Sunday, December 19, 2010

The Path to Infinite Return Marketing

Who the hell will be investing in traditional TV advertising in 10 years from now?

The short answer is most likely something like "very few marketers based on the dimensions that characterize their core target audience" because TV as we know it today will be a dinosaur of the past.

C'mon, let's look at the current "User Experience" a.k.a. UX with TV.  Isn't it clumsily awful?  How easy is it to find content that you reasonate with from your remote control?  How about to find new content based on a real-time aspiration that might come up?

I would argue that I am not the only one who believes that the current TV UX is to the TV industry what the Icarus' wings are to the plane industry.

The myriad of unmet consumer needs in the TV UX represent a multi-billion dollar market in the future of digital TV.

For years, I have been an advocate of new video technologies, as early as 2000 I had the incredible opportunity to be involved in the launch of the first broadband wireless Internet Service Provider in Europe.  One of our core offerings was a video conference service that was streaming live over our high speed broadband network.  It was a great window into what the future of TV carrying over the Internet could hold and what the cost benefits could be for those who operate traditional TV networks broadcasting over older types of networks.

Then, a few years later, I actually worked for a High Definition Satellite TV provider called DISH Network in the U.S.  At that time, we were still focused on our core TV programming service while trying to leverage synergies with Internet and phone service providers in the "triple play" market.

The subsequent years, I have followed with interest the swings of the Internet Protocol TV (IPTV) as the strategic forces at the software and hardware levels continuously evolved in an hard-to-predict pattern and volatile ecosystem.

These days, we hear more and more marketing buzz around the advent of such IPTV solutions.  In the U.S, the main incumbent telecommunication carrier - AT&T - unrolled its U-Verse service that already makes an interesting step towards the interaction of traditional TV with the web (Verizon offers a competitive alternative called FiOS).  Programs are streamed over their IP network and DVR integration throughout the house is simple and also leverages the easiness of wifi IP solutions.

The notion of cloud that blurs the traditional borders of personal computing is now extending to the mysterious realm of interactive TV.

The big search guys like Google saw the unmet UX TV need, big time, and are jumping two feet into the circle of IPTV:

Interestingly enough, they even sealed a partnership with my old friends at DISH Network and it clearly is the "enhanced experience" that is being promoted, the "there is an app for that" angle to highlight the differentiated TV value proposition:

Now, it will take some time.  The ad big bucks are at stake and when you own the walled garden content that flows along the traditional conduits of TV media, you are going to make sure that the ambitious cyber TV movers will put their hands into their deep pockets before they can surf your wave.

I found this interesting article on Twitter about Google discovering some of the inherent hiccups related to trying to tap into the TV industry.  But it is just a matter of time before smart win-win business models that make the pie much bigger to all actors in the value chain are worked out.

So advertisers will be investing in new forms of TV advertising that are more likely to be a mix of the traditional TV ad placements and of the social marketing/paid per click search ones.  It is also possible that new forms of layered marketing will come in.  A great concept along those lines is what Jean Touboul has initiated with Encontext Media.  How cool is that?  How large is the target market?

If we look at the current return on traditional TV, I am not so sure about the rationale.  Based on my growing marketing experience, I tend to believe that traditional TV is an act of marketing desperation.  What I mean by that is that most companies invest in TV because it was a disruptive mass marketing channel in the twentieth century as mass retailing started and it allowed companies to "get the word out there" to the masses.  Nowadays, companies still invest massive amounts in TV advertising because they think that they don't have other alternatives to drive their target audience from the stage of product awareness to the stage of purchase decision.  Once they have spent what their marketing budget allows on other channels and see that there is not much apparent scalability, they still believe that TV is the magic wizzard that is going to sustain their sales growth.

Alright, does that really make sense?

I certainly do not have worked on a sample of TV campaigns that is large enough to represent what's going on in the entire industry but I have had the chance to cross-pollinate my thoughts with leaders in the industry throughout my career and what I have seen so far is the following:

I used a cool app called syncpad on iPad to put this together, not so sure if the stamp above is readable though.  What I have tried to represent is that the correlation between your weekly media TV spend (Generally depending on the company and the type of TV campaign, weekly spend hovers around at least $500,000 a week) and your weekly revenue through your retail and direct sales channels (Generally much higher than the media TV spend otherwise, past the launch phase, it is hard to justify from a P&L standpoint) is of very poor quality.  An increase in media spend has a low probability of translating into an increase in sales, even if you don't spend anything for awhile, your sales are going to fluctuate a lot sometimes north of 30-40% from their average value without any dime in media spend...

That's another way to say that the notion of cloud expands into the TV industry :-) 

Directionally, although it is extremely messy in terms of level of investment and also cause-effect relationship over time (there generally is a lag between the time you invest in TV media and the time when this investment might have an influence on your sales), there still is some sort of volatile upwards trends though.  That's what most marketers look at when making multi-million dollar/billion dollar investment calls.

In my humble view, this is very sad and very scary to think that what is perceived as a core driver of our global economy is in actuality a volatile medium that will undergo much transformation before becoming truly accountable and scalable from a return standpoint.

But the path to infinite return marketing is near.  As companies understand the power of pull and weave in their traditional marketing new forms of social marketing that have a zero cost of production, a zero cost of media placement, and a high conversion rate on a highly targeted audience, they will gradually shift their marketing dollars to the pull media.

Could that pull media have legs in IPTV?