Here are some words to learn for 2009 business plans:
• Acceleration in a slowdown
• Recession as a crucible, not a forest fire
• Confidence in a downturn
• Media combinations (advertising + entertainment + content)
• Mobile mobile mobile
• Humour as a weapon
• Individuals count
Sorry, where was I? Conference induced trance state, which I now need to break out of. It is always bad when you start thinking in buzz-words.
SIME is a very hard thing to summarise, as I mentioned before, and I have deliberately ducked out before the wrap up session to make sure I have a fresh set of thoughts on the matter. Something really important is happening in digital media and it is not what I expected to find. I’m going to try to explain it, but first there is a heap of ground to cover. I’ll cut it into chunks, not necessarily in chronological order: markets, content, technology, trends. I’ll cover the first two here today, more to come.
1 What is up with the marketplace right now?
This section covers the general global market, ad revenue, fund raising and general sales outlook.
Hans Rosling put up his now famous slides, which are available on GapMinder. It put the whole world into perspective for us. I recommend reading them and understanding the scale of the global macro-economic and demographic changes. It will change your outlook on pretty well everything. Since Hans is a genius, and any attempt to portray him is doomed, I’ll just stick to his tag line: “Stop allocating $100 to the past and $1 to the future. You have to reallocate resources. When you do, all problems can be solved.”
He also said “believe in markets, civil society, democracy and people. Then do good”. I suggest we all take his advice.
My take was “all those newly middle class people with nice new bandwidth are going to want a heck of a lot of video content”. Where is that going to come from?
A quick rundown from CEOs of major companies in India, China, Japan and Eastern Europe showed us that regional companies are growing into giants. The explosive growth in India and China has already created the two largest mobile phone and internet constituencies. While one is democratic and the other autocratic, they are both driven by huge grass roots demand, even on average salaries of $10 or less a day. Key tech differences are also clear: the Asian markets are driven more by topics than by individuals: bulletin boards and threaded conversations beyond freeform self-expression. That is probably going to change over the next decade. Matchmaking is huge, politics are huge, online games even huger.
The rise of the middle class, the rise of broadband and the rise of mobile still has 5x to 10x growth left in it in the B_IC nations. (not Russia, no one knows what is happening to them right now, and no one really offered an opinion)
Japan is in decline, seriously negative sentiment, ageing, economic malaise and yet still utterly technophile and immensely innovative.
Again, all huge consumers, and some avid creators, of video content and other UGC.
The nice lady from PwC with the umbrella led us through the media marketplace. The market for ads is fragmenting faster than ever. Online is not suffering as much as traditional media, even though the total ad spend is down dramatically, because the structural shift of spend from traditional media to digital media is still going on. Where that shift is most advanced (US, UK) is where the recession pain will be felt first if you are ad supported. Where the shift has hardly happened (Poland, India, China, Austria) you may not feel the drop in ad spend at all if you are dependent on online ads for revenue.
Ads are migrating to safe harbours, and to maximum effectiveness. These are not always the same thing, and you have to be both.
What is interesting to me is the source of the ad content: as ad spends decline, the demand for cheap video and visual content must increase proportionally, yet there are very few tools for creating cheap video content.
Per Roman of GP Bullhound showed us how the market for investment is in a very interesting place right now. It is going to take excellence in management, execution and revenue growth to get finance in 2009. It will be harder and take longer. With banks out of the picture, global equity markets off 38% and VC activity fallen by 50% in last quarter to September 2008, the signs are mostly bad. In fact Tech investment survived longest, but even that has fallen to near zero in the last 10 days. On top of that, poor demand has driven down prices and multiples (from 6x to 1.5x) and that has, in turn, made many good companies pull back from fund raising, further exacerbating the trends. To add more woe, VCs are turning into timesucking monsters – they want so much reassurance that they latterly run startups to death with more and more Due Diligence demands in such risky times.
Yet, good companies are getting even more money – albeit at valuations they do not like. VCs are investing in their existing portfolios as cash is now a deciding factor in success and it is a factor the VC can control.
To put it another way: if you have raised money recently, the speaker, Per Roman of GP Bullhound described those of us who have as “Geniuses”. I blushed, but put my hand up anyway having recently banked £1.5m with more to come (finger’s x’d).
The key advice on fund raising was:
1. Don’t, if you don’t have to
2. If you must, focus on revenue, execution to a plan, agility, loving your existing customers (who are worth 10x compared to a customer you do not yet have) and following the best strategy.
The good news for startup CEO’s is that you can bury a lot of bad news, change management, change processes, and build great teams as labour is more mobile. The very best digital teams all appear to have been built in a downturn period, some sort of baptism by fire effect?
His last financial message was simpler: exits are out right now. Valuations are so poor, the IPO market so dead and the appetite of acquirers so nervous, that it is best to ride it out on your cash and revenues. Use the time to court a partner, probably mid-sized not mega-big, and fit yourself to solve their problems. When the markets turn, you can be first on the menu.
A later session from Robert Lang at Result covered how to get an exit. Actually, he was talking about using networks to get trade partners, but it was explicit that start-ups get trade partners to encourage someone else to buy they. (Just as at the Essential MediaTech event). I enjoyed this, as there was one gem in it: focus on companies that are ranked 3 to 5 in a space. They want you. They need you to help them drive revenue and innovation in a downturn. Stay clear of the top 2 companies in a space as they probably don’t need you, will react slower, will be more cautious (as they have more to lose) and they will have no compulsion against simply running you out of road to stop anyone else buying you.
That session also pointed to some great ways of staying Agile, being Responsive but still Sticking to a Plan. Any start-up looking to exit needs luck, so shotgunning the whole partner landscape was a valid approach, but only if you had the smarts to “fail bad leads fast”. Also, when looking at a business landscape, he encouraged us to think about languages and cities rather than country borders or politics, which seems like sound advice.
The summary from the markets section: not all gloom for tech start-ups, just be realistic and execute brilliantly.
2 What is up with Content?
This section covers all forms of content: text, ads but mostly video, music and humour.
Content is still everything, but more of it is being created by the broad consumer participation than ever before.
Humour has replaced the factual news in most people’s lives: we trust comedians to pick up on what politicians are not saying, more than we trust the news to tell us what politician are saying. (For politicians replace with “football stars”, “pseudo celebs”, “mega business” and “professional PR companies” as required.)
Entertainment content drives everything we see: hardware, software, platforms, servers and business models. Who could have guessed that games, music and video would change the world we live in, and go on to keep on changing it for years to come. The arms race between consumer demand and IPR control has been won, by the consumer.
Any content business must learn to ride the wave, use positive feedback and actively participate in the shift from text -> speech -> video -> mobile video.
The winners will learn to use Constant Partial Attention from their audiences plus Time-Stacking plus Ubiquity to their advantage. Think of kids with mobile phones and laptops with the TV on and one earpiece in. That is the new media consumer. The days of watching 18 hours of TV a week with no interruptions except supper are dead.
30 seconds is the sweet spot – that is the most watched genre now: short! Sadly finding them is really hard. YouTube is a dumb repository and most others are no better. We really need better video search and indexing to make full use of these short clips (and more tools like JayCut to make sense of them and bring our ideas together from the storm of clips)
When even porn companies complain about losing money, the need for new business models is clear and present. It is not clear what those models are yet.
Music still drives content, and increasingly drives video content made by fans and amateurs that out distributes the commercial content through viral channels.
Music has begun to learn (and nice people like Mia Rose and Ace of Base are showing them how) but film seems stuck in the dark ages of fighting their own consumers in a war they can never hope to win.
Content is still king, but it can be content that was made by anyone. The judge of whether it is any good at all is no longer the marketing and P&A budget put behind it, but genuine public opinion.
Platform A (the new AOL marketing team) were pretty good at pointing out the major content trends for the advertisers: we love search, we hate email. We love having power over brands, we hate being told what to think.
There were some hard numbers, which was good. I liked the analysis that a retailers sales will drop from 90% to 50% if they are not trusted, but that any fool retailer still has 13% of people who will buy from them. There is a business in servicing fools, perhaps? Either way, the good advertising partners are those who are best able to turn the hurricane of information into useful analyses that the client can act on.
The big forces on advertising are:
• Intent to purchase
• Ease of Use
… and eggs that always need sucking.
Thomas Crampton and Digital Dan showed us heaps of videos, many of which were funny. Humour again: very powerful stuff if used to drive uptake of an idea. But the thrust of the piece was that creative content was being used in political campaigns to drive up engagement and counter voter apathy. You’ve all seen the Sarah Silverman Big Schlep or the ObamaGirl song, so you know what we mean.
You might not have realised that Chris Hughes, 24, of Facebook fame, helped Obama to create his website and the web campaign. Facebook style learning about micro-targeting of people based on web data on their preferences and opt-in data from widgets and telephone interviews meant that Obama’s team was able to finely change every message so it had the maximum chance of winning that one person’s vote. That is both wonderful and VERY SCARY as we have all given away far too much personal data to people who want to use it for their own ends. (*)
(*) – no, really, the politicians do NOT care about you personally, only your vote.
Facebook really knows about content as well – it can create starts, launch campaigns and write books now. Using content and social network media tools to change our minds is a very powerful idea. It is an idea that will not go away, and an idea that every brand and every political party will use from now on. Expect to see more and more of it.
Obviously user generated video and humour played a huge part in Obama’s election. I just hope that the few Moviestorm movies made their own little impact on voters who saw them.
The view from McCann was that the revenge of the physical world was also upon us. Digital ubiquity was devaluing experience and content, so unique, scarce, real world objects and live events were of even greater value than before. Linkedin the real world to the digital world was the next huge challenge for brands and content. The buzz words from that session were:
Unique / Relevant / Timely / Quality / Scarcity / Personalisation / Lasting
… and eggs to suck.
The summary from the content section: entertainment is everything now. Doesn't matter if you are text, music, video or a game; entertain or die.
So, there we have a run down of the first two chunks. I’ll follow up with technology and wrap up with trends as fast as I can. For now: it is off to the gala dinner at Ambassadeur.