Some Thoughts on 5G

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The promise of 5G wireless connectivity as the backbone of the “4th Industrial Revolution” has brought predictions of how the global economy will be changed both positively and negativity. Social impact aside here are some quick thoughts on how I think some tech leaders today will evolve.

Apple

Remember when everyone was touting the revolution of wearables with Google Glass, etc.? Well, Apple is the clear winner so far with AirPods and Watches. 5G will make it imperative that they continue to iterate on these two categories as the iPhone will become less important, unless you are streaming video. More apps will integrate Siri in a meaningful way “Siri get me a Lyft”, “Siri order a salmon bowl from Digg Inn”, etc. Siri can also be used in China, which isn’t the case for Google Assistant.

It would be interesting for them to create some sort of TV SDK beyond an app store for Apple TV, similar to what they have done with HomeKit or CarPlay for 3rd party hardware partners to make it easier to stream video to all of your TVs without buying Apple TV hardware for every set in the house. Roku has done a fantastic job with this strategy to extend reach beyond hardware. Maybe this will come for Apple with whatever they are developing in the TV streaming space.

Amazon

Alexa will be the cornerstone of their connection to the consumer in the 5G era. How they extend the primary consumer engagement point beyond speakers into wearables will be interesting to watch as they are totally dependent on 3rd party hardware manufacturers for headphones, etc. that haven’t broken through in a big way. They are rumored to have a plethora of Alexa connected devices coming out this year – including a microwave and car specific device. Their early lead in speakers has been challenged by recently by Google’s aggressive pricing in the US market so they will need to find new platforms to connect the consumer with Alexa.

Google

Their first foray into hardware wearables, Google Glass, didn’t gain widespread consumer acceptance and Android partners like Samsung haven’t been able to crack the space to compete with Apple as they have in the phone category. I think the current iteration of Google Assistant is superior to Alexa or Siri so it will be imperative that they get the gear side of the business fixed. They are showing promise in connected speakers by taking share from Amazon with aggressive pricing.

Facebook

Facebook is late to the voice computing but they were also late to mobile when 4G rolled out and they thrived. Things have changed mightily for them over the last two years with consumer trust at an all time low and the intimacy of voice controlled experiences could put them at a big competitive disadvantage. They are developing speech recognition under the name Aloha and have a smart speaker in the works.

They also could win in cloud powered VR that eliminates the need for the cumbersome hardware with Oculus which has been a bust since being acquired in 2014.

Netflix/Disney

Netflix has a huge lead in direct to consumer SVOD but with Disney’s marketing capability and best in industry library and IP I predict that they will have a US subscriber base as large as Netflix in 24 months following launch in 2019 (a big caveat will be getting the UX right which is why they acquired BAMTech). The battle for new subscribers will then shift to preventing churn in the US market and global expansion with China being the golden goose where Disney currently has a competitive advantage.

Comcast/Verizon/AT&T

Hi-speed internet, cable and wireless packages will finally blur and merge enabling true cord cutting and they will need differentiate with gated offerings of exclusive content to stream directly to TVs and phones. This imperative has been the driving force behind the M&A frenzy to build scale and a library of valuable IP along with the data that comes with the direct connection to the audience.

Everything You Need to Know About the Future of TV Advertising is in the New NBA Deal

The NBA reached a new 10 year rights agreement with Disney/ESPN and Time Warner/Turner over the weekend that will at least double and possibly triple the current annual rights fee paid to the league. The most interesting aspect of the deal is the de-bundling of at least some games from cable TV packages. From the Wall Street Journal:

“The league also laid plans in partnership with ESPN for a new online video service that would show live regular season games, the people said. In a significant move for ESPN, which derives its huge profits from the pay-TV ecosystem, that service will be open to people who aren’t cable or satellite TV customers.”

This is a big risk for their current business model as they derive around 60% of their revenue from cable TV providers as part of your cable package. However, it is where the market is going and the potential revenue from a la carte purchases (buying a game or a package of games) and more targeted advertising could bring in much greater revenue that the current business structure. What happens when people can consume content without a cable package? What could make up the revenue shortfall?

First, these assumptions can be made about where the market is going:

  1. Video on demand is driving content consumption. This can be live or recorded and through an internet or cable connection. The channel and time driven tune in window programming format is on the way out.
  2. More targeted advertising through programmatic buying platforms has re-shaped how internet advertising is purchased. Big spending advertisers will demand that TV eventually be sold the same way. 65% of advertising on the internet is now purchased on a performance based model.

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As smart set top boxes evolve, “smart TV” penetrates more households and more content is consumed on mobile devices the opportunity for hyper-targted advertising through TV/video will become the standard in the marketplace. The tools marketers that use to build deep data profiles constructed by piecing together a consumer’s engagement across multiple touch points that live in the cloud driven by Adobe, IBM, SalesForce, Oracle and SAP will drive more change in the $75 billion dollar TV advertising business than anything else in the last 60+ years.

Apple is winning the talent war

iPhone 6 orders are forecast to be the most in demand product in the 38 year history of the brand. Just last year analysts and journalists were bemoaning the death of the brand with the passing of Steve Jobs. What they didn’t account for was the culture he created and the empowerment he entrusted with Tim Cook to make the brand his own. When a real sense of mortality and reality set in with Jobs he seemingly spent a lot more of his genius focused on creating not just a new iPhone but a company culture inspired by his values of the intersection of art, technological innovation and emotive marketing. If you look at the list of recent hires from Dr. Dre, Jimmy Iovine, Angela Ahrendts, Marc Newson, Ben Shaffer, etc. Tim Cook is creating an unparalleled culture of creativity all built around the values Steve Job espoused and created the most interesting company training program in the world. In any business your most valuable asset is the team of people who work there, I think Tim Cook’s roster of talent may exceed the current market capitalization that is already the most valuable in the world.

Amazon’s Super Bowl Commercial in May

Last week to much fanfare Amazon.com sold Lady Gaga’s new album for $.99 as a promotion for their new cloud music player. They sold 440,000 copies of the total 1,108,000 for the week, which was the best selling album since 2005. 662,000 copies of the total were sold via digital download giving Amazon a 66% share of the digital market for this particular album. Gaga’s record label confirmed that Amazon paid the full $9 wholesale cost of the album netting them a loss of $8 per sale (not factoring costs of delivering the album, etc.). That equates to a cost of $3.5 million for the promotion or a little more than a :30 spot during the Super Bowl. Was it worth it? Well, lets say it netted Amazon 200,000 new customers along with all of the earned media buzz, $3.5 million is still a lot of money but their timing seems to be perfect since Apple announced that they will be launching iCloud next week so anything Amazon can do to gain first mover status in the category will be needed to go head to head with what promises to be a cloud solution that is tightly integrated with the huge Apple ecosystem.

Is Google Creative Labs the best ad agency around?

They don’t have any clients aside from their parent company but Google Creative Labs is coming out with the most engaging TV ads around these days. They connect emotionally to deliver a memorable message.

This ad for Chrome debuted on Saturday Night Live in conjunction with her appearance with Justin Timberlake. I don’t know if made more people switch from IE, Firefox or Safari but it connected the Google brands with a large, desirable audience….and I bet they didn’t pay Lady Gaga to appear as it is essentially a 1:30 commercial for her new album.

When my wife saw this spot for a Dad who tracks the childhood of his infant daughter through a suite of Google products made my wife cry. I was happy it wasn’t for diamonds or a car because I probably would have been shelling out for whatever they were selling.

The next spot “It Gets Better” probably demonstrates the power of the web to connect people (using Google products) and change a life more than all of the articles on TechCrunch ever could. I saw a few people post on Facebook how emotional the ad made them, an important timely message that delivers in 1:30.

Emotional advertising used to be the sole domain of Apple in computers (do people still use the word computer?) and electronics but Google is making more creative ads. I think a lot of people in the advertising industry wondered what they were up to when they put together their all star team for their in-house agency. I guess they wanted to make cool ads….imagine that.

Get ready for the iTax

It was interesting to see that Apple rejected the Sony e-reader app for the App Store last week. It is still unclear exactly why the app was rejected aside from Apple thinking Sony makes junk, but if it was rejected because they didn’t pass along a 30% cut to Apple for the purchase it is a bit scary. I bought the iPad the day it was available last year and downloaded a book from the iBook…cool, more or less same as the Kindle from a UX but turned the pages with a swipe as opposed to clicking. However, when the Kindle app became an option I downloaded all of my reading there. Why? The selection was about ten times the size of the Apple store, plus I could read it on any device. I don’t think Apple will make the rules that you must make purchases through their platform retroactive or make it impossible to read Kindle books on your iPad because they would receive so much negative backlash. This is scary for app developers though. Can you imagine Apple demanding a 30% of all purchases through an app? What about those serving ads, content providers, etc. if iAd became a mandatory platform? That is a massive portion of any profits. I think such a large chunk that developers would shift away from iOS to android. This becomes even more of an issue for everyone who feeds off of the Apple ecosystem when start to look at projections for the growth of mobile business from David Shapiro, Google’s director of small business marketing – “Two-thirds of all purchases and half of transactions will occur on mobile devices by 2015” click here for the whole article .

What will Social Commerce look like when it gets here?

I finally got around to seeing the Social Network this weekend and it sparked me to start thinking about how social networks are going to change the way we buy everything from cars to diapers. Facebook in particular has been adopted at an unprecedented rate globally  and everyone knows that word of mouth is the most powerful tool in moving someone from consideration to purchase. How does word of mouth evolve as social media becomes part (and probably the most influential) of the purchase process? Here are some questions that I want to answer before the map the future of social commerce can be drawn:

  • What lines will be drawn from a privacy perspective? You obviously don’t want all of your personal purchases shared, what is fair game and what is not, who decides?
  • What role will mobile devices play in this? This is where the real innovation is occurring with bar code readers, NFC chips embedded in the next iPhone (speculation), geo-location applications (foursquare, WHERE, SVNGR, etc.) that can tailor offers and experiences to your specific locations, and traditional credit card processing companies being challenged by new players like square this all has the potential to disrupt the way people shop in a big way.
  • What platforms or tools that do not currently exist and are yet to be born that will become the glue that binds all of these processes together? Will it be Facebook? As social networks and the web in general evolve into something that is an important piece of every bit of our life and not something done from a desktop or laptop screen what is next? How will the rapid deployment of 4G wireless networks that promise wi-fi speed everywhere  change the way people shop in-store, on the go and at home?

How do you justify spending $3M on a Super Bowl commercial?

It is always an interesting thing to debate  – is a :30 Super Bowl spot worth the money? I think it depends on how “mass” your brand audience is (that is why beer and cars dominate the game) and of course how good your creative and integration across social platforms is, but it can be a good and sometimes great investment. Here are some things you must consider that are unique about the Super Bowl as an event:

  • Over half of the US population tuned into the game at some point yesterday – 162.9 M – where else do you get that sort of mass audience this day in age? Nowhere.
  • The average audience was 111M so lets say you paid $3M for your spot for the sake of simplicity that delivers a CPM of about $27. That is 3-4 times what you normally pay for broadcast TV but well worth it and at a smaller premium over what the NFL gets throughout the season being a live sports event. The “Force” spot for VW had 15M views on YouTube in two days, prior to even airing during the game.
  • Nobody DVRs the Super Bowl and it is only time people are excited about watching commercials.
  • The social aspect of the ads now can deliver an additional 50M or more impressions from places like YouTube, the massive TV news and print coverage, etc. everyone is an armchair ad critic following the game.

So how do you maximize your spend if you have an extra $3M lying around?

  • Put together a spot that is actually creative and smart. What was so compelling about the VW ad above? It wasn’t the features and benefits of the Passatt or it hugging tight corners on a mountain road. It was embedded on YouTube a couple of days before the game, people passed it around because of a great emotional connection that it triggered, not sophomoric humor which has no long tail.
  • Make sure your spot is for something new and is easy to find using social media and search after it airs. Use this as your opportunity to tell the second chapter in the story. All great advertising campaigns build on a message in a linear way over time.

Mobile Payments..The Next Big Thing

Everything is pointing to mobile payments as the next frontier that Apple will conquer with the introduction of the next iPhone. They have been awarded several patents for mobile commerce and rumors from suppliers support the idea that they will adding a NFC chip to the next iPhone. Here are the reasons I think this will be a massive game changer for mobile and social commerce:

  • Apple already has 160 million credit cards on file for iTunes, they will set up a system somewhat like PayPal where transactions are directly debited for your checking account to pass over the 2-5% fee charged by the credit card providers.
  • Retailers hate the current credit card providers, ask any small business or restaurant what they hate most and this will be at the top of the list. If Apple delivers a simple, transparent, user friendly system – watch out American Express and MasterCard, hello iBank.
  • NFC is not new technology, it has been used in Japan, South Korea and throughout Europe for a long time, the payments are often collected by the phone service providers (you better believe Apple will cut them out of this). It is used for subway and bus passes over here, etc. Apple wil come to the table with a simple system that will empower even Mom to link up her iPhone to her bank account.
  • I think the possibilites this business will spawn are seemingly endless. They could push to replace all of the frequent shopper cards stacked in your wallet or purse with a simple loyalty system across all of your purchases. This would allow them to set up something similar to dunnhumby.

There will a huge amount of competion for this space from the current card providers, upstarts like Jack Dorsey’s Square , Facebook and their Points currency, and Google. How will it all shake out is anyone’s guess. I would probably place my early bet on Apple for two reasons – the iPhone is wildly popular and the device most ready to make it a good experience and Apple’s ability to take existing technology and bundle it into a seamless user friendly experience.

iOS vs. Android not that important

The battle for the next generation operating system is getting a lot of buzz these days from geek fanboys.  Everyone can agree that lightweight systems that can run a variety of devices from smart phones to netbooks that run apps and web based tools are the future of information access, interaction and engagement.  The two leading platforms today are Apple’s iOS which runs the iPhone and iPad and Android from Google that  runs a variety of devices from their manufacturing partners.  Pundits are obsessed with arguing over which one of these platforms will become the dominant platform, likening the battle to Microsoft versus Apple in the 1980s.  In my opinion it doesn’t really matter what is the dominant platform is.  Neither Apple nor Google make money off of selling their mobile OS to the consumer.  I have an iPhone iPad and was playing with some Android phones this weekend and the web browsing experiences are pretty similar.  I think that in the future there will be a move away from specific apps to web based experiences.  The app store on Android is still evolving but it is going to copy the Apple model in the end.  So the question then becomes who will be the big winners in all of this from a financial windfall perspective?
Here is my list of winners:
Apple – folks are buying up their mobile devices at a feverish pace and they have the highest margins in the consumer electronics business.  It will also be interesting to see how the iAd mobile advertising platform is adopted by both brands and the consumer over the next year.
Google – search will evolve on mobile and some of their great web based services such as YouTube, Docs and GMail will become cash cows from relevant ad placement.  They win on Apple or Android in my opinion because they make great products and services.
Mobile carriers – consumers are dying to give you guaranteed over two years an extra $15 – 30 per month for data service that sucks…nice business.
E-commerce incumbents – Amazon and EBay have a great understanding of the mobile space.  Last week EBay acquired RedLaser a mobile bar code reader made by a company called Occipital which allows you to scan a barcode on your mobile device.  Here is how Steve Yankovich vice president of eBay Mobile summed up the reason for the acquisition “The goal is to think about where consumers are when a product becomes of interest — buy or sell. My contention is that most of the time when inspriation strikes us around being a consumer, we are not sitting in front of our laptops”.  The company says it expects to see $1.5 billion in gross merchandise sales volume through its mobile apps this year.
Social networks – mobile devices are the grease that really makes the wheels of the social space turn.  Easy access from millions of new devices will only increase the number of people on twitter, Facebook, foursqaure, etc.
The losers:
Microsoft – the consumer is being to conditioned to get what you make all of your money on for free.  That won’t work out well for their business model in the end.
Legacy PC brands – Dell, HP, Lenovo  can’t keep up with flat manufacturing business models employed by companies like HTC in the mobile space and netbooks and laptops are soon to be declining categories as mobile devices become more powerful and the preferred tool to consume web content.  Similar to what happened in flat screen TVs with Vizio becoming the #1 brand.
Retailers who don’t get the web – it has revolutionized the shopping experience, customer service and empowered the consumer, most retailers still don’t get it.
Research in Motion – They understand mobile email, not much else.  Have you ever tried to browse the web on a Blackberry?  It sucks.