Russ Pearlman's Blog

I was just in Chicago to attend the Alterian Engaging Times summit. The attendance was great, and there were some impressive brands represented including Dave & Busters, Western Union and many others. The theme of the summit was the rise of social marketing and how to best engage customers.

The keynote address was given by Stan Rapp, an industry veteran – and quite a character to boot. I really liked a lot of what he had to say - but I think the most valuable part of the message was related to companies doing things “to” their customers, doing things “with” their customers and doing things “for” their customers.

Doing things “to” your customers are the typical horror stories that get posted all over the Internet. A company didn’t take care of me, made a mistake or just plain didn’t make me feel that they valued me as a customer. I know I’ve had that recently myself with such brands as Marriott, DirecTV and AT&T.

Doing things “with” your customers are ways that you engage the community. For example, Alcatel Lucent donates use of their campus for the American Cancer Society’s Relay for Life every year in Plano. This makes you feel good about the company, and it makes you feel connected.

Doing things “for” your customers are incentives and/or other special things you can do to provide value. For example, Nike provides information on running events and posts run times for users in training. American Express provides services for making hotel reservations and concert ticket purchases. Chik-Fil-A provides all sorts of free meal options when you engage with the brand (including dress like a cow day).

I think one of the simplest things that a company can do to move into this “for” group is just listening. Best Buy had a great idea with TwelpForce which is a program where Best Buy listens to Tweets and provides instant support / feedback. How often do you find yourself trying to call customer service, send an email or post to a company’s web site and not feel like they understand your questions / comments  / complaints? The simple first step of acknowledging a customer and responding to them really moves a company dramatically up that chain.

David Williams, Merkle’s CEO, often challenges with the question on how you can spend a large advertising budget in social media. For traditional media, it’s as simple as buying print ads, direct mail fliers, radio and TV commercials. Part of the answer, I believe, is moving from a unidirectional medium to bi-directonal. To do that, you need to integrate your online systems (i.e., web-sites and customer information systems), your support systems (i.e., call centers) and your marketing tools (i.e., campaign management, micro-sites, social presence, etc.) In this new world, it isn’t about buying lots of eyeballs – it’s about crafting the message and engaging in a conversation. It’s not a one time investment, it’s a long term investment that really changes the game.

I know that it’s been a while since I updated my blog. The biggest reason is that I’ve taken on a new position at Merkle as the Chief Technology Officer.

Since Merkle isn’t a well known company outside of the Database Marketing environment, it’s worth spending a bit of time describing what Merkle does. Since it’s foundation in the 70’s, Merkle has traditionally focused on helping companies reach their customers. In the most recent incarnation, that means helping marketing organizations to be most effective in understanding their customers, how to effectively execute campaigns and how to measure the results of those efforts. Now with more than 1,200 employees and over $250 million in revenue, Merkle is embarking on its next generation focused on end-to-end, integrated marketing optimization.

And, that’s where I fit in. My background has been on custom application development and integration with a focus on new media and digital channels. The next generation of technology for Merkle extends beyond its existing strengths in developing customer databases, analytics and campaigns (including direct mail, email and mobile). It’s a stronger reach into operational data, digital asset management, marketing organization effectiveness and new aspects of customer interactions including social. While I was at Capgemini, one of the hardest questions we had with our own clients was how to monetize these digital channels. At Merkle, I’m working to help answer that question – along with some of the biggest and best brands in the world.

I’m really excited about the opportunity…

A repost from my guest blog appearance from the Ericsson Televisionary blog site.

Capgemini Conulting just released a report together with In-Stat where we estimate that, by 2013, about 46 million households will use a connected Blu-ray player, video game console or a media enabled PC to stream video from the Internet to a TV set. Overall, the data from the report points to a strong and sustained growth pattern for the electronic entertainment industry. Central to the report’s findings is an identified US$10 billion in revenues that do not exist today—but will be on the market for electronic entertainment by 2013. Other key findings from the report include:

• By 2013, 93 million US households will have broadband (up from 72.9 million in 2008) • Saturation of media enabled PCs connected to TV sets is expected to reach 45.2 million US households by 2013 (up from 18 million in 2008)
• Pay-TV video on demand services are expected to provide over US$ 2.6 billion in ad revenues to the Pay-TV industry in 2013
• In 2008, the market for advertising delivered through online video services was nascent. By 2013, Capgemini and InStat expect this market to grow by over 1400 percent—up to about US$ 1.8 billion.

To download the entire report for free please click. To learn more about innovative Digital Content Services that are helping define, shape and implement new business models for companies in order to capitalize on this new market growth, please click for a free whitepaper.

So, Chitika Labs has a relatively scientific way to track iPads sales by looking across their ad network looking for iPads that are browsing the network. Pretty good idea, and it seems fairly reasonable to me. As of this time, they are tracking North of 850,000 iPads out there in the wild with an uptick of about 1 every 3 seconds (if that rate keeps up, that represents about 10M iPads per year). Interestingly, they also have some information related to usage by state (thus my quick calculation of 25,000 iPads in Wyoming).

Now, I’m not trying to continue throwing cold water on Apple, and this is now my third posting on the iPad, but I think that these preliminary numbers continue to reinforce my estimate of about 4.5M iPads that I think will ultimately be sold. I think that the strong out of the gate “fanboi” buyers boosted the original population, and I suspect that update will slow down quite a bit. When the 3G versions come out, there will certainly be another major uptick, but I don’t expect that to be huge.

Anecdotally, I’m hearing a lot of great things about the iPad, and I’m even hearing about “notebook” replacements, but I don’t think that is realistic. It’s a good device for simple email, browsing and viewing Microsoft Office documents. But the more advanced capabilities of a laptop is still essential.

I just finished reading Walk the Walk by Alan Deutschman. It’s a good short read, but it does highlight a few important things that I think are absolutely true of leadership. First, keep it simple – let everyone know where you stand and where your first 2 or 3 priorities lay. Second, there is not such thing as a typical leader.

As for the first point, its not only important to focus on the key few things that drive you, but you have to be consistent and actually follow what you said. People rarely respond to words – they respond to actions. When you say one thing and do another, they lose faith in you as a leader. When they see you say something and actually do it – they are inspired. Recently, I was involved in a company internal meeting where we reviewed the fact that many of our delivery projects were under performing from a delivery perspective (financially mostly). What were the root causes? Well, for one, while we tell everyone that delivery is important to us, in reality, we are focused on sales and revenue as our KPIs. Given this emphasis (and clear demonstration on how important it is), our ‘walking the walk’ resulted in some very good sales – even in a poor economic climate. The down side, of course, is that we’ve let slip a few fundamentals of our delivery capability. To fix it, we can’t simply start communicating on how important delivery is (which is what I heard our leadership say was step #1). But, we have to start ‘walking the walk’ and show our teams that there is teeth behind this – by rewarding delivery, by emphasizing it more often and by judging our people based on it.

I think the second point is just as critical. Often, people see leaders that they respect and try to emulate them – often at their own peril. We all have natural abilities and ways of thinking. Trying to channel those based on successful role models is a good thing, but trying to dramatically change your persona based on what you “think” a good leader is will end up causing you to ‘talk the walk’ but ultimately end up in trouble. Is Bill Gates a successful leader? Yes. And Steve Jobs? Yes. Are they almost totally different people? Yes. A good lesson here is to be yourself, find your true principles and follow where they lead you.

And, one final note – the book decides to end with a case study on Barack Obama. Unfortunately, the book was published well in advance of his greatly declining public opinion polls. While Alan Deutschman appears to be a big fan of Obama (not sure if it’s his policies or leadership skills), he ultimately further underscores his own point. Obama has continued to be a model of “talking” not “walking.” When he promised transparency but didn’t deliver – he lost leadership credibility. When he promised the end to partisanship but didn’t deliver – he lost credibility. Barack Obama has a tremendous number of natural abilities that makes him a potentially transformative leader – but his inability to “walk the walk” is turning him into just another politician.

A posting by Eriq Gardner on Yahoo (Cute baby video wins battle against music label) provides a summary of a dispute between Stephanie Lenz and Universal Music Group. The case involves the posting of a video on YouTube by Stephanie Lenz back in 2007 of her toddle dancing to the Prince song “Let’s Go Crazy”. In response, Universal demanded removal of the clip since she did not pay for rights to use the song.

But, instead of just complying, Lenz decided to fight back working with the Electronic Frontier Foundation. Ultimately, a judge ruled that her video was a “fair use” of the song. She then sought damages against Universal for sending a merit-less take-down request. As it stands now, it looks like she may be successful against Universal - but it hasn’t entirely played out.

As digital media continues to expand, it’s worth reviewing what things like “fair use” really mean. United States copyright law is covered in title 17 of the U.S. code. Sections 107 through 118 highlight several limitations of a copyright owner about their ability to limit the reproduction and authorization of their property. One of the more significant areas is now known as “fair use” which has been progressively determined through a number of court rulings over the years. Section 107 specifically calls out the particulars of fair use which include: the purpose and character of the use (e.g., non-commercial use such as non-profit or educational purposes), that nature of the copyrighted work, the portion used in relation to the work as a whole and the effect of the use upon the potential market (or value) of the copyrighted work.

Now, I’m not a lawyer, and I certainly won’t pretend to be one here. But, this ruling does continue to push the envelope of what is allowable in terms of copyrighted materials. With the value of digital content declining (e.g., the revenue of a physical disc vs. a download) original content owners are trying to keep whatever control and revenue they can. But, as in Universal’s case here, I think many content companies are going about this the wrong way. For example, if I wanted to use music in a simple home video that I then posted to YouTube, it would be better if the right owner simply provided me with a portal where I could pay a small fee for use of the song. (People are already doing this – why not try to monetize that instead of spending money on lawyers to prevent it.) Perhaps I could even have a site that enables the download of these songs directly. This type of situation doesn’t really reduce the market for the materials, but it does enhance the enjoyment of the media itself. People are willing to pay for premium content. And, if they won’t, those companies won’t be in business for very long anyhow.

So, Walmart is back in the digital video distribution game. They recently announced that they will be purchasing Vudu, a 2nd tier video distribution service (for as much as $100M in cash). In just about every story I’ve read about this purchase, I hear people talk about the first time Walmart tried (in 2007 in collaboration with HP), and I’ve heard various reasons why the analysts think it failed. I’d like to add my own thoughts to that conversation as well as predict why I think this time around is different.

• Was it the price? Certainly – consumers have demonstrated time and time again that they do not value the price of digital content at the same level as physical content (at least for content they are used to getting physically).
• Was it the DRM? Certainly – the first time around, Windows DRM forced users to play movies on their PC / laptop or on Windows DRM compatible devices (i.e., NOT Apple). This was (and is) a small market – despite all the fanfare, how many people have their home TV hooked up to a Media PC?
• Was it the model? Certainly – consumers just don’t want to BUY large movie content and STORE it themselves. They prefer to RENT or STREAM and have it available “in the cloud”.
• Was it is Walmart’s best interest? Certainly – and I haven’t heard many people talk about the reality here. Walmart (in 2007) sold about 35% of all DVDs in the US. The 2nd best was in the single digits – Walmart was the 800 lbs gorilla, the banana, the safari, etc. Digital distribution did NOTHING to help sales in Walmart stores, it didn’t gain them additional margin or revenue and it didn’t fit with any of their key demographics. Walmart wasn’t behind digital distribution because it thought it was a good idea – it was doing it because a defensive strategy was presented to them by HP.

So, why did Walmart try video downloads back in 2007? Well, for several reasons I think:

• Apple. With iTunes and iTV heading towards digital, Walmart wanted to make sure their position of dominance was maintained. HP came along with a compelling offer – they would take care of the technology and risk, Walmart would simply drive traffic and negotiate with the studios.
• Apple. The studios were cutting deals with Apple for their services, and Walmart wanted to make sure they weren’t setting a precedence that would ultimately hurt Walmart. By having a service of their own, they could make sure that all deals the studios were making in digital were consistent with Walmart’s ultimate plans. (We all know that Walmart’s core competency is negotiation – this was another opportunity to leverage that strength.)
• Me-to. At the time, there were a number of “experiments” in video download services. Walmart had the name and an existing digital music business. It made sense for Walmart to be in the game too.

Will things be different with Vudu? Yes. Here’s why:

1. Walmart cares this time. Walmart doesn’t have a partner taking most of the risk, this time its a $100M gamble all their own.
2. This is no longer the digital DOWNLOAD service – Vudu is compatible with networked TVs that enable streaming right to the living room. That’s a much larger audience than the 2007 version.
3. Consumers have changed. The idea of digital delivery is not as foreign any more. It’s still somewhat rare – but it is no longer the 3-eyed alien that it once was.
4. The studios get it now. Digital has entered into a new phase of maturity at the content creator level – they now see digital as another distribution channel, not just a gimmick that might get them a few extra bucks.
5. TV’s get people to the Walmart store. Unlike 2007, acquiring compatible TVs is a reason to drive traffic into the stores. This is more consistent with Walmart’s corporate strategy.

I think this is huge industry news, and I think it will be a success. Walmart didn’t do it right the first time (but then again, it didn’t cost them much then either).

Recently, Capgemini commissioned a paper with In-Stat related to transformation in the digital space. This is part of our marketing around Digital Content Services (which I hope to post a link to our latest white-paper here soon). A portion of the research is pointing to a demographic area that In-Stat calls the ‘multi-taskers’: these are essentially digital natives who are so used to technology / entertainment that they normally do a number of things at once including emailing, text messaging, etc. while playing games and/or watching filmed entertainment. But, just how big are those groups?

In the range of 18-24 alone, there are 6.5 million males and 4.8 million females in the United States. Across all age ranges, there are about 38 million males and 28 million females. Wow… that’s pretty incredible.

So, what does that mean to my thinking about the iPad? Well, I still think there are some significant challenges to the iPad including a lack of camera, concerns about battery life and the ability for users to read on it for long periods of time. The fundamental problem in my mind, however, was that the iPad doesn’t really replace any existing devices nor does it fill in a gap. But, when thinking about these multitaskers, I starting thinking that perhaps the iPad is a perfect fit for this demographic. They will continue to use their HD TV for movies / television and their cell phone for texting, etc. But, they can also use the iPad simultaneously to play games, browse the web, etc. So, the iPad won’t be a primary device, but it will be a nice secondardy device for these multitaskers.

Given the demographics I’ve see for this group, I think that represents about 30 million potential buyers. If the update is about 15%, then I’d expect to see 4.5 million iPads ultimately sold. So, that’s my new predicition…

I’m probably the only person to blog about the launch of the iPad today. (Was that sarcastic enough?) Never the less, I’m going to add to the rash of dialog. Today, I’d like to talk to a very basic question – will it be a success?

It’s important, I think, to look back at the iPod and iPhone. Compared with other MP3 players, the iPod is extremely successful. Was it because the iPod had better sound quality? No. Was the form factor that much more amazing? No. Was the price really compelling? No. How about the iPhone? Is the calling capabilities better? No. Is the price great? No. Does it provide a better multimedia experience? Probably yes – but I don’t think that was the biggest success factor.

At the end of the day, I believe the real success of the iPod and the iPhone today comes down to a very simple idea: content matched with the device. iTunes and the songs available from Apple is what made the iPod the “killer app” that it is today. The iPhone was very attractive in terms of screen and interface – but what turned it from a toy into a phenomenon was how well it integrated into iTunes for music and video at first and now a huge wealth of applications. What just about every competitor was unable to do was marry content with devices – resulting in near monopoly for Apple at this point (at least in the music space).

So, where does that leave us with the iPad? Will the content be there? Absolutely. So, from a consistency perspective, you’d think I’d be predicting success. And, there is certainly some truth in that. I believe that the iPad is going to be more successful than just about anything in that category (including Kindles or Sony EBook readers or tablet PCs.) But, is it going to be another ‘killer app’ from Apple? I don’t think so. And, here’s why…

Who is the primary target for the iPad? For book enthusiasts, the battery life doesn’t work – only 10 hours of battery time (which is a marketing number anyhow) means you have to plug it in daily. Compared with a Kindle that’s terrible. For music enthusiasts, it isn’t nearly as portable as an iPod. For video enthusiasts, it’s an interesting option, but the storage costs for the device aren’t as attractive as external hard drives or media PCs. For folks looking for a lightweight PC replacement, it isn’t powerful enough to run real productivity software, and it’s lack of peripheral connectivity will frustrate most users in this camp. Since it doesn’t support making phone calls, it isn’t an iPhone replacement either.

Since the iPad doesn’t really attract a primary user type, it could still be successful as a ‘jack of all trades, master of none’. But, I highly doubt it. The one area where I could see it providing a unique capability is related to ’TV everywhere’ (i.e., where you can get live broadcasts of digital television such as sporting events on portable devices). Unfortunately, we are still years away from the content and distribution folks working out the business models for this capability.

At the end of the day, I’m predicting mediocre sales of the iPad with it eventually being just a ho-hum member of the Apple product line-up. It’s not a game changer, and it’s not going to cause any major device switching.

I’m a bit late in updating my blog from CES, but as they say, better late than never.

While at CES, I participated in a number of great panels including those from CESCA (the Consumer Electronic Supply Chain Academy) as well as Digital Hollywood. There was a lot of great participation from the industry, and I learned quite a bit. One of my favorite topics was about ‘TV Everywhere’ – about watching TV on all devices whenever and wherever you want. The technology guys in the discussion were convinced that this is just 3-5 years away from mainstream while the content guys all said 7-10 years. What an interesting difference – and it shows, like many situations, that it isn’t about the technology as much as it’s about how you use it.

The other big thing at CES this year was all the 3-D televisions. You may have already read a lot about this, especially if you followed CES at all. I know that I’ve heard a lot about how cool it is, how some people think it’s impractical, etc.

From my own point of view, just like the discussion about “TV Anywhere’, I think it comes back down to the content. Live sporting events in 3D? Adult content in 3D? Video gaming in 3D? Those are probably going to be the drivers. But, I think there might also be a brewing content war – each different TV maker has a slightly different technology for the glasses, and I think the compatibility issues are going to be a big problem. How do you invite 5 friends over to watch “the game” in 3D? You all have to be using your own glasses, and these aren’t going to be cheap – probably $30 each.

So, while 3D is making waves in the theater, and there might be some consumer demand, until the content is there and the standards are worked out, it’s going to be a long way off. Technology: 3-5 years, reality: 7-10…