Web Freebies Stimulate Sales, Not Stifle Demand

The copyright police units at several media companies have aggressively fought to keep their protected works off free access sites like YouTube. These efforts are rooted in the long held belief that copyrighted works should controlled by their owner. The advent of viral marketing, file sharing, and user-generated content has turned this mindset on its head. Should media companies change their relationship with the YouTubes of the world from adversarial to collaborative?

YouTube is working with content creators to drive sales with free videos and songs on its web site. The formula is exposure to the free content stimulates demand for buying a movie or song through legitimate channels. In this scenario, consumers are buying, not pirating, copyrighted works. Thus, rather than fighting free distribution with an aggressive monitoring effort, entertainment marketers should be exploring ways to exploit tools such as YouTube to whet appetites of people who will pay for entertainment.

Link: The Daily Online Examiner – “YouTube: Free Clips Boost DVD Sales”

Sky Not Falling for Online Advertising

A grim reality for media sellers is that a weak economy triggers marketing belt tightening that almost always includes spending less on advertising. Such reductions occur because they may be a preferred alternative to cutting expenses in other areas such as payroll. Also, cutting back on marketing spending may be viewed as a short-term situation that can be reversed relatively quickly. In today’s uncertain economy, it is not surprising to see marketing spending cut back, but perhaps surprising is that at least one area is seeing more spending… online advertising.

A report released by the Interactive Advertising Bureau indicates that Internet advertising revenues increased 11% in the 3rd quarter compared to the same period last year. Any growth at all is noteworthy; double-digit growth is astounding. The reasons are simple: 1) online ads allow for fairly precise targeting, and 2) marketers like that online ads allow for easier tracking of effectiveness than ads placed in traditional media. Whether it be the number of clicks an ad generates or tracking sales that occur from an ad that directs consumers to a URL created specifically to track ad performance, online ads enable marketers to better understand how well (or poorly) their communication efforts perform.

The need for advertising has not diminished just because of a slow economy. In fact, one could argue it is the time when advertising is needed most. What has changed is the need for greater accountability in how ad dollars perform, and online ads meet this need.

Link: Response Magazine – “Internet Advertising Revenues Up in Q3”

Youth Prefer You Tube over Boob Tube

Here’s another stat that will make traditional media properties cringe: 10-14 year-olds are spending more time online than in front of their TVs. According to a recent study by DoubleClick Performics, 83% of the youth sampled indicated they spend one hour or more a day online while the figure for spending the same amount of time watching TV was reported by 68%. The impact of this trend is not limited to parents, who are challenged to not only monitor kids’ online surfing behavior. Advertisers are affected by this tend, too.

Not too long ago, reaching youth markets was easier for advertisers as they could rely on TV to deliver this coveted audience. Now, with youth spending more time online (and on wireless devices), another audience has become more fragmented and difficult to reach. The study does point out some specific behaviors that should enable advertisers to pinpoint youth web surfers better such as the fact that over 70% visit social networking sites (especially MySpace). The trend toward greater use of the Internet by youth could be viewed as an opportunity in that online media provide ways for marketers and consumers to engage in meaningful interaction that simply is not possible through mass media advertising.

Link: The New York Times – “Preferring the Web over Watching TV”

Give Customers a Voice… So Others Can Listen

Many people make extensive use of the Internet to research products and services when making purchase decisions. More of us are reading user reviews as part of the process of information search. A survey of online shoppers by Opinion Research Corporation found that 61% of those surveyed seek out customer reviews and other types of feedback posted online when making a buying decision. Certain product categories are of great interest to searchers who want to read what customers have to say about products, namely leisure/travel services (82%) and electronics (80%).

It was not all that long ago that giving customers what they wanted on the Web could be achieved simply by having a web site. Today, a web presence is a necessary, but not sufficient condition for marketing success. Transparency with customers is in; the days of sellers holding more information than buyers has passed. Whether it be creating a user review area on your web site or engaging customers and others using blogs, be open to ways you can have a conversation with those people who are talking (and listening) about your company and products.

Link: eMarketer – “Online Reviews Sway Shoppers”

Build Communities, Build Relationships

If social networks were a fashion item, they would be the must have marketing accessory this season! The success of sites like MySpace, Facebook, and Digg have prompted brand caretakers to explore creating social networks around their brands or product categories. The idea is that if people are interested in meeting others with similar interests as shown by the millions of visitors to the top social networking sites, then there might be commercial applications for social networks for relationship building and maintenance. I would say there is commercial potential… for some brands.

Creating a social network just because others do it is no more logical than advertising because your competitors do it or lowering your price to match your competitors’ price. A brand has to matter to customers in the first place before they would consider investing time and emotions in a social network. An example of a brand that has the foundation for building a social network is GM’s Saturn. The brand recently launched its own social network, ImSaturn. Saturn has had a legion of devoted customers since its inception in the early 1990s. Saturn owners are somewhat like Apple Mac users: not the largest customer group in the industry but very loyal to the brand. In three weeks, more than 1,200 people joined ImSaturn (including yours truly, an owner of two Saturns). This initial response exceeded the goal of having 1,000 members during the first six months.

It’s all about relevance- creating a social network cannot make your brand relevant. The brand must already be perceived as credible and its promises delivered to the target market. A social network is a way to bring together people with similar feelings toward a brand and even draw in people from their personal networks. With those capabilities, social networks are not likely to go out of style anytime soon!

Link: Response Magazine “Saturn Creates Its Own Social Networks”

The Value of Positive Word-of-Mouth

Word-of-mouth communication has long been acknowledged as an influence on consumer behavior. The power of word-of-mouth is evident as marketers are increasingly seeking ways to engage in viral marketing and social networking. We know that negative word-of-mouth has potentially undesirable effects, but can the benefits of positive word-of-mouth be assessed? Absolutely, according to comScore, a marketing intelligence firm.

In a survey of the impact of onlione consumer-generated reviews on consumer behavior for certain services, comScore found that word-of-mouth in the form of user reviews are often accessed, have an influence on buying decisions, and can even lead to a willingness to pay a price premium. Restaurants, hotels, and travel were the three services for which highest percentages of consumers reported reading online reviews and acknowledging that reviews influenced their buying decisions. These findings are not surprising as the intangible nature of services leads us to seek information pre-purchase to help us make an informed buying decision.

The effect of user reviews on price willing to pay for services is particularly noteworthy. When a service provider is rated “Excellent” in user reviews, consumers sampled said they were willing to pay price premiums ranging from 22% for travel services to 99% for legal services compared to service providers rated as “Good.” It is a given that it makes sense for a business to monitor word-of-mouth about its performance on online user review websites to understand customers’ likes and dislikes. Now, we know it makes dollars, too!

Facebook and Social Ads

Facebook introduced its much anticipated advertising model on Tuesday of this week. Facebook ads put a different twist on serving ads over the Internet. Ad messages from marketers appearing on Facebook will be delivered by Facebook members as a type of referral to their friends. The concept has been branded “Social Ads” by the company. Also, businesses can create Facebook pages, and Facebook users can sign up to become “fans” of the business. Fans will be the transmitters of ad messages to friends they believe would be interested in learning about a particular advertiser.

The potential benefits to advertisers are two-fold. First, companies that use Facebook ads can obtain an extensive amount of information on audience characteristics, both demographic and psychographic data. Second, credibility of ad messages could be enhanced because of the implicit (or explicit) endorsement of one’s friend rather than an ad coming directly from the marketer. Word-of-mouth is powerful; there are no better messengers for a brand than users who are convinced that the brand delivers value! Link

New Marketing Mix for Magazines?

Old media is trying hard to avoid the appearance of, well, being old. Major market daily newspapers are in a fight to avoid the decline stage of the product life cycle. Magazines face a similar challenge as consumers use the Internet as an information source, one that can be more current than magazines that are published weekly or even less frequently.

How can magazines stem the flow of readers to new media platforms? Heavy doeses of advertising? Nope, to easy to ignore the direct mail subscription offers that appear in our mailboxes. Cutting subscription rates to make mags more enticing to consumers? Not worth the risk that increased subscriptions would offset lower revenues per subscription. Before we write an obituary for the magazine industry, Time, Inc. might have the answer.

Time is developing a service called Maghound. This service has been called the Netflix of the magazine industry by some experts. Maghound will give customers web access to multiple magazine titles each month (3 magazines for $4.95, 5 magazines for $7.95, or 7 magazines for $9.95). Customers can mix and match titles, changing them whenever they want. Maghound is scheduled to be launched in the second half of 2008.

Persuading people to consume magazine content this way will be a challenge. We have become accustomed to getting so much information from the Internet at no charge. The ability to customize one’s subscription list at any time is a major selling point of this service. Not only would moving consumption of magazine content to the Internet benefit publishers through reduced costs for printing and postage, but readers’ movements through pages on a magazine’s web site can be measured. The ability to track the pages viewed and amount of time spent on pages will make advertising in these magazines’ web versions more attractive to marketers.

Free Site Access Another Sign of the Times

The New York Times has abandoned its premium content service, Times Select. As of today, visitors to nytimes.com have access to all content on the site. The Times Select service gave subscribers access to works from Times columnists and the newspaper’s archives. Some industry observers believe the move is in response to the possibility that the new owner of The Wall Street Journal, Rupert Murdoch’s News Corp., plans to open access to wsj.com in the near future.

The decision to open access to NY Times content reflects two things. First, a cornerstone of the internet’s popularity is access to information. Any distributor of information that attempts to restrict access through selling subscriptions risks driving people to other web sites where they can access info at no charge. Second, increased traffic that will come from open access to content makes sites like nytimes.com more attractive to advertisers. The result will be enhanced advertising revenues that ultimately could more than offset subscription revenues that are being given up. Link

The Power of Community: Nothing Rivals It

Yahoo’s acquisition of Rivals.com, a site dedicated to college and high school sports, is a clear acknowledgement of the Web’s prowess as a gathering place for communities of people with shared interests. Yahoo is a destination portal already, and its acquisition of Rivals.com is a sign that it seeks to bond with one of the most passionate consumer communities in existence: college sports fans. Adding Rivals.com content gives Yahoo an advantage over sports-only sites such as ESPN.com. Tapping into the devotion of college and high school sports fans is a way to attract users to Yahoo and keep them on the site to meet their content needs in other aspects of their lives. This move gives Yahoo an opportunity to enhance the brand experience it offers and become more relevant to Rivals.com users.