Object Commerce

The Problem with Video Ads

There's a lot of experimentation with bookending online video with ads. Have to say I think this is a  dubious proposition. Not because it's technically difficult, or there's a shortage of advertisers or of users who like to watch video on their computers.

The problem is in what we users expect from our computing experiences: instant gratification. Online video with ads either before or after the clip counfound this expectation in a number of ways.

When you click a button, you want whatever you expect to happen to happen, and you want it to happen immediately. It's why you and everyone you know continually upgrades to a faster processor, or network connection, more memory, hotter graphics card, WiFi connection, whatever. Media gratification at the speed of thought, please.

Add to this the fact that on the computer, we experience unexpected results as bugs. It's a learned aspect of user interface grammar, just as a close-up communicates heightened importance or emotion in film grammar.

When a video clip forces you to watch an ad before the clip runs, the two bad things described above happen simultaneously. The desired clip is delayed (as much as 30 seconds - an ice age in compute time) and you also experience something other than what you expected -- an insurance commercial instead of a political analysis, for example.

Simple. Run the ad at the end. But if the ad runs there, as in Revver videos, there's little reason to watch it.

So, bad at the front end, useless and easy to ignore at the tail end. When a new form of ad manages to simultaneously evoke feelings of crappy programming! lousy connection! and bug! you know it could be in trouble. Gonna have to step past the obvious and the easy, on this one.

Kill the Head, and the Long Tail Dies

There are plenty of emerging digital media platforms out there with bespoke viewing dynamics, all dependent upon compelling content to get traction. Mobile tv, handheld tv, broadband formulations, media centers, AV pods, PSP's, you name it. And many are commercial ventures beset by pesky investor return expectations. For these, existing major content is unsuitable to the new platform reqs, hobbled by some combination of:

• rights hairballs
• preferential release schedules that push new platforms that do manage to get major content to the end of the queue
• ruinous economics that extract every nickel from the new platform, leaving the newco margin-free - like a movie theater without popcorn
• inherent aesthetic and formatting disconnects

Chris Anderson's seminal and compelling Long Tail analysis delivered news you could use - or misuse. For many companies the Long Tail didn't help, very much. The flaw in many Long Tail-dependent approaches is that Long Tails thrive when accompanying the "Big Head" of major content. All the examples in the original thesis are for offerings with both major and Long Tail content. Kill the Big Head, and the Long Tail dies. (MP3.com, Listen.com, etc.).

But how do you launch a new platform when pro content is unsuitable, unavailable, or uneconomic, and the free stuff isn't worth paying for?

Enter YouTube. A combination of head-end clips delivered through a large DMCA take-down loophole that puts the onus on the rights holder and not the service provider, plus original clips on every subject imaginable. Perhaps most important, YouTube's social networking functionality works just fine. As Amy Jo Kim has pointed out, there is game-like functionality in the best of such sites. You score when people view your video, when they subscribe to your channel, comment, and perhaps best, reply to your videos with videos of their own - the broadband AV equivalent of IMing. Plus, the videos you watch, or the videos you supply are a form of character creation: you are your media, after all. And the easy HTML embedding delivered the viral mojo, from blogs to MySpace.

Would it all have worked without the head-end content? We'll never know, I guess. But remember, it was the pirated Lazy Sunday from Saturday Night Live that first got YouTube it's first big blast of the world's attention. Not Lonelygirl15.

By contrast, look at companies like Revver - a long-tail business model that nonetheless requires rigorous review and filtering out of pilfered head-end content. No Colbert Report, Zidane Head Butt, Lazy Sundy, Sensational News Clips...just Mentos and Coke, and a very v e r y  l o n g  t  a   i   l    .    .    .

Hi Ho, Hi Ho...

Barron's is under the impression that Apple may make a bid for Disney once the Pixar deal is closed.

Now, that would be news. But seems unlikely, no? After all, Jobs is too smart to risk Apple's long fought-for success on such an amorphous enterprise.

Fine for Pixar, because it's exactly the tonic the old mouse needs. By contrast, or indeed by any measure, Apple is a juggernaut. After a merger, it could find itself a juggernaut handcuffed to a meandering gaggle of dwarves for some time to come.

On the other hand, the scenario must seem familiar: a great, pioneering consumer brand without its visionary founder, inexorably losing its mojo under one uninspiring, "safe" manager after another. Apple in 1996? Or Disney today? And there's the undeniable possibility of an end-to-end redefined entertainment powerhouse. From gleam in the creative eye to fully integrated primetime lineups delivered to iPods, laptops, smart plasmas, and mobile phones that will make today's Treo seem as smart as a bar of soap. Just take Disney, inject a new operating system...

If I were a Disney shareholder, I'd jump at it. I'm guessing Jobs would think twice, but he just might jump at it too.

iPod Jesus

Didn't Geoffrey Moore say that when your product becomes a metaphor for the relationship with god, you've won?

"When I go to iTunes, I select all that I want. When I go to Jesus Christ, he gives me all that I need. It's that simple," Sberna told his congregation Sunday morning.  Link

Technology? We don't need no stinkin' technology..!

Technologists tend to say things like "our proprietary blah blah enables customers to..." or "this robust platform allows end users to..." and so on. All sounds good, except when it comes to big league media.

Let's say you've developed one of these marvelous technologies. And you've decided that pushing big league media through it is the best way into the market, the best way to get big fast. After all, you can do all this robust empowering through an unprecedented, buzzword-compliant embodiment of Metcalf's Law, etc. etc.

Sounds like a plan. In fact, sounds like a business plan. But the simple truth is people just want to hear the music, or see the movie. Unless you've created something that will redefine the way they experience the media, they will not wake up one morning wanting to standardize on your platform or sync with your widget. Given how rarely this kind of thing happens, rights holders don't wake up thinking they need your technology, either. In fact, they wake up every morning assuming you need them.

And usually they're right. The hit music, artist, actor, story, special effect - whatever - is a miraculous, shiny object that attracts and mesmerizes millions, leads people to open their wallets, become emotionally open to related marketing messages, buy licensed merchandise, repeat taglines, act out scenes, play air guitar - and maybe even adopt your solution.

Rights holders know this, and will price accordingly. Which means there will not be enough margin left over to make you profitable. Repeat: there will not be enough margin left over to make you profitable. Some might say, but look at Apple. Isn't Apple making money selling tunes? After all, they've sold over 250 million of them. That's a quarter billion dollars!

There's a restaurant called B.J.'s in Cupertino, right alongside the Apple campus. Walk in there any weekday for lunch, and there's probably more value in the options held by the amiable crew munching hamburgers there than there is margin in the 250 million tracks. Assume even 10%, and it really doesn't add up to a business.

And herein lies the secret. Companies that are not rights holders but have made significant money with big league media have done so by leveraging or creating ancillary value. Two examples. MTV got music for free in a new form, aggregated an audience around the music, then sold the audience to advertisers. All ancillary value. And Apple smartly aggregated users be giving them simple tools to repackage the album according to their tastes (remember "Rip. Mix. Burn." ?). Extrapolating, they eliminated the recordable CD, and replaced it with sexy, expensive hardware to take the playlist places it had never been before. Result: revenue and enormous equity value. And very little of it from the margin earned selling tunes for 99 cents.

Not to belittle the  accomplishments of either company, the confluence of design and marketing, the rightness of the offerings, and the way each was a framebreaker that has redefined the consumption of media. No, quite the contrary.

So if you insist on going the big league media route, assume zero margins, and either a) find and leverage the latent value inherent in an audience's attraction to the media, or b) get the end user to need your stinkin' technology. 

Object Commerce Consulting

Object Commerce Consulting focuses on business design and development for digital goods and services. These are products sold through a growing set of networks, including 3G mobile, social nets, VoIP, and open and private peer-to-peer. They're delivered to a profilerating flock of devices - pc's, mobile phones, media centers and portable media players, voice clients, game machines, PDA's, convergence boxes. Collectively, this marketplace is growing and evolving along every axis.

Object Commerce was founded by Ron Martinez upon product, business, and patent development first undertaken in 1995, with the groundbreaking Transactor ownable object technology featured on the back cover of the first issue of Wired Magazine. Wildly ahead of its time, the market has caught up with the vision of digital product available in markets so ubiquitous, they are in fact ambient. Apple's iTunes put "object commerce" on front pages around the world, and the hypergrowth in mobile content globally constitutes the first truly mass, ambient market. Others include peer networks that have yet to be successfully commercialized.

Object Commerce Consulting's areas of expertise include:

• Market understanding, analytic and commonsense - what's really driving the market?
• Refining the raw material of general technologies to address real market need
• Addressing emerging, highly decentralized marketing channels
• Product design that leverages competitive differentiation
• Messaging, presentations, and marketing communications
• Business case, market, and key deal development
• Support for business plans and financing activities
• IP and patent portfolio development

Object Commerce projects may be supported by a network of key collaborators in the fields of legal and contracts, finance, payments, entertainment, networking, IP development and patents, and consumer-facing product and human factors design. Engagements are time- or project-based, as required. To get in touch, email:  ronmartinez AT mac DOT com.

When Networks Compete, You Win

The other day I pulled into a gas station kind of on a nowhere intersection in San Francisco to gas up, and pulled out my laptop to check a street address. Noticed the powerbook's WiFi connection in full bloom. Turned out there were three or four networks, including two open networks, so I joined one and got the street address plus a Yahoo map, hit a few emails, and even made a SkypeOut call while my beloved, benighted Honda Element guzzled prehistoric swamp nectar till it couldn't drink no mo'. Engrossed in the laptop on the passenger seat, I forgot where I was until the annoyed guy behind me indicated with three short blasts that we were hogging the hi-test.

But the interesting thing is that, even though I know there are hotspots all over the place, that most reasonably-sized cities in the U.S. are awash in networks, I really didn't expect any at that gas station. But I am certain my seven-year-old will expect networks to be more than the occaisional hotspot oasis. She will expect networks to be so ubiquitous as to be ambient, universally available, and for her purposes undifferentiated, delivering any human-perceivable communication or machine capability digitally to her fingertips, irrespective of the acronym it rode in on.

My seven-year-old will be able to get a taste of this when she's eight, later this year. As will you and I, when we lay our hands on a Motorola/Skype phone. This phone will connect to cellular networks, as expected, but it will also brightly offer to make that call using Skype through the WiFi connection it just discovered. By the way, that second call will be free, to anywhere in the world, or maybe a couple of cents a minute if they're using a regular old phone of some type at the other end.

You can do this today, really. If you have a WiFi-capable Pocket PC + phone, you could make your calls by cell or with the Skype, once you find the WiFi.

By the way, do the math: a SkypeOut call currently costs 1.7 EU cents a minute to most places on Earth. That's about USD $0.022 a minute. With my super size account (and twelve month commitment), I get 4500 minutes from Sprint for $165. With taxes and various fees, we're at $180. That's USD $0.04 a minute, double the cost of Skype anywhere in the world, but for U.S.-only calls. And if I'm calling another Skype client, the call is free. "Free" meaning at no incremental cost to the hardware and bandwidth I'm already consuming for other purposes, like editing this post.

The information here is the simultaneous presence of ambient networks. Different mechanisms, different technical DNA. As far as I or my kid are concerned, we can use either one to talk to someone back at home, or to a loved one halfway around the planet.

But one of them is free.