Monday, May 31, 2010

The Impression Economy

Over the last years, the decline of the print business forced the emergence of new business models to align journalist compensations with the brutal truth of their poor publication’s financial situation. An emerging trend seems to be the alignment of journalist’s payments with traffic to their published articles, thereby establishing a very transparent performance metrics system that is rather unusual for large scale organizations and highly educated employees. The number of impressions that a particular article generates determines the compensation that the journalist is receiving. This will definitely lower the average pay for journalists and motivate them to produce primarily traffic generating articles. And it could seriously threaten longer research centric articles and pieces.

But this posting is not trying to engage in the already very heated and difficult discussion but rather explore of how this “Impression economy” (that might be soon the dominant business model in journalism) could have impact on other industries and influence their business models. At minimum this “Impressions economy” could be adapted within the marketing and media industry and for parts of any retail based business that requires physical or virtual traffic.

The key factors of how successful this “Impression Economy” could be will rely on two critical elements:

  • Impression is a rather crude metrics that does not account for the quality of impression. Recent engagement studies try to better understand the different impact of various impressions on consumers and readers. A high engagement impression could have a value of 10 or 20 low engagement impressions. Any expansion of the Impression economy will require smarter, easier, and scalable metrics systems that connect impression with engagement without creating too much complexity. The beauty of impressions is its real time simplicity that can’t be lost.
  • Any seemingly inefficient industry where overall business performance could benefit from a better linkeage of individual versus collective performance and thereby reward high performing employees while reducing they pay for lower performing ones. Journalists were the first to hit by the downward pressure of their compensation because of the high cost pressure on newsrooms and publications. They were perceived as highly inefficient organizations with little to no accountability or smart performance measures. Robert Murdoch famously complained about the fact that every Wall Street article will be reviewed and edited by over 8 journalists before final publications (This has now changed since he bought the newspaper but I have not been able to find the new “improved” number).

One nightmare scenario of the “Impression Economy: is that the middle class of well but not very high paid earners could disappear, since only a few people have the talent or luck to attract a high volume of impressions, most people’s impression would play at the end of the long tail and therefore they would only earn a small compensation.

Compensation would not look anymore like a organizational pyramid but like a wine decanter with a few high earners while 95% of all earners would earn close to minimum wages in this “Impression economy”. The optimist would suggest that there will be a rise of “Impression co-operations” that would allow a broader base of people to earn a decent living. The “Impression Economy” might not expand beyond the realm of journalism but we better be ready to understand its underlying mechanics and consequences.

Sunday, May 16, 2010

Application Marketing

Applications are currently the hottest marketing device that brand marketers and agencies are discussing at their still exsiting business luncheons and dinners. They love discuss what kind of iPhone application should a particular brand develop? Or don’t we need to launch a widget that will be heavily used by our core customer group and which can then be leveraged as the biggest word-to-mouth vehicle since “The Blair Witch project”?

I think this whole discussion misses the most critical and insightful point. In most cases it is less about developing new applications than transforming the majority of all other marketing vehicles and programs into something that closer resembles an application. What does this mean?

The definition of an application (grounded in the software world) goes like: “An application is a computer software designed to help the user to perform singular or multiple related specific tasks”. Translating this into the marketing universe I suggest a few additional elements of what defines “application-ness”, what makes an application an application:

  • Control: The application allows the consumer to have full control of when to use the application. The usage is always determined by the consumer not the brand or the schedule of a media company
  • Interactivity: There is some level of interaction between user and application that does not lead necessarily to any level of personalization but it allows to millions of different usage paths between consumer and application
  • Service: Most importantly the application provides a perceived service benefit to the consumer (yes, the vacuum cleaner or a mixer is an application).
  • Ease of use: The application is making something easier that was previously more difficult, it can relate to one or many tasks, it can make something much more or just slightly easier.

I believe that today’s marketer’s job is much more about making every marketing interaction and program, from TV spot to Display banner or Search term, more application like. This job is more important than creating new isolated applications for in most cases just Apple’s large world of devices. A TV spot that can live outside of a programmed TV schedule and that provides some longer lasting opportunities of interactivity or a display ad that does not lead to the usual microsite but that has some level of targeted interactivity integrates components of application-ness. Ultimately the best modern marketing will become more and more like a service to the consumer that makes something just easier, more interesting, more entertaining, in short: more like an application.

Sunday, May 09, 2010

Agency consolidations?

The 10 years before the early 2000ies showed a strong move towards agency consolidation in the marketing services industry. But the last 10 years don’t seem to repeat the trend; it seems that the level of consolidation in the marketing services has reached its peak. The largest ten global agencies still account for probably at best 20% of overall agency fees, and depending on the math maybe as low as 10%. Why did this consolidation trend stop? Here are my hypotheses:

  • While agencies looked more and more internally over the last 10 years, they did not realize that new players moved into their territory and took away a decent amount of their revenue (e.g. Google.).
  • Most agencies have not figured out how to keep an innovative and creative company culture while growing towards a large organization. It seems that most agency offices reaching more than 1,500 people experience a quality decline. Size and innovation appear to be a difficult marriage in the universe of agencies.
  • A lot of service marketing organizations started to fragment their offerings into multiple different independent profit centers, denying their organization any scale benefit. Suddenly their focus turned more into infighting between the different profit centers instead of concentrating on performance and innovation improvements on a large scale.
  • Quite a few talented creative minds got tired of their large organizations and started their own agencies. They were able to gain the business of large brands and companies, since most agencies did not develop any stickiness to their clients beyond the sexiness of the last TV commercial.

I don’t see any reverse in this stopped movement towards a more consolidated agency space, since most agency leaders don’t’ spend sufficient time on developing the right strategies to turn scale into a true competitive advantage, in both increased efficiency (with a strong focus on cost management) and an improved effectiveness (with a strong focus on strategic and creative quality). This will not change until creative and strategic marketers take the “scale benefits” discussion away from financial engineers and develop their own approach of how to leverage the size of an agency as a true benefit to their clients.