Archive for the 'Innovation' Category

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Advertising on the Internet needs innovation

On the weekend, I caught up with Cameron Reilly of the Podcast network , and he was telling me about his views on monetising podcasts. It got me thinking again about those things I like to think about: how content can be monetised. Despite the growth in online advertising which is tipped to be $80 billion, I think we still have a lot more innovation to go with revenue models, especially ones that help content creators.

Advertising is a revenue stream that has traditionally enabled content-creators to monetise their products, in the absence of people paying a fee or subscription. With the Internet, content has undergone a radical changing of what it is – digital, abundant, easily copied – whilst the Internet has offered new opportunities for how advertising is done. However, the Internet has identified the fundamental weaknesses of advertising , as consumers can now control their content consumption, which allows them to ignore embedded advertising altogether. Content on the other hand, still remains in demand, but means of monetising it are slipping into a free economy which is not sustainable. I make that point to illustrate not that professional content creation is a sunset industry – but rather there’s a big market opportunity as this massive industry needs better options.

time mag

"Hey man, there’s this new thing called the Internet. Sounds pretty cool"

One of the biggest innovations in advertising (and enabled by the Internet) is of contextual search advertising. This has been popularised by Google, which now makes 98% of its $17 billion revenue from these units. This advertising dominates online advertising (40% of total) because of its pull nature, whereby key-words stated by a consumer in effect state their intention of what they are interested or would like to purchase. Whilst this is a highly efficient form of advertising, it also has its weaknesses – for example, it is not as effective outside of the search engine environment. Google makes 35% of its revenue from the adSense network , where these contextual ads are placed on peoples personal websites. Evidence from high traffic bloggers suggests they barely make enough money through this type of advertising. Another point to consider is that aspects of the Google network include significant partnership agreements like the one with AOL which accounts for 10% of Googles revenue (this is a 2005 figure which has likely changed, but Google does state in their 2007 report "Our agreements with a few of the largest Google Network members account for a significant portion of revenues derived from our AdSense program. If our relationship with one or more large Google Network members were terminated or renegotiated on terms less favorable to us, our business could be adversely affected.". AOL most recently reported for Q1 2008 half a billion dollars largely from search advertising ).

Other attempts at creating more efficient advertising which have existed for over a decade, have come in the form of profiling or behavioural tracking. However, these forms of advertising has also highlighted the growing awareness of consumer privacy being eroded, and is under heavy scrutiny by activist groups and government. Facebook is a company that is best posed to deliver new forms of advertising because of the rich profiling data it has, but it itself has faced massive backlash .

My view is that the majority of online advertising for successful individual publishers at least, has largely come from traditional approaches to advertising – a masthead blog with a sales team that uses display advertising. How effective this display advertising is is debateable with widespread banner blindness and consumer control over their content, but it would appear that this is more a case of advertisers seeing this as the least bad on the overall scale of opportunities. The fact it replicates the mass media approach of number of unique consumers viewing the content, and not the types of users, means this isn’t anything new other than being done in a digital environment.

Digital content is in need of a better monetisation system.
Targeted advertising is the most efficient form, yet consumer privacy is a growing force preventing this. What we need, is not a new advertising technology, but a new way of thinking about advertising – in a way that can help the content economy rather than riding on it without giving benefit. Contextual advertising sounds great in theory as it calculates key-word frequency of words on a website, to match it to a key word ad – but it’s proving in practice these ads are not very relevant. Yet trying to think of a smarter way to advertise, may be the wrong question – perhaps half the problem itself is advertising as a concept?

perspective

Are we running down a tunnel, only to find there is nothing there?

Content which comes in the form of news (historical and breaking), analysis, and entertainment can be monetised via a persons attention or through a transaction (ie, subscription, fee, etc). Both this approaches have different barriers.

– Attention: The key driver is increased dollars per unique person, over a period of time. The barriers to this approach is the challenge of identifying the individual in a way that gives advertising that is highly relevant and will result in a conversion. In other words, privacy privacy privacy.

– Alternative payment: Requiring consumers to pay for content is a barrier due to the paid wall. What is more problematic for digital content, is that the ability to replicate it freely makes it not just easy to do for the masses but has created a culture of if it’s not free, it’s not worth purchasing unless its really necessary. There needs to be a strong value proposition for a consumer to purchase content, and in the absense of a brand and marketing, the restriction of what value the content offers is a barrier for consumer demand as they don’t know what they are missing out on.

So as you see above, content creators are in a difficult position. Charging people reduces their opportunity unless they are really established, but even then, due to the digital environment they don’t have any control over subsequent distribution (with rampant piracy). Yet advertising is fraught with being irrelevant and hence not effective (so advertisers go to other forms) and any attempts to make it more relevant, gets held back by the concerns of privacy advocates (and rightly so). Whilst the Internet parades itself as an advertising growth machine, it’s growing in new areas but not the old areas that have traditionally been the medium for advertisers.

This advertising growth is largely being driven through utility computing products that aim to make information retrieval more efficient (ie, search). However, the growth for the content creators, is not happening. As Cam was telling me, in a market like Australia – small content organisations like TPN and Bronwen Clune ‘s Norgs , don’t have access to the big end of town for a sales team. And he didn’t have to tell me, those Google ads for the smaller guys, are not enough to pay the bills. That small to middle end is not being really catered for.

But before you jump on the phone and create some mid-tier advertising network that caters for a niche, think about the real problem: content creators need a better solution to monetise their content. But advertisers also need a better way of selling, other than some slick-talking sales person who can sell ads on pageviews (a broken model with weak alternatives ) They need advertising that is suited for their product, but the market now includes other products media outlets never had to compete with like marketplaces now happening online and utility computing products. Whilst the technology community obsesses about search , let’s also remember we have yet to see a new way to monetise content that is superior to the old world. Contextual advertising of text is the latest new thing area, but that technique is nearly a decade old. As I prove above, outside of the search environment, it is showing to not be that effective.

Where is the innovation going to come from? Not through technology but with a new paradigm shift like how content creators operate . New ways of thinking about the way we ‘sell’ like what the VRM Project is challenging. But perhaps more fundamentally, is an understanding that the holy grail of targeted advertising has got a speed hump called privacy – and that may actually be a sign of not going faster towards better targeting, but changing the vehicle all together.

It’s all still alpha in my eyes

The invention of hypertext has been the most revolutionary thing since two previous technologies before: the printing press and the alphabet. Combined with computing and the Internet, we have seen a new world represented by the World Wide Web that has transformed entire industries in its mere 19 15 year existence.

The web caught our imagination in the nineties, which became the Dot-Com bubble. Several years after the bust, optimism reawakened when the Google machine listed on the stock exchange – heralding a new era dubbed “web2.0”. This era has now been recognised in the mainstream, elevated by the mass adoption of the social computing services, and has once again seen the web transform traditional ideas and generate excitement.

davewiner
The web2.0 era is far from over – the recent global recession however has flagged though that the pioneers of the industry are looking for something new. As the mainstream is rejuvenated by web2.0 like the Valley was not that long ago, it’s time to now look for what the next big thing will be. Innovation on the web is apparently flattening. Perhaps it has – but the seeds of the next generation of innovation on the web are already here.

Controversy of the meaning of web2.0 – and what its successor will be – should not distract us. We are seeing the web and associated technologies evolve to new heights. So the question is not when web2.0 ends, but what are we seeing now, that will dominate in the future?

My view:
• The mobile web. The mobile phone is now evolving into a generic entertainment device, becoming a new computing device that extends the reach of the internet. First with the desktop computer, and then with the laptop computer – new opportunities presented themselves in the way we could use computers. The use of this new computing platform will create new opportunities that we have only scratched the surface.
• The 3D web. Visit second life, the virtual world, as you quickly note the main driver of activity is sex and that it’s just a game. However, porn and games have spearheaded a lot of the innovation of technology in the past. The 3D web is now emerging with four separate but related trends: virtual worlds, mirror worlds, augmented reality and lifelogging.
• The data web. Data has now become a focus in the industry. The semantic web, eventually, will allow a weak form of artificial intelligence that will allow computer agents to work in an automated fashion. Vendor Relationship Management is changing the fundamental assumptions of advertising, with a new way of how we transact in our world. Those trends, when combined with the drive for portability of peoples data, is having us see the web in a new light with new potential. Not as a collection of documents, and not as a platform for computing, but as a database that can be queried.

So to get some discussion, I thought I might ping some smart people I know in the industry on what they think: Chris Saad, Daniela Barbosa, Ben Metcalfe, Ross Dawson, Mick Liubinskas, Randal Leeb-du Toit, Stewart Mader, Tim Bull, Seth Yates, Richard Giles as well as you reading this now.
What do you think is currently in the landscape that will dominate the next generation of the web?

Search, email and wikis are the catalysts for innovation

A colleague added me to their network of trust on spock, one of the new people search engines, and so I had a play around. Spock and its competitors have come about on the premise that a large amount of search engine traffic is purely due to people: about 7% of all searches are for a person’s name, estimates search engine Ask.com. One percent of the search market is estimated to be worth a billion dollars, so this is a significant market opportunity.

Now take a step back into my mind this year. I’ve been doing a lot of thinking about e-mail this past year: first as I explained to people why wikis and blogs are a better way to collaborate than via e-mail; and more recently, as I prepare a whitepaper for January 2008 proposing we replace using e-mail for our corporate communications with RSS. E-mail is the default tool at my firm and its opened up doors to do things we couldn’t do before, but it’s also why we have e-mail overload, as e-mail wasn’t designed to do this.

Can you now see something I am noticing? Established general technologies like search and e-mail – now being replaced by more specific functions. Some would say you are defining a previously unrecognised niche. That is afterall, what is means to be an entrepreneur.

Traditional Search and traditional e-mail are powerful tools. People over-use them to do all sorts of things that they couldn’t do before. As these general tools were adopted, people could experiment and push boundary’s in ways the inventors of the technologies never thought before. And bam – that’s why we have a love hate relationship with e-mail; and why search has become the default industry underlying the web economy. They are doing something we now need; but because they weren’t invented to deal with that specific need, it is more like a blunt tool being used when all is needed is a glass pick.

Innovation is coming
I’ve been told repeatedly that technology should not drive strategy. I agree to some extent. However, I’ve also proved the management at my firm wrong on that point by results. When I proposed a firm wiki, and it was approved, it was taken as a risk. All I needed was that gateway to get in behind the door, and just let it do its magic. I have witnessed first hand when you give people a wiki – or probably better said a mashup enabler – you will see them take to it because they can now do things they never imagined. A general tool like the wiki in its freedom to manipulate the structure, has allowed staff members to create new ways of satisfying their painpoints. Technology should not drive strategy – I agree. But one thing I am convinced of, is that you need to just drop a technology onto a userbase, and let them experiment. Give them the potential to do something – things you never thought they needed – and watch them take to it like honey to a bee. Technology can help drive innovation through (accidental) imagination, which in turn can drive strategy

How does this link with innovation? MacManus has lamented on the lack of innovation on the web. I’m thinking something else. As these general technology tools have been adopted by people, new niches are being discovered. As I responded to MacManus’s article: the guy that invented the wheel was brilliant; but the guy that attached another three was a genius.

Think innovation on the web is dead? I think it’s just starting.

John Hagel – What do you think is the single most important question after everything is connected?

I recently was pointed to a presentation of John Hagel who is a renowned strategy consultant and author on the impact the Internet has on business. He recently joined Deloitte and Touche, where he will head a new Silicon Valley research institute. At the conference (Supernova 2007), John outlined critical research questions regarding the future of digital business that remain unresolved, which revolved around the following:

What happens after everything is connected? What are the most important questions?

I had to watch the video a few times because its not possible to capture everything he says in one hit. So I started writing notes each time, which I have reproduced below to help guide your thoughts and give a summary as you are watching the presentation (which I highly recommend).

I also have discovered (after writing these notes – damn it!) that he has written his speech (slightly different however) and posted it on his blog. I’ll try and reference my future postings on these themes here, by pinging or adding links to this posting.
Continue reading ‘John Hagel – What do you think is the single most important question after everything is connected?’

You need to be persistently adaptable

Tim Bull has recently written an interesting discussion point on when is the right time to innovate. In a post titled “Steam engine time“, he asks:

If innovation is a process of the right idea, in the right place and at the right time, how do we judge what the right time is and measure what is going on around us to hit the right spot?

Some would say luck has something to do with it, although I believe that is the perception from an outsiders point of view. In my eyes, a core set of attributes are required for innovation.

Consider this quote from Calvin Coolidge, 30th president of USA:

Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan ‘Press On’ has solved and always will solve the problems of the human race.

I think Tim is wrong to ask when is the right time, because innovators understand their environment, adapt to it – and then push until they get there. Persistence and adaptability, in my eyes, are two crucial aspects needed in a person or even a country or company, for it to successfully move forward. However whilst persistence is key – you need determination to push forward despite the barriers you are going to encounter – adaptability is the real secret to successfully innovating.

A case-study: multiculturalism in a flat world
Although I was born and bred in Australia, I have been brought up under a very strong Greek influence. With an Australian-born father, and a fresh-off-the-boat Greek mother – I have lived a life straddled in two cultures. Going to an Anglo-Saxon school, yet at the same time doing Greek classes at 9am Saturday (but leaving early for my schools footy games) – I grew to resent Australia’s multiculturalism policy. Without going into too much detail because this will turn it into a political discussion and detract from the point I wish to make – I disliked the fact that Greeks in Australia refused to integrate into the local culture. The Australian government’s stance of officially supporting Multiculturalism, which does things like pay for that Saturday morning tuition, was to me a stupid policy.

Fast forward to 2005, when I visited the Balkans as part of my nine months traveling around Europe. Serbia’s story is one of the saddest stories in Europe. Walking around the city of Belgrade, interacting with its inhabitants, and just generally experiencing Serbia – you realise you have come across a hidden gem in Europe. Yet once you look at the statistics and talk to some of the educated, you understand otherwise: a basket case situation that has little hope.

Serbia, like a lot of other countries I discovered in my travels, have a cultural problem: they can’t let go of the past. Millions of people have died over differing interpretations of history. The Republic of Macedonia’s identity is entirely staked on the fact they are situated on the lands of Alexander the Great. Identity to the nation states of Europe, is in history. And challenges to that history, and their identity, has led to some stupid wars affecting millions of innocent lives.

So guess what? I now think multiculturalism is the best thing my country could ever do, for the simple fact we can never have a fixed identity – what it meant to be Australian 50 years ago looks very different from what it looks like now. In Europe, identity is based on ethnicity with a fixed identity tied to history, language and a religion. In Australia, our identity isn’t allowed to be based on a certain ethnicity, and forces us to find common ground on what really matters like our way of life. If it wasn’t for the policy of Multiculturalism, we would be turning into one of these static nation states within Europe who become fixed as a certain point of time. The Greeks are still mourning over the Turks capturing the Great City of Constantinople from them in 1453 (which is why Tuesday is the unlucky day of the week for them). Yet for the countries like Australia, who don’t have much of a history – they are not locked – and consequently look forward, rather than back. Multiculturalism is a crucial ingredient to our success, because with all that diversity, it means we are constantly evolving our culture to the times without any one group fixing it. And with a globalised word, Australia’s ability to adapt to circumstances will be a key competitive advantage we have over countries.

If you don’t agree with me, have a read of Thomas Friedman’s The World is Flat – a book a entrepreneur/intrapreneur suggested I read. This guy who told me about the book was a German from Argentina, working for an Indian company to set up the company’s presence in Turkey! He told me that after he read that book, he quit his job and got himself into his current role. He faced the facts, and adapted his career.

Adaptability as success
You’re probably wondering what I am trying to get at, but to tie it back to my point about adaptability, successfully innovators need to constantly adapt to their environment. What happens with people once they get an idea, is that they spend all their time trying to fit it into a world that once existed, only for the world to be a entirely new place. Successful innovators need to constantly evolve their ideas, to the changing circumstances.

In October last year, I made a proposal at my firm to implement a new technology. For the months leading up to that point, people had to some extent talked down my idea and some even flat out rejected it. October however had me find the right person to hear my idea. And yet if I look at what I originally had thought, and what it is now – it is almost a completely different thing. Because when I pitched my idea, I was asked “why” it works and “how” is it different from anything else. It was that ‘why’ question that had me spend countless hours researching and understanding – adapting – my idea to the scenario being presented to me. I successfully made my business case, because I was given the opportunity to reframe my idea and adapt it to the circumstrances I was presented. Had I not adapted my original idea and vision, I wouldn’t be doing what I am doing now.

Of course, I could have summed up the above by mentioning Charles Darwin’s theory of evolution. Survival of the fittest, right? Adapt to the Green forest like that Green lizard that looks like a leaf, and you’ll find some food (rather than being the food yourself). Adaptability in life is a key critical success factor; and with innovation, it is the hidden factor that on the outside and in retrospect by others, gets attributed as luck.

Update 20/6/07: Catching up on some reading, I just came across a great posting by Marc Andreessen, an internet pioneer, who talks about the four types of luck and which nicely complements my thoughts above.