Monaco Media Forum and Ofcom conference: Telecoms opportunities abound
Clearly, we're pleased to see the industry moving so enthusiastically to grapple with the realities of Telco 2.0 principles, but two valid questions to ask are: to what extent does this reflect the specific audience which Telco 2.0 attracts, and how well, if at all, do the challenges of Telco 2.0 concepts map across other segments of the value chain?
Luckily, we received invitations to two interesting conferences which pleasingly echoed many of the same issues we are striving to address: the Monaco Media Forum and the OFCOM International Conference, for which our senior associate analyst, James Enck, was also asked to prepare a short paper on the challenges of funding next generation access.
In this article, we present some of the key takeaways and their relevance to the Telco 2.0 message. We've also gathered some must-see videos of key presentations:
Lubricating the digital economy
Both conferences came during a period of unprecedented turmoil and uncertainty, as the banking crisis evolves into a broader economic crisis. However, there were a number of positive messages regarding new opportunities for the broad ICT spectrum. Generally, we see these messages as broadly supportive of our views regarding the telco segment as a relative defensive sector with a huge opportunity to innovate and emerge from the current economic crisis as very different beasts.At the OFCOM event, Eric Bresson, the French Minister for Communications, made an inspiring speech in which he made a strong case for ICT as a magnet for investment and a driver of economic development and stability, and outlined some of the forward-looking steps which France is taking under its 2012 Digital Blueprint. Key points:
- ICT in Europe accounts for 25% of total economic growth today, and should represent around 30% of growth over the next five years.
- The increased contribution of ICT to the economy means that it will become even more indispensable as a driver of job creation and defensibility (e.g., you can't "offshore" a datacenter or FTTH network).
- The promise of greater long-term economic competitiveness makes ICT one of the most attractive investments which national governments can make. The current turmoil gives us a great opportunity to respond with a digital revolution.
- France is taking ambitious steps with its 2012 programme, including universal access to government e-services, but also implementing a robust mechanism for citizens to manage their "data shadow" (a theme we have written about recently).
- A case study involving a European Cup tie-in campaign for Puma shows a 10:1 ratio of accuracy of consumer phone numbers in comparison to standard web registration forms, demonstrating the power of tying telco customer identity to lead generation and market intelligence applications. The same session contained some discussion of pouring telco data (CDRs) into the profiling process.
- Publicis Group confirmed that its campaign planning for 2009 on behalf of many major clients contains allocations for mobile campaigns, for the first time ever. This was also echoed by AdMob, which has a number of brands in its stable committing to multi-million dollar mobile advertising campaigns in 2009.
- A number of presenters alluded to the relatively low proportion of online in total ad spending (currently 6 - 7%) versus direct response marketing (17%), which points to huge upside if the medium can deliver the same level of relevance and granularity.
- Maurice Levy, CEO and Chairman of Publicis Group, contrasted the dynamics of the dotcom crash with the current environment, predicting that offline budgets will be the first victim of cutbacks in this cycle, in preference for the more granular analytics available in the online world.
- Jeffrey Cole of USC's Annenberg Center, in his wide-ranging and entertaining presentation, cited an important figure - that the average US household today spends $260 per month on telecom services which didn't even exist a generation ago. Even at the poverty level, $180 average monthly expenditure demonstrates the extent to which telcos have created an essential feature of modern life.
The customer data dilemmaDespite the perception that they are formidable masters of data, the online players face the same set of dilemmas as telcos in the area of balancing stewardship of data with the need to drive forward with better audience definition, profiling and targeting. A number of presentations took the view that the online world and consumers are in the evolving process of reaching an understanding:
- Jeffrey Cole observed acutely that the pressures on the content world force it towards ad-funded distribution models, which inevitably leads the consumer to the same compromise made with television in the 1950's - the cost of "free" content is advertising.
- The distinction between the television compromise and the online situation is the perception of greater invasiveness in an online context. Our premise remains that over time, as ad content proliferates, consumers will trade a lower level of anonymity for more relevant content. The panel discussion at the MMF following Avinash Kaushik's presentation (found in our next section) contained some interesting discussion of stewardship and strategies to promote trust, so that consumers will find this a trade they can live with.
- Nikesh Arora of Google again underlined the data dilemma and possible compromises in both his MMF and OFCOM presentations. His central point on the issue was that there is a generational aspect at work which makes "millennials" much more relaxed about privacy, particularly with regard to the perceived benefits of self-expression. He also made the case that consumers have been giving away personal metadata via credit card use for decades with relatively little pushback. (He may have a horse in this particular race, but his underlying point is a valid one.)
The challenges of personalization/customization/optimizationThere was no shortage of coverage of these issues, primarily from the perspective of advertising, but we all acknowledge the importance of the same to telcos, who have largely struggled here to date. This is particularly ironic given telcos' direct and personal relationship with large numbers of customers. However, with the evaporation of traditional sources of growth, personalization, customization, and optimization arguably matter more to telcos now than ever, so it pays to listen to the experiences and approaches of those engaged in this space. Innovators were not in short supply at the MMF event, and we were treated to a number of presentations by interesting companies, whose value proposition is entirely rooted in analyzing and organizing data in such a way as to make it more relevant, and thus more compelling, to the end user:
- Calvin Lui, CEO of Tumri, discussed his company's approach to better ad performance through customization. Tumri's technology deconstructs the various elements of online ad creative content (color scheme, call to action, special offer, background, etc.) and reconstructs presentation in response to its own analytical data and the target demographics identified by an advertiser, all in under 100 milliseconds. This allows advertisers huge latitude to experiment with various configurations and messages across multiple target groups and assess performance to continually optimize effectiveness.
- Amiad Solomon, CEO of Peer39, described his company's take on improved targeting through semantic analysis. Peer39, whose team includes the original developers behind AdSense, seeks to make online advertising content more relevant by analyzing the entire semantic context of webpages, including comments sections and user forums. This holistic approach to context is quite different from a key-word based approach. After all, what good is serving ads against key words when the context may be entirely erroneous? Consider an extreme example: a website covering "drag racing in Queens, New York" - for which a keyword approach might serve an ad related to "drag queens in New York," which would most likely be unwelcome to the target audience.
- Dave Sifry introduced Offbeat Guides, which embraces personalization throughout. Offbeat Guides are personalized travel guide books, each unique to the individual traveller, put together by the travellers themselves on the company's site from a wide variety of sources on the web, and customized along a number of parameters such as date/season of travel, point of departure and various flavours of special interests and preferences. Customers may buy either a .pdf version, physical print version, or both, and soon Offbeat Guides will be available in HTML format to allow easy viewing on mobile devices.
- Avinash Kaushik, head of analytics at Google, presented a very well-received talk entitled "Experiment or Die." It was an interesting mixture of personal experience and observations from the analytics world, coupled with cautionary statements towards old media that it must find and hire talented people who understand analytics and optimization, or face the consequences. He discussed a number of experiments which various sites have carried out on presentation, advertising footprint (interestingly, one example achieved a 40% uplift in ad revenues by reducing the ad footprint by 25%), and pricing structures. His main messages, as we interpret them, were: companies have to experiment in order to learn and improve, defining the right performance metrics is key (website "hits", he said, are "How Idiots Track Success"), and the company has to free itself from constraints placed on it by HIPPOs ("Highest Paid Person's Opinion") in order to innovate.
Adapting the old to the new and remaining relevantThis was really at the heart of both conferences, from different perspectives. For the OFCOM audience, largely regulators and their ecosystem, the challenge is to adapt to rapid technology change and remain relevant to the market in that context. For the old guard among the MMF participants, the challenge to adapt and remain relevant to shifts in media definition and consumption has never been more pressing. One moderator in a breakout session noted that, at many media conferences, the old guard broadcasters and new media types tend to congregate along tribal lines, and in many cases don't speak the same language, when in fact their interests are probably more aligned now than ever before:
- James Murdoch's star turn in a solo interview touched on many of the themes of tensions between old media and new media. In particular, his comments about not using the web to simply replicate newspaper content online, but rather to engage the audience and drive consumption of the core product, resonates quite strongly.
- Ben Silverman from NBC Universal and Mark Thompson from the BBC touched on similar themes with regard to online video. Mr. Silverman stated that Hulu is 50% ahead of where NBCU originally expected viewing to be, and both he and Roma Khanna (representing NBCU at the OFCOM conference) discussed the demonstrated potential of online video to actually boost, rather than depress, viewing of "destination TV" content. In other words, online and offline are not necessarily locked in a binary relationship, at least not when executed with some joined-up thinking.
- Maurice Levy from Publicis Group made some very interesting statements regarding customer-centric advertising and brand evangelism in his panel with Niklas Zennstrom. In particular he alluded to the case of a major client who has created over 600 TV ads (a lot in television termvs), as against over 20,000 which have been created by individuals. Whether these will always be aligned with the brand values envisaged by the company is a concern, and companies are increasingly having to grapple with the balance between retaining control and letting the consumer "own" the brand.
- The contentious issue of piracy and the role of telcos and ISPs in combating it was never far away in either conference, though more so at the OFCOM event. One interesting anecdote which arose from the MMF music breakout panel, was that of TDC, the private equity controlled Danish incumbent. Faced with commercial pressure from utility FTTH projects, and legal pressure from rights group KODA over file sharing, TDC earlier this year took a very clever decision. In a perversion of the sender pays model, TDC struck a deal with KODA and a large number of music labels, to pay the equivalent of what KODA collects each year, in return for unlimited access to music for its customers via legal download and a cessation to legal pressures against TDC and its customers. So, TDC pays the original sender to become the new sender, thus avoiding having to police its customer base, delivering a generous-looking gift to the end user, and gaining some ground on customer retention (the DRM wipes the content if the customer leaves TDC).
Big picture takeaways We appreciate that this article represents a lot to absorb, and we hope that many of the key messages are self-evident, but, if not, our view is that there is much here for telcos to interpret positively:
- Connectivity and interactivity are definitively embedded in the lives of consumers as indispensable elements in a very uncertain and volatile world. Consider what that could, and should, mean for your business, and how you will capitalise on it.
- The media world, far from being an enemy or parasite, will share many of the same challenges as telcos, as broadband becomes more ubiquitous and advertisers/content publishers grow more selective and sensitive to the economic realities at hand. Your opportunity is to cross the conceptual and industry language barriers to define how you can help - because it seems clear that you have customer and data assets which could be used, responsibly, to the benefit of both parties.
- Take the chance to learn from the approaches of innovators in analogous parts of the value chain. Just because you're not directly involved in web analytics, site optimization, or the travel guide publication industry, doesn't mean that you can't gain something from the experiences of people who are.
It's been done by others, just look at Monty Python.