Yet, while we struggle with that gap today, the pace of data continues to accelerate. There are now more than 2 billion users of the Internet[i] accessing and generating vast amounts of data. According to Cisco’s most recent Visual Networking Index[ii], Internet traffic increased eightfold over the last five years and will increase another fourfold over the next five. They estimate that by 2015, annual Internet traffic will approach one zetabyte. That’s a staggering amount of data. The gap will continue to grow.

To put that into perspective, let’s start smaller with a petabyte. A petabyte is 10¹⁵ bytes or 1 million gigabytes – capable of storing about 350 million MP3 songs[iii]. Using Gracenotes[iv] as an estimate on the total number of songs available (around 97 million) and the release of about 50 albums (or 500 songs) per week, it would take almost a thousand more years to have a petabyte of professionally recorded music. And a zetabyte is one million petabytes!

Figure: How Big is Each Byte

The reason why this is so problematic to on-line marketers is that it continues to underscore the one-to-one marketing “data treadmill” – no matter how much data you collect about a single customer or potential customer, there’s always more to collect as their “digital exhaust”[vi] continues to expand in size and scope. While some of today’s largest marketing databases range into the terabytes of data, future database will need to expand significantly. But the emphasis will continue to be applying “big judgment” to “big data”; collecting more data and throwing it at existing processes is just throwing gasoline at the fire.

While I think the article is provocative enough, I’d like to pile on – the people who are often pushing the most for cloud technology are often the least empathetic to what IT actually does. When you see IT as slow and expensive, you can easily be seduced by the idea of completely outsourcing business supporting systems to cut IT out, with the immediate reward of “it just works” type of thinking. (Everyone seems to believe that the other guy’s IT is better than my own. Having been in many organizations, be careful what you assume.). And, frankly, it’s often hard to argue that there aren’t some really great opportunities for SaaS to have major break-throughs. For example, I’m a big proponent of Concur, which is a travel and expense SaaS tool that I’ve been using for a long time. Equally, Salesforce.com has shown how CRM can be extremely effective in a cloud-based configuration.

But, as I often point out, it’s rarely the big applications themselves that are the hard part. What’s hard in IT is system integration, monitoring/operating things in connection with each other, managing data and dealing with unexpected situations. Cloud doesn’t solve the integration problem unless you completely migrate all systems onto a single platform. Cloud doesn’t solve monitoring/operating because it doesn’t get rid of all systems – and it perhaps makes it worse because you now have off-premise systems that you aren’t able to understand more fully what may be going wrong (i.e., is it a network failure, too much data, etc.) While there is some movement here, it’s still pretty much a black box. Managing data isn’t any better – it still exists in spreadsheet, databases, enterprise systems and cloud systems. As a matter of fact, cloud also often makes this worse as limited data format customizations within the cloud systems means that you have to implement additional ETL capabilities to make it fit the platform. And, finally, it doesn’t address unexpected errors – that can still happen across the organization and even in the cloud (or connecting to the cloud) as well. And, as the article points out, unexpected errors could now be coming from your SaaS provider who makes updates to their software without any typical production communications. The mantra “there are no migrations or versions” is sexy to the end user until all the data connections feeding the system breaks. (In computer science, we call this a “side effect” – which like the military equivalent “collateral damage” – sounds really innocuous until you realize that there is literally nothing you can do about it until you resolve the root cause. And, do you suspect it will be your cloud vendor stepping up to admit that it was their change that caused your problem?)

As a good example of this, I was at Dreamforce (the Salesforce.com conference) earlier this year where I listened to a team discuss a “success story” of building an application on Force.com. They called it a success because the team was able to build a ground up application in 9 weeks that pulled in data from numerous sources to  provide visibility to multi-level-marketing commission values. As the topic went on, though, it was noted that the data was actually fed from a corporate data warehouse that integrated all the systems into a single view which was then forwarded to the Force.com platform. Essentially, they had created a fairly straight forward non-transactional visibility system that relied on heavy duty IT support and integration to make function. If the underlying data warehouse went down or the integration between the systems broke, the application itself would go stale with data and be unusable. So, of course, this solution still requires IT support. (Perhaps that’s why salesforce.com changed its motto from “No IT” to “No software” – or perhas they were picking fights where they should have been building bridges.)

From my perspective, cloud should be seen not as everything but as another tool in the belt of solving business problems. There are a number of situations where it’s a great fit today. And, I expect that to conitnue to expand as more investments are made in the space. But, equally, it should not be seen as the solution to all problems, and, IT especially, needs to continue to deal with governance and processes like ITIL.

And, as a proponent of cloud concepts, I’d also like to warn IT that this point of view should not be used as a weapon to defend the status quo. Cloud is upon us, and we need to take advantage of it however we can – just like the introduction of any new technology that can lower costs, make us faster and deliver more value. Don’t be afraid to roll with the change…

However, I believe that his argument is myopic. If marketing makes technology decisions in a vacuum, you miss a great opportunity to pull in information from across the organization or even share your information with others. For example, about five years ago, I was working with one of the world’s largest automotive retailers. The customer information systems were completely siloed between sales and warranty service – which caused numerous customer service challenges. By fully integrating these systems, we were able to provide seamless customer interaction across the organization all the way from marketing through sales through service – with much happier customers the result. This project required the cooperation of multiple business units including automotive, parts, warranty and sales.

Secondly, by putting a Chief Marketing Technologist in the organization itself, you create shadow IT that tends to prioritize its own needs independently. While this may accelerate things in the short term, it can really cause headaches in the long term. Often, as departmental solutions grow is size and complexity, IT needs to be brought in causing big transitional hardships such as costs, downtime and loss of functionality.

I believe the better answer is for marketing and IT to forge stronger alliances. When selecting tools, engage with IT to support the process so that they can worry about things like security, integration, performance and cost. When looking to implement a new project, work with IT to see if other sources of customer data can be pulled in for analysis. Of course, this is a two way street. Today, too many IT shops are ineffective and have little understanding of marketing. CIO’s should be pushing IT to become more business focused. If they aren’t, you can always initiate the conversation yourself – I’m not sure I’ve ever witnessed a close minded IT shop when business users are trying to treat them as partners.

At Merkle, we are often in the juxtaposition of marketing and IT. We make it our job to understand the business of marketing and provide value. We also make it our job to understand IT to make use of best in class solutions through the efficient use of technology systems. However, we find ourselves more and more engaging directly with senior technologists from IT at our client’s companies who see value in the services we provide and the data they could use across their organization. Finding ways for our clients to blur the lines between sales, marketing, IT and all other groups focused on the customer is what we strive for. It’s what all marketers should be striving for themselves…

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.

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…

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.

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.

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.

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.

• 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).