Friday Jan 05, 2007

Ryanair fails to close down web site

I have only flown on Ryanair a couple of times to Ancona, a holiday destination in northern Italy which is not served by any other carrier out of the UK. On both occasions, being the height if the summer peak season, I had to pay scheduled airline fares and despite it being a no frills budget airline. It would have been slightly cheaper to fly with BA to Bologna further to the north. As I recall, both times the flights were delayed.

Despite the media profile of its exuberant founder usually playing the underdog card (sound familiar?) Ryanair is under attack from many different groups - today by a government minister over the airline's apparent disregard for environmental issues. Not least of its critics are many of its own passengers who have found it virtually impossible to get in touch with the company to complain.

One such disgruntled passenger for whom Ryanair lost his luggage leaving him stranded at Ancona airport in only the clothes he was wearing and then incredibly charged him £160 to fly back home, decided two years ago to set-up a critical web site at the URL www.ryanair.org.uk. Numerous other passengers then posted their own complaints about the airline on the site.

Last year, Ryanair took the case on trademark infringement grounds to Nominet, the organisation that resolves domain name disputes. Ryanair won the case, but the site's owner, undaunted by the ruling set-up a new website at www.ryanaircampaign.org This time the legal team from Ryanair took its case to the World Intellectual Property Organisation, a committee of the United Nations and lost its case.

As a result, like the McDonald's 'McLibel' trail, Ryanair has generated considerable publicity for the site and according to its owner quoted in Private Eye, he would have allowed things to die down had he not been pursued by Ryanair's legal team.

This is certainly not the first time that a company has tried to close down a web site. On the Internet, so-called cyber squatters have deliberately registered URLs with addresses close to established names in the hope that the brand owner will offer to purchase the URL to avoid confusion among their own users or protect their reputation.

Unlike any other communication media before it, the Web and more recently blogs have created a feedback or response mechanism for customers, that often through word-of-mouth, can rapidly build an audience to rival a company's own web site.

Thursday Jan 04, 2007

An Inconvenient Truth: factual programming moving out of peak time

In contrast to Casino Royale (see Tuesday blog) one film that most advertisers would probably have paid to ensure their products were not on prominent display would be 'An Inconvenient Truth'.

I rented the DVD to watch over the holiday with my family, having previously seen the film as an in-flight movie, paradoxically while travelling in the upper atmosphere above the Atlantic and across Greenland and Northern Canada, parts of the world most at risk from global warming.

Since leaving office five years ago, Al Gore has managed to bring the subject of global warming to the attention of a new audience - North American movie goers. Like recent films by Michael Moore and Morgan Spurlock, his documentary film has become a modest box office success with audiences. Although Gore adopted a restrained lecture theatre approach to presenting his argument, the scientific evidence he presented was overwhelming. However, given the subject matter and underlying message, it was rather irritating to see Gore throughout the film being chauffeured around in large limousine type cars or at one point at the wheel of a 4x4 off-road vehicle (needless to say being driven on a road).

Interestingly, he choose (or was forced to choose) cinema rather than television as a platform to convey his message. Traditionally, despite network television schedules being dominated by popular dramas, light entertainment and sitcoms during peak times, most channels have always allocated time outside of peak to documentary programmes. Despite audience fragmentation, a network television broadcast might have created more public debate and arguably would have reached a much wider audience. Movie goers by virtue of paying-to-view a film are likely to be already more sympathetic to the film's message than the US population as a whole.

When the history books of the noughties (a term increasing being applied to the 2000s) are written, it's quite possible that former US vice president Al Gore will have been judged to have made a greater impact on the global warming debate forward from outside of the White House than the current 'lame duck' president will have been able to achieve from inside the Oval Office - even if he was inclined to join the debate.

Wednesday Jan 03, 2007

Camera phone footage challenge to news media agenda

The Iraqi authorities had hoped that by releasing their own edited version of Saddam Hussein's hanging that they could show the world that an orderly and 'dignified' execution had been carried out - in complete contrast to the way that Saddam's own regime brutally treated its victims.

Instead, sound and pictures shot by a camera phone smuggled in by either one of the guards or witnesses recorded Saddam being taunted just before he was killed. As a result, Saddam's death has become the most controversial media disclosure from Iraq since the pictures of American soldiers abusing prisoners inside Abu Ghraib were released in 2004.

In a short space of time, the camera phone has become the most powerful news gathering tool available to 'citizen reporters'. Not only can most new mobile handsets record video but these images can be almost instantaneously distributed over the network to other users and uploaded to the Web. File sharing sites such as YouTube also now have many video postings form American soldiers serving in Iraq.

After the 7/7 London bombings in July 2005, news organisations for the first time widely used camera phone footage from victims caught up in the blasts particularly those on the London Underground trains. In the past couple of years, video sharing sites on the Internet combined with 24 hour news channels have had the effect of moving television news coverage towards lower (production value) quality, unedited on-the-spot content.

So-called citizen journalism will increasingly challenge the official version of events. This quite possibly will spill over into other situations in which the coverage is tightly controlled, e.g. fashion shows, and 'manufactured media events' such as award ceremonies and film launches. This has the potential to provide parallel coverage in much the same way that paparazzi photography has created a new magazine sector that co-exists alongside mainstream titles that use carefully managed photo shoots and interviews.

Tuesday Jan 02, 2007

Product Placement: Subtlety Increases Effectiveness

Over the Christmas and New Year holiday, as a family we finally went to see Casino Royale, the new James Bond film at our local cinema. The film's producers seem to have largely managed to re-invent the James Bond on-screen franchise, that in recent films had become too cheesy, overly dependent on special effects and predictable one-liners, and had strayed ever further away from the original Ian Fleming novels.

As a film, Casino Royale abandoned several of the established Bond film cinematic clichés such as the opening chase / escape sequence, car chases through crowded streets (replaced by a chase on foot) and even the silhouettes of women used as background images during the opening titles. Even the familiar electric guitar-led Monty Norman theme tune was held back until the final scene in the film.

What was noticeable was the amount of blatant product placement scattered throughout the film. For example, the parking lot outside of the Casino Royale could have been a Ford luxury car showroom since it contained mainly Volvo; Jaguar and Range Rover models alongside Bond's own government provided Aston Martin (also owned by Ford). The convoy of three showroom clean Land Rover Defenders driving through the African jungle almost worked - but my children couldn't understand why James Bond was shown driving a Ford Focus.

Screen shoots of Sony Ericsson mobile handsets were also interspersed throughout and weaved into the plot - not surprising perhaps since Columbia Pictures is also a division of Sony Corp. Bond's preference for Omega watches ahead of Rolex was even included in the script.

In the same way that viewers can distinguish between editorial and paid-for advertising content in the Media, content producers need to ensure that all product placement is handled subtly. Otherwise paid-for product placement is in danger of becoming a cliché of itself.

Monday Dec 18, 2006

Being the dot in .com and in Web 2.0 - what's the difference?

The Internet is said to be going through a new, secondary stage in its development - the so called Web 2.0 phenomenon. Compared to even a year ago, significantly more Internet users are fully 'participating' online by sharing their own content with others - either through blogging or wikis, or through uploading their own photos, videos or sound files to social networking sites such as myspace or bebo or to specific video sharing sites like youtube.

In the case of Wikipedia, users are able to contribute new or correct existing encyclopedia entries unlike the conventional britannica.com publishing model for example where groups of Encyclopedia Britannica authors and editors would contribute and control all the content.

The term 'Web 2.0' is usually attributed to the industry commentator Tim O'Reilly, who used it at a conference in 2004 to describe a new community-based approach that was resulting from a growing number of applications that empowered individual users to be content publishers themselves. The full article is availble at:

http://www.oreilly.com/pub/a/oreilly/tim/news/2005/09/30/what-is-web-20.html

Previously, the 'Web 1.0' model assumed that in the longer term, the Internet would follow conventional publishing rules whereby web site owners would publish content to view and download via a browser or media player. As a result, ADSL broadband technology was developed around maximising download speeds. In most homes in the UK, depending on a number of factors including distance from the local exchange, users can normally download at speeds of 3-4 mbps. By contrast, the return path speed (required to upload content to a web site) is nearly always capped at just 576 kbps.

Equally significant, Web 1.0 was centred around a browser user experience running on the user's desktop. Web 2.0 extends to cover any device connected to the network - anywhere - anytime.

The earlier Internet was dominated by large organisations, whether start-up firms awash with IPO funding or the online divisions of established businesses. Frequently, the most successful web sites employed were able to employ their own in-house web design teams, usability consultants and search engine optimisation specialists, to ensure that their online presence (and investment) attracted the highest traffic volumes. In effect, the end-user was kept on the outside, browsing content using the functionality to access it that the web site owner provided.

Consequently, both the network infrastructure and web site hosting environment evolved around a single directional model. Webmasters mainly needed to take into account scalability, security and availability, while at the same time having a contingency plan to handle spikes in usage.

Web 2.0 is changing the rules. Webmasters additionally need to have an agile, flexible infrastructure that can adapt to constantly changing user-driven requirements. The web site owner is no longer the dominant party setting the editorial agenda. Instead within the constraints of the hosting environment, individual users between them can determine what type and format is posted.

For any company or individual setting up a Web 2.0 business, they need to ensure that their technical infrastructure can continuously adapt to changing circumstances and is not locked into closed, proprietary standards that restrict future growth. From now on, groups of users are more likely to set the direction of the Web.

Wednesday Dec 06, 2006

The Big Mashup - Web 2.0 and the Participation Age

How the network is changing entertainment and news gathering in the Participation Age.  Check out the Big MashUp at: www.sun.com/thebigmashup

Monday Dec 04, 2006

BT Vision: gradually shifting the control to the viewer

The launch today of BT Vision, the new on-demand video download service from BT, represents a significant step towards achieving television for anyone, anywhere, at anytime, and on any device.

BT Vision will be delivered through a new set-top box, the V-box (a personal PVR, personal video recorder similar to the TiVo or Sky Plus) offered free to existing and new customers who sign up for a new contract for BT Total Broadband. Like the BSkyB service download service launched earlier this year, the V-box needs to be connected to the customer's broadband service in order to download on-demand content that will then be stored on the PVR.

Not surprisingly, BT Retail has decided to make it conditional on BT Vision customers subscribing to one of its own BT Total Broadband packages although unlike other on-demand download services available, BT Vision does not require a monthly subscription or a minimum monthly payment other than the broadband and telephony charges. The V-Box also enables customers to receive more than 40 Freeview digital terrestrial channels through their existing television aerial. The box is also HD ready and according to BT will offer a platform for user-generated content to be uploaded.

BT aims to have two to three million BT Vision customers in the medium term. This compares to more than eight million BSkyB households, most of which use a BT line for their return path, e.g. ordering pay-per-view events.

PVR based on-demand television is still built around a time shift viewing model and could be considered an intermediate technology between linear scheduling and truly on demand programming whereby the viewer can select in real time from the broadcaster's total catalogue.

For BT Retail, BT Vision will help it retain its existing broadband customers at a time when the established broadband service providers are gradually losing market share to new entrants offering lower priced packages and importantly help in the drive to get other customers to re-connect to BT. For the consumer, leaving aside the BT telephony monthly subscription costs, it opens up the pay-per-view market by offering a service not tied to paying for a broadcaster's channel package and equipment rental.

Monday Nov 13, 2006

Tesco ClubCard: How IT helped transform Tesco's customer insight (FT Weekend)

Until the introduction by Tesco of its ClubCard customer loyalty programme tweleve years ago, retailers and manufacturers alike had only a rough idea of what different groups of shoppers bought. This knowledge was usually based on either self-completion questionnaires, counting the number of items remianing on the supermarket shelf or a researcher following individuals around the store noting all their purchases. Grocery retailer Tesco has now built a 40 terabyte database recording every single purcahse made by its 13 million ClubCard customers every time they use their card. The FT Magazine this weekend published a feature on how the Tesco ClubCard has become consider the company's most significant competitive advantage - even ahead of its scale and market penetration.

Friday Nov 10, 2006

ntl approach to ITV over potential merger

ntl yesterday shocked the television industry and the City when it revealed that it had made an approach to ITV with a proposal for a possible merger or takeover bid rumoured to around ?5 billion. The news comes only a few months after ntl completed its acquisition of publicly-listed Virgin Mobile to become the UK's first true quad-play company offering its residential customers: telephony, broadband, video and mobile.

Virgin Mobile was a MVNO, mobile virtual network operator since it didn't have a network of its own but instead leased capacity from T-Mobile and used them to handle customer billing even including the printing of Virgin Mobile's monthly statements. Under the terms of the deal, ntl acquired the right to re-brand its UK operations under the Virgin brand umbrella.

Most of the week the City pages have been reporting ITV's ongoing struggle to replace Charles Allen as its Chief Executive. Allen has presided over ITV at a time when it has faced increasing audience fragmentation particularly in satellite homes, losing more audience share to BSkyB than the other terrestrial broadcasters. Institutional investors have lost confidence in ITV's ability to maintain audience share at a time when its ITV1 channel has increasingly relied on a small number of programmes and formats. Recent new episodes of some of ITV's strongest dramas failed to halt audience declines at the start of the Autumn schedule. Allen himself became CEO of the newly created ITV created from the merger of Carlton and Granada when Michael Green was similarly forced to resign by city investors, most notably Anthony Bolton a fund manager at Fidelity.

The news of the talks came on the same day that ntl reported that in the previous quarter it had churned 36,000 customers. In some respects its not surprising that ntl, like the other broadband market leaders BT and AOL are losing customers to new entrants. But more importantly, ntl is having to rollout aggressive pricing for its bundled package that ill erode its ARPU that is among the highest in the industry.

At first glance there doesn't appear to be too many cost synergies between ntl and ITV. ntl for example produces little original programming of its own.

In ntl cable homes, ntl would be able to promote the ITV channels on the electronic programming guide much in the same way that BSkyB does on its proprietary set-top box, that might help to halt the fall in audience share in cable homes. The two companies combined would also present a greater challenge to BSkyB's dominant purchasing position for the rights to certain sports and feature films. For ITV, yesterday's announcement will not help in their search for a new CEO with most of the industry heavy hitters including Stephen Carter, formerly managing director of ntl, having been ruled out already. The story will also be of interest to any private capital consortium considering making an offer for ITV.

Text search blogs.sun.com for references to Google

Thanks to Dennis who posted a comment to yesterday's blog on Google's print and radio ad sales plans with a link to a search engine using Google's own customisable search that he has set up which searches through all Sun blogs for mentions of the word Google.  Additionally of course you can search from the blogs.sun.com home page.

Thursday Nov 09, 2006

Google expanding into radio and print ad sales

In the past few days, Google has announced that it is planning to set-up advertising sales units for regional newspapers and local radio stations in the United States. If this goes ahead (and separately it has been reported that Google has already started hiring experienced radio airtime sales people) it marks a departure from the company's focus on online media.

Display advertising sales are very different from it current classified lineage model. At present, advertisers pay Google traffic referral fees based on a cost-per-click basis. The AdSense model enables advertisers to bid competitively for certain textual names (sponsored links) relating to a product category, e.g. car insurance or even product name. In the past year, there has been several law suits taken out by tradename owners attempting to restrict online users being 'diverted' on the Google results page away from their own Internet sites by the positioning of the sponsored links.

It is not clear whether Google intends to act like a true 'market broker' in the sense that it will bulk purchase airtime or newspaper pages in advance and then re-sell them among their customer base, e.g. taking the risk of not fully filling the inventory. Advertising time and space is a perishable commodity. Alternatively, it may act as a sales house, 'repping' regional newspapers and local radio stations to its existing online advertising buyers.

The first option exposes Google to new risks in that in most cases it will not have established relationships with the print and radio agency media buyers. which are bought using audience research data rather than direct response models. From a media owners perspective, editors potentially lose control over the make-up of their publications. Certain categories of advertising are thought to be more empathetic to the editorial than others. Looking at most consumer web sites, this certainly doesn't seem to be a factor taken into account.

Importantly, what we are probably witnessing is Google's move into mainstream advertising and the ultimate prize of network television. The purchase a few weeks ago of YouTube provides Google with a platform and audience from which to deliver video programming. However, the online advertising model is predicated on being content sensitive which neither local radio or regional newspapers are. Both media simply 'broadcast' the same content (and advertising) to an audience geographically defined. I suspect we'll see further announcements from the GooglePlex in the coming weeks.

Ovum: Climate change and ICT

Climate Change and ICT by Stephen Young, Principal Analyst, Ovum.

This article by Stephen Young published on the free-to-air part of Ovum's web site provides a good summary of the impact of ICT on CO2 emissions and highlights some of the issues raised by the Stern Report by using ICT industry examples.  Here's a direct quote:

"It can help to think of ICT players as either victims, villains or potential heroes of climate change, and it is the latter dimension that Stern seems to miss.

For example, telcos are as likely to be victims of climate change as other network infrastructures, and are already suffering the effects of global warming due to the increasing frequency of severe weather effects. As villains of climate change, telcos use energy to power the telecoms network, to heat and cool buildings, to protect equipment and for transport. But telecommunications is less energy-intensive and carbon-heavy than many other industries. Stern points out that telecoms generates 2.29% of UK economic output, with only 0.82% of the sector's total costs coming from energy.

The deployment of next-generation networks (NGNs) will further reduce telcos' energy usage, but what about the services and applications that sit on the new infrastructure? The rapid growth of web-based services is driving up power demand and CO2 emissions: it is now estimated that the total electricity used in powering and cooling the 2 million servers of the five major search engines is around 5 gigawatts - almost enough to power the Las Vegas metropolitan area on the hottest day of the year. Many telcos and service providers are now implementing specific actions to reduce their carbon emissions by measuring, reducing and offsetting their CO2 emissions."

In his article, Young also references the announcement six months ago by BSkyB to go carbon neutral as a company.

Climate Change and ICT by Stephen Young, Principal Analyst, Ovum.

Wednesday Nov 08, 2006

Sustainable Computing: is the PC itself or its design the problem?


Remove the case from any desktop PC and you'll find inside virtually the same layout and component set that was contained in the original personal computer developed by IBM in 1981.  Among the components inside you'll find a microprocessor, a hard drive (the most common cause of PC problems), the motherboard, a disk drive (the DVD format being the latest version that extends back to floppy disks) and of course a electric fan to cool the heat generated by the chip.  Since the PC was first launched, according to a recent mailshot from Apple Computer more than 114,000 PC viruses have been identified.


In the past 25 years nothing much has changed other than each of the components have become faster, more powerful and cheaper.  At the same time, consumer expectations of what the PC can do have been stretched further and further.  Online gaming, instant messaging and video streaming have been added to word processing, spreadsheets and presentation packages.  Nowadays at the point of sale, most retailers differentiate between various PC models and manufacturers based on their multimedia functionality, which frequently is only used to its full capabilities for a very small amount of the time that the PC is switched on.

As Thomas Friedman observes in his bestselling book 'The World is Flat', the PC has become a truly commoditised product on a global scale combining components from many countries and increasingly being assembled in low wage economies.

Most of the world's leading corporations now use IT as a competitive advantage rather than view IT simply as a cost centre.  Interestingly, many have built their businesses around networked applications rather than putting a PC on the desktop at the point of service delivery.


Based on the reliability of the average desktop (at least the ones I have owned), if PCs had been deployed by Tescos at their checkouts, up until a few years ago the result would have been queues stretching back to the bakery counter (plus additional refrigeration units in the chiller section).  Similarly, without networked computing, the airlines would never check-in all their passengers for the flight to leave on time.  City dealing rooms would not function.  ATMs would routinely freeze and not dispense cash.

There are thousands of schools and educational institutions with a combined purchasing power far exceeding any individual corporation.  Why then do they continue to install desktop PCs their classrooms when there are alternative networking computing systems that would be both virtually silent and not generate heat?  As a citizen and taxpayer, I don't want schools to start spending money on air conditioning when there are alternatives.


Finally my thanks to Andy Grove for his comments yesterday that prompted me to write this response.  I would like to give equal prominence on screen to reader comments but template that I am using in Roller does not allow this. 

Tuesday Nov 07, 2006

Moving sustainable computing up the educational agenda

As a school governor, parent (and taxpayer), I am amazed to hear that teaching staff are now suggesting that air conditioning units need to be installed into school classrooms to help reduce the heat being produced by desktop personal computers. Typically each PC consumes around 150-250 watts of power. Multiply that by 15 PCs in a classroom (or even 30 units) and combined they produce staggering amounts of heat.

In addition to the heat, each of the PCs will be fitted with an internal fan to help cool the microprocessor. Again, taking the combined noise output from 15 PCs, it can be very difficult for a teacher to be heard at the back of the classroom when all the PCs are switched on.

Incredibly, for most primary and secondary school educational purposes the processing capability and complexity of the software used, e.g. office suite applications, is far in excess of the day-to-day learning requirements.

At the other end of the educational spectrum, immediately before joining Sun I worked for a Business School that is part of the University of London. One Monday morning we all came into work to find that a number of the PCs in the staff and academic offices had been stolen over the weekend. Needless to say, the thieves had selected the more up-to-date PCs (including my own) plus the Apple computers used by the Web Office. Apart from the financial loss to the university, the theft had two consequences.

Firstly, the department was unable to work properly for three days while we waited for the local police to fingerprint the offices and for the School to replace the PCs. Secondly, and more importantly, with the theft critical information left the building including student databases and several academic papers that were being prepared for publication. In the age of the Internet and network computing, it turned out that very few people had backed up their files onto the network.

For any educational institution, thin client computing has to be the way ahead. How long can the outdated PC model be sustained? It does however represent a good new business opportunity for air conditioning firms.

Monday Nov 06, 2006

Sustainability moving up the agenda

The debate surrounding climate change and how businesses and individuals can help reduce their carbon emissions seems to be gathering pace. Last week, Nicholas Stern published his committee's report for the UK Treasury on the economics of climate change. In the report, he called for urgent action by governments and corporations around the world to reduce the current level of CO2 emissions.

His findings necessarily require changes in the economic framework that will impose costs on those activities that create the most environmental damage, i.e. green taxes. It is a fact of social life that the majority of people will not change their behavior for purely altruistic reasons. Even if some do, it is argued that their actions will be offset by others who continue for example, to drive 4x4 cars around the streets of Central London.

Politicians know that voters will tell pollsters that they are willing to pay additional taxes to help fund improvements in the health and education systems but at the ballot box will invariably vote for lower taxes. This is despite the fact that in the past 20 years, the main party that has promoted lower taxes has subsequently raised them for the vast majority of voters when in office.

At the current point in the debate, it will still take a brave (and some might say foolish) politician to advocate raising taxes on air travel. As loss leaders, low cost airlines regularly advertise £1.00 return flights to many European destinations that clearly are offered at below cost price. At present, Kerosene the main aviation fuel used by airlines is not taxed anywhere in the world. If the UK were to impose a tax on aviation fuel ahead of the rest of the EU member states, in the longer term it could adversely affect the UK's position as the main hub for long haul international travel out of Heathrow.

For Google, energy costs are now their second largest cost behind computer hardware. It has been reported that Google is locating its datacentres near to steel plants to ensure a stable, high power electricity supply. Similarly, the financial district in Canary Wharf in London now consumes the same amount of electricity as the whole of Wales. Energy costs are now moving up the business agenda for many companies that until recently considered them only to be a political issue.

Friday Nov 03, 2006

Google forecast to overtake C4 in advertising revenues

According to recent forecasts by the media buying agencies Mindshare (owned by WPP) and Initiative (part of the interpublic Group) Google's internet search advertising revenue in the UK is set to overtake Channel Four's 2006 revenues of £800 million. Within 18 months both companies expect it to surpass ITV1, Britain's leading commercial television channel. ITV1 accounted for 90 per cent of the ITV group's £1.63 billion total advertising revenues last year.

Only 20 or so years ago, ITV which was then organised as a group of 13 or so independently owned regional broadcasters was described by media mogul Lord Thompson as a "license to print money" and was able to support many of the same working practices common to Fleet Street newspapers.

According to many commentators, Google and its Adsense performance-based advertising model has become the ad industry's new 'license to print money'. Unlike the commercial television companies, Google is unfettered by the need to create any of its own editorial content to generate audience that can be monetised through advertising. User generated content such as video clips uploaded to YouTube are increasingly driving online traffic.

However, despite several commentators including a lead article in The Economist a few months suggesting that Google's inextirable rise signifies the slow death of conventional advertising, Google Adsense will at some point hit a peak since it is mainly based on classified and direct-response advertising.

Despite all the hype, the latest IPA Bellweather Report published in July estimates that online advertising accounts for just 4% of total marketing spend - up from 3% a year ago. Main media advertising such as television, radio, print and outdoor accounts for 33%, Direct Marketing 27%, Sales promotion 12% and All Other 24%.

Whilst Google Adsense is highly cost effective at generating content proximity based click thrus online, it cannot substitute for the more creative, emotional demand building side of advertising. Without being exposed to the 40 second ads on television of the beautiful people driving beautiful cars down beautiful traffic-free country lanes, online users would not be aware of the brandnames appearing in the right hand column of search results.

BSkyB restarts film download service

Several weeks ago I blogged about the security flaw that had emerged in the Microsoft DRM, digital rights management software that had caused a major broadcaster to halt their film and sport download service.

In the past couple of weeks, BSkyB has restarted its fledgling broadband service that according to a company spokesperson has already delivered more than one million film and sports clips, making it Europe's leading download service.

http://blogs.sun.com/stephendavis/entry/security_flaw_in_microsoft_drm

Tuesday Oct 31, 2006

Breakfast TV: more variety, less choice

Advocates of de-regulated markets argue that increased competition will bring about greater consumer choice as companies compete more fiercely with each other to maximise market share or exploit revenues from niche sectors. In fact, unfettered markets frequently produce the reverse - less choice but more variety of the same thing. A good example is American breakfast television.

Flicking through the channels on my hotel television on a recent business trip to the US, it was noticible how each of the major networks had adopted virtually identical breakfast formats. Not much had changed from 5 years ago when I spent considerably more time in the US.

Breakfast programming is designed for goldfish, i.e. a short cycle of the same content endlessly repeated. This is a consequence of the short, interupted viewing for early morning television, with in most cases the television simply 'being-on' in the background as viewers prepare to leave for work.

Typically in the US, editorial programming consists of just a couple of lead stories or features repeated every 10-15 minutes. These typically tend to be: freak weather conditions (with never any reference to global warming); local gun shootings or robberies, and personality based coverage of elected politicians or candidates. Last week, it was the case of a mid-term election candidate that was allegedly seen at a party held at the Playboy Mansion. Often it is a politician's own paid-for advertisement that is used as the basis for a news story.

These short news bulletins are intersperced with traffic reports (pictures from traffic cameras on the main commuter routes) and endless weather forecasts. On one channel, the forecaster gave details of the predicted tempearatures and wind speeds for different parts of Manhatten. Not surprisingly, each forecast was virtually identical.

Programnming 'sameness' even extends to the presenter line up, usually consisting of four people standing behind a desk in an open plan studio, playing off each other with (scripted) banter as the screen fades into a commercial break. A professional looking female news anchor (always with dyed blond hair and big clothes), a jovial middle-aged overweight weather forecaster, a younger features reporter from the region's largest ethic groups, etc.

In the same way that every Marriott hotel room is identical, it's the same for breakfast television whereever you are in the US.

It's no wonder that viewers are choosing to view news content online before leaving for work instead of tuning into breakfast television with the resulting fall in ratings particularly among younger more upscale groups. Ironically, I learned more about the US mid term elections and current legislative proposals being considered by the State of California by listening to my car radio 7,000 miles away in the UK for half an hour than I had done during three days staying in the country.

Monday Oct 30, 2006

Web technology fuelling self-service

International air travel is probably the best example of how online self-service has transformed the customer experience. For passengers that have booked their flight online - either via a travel agent or flight aggregator site, or the airline's own web site, it is possible not to have any human contact with the airline itself until a member of the cabin crew checks your boarding pass at the departure gate as you embark the plane.

For the airlines, most of which operate at very thin margins on the de-regulated routes, online self service has helped to reduce on-the-ground staffing costs at airports as well as lower the cost of ticket sales from bypassing travel agents' commissions. The acceptance of online booking by passengers has meant that most of the low cost carriers now only sell direct. The days of the flag carriers maintaining a network of their own embassy-like ticket offices in prestigious retail locations in major cities around the world seem to be gone.

For the passenger, after the financial booking has been made online, it is possible to add frequent flyer details, request seat allocations, order special meals and even check-in up to 24 hours before the flight, all of which previously would have required a phone call to the airline. At the airport check-in, much of the time spent standing in line is accounted for by data entry by the desk clerk - a task that has be transferred to the customer.

Airlines have always struggled to differentiate themselves from their competitors, since by virtue of what they supply: travel between the same cities and airports; on the same planes (and seat configurations); with the same journey time; with the same food; the same on-the-ground facilities; and even the same ticket prices. Most have needed to resort to promoting the quality of their in-flight service (smiling hostesses or television channels) or genoristy of their frequent flyer programmes.

Online customer self-service has not only enabled airlines to reduce their cost base but provide greater service differentiation to passengers through perceived 'mass customistation' of what is after all a commoditised product.

Monday Oct 23, 2006

"Video-hungry users could push Net to brink"

Reuters on Friday reported that Nortel Networks is projecting that soaring demand for games, video and music will stretch the Internet to its limits. In an interview, a company spokesperson said that they expect service providers will need to make big investments in networking technology such as its own routers to avoid a crunch.

According to Nortel, massive overbuild of Internet bandwidth capacity helped lead to the dot com led industry meltdown six years ago. The capacity bubble helped service providers cope with the surge in demand for bandwidth that came with the advent of online so-called Web 2.0 file sharing sites like myspace, bebo and YouTube.com.

The traditional broadcast model wherby a television or radio programme is transmitted to all viewers at the same time was an efficient way of using the available spectrum. IPTV and video on demand opens up the possibility of broadcasting to an audience of one.

Without the significant investment programmes to upgrade network capacity and bandwidth made by fixed line carriers over the last five years, the second wave Internet businesses built around user generated content would not have been possible.

THe challenge for the netowrk operators is increasingly how they too can benefit from increased network traffic. Other than charging for consumer broadband access most of the increased network traffic is being generated by Internet busineeese with no connection to the network operators. Most Internet users now freely switch between their favourite web sites and use a search engine to navigate new web pages without referring to a portal previously the landing page for dial-up users.

Friday Oct 20, 2006

Second wave start-ups selling out to competitors

Initial Public Offerings or IPOs, whereby private companies choose to raise additional capital from new investors by issuing shares on a listed market (going public) no longer seems to be the preferred route for the recent wave of Internet and technology start-ups. Instead most start-ups have opted to sell out to established competitors either for cash or in exchange for stock options in the acquiring company.

This trend among second wave Internet companies is in contrast to the frenzied rush by dot com start-up some 6-7 years ago, when to some observers many dot coms didn't appear to have (or be concerned about) a sustainable business plan beyond the IPO. The IPO was an end in itself. Most of the talk seemed to be about exit strategies for the founders rather than creating long term profit growth for the new investors.

Recent changes in regulatory controls mainly affecting the firms that advise start-ups has probably dampened the financial industry's appetite for managing IPOs. At the same time, investor interest in new issues has not recovered from the bubble bursting in the spring of 2001.

For the directors and staff of start-ups, selling out to an established firm can have other advantages. In the case of YouTube for example, Google offers considerably more technical expertise and resource to help build the business infrastructure than would be possible from the 60 or so burned-out staff employed by the start-up. Additionally, Google lawyers can start to tackle the tricky issue of copyright and maybe reach agreements with content owners such as the music studios and media companies.

Thursday Oct 19, 2006

Google buys YouTube rather build Google Video

For a company that famously has built everything from scratch rather than bought its business from competitors, it was surprising to read last week that Google has bought YouTube for US $1.65 billion in Google stock. It is reported that Google even developed its own in-house financial accounting system instead of using one of the industry software packages.

In the past 12-18 months, the founders of YouTube Chad Hurley and Steve Chen (and you guessed right the business started out in a garage in California)have created a simple to use, website to which anyone can upload video clips in order to share them. Every day YouTube users upload 65,000 new videos and watch more than 100 million clips.

In some ways this is Web 1.0 meets Web 2.0.

Like dozens of other independent video sharing sites, YouTube has never made a profit, incurs significant costs from storing and delivering videos and as yet has not made any real revenues as such. Then there is the issue of copyright. Many of the video clips stored by YouTube are not the intellectual property of the users that uploaded them onto the site.

For YouTube, Google's search-related advertising model should help the firm start to monetise its audience. Google can immediately add YouTube to its network of sites for which it sell advertising. YouTube will apparently retain its separate identity (for now at least).

Google has bought a market leader. According to web traffic statistics, YouTube has four times as many visitors as Google Video and streams nine times as many video clips. It has been reported that not only Microsoft and Yahoo! were interested in buying YouTube but that News Corp and Viacom, owners of competitive file sharing sites wanted YouTube.

Overall, this deal strengthens Google's market position and may well indicate a change in strategy away from building to buying.

Wednesday Oct 18, 2006

Build or Buy: Corporate Growth Strategies

Modern capitalism is predicated on economic growth.  Firms that choose to go public, do so knowing that by becoming a publicly listed company they will be expected to deliver business growth to the market usually on a quarterly basis. Listed companies are therefore under constant pressure to show signs of revenue growth to help maintain and build their share price that is a reflection of the market's expectation of their future profits.

In general, growth can either being achieved through building organically, i.e. creating new revenue streams or incremental revenues from existing activities or through buying another company's business.

After a period of relatively little M&A activity for the past five years, the past 6-12 months has seen a resurgence among European telco and media companies in mergers and takeovers - the majoriy of which have been non-contested takeovers, e.g. ntl (Virgin Mobile); Telefonica (O2); and BT (Radianz, Albacom and Infonet).

So why has M&A suddenly come back into fashion and there has been little in the way of contested bids?

In most cases, it probably reflects an improvement in sector business confidence and the ability of telco and media firms to raise funds in the capital markets. From a position a few years earlier when many established firms had overstretched themselves with speculative acquisitions of dot com start-ups (worried about being left behind in the online world) as 'traditional' cash generative businesses, they can now look at making investments in a second wave of start-up buinesses.

In the Media sector, the acquiring companies have been looking to expand outside of their traditional businesses such as Associated Newspapers recent purchases of relatively small start-up online busineses such as villarenters.com and simplyswitch.com.

In some cases such as Carphone Warehouse's acquisition of the AOL UK business, the deal makes sense from providing sufficient economies from an enlarged customer base or immediately acquiring a ready made customer base that otherwise would take several years to build with substantial marketing costs.

But at a time when there appears to be so much technology-led change taking place in the sector potentially opening up new consumer markets, there appears to be little corporate apetitite for large scale product launches.

If the frequently referred to statistic of 50 per cent of all mergers failing to deliver against their stated goals or grow revenues beyond the two previously separate businesses is applied, it makes for a period of industry consolidation and slower growth at a time when most commentators expect the demand for communications services to increase.

Monday Oct 16, 2006

User Generated Content Vs. Professional Journalism

For the past few days, I have been aware of an amusing case of mistaken identity that has generated a series of postings on a Yahoo! Finance discussion board. I should point out that the mistaken identity actually refers to me... and this blog.

Around ten days ago, someone posted a question on the Yahoo! discussion board asking whether I could be the same person as a senior executive with the same name at a company called InfoSpace Inc. To be honest, until last week, I'd never heard of InfoSpace Inc., which from conducting an online search, appears to be a US-based mobile media company that supplies ring tones and music to mobile operators.

I am amazed that there are so many gullible people who quickly become involved in an entirely meaningless online discussion. If any of the participants had read my previous postings it would be obvious to them that I have no connection to InfoSpace. Despite this, someone actually wrote "Again, I'm not 100% sure Sun's Stephen Davis is INSP's Stephen Davis. But from reading his blog, I strongly believe he is." Another contributor wrote "He could be in London blogging for Sun but drawing some INSP consulting revenue for providing the occasional quote". Fascinating stuff - you couldn't write a better script.

Entertainment and comedy value aside, in the so-called blogosphere this episode highlights how readers should question and challenge the content of blogs and discussion boards in the same way they do other forms of publishing and media.  If I had been published as a column in let's say the Financial Times, would this discussion group have got so excited?  It also illustrates how rumours can (and frequently do) fuel herd instinct investor behaviour - particularly at the margins.

Online discussion boards and personal blogs are no different to any form of writing or journalism except that in most cases they provide a certain amount of anonymity for the author - and arguably less accountability.  They will never replace professional by-lined journalism that is commissioned and published by companies specialising in producing editorial content for publication.

In an online media environment increasingly populated by user-generated content (Web 2.0) and a broadcast and publishing market chasing more difficult to find audiences, the value of professional journalism becomes even more important.

Maybe as a colleague suggested, I should set-up blogs.sun.com/billclinton or blogs.sun.com/billgates.

Friday Oct 13, 2006

Vodafone withdraws Contract sales from Carphone Warehouse

Vodafone yesterday announced that it would be withdrawing its contract customer business from high street retailer Carphone Warehouse and switch to rival Phones 4u as the exclusive third-party sales channel on the high street. The change will take effect from the end of November and impact Carphone in the crucial sales period running up to Christmas.

On the news, shares in Carphone fell by almost 15 per cent in trading yesterday having been boosted the previous day by the news that Carphone would be buying the AOL UK business from Time Warner. It was interesting to note that CPW will pay for AOL UK in cash whereas YouTube accepted Google stock a few days earlier despite recent stock price falls and many analysts suggesting it still remains over valued.

For Vodafone, the decision to withdraw its higher margin contract customer business from Europe's largest mobile phone retailer is a calculated risk. Vodafone will hope to offset any lost market share by being able to pay Phones 4u a lower commission on new contract customers. The move by Vodafone yesterday may also prompt other network operators to reduce the number of third-party sales channels for their contract customers and concentrate on building direct customer relationships. Last year for example, O2 announced that it was reversing its decision to scale back on its own O2 branded shop and would be looking to develop new retail sites.

For an industry built around new technology, it seems strange that so much of its retail business has remained on the high street and has not transferred online. In the rush to sign-up new customers and build market share, the operators were willing to pay high commissions. This resulted in numerous new entrant retailers (some tied to a single network others being independent rather like the public house model) on the high street.

Most of these have now closed down leaving The Link (DRG), Phones 4u and Carphone Warehouse dominant. Like other retail businesses, the sales people in these stores were trained to sell a product, i.e. the (heavily subsidised) handset rather than a service, i.e. the network operator. Their legacy to the industry is that for most customers the network is simply not relevant.

Interestingly, the rollout of consumer broadband has not taken the same retail route. Partly perhaps because there is less to choose between different wireless routers at the point of purchase and most customers are upgrading from dial-up anyway, but it illustrates how the industry has moved on.

Thursday Oct 12, 2006

CPW acquisition of AOL UK will boost its 'unbundling'

Carphone Warehouse, Europe's largest mobile retailer has agreed to buy Time Warner Inc.'s AOL Internet access business in the UK for 370 million pounds in cash. The addition of AOL UK's 1.5 million broadband customers combined with its own, will give Carphone Warehouse an 18 percent share of the UK broadband market behind BT's 20 percent share and cable group NTL's 26 percent. Since its controversial 'free broadband for life' offer to customers that agreed to sign up for its TalkTalk fixed-line service launched six months ago CPW has signed up 625,000 broadband customers. Demand has outsripped CPW's ability to deliver its unbundled broadband service with widely reported delays in rolling out the broadband service to customers in many parts of the country.

For Carphone Warehouse, the acquisition of the AOL's UK customer base provides a significant boost to its plan to 'unbundle' 1,000 telephone exchanges owned by BT Group. Under the tems of Ofcom regulatory requirements, new entrants can install their own local loop equipment alongside that operated by BT for its own retail customers.

Until Carphone unbundles BT lines and can offer its own broadband product, it is forced to provide them using BT wholesale broadband and make a loss. Connections only become profitable when customers use Carphone's own broadband product. Only 20,000 of Carphone's 625,000 broadband customers were on unbundled lines at the end of the second quarter.

A few months ago, Cable & Wireless sold its Bulldog Communications retail customer base to Pipex claiming that the acquisition costs for new retail broadband customers were too high. It was reported that in many cases, Bulldog did not have sufficient numbers of retail customers to make local lopp unbundling viable in BT local exchanges.

As a business, telecoms is all about scale to drive operational efficiencies. AOL UK offers CPW a large, fairly stable customer base consisting mainly of former dial-up subscribers that have upgraded to broadband. The AOL UK customer base is reported to be older and less technically savvy than most other broadband services but for CPW represents an opportunity to cross-sell other services, particularly fixed line. For any new entrant, the most valuable asset is having access to an established customer base. In any utility supply business, the value of a billing relationship - no matter how transactionally based - should not be underestimated.

Wednesday Oct 11, 2006

Mobile Commerce: is Europe likely to follow Japan's lead?

Last year in Japan, the number of people using mobile phones for Internet access exceeded desktop computer users. According to data from the Japanese government, 80 percent of e-commerce by teenagers aged 15-19 was carried out on a mobile phone in 2005. The same report estimated the size of Japan's mobile commerce market more than tripled from 2002 to 2005 to reach 407 billion yen ($3.5 billion). For comparison, the mobile commerce market in the United States and Canada combined is expected to reach only 75 percent of that size by 2009.

Why is mobile commerce or m-commerce in Japan growing so much faster in Japan than other developed markets and is expected to continue to grow in years to come? There are probably two main reasons.

Firstly, the growth of the m-commerce market is supported by a spread of high-speed third-generation phone services. According to U.S. research firm Strategy Analytics, Japan had the highest number of 3G service users in 2005, followed by South Korea. Not only is 3G considerably faster than 2.5G, in most cases, 3G services are built around a flat-fee access charges. Such flat rate 'always-on' charges encourage 3G users to browse content on their phones much in the same way that broadband pricing and access speeds has led to increased data transfers and online usage versus a dial-up connection in the home. 3G leads to greater online surfing which in turn leads to increased impulse purchases.

One of the issues that was thought would limit the expected growth in m-commerce transactions was security fears. Many Japanese consumers still fear entering their credit card numbers online or on mobile phones. More than half of e-commerce sales in Japan were paid with cash (presumably cash on delivery) rather than electronically in 2005, while 13 percent were settled with credit cards, government data shows.

Secondly, the comparatively high amount of time Japanese workers typically spend commuting on public or mass transport systems must be another factor. Fortunately for Japanese, there maybe cultural sensitivities about conducting a conversation on a mobile phone in a crowded train carriage that don't seem to apply elsewhere in the world - not at least on my train out of Cannon Street.

Mobile browsing from the palm of the hand further highlights how the mobile phone is the ultimate one-to-one personalised consumer device.

So will m-commerce catch on to the same extent in Europe? Although, m-commerce is likely to grow rapidly alongside the rollout of 3G services, European consumers are probably less tolerant of viewing content on such a small display area despite the fact that the western alphabet of 26 symbols is clearer to read than some 2,000 Kanji characters. Services directly related to the phone such as music downloads will be the most popular but certain categories are likely to remain store based.

Low interest repeat purchase categories such as groceries may benefit from commuter's winding down time. But as boo.com proved, it is very difficult to convey more considered items such as fashion clothing online - and it will be even more difficult on a mobile handset.

Monday Oct 09, 2006

Forrester report misses the point

Forrester Research, a US based market research firm, last week published a short report entitled 'Blog Design is Broken'. In the 14 page report, its author Kerry Bodine makes a number of observations based on conventioal web site usability practices such as the placement of navigational toolbars on the left hand column. She goes on to suggest that Corporate bloggers should adhere more closeley to these design conventions otherwise she reasons that they will potentially miss out on using blogs as part of their marketing mix.

But Ms Bodine and her colleagues completely miss the point.

While it is true to say that over time a number of usability-based web design criteria have become established across most web sites, e.g. horizontal subject tabs as developed by Amazon across its sites - blogging is a completely different type of phenomenon and many blogs largely ignore these design conventions since they are content driven rather than design led.

Unlike a conventional web site owned by a firm for the purposes of promoting its business interests, blogs are about user generated content in most cases, without any underlying commercial pressure. Similarly, Forrester like old style media companies, has to sell its research to its Corporate customer base and so commissions its analysts to write about subjects that are most likely to sell or be of interest to their Corporate subscribers.

McDonalds, the fast food (sic) chain is cited in the report as a firm who's senior executives are using personal blogs to promote its business. In the example, McDonalds is referencing a press article to highlight its own environmental record on waste. But surely, this is no difference than issuing a Corporate press release.

Unlike most Corporate communications, blogs are written spontaneously and not to a pre-determined editorial agenda. Consequently, bloggers may alternate between writing about a subject area in which they have first hand knowledge or experience and the next posting might be totally unrelated on a more personal topic for which they are no better informed than anyone else. This is partly what makes blogs differ from conventional journalism.

If a firm follows Forresters advice and designs their blog pages using conventional usability rules to look like the rest of their web site it will detract from the rawness of the contributions and may no longer be perceived as being user generated content by the readers but simply the firm posting a message and inviting feedback. In many ways, no different from the letters to the editor that have appeared in newspapers for more than a century.

Friday Oct 06, 2006

Are teenagers the main drivers of today's technology innovation?

Listening to the speakers yesterday at SunLIVE06: Telco, Media & Entertainment, a one day conference and technology exhibition held in London (blog here), I heard several of them make reference to how teenagers have now become the driving force behind technology innovation.  This is depite the fact that in most developed countries, as a demographic group they are declining as a proportion of the population and have lower disposable income levels than other young adults.

I thinks its fair to say that many of the delegates taking part like myself, were first exposed to computing as teenagers either through the Sinclair ZX81, Acorn BBC or IBM PC 5150 .  Nowadays computing is an intergral part of everyday life from central heating controls in the home to portable media players.  One of the speakers suggested that the reason that technology is so widely embraced among teenages is that it enables them to escape the control of their parents.  Remember as a teenager the fear of ringing up girlfriends and telephonne being answered by their father or older brother?  Okay, maybe not then. But SMS text messaging, instant messaging not to mention email has transformed communications between individuals.  This is impacting the consumption of media.

Increasingly, instead of broadcast channels or themed programming, consumers now want to be treated as an audience of one. They also want to be part of, even particpate in the latest trend or fad.  A year or so ago, it was suddenly 'cool' to wear a coloured plastic bracelet.  A few months later they were seen as being rather 'naff'.  For technology companies that have R&D cycles stretching out over many months or years, this presents a particular challenge.

Most speakers agreed that in future, its likely that the mobile handset will become a multi-functional personalised device combining a mobile phone with a media player (able to display live content and download files), mobile payment wallet, GPS navigational tool, personal records file, e.g medical history, as well as a Web browser and email client.

As the group that most heavily uses the non-voice functionality of their mobile handsets, teenagers are likely to remain the 'early adopters' of many new mobile technologies that in turn will determine what and how content is delivered over the network and then how it is monetised.

Wednesday Oct 04, 2006

Tesco to enter software market

Two days ago, Tesco announced that it planned to enter the UK consumer software market by launching its own range of own-brand desktop software applications including: an office suite; two security / virus products; a personal finance tool; a CD/DVD burning tool and a photo editing tool.  In a statement, the company said that the software has been specifically developed for Tesco and would retail at around £20 per title - substantially undercutting the price of existing branded products.

Tesco clearly has ambitions to extend its online presence beyond its store retailing, utilities and financial services businesses.  The Group has invested heavily in building Tesco Direct, its online shopping site.  In the six months to June 2006,the Tesco.com businesses achieved sales of £554 million. Like-for-like sales were up 28.7% with profit up 43.1%.  Despite this impressive growth, online revenues still only account for 3 per cent of retail sales.

So why would a food retailer launch its own software?  And, why not direct its customers to freely available open source software such as Open Office?

In its gap analysis, Tesco will have seen that the home computing hardware market has become commoditised around two competing operating systems and three chip manufacturers.  Tesco probably also recognised that the web browser / media player sector was dominated by free-to-use players and offered no opportunity to monetise a new entrant.

Although by most standards the consumer software market is fairly mature, most existing products are highly priced and for the vast majority of users over-engineered.  It is said that users typically only use ten per cent of most software programmes.  How many people do you know have used any of the scientific formulas in spreadsheet programmes? Additionally, the Internet itself has brought about a change in consumer acceptance  of technology of being 'good enough' or fit for purpose.  At the same time, inter-operability has become more pervasive with consumers now less tolerant of closed proprietary software.

Tesco has taken over from Virgin as the company that can apply its brand to any new business venture.  Virgin was perceived as being the underdog trying to claw its way into new markets through doing things differently - always with a joint venture with an established player, e.g. Singapore Airlines, RBS, T-Mobile, Stagecoach, etc.  Tesco can go it alone - trading on its reputation of value for money, customer service and attention to detail.

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