Tuesday, May 31, 2011

What is Next for Google?

How did Google get so big? The answer to this question is undoubtedly due to the advantage conferred by its PageRank algorithm. However, Google is not the only one to have a clever algorithm like this, more and more have been developed (Amazon for example). This means that Google will not continue to benefit from this previous success for much longer, it must look to keep its advantage by doing what it does best, be innovative and understand what the customer wants. In addition to its search engine and associated advertizing revenue, Google has developed other successful applications such as e-mail service with Gmail, mapping systems with Google Maps, and Internet browser Google Chrome and a mobile phone software, Android (now on tablets too). So, what should Google do next?

One of Google’s strategic initiatives is to enhance advertizing through new formats, such as video ads (do what it does well, better). What better way to do that than to acquire YouTube? In addition to this, promotional videos from advertizing companies can be shown before user-requested content, thereby securing a fixed source of revenue. Participatory Video Ads (PVA) such as the Tipp-ex bear video create a lot of buzz and are a good investment from marketing departments. Moreover, Google can keep its Ad words and Ad sense algorithms on the new platform as well as using banner advertising on the search results page. Video recommendations and brand channels (such as the British Royal Family channel and their retransmission of the Royal Wedding) can be further sources or revenue.
Another recent acquisition of Google’s, which can lead to think more applications are coming, is the one of Q&A service Aardvark. Was it too early for them to launch Google Answers? Is the time right now? Certainly, Google seems to think so and I think that we can expect a new and improved version of Google Answers to satisfy more of our curiosity soon. Google’s textbox is, undoubtedly, the most-used question submission form in the world, and most of us can’t even remember whom we would ask these question BG (Before Google). It thus seems natural that Google would develop an application to respond to that need, and even though it has failed before, it does not mean that it is never to be tried again (www.techcrunch.com).

However, the most interesting part of Google’s future will see how it fights against Microsoft to achieve complete web dominance. Microsoft still holds Windows, Internet Explorer and Office, which provides them with multiple advantages. Windows is the default operating system for all non-Apple computers, IE is the dominant web browser, and Office is a never-ending cash cow for the company. This is a big problem for Google, because as of now, it does not control standards for any of the platforms on which this contest will take place. Bing, Microsoft’s search engine, is definitely a big threat for Google, and the battle between the two companies will be ruthless. In the past, Microsoft has used the same strategy to undermine or even eliminate its competitors, price-cutting. In contrast, Microsoft’s preys have also made a common mistake, they have all failed to deliver architectures that cover the entire market, potentially enabling them to provide products functioning on various platforms, releasing well-engineered products and create barriers against cloning. Google knows that an architecture war is coming, and soon, and is doing its best to delay this battle in order to better prepare.

In order to counteract Microsoft’s strive for domination, there are certain strategies that Google could put in action. One of them would be to follow Amazon’s model in turning its website into a major platform. Amazon’s proprietary yet open API is the success factor which has led the site to survive, and well. A Google API for Web search services would enable them to become the industry standard. Google is still reliant on Microsoft software, and should thus detach themselves by creating software and services to rival Microsoft’s, a difficult task. However, in competing with Microsoft, Google must make sure that it does not make the same mistakes as its the unlucky predecessors in a battle. (www.technologyreview.com)

Monday, May 30, 2011

A Follow up to Intereconomia Visit - Suggested Business Models for Internet TV

Following our visit to the Intereconomia premises in the center of Madrid, here is a little follow up on what business models Internet TV companies should adopt.

The business models I will suggest for Internet TV will be based on Michael Rappa’s ‘Business Models on the Web’ study.
I strongly believe that the first step in monetizing such a business on the Internet is through advertizing. We have seen contextual advertizing work very well for the likes of Google for example. As of right now, and according to the manager of Intereconomia who gave us the tour, it is impossible for them to monetize their Internet site this way. The reason for this being that the traffic generated on their website is significantly lower than the one they generate on television. Nevertheless, as viewer attention shifts from the traditional television screen to the modern computer screen, this traffic statistic, and thus the business model, could be subject to change.

Another possible strategy to monetize Internet TV could be by adopting a community model with public broadcasting. Through this business model, companies adopt a user-supported model used by not-for-profit radio and television broadcasting extended to the web, supported by the community of users through voluntary donations. Intereconomia is not a not-for-profit organization so I do not believe that their primary source of revenue could be the latter however, it could serve as a secondary source of profit.
Unless the channel is on pay-tv, I do not believe that a subscription model would be beneficial for media companies. We have seen newspapers uploading their content up on the Web for free (the exception being the Financial Times) and I believe that media companies such as Intereconomia should do the same. In addition to this, their site, up to now, has not been based on a subscription model, and making their customers pay for previously free content could have drastic effects.

A Follow up to Intereconomia Visit - Evolution of Traditional Media

Following our visit to the Intereconomia premises in the center of Madrid, here is a little follow up on how I see the traditional media evolve in the future.

After the visit, it seems that there was a general consensus amongst the director and employees that Internet TV is the future. Even though it is a very small part of their business (and thus accounts for a very small part of profits), the director still believes that it is of paramount importance for the company to be present in this medium. I believe that the traditional media will be, in the future, tailored to Internet vision; which will revolutionize we see the media. Critical changes might include the division of certain programs into different parts so as to accommodate the viewer in the sense that s/he will not have to download excessive files. An example of this could be downloadable parts of the news broadcast such as current events, international events, business/economy section, sports, etc.

We are already seeing interactivity in this area, with the development of the Internet; the media is not a one-way stream of information anymore. However, I believe that improvements can still be done in the aspect of interactivity with the media. The possibilities for viewers to give their opinions will still exist, but other features will be added (such as the possibility to hear the news in a different language, according to where you live and many more options).
The competition is going to increase and play an integral part in deciding which media channel stays or vanishes. Over the years, improvements in technology have made information available and accessible to many at incredibly fast speeds. I believe that channels with the greatest human resources will have an advantage as they will be scattered over their region of operations and will thus be able to cover and report stories more rapidly than others. In addition to this, the formatting of this information is becoming easier (I’m thinking about green screens) which news reports to be broadcasted from small, local bases. This I have had the chance to witness first hand in the Intereconomia building. Traditionally, news broadcast rooms have been great in size but now, the high ceilings and great spaces allocated to various cameras and engineers is becoming redundant. In addition to the reducing costs of personnel operating these cameras, sound engineers and more (due to the fact that it is mostly automated nowadays) and the reduction in size of the premises allow media channels to be present in more places at a reduced cost to more effectively and rapidly transmit that information to the public.

Sunday, May 22, 2011

My Precious

Blockbusters, ah! Blockbusters. Every studio manager’s dream is to create more blockbusters. But what is the key to a blockbuster if not giving the public what it wants? A typical studio will produce about 10 blockbusters per year, two of which will actually be blockbusters and generate great returns, three to four of which will break even or generate an average return, and the rest, two to four, will lead to losses. Blockbusters, by nature, target a mass audience, the head of the long tail, to generate the most profits for the studios, one of the reasons why they invest and milk franchises so heavily. With such a percentage of actual success, do the studios really know what the audience wants?
VOD, along with the help of web-analytics and user interaction, can track what the movie audience really wants. Actions taken during the movie (pause, rewind and re-watch a scene, or stop the movie all-together) can be tracked and information about consumer’s movie choice and response can be captured through web-analytics. This information, apart from creating great value to VOD providers, can also be very valuable to studios. This information could help studios determine trends in what the audience is interested in and react in a positive way. This information could even change the metrics and criteria by which studios evaluate the difference between movies and blockbusters.
Could VOD actually be studios' greatest ally?

Friday, May 20, 2011

Conquering the Long Tail

On-line databases or/and partnerships with telecom operators allows companies such as Netflix to take advantage of a much increased share of the long-tail. Previously, in order to rent a DVD, one had to get dressed, go in the street and find a video rental store. Netflix came in with a disruptive business model and changed all that. Users had the power to rent DVDs from their computer and would only have to wait for it to come in the mail. But this is not all, with Netflix's shift from product to service provider, users can now stream the films they have rented from the website, giving the additional benefit of instantaneous service. Continuing to improve their service will enable them to reap more benefits as they will not have to deal with the fixed costs of storing the DVDs, mailing them to the clients and general wear and tear of their products. This move to a digital movie database will enable Netflix to acquire more movies in order to complete their database and thus satisfy the needs of their every client.

Long Tail
Incumbent movie rental companies such as Blockbuster could not satisfy much of the long tail due to the high inventory cost of their products. Having stores in key locations (expensive rent), staff and storage led to the failure of the company when faced with competitors operating under a different cost structure, such as Netflix.
Many more advantages come to mind when thinking about what Netflix can do with its online database. A myriad of opportunities to increasingly satisfy the consumer with simple web analytics exist, such as an Amazon-style personal recommendation system, a Facebook-style profile to check what your friends are watching, what they liked/disliked or even what they can recommend for you. In addition to this, Netflix can increase their revenue source by developing algorithms such as Google Adsense, which should, of course, be kept at a non-disruptive service for the customers. Partnerships with telecom industries could also be a great opportunity for Netflix to enable its subscribers to stream their movies directly from their TVs (without the need of an additional set-up box, hard drive or cable).
DVDs will still have a certain market share due to the non-technological savvy population around for some time, and areas lacking internet penetration. However, once these problems are resolved, will the DVD become a fossil, a relique of the BN era (Before Netflix)?

Monday, May 16, 2011

TV to TV 2.0

The web has evolved from a strictly informative medium to a participative medium. The television industry is moving in this direction as well with the emergence of interactive and connected television. Users are now able to control what they watch, when they watch it and even share their thoughts with their friends. Extra features to a show or movie could be added as we have seen with the 'Lost' TV show and its participative webisodes. 
This introduces new revenue streams for the television industry. Traditionally, the greatest revenue stream for television channels was advertising, especially during prime-time shows. Trends show that we are moving away from shows cut by advertising. This brings rise to new opportunities such as paying applications and extra features to complement shows or movies. But is traditional advertisement really dead?

Monday, May 9, 2011

Could Digitalization of the Movie Industry Bring Back Live Theater Performances?

The music industry has heavily suffered from digitalization, and technology in general when studied closely. It all started with the radio in 1923. The year the radio was introduced, people gained a free access to music which thus eliminated their need to purchase vinyl records. But the music industry adapted and survived, not doing badly until Napster brought the idea of free music around with the internet. Technology does not kill an industry, it revolutionizes it. The music industry is not doing badly, on the contrary, people have never listened to more music than nowadays. Only a part of the music industry is suffering from these advances in technology (the record labels, mostly). A little part of the revolution from this new technology came in the form of bringing back live concerts to scene. Artists have noticed that selling their music to customers through the traditional medium (physical discs) is not profitable for them anymore. Live concerts, and the consequent sale of their merchandise (t-shirts, etc.), are.

This situation could apply to the movie industry in close to the same fashion as what happened in the music industry. Following this train of thought, the digitalization of the movie industry would make movies more affordable and available to the public (something which is already happening now). If it turns out that 3D technology does not save cinemas (as discussed in previous posts) and that they will suffer a similar fate than that of music distributors, it could be argued that theater will make a comeback. Actors and producers will be payed much less than they are now if the margins gained by the studios get thinner and thinner. The actors (or/and producers) could then be compared to music artists, and will then realize that the best way for them to continue making a living with their passion will be to come back to traditional distribution, one which cannot be digitalized, theater. People who love movies for the art of it will behave in much the same way as music lovers do nowadays and go see more concerts. In other words, the movie industry could move from a content focused industry (which is what I believe it is now) to an experience focused industry. And who knows, if this happens, cinemas could transform their premises, for a reasonable price, to host live shows instead of projections!