KPCB Internet Trends (2011)

Advertising

While online advertising is booming, it’s still not on par with time investment by people per medium. Print is hugely overpriced, representing 8% of people’s time and 27% of ad spending. Contrast that to mobile: 8% of time spent and 0.5% of ad spending.

Content Creation

Content creation has become a commodity. Newspaper continues to decline while we experience the golden age of content aggregation.

Commerce

E-commerce now represents 8% of all retail commerce and will grow dramatically. Retailers beware: The #1 reason for customers to abandon the in-store purchase is because they found cheaper options online. #2 reason: They found a cheaper price at a different store.

Economy

We might muddle our way through it. Or the economy collapses. Nobody knows. This uncertainty is the biggest challenge for politicians, economist and people. Uncertainty might be the new normal.

Empowering people

More people have access to the wireless grid (85%) than electricity. Over 200 million farmers in India receive payments via mobile devices and they have become instrumental during disasters.

Globalization

While we talk in our echo chamber all day long about Amazon, Apple, Facebook and Google (and they remain global mega-leaders) Internet giants from China and Russia (Baidu, Tencent and Yandex) are catching up quickly.

Here’s an eye-opener: 81% of users of the top global Internet Properties are outside the U.S.

Identity

A big challenge for all of us: How will identify and authenticate the almost billion Facebook customers with the 1.4 billion mobile customers by 2012?

Innovation

The economy is down but U.S. mobile innovation is still the global leader: Made in the US-smartphone operating systems – Android, iOS and Windows Mobile – have increases market share from 5% in 2005 to 65% today.

Mobile

Mobile subscriber growth is more explosive than the initial Internet adoption, leaving TV adoption in the dust. Smartphone shipments have surpassed feature phone shipments.

Usability

Usability matters and it will become even more important over time to deliver complex services to people through a simple interface. The next revolution? Between your ears. Voice recognition, sound creation and sharing, and audio interfaces.

Yahoo!, the last traditional media company, is in deep trouble. Just like AOL, MSN and Forbes.com – dinosaurs founded in a time where media agencies had to manage scarcity. The Yahoo! Homepage used to be part of a digital media plan just like buying commercials during the NFL season for beer brands. Two things changed: ad networks, DSP’s and ad exchanges changed the focus of media agencies from placement buying to audience buying. And, more importantly, people are less interested in reading professional content and pay more attention to content created by their friends.

What is Yahoo’s response to a changed marketplace and customer behavior?

More content, more video, more, more, more. I wonder if Albert Einstein’s “Doing the same thing over and over again and expecting different results” has become Yahoo’s mission statement. More is not the answer. Traditional media companies will never be able to compete with the amount of content created on Social Networks, Twitter, Foursquare, YouTube, Facebook, Google+, Blogs, sites, Tumblr, etc. I’m not predicting the death of Yahoo!, nothing ever dies. VCR’s are still flashing “12:00” in millions of households, papers are being delivered to millions of door steps each morning and millions of faxes are being delivered each week. It took decades after the telegraph

was invented until the last telegraph was sent. (January 27, 2006, to be exact.) Yahoo! will be around for a long time to come. More irrelevant and less valuable by the day.

The demise of Yahoo! points to an important development

Online advertising is in the middle of a radical evolution but the majority of agencies/brands are acting as if it was still 2005. During that period, the majority of digital marketers were complaining about silos and the fact that they were cut off from the traditional campaign. Digital advertising had no place at the table and was not more than an afterthought: “Make sure the banner ad looks like the commercial.”

The disconnect is now between display advertising and social media

I see more integration between TV/Print campaigns and Social Media compared to Display Advertising and Social Media. The challenge is that Display Advertising continues to be deeply anchored in the world of Direct Marketing, creating a massive disconnect between that display advertising and Social Media. When your goal is to convert prospects into leads, a Social Media integration seems nothing than a silly distraction. Or, is it?

We’re reliving 2005 in the display advertising space: SEM/SEO is always at the table, Social Media the hot new toy and display advertising was relegated to the basement and algorithms.

What is the remaining value of media buying agencies?

The agency role in this new ecosystem will be re-evaluated by brands. The main challenge for media buying agencies will be their unique value proposition. It used to be access, buying power and custom tools. That competitive advantage is slowly disappearing because content created outside of traditional media properties gains importance and relevance over time.

The secondary challenge is the lack of trusted measurements. Ask 100,000 marketers about trusted and reliable measurements and you will get 150,000 answers. Is it impressions, clicks, conversions, engagement, connections – what the hell is it? It’s a lack of industry leadership but also a lack of confidence by agencies based on the fickle brands. “Oh, you focus on conversions? Sure, we can do that.”

Sorry, I don’t know the answer. I just have a lot of questions.

The marketing landscape continues to evolve rapidly. We’re still trying to answer the questions of 2005, while our clients expect us to answer the questions of 2012. As a industry, we need to find better ways to measure, to attribute and to communicate our value proposition to clients.

The conference season is upon us. I hope we can spend less time talking about case studies and acting as if we knew the answers. Instead, let’s ask more questions.

The Ford Pinto was a crappy car. No doubt about it.

The Pinto was introduced in 1970 and sold over 100,000 units by January 1971.

Why?

The power of mass media

40 years ago you could take any product and sell it to people. You had to throw a lot of media money at it and somehow people would buy it. The commercial said it looked good, so it must look good. The print ad said it’s cool, so it must be cool. The radio spot said it’s breaking barriers, so it must be breaking barriers.

There was no Edmunds, no Twitter, no Facebook, no Google.

The Ford Pinto wouldn’t sell 100,000 units today

You can’t throw marketing dollars at a product problem anymore. It just doesn’t work.

40 years ago, the lipstick-on-a-pig routine worked.

Today, even major cosmetic surgery doesn’t do the job anymore.

You can scream “Beauty” all day long, it makes no difference as long as Google says “Pig”.

Marketing needs to be responsible for what gets made.

Many people wonder why brands switch agencies so quickly these days. Why CMO’s leave after less than 2 years.

It’s the product, stupid.

Marketing is powerful. But it’s not powerful enough to hide the truth about a product.

CMO’s and agencies will regain leverage when they finally realize that effective marketing is the by-product of a great product.

One day, an agency will stand up to the product team and say: “We can’t sell this effectively. Don’t throw your media money at a terrible product. Everybody will lose. Instead, put your money into product innovation. Effective marketing will follow.”

That’s my agency of the future.

What brand built the first island on Second Life? What brand marketed itself first on Twitter? Quora? MySpace? Napster?

Who cares?

It’s good to be the first on the moon. It’s great to introduce the first touch-screen tablet. It’s an advantage to feature the first hybrid car.

Nobody cares if you’re the first to market yourself on a new platform.

Let me rephrase that: Nobody of your prospective customers cares if you’re the first to market yourself on a new platform.

Your agency might care. It’s good PR and communicates they’re an innovative marketer.

Your communication department might care. They get featured in trade magazines and invited to speak at conferences.

And your customer? They are busy living their lives.

It can cost you a pretty dime to be the first mover.

Remember the iAd? The first movers had to pay $1 million just to get in. Within a few months, the price dropped to $300,000.

Think about it.

The user base was very small in the beginning and Apple charged a million.

Now, millions are using the tablet and the price dropped dramatically.

It’s the premium you pay when you are the first mover.

The next Gold Rush: Google+

Google+ launched a few weeks ago. Apparently, it has a lot of traction. Social Media experts are falling all over themselves to squeeze money out of that new platform by marketing webinars how to make money from Google+. Brands and agencies are anxious to get in on the deal. Ford is already in.

Good for Ford.

Did they sell any more cars because of their Google+ presence? Did they change anybody’s mind about the brand because they “hung out” with 14 people?

Of course not.

Look, I like what Ford and Scott Monty is doing. They utilize Social Marketing in very innovative ways. They got a lot of PR and applause from the echo chamber for their Google+ initiative.

You’re not Ford.

You have a lot of time. Take that time and explore what others are doing. Only geeks and nerds are on Google+ right now. No reason to rush into it. Understand the landscape, participate as an individual to understand how people are using it. Make a business case and dive into the platform with a Direct Marketing approach: Start small, test, layer and, once you found something that works, expand.

Don’t think of yourself as a teenager that missed a party: The world is not coming to an end. You’re an adult now. There will be many more parties.