are losing control over content, so it loses relevance as a primary “magnet” for demographics. People are creating content.

You Don’t Know Chat

  • Donna Cohen, Senior Vice President, Customer Experience, inQ

Donna Cohen shared best practices around incorporating chat to enhance customer experience.

  • Beware your graphics! She showed several examples in which stock photos of CSRs (customer service representatives), smiling, were displayed next to messages, “Sorry, we aren’t available.” Think before using ubiquitous stock images. Create a unique image to enhance your brand.
  • Think carefully about how to introduce chat. Do you want to use “proactive chat,” which presents itself to the customer? Reactive chat is invoked by the customer. Be careful to not interrupt the customer with proactive chat. You can arrange it based on clickthrough, if a customer keeps returning to a page, etc.
  • Scripts must be realistic yet human. Don’t be afraid to ask for the sale.
  • Make sure your chat reps know the website; a surprising number do not, and they say inappropriate things.
  • Certainly, they must know the buying process, or whatever process they’re supporting. Guiding a customer through a process can be very effective.
  • Observations:
    • Social technologies raise the bar for all types of communications, and chat is no exception.

Business Strategies for Success in “the Groundswell”

“Groundswell” is a forthcoming book about the social impact of Web 2.0 by Forrester analysts Josh Bernoff and Charlene Li, and Bernoff outlined some of its key tenets in this session. “Groundswell” denotes the bottom-up potential of social technologies like blogs, wikis, Facebook, Twitter and YouTube. Senior marketers should have five key objectives, according to Bernoff: listening, talking, energizing, supporting and embracing customers. Finally, he offered two ROI scenarios.

  • Listening—blogs and forums enable customers to directly communicate with your company and with each other. These communications enable insights to emerge. You can develop a customer sounding board that is continuous and self-sustaining.
  • Talking—let customers help you spread the message about your offerings, either on your online spaces or on MySpace, Facebook or others. Once customers feel that they have a place to communicate, they will invite others to get involved. It can be very viral.
  • Energizing—”energized” customers are also known as raving fans. They become active advocates. Think about Apple or Harley-Davidson customers. Bernoff’s examples showed that customers often become energized when your company takes their advice and makes a change that they care about.
  • Supporting—here, customers begin to help each other because you have created an environment in which they communicate with—and thank—each other. His examples included one man on Dell’s community forum that had made over 20,000 posts in eight years. “I actually enjoy helping people. That’s what got me hooked: when you help people and they say, ‘Thank you’.”
  • Embracing—in this stage, you actively solicit, cultivate and harvest customers’ ideas in a public forum. It’s like real-time collaborative innovation.
  • Executive blog ROI—obviously there are many variables here, but generalizing, you might spend a little under $300,000 on an executive blog the first year, but you would reap over $350,000 in returns.
  • Support Forum ROI—general numbers for a support forum were $750,000 and $1 million return the first year. These numbers improve significantly each year.

MTV: Defining the Next Generation

MTV has been a transformational force and (U.S.) pop cultural icon since its launch in 1981, and Christina Norman shared her vision for how social computing was affecting culture and media. She also described how these social forces were affecting media and offered suggestions about how senior marketers could respond. Her prescriptive remarks revolved around four themes:

  • forrester-social-sphereFocus on the content, not the medium—TV, like all media, has led a siloed existence, and executives must think beyond the distribution method. Like many media executives, Norman wants to create value with content, which should flow seamlessly to any screen or venue. But she sees beyond the three screen strategy: she wants to layer community and connection on top of content.
  • Make sure there is a strong emotional connection—the content has to be relevant. For example, MTV reallocated 11.5 hours of advertising time so that emerging artists could appear. They want the audience to discover emerging artists on MTV. MTV’s increasing political content also creates emotional connection.
  • Give the audience the ability to find each other—through the content and through activities and participation. They launched activist community, think.com to instigate change. Video Music Awards encourages the audience to create and remix content, which can then be featured on MTV.
  • Allow the audience to help shape the brand, and own it. For example, the audience is involved with voting for acts that go through a culling process before appearing on MTV.
  • MTV recognizes that “the audience” is splintering rapidly, and people want increasingly unique experiences. The music industry as we have known it is dying. People have control, and they won’t give it back.
  • Some attendees asked how they could apply these insights to their (non-media) businesses. Norman seemed stumped at that one, but let me offer these restatements of her four themes:
    • Focus on the experience, not the product (service)—enterprise silos don’t help customers in any visible way. Customers want to have better experiences, and products and services can help them.
    • Make sure there is a strong emotional connection—As Delta’s Laura Hunnicutt and P&G’s Stan Joosten reflected, you can add value around the product by enabling customers to take ownership of how they use it. Let them share their experiences and reflect each other’s experiences.
    • Give customers the ability to find each other—any product has its geeks and enthusiasts, who will be the first to give suggestions, help and criticisms. If you do it right be creating a community or participating in a third party community, you can encourage this. The sharing and knowledge exchange itself becomes valuable to customers.
    • Allow customers to help share the brand—solicit and honor their ideas publicly.

People Who Are Changing the Face of Media

Shar VanBoskirk served up a knowledgeable and spicy panel to discuss the pressures facing media and how alternative media trends were affecting the market. The focus was on the impact of social computing. Selected remarks:

  • People are the network now, not media.
  • Media is now anything you can put advertising against (any content).
  • Behavior around content is as important as the content itself.
  • Reviews are positive in general. People want to love you.
  • Try new things, or you’ll get caught by the pack. Just do it.
  • Social media is neither positive nor negative. It’s here. Deal with it.
  • Brands add value in a fractured world. They provide context (but they have to be alive, that is, interacting with customers in a visible, public setting).
  • Google innovates very little; they buy media (YouTube). Their $180 billion market cap is a lot to lose if they change too much.

Why the Convergence Culture Matters

In this session, MIT’s Henry Jenkins addressed the cultural shift that’s packaged in social computing and Web 2.0:

  • Jenkins stressed that convergence was a cultural process, not technological. Distribution is the cloud; the “black box” is an outmoded artifact.
  • The participatory culture has relatively low barriers for engagement and a propensity for sharing creations. Moreover, it has an informal membership in which members believe their contributions matter and care about others. Every member must believe that they can contribute whenever they want and be appreciated.
  • Jenkins then contrasted “old consumers” with “new consumers”:
    • Old: predictable – new: migratory
    • Old: isolated – new: socially connected
    • Old: silent, invisible – new: noisy and public
    • Old: compliant – new: resistant
  • When asked whether copyright was obsolete, Jenkins responded, “No,” but posited, “Control is counteracted by culture now. You have the right to control but every reason to let go.”
  • An historical point of reference: whenever the equilibrium between landowners and peasants was upset, there was conflict until it was reestablished. Both sides need to understand the new rules. (content owners are the landowners).

Mobile’s Role in Social Computing

In North America, 80% of consumers own a mobile phone, and it should be strongly considered by marketers as a vital part of the mix, especially when addressing GenX and GenY. Charles Golvin led the presentation and discussion:

  • Mobile is unique because it is intimate: it combines velocity and physicality.
  • Four of five North American households have one or more mobile phones, and 44% of people use messaging in some form.
  • Mobile advertising is the prescription for what ails carriers. Citing Forrester research, Golvin acknowledged that 79% of consumers complain that ads on mobiles would be annoying. However, they also dislike ads in print and on broadcast media. Most people will not pay to use multimedia services, so ads are the answer to providing it for “free.”
  • He showed several examples of mobile advertising: text, banners and search.
  • Although the mobile advertising landscape seems complex, let’s not forget that (Internet) online advertising seemed complex and risky in the early days.
  • He cited some interesting statistics regarding “intimacy” (among users who have mobile Internet):
    • “Youth” have 58 friends in their social networks – “Adults” have 74
    • Youth have 43 IM buddies – adults have 45
    • Youth have 35 people in their mobile address books – adults have 60
  • For more on cutting edge mobile trends, see our Digital Hollywood coverage of mobile and social networks.

Virtual Worlds—Payback Time?

Virtual worlds like Second Life have intrigued many marketers for the last couple of years, and many who have rushed to create presences there have been disappointed. A long-time follower of gaming and virtual worlds, Paul Jackson gave a fascinating and valuable session on the status and best practices for how marketers could approach this new medium. He also gave a rough ROI picture of investing. Just like anything, if you approach virtual worlds with appropriate goals, you can benefit significantly:

  • Most people in these worlds are creators and builders, and they are very excited about their space. If your offering is introduced appropriately and respects what they are trying to accomplish, you can gain strong supporters, both “in world” and out.
  • It is a relatively inexpensive platform for experimenting; it will also be increasingly mainstream, so understanding how it works could have major ramifications for your overall communications.
  • On the other hand, the numbers of people involved are very small, from most marketers’ perspective. The worlds themselves are quirky and frustrating. Media backlash is already underway.
  • Advertising opportunities exist “in world” and “in game.” Several major companies are there: Coca-Cola, Adidas, Nike, Toyota and Nokia.
  • High-tech companies are running events and media conferences. Several corporations run recruiting campaigns.
  • To get involved, you can join a world like Second Life or build your own as MTV did with Virtual Laguna Beach.
  • Developing a full presence, including subscriptions, buying/renting land or space, a creative agency to build your space and staff to run it typically costs $100-200,000. Coke spent $1-2 million on its Second Life presence, but that has been the largest campaign thus far.

Read our more detailed analysis of this track.

Forrester_Con_Forum_logo2Social Tagging: How It Can Help Your Online Sales Strategy

This was one of the most strategic sessions of the conference: tagging is a relatively unknown, simple yet transformational Web 2.0 activity and technology. Rosenblat and Shaffer represented companies that offer tagging solutions, and they all shared numerous examples. Companies can use social tagging to increase their average online sale, organize and monetize user-generated content and drive repeat visits. Here’s how it works:

  • You can think of tags as collective bookmarks on steroids: users tag things to make them easier to find. Users visiting your site have the option of “tagging” or “labeling” content (pages, pictures, videos, podcasts) with a combination of existing tags and their own tags. Creating or using a tag is a one-click process, so it’s easy.
  • Search engines use software algorithms, but they are limited in “seeing the forest for the trees.” There were some humorous examples of this, like Marriott’s number one suggestion for a North American user for a “romantic hotel” was in Armenia. With tagging, real people have viewed the content, reacted to it and categorized it for other people.
  • Where this becomes really transformational is that website navigation can rely on tags to adjust navigation on demand, so it makes sense for more people. Site navigation can be emergent.
  • Some major sites that use social tagging are: ACE Hardware, Amazon.com, Brookstone, RadioShack, Sheraton, Staples, Toys “R” Us, Walgreens and Yahoo! Travel.
  • Tags do not interfere with site navigation, but they offer alternative navigation. They can lead people to find what they want more quickly.
  • Yahoo! recently added tagging as a way to make its one million user-created Trip Plans more organized and accessible. It recommends destinations based on Trip Plan tags, combined with user profiles and behavior.

Read our more detailed analysis of this track.

Analysis

  • Web 2.0’s “social” technologies have been around for years, but I predict that global enterprises will ramp up their adoption significantly in 2008. Experiences shared by Dell, Delta, Playboy, Procter & Gamble and Wells Fargo clearly show solid progress by early adopters.
  • From an enterprise technology perspective, Web 2.0 is a completely different animal than “enterprise 1.0” solutions to which executives are accustomed. Once executives discover this, as they will in earnest in 2008, adoption will increase rapidly in 2009:
    • The cash outlay for blogs, wikis, social tagging, podcasts and “Facebook-like” applications are minimal compared to enterprise 1.0 solutions like ERP and CRM.
    • Less is more: these tools are simple, and they have emergent qualities that enable users to mold them to the work process while maintaining flexibility and scalability. This is possible because their architectures are distributed, their complexity is encapsulated and many are available via the software as a service model. They are truly another generation of software. All these characteristics mean that training costs are minimal.
    • They tend to play well with service-enabled enterprise software, so large-scale “systems integration” is rarely an issue.
    • There are few barriers to adoption, and Generation X and Generation Y workers will insist on working with these tools because they have used them through school.
  • This conference was insightful and well-run. It had a good balance of enterprise speakers, technology innovators and analysts. It could move into exceptional territory by integrating the voices of customers who are heavy users of digital spaces in which they interact with company employees and other customers. It would be very helpful to marketers to have a panel that included someone like Dell’s Manish Mehta, along with three customers that have been active in Direct to Dell.
  • Media and technology companies were well represented (Microsoft, Playboy, MTV, CBS), but there was a distinct gulf between them and products companies with respect to “social technologies.” Product companies’ DNA involves bits more than bytes. Customer relations is a second suit for them: the way that they compete has more to do with raw material prices, sourcing, manufacturing and distribution. That said, media companies’ challenges and transformation process (Playboy, MTV) offer valuable lessons learned if listeners abstract away from the business.
  • Christie Hefner’s insight about humanity being a constant was simple and on-point: too many leaders can get distracted by what’s new (the technology) and lose perspective. Although everyone says that their brand promise transcends products, consumers will challenge that and reward those who really know what their value is (and deliver it according to the new rules, i.e. let customers deliver it to each other). Her point that changing modes of communication (media) confronts the business to reexamine its identity and relevance to customers was right on and widely applicable.
  • The public relations industry is at a major turning point, and its challenges eclipse those of almost any other industry. The entire PR concept (and PR firms’ value proposition) is predicated on an “us and them” separation between customers and companies, for which PR serves as a buffer. Gunpowder is flowing into the market, so castle walls are looking irrelevant. Richard Edelman’s themes of “serving as an advocate” rang true and will remain so in the new environment, but the trend to direct communication will probably remove much of the intermediary role. Fortunately, this will not happen overnight, so the industry will have some time to adjust.
  • Globalization was invited to the conference but was not a keynote. The global social technology trend and market coverage of most attendees were mere facts. However, the most interesting customers in emerging markets are hyper-social, so this significantly increases the stakes in the race to understand this environment. It will pose additional complexity for U.S. multinationals that are often prone to stumbling on cultural differences (vs. European multinationals). See conclusions below for more on this.
  • As I wrote in my recent Advertising Transformation Report, social computing trends also wreak havoc with the advertising industry, which is still oriented to reaching mass quantities of people. Kevin Johnson showed that advertisers were way out of synch with media consumption: companies spend 43% of their budgets on TV, when consumers spend only 32% of their media time there. The mirror: companies spend 6% of their budgets online, where consumers spend 34% of their time.
  • Target the person, not the content.

Conclusions

  • As consumer empowerment approaches critical mass, companies with robust collaborative communities will begin to dominate late adopters because customers will perceive open companies are more relevant and rewarding to do business with. This will begin to happen in 2009-2011.
  • A fundamental truth of this emerging “social era” is that customers feel deeply gratified by helping—and receiving help by—other customers. By encouraging customers to share and help, companies will not only lower their costs to serve, they will increase satisfaction of those helping and those being helped. Customers are by default customer-focused, and they are often better equipped to help other customers than employees.
  • But this is not a zero-sum situation: by working with customers, companies will increase the value and leverage of employees and company experts by enabling them to focus on their unique area of expertise.
  • Carrie Johnson’s mention of social networks’s penetration of metropolitan India was 69%, and this reflects a strategic reality in emerging markets: knowledge workers are fast adopters of social technologies, lifestyles and sensibilities. These are precisely the people that represent the global growth for many (most?) consumer products. This fact raises the stakes significantly for marketers. Penetration in North America was 20%, which could lull them into a false sense of security. Global companies that delay adoption risk losing their relevance in emerging markets in which culture is already a high barrier for U.S. firms.
  • As if that weren’t enough, mastering social computing will be critical to introducing brands in global emerging markets. The disruptive force of social computing may be magnified in emerging markets, where brands do not have the brand capital to which their executives are accustomed. Their successful entry may well hinge on developing relationships according to the new social computing rules, especially since younger people in these markets are often the first in their families to enjoy markedly higher consumption levels.
  • Paul Johnson was visibly intrigued by my question about using virtual worlds in emerging markets to connect with customers. He and Robbie Bach both emphasized that members of gaming clubs and virtual communities were very passionate and committed—and that games and worlds would have a huge impact on digital communications as a whole. Members could be excellent partners for learning about culture of both digital worlds and the geography.
  • Gaming and virtual worlds are a rich soup of interactivity,
    collaboration and entertainment. Microsoft’s Robbie Bach and
    Forrester’s Paul Jackson showed some of these spaces’ potential, but I
    recommend mashing their insights up with Playboy’s intent in Second
    Life: more of all communication will trend toward gaming and
    virtual worlds, so gaining an in-house understanding of how people act
    in these spaces may well be a strategic imperative for your company. If
    this is your goal, make sure to set expectations accordingly.
  • Like PR, advertising will have to reinvent itself completely. Of course, mass messages will continue to have a place, but the industry’s focus on large, consolidated buys and carpet bombing will meet increased resistance and decreased returns. Marketers need to return to the core of what they do: communicate with customers to inform in a relevant way. Mass advertising is widely perceived to be inane because it doesn’t speak to individuals. Consumers are increasingly accustomed to being addressed individually. The good news for the industry: social computing changes the economics of communication: mass advertising was about Industrial Economy efficiencies, which are increasingly off kilter in the Knowledge Economy. For more on this, see The Knowledge Economy: The Ultimate Context for Understanding the Future.
  • Consumer empowerment is disruptive due to the readjustment that must happen among Jenkins’ “landowners” and “peasants,” which was his eloquent metaphor for struggle for intellectual property and customer communication itself. Enterprises have owned most of the knowledge, the communication (only they could afford mass communication) and the customer relationships. Now customers are co-opting all these things. It will be an uncomfortable transition for some, but for astute executives with a taste for risk, it is a rare opportunity to leapfrog competitors.

2 comments to Forrester Consumer Forum 2007—Web 2.0 Poised to Cross the Chasm in 2008

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