The Challenge of Consumer/Advertising Misalignment: How to Finance Free Content
 At Digital Hollywood Chicago, few disputed that broadcast TV and mass advertising’s golden age had passed and that several technologies and cultural shifts were pressuring senior marketers to change. To fully appreciate this challenge, one has to consider the three screens through which most consumers experience “content. ” What consumers do with the changing capabilities of each screen changes their expectations and behaviors about their experience with all three screens, dramatically increasing opportunities and threats. Interactivity is increasingly available for TV (video). Convergence among the three screens is another important thread. Younger generations of consumers have little tolerance for the concept of mass advertising.
The most rapacious symptom of the weakness of the mass broadcast advertising model is the widespread adoption of the PVR (personal video recorder), which enables (home) viewers to record TV programs—and to skip advertisements. A couple of eye-opening facts: 1) on average, TV programming contains 8.5 minutes of advertisements during each 30 minute segment of programming and 2) 70% of adverts are fast-forwarded through or eliminated. And these numbers pertain to (mostly) non-digital (analog) […]
Now Everyone Is a Producer—How Will User-Generated Content Affect Traditional Media?
 User-generated media (UGM) represents a poignant dichotomy within the context of Digital Hollywood Chicago: panelists and speakers represented a full spectrum of players that provide the capability for people to communicate, work and entertain themselves, but they have in common that they represent business interests. These players are in the business of commercializing communication. Consumers (aka “users,” “people”) represent personal interests: they communicate because they want to; they have little commercial interest in most of their communication.
Panelists grappled with this reality but did not address it directly. They explored business models for UGM—and mostly came up empty. The problem that UGM poses to providers is two-fold: UGM costs providers money in terms of bandwidth and other resources. It also carries a considerable opportunity cost, which is hard to measure but palpable: it crowds out commercial content by occupying customers in two ways: creating UGM and experiencing others’ UGM.
UGM is also difficult to compete against because its producers play by much different rules: they usually produce for free, while commercial producers have high costs. UGM producers […]
Reading between the Lines: Apple’s New Business Strategy reveals why Apple could emerge as a three-screen player par excellence.
 Apple’s name change in early 2007 was heralded as the company’s redefinition as a consumer products company. The conventional wisdom held that the lion’s share of the run-up of Apple’s stock price had been due to the excitement of the iPod and the successful rekindling interest in the company’s Macintosh computers. Moreover, Apple’s stock had limited headroom because consumer electronics heavies were getting into the market for music players, and this would leech profits. The iPhone looked great, but it was overpriced in a hyper-competitive market; it wouldn’t penetrate much beyond a few gadget freaks.
This prevailing view works great for Apple because it keeps people focused on the wrong things—literally. Apple’s business strategy is far more profound. It goes far beyond the SIC, hardware or even software. It is an experience strategy based on content and communications.
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Rebooting Kraft—CEO Outlines Growth Strategy clearly shows the innovation imperative: A Play in Two Acts, Starring the Consumer.
 Irene B. Rosenfeld, Chairman & Chief Executive Officer of Kraft Foods, outlined her vision for relaunching Kraft at the Executives’ Club of Chicago’s Chicago CEO Breakfast on May 30, 2007 at the Mid-America Club. She was enthusiastic about the company’s second lease on life: having spun off of Altria this spring, the company is newly independent, and she was eager to share her plan to drive growth by addressing the “eye of the consumer.”
Kraft Foods is the second largest food company in the world and the largest in North America. It has seven brands that produce revenue of over $1 billion and fifty that bring in over $100 million each. Central to her strategy is leveraging Kraft’s formidable brand portfolio and other economies of scale. Rosenfeld “came home to Kraft” about a year ago, having had highly visible leadership roles at the company in the past and the top job at Frito-Lay immediately prior.
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![Payment Processor Wins Web 0.2 Citation for Delivering "Yechsperience" [customer experience satire]](http://rollyson.net/wp-content/uploads/2007/03/webdot2-logo.png) Achieves Payor of Last Resort Status
Chicago, 13 March 2007—Today, the Global Human Capital Journal awarded StaySmall, the global payment intermediary, the odious Web 0.2 Citation for inducing a poignant bout of customer yechsperience™.
As readers know, the GHCJ exercises stringent criteria before conferring the Web 0.2 Citation: to earn it, companies must induce prolonged feelings of frustration, confusion and anguish in customers more effectively than their competitors.
Tonight, StaySmall delivered in spades, as reported by the judges. Here is a summarized account of the findings…
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Web 2.0 Is Transforming Relationships Between Customers and Companies*
 I’ll risk using a hype-laden term like “Web 2.0” in the title: I think most of us have been around long enough to understand that hype doesn’t mean that nothing is there, although it can distract us from seeing things that we should be watching.
I have been in the thick of the “adoption curves” of Java, e-business transformation and SOA/Web services (detail). They have been instrumental in creating a new information infrastructure and business process capabilities. “Web 2.0” will prove to be the most transformational so far because it is changing relationships. It changes individuals’ relationships with each other, and it will change how companies and the customers relate to each other. It will demand “Marketing 2.0.”
Tectonic Shift
As I argued in The 3.x Economies, we are transitioning away from the Industrial Economy and entering the Knowledge Economy. In the Industrial Economy, companies created value by manufacturing products efficiently based on their core competencies, and they marketed products to customers. They also created and marketed services on a large scale. “Marketing” grew as a profession during the 20th century when […]
Immensely Valuable Field Guide for Word of Mouth Practitioners—with a Twist
 Word of Mouth Marketing is an exceptionally useful, insightful and surprising book. Andy Sernovitz has done a masterful job at creating a brief, lucid and tactical guide to realigning your company’s relationships with your customers, quickly and inexpensively. It is very straightforward, honest and full of practical techniques. Moreover, it is very human because it addresses customers as human beings, not demographics. I suspect that this aspect of the book might peeve those marketers that are invested in the difficulty and complexity of their craft. Think about it: when customers were (relatively) mute and invisible, marketers were the intermediary between the enterprise and the customer; in the absence of the customer’s voice, they created models and theories to simulate it. WOM, powered by Web 2.0, means that customers can talk in their own words, and companies can listen. The customer’s back!
However, this direct customer connection also means that marketing will be much more fun and less frustrating for companies that understand the shift and engage their customers. This direct, fun and productive new reality emanates from the book’s every […]
Media Reflects Power Shift away from Producers to Consumers—Glimpses of Consumer Empowerment
 The Executives’ Club of Chicago assembled a visionary panel to give Midwest business leaders their advice for media communications in the (“new” ,^) digital age. Rishad Tobaccowala, CEO, Denuo Group and Chief Innovation Officer, Publicis; Dr. Jim Taylor, Vice Chairman, The Harrison Group and Emily L. Barr, President & General Manager, ABC 7 Chicago were panelists, and Susan D. Whiting, Chairman, Nielsen Media Research moderated the breakfast, which took place 30 January 2007 at Chicago’s Mid-America Club.
Ours is rapidly becoming a P2P world in which individuals communicate with individuals digitally, and this represents a profound shift for media companies, their clients and everyone’s customers. The focus of the morning discussion was “media”—television, print, radio—which are still largely organized to deliver one message to an audience of many. Of course, the “mass” has always been comprised of individuals, but their alternatives to mass media have been few until fairly recently. Now they are tuning out mass messaging in favor of more relevant communications, which increasingly come from—other individuals. Meantime, people are increasingly connected via the Internet (whether through mobile […]
An Excellent Primer for the Core Competency of the 21st Century
 To thrive in the Knowledge Economy, companies will have to learn how to innovate at warp speed, or they will simply slip beneath the surface of the water like stricken liners. Ultra low costs and exceptional quality feature sets are merely expected, and they no longer differentiate.
Conventional wisdom holds that “innovation” cycles reappear every five years, when companies have exhausted the then-current cost-cutting approaches and need to focus on driving the top line.
However, the Knowledge Economy doesn’t call for your father’s innovation. The 21st century kind will require that companies turn themselves inside-out. Winners will learn to engage and catalyze their customers’ creativity. As author Patty Seybold aptly puts it, “Companies with the smartest customers win.” Outside Innovation is an in-the-trenches manual for evolving your company to embrace the innovation imperative.
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A Must-read Guide to the Importance of Web 2.0 and the Knowledge Economy
 The Long Tail is a watershed book that reflects many of the profound socioeconomic changes wrought by the transition from the Industrial Economy to the Knowledge Economy. The “Long Tail” represents the splintering of the mass market—what is happening, why and how you can thrive in the new era of the niche. Moreover, it shows how the mass market was a temporary phenomenon that developed because niches were not economically viable for producers to address.
Chris Anderson is editor-in-chief of Wired, and the book has an appreciation for culture, the economics of technology and the importance of innovation. It’s also very well written: Anderson tackles some fairly abstract concepts, but the reader doesn’t trip over them. It’s possible to read the book quickly, but there is plenty of substance for a detailed, reflective reading as well. Difficult to over-recommend!
The Long Tail offers an insightful look into the byte-oriented Knowledge Economy and its movement away from the zero-sum, bits-oriented Industrial Economy—and what this holds for business and culture. The book […]
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