A manual for the brand-agency-vendor relationship

The fall of the agency

Five years ago, I found myself as an executive of an ad serving business in Europe, competing against the likes of Atlas and DoubleClick for mostly agency clients. The pitch was about delivery speed, reporting functionality, and how quickly one could traffic 30 placements with 20 creatives after a martini lunch. The agencies spoke our language and the brands did not, allowing the agencies to not only make a handsome profit from our technology (often $0.05 to $0.50 CPM above cost), but also to own the client's data and the pixels on their site, making it hard for the client to move their account in the future.

Most clients failed to understand why that could become a problem, and most agencies failed to see how quickly it would change. By my estimation, ad serving contracts have gone from being 90 percent held by agencies just five years ago to perhaps only 30 to 40 percent today.

The enablers of this change are the demystification of what ad serving is and the influx of cheap labor that understands how to use it. Ask most CMOs and they can tell you their ad server gives them independent reporting, view-thru measurement, and campaign management. And chances are they've found a low(er)-cost resource to manage the entire process for them.

More importantly, ask the smart CMOs and they will tell you that taking control of their ad serving gives them the power to switch agencies if and when they want to without losing historical data or needing to re-pixel their website. To this day, Dart does not have a feature for porting a client out of one agency's account into another's, and probably with good reason.

Meanwhile, ad serving isn't the only aspect of digital marketing that CMOs are looking to bring in house. Brands are now also well positioned to negotiate the best rates. While some agencies still hold guaranteed access to certain inventory sources at preferred rates, the percentage of media that is being bought through auction tools is rising sharply, and where an auction exists, so does "equal" access (and therefore CPMs).

The dirty truth about Facebook commerce

What is social commerce?

Social commerce can be thought of simply as the intersection between social media and e-commerce. Think of it as how you can use social media to drive consumer interactions and engagement as part of the process of selling.

Techniques span everything from simply having a Facebook page that drives traffic to your website, social plugins (such as the Facebook "like" buttons and social logins), user-contributed reviews on your e-commerce site, Facebook-specific promotions, and full-blown Facebook stores.

How brands can use social commerce

There's a lot of experimentation going on as brand marketers explore the new frontiers of social commerce. At times, it feels like the Wild West -- a frantic race to unlock hidden gold buried somewhere in Facebook. Experimentation is good -- after all, if we can find new ways to leverage the Facebook powerhouse to do more than drive traffic, then there's definitely gold to be discovered.

With all this frantic activity, it's worth looking again at how customers buy, why they don't, and the role that social media plays in loyalty and driving conversions. Loyalty is important because it drives profitability -- repeat customers are many times more profitable than new ones. And loyalty principles are inherent to social media success; even if loyalty is a slightly old-fashioned term, there are many lessons that can be applied to social media.

A recent PwC research paper sheds new light on what we already know: When consumers were asked to rank factors that influence purchase decisions, they were driven by price and their experience with a brand over all else. PwC notes that long-term relationships were formed by friendly, helpful service and the people behind it. This can be thought of simply as the "brand experience." Loyalty programs rank last.

The "brand experience" is the user's perception of the brand, while interacting across channels and spanning experiences that define the relationship, especially when things go wrong.

While this research confirms what we already suspected, it does shed new light on how we should view social commerce, as many social programs are focused on building the "social channel," rather than using social to serve customers better.

Many brands have social media teams focused on decoding the social media formula. These separate teams are reminiscent of the early days of e-commerce, when many companies set up a group focused on how to make e-commerce work. This resulted in stovepipes, in which e-commerce was separated from the rest of the business, and then needed to be re-integrated as it became clear that e-commerce was not a business in its own right, but a channel that needed to be integrated with all other channels. In time, I suspect that we will view social media in the same way, as a communication and engagement platform that needs to be integral to the rest of the business, rather than standalone. Social media will be key in shaping the brand experience, but will do so in conjunction with all the other channels and not as a channel in its own right.

I'm sure that some will take issue with this -- if you're selling a service that enables brands to offer Facebook storefronts (f-commerce), then this is heresy. But my perspective is different. I look at what the data tell us about how, why, and where customers want to buy.

In the light of this, let's consider five home truths about social commerce.

Facebook IPO will be a bad News for Telcos

If you thought Facebook’s OTT business model was bad news for cellcos, just wait until their IPO kicks in.

That’s the warning from London-based M&A advisory firm Magister Advisors, which said Wednesday that Facebook’s IPO is “about the worst thing that could happen to network operators”.

"They're supporting the end users' social networking habits, but they see very little, if any, commercial benefit and the downside risks are significant,” said Magister MD Victor Basta. "Facebook is a textbook example of an over-the-top technology and is effectively turning mobile network operators into digital drug mules."

Digital drug mules!

Dithering over Facebook’s OTT model (or any other OTT service), its potential impact on operator revenues – particularly SMS – and the fact that cellcos technically are not part of the Facebook ecosystem is nothing new. But Facebook’s planned IPO will make an already grim situation worse, claims Basta, because it will give Facebookless incentive to share revenues with operators:

Facebook has made recent noises about sharing some revenue with operators, such as payments income from users playing games on Facebook. However, Facebook will be under intense pressure after its IPO to justify its likely $100 billion valuation. With revenues below $4 billion, Facebook will have to make rapid progress to achieve the $30 billion in revenues that will support that valuation.

In Magister Advisors' view, much of the required additional revenue has to come from its increasingly important mobile channel, making it more difficult to share significant revenue with operators. So while Facebook wants to position itself as more ‘operator-friendly' than Google or Apple, the harsh reality of Wall Street's quarterly expectations will drive them to maximize revenue from mobile, at the operators' expense.

Personally, while I’m sure Facebook will be under tremendous pressure from Wall Street to hit targets once it goes public, I can’t see how that would sour Facebook’s plans to work more closely with operators.

For one thing, from a sheer revenue-generating POV, Facebook doesn’t need to cooperate with cellcos now, IPO or not, because it makes its money from advertisers. The IPO doesn’t change that. Facebook will be just as OTT as before, and cellcos will be out of that loop.

Meanwhile, Facebook’s mobile strategy has been a little more than making “recent noises about sharing some revenue with operators”. For example, one of Facebook’s motivations for working closer with cellcos is to get access to their billing APIs. At MWC in February, Facebook CTO Bret Taylor said Facebook wants to work with operator billing to improve things like mobile payments for buying objects in the middle of a mobile game.

And Facebook isn't the only OTT player keen on building better operator relationships. A number of big-name OTT players are reaching out to cellcos as part of their mobile strategies precisely because they understand that a strictly OTT business model only gets them so far. They’re not partnering with cellcos just to mollify them about SMS losses and free riders – they’re doing it because they’re getting something out of it that they can’t get on their own.

Obviously the relationships are more complicated than that, and it's early days, so just to what extent cellcos can monetize these new relationships remains to be seen. But I can’t see how Facebook’s IPO will make much difference in that regard.

Telecommunication Companies are still struggling with Paradigm Shift

t seems like every telecoms-related conference I’ve been to this year – and I know it’s only March, but bear with me – has had a recurring theme that goes something like this: telcos really have no idea how much their industry is changing.

This year’s Mobile Backhaul Asia conference in Bangkok has been no exception.

Speakers advised delegates first thing Day 1 that while telco executives aren't completely oblivious to the paradigm shifts going on around them – brought on by smartphones, social media, etc – there’s a huge difference between being aware of change and understanding just what that means.

For example, it’s well understood that OTT players are challenging the telecoms status quo, but many telcos don’t fully appreciate just what a big deal this is, said Mike McConnell, CTO and executive solution consultant for Huawei Technologies.

“I really don’t think people fully understand this, even though they say they do,” McConnell said in his morning keynote. “It comes down to how [OTT players] go to market and how different it is from the telco model.”

For OTT players like Facebook, Google and Skype, the key difference is that –unlike telcos – their service is not the product, but the user base. “They offer the service free and grow their user base any way they can. They build their population, and that’s the product, which they sell to marketers. Telcos don't do that – they still want to charge for everything they put in front of their customers. It's very difficult to make that work when you compete against the OTT model.”

Another example from McConnell of underestimating current trends: the well-cited stat that mobile devices are replacing PCs as the Internet connectivity terminal of choice. “It’s critical to understand what that really means,” he said.

For a start, many new OTT services – such as Foursquare – are developed specifically with smartphones and tablets in mind, not PCs (not even laptops), he said.

Also, mobile broadband networks and hot spots will have a significant impact on traditional cash cow of roaming business models, McConnell added. “When I travel, I can get onto a Wi-Fi hotspot and do 98% of what I need to do without using voice at all, and when I do need voice I can use VoIP.”

Gian Paolo Balboni, head of innovation trends at Telecom Italia, also stressed the importance of fully understanding the current trends driving the mobile data business – from smartphone and tablet usage to OTT content.

Take tablets, for example. “Tablets consume up to nine times as much data as smartphones, but over 90% of tablet data consumption is taking place on Wi-Fi, not the mobile network,” Balboni said in his morning keynote. “Wi-Fi is an important factor that we need to understand better.”

Bonus takeaway from Day 1: mobile backhaul will be as heterogeneous as the access network.

Industry players talk much these days of small cells (including Wi-Fi) as an inevitable feature of LTE, and the challenges of operating such a heterogeneous network. But the same will apply to backhaul as well.

While fiber is often talked up as the ideal backhaul link for next-gen mobile, Dirk Wolter, director of mobility architecture for APAC, China and Japan at Cisco Systems, pointed out that operators will likely utilize a mix of backhaul solutions – fiber, microwave (point-to-point and point-to-multipoint), Ethernet, Wi-Fi mesh and (for operators with fixed-line assets as well) xDSL and PON.

Huawei’s McConnell agreed, but added that LTE itself will also serve as a backhaul technology for mobile hotspots.

Ran Avital, VP of strategic and product marketing at Ceragon Networks, pointed out that while there are multiple tech choices for mobile backhaul, it’s important to understand the differences between them in terms of opex, cost, form factors, capacity, NLOS support and service predictability.

Apple's Grass Root Enterprise Infiltration

What we see is an important, and so-far overlooked, new management application targeted at institutional and enterprise customers, the Apple Configurator. This app provides a critical link in the Apple ecosystem for enterprise IT organizations, Mobile Device Management (MDM) providers, ISVs and VARs that allows enterprises to significantly improve and simplify the cost and complexity of managing iOS devices. Basically, the Configurator allows the configuration of an enterprise-standard iOS device/app image, then allows/enables that image to be deployed across multiple iOS devices. Previously, users and enterprises have had to manage multiple iTunes accounts in order to manage multiple iOS applications and content, depending through which account the apps and content were acquired. Such a management approach becomes onerous as the number of devices grows beyond even a few.

Apple Configurator allows improved simplicity in this regard. According to Apple, it can manage everything about an iPhone or an iPad, iPad, including apps, accounts, and content. Enterprise IT organizations, for example, can now configure an enterprise iPad image once, deploy it across enterprise and individually-owned devices, and keep it agnostic of/parallel to personal accounts on those devices.

The net impact for iOS users, developers, services providers, and enterprise IT shops is an opportunity to simplify and standardized enterprise management and use of iPads, iPhones and any iOS device. We see this as enabling an even faster- and farther-growing Apple grassroots enterprise presence and power, far beyond what is enabled by iPhones and iPads themselves. And it may strengthen movement by enterprise IT groups toward embracing iOS devices at a greater breadth and pace – eventually and effectively shifting Apple’s own non-enterprise-IT stance as well.

Why is it Happening? The Apple Configurator has been a capability missing from, and increasingly needed by, Apple’s ecosystem.

Apple maintains a laser-like focus on the user experience and on consumer sales. To this end, they have built a hyper-competent content and device ecosystem. This in turn has allowed Apple to develop a highly-curated-but-closed ecosystem. Together, the focus and the ecosystem have yielded premium pricing and market leadership in tablet and smartphone spaces.

Apple has also studiously avoided enterprise IT. Steve Jobs himself regularly stated that he did not want Apple to be, or become, an enterprise IT provider, preferring to focus on more creative and new types of devices, content, and services that enabled consumer/end users.

However, Apple is a victim of its own success when it comes to the enterprise. We’re starting to see more frequent orders for thousands of iPads coming in from enterprises worldwide. We see more and more pressure from enterprise business app and service providers to integrate their offering with iPads and iPhones. And the continued blurring of user device/business device removes functional and managerial boundaries between the consumer and the commercial environments – something that Saugatuck has been researching for clients for several years now. (Read: “Growing Pains: Consumerization Is The Heart of Fundamental IT Change,” and “Consumerization of IT Raises User Expectations, Creating Vendor Opportunities”)

Apple’s approach of decoupling management capabilities, network infrastructure, devices, applications, content, and delivery has allowed it to focus on its own core competencies: developing new user functionality, fostering its developer ecosystem, and allowing others to fill the demand of users and organizations by building within its ecosystem. Already there exist a multitude of MDM providers that operate within this niche, and we fully expect that more will begin to work within this space. On top of this, many 3rd-party ISVs and SIs are turning to the iOS SDK to provide value-added services to enterprise customers currently using solutions from larger vendors like SAP and IBM.

So despite is proclaimed “non-enterprise” stance, Apple has made very successful inroads into the enterprise market from the bottom up – driven by consumer demand, encouraged by broad ISV/developer interest, and capitalizing on increasing enterprise policies that enable and encourage “bring your own device” (BYOD) (Read: “Mobilization in the Cloud: Facing Bring Your Own Device Policies in the Enterprise”). (source: Alax Bakker - information-management.com)

Optimism in Mobile World Congress: Mutually Beneficial Cooperation between OTT and Cellular Operators

Let's get one thing straight. There is no recession in the mobile telecommunications industry.

Anyone present at Mobile World Congress in Barcelona last week for the annual tapas and telephone fest will vouch that it was the most energetic, positive and crowded event in years, attracting a mass of new peripheral players that are finally seeing that connectedness is everything.

The Insider cannot recall a time when so many different industries were represented in keynote sessions, on the exhibition floor and in cross-industry panel discussions. On the surface it was all positive, but some of it was almost too upbeat. Maybe it was the bright sunshine, copious amounts of sangria or the hallucinatory effect of coffee-con-leche on tap, but the love-fest involving OTT players and operators seemed, at times, almost too good to be true.

Facebook was well represented not only in the keynotes but also in the TM Forum led “operators as intelligent partners” stream. Don’t let the tongue-in-cheek title fool you, this was where the likes of Expedia.com and Facebook came straight out and said they are not only actively seeking out ways of cooperating with operators, they felt it essential for their long-term growth, nay, existence.

Flanked by senior representatives from AT&T, Teliasonera and Telus, Vaughan Smith, VP of Mobile Partnering at Facebook outlined that CSPs had skill sets and reach that his company did not wish to emulate and, particularly in the area of billing, wanted to work closely with them, happy to share the revenues. His realistic view was confirmed by the fact that a large percentage of mobile Facebook users do not even have bank accounts, let alone credit cards with which to pay for goods and services online.

Facebook’s future revenue growth will come from online commerce and if customers are unable to pay, the whole exercise becomes academic. However, by utilizing the existing billing arrangements operators have with their pre-paid community, the payment issue could be circumvented. He gave examples of the dramatic uptake of Spotify sales once they launched on Facebook, and how that could be emulated by almost any digital services provider.

His views were also echoed by his CTO, Brett Taylor, who announced in his keynote address that the company is participating in “a number of industry wide initiatives” intended to support the development of the mobile web, focusing on technology standards and payment enabling.

With the objective of reducing online payment verification from eight steps to one, he announced a partnership with “operators around the world to improve both the user and the developer experience of operator billing.” This work will remove the need for the SMS verification step for the “vast majority” of customers, while providing developers with a single SDK to get global reach with “very, very simple” technical verification.

“That way, payments on the mobile web can be what it should be – a single step to confirm the purchase,” he concluded. Operators working with Facebook on streamlined billing are AT&T, Deutsche Telekom, Orange, Telefónica, T-Mobile USA, Verizon, Vodafone, KDDI and Softbank.

Jeff Warren from Expedia, now the world’s largest travel sales company, said the need to work with mobile operators hinged around connectivity for travelers wherever they are. The whole nature of the business is travel, much of it offshore, but to provide the best service Expedia needs to be in contact with its customers wherever they are to provide the latest updates, cancellations, alternative travel, etc. but the nature and cost of roaming means that most of their customers switch off their phones as soon as they leave their home country and the whole value proposal is lost.
He wants to see how his company can work with operators to make roaming, even specifically for Expedia customers if possible, a seamless and cost-effective service.

David Gurrola from Orange's Consumer Mobile Business, in his presentation said that increasingly complex value chains meant the way operators partner with other organizations has “completely changed”, with it being “much more about bringing together ecosystems.”

Gurrola added that operators will need to become more flexible and more willing to compromise with partners in the future, as well as develop a clear understanding of the value partners can bring. “Operators must go deeper, overcome risk aversion, and act quickly in to changing roles within the partnerships,” he said.

Sounds like a future TM Forum ‘agile business case study!’ (source: telecomasia.net - Poulos)

NTT Com launched Fiber Optic Services in Indonesia

Japan's NTT Com has launched its own fiber network in Indonesia, through its local subsidiary.

NTT Indonesia has gone live with a fiber service in the East Jakarta Industrial Park, the company announced today.

The company revealed plans to build and operate fiber networks in additional locations in Indonesia in the near future, including more industrial parks and office buildings.

NTT Indonesia received a fixed-line operating license from the Indonesian government in December 2011, becoming the first foreign carrier to receive clearance to operate an end-to-end fiber network.

In a statement, NTT Com said that demand for high-speed network services among Indonesian enterprises is growing as more local companies look to expand internationally.

NTT Com has been expanding its presence and capacity in the APAC region. Last month, the company revealed it had agreed to collaborate with the Lao National Internet Center to provide Laotian ISPs with access to its Tier-1 network.

In November, NTT Com announced it had committed to upgrading its PC-1 cross-pacific cable to true 100G by mid-2013, more than tripling the cable's capacity to 10Tbps. (source: telecomasia.net - Dylan Bushell-Embing)