The Future Place Blog

All that networks is not gold

TechCrunch is discussing why Friendster has done so badly, the impetus for the conversation being an article in the New York Times by Gary Rivlin. Evidently Friendster rejected a US$30million offer from Google in 2003 and has been heading downhill every since.

The article lists several problems ranging from the architecture of the network, the Venture Capitalists on the board, and Friendsters inability to upscale when social networking took off. If Friendster had been able to ride the tide then MySpace may have found life much more difficult.

Just as interesting and illuminating as the article are the comments (81 at the time of writing this post) including many from Friendster users. The overwhelming picture is of an organisation that has missed the bus but also of a cacophony of different interests and agendas.

I am beginning to wonder if the moral of the story is that if somebody offers you $30million you might risk losing some future offer of $1.65billion, but it is probably worth your time taking the money when it is offered.

Will marketers give control to their customers?

Max Kalehoff has a really interesting post where he poses the question “Are marketers serious about ceding control to consumers?”. Max starts of by reporting the recent speech by P&G Chief AG Laffey. Laffey said that it was time to cede power and pointed out the more in control they are, the less in touch they are. Max reports that at the Master of Marketing session at the recent US Association of National Advertising conference, Laffey’s speech was backed-up by contributions from HP, Sony, Wal-Mart, and Mastercard.

However, Max has his doubts. When the conference was asked whether they had heard about Web 2.0 only about 5% of these industry leaders put up their hands.

Max’s view is that even with the board onside there are the problems created by the big silos. Amongst the key silos he lists are:
The legal silo, to whom protecting the company is often inimical to ceding control (to anybody)
The advertising silo, big money is paid to old media such as TV, the advertising departments know how this works and are comfortable with it, but broadcast and discussion are a bad mix.
Finally Max lists the customer service silo. Potentially customer service is the new centre of the operation, where the listening and the talking is focused. But if a corporation perpetuates a cost centre called customer service which is not an essential part of the whole business, it will be a silo preventing co-creation and co-existance.

Perhaps there is another silo, the market research silo? For decades market researchers have adhered to pseudo-scientific procedures based on being the silent observer, independently assessing respondents as if they were lab rats. If a brand is ceding control to its customers, learning to ride their creativity rather than programme their choices, then the traditional market research model is defunct. If market researchers are to be part of new co-creational brands we will need to adapt our methods to work with consumers to help them explain their needs and wants, and to move away from the outdated command and control modes of doing business.

Wikipedia unblocked in China?

Although Web 2.0 and the participatory web have been making massive inroads in the west, it has been less apparent how successful a democratic and inclusive Web would evolve in China, a country more renowned for censorship and co-creation. Leading internet companies such as Microsoft, Yahoo and Google have attracted criticism for co-operating with the Chinese government over censorship.

In contrast to traditional website companies, such as Yahoo and Google, Wikipedia has stood firm against the pressure to accede to censorship and seems to be winning the battle.

Editor and Publisher reports that Wikipedia have announced that their site has been made available across China, after a year of being blocked by the Chinese Government. When Wikipedia is not being blocked in China it draws 46% of it users from the Chinese edition from China.

Other reporters have commented that parts of Wikipedia are still being blocked by the Government, such as articles about the Trainmen Square massacre in 1989. The Wikipedia article includes reference to both the Government’s figures that 200-300 people died, and the Chinese Red Crosses estimate of 2,000-3,000.

The Internet has a massive potential for change, but the picture of how this will happen in China is far from clear. Lesson learned in the West are likely to be of interest, but are not necessarily predictive.

Netflix creates a buzz with co-creation contest

Womma report that online DVD rental company Netflix have offered a US$1million prize for the person who can improve their video recommendation software by at least 10%. If nobody wins the prize Netflix will pay a prize of $US50,000 to the best idea, until the prize is won.

Netflix are effectively spurning the engineer only solution to their problem, in order to leverage more business from their 5.2 million subscribers. To help people develop algorithms Netflix are releasing 100 million movie ratings from 500,000 registered users.

Netflix already have recommendation software, but they think is can and must be improved. The basic idea of the recommendation software is to increase consumption by making suggestions that are sufficiently appealing that they extend the list of titles paid for.

One of the key elements of co-creation, and the thing that separates it from a suggestions box, is the degree to which the company is serious about implementing co-created ideas and serious about recognising the people who co-create the ideas.

Finally, Google buys YouTube

After a couple of weeks of rumour and speculation Google has bought YouTube for a reported US$1.65billion. YouTube was launched in February 2005 – not a bad return in 20 months! YouTube claims to have 20 million unique visitors a month with 100 million videos being viewed each day.

This outcome answers the questions that were being raised about what sort of business model YouTube was going to use to make money (it was reported to be losing about US$500,000 a month). Now the problem moves over to Google, who are showing skill in this area. The tie up that YouTube already has CBS and that Google has with Sony BMG and Warner Music, should allow a hybrid of paid for by advertising and pay per download for movies, clips, music videos etc.

At present YouTube will continue to operate as a separate business, but we might be seeing the start of a trend. Rupert Murdoch bought MySpace last year for US$580 million (a price which is now looking pretty good), as sign that the big players are looking for the Web 2.0 successes. The separation between the owner and the day-to-day business probably reflects a lack in clarity about how to leverage the benefits.

To hardcore Web 2.0 enthusiasts the question is whether big business will corrupt Web 2.0, or whether Web 2.0 will revolutionise big business.

What types of research are online?

The tables below show how the types of research conducted online in Europe and US have converged over the last 5 years. The figures are from Inside Research and show that there are now very few differences in the makeup of online research in the US and Europe.

The main difference between the two regions is that the US has more sales tracking online as a proportion of all online research, whilst Europe has more customer and employee satisfaction. Online qualitative represents a very small share of both markets.

Many thanks to Larry Gold of Inside Research for the information, and click here if you want to know more about Inside Research.

How should CRM and Market Research co-exist?

In the 20th Century most marketing was mass marketing. Advertising was mass advertising, product ranges were narrow and designed to reach the maximum number of people with the minimum number of variations, and segmentation was seen as the high point of targeted marketing.

CRM, permission marketing, personalisation, bespoke production, loyalty and affiliate schemes are all beginning to treat each consumer as a segment of one. Brands are developing one-to-one relationships with their customers, where each transaction is seen as a conversation between the brand and the customer.

Brands are developing extensive databases of their clients and their transactions (part of the electronic wake created by customers). Following, somewhat slowly, the development of databases, techniques for utilising these databases are being developed. Initial techniques included statistical approaches such as Chaid and CaRT, but have since been developed to integrate marketing and communications with data mining and AI approaches.

Brands are beginning to see their relationship with their customers as a conversation rather than a monologue. Every communication with a customer is seen as a chance to build the relationship, to find out more about what the customer wants, and to offer relevant products and services to the customer.

One potential issue for market researchers is our long-established code of conduct, separating marketing and research. Traditionally, market researchers have avoided any form of market research which is used for direct marketing or database building. The problem with this approach is that it does not make economic or business sense for many clients. Where clients are treating every communication as a conversation, conducted for the mutual benefit of the brand and the customer, the market research paradigm often does not fit well. With classic market research there is no direct benefit for the customer, they can’t buy anything, their answers won’t improve their personal service from the brand, the points they raise (praise or criticism) won’t normally result in replies to that customer. For the brand an email invitation to conduct a survey can be a lost opportunity, many brands limit themselves in terms of their communications, to avoid annoying customers, for example they may limit emails to one per month. If emails are limited to one per month, then an invitation to a survey will block the ‘conversation’ for that month.

Many types of research require the classic, independent type of market research, conducted by independent researchers, with traditional codes of conduct (for example comparisons between providers), but most research does not require the traditional codes of conduct and pseudo-scientific procedures.
Challenges
The main threat to the market research industry from CRM is that reserach becomes bypassed. As brands develop their conversations with customers, many aspects of market research could be conducted as part of that process, but not necessarily by market researchers. Even those aspects of market research not conducted as part of the conversation with clients could suffer as it will look relatively expensive when compared with research which has been integrated into the brand/customer conversation process.
Options
The main opportunity for market researchers is to seek to own large parts of the brand/customer conversation process. The core competences of market researchers include asking the right questions, creating the correct contexts, and understanding consumer responses (for example by reading below the surface). If market researchers can update their codes of conduct, CRM related research could be one of the largest part of their business.

Ofcom Report Shows Growth of Web 2.0 and of a new digital divide

The UK telecommunications regulator Ofcom’s 2006 report “The Communications Market 2006” shows a number of interesting trends which are probably typical of most of the Western world.

The decline of old media
In the UK the number of mobile phones grew to 65.5 million in 2005, compared with a population of around 61 million. Between 2000 and 2006 the number of households with a mobile phone went up from 71% to 90%, while the number with a landline fell from 94% to 90%. Over the same period of time the number of homes with the Internet went up from just of 40% to 60%.

Amongst all adults the average TV viewing was 25.5 hours, amongst 16-24 year olds it was 18.3 hours. Over the last fours years the viewing time for all adults has stayed the same, but 16-24 year olds it has fallen by one and a half hours.

The young and social networking
70% of Internet users aged 16-24 years have used social networking sites (e.g. MySpace and Bebo) compared 41% of the general population of Internet users. 37% of 16-24 year old Internet users have contributed content, compared with 14% of all users.

19% of 18-24 year old Internet users claim to have their own website or blog, compared with 11% of all adult users.

The Implication for brands and research
There are still some who describe Web 2.0 as hype and even some who are doubtful about online research at all. Conventional media and conventional research is increasingly failing to reach young people. If the future of your brand depends to some extent on young people, then you need to adjust your frame of reference. With 70% of young Internet users already using social networking, and given that about 90% of young people use the Internet, there is already a majority of young people using social networking. About a third of young people are contributing content on the web.

Research 2.0 firmly on the research Agenda

Tuesday saw an MRS Online Conference in London, and the key take away from the day was that people are beginning to recognise the threats and opportunities created by Web 2.0 and the need for market research to respond by exploring and defining Research 2.0.

The conference was held because the June conference was over-subscribed, and it still managed to pack the room out. Several speakers from the June conference were able to make a repeat performance including Graeme Trayner and Nick Waktkins. Graeme illustrated the importance of participatory media and Nick showed how blogs can be used as part of the research process.

Mark Pearson of Egg thought that he risked the ire of delegates when he suggested that companies like his who fully integrate, in-house, research, customer management, and sales making large parts of the market research process irrelevant. Perhaps to his surprise, most delegates were willing to take his point as a genuine call to arms in terms of adding value, rather than wanting to climb back into the bunker.

The final part of the day was brief presentation of the immediate future of market research followed by an hour of syndicate working. The consensus amongst the five working groups was that online has arrived, panels are the name of the game, and that we all need to respond to the challenges of Web 2.0.

Much of the praise for the success of the day was down to the Chairman Pete Comley who crafted a speaker line-up which managed to cover current issues, such as panel quality, and which also managed to cover the Web 2.0/Research 2.0 issues.

Lego and Co-Creation

In the old days people bought a Lego set and it either had the bricks you needed or it didn’t, but no more! Lego Factory has a 3D modelling tool that allows to design your virtual model, using whatever bricks you want. Once you have created it you can order then order the kits you need, as so can anybody else. Over 30,000 designs have been uploaded so far.

But at Lego co-creation goes much further. The programmable Mindstorm was first launched in 1998. Within weeks a Stanford graduate named Kekoa Proudfoot reverse engineered the RCX brick (the programmable bit) and posted all the key details online. Other Mindstorm fans quickly used the posting to create their own Mindstorm tools and even created on open source operating system and language. For a moment it looked as though Lego’s lawyers would step in with cease and desist orders to protect Lego’s intellectual property. Luckily, Lego decided this would be inimical to their core mission of encouraging exploration. As a result Mindstorm fans have created extensions, ideas, designs, were the key to evaluating the recent revamp of the Mindstorm product range. Lego have even written  a “right to hack” into the Mindstorm software license.

For more information check out this article from Wired.