Is Crowdsourcing Disrupting the Design Industry?

"This is an issue that I simply cannot wrap my head around. Spec work appears in the design field infinitely more times than any other industry. It absolutely floors me that people think that it is even remotely ethical to build their businesses by tearing down ours."

- Mark Hemmis' comment on AIGA policy statement on spec work


by Hutch Carpenter

The past couple years have seen an increase in the use of crowdsourcing by companies to procure design assets. It works like this:

1. Requesting organization posts a request for submissions to a design crowdsourcing site (e.g. 99designs, crowdSPRING, MycroBurst, etc.)
   
2. Interested designers review the request, and create their entry
   
3. They submit their entry to the site
   
4. Requesting organization selects its favorite, pays the winning designer the announced fee

These design requests are often for logos, but for a number of other types of initiatives as well. For example, 99designs' list of requests (to the right) gives some sense of the types of projects.

So far, so good, right? Well, a lot of designers think not. As Mark Hemmis' comment above shows, these open spec work contests have been raising the ire of the designer community.

Is crowdsourcing ripping their industry asunder?


Designers' Beefs with Crowdsourcing

Three aspects of crowdsourcing design raise concern for many in the design industry:

1. Lack of compensation for designers whose entries are not selected
   
2. Diminishes the design profession
   
3. Not sustainable in the long term

Compensation: To be competitive, individuals will need to invest some time in designing a submission for a company. With a good number of entries, this equates to a decent number of hours invested. According to Pamela Pfiffner:


"The problem is, spec and crowdsourcing can lower your value and hourly rates so far that minimum wage looks like a fat paycheck."


Her statement takes things to a logical extreme - someone would have to do nothing but spend their time entering contests. But she does a good job framing the issue.

Diminishing the profession: The issue with crowdsourcing is that it says, "this stuff is easy!" A commenter on this post, How NOT to Design a Logo, baldly gives this concern legitimacy:


"Logo design contests are great, its the only way I go. I get my pick of 5-10 designs for less then $20. Designers these days are a dime a dozen, be happy you get the work."


The design industry has characteristics of being craftsman, as well as strategists. At least the higher end firms do. Sentiments like that are grating.

Not sustainable: The concern here is that over the long term, the economics of crowdsourcing will cause existing designers to exit the industry, and potential designers will opt for different careers. According to Jacob Cass:


"Design contest sites are not the future of graphic design... nor do I see a time when it ever will be, however, in the long term I believe spec work is going to be detrimental to the design industry... both devaluing design and designers as a whole."


The argument here is that rather than expand the pool of talent for design, crowdsourcing will ultimately reduce the industry.

So designers themselves are lining up against these types of crowdsourcing design contests. Which begs the question...


Why Are Crowdsourcing Design Contests Growing?

Jason Aiken has this to say:


"Truth is - 99designs is growing by leaps and bounds. We have record numbers of projects being launched and have needed to hire new staff to help us keep up with the growth.


The motivation of organizations seeking design work seem clear enough - tap a large network of creativity, manage expenses within budget. But what are those designers doing there?

It seems that not all designers are of the same mind about these crowdsourcing design contests. Some actually embrace them. Why?

Build your portfolio: Not all designers in the world have 10 years experience and a roster of paying clients. For those starting out in the business, the competitions provide great fuel for creating designs. If you want prospective clients to see what you're capable of, the design competitions seem to offer a chance to create that portfolio.

Benefits include:

• You need to think not abstractly about design principles, but concretely about how a design project relates to a business
  
• Competitions are great for elevating one's focus and creativity
  
• You can benchmark yourself against other submissions, including those selected if yours is not

Personal interest: Some projects just pique the interest of a person. Maybe there's a day job with a paying company, and then a chance at night to do things "your way" on a project of interest. The project taps some areas you want to pursue, or maybe allows you to try something out without concern as to whether the client will ultimately want the design.

Extra business: Everyone is hustling in a weak economy. If your design business has some slack in demand, why not apply the available creative resources toward an occasional crowdsourcing project? If you're a professional shop, presumably your odds are better than most.

Access to high-end ad agencies: This was the case when Porter Crispin + Bogusky solicited logo designs for their start-up client Brammo, maker of electric motorcycles. They ran the contest through crowdSPRING. The contest sparked plenty of debate, but also saw 700 entries. One reason was that young up-n-coming designers wanted the chance to impress a firm of the caliber of PC+B, who can send many paying clients their way.

That's the designer participation set of motivations. I guess the best way to think about companies' motivation is this - Do they get results?

Since the number of requests from companies is growing, design crowdsourcing sites are working at some level. If they weren't, word would spread pretty quickly and companies would stop using them. This comment from designer Morgan Stone on Alex Bogusky's blog post about PC+B's use of crowdSPRING is illuminating:


"As a designer... crowdsourcing scares me. I think it has to do with the harsh reality that sometimes it doesn't take experience or a big title to design something truly amazing."


What's the staying power of the crowdsourced design contest approach? And will it disrupt the industry, in the Clayton Christensen sense?


Sustainability and Reach of Crowdsourcing Design Contests

Altimeter Group's Jeremiah Owyang wrote last year, "Without a doubt, Specwork (like crowdspring or 99 designers) is here to stay - economics will drive this forward." For the buyers, yes. But the supply side of the equation - the designers - is that here to stay?

I believe it is. The numbers say it is. Here's what I mean:


In a 2009 article, Forbes noted that there are 80,000 free lance designers in the U.S. alone. Add in the talent from around the world, and you can see that there is a large of pool of creativity. Maybe 200,000 designers globally? 99designs claims to have roughly 54,000 designers on its site.

Designers have some motivation to participate in crowdsourcing design contests, as noted for the reasons above. It's not like every designer will submit regularly. But every project reaches some new set of designers, and occasionally gets a repeat one as well.

All it takes is for a business seeking design work is maybe 30, 40, 50 submissions? As a percent of the global number of designers, that's not much.

40 / 200,000 = 0.02%

Here's what designer David Airey said about getting clients from crowdsourcing sites:


"I've had direct clients and also have been one of those in the crowd. Surprisingly, some of my best clients are the ones that followed me from these crowd sourcing sites. That's probably because they've already been through a working process with me, and they like what they've experienced, so there's no mismatch of expectations like a new client."


I do see the sustainability of the business. It's complex, but there are enough people who do see advantages to participating. Even if only for certain periods of their lives or only on occasion. I don't see entering crowdsourcing design contests as a full-time pursuit for someone.

Next question: how much can crowdsourcing chip away at the traditional areas of the design industry? Is there a gap that crowdsourcing addresses? (Erica's post, Bokardo's post):


Many designers in the debate note the importance of establishing a rapport with clients, and understanding their clients more deeply than a set of colors and fonts. A firm such as Nocturnal Graphic Design Studio appears to deliver value through deeper relationships and more strategic approaches with its clients.

But Erica's point above is well-taken. Sometimes, you're not in the market for that level of involvement. Small and mid-sized businesses do not need the full horsepower of high-end design firms. As one designer (snootily) commented on the PC+B blog post about using crowdSPRING:

"99 designs and their nefarious brethren have a client roster whose market recognition for the most part is similar to that of Joe's Morgue & Jerky Outlet."

Of course, this may not be contained to SMBs.


The Disruptive Potential

Have you checked out what Mountain Dew is doing with crowdsourcing (aka "DEWmocracy")? As Wired notes in a January article:


"Mountain Dew is asking consumers to choose three new sodas, from selecting the flavors to naming them, designing the cans and choosing the ad agency to promoting the product."


Not all of this is crowdsourcing design, but it is an edgy experiment in leaving the professional firms behind.

Right now, as Steve Douglas of the Logo Factory notes, the biggest chunk of business is for logos. Which you can see at the start of this post in the 99designs project list.

The U.S. Census Bureau had the graphic design industry generating $2.8 billion in revenue in 2002. It is a large, diverse, complex industry. My expectation is that design contest crowdsourcing will encroach more into large enterprises for tactical projects, as the smaller businesses continue to use them and get good results. Large companies' efforts, such Mountain Dew's DEWmocracy, Unilever's crowdsourcing contest for a TV campaign for its Peperami snack food, and Doritos' crowdsourced Super Bowl ads, add fuel to this.

Two things are needed for the crowdsourcing model to encroach further into the design industry:

• Leaderboards/reputation
  
• Smartsourcing

Leaderboards let prospective buyers know who the best are. We see them on Topcoder for programming contests. It's a way to establish visibility and credibility far beyond the recommendations you maintain on your own site. It will take some changes by the crowdsourcing sites, enabling recognition for designers who do well in contests, even if they are not picked. It also would need to have different bases for identifying top designers.

The other wrinkle is to allow a form of smartsourcing. Once the top designers are identified, they are invited for larger companies' design projects. This is pretty similar to the current state of things, except the basis for access changes somewhat. It's not just business relationships a designer/firm has established with the big ad/marketing/brand agencies. It's based on performance.

With these two elements, I can see how crowdsourcing becomes more important, more disruptive, in the world of business design.


Don't miss an article - Subscribe to our RSS feed and join our Continuous Innovation group!

---

Hutch Carpenter is the Vice President of Product at Spigit. Spigit integrates social collaboration tools into a SaaS enterprise idea management platform used by global Fortune 2000 firms to drive innovation.

A world without newspapers?

by Adam Hartung

We're rapidly becoming a quick-communication world. 140 characters is all we get on Twitter, and it's becoming the new "elevator pitch." Communication has moved from letters and phone calls to texting and Facebook. What we write, and say, is getting shorter. Book sales have declined for 4 years, and magazines are rapidly becoming an historical artifact. We rely on bloggers to read, digest, reformat and inform us quickly about what we want to know.

But, behind this, there has to be real fact gathering. Somebody has to report information as it happens, and dispense it. In many countries this was done by the government. But in the modern world we've relied on newspapers, and the wire feed services (AP, UPI, Reuters) that supply newspapers, to give us a lot of the raw news. Newspapers used ad revenue to pay for news acquisition, and they delivered the stream every morning.

But now, due to internet competition, newspapers are running out of cash. As people turn to the web for instant information advertisers have dropped newspapers. Subscriptions have fallen. And several newspaper companies, such as Tribune Corporation, have filed for bankruptcy. Many towns are at risk of losing the daily newspaper altogether. And employment has dropped to 1950's levels



So, what will be the prime source for information? Where will bloggers, and tweeters and web sites get the news if the newspapers disappear? Who is going to pay for field reporters, investigative reporters and correspondents in places far away - or dangerous like wars. The public has already bemoaned the lack of "news" in television news - which is more about pictures than news. And nowadays television news is dominated by opinion programs like "Countdown" or "The O'Reilly Factor."

It's clear that people want their information digitally - and mostly from the web. It's also clear that advertisers are drawn to the web with its far lower ad rates and specific, trackable ad placement. But what's unclear is where original news content will be created when the newspaper companies disappear. Even the most successful news web sites (Marketwatch.com and HuffingtonPost.com, as examples) depend largely upon information supplied them from wire feeds and newspaper sources for content.

A free society depends upon access to information. And nowhere is access more available than the USA. But unless there is some serious innovation in publishing, the system is at risk of collapse. Opinions will be as available as air, but if the original news sources dry up - what will everyone talk about? How will people - investors, voters, parents, politicians and others - obtain original information to become informed? Understanding what will replace the newspaper industry as a source of original news content is a difficult question to answer.

What will be the innovation that will keep the river of original, real time news flowing? In 2020, how will we be able to obtain information we can trust for accuracy?

The "media" industry is in big trouble. Large players, like News Corp., have seen profits decline - despite acquisitions like MySpace.com. GE recently agreed to sell NBC/Universal for less than it cost to create. But so far, few have figured out how make a profit from digital media as the market transitions away from print and television. While web sites proliferate, they produce less than 1/10th the revenue of old media.

Without some serious innovation, our news could soon be long on quantity - and very short on quality.


Editors Note: Apologies all around. This article from Adam Hartung was orignally supposed to be part of January's Innovation Perspectives, but I misplaced it. I hope you still enjoy it.


Don't miss an article - Subscribe to our RSS feed and join our Continuous Innovation group!

---

Adam Hartung, author of "Create Marketplace Disruption", is a Faculty and Board member of the Lake Forest Graduate School of Management, Managing Partner of Spark Partners, and writes for "Forbes" and the "Journal for Innovation Science."

Alice.com Proves Not Making Money Can Be a Winning Strategy

by Ric Merrifield

It doesn't happen very often, but sometimes I hear about a new company or a new innovation and slap my forehead wondering why I didn't think of it first. Netflix was a little bit like that, but I heard about alice.com today and that one in particular bugs me because I have been writing about the basic idea behind Alice for nearly three years, I just hadn't thought to turn it into an actual Web storefront.

So what is Alice and why is it such an a great idea? Well, Alice (named for the Brady Bunch character - good move), is a site that sells consumer goods over the internet. Things like soap, toilet paper, laundry detergent, and so on. The clever part about their model is that they don't make any money selling the products that they offer. They make their money selling advertising on the site, and selling purchase data back to the manufacturers (which the manufacturers have wanted, but lacked forever). Data is king in the world of sales, and Alice is positioning itself to be the impartial third party that sits between the customer and the manufacturer. As long as Alice doesn't compromise the identities of their customers, I don't see how they can lose. Customers value price and manufacturers value richer customer data (what they buy and what causes them to buy), and everyone wins.

This model is in some respects like Costco in the sense that they also don't try to make any money selling the products in their stores. It's no secret that Costco's profits come from their membership dues and that model has served them (and their shareholders) very well for a long, long time. Counter intuitive, but brilliant in retrospect.

I love the spin that Alice is putting on this, and with such a great name, the only way they can fail is in execution, and with two seasoned leaders, that seems pretty unlikely.

This is the kind of rethinking other organizations need to be doing right now. Instead of just optimizing business models that are based on the old fashioned brick and mortar models (like narrow margins on markup), there are so many opportunities to solve age old problems (like manufacturers not getting good data on who is buying their products - and what advertising actually causes customers to buy their products). People need to figure them out like Alice.

I am half tempted to start a site that sells meat at cost and call it Sam (after Alice's boyfriend, the butcher), but meat's a very different animal, if you will.


Don't miss a post - Subscribe to our RSS feed and join our Continuous Innovation group!

---

Ric Merrifield is known at the "Business Scientist" at Microsoft Corporation in Redmond, WA and is the author of "Rethink". He blogs about ways to rethink through getting out of what he calls "the 'how' trap".

Creating Customer Value and Conversation

by Braden Kelley

On playfool.com I came across a very interesting potential partial solution to the societal problem of drunk driving using an integrated approach, that combines an interactive game with advertising and the services of the local taxi association. And of course, the bars and clubs are happy to participate in order to reduce their risks (or maybe out of the goodness of their hearts). This is a great example of how to create customer value and conversation instead of just shouting at potential customers via traditional advertising.

So, without further ado is an interactive marketing experience not likely to be mistaken for the Wii:





Are you creating customer value and conversation with your marketing efforts?

Can you think of other interactive experiences or innovations to help combat societal ills?


Enjoy this post? Subscribe to our RSS feed and join our Continuous Innovation group!

---

Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Creating Preference in a Commodity Business

by Matt Heinz

I was asked recently how to successfully sell value in a commodity business. When your product or service is virtually identical to what is available elsewhere, how do you create differentiation, preference, value and market share acceleration?

It's not easy, but there are ways. Here are five to start:

Service: How well you treat your customers can make a big difference, especially if you want to be a premium-priced commodity seller. Customers who don't value service will always buy on price, and if you want to be the low-cost leader, that's fine too. But if you want to sell value with a commodity, provide excellent, remarkable service at every level and every interaction with your customers and prospects.

Trust: What's your reputation? What are you known for? Do customers trust you, and why? Know what your customers value, and establish a tight bond between those values and the trust you create and strengthen in the way you do business, every day.

The Little Things: There are countless ways to do little, remarkable things for your customers. Unexpected things that make you stand out, thoughtful gestures that show you're different, and that you care. Real estate agents who bring new buyers a pizza or sandwiches on moving day, that's special. Auto dealerships that offer free car wash service for life. Things like that can be huge for differentiation and preference, not to mention word-of-mouth for your business to new prospective customers.

A Consultative Approach to Selling: Are you just selling the commodity, or are you providing additional value in the sale? Are you teaching customers more about the industry they work in, the environment in which they need that commodity. Are you helping them be more successful in the process of buying? Provide that kind of value-added service as part of the sale, and you're creating immediate value & differentiation.

Results: A commodity market doesn't necessarily mean that every option is the same, and will deliver the same results. How are you able to transcend what you're selling, and deliver differentiation and value in how that commodity impacts your customers? Is the end-result better through you? How? And how effectively can you communicate that results-based differentiation? Let your happy customers tell that story for you. Use their enthusiasm and success in the market to drive preference and value.


Enjoy this post? Subscribe to our RSS feed and join our Continuous Innovation group!

---

Matt Heinz is principal at Heinz Marketing, a sales & marketing consulting firm helping businesses increase customers and revenue. Contact Matt at matt@heinzmarketing.com or visit www.heinzmarketing.com.

Apple's Hidden Disruptive Innovation

by Braden Kelley

People often think that disruptive innovation happens overnight, but often it happens one step at a time. Before the iPod was an innovation, Apple had to not only launch the device, but also the iTunes Store for music, and the Microsft Windows version of iTunes. Apple also expanded the iTunes Store to include audiobooks, movies, and television, but by then it had already become a mass-adopted disruptive innovation that has changed the music industry forever.

Apple then launched the iPhone and changed the power paradigm in the mobile industry around mobile applications publishing - resulting in the App Store.

Apple is about to do it again, but nobody is writing about it.

In retrospect I believe we will look back and point to January 27, 2010 as the day that Apple changed the power paradigm of mobile data plans and subsidies in the mobile industry.

Up until now, the mobile postpaid market has been defined by mobile phones subsidized in exchange for two-year contracts (at least in the United States), and mobile data plans that also often require a two-year contract. Even when Google announced the Nexus One as an unlocked device, T-Mobile (or any other carrier) is still going to charge you the same monthly cost as someone who bought the subsidized phone. Meanwhile, The carrier partner announced for the iPad, AT&T, has two regular 3G data plans:

1. $35 per month (200MB limit)
   
2. $60 per month (5GB monthly limit)

AT&T sells two 3G data cards - free or $49 - both requiring a two-year contract. But Apple yesterday announced that AT&T will provide 3G service to iPad users WITHOUT a two-year contract (or any contract for that matter). Pay as you go data access that is actually CHEAPER than their regular 3G data plans:

1. $15 per month (250MB limit)
   
2. $30 per month (unlimited)

To my knowledge, this is the first time (at least in the United States) where a carrier has given a cheaper price for service to a customer bringing an unlocked, unsubsidized device onto their network. This is of course how it should be, but still this is a watershed moment. If other carriers adopt this model with the iPad, then eventually some carrier may start to do this with other devices, and it may open the door for a different subsidy to emerge.

If carriers finally start to acknowledge that people who bring unsubsidized devices onto their network should pay less, then it opens the door for someone like Google to start paying people to use their device. Google could leverage their ad-serving platform and Google Checkout to launch a phone that effectively gets cheaper the more and longer you use it, regardless of which carrier you use and whether you're using pre-pay or postpaid (standard monthly service).

This is the innovation that I thought Google would launch with the Nexus One, but they didn't. Can Google now lean on T-Mobile and others more now to offer differentiated pricing for owners of unsubsidized devices?

The data plans offered by AT&T for the Apple iPad may have not seemed very interesting on January 27, 2010. But, I think looking backwards we may very well see this as a defining moment for the mobile industry.

Thank you Apple.


To see what I think of the Apple iPad, please go here.

Enjoy this post? Subscribe to our RSS feed and join our Continuous Innovation group!

---

Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Innovation Perspectives - Packaging Up Innovation

This is the sixth of several 'Innovation Perspectives' articles we will publish this week from multiple authors to get different perspectives on 'What product or sector is in desperate need of innovation?'. Here is the next perspective in the series:

by Adam Schorr

While recent years have been a boon for innovation in various industries such as consumer electronics and automotive, the consumer packaged goods industry seems to be stuck serving up warmed over versions of past innovation. But while product innovation in CPG is badly needed, the true innovation crisis in CPG has to do with the fundamental business model. Although the players have been changing due to industry consolidation, the CPG industry continues to labor under a decades old business model whose foundational truths evaporated years ago.

The essence of the CPG business model is as follows: One group of companies manufactures products that are perceived by consumers as significantly better than the alternatives. Over time, these products serve as the backbone for brands that are loved and trusted by consumers and which are relied on as shortcuts to simplify purchase decisions. These companies sell their products to a second group of companies (retailers) who have expertise in merchandising and who, in turn, sell the products to the end users (consumers).

This model worked out well for the manufacturers when two things were true: 1) Their products were perceived by consumers as significantly better than the alternatives and 2) They had the trust and attention of consumers and were able to motivate consumers to go to the retail stores to buy.

Today, these essential truths are no longer true.

With ample contract manufacturing capacity available in the market, private label goods are proliferating. More importantly, a sizable and growing share of consumers perceive private label versions of products to be as good or better than their branded counterparts. Just as troublesome is the fact that manufacturers no longer have the trust and attention of the consuming public which means they cannot influence consumers to go out in droves and shop in retail stores as once they could. In a world where manufacturers are not producing products that are perceived as significantly better than the private label alternatives and where the 30 second commercial no longer holds a mass audience in rapt attention, manufacturers of branded consumer goods are in a very precarious position. One has to wonder whether the role they play in the CPG value chain is still needed. I can assure you that the retailers are asking this very question and are answering it ever more vociferously in the negative.

Sadly, some of the CPG players draw the wrong lesson from their current woes. Some have declared a war on costs, seeking to drive cost of out of their system so that they can reinvest back in their brands. This is an example of trying to play your game harder. Playing your game harder makes sense when success is a function of skill. But success in CPG today is not a function of skill, it is a function of position. The retailers occupy a privileged position on the competitive landscape. They own the shelves and they own the stores in which consumers shop. Trying to win a battle of costs against private label goods is a waste of time. Branded goods will not only lose this battle, they will undercut whatever raison d'etre they still possess.

All is not lost for the CPG community. As always, innovation is the key to success. Branded goods manufacturers need to focus on two things: 1) Knocking the socks off of their consumers with products that are not easily copied. These fantastic products will earn the attention of the consuming public. 2) Finding a way to recapture the relationship with the consumer.

The 30 second commercial is not coming back as a means of building consumer relationships. Brand stewards must leverage new technologies to turn the attention that their products earn into brand loyalty that can deliver financial returns. Once these two fundamentals have been re-established, CPG manufacturers would be wise to re-evaluate the rationale for funneling all of their sales through a channel that has demonstrated robust support for building its own private label business at the expense of the big brands.

The path of meaningful innovation is the only path to success for the manufacturers of branded consumer goods. They can choose to continue tweaking the current model or to seek a new model. One thing is clear: The market will not wait for them.


You can check out all of the 'Innovation Perspectives' articles from the different contributing authors on 'What product or sector is in desperate need of innovation?' by clicking the link in this sentence.

---

Adam Schorr is an experienced innovator and brand manager with a passion for the human soul and its ability to reshape the universe. Adam blogs about innovation, marketing and all sorts of quirky topics at www.adamschorr.com.

Innovation Perspectives - Cash, Plastic or Free?

This is the first of several 'Innovation Perspectives' articles we will publish this week from multiple authors to get different perspectives on 'What product or sector is in desperate need of innovation?'. So to kick it off, here is my perspective:

by Braden Kelley

There are lots of industries that are desperate for innovation, especially in this recession, but my choice is the publishing industry. First let me say that far too often the publishing industry is too narrowly defined as relating to the publishing of books. Or, if it is thought of in a more holistic manner, then it is still spoken about in terms of its isolated silos - books, magazines, newspapers, music, software, etc.

Yet what is the publishing industry but a group of businesses that make their living distributing the work of "artists" to the masses. And no matter which of these silos you choose to read about, you'll come across stories of their pending demise (even software). Taken at face value, the publishing industries are facing an apocalypse and should be desperate for innovation - and they are...

Recently I came across an article talking about how now instead of paying 99 cents a song as on iTunes, users will be able to download and listen to the music they want for free after watching a 15- to 30-second advertisement at sites like FreeAllMusic.com. As a concept, advertising-supported music you can share is not new. It used to be done with the radio and a cassette recorder, but now it is possible for downloads and sharing and social media to all be combined together. For a music industry struggling against piracy, it needs to innovate further in areas like this.

The magazine industry is shrinking at an accelerating rate with magazines like Business 2.0 (one of my favorites) closing up shop, and rumors swirling about Newsweek possibly disappearing as well. Two newspaper towns are becoming one newspaper towns and the art of the newspaper business (feature stories and investigative journalism) is quickly being replaced in the dailies by more stories off the wire.

Both newspapers and magazines are hoping that devices like the Amazon Kindle, Barnes and Noble's Nook, and their own e-reader creations will save them. Some magazines are getting a little more creative. National Geographic is offering their entire archive on a portable hard disk, and Sports Illustrated is preparing for the new generation of rumored slate computers with a new interactive format.

The book industry is coping with the fact that on Christmas Day, for the first time in history, Amazon sold more digital books than paper books, and also with Google's designs on digitizing every book they legally can. So, as you can see all of the silos in the publishing industry are desperate for innovation.

But what does the future hold for the publishing industry?

If you watch the embedded video in my Apple Tablet Sneak Preview article, or if you watch the embedded video of Coursesmart's offering in my Microsoft-Apple-Google in Tablet Battle article, I think you'll get a sense of where things are going and the kinds of innovation that the publishing industry silos will need to consider.

The bottom line is that when people start carrying around high-definition multimedia devices with them that are always connected to the Internet, then the boundaries between different media types are going to feel artificial. Customers will flock to more integrated content.

This will require companies delivering information or entertainment solutions to customers to innovate new partnerships and deal structures, new business models, and new product and service offerings to better meet customers' quickly evolving entertainment and education expectations. Industry structures and silos are about to be transformed.

So, what kind of publishing industry innovations can you imagine in this new world?


You can check out all of the 'Innovation Perspectives' articles from the different contributing authors on 'What product or sector is in desperate need of innovation?' by clicking the link in this sentence.

---

Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

Cut Your Jargon Emissions

by Kevin Roberts

It's getting to that time of the year when people are makng New Year's Resolutions. For anyone working in business, here's an idea: let's try and make 2010 the year of plain English. A good way to start would be to read George Orwell's 1946 essay, Politics and the English Language. Orwell understood how language could be used a weapon against the powerless, and how jargon and cliches are used to hide meaning, not clarify it. He offers six timeless rules for effective communication:

1. Never use a metaphor, simile, or other figure of speech which you are used to seeing in print.
   
2. Never use a long word where a short one will do.
   
3. If it is possible to cut a word out, always cut it out.
   
4. Never use the passive where you can use the active.
   
5. Never use a foreign phrase, a scientific word, or a jargon word if you can think of an everyday English equivalent.
   
6. Break any of these rules sooner than say anything outright barbarous.

I am not 100% on number 6, and here's another one for people in business:

7. Try and express your thoughts in one breath.

MBA-speak started by infecting the workplace but has tragically made its way into sport (losing teams now "lack accountability") and even the home (KPI's in the kitchen!).

• Why do we have to touch base to get our ducks in a row when we could just meet?
  
• Why must we synergize our learnings going forward, when comparing notes would do fine?
  
• Why wouldn't a busy person save time by saying "I'm busy" instead of due to cascading workflow, I am lacking in requisite bandwidth?
  
• Why reach out when you can just make a call?
  
• Why can't we leave a meeting with things to do, rather than take-home actionables?

Communication is about accountability. If we express ourselves clearly, we have no choice but to stand by what we say. By resorting to cliches and jargon, people are blurring meaning to avoid scrutiny. It's also laziness.

People are hungry for clarity and authenticity. In every part of life, let's commit to using language to amplify meaning, not bury it.

---

Kevin Roberts is the CEO worldwide of The Lovemarks Company, Saatchi & Saatchi. For more information on Kevin, please go to www.saatchikevin.com. To see this blog at its original source, please go to www.krconnect.blogspot.com.

The Selfless Gene

Contrasting expectations of species-level evolution, the classic phyletic gradualism model (left), and the punctuated equilibrium model (right).


by Kevin Roberts

Biology fascinates me. I love the work of Stephen Jay Gould who theorized how change in evolution happens at the edges, the margin, the fringe. He calls this 'punctuated equilibrium', and it explains how evolution doesn't take place on a predictable, linear path but with unpredictable and dramatic bursts coming from the outer reaches of the species. The same can be said of the world of ideas and innovation.

Another biologist, Richard Dawkins, a brilliant communicator, created a lot of confusion when he called his 1976 book on evolution, 'The Selfish Gene'. The book details the brutal efficiency of evolution, but the phrase itself has entered common usage to mean that human beings are genetically programmed for selfishness. It means nothing of the sort - and isn't it great when research comes along that proves the exact opposite.

The NY Times reported last month that research into young babies demonstrates that we are born with an in-built instinct to help others. Before parents have even begun to teach the rules of social behavior, researchers saw kids as young as 12 or 18 months in small, selfless acts of kindness. This innate generosity and willingness to share and cooperate is unique to humans; even our closest ancestors have no interest in helping out a fellow chimpanzee unless there is something in it for them.

Researchers are quick to point out that there is ample evidence that selfishness plays a part in our make-up too. As one of the researchers puts it, "That's why we have moral dilemmas, because we are both selfish and altruistic at the same time."

These findings confirm what radical optimists already believe, and it's nice to have some science to put in the back pocket.


Image source: http://communities-dominate.blogs.com/brands/2007/08/index.html

---

Kevin Roberts is the CEO worldwide of The Lovemarks Company, Saatchi & Saatchi. For more information on Kevin, please go to www.saatchikevin.com. To see this blog at its original source, please go to www.krconnect.blogspot.com.

Better to be Honest than Sneaky

by Hutch Carpenter

I'm generally not tracking the "post ads to your social networks" movement, be it sponsored blog posts or tweeting ads to your followers on Twitter. There is one aspect to it that I think is most important: disclosure. Robert Scoble has a post up, More thoughts on in-Tweet advertising, where he notes that he unfollowed people on Twitter who were running ads:

So, I unfollowed and won't be looking back. Actually I unfollowed Pirillo too. I don't think he's disclosed everything clearly or explained where his ads were coming from and until he does I'll stay away.

His perspective reminded me of an experience I had years ago in the late 90s when I worked as an investment banker for Bank of America. It taught me the right way to disclose unsavory facts.

Selling a Superfund Deal: The Wrong Way

You know what the Superfund is? It's the federal government's program to clean up the nation's uncontrolled hazardous waste sites. Throughout America, there are parcels of land with dangerous materials in them. Superfund is there to help get them cleaned up.

We had a client, a rising star in the software world, that need financing for a new headquarters in Mountain View, CA. A headquarters built on a Superfund site. That designation, from 8 years before, meant the land had been declared a hazardous waste site. By the time of the deal, the site itself was cleaned up, and was in an "operation and maintenance" phase. Its status was sufficient for the company to build on. But anything with "Superfund" on it is a big red flag in banking. And we knew it.

I was in the debt financing unit, and I worked with our real estate group on this one. After deliberating, we decided to bury the Superfund status deep in the materials selling the deal - in the prospectus, in the deal presentation. Act essentially as if it was a non-event.

Which at this point, was true. The property was clean and ready for development.

It was also a mistake.

Other banks got to the Superfund status of the site as they went through their analysis of the deal, and saw that it had an afterthought treatment. They didn't like that.

And they didn't participate in the deal at the levels we had expected. We got stuck with a larger percentage of the deal than we wanted. We scrambled, got one other bank to join and accepted holding a larger portion of the deal.

Wasn't a pleasant experience. Nope, not at all.

Selling a Superfund Deal: The Right Way

It's not often in life you get a chance to rectify a mistake so readily. But I did. Several months later, the software company approached us to increase the deal size, by nearly double. You might imagine the trepidation that request caused internally.

To raise double the amount, after having a number of banks turn us down, meant we were going to have to go much deeper in the market. It wouldn't be easy.

We decided to do it, but with a big shift in approach. We led with the Superfund status. Put it out there, and directly address issues. Create a separate write-up that specifically addressed the Superfund status, the remediation efforts, and the reasons Bank of America was comfortable with it.

When I got out there and presented the deal at the prospective lenders meeting, I talked in detail about the Superfund site, upfront. Amazingly, no one got up and left the meeting. They seemed to take it in stride.

And the result? Easily got the larger deal done, and even increased its size a bit.

Lesson: Don't Be Cute

What did I learn? People aren't stupid. Treating them that way is a sure recipe to piss them off. Scoble's comment illuminates that fact.

I'm not saying openly declared ads will be welcome, but for sure trying to slip 'em in to the tweet stream is the wrong way to go. There is a "right" way to go about this advertising thing, if it's going to happen. Acknowledge people's concerns, and address them intelligently. You'd be surprised the effect that has.

Don't make your Twitter account a hazardous waste site.


Image Credit: dbking

---

Hutch Carpenter is the Director of Marketing at Spigit. Spigit integrates social collaboration tools into a SaaS enterprise idea management platform used by global Fortune 2000 firms to drive innovation.

Obviously You Feel the Love

by Kevin Roberts

Don't you love it when scientists come out with studies proving the completely obvious? The advertising industry is not immune from such studies, as the American Association of Advertising Agencies has recently released a paper entitled: "Why You Need to Incorporate Emotional Messaging Into Your Marketing Communications." It states "Recent studies have proven that emotional advertising is more effective than a rational strategy."

The AAAA paper points to a study of the 880 winners of Advertising Effectiveness Awards from the UK's Institute of Practitioners in Advertising (IPA) which has offered further proof (as if there was any doubt) that if you put your message in emotional terms, it will carry more weight. Some highlights from the analysis:

• Emotionally based campaigns outperformed rationally based campaigns on every single business measure in the cases studied—sales, market share, profit, penetration, loyalty and price sensitivity.


• Emotional appeals are almost twice as likely to generate large profit gains as rational ones.


• The more emotion dominates over rational messaging, the bigger the impact on the business; the most effective ads are those with little or no rational content.


• Emotional advertising is particularly good at reducing price sensitivity, and hence leads to large profit gains.

I've given hundreds of speeches and written a couple of books - Lovemarks: the future beyond brands, and The Lovemarks Effect on the very subject of emotional primacy. I religiously reference neuroscientist Donald Calne - people are 80% emotional and 20% rational; reason leads to conclusions, emotion leads to action.

Whilst the 4As are "surprising with the obvious", their survey is actually very timely. The job of keeping clients on an emotional track is a never-ending one. My #1 job when I started as CEO of Saatchi & Saatchi was to "emotionalize clients." There is frequently a tendency on the part of brand managers to cram too much information about product benefits into advertising; to be overly prescriptive; to run with facts not stories. There are only two questions that matter in advertising: "Do I want to see it again?" And "Do I want to share this?" An ad crammed with data ain't gonna be revisited or shared.

Btw, other startling "surprising with the obvious" findings from scientific studies include:

1. Gun-Toting Drivers are More Prone to Road Rage
2. Too Many Meetings Make You Grumpy
3. Swallowing More Than One Magnet is Dangerous
4. Memory and Concentration Fade With Age
5. Time Flies When You're Busy


Image source: http://www.elt.lt/2008/02/14/all-you-need-is-lovemarks-lovemarks/

---

Kevin Roberts is the CEO worldwide of The Lovemarks Company, Saatchi & Saatchi. For more information on Kevin, please go to www.saatchikevin.com. To see this blog at its original source, please go to www.krconnect.blogspot.com.

A Billion Views Cannot Be Wrong

by Kevin Roberts

TV will never die, YouTube will never kill it. YouTube (or its future manifestations) will never die either, TV will never kill it. We're in the world of and/and, where possibilities are not mutually exclusive and creative exposure is based on merit.

A couple of weeks ago, YouTube hit a billion views a day, and the inevitable happened. TV and YouTube are looking at working together. The Daily Telegraph says that the UK's Channel 4 is looking at a deal to sell its own advertising around its own content on YouTube and sharing the revenue with YouTube (read Google). It's like someone moving into your house, renting your living room unsolicited, and giving you a cut of the profits. And I say, good luck to them!!

The power is with the creative champions, and YouTube have proven to be just that. As Steve Jobs said, "creativity is just connecting things." YouTube have connected the techno-geeks, mobile phone users, and home movie recorders together like never before. Their revenue share model has been around for a while, and high volume users are already benefiting from a share of the profits. So why not a TV Channel? It's a Sisomo world, and the game has changed forever. Channel 4 are getting a second bite at their own content, and more importantly, integrating with other platforms online will drive users back to TV, still the focal point of living rooms around the world.

---

Kevin Roberts is the CEO worldwide of The Lovemarks Company, Saatchi & Saatchi. For more information on Kevin, please go to www.saatchikevin.com. To see this blog at its original source, please go to www.krconnect.blogspot.com.

Innovation Perspectives - Engineering versus Intangible Value

This is the first of several 'Innovation Perspectives' articles we will publish this week from multiple authors to get different perspectives on 'Roadblocks and the Critical Relationship Between Marketing and Engineering in the Cause of Advancing Innovation'. To kick it off, here is my perspective:


by Braden Kelley

Let me start off by recommending that you watch the movie I've embedded, as it does a great job of describing how there is often an engineering solution to a problem and a marketing solution to a problem. This in part explains why there is often a tension between marketing and engineering when it comes to new product development - they see different solutions, assign value differently, and view success in divergent ways. So, please enjoy the video, and my article will continue below it:





So in the future, with the problem at hand, you might want to ask yourself - "Is the problem best solved by changes to the real value, redefining the intrinsic value provided, or a bit of both?"

Of course it is very hard for people to ask these questions honestly as they have a default response, but asking them in a cross-fuctional environment may yield a more holistic and informed response. And after all, many of the barriers that people tend to erect in the achievement of something are often because they didn't feel involved in the decision-making process.

So, what are some of the barriers that people erect in a sometimes tension-filled environment?

1. Isolation - You just avoid communicating with the other side as much as possible


2. Stonewall - You just do what you would do anyways and ignore the input from the other side


3. Passive Aggression - You consciously choose to behave in a way that will cause the effort to fail, so that ideally you get your way instead


4. Build a Fortress - You build complex written rules of engagement for your department saying that it has to be this way because you're too busy and these rules will help you be more organized


5. Omission - You take the inputs but then you don't do anything with them (marketing doesn't promote a feature, or engineering doesn't fully develop it

The biggest danger to the cause of advancing innovation when it comes to the engineering and marketing departments is that the relationship develops into one without constructive conflict and without healthy collaboration. For innovation to be repeatable in an organization these two sides must share openly, have their perspectives valued, and contribute to a conversation. Marketing and engineering hear different aspects of the voice of the customer in their interactions with them, and they approach solutions to problems in different ways.

I would even argue that there is probably no more important set of cross-functional relationships than those between marketing and engineering, and that their health will determine the future success or failure of the organization. The executive team should consciously monitoring the health of these relationships, because when they start pulling in opposite directions, the entire organization could be ripped apart.

What directions are these two organizations pulling in your organization?


You can check out all of the 'Innovation Perspectives' articles from the different contributing authors on 'Roadblocks and the Critical Relationship Between Marketing and Engineering in the Cause of Advancing Innovation' by clicking the link in this sentence.

---

Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

The Participation Economy - Part 1

T-Mobile - 'Life's for Sharing' Dance campaign

by Kevin Roberts

I was recently contacted by a journalist to talk about the Attraction Economy. What bad timing. I've moved on. From our experience with the T-Mobile "Life's for Sharing" campaign, a new shift is taking place. We are entering the age of the Participation Economy.

When watching or approving anything we make, my rule of thumb used to be: Do I want to see it again? But increasingly that's given way to: Do I want to share this? I've written about the dynamics of sharing before. It may sound like a lesson from Kindergarten, but sharing is powerful stuff.

The transformation of business and society is always seen through a collection of shifts. Power and energy changes direction and new dynamics rule the day.


The Participation Economy is an aspiration as much as it is a reality. The global recession dealt a blow to its development, perhaps. But a number of contributing factors lead to the Participation Economy, chief among them the web. Our real-time digital infrastructure is an empowering, entrepreneurial platform that lets you showcase your creativity like never before. We've seen this introduce a self-generating energy that we're just beginning to understand and harness.

All of this is an evolution. We're not totally there yet, so Attraction still plays a huge role. And the term is not my invention, as the Participation Economy has been around a while for the design of products. But it's much larger than that.

Participation is also about the health of society. The past decade witnessed rapid change in society. America doubled its consumption of antidepressants. 1% of the population is in jail. 48% of Manhattan lives alone. Social dislocation creates new channels for interaction and our need to participate and join together is going to grow in this regard.

Like the Lance Armstrong Flash Mobs I blogged on, the Participation Economy is more about sharing ideas than making purchases. It's about connecting us with ideas. When we participate, we join a larger community around an idea. That social dynamic is fluid and natural and it's a hotbed of innovation. More and more, we will see that the best ideas create an opportunity for participation. It channels the energy of a community. After all, Steve Jobs said: "Innovation is just connecting stuff."

---

Kevin Roberts is the CEO worldwide of The Lovemarks Company, Saatchi & Saatchi. For more information on Kevin, please go to www.saatchikevin.com. To see this blog at its original source, please go to www.krconnect.blogspot.com.

Video Interview - Saatchi & Saatchi CEO Kevin Roberts

by Braden Kelley

I had the opportunity to interview Kevin Roberts, CEO of Saatchi & Saatchi at the World Business Forum this week at Radio City Music Hall in New York City. You can see the video interview here:





Saatchi & Saatchi is a well-regarded advertising agency and Kevin Roberts has a lot of great insight on the customer. In this short video we chat about the evolving relationship between customers and their mobile devices, the state of integrated campaigns with social media as a component, and about Saatchi & Saatchi's "Do One Thing" (aka DOT) campaign.

For those of you don't know, Kevin Roberts is a contributor here on Blogging Innovation.

What do you think?

---

Braden Kelley is the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy. Braden is also @innovate on Twitter.

A Cosmetic Fix?

by Steve McKee

One of the questions I'm frequently asked by corporate leaders struggling to manage in the current environment is how far to go with their cost-cutting measures. With their companies suffering sales declines, they've got to trim somewhere to maintain profitability (and in some cases to stay afloat), but they don't want to cut the wrong things.

Recent moves by Jean-Paul Agon, CEO of L'Oreal, offer a good example. The luxury cosmetics maker has had a difficult year so far, in part because it "scrimped" on brand promotion, reports the Wall Street Journal. In light of this Agon knew he had to cut back, but he has done so wisely. He launched a reorganization plan which included a hiring freeze. He trimmed travel expenses and even closed three factories. What Agon did not do was cut off the company's lifeblood, marketing and R&D.

Says Agon, "We're strengthening our media and promotion. It's a brave strategy because when you face a crisis, most companies say I'm going to reduce my media budget. We decided to do just the opposite." When it comes to R&D, Agon is even more resolute: "The last thing to do would be to give up innovation because cosmetics is really about permanently inventing new products, new technologies, new benefits, new results."

There is no cookie cutter answer for how a struggling company should cut back to make its numbers work. But when you're faced with those difficult decisions, do your best to trim expenses and leave the investments in place.

---

Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

The War for Talent Escalating

Here is an interesting video on how China has started advertising on Silicon Valley billboards to attract tech talent from Silicon Valley back to China.

America used to be the top magnet for tech talent in the world, but now risks losing that mantle as other countries develop. Will American companies be able to find a way to stop the brain drain back to immigrants' home countries?

Check it out:



What do you think?

@innovate

Follow-up: Other People's Money

Just came across a Seattle Times article talking about how Microsoft is going to produce digital short films for Xbox Live.

Buried in the article in a single sentence was the following:

"The pilots will also be distributed over MSN and Zune."

So, Microsoft is halfway home by starting to produce content that people might find interesting.

Now they should leverage the infrastructure they are putting in place to produce content and partner with Microsoft Advertising to make and distribute content that site owners will find useful.

As we discussed in the original article, producing and syndicating useful content in key verticals then might encourage small site owners in those verticals to switch from Google Adwords, and lead to a larger query share for Live Search down the road...

What do you think?

Other People's Money

As Google's share of the search business approaches 70%, Microsoft is left needing a bold move to remain relevant.

While Live Search is a good product, Cashback will not save them from the Google monster.

Let's look at the problem that they are trying to solve. Or rather, let's look at what Microsoft is trying to achieve in the search business. Ultimately, Microsoft is trying to become the ad platform of choice. Being the search engine of choice would be nice too, but it is not their primary goal.

So if Microsoft wants to be the ad platform of choice, what do they need to do?

Well, first they need to become the number one choice for contextual advertising distribution. This should be the primary goal. Moving up in search engine popularity should be a secondary goal. If Microsoft marshalled their resources towards dominating contextual advertising, search popularity would follow as a byproduct. Why?

Well, if you run a blog or some other kind of site, and Microsoft is sending you a check every month, are you not at least a little more likely to use Microsoft Live Search as your default search engine?

What then happens if Microsoft offers to add cashback from personal Live Search behavior to contextual advertising syndication payment accounts?

What then happens if Microsoft partners with Amazon or NewEgg to offer discounts on Microsoft merchandise to contextual advertising distributors through a gift certificate conversion scheme?

Finally, what then happens if Microsoft tries to help solve the content creation challenge that millions of small site operators face?

It costs money to create content for your site. What if Microsoft offered site owners relevant ad-supported content for their site for free (possibly focusing on key verticals)?

Mmmm.... It's starting to add up...

More content on site... More visitors...

Would that be a bad thing? Wouldn't everyone win?

So, what are you waiting for Microsoft?

Your opportunity is here, your opportunity is now...

What do you think?

Will Big Name Animation Talent Succeed on the Web?

Recently announced was a deal for Google to syndicate a web-only series of content by Seth McFarlane, creator of Family Guy, via its AdSense network.


The hope is that the content will be attractive to advertisers as will its syndication to a targeted set of thousands of web sites where Mr. McFarlane's target audience (typically young men) tend to gather.

It remains to be seen whether enough advertisers will show an interest in buying pre-roll, bottom banner, or brought-to-you-by style advertising to support Google's investment.

Extending the unconventional approach is an option for advertisers to work with McFarlane to create animated ads to go with the content (for an extra fee of course).

The one thing the New York Times author appeared to miss, and that Google may miss to, is the ancillary revenue Google stands to earn from incremental PPC or other advertising from increased impressions and clicks on the sites where these sites will likely appear. Google may or may not be able to sufficiently isolate this benefit, but they will still earn the revenue. This additional, difficult to measure, revenue may hold the key to making this experiment a success or a failure.

It is this second revenue source that leads me to think that this Google approach to boosting ad revenue might be a good innovation--if they can find the right content and measure the secondary revenue effects.

What do you think?

Targeting By The Seatback Of Your Pants

Flying to Hawaii a couple of weeks ago, I was remined of the phrase, "You may be talking but nobody is listening." Hawaiian Airlines had seen fit to pollute the cabin with an endless stream of untargeted advertising on the plane's set of televisions (no fancy seatback units here).

Now, at least on American Airlines the "advertising" mostly masquerades as entertainment (CBS sitcoms or clips of Letterman and 60 minutes) to try and loyalize the shows' base or to pull in new viewers, but it's still advertising. American Airlines has traditional advertising as well, but less than what I saw on Hawaiian Airlines.

Broadcast networks have at least some justification for spamming people over the airwaves (it's their only revenue source and they are only able to target based on dominant audience profiles). The availability of on-demand, seatback entertainment systems, leaves airlines with no excuse, and in fact every motivation as advertisers would willingly pay more for targeted impressions.

For targeting purposes, the airlines know who purchased the ticket (likely their age (senior/adult/child), phone number, e-mail, address, zip code, how much they paid, the credit card they paid with, etc.). About frequent fliers they will also know how frequently they fly, their home airport, and maybe even whether they are travelling on business and for which company. So it would definitely be possible to design a system to target advertising in-flight.

At its simplest, airlines could define the programming schedule as a mixture of content blocks and advertising blocks (interstitial advertising) and target the advertising by seat, using passenger data. Passenger data could be loaded up at the beginning of each flight by a gate agent using a USB key, smartcard, or other portable data storage device. Every seat could potentially receive a different combination of commercials during the flight.

Airlines wishing to avoid interstitial advertising could design a more complex system to support advertising that would appear during the programming (as banners, or whatever). Whichever way the airlines went, they have the opportunity to create a system that would likely attract the highest rates for video advertising on the planet to help them pay for the increasingly expensive fuel to fly the plane.

Now where did I put that ticket again?

P.S. I also thought it was interesting that Hawaiian Airlines has chosen to go "cash-free" and only accept debit and credit cards. I agree with offering it as an option, but I'm not sure I agree with abandoning cash. Why would you want to do anything to make it more difficult for people to give you their money?

Followup - The Future of Broadcast Television

I finally got my password to the beta program for hulu.com and I must say it is what I thought it would be, a site where you can watch advertising-supported Fox and NBC programming for free. This article is a followup on innovation article #75 of November 11, 2007. ABC.com has been doing this for some time, but this marks the first time that two competing networks have gotten together to share development costs on such a venture. The real question is not whether it will be successful or not, but how successful it might be.


The site sounds a near-certain death knell on iTunes future capacity to offer television content profitably. ABC already has their content for free online, and now NBC and Fox do as well. While some people may want to be able to watch content without commercials, I surely doubt that the size of that market segment are going to be large enough to make it worth the investment in servers and development cost, not to mention marketing and other costs. People that are that adamant about not having commercials, and are willing to pay for that privilege, will surely spring for the DVD instead.

From the networks perspective, surely they get more than a dollar or two in advertising revenue per view, so then it becomes a question of the number of views they get and whether that covers the operational costs. The great thing is that the development costs have already been covered by the broadcast division, so the content is ostensibly free to the online division (with the exception of any royalties they must pay).

This calls into question whether iTunes will really be able to ever succeed in video of any kind, including movies. It is in the networks best interests to host their own content or to host it via a platform that they control. By doing so they not only have the opportunity to increase their revenue, but also to cross-promote - to push people from show to show, or sell DVDs and other merchandise.

Finally, if people consume the content on a platform that they control, the networks have a better opportunity to loyalize consumers and even to elevate their interest to involved fan. If they can elevate their interest from casual viewer to involved fan, they may buy merchandise, but more importantly they are likely to then be worth more in terms of advertising revenue (repeat visits, links out to community sites, etc.).

Hulu.com isn't a revolutionary innovation, but it does bring a few new things to the party when it comes to advertising-supported premium content:

1. Ability to embed a program in any other site on the web
   
• Surprisingly without commercials
• Also allows you to resize the timebar to create a custom clip
2. First site to offer movies for free (advertising supported)
3. At the end of the video clip, it gives you either
   
• A link to the show's web site telling you when the show airs
• A link to Amazon Unbox where you can purchase an episode for $1.99
  
• Three formats (computer, TiVo, or portable device)
• Text saying that people can download or purchase a season (but no link)

Hulu does have the ability to revolutionize the industry in a way that YouTube never will, if they have the vision and the organizational capabilities...

Starting with two major networks' content available gives Hulu the chance to at least try to establish itself as a destination for more than Fox and NBC content, potentially stripping YouTube of its best user-generated and premium content at the same time. Hulu has the chance to establish itself as the platform for introducing all kinds of other advertising-supported premium content:

1. Television and Movie Back-catalogs
2. Foreign and independent content (movies, television and shorts)
3. Public television content
4. Music videos
5. Video podcasts
6. Audio podcasts
7. Audiobooks
8. Temporary promotional content (i.e. concert or other live entertainment teasers)
9. The opportunity to create a new style of infomercial

It will be interesting to see if Hulu seizes the opportunity to create an industry platform instead of just a nice little joint venture. It will also be interesting to see what the effect of Hulu and other premium content sites are on shared networks. I guess we will see.

Do you think Hulu will maintain a closed or open network?