When Thomas Owadenko planned a weekend getaway to the Provence region of France with his wife a few years back, he went to a logical source of information the Internet. Looking for a place to stay, Owadenko browsed the usual travel sites Expedia.com, Hotels.com and Travelocity. He found information about availability, pricing and amenities, but still couldn’t make up his mind. He realized what was missing: an experience of his potential destinations, an actual sense of what it would be like to lay back on a bed, stroll the grounds, have a drink at the bar or take a swim in the pool.
A successful Internet entrepreneur, Owadenko sensed an opportunity. He decided to do for the hotel industry what iTunes and other sites had done for the television and movie business offer high-quality video via the Web. Months later, after a round of funding, he unveiled Parisbased Trivop, billed as the world’s first hotel videoguide.
“With video, you can have a kind of emotion about a destination,” says Owadenko, the company’s CEO and the founder of European e-commerce sites such as Rhapsodis, Primashop and Akabi.com. “Video offers total transparency to users when they book their hotels online.”
In a fast-moving Web 2.0 world, this is how you catch lightning in a bottle: See the opportunity. Make it happen. A new generation of companies has taken the place of the startups wiped out by the dot-com crash. Armed with real business plans, they are capitalizing on trends from the increasing popularity of multimedia online to the proliferation of broadband connections. The upshot is a mushrooming digital economy in competition with traditional media along with a new set of rules for CEOs.
Trivop got its start last year in 10 European cities and has moved quickly into the
Owadenko is excited about Trivop’s plans to accept videos from travelers. He believes that the home movie phenomenon witness YouTube will help to build a worldwide contributor community and differentiate Trivop from competitors.
Sometimes the driving force behind a dot-com is the pull of a new idea. Sometimes there’s also the harsh push of reality. For Scott Sassa, former West Coast president of General Electric’s NBC network, the transition from old media to new involved a little bit of both. “It was an evolution,” Sassa says. “We were very successful at NBC: No. 1 three of the four seasons that I ran the programming. But we laid off staff three times. It always seemed to me that the business was going to have to change.”
Sassa jumped first to a role as president and CEO of the social networking site Friendster, then to a gig as cofounder and CEO of uber.com, where users store and share songs and slideshows. Uber’s aficionados run the gamut from blogging teenagers to the boutique clothing designer, Rami Kashou, who recently moved his entire website to Uber. “The rare looker in a world filled with fugs,” wrote Spin magazine in a recent review of the site.
More than an online bulletin board, Uber enables its members to comment on posted material. Sassa finds the attraction to dialogue among the most distinctive facets of the Web 2.0 phenomenon. “When I was at NBC we fought with Warner Brothers over who had the digital rights to ï¿½ï¿½West Wing.’ But the No. 1 site for ‘West Wing’ wasn’t either of our sites, it was an online discussion board called Mighty Big TV. The reality was people didn’t want to see the warmed-over content, they wanted to participate in the discussion: “Was the episode good? What would you have done?’”
Uber depends on ad revenue, though Sassa has resolved not to spend too much time counting beans early on. “At Warner Brothers we were doing Six Sigma analysis to figure out how much money we could make on each commercial break,” he says. “When I went to Friendster, we increased the revenue per user from six cents a month to 63 cents in a fourmonth period. It was not the right thing to do, because we focused the company on an ad sales team instead of focusing it on users.”
In an online environment, Sassa says, “The smart thing to do is to get really great viral usage first and then move into the monetization.”
In addition to websites, the Internet economy features an expanding ecosystem of support companies building infrastructure, pushing content to customers and helping with marketing and measurement in the new environment.
Paul Sagan endured the teeth of the Internet whipsaw. In 1998 he signed on with Akamai Technologies, a hot, new startup providing super-fast digital delivery services to hundreds of websites. Sagan watched as the dotcom world tumbled under the force of the
As its customers faltered, the company plunged toward bankruptcy. Akamai, from the Hawaiian word for “clever,” seemed another big idea headed for the high-tech dustbin.
Nearly seven years later, Akamai is on the move again, in large part due to the upsurge in demand for multimedia online. Its 30,000 servers in 70 countries dish out NBC sitcoms, NCAA basketball games and movie downloads from Starz. Sagan counts Microsoft’s Bill Gates and Apple Computer’s Steve Jobs as customers.
Online sites, including Yahoo and iTunes, use Akamai to deliver digital products microseconds faster than the conventional Internet. Akamai parks data locally to cut the travel time of voice, data and multimedia packets, much the same way a PC caches content for fast retrieval.
Akamai’s innovation is software algorithms that build virtual pipelines on top of the thousands of individual networks that make up the Internet carpool lanes that enable content to breeze through traffic. The business model is simple: Companies could build private networks themselves to cut through choke points, but in many cases, cost is a prohibitive factor.
Online video and e-commerce are driving the Akamai charge: Some 190 million Americans are expected to view online video by 2012, up from 137.5 million last year, according to media analyst eMarketer. Forrester Research projects e-commerce sales rising 17 percent to $208 billion in 2008.
Supercharging the Internet resuscitated Akamai’s prospects: Revenue tripled in three years, to $636 million in 2007, while earnings nearly doubled year-on-year to $101 million. Akamai stock was trading recently at around $35, up from 56 cents in late 2002.
At the heart of the digital economy, Sagan says, is an emancipated online consumer. An Emmy-winning television producer who helped launch a Time-Warner cable news channel in 1991, Sagan sees permanent change on the horizon.
“The power has shifted from the seller to the buyer”, he says. “In the old media model, there were very few channels. You were forced to watch them. Now you don’t have to watch commercials, and if the person who wants to entertain you isn’t cooperating, you are one click away from another option.
“The job of a media CEO has gotten much, much harder,” he says. “The traditional business, the cash cow, is getting squeezed. There are so many new competitors in the online world. If you are a media executive these days, the kind of people you need are not just actors and scriptwriters, you also need engineering talent. You’re trying to struggle through building applications. You have to understand how search engines can drive traffic. It’s not as simple as putting out a signal where everyone can watch it.”
Geoff Ramsey launched eMarketer in the mid-’90s to help sift through the clutter of information on the digital economy and the electronic marketing practices of traditional businesses. Based in
The company’s co-founder and chief executive, Ramsey acknowledges that the rules of engagement have changed. He suggests that it’s important for all media businesses to focus on content distribution in a world filled with innovative new channels.
“Content is king,” Ramsey says. “In a fragmented market, the winner is not television versus Internet, it is who ever has the best content and is easiest to get to. The big television networks want to make valued content available on as many forms of transmission as possible. Consumers are going to their PCs to watch TV shows. That breaks up the whole prime-time model. It has become “my time, not prime time.”
For their part, Internet CEOs face the challenge of making money from a medium that many of its users view as ubiquitous and free. A fluid business environment without safety nets waits.
“When I was with Warner on the entertainment side, you would walk down the hallway and there was an HR department and a PR department,” says uber’s Sassa. “In the startup business you are the HR department. You don’t have that infrastructure around you.“It is really liberating. You have to use that to your advantage by making really fast decisions, because speed is the only clear advantage you have.”
Honest Multi-Channel Marketing: Five Tough Questions to Ask Your CMO
While marketing has become more measurable, the focus has been on results, not costs. When costs are discussed, standards vary from channel to channel, making comparisons impossible. In a struggling economy, all costs must be included in your analysis for sound decisions. This is the only honest approach to measurement, budgeting and goal-setting.
Here are five questions that get to the heart of measuring multi-channel marketing ROI:
How does conversion to sale vary by sales channel (call center, website visit, retail location, event, etc.)?
As a rule of thumb, e-commerce conversion rates typically hover around 5 percent. Call center conversion rates often range from 25 to 35 percent. That’s a sixfold performance difference. Is this factored into your analysis when comparing online activities versus traditional media?
How does the average value of a sale vary by sales channel?
Just as conversion rates can vary by channel, the size of an average sale can swing wildly. Skilled call center agents or experienced retail salespeople can easily beat the average sale. Factor it into your analysis.
What are the fixed, variable and overhead costs associated with your marketing initiatives?
Too many marketers focus on media and other variable costs but that’s like saying the cost of owning a car is the cost of gas. It doesn’t account for the initial cost, insurance and maintenance, much less the occasional speeding ticket.
For DRTV, include all production and agency expenses. For online marketing, calculate the internal and external Web development costs to support the campaign and all agency fees. To back into a real number, you can take the total operating budget for the e-commerce team and divide by the number of sales from that channel. You can do the same with call centers, trade shows, just about everything. It’s not perfect, but it should get the conversation going.
Was the incremental lift of this campaign better than doing nothing at all?
Now we’re really getting personal. For mail campaigns, you can hold back a no-mail control audience. For online, track cookies and serve up nonprofit banners to a portion of your target audience. For broadcast and print, try holding back advertising from a market DMA and compare local performance to a similar area. With so much activity, you need to know which marketing efforts are really generating results.
Does this channel scale to hit your growth goals? How is performance affected by increasing spending in variable costs?
This question drives optimization across channels. You can achieve fantastic results in search engine optimization and search marketing but, in general, you can do little to increase the total number of people searching for your product or category in a given month. If you spend 20 percent more on DRTV media, will it drive 20 percent more in revenue?
Try these questions out at your next marketing budget review. If you’re surprised by excuses about why measurement across channels can’t be done, don’t get caught in the smoke screen. Demand accountability. Your company will benefit from the fact-based decision-making it allows.
Brian Gilbert is vice president of integrated marketing for Hacker Group, a direct marketing advertising agency (www.hackergroup.com).