KPCB Internet Trends (2011)

This week ex-Morgan Stanley research analyst, now at KPCB, Mary Meeker delivered her latest Internet Trends presentation. As always, Mary’s distillation of trends is always good value and genuine insights are peppered throughout.

For the time starved amongst you, here are some highlights:

World view:

• Though still with some ground to make up, it’s striking the number of Chinese and Russian internet companies popping into the global top 25.

• What’s more, between 2007 and 2010 China accumulated 246million new internet users – that is more than exist within the USA.

Mobilising the people:

• Mary notes that even in recessionary times breakthrough technology and services can breakout. One need only look at the extraordinary first weekend sales of Apple’s iPhone 4S to confirm this.

• 2010 QTR 4 saw more mobile devices (which includes Tablets) sold than PCs and signs that Smartphone sales outstripping feature phone sales in US/EU

• That said. still enormous unconverted user base with 835 million Smartphone users against 5.6 billion mobile device subscribers.

• Apple getting plenty of headlines right now, but it’s Android mobile devices with the remarkable quarter on quarter ramp up – jumping from 20million to 150million units shipped in between quarters 7 and 11 post-launch.

• Global mobile success story continues with app/ad revenue up by a factor of 17 between 2008 and 2011 to a figure of $12billion.

Touchy, feely:

• Meeker calls out the latest trend in the evolution of human computer interaction being from text command lines to graphical user interfaces (GUI) to natural user interfaces. Yes, Steve gets a name check too.

Cash is no longer king?:

• E-commerce story continues to be one of growth through tough economic times but plenty of room to grow.

• Again the big story is growth in mobile commerce with ebay and PayPal doubling or more their gross mobile sales/payments since 2010.

• The uplift in mobile e-commerce activity has been of particularly benefit to local commerce through the plethora of location aware discount offer aggregators.

Power to the people:

• Meeker identifies overarching mega-trend as the empowerment of people via connected devices.

• She references the Twitter traffic patterns post Japanese earthquake, the fact that 200million Indian farmers currently receive government subsidy payments via mobile devices and 85% of global population are now covered by commercial wireless signals versus 80% being on electricity grid.

Author: Greg Andersen (@gandersen), CEO, BBH New York

In the last couple of weeks I’ve read two specific articles that made me really stop and think about our future as a creative industry. The first was the March 26th New York Times article “In a New Web World, No Application is an Island”. It paints a picture of a silky smooth, boundary-less web full of open and interconnected apps thanks largely to HTML5. The creative palate and resulting experiences made possible by the likes of HTML5 are truly thrilling. The second article was “Nine jobs that humans may lose to robots”. On the list are occupations you’d expect to see left to machines, like soldiers and astronauts. But taking a step back and considering the all the advances in marketing technology I can’t help but wonder if advertising people, including creatives, will be appearing on that list when the article is inevitably written again in a few years time.

To be clear, this isn’t an anti-technology rant. That would be odd on the BBH Labs blog and flies straight into the face of tons of BBH work and investments within the agency. Rather, it is one guy’s view of a potential future brought on by a lot of very well intentioned innovations and advances, marked in my mind by said excitement around HTML5.

On the surface, what HTML5 offers to creativity and brand experiences is nothing short of amazing. Things like immediate video playback and better video tagging and search-ability will help to further accelerate content adoption and open exciting new creative uses of video. It also means that it will be easier to connect specific video content to other related content like articles, photos, data, etc. In short, HTML5 will make for brand experiences that can go both broader and deeper while maintaining a high quality user experience. Done well, these experiences will be good enough to be searched for and sought out…even if they are really just marketing.

Another positive side of HTML5 is its openness; providing the ability to create vastly better experiences on the free range of the web not penned in by walled garden technology companies. But this also means an incredible open flow of MUCH richer user data around preferences and behaviors. In itself, that’s not a big deal. Agencies and marketers and media owners constantly seek out better information to make better things and better decisions. But marketing is now also swamped with new marketing technologies to take advantage of this data. Coupled with tools for behavioral targeting, tools for social media monitoring, tools for conversion optimization, tools for automated bid optimization, tools for CRM marketing automation and tools that make it much easier for rich creative automation… I wonder what the role for us humans really is.

The best brands and their creativity make people both do and feel. To accomplish that we must not lose humanity in marketing creativity regardless of what is possible technologically. Human creativity is a special thing and when applied to brands there is still something oddly reassuring knowing that behind most any piece of brand communication there is a human engaging another human through a discourse of persuasion.

Asimov’s First Law states “a robot may not injure a human being or, through inaction, allow a human being to come to harm.” Man, I hope he was talking about advertising people.

The most provoking part of the presentation is the Disruptive Innovation slide. PSFK had a great blurb on describing the importance of this theory:

Disruptive Innovation is what’s to blame for the success of smaller, nimbler but sometimes cheaper products or services that manage to disrupt the success or complacency of larger, traditional brand players. Think of Amazon’s continued growth and eventual ‘breaking’ of Barnes & Noble, or Netflix’s killing of Blockbuster. Meeker’s presentation lays out two ways in which this disruptive innovation can happen

The two ways that Disruptive Innovation can happen. The first is a Low-End Segment Strategy by offering a product or service at a very low cost and then move up market. The second is called a Non-Consumption Strategy which basically means true innovation where consumption didn’t exist prior to the product being available.

We have the presentation embedded here for your enjoyment. Please tell us what you found interesting? What worries you about this data? What excites you about this data?

Before we go much further, it’s worth saying what this isn’t about: it’s not another essay on the accelerating declines in the newspaper industry’s circulation figures and ad revenues, as much as these may form the backdrop, even the driving need behind the changes at TMG. Instead, the starting point here is the premise that adland still needs media and media needs adland, no question.  And, equally importantly, all of us need to find forward-looking ways to accelerate our own response to the change going on around us. Listening to what they had to say, the relevance for any commercial creative business hit home hard. Here then is an unapologetically positive attempt to capture the implications of what we heard: what can we learn from one media brand’s story?

1. THE POWER OF A PILOT STUDY: ‘PROJECT VICTORIA’

Small, nimble, under the radar, with permission to fail: Will Lewis took a team of just seven, each with different skills and experience, out of Canary Wharf to Victoria and set up a separate unit to experiment with new ways of working. For five months they worked with just a dozen journalists to create the first 4 pages of the newspaper and a dummy website, each and every day.  And just about every day they deliberately trialled different ways to deliver it: from different seating arrangements to different processes and responsibilities.

Section editors sit in conference (at centre, surrounded by overhead TV screens)

Today, editors for each of the paper’s sections meet at a central table three times a day for conference, with their individual teams working in spokes fanning out from that hub, reflecting the layout they found worked best in the pilot.  Obviously this alone wouldn’t have transformed their output, but it has cut down unnecessary lines of communication and created greater cohesion across platforms.

Above all, the pilot allowed the team running it to find out as much about what wouldn’t work, as what would.  A controlled environment where several different approaches were tried out meant failure was an (acceptable) option.

2. INTEGRATED STORIES NEED INTEGRATED LEADERSHIP

In terms of responsibilities, there is no complex matrix system separating channel expertise from editorial expertise. Instead, an audience-driven approach gives each section editor responsibility for how their stories play out across ALL media. And as a general rule, a story is given equal prominence whichever platform it appears on.  Regular conferences ensure if a story crosses sections of the paper this is spotted early and priorities get agreed.

The implications here suggest themselves: telling a story in a multi-channel world is probably done faster and better by a multi-discipline team sitting together, with one point of sign-off.

3. HAVE SIMPLE, TANGIBLE GOALS (and, like it or loathe it, some independent auditing)

Project Victoria’s aims were straightforward: could they move to a model where more content was produced, more often, by fewer people (from “11 pairs of eyes to 3-4 pairs”), across more platforms (print, online, audio and video)? Whilst maintaining the quality of journalism? Without increasing errors?  Without driving people into the ground?  Independent auditing proved they could.  In fact, the net result was more content, of equal if not higher quality, for less. And intense though ‘intra-day’ (versus the old once a day, 9pm deadline) submissions may have been, people actually enjoyed it.  At the root of this was a simple realisation that is particularly telling for any creative business: they needed more content creators and less people handling it.

4. HAVE BUY-IN FROM THE VERY TOP

With a business as steeped in tradition as the newspaper industry, instigating change would have ground to a halt if it hadn’t been for the support and conviction of the proprietors and the likes of TMG CEO Murdoch MacLennan.  Deeper within the organisation, people’s jobs depended – or appeared to depend – on the status quo staying exactly that, the status quo.  Even passive obstruction (the most lethal) at that level could have easily derailed the project without support right at the top of the company.  It goes without saying the same applies to any organisation facing this degree of change.

5. MAKE IT PERSONAL

When they moved from pilot to roll-out (a program lasting a phenomenal 18 weeks, training 25 people a week) the going in point was that an integrated, multi-platform approach was not about killing the newspaper off, but about protecting and growing it for the future. It was even pointed out that the web gave the Telegraph a stronger international presence in markets where the paper could not be physically printed. Yet they soon realised people needed to know why it was important to them personally. Saving an industry is not enough. With TMG staff there were a number of positive things to choose from, some of which might be reframed for anyone working in a creative business: you could now be a journalist across 3-4 different media, not just one; working to intra-day deadlines is higher intensity, yes, but it doesn’t mean longer hours; the quality of journalism is improved by more information and a greater choice of stories and, within reason, a faster pace of working sharpens the output, rather than weakening it.

6. TELL PEOPLE ONCE. THEN TELL THEM AGAIN. AND AGAIN (…AND THEN ONE MORE TIME)

A very simple point and one we’ve all heard before, but yet still nearly always overlooked.  In short, when we’re bored of talking about what needs to change and why, others may just about be starting to listen and taking an interest.  Experiment with different ways (large groups, one-on-one etc) to do this.  Accept not everyone will embrace change at the same speed.  Some people may never get it, whilst others may take a while to do so.

7. GIVE MORE TIME & FOCUS TO THE PLANNING PHASE

In terms of delivering a story, it may come as a surprise (it did to us) to hear over half the paper is made up of set pieces that are completely possible to plan for.  In fact meticulous planning is increasingly an absolute necessity.

The web has both exacerbated the need for planning and provided the tools to do so. First, the web is key to story building & fuelling: online publishing means more content, starting much earlier and lasting longer.  Inevitably, this dictates that a plan is in place guiding what content is released, when and how it unfolds over time.

Second, the web can be key to story ownership, in turn helping to drive actual newspaper sales (with the recent MP expenses scandal the media and associated parties were directed initially to Telegraph.co.uk to ‘prove’ the story was live & legitimate in order to engender a response, which was then used to deliver the story in full most publicly via the paper).

The parallels & implications for our industry here seem particularly significant – sure, a lot about a brand story cannot be controlled in the way it used to be (nor should we try), but this provided a timely reminder that we can and should plan the steps we can control.  Without doubt, this also hints at the opportunities to fuel & curate brand stories in closer partnership with media owners.

8. STAY IN PERMANENT BETA

TMG live the spirit of this in a number of ways.  Their innovation Lab has partnerships with Google, Apple and Adobe with whom they develop new and experimental outputs, with a focus on rapid prototyping & delivery (concept to delivery in 6 weeks).  By way of example, they were the first publisher to launch a Google Android app.

TMG are also focused on what needs to change next within the organisation, which they’ve identified as getting editorial & commercial to work hand in hand.  Nancy Cruickshank stresses that a renewed focus on audience and tangible metrics will contribute to resolving what might otherwise be a predictable tension between the two.  Tough as it may be, this is where it gets really interesting. Above and beyond e-commerce (easy because it is measurable; plus reader offers, products & services are unsurprisingly strong sources of revenue), TMG see connecting buyers and sellers through content as the Holy Grail.  Indeed, people may come to the Telegraph site to read news stories, “but when we can move them to do stuff too, it actually improves the reader experience”.  Which is where brands looking for new, more effective ways to connect with their audiences come in.  Although – perhaps inevitably – this is also when concerns around brand integration versus journalistic integrity get voiced, a well thought-through partnership with the right brand has the potential to drive far greater value for all concerned.  Interestingly, on the other side of the Atlantic, the New York Times R&D Lab is pursuing new types of technology-driven innovation with equal vigour, the Nieman Journalism Lab describing recently how “In the (NY) Times R&D Lab, the future of news is the future of advertising.”

By the end of the visit, the overwhelming sense we’re left with is of an organisation that understands change is the new steady state.  Rather than resisting change, better to lean into it, plan for it, even enjoy it.  And on that note, I leave the final word to Chris Lloyd, Assistant Managing Editor at TMG and one of the original team of seven:

“It never really stops.  Don’t let a stagnant state set in.  Keep moving, keep changing.”

Our thanks to the Telegraph Media Group, in particular: Chris Lloyd, Rhidian Wynn-Davies, Murdoch MacLennan & Nancy Cruickshank

I had a message from my brother Tim (@malbonster), co-Founder of social media agency Made By Many in London, when I woke up here in NY. Tim is ‘into Twitter’. His message was subject titled: ‘I hope it’s not, but the fun bit feels like it’s almost over’. He was lamenting a tweet he’d read this morning from a friend (@netgrrl) which read: ‘Ah… I’ve mentioned coffee too many times now, I’m being inundated with follows from coffee marketers.’ Yes, I found myself nodding subconsciously, it’s being ruined. The crazy experimental bit with no rules, where no one has any idea how to monetize, or even whether it will be successful, and where marketing has been wrong-footed; that’s all gone . . .

(for full post click below)

Yet almost immediately I recalled a blog post by John Winsor (@jtwinsor), Exec Director Strategy & Innovation at Crispin, from last week. In the post, ‘Does Twitter Really Matter?’ John was recounting how only 1 in 70 (yes, one in seventy) students in a senior class he was teaching at Boulder was using Twitter, and only one-third had even heard of it. This raises the question, as John puts it, are we just talking to ourselves? Or to the early adopters, ahead of the curve? He’s almost certainly right – a very small group of people are far more ahead of the majority than they would imagine.

But given this echo-chamber reality, is it possible Twitter can already be on the verge of being ruined by marketing (and what would that really mean, in any case?). Or is it more likely we’ve just seen the end of the ‘launch’ period?

The swirling winds of change continue to pummel us, there’s no doubt about it. The departure of social media pin-up children to more grown-up & well-funded companies where ‘social technology … can transform businesses, not just be used for viral marketing & word of mouth’ (see David Armano’s move to Dachis Corp), and the arrival on the scene of new ventures such as Twitter Partners, a company that helps big brands manage their identities on Twitter, confirms some structure is starting to be baked into the chaos.

Twitter has always had structure, but it’s been the awesomely simple internal discipline of 140 characters. These emerging and more external structures, and the organization of something that was previously wonderfully loose and liberating are undoubtedly going to transform Twitter and may indeed make it both better and worse, depending upon who you are and for what you use it. It’s certainly the case that Twitter skews older than many might have expected, and maybe this will impact the way it develops and is eventually monetized. It’s also certainly the case that there are some perception issues from which certain heavy users suffer. The most common of these being the disconnect between the frantic activity on one’s Tweetdeck or Tweetie app and the much less frantic readership of the tweets one actually puts there; it’s easy to mistakenly believe that one’s participating in a gigantic conversation featuring half the entire world when in fact only a tiny handful of people see most things posted (see Mike Brown’s comments under Winsor’s post for more on this). This might be creating the illusion of importance and/or Twitter overload in small numbers of hyper-connected people. And finally, it’s certainly true that just about everyone seems to be experimenting with how dollars might be squeezed out of Twitter; to some extent the tentacles of marketing are beginning to make themselves felt to everyday users. All true.

So where does this leave us, three years in? Steve Rubel (in today’s AdAge) boldly asserts that Twitter is now peaking and will soon be abandoned – by the geeks at least – for something newer, shinier and more edgy. I’m not so sure, I think the best is yet to come. This still feels like the start of something that has many iterations and plenty of nuances still being worked on in tiny start-ups or gestating in people’s brains (premium versions, groups, mobile functionality, ad models, video Twitter, family Twitter). It may simply turn out to be microblogging 1.0.

Whoever ends up being right about Twitter, the reality is probably relatively simple, and is most economically summarized by Sir Winston Churchill: “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”