A really nice campaign done in China for Garnier beauty product
I must admit I was quite skeptical when I first saw this video as my reaction was ‘yet another journalist jumping on the information security bandwagon’. But Peter Warren Singer’s talk isn’t a bad overview for the man in the street and some of the questions from the Googlers are not bad, (I must admit I thought I might see some more nuanced questions and points from them).
At the moment in the UK, there is an ongoing exchange of ideas in the media and by politicians in favour of, and against Scotland becoming an independent country outside the union of the United Kingdom. What I have noticed during my short time in country is the vast difference between London and the rest of the UK.
For as long as I can remember there were different scenes in London compared to the North. Rare groove was a very London thing, whilst acid house started to percolate through the clubs in the North of England. (Admittedly Colin Dale doesn’t get enough credit in his work championing early house in London). Going back further, the Ska revival came out of the Midlands and Northern Soul was called that because it was played from Wigan to Stoke-on-Trent. All Around The World Records regularly charts with singles and compilation albums that seem crass and unsophisticated to a London audience, precisely because they are aimed at audiences outside the capital.
This cultural divide extends online, tools like Foursquare have a much lower adoption rate outside the M25, part of this is down to poor mobile infrastructure – which is worse than the Swiss cheese nature of networks in London.
The disparity between London and the rest of the country reminded me of the old city states in Greece, I don’t want to flatter London by comparing it Athens, (lets face it Tower Hamlets, Newham and Hackney are more akin to Sparta), but the difference between London and the hinterlands hints at a de-facto independence.
So what does all this mean for social media marketers? This is something that I have pondered the past few days. I think that there is a case for a definite segmentation in the approach; targeted advertising is a given so the change would more in terms of owned media. Outside London; mature platforms like Facebook, with less focus on mobile marketing. In London, a more experimental approach perhaps incorporating WhatsApp to capture mobile phone numbers (which are a more reliable ID than email addresses which can be easily churned).
I would be interested in hearing other people’s ideas on this, please feel free to put any thoughts in the comments box below.
There is no point doing mobile advertising if you are not prepared to invest in a call to action that is suitable for mobile devices. Here’s an example, presumably by Ogilvy and OMD for Huawei Enterprise on how not to do it.
First up, here is the advert served up on a page of the Washington Post’s mobile site:
I don’t want to get into the debate about the inventory itself, though I would prefer to purchase a page takeover rather than this kind of banner simply because it helps reduce clickthrough.
Here is where you are directed through to if you click on the ad, this is a non-mobile optimised page on Huawei.com. It is shrunk to fit on the iPhone screen to the point that it’s pretty much useless.
I imagine that it would look even worse on a BlackBerry that is likely to be used by a proportion of the target audience for the advert.
This post follows on from my first post that looked at the valuation of the WhatsApp acquisition.
From a WhatsApp point-of-view the why is perfectly simple, everyone gets rewarded for all the hard work that has been put in building a successful product with 430+ million users around the world. It is the end pay in a classic Silicon Valley fairy tale.
For Facebook I think that the why becomes more complex and multi-faceted. If we have a look at Mark Zuckerberg’s own statement around the deal, some aspects of his explanation stood out:
If it’s not advertising what is it?
It was quite telling that the top comment on Zuckerberg’s posting about the deal was:
Chiranjeev Kumar Dear Mark Zuckerberg, You own Facebook, Instagram and now Whatsapp. Basically, you guys have more information than NSA, RAW & ISI combined.
Facebook already has a wealth of data on a number of people who aren’t on Facebook with shadow profiles of everyone who features in many Facebook users address books but who aren’t currently members. It can see if they are in more than one users social graph. WhatsApp offers the potential to enrich this database further.
A question of identity – In many countries like China, consumers have two or more email addresses, one of which is used for circumstances when they are likely to be spammed. A mobile phone number offers a greater likelihood of relating to a real identity, as the barrier to entry on replacing your mobile number is a bit higher.
Enriched with context – every bit of data that Facebook can get about activity that occurs outside of a Facebook page helps with advertising targeting, even if the advertising isn’t served up through WhatsApp. I suspect there is a large overlap between the current Facebook and WhatsApp user base. When I think about Hong Kong which has a 50+% WhatsApp penetration and high Facebook adoption, it is easy to see how this context could enrich consumer insight for Facebook. I used WhatsApp to deal with my estate agent, building contractors repairing the air-conditioning unit and even put in my pizza order!
WhatsApp has a number of low risk untapped sources of potential incremental revenue:
One-to-one brand relationships – WhatsApp has the potential to be an opt-in one-to-one marketing channel with a personalised and enriched relationship greater than that provided by a Facebook page. Similar services are already provided on WeChat, LINE and KakaoTalk to allow brands engagement with consumers.
WeChat, KakaoTalk and LINE all make money from stickers. Stickers are used in Asia as communications short hand, or as a social lubricant when it would be harder to put words to reply to a message.
At the moment WhatsApp hasn’t developed this content fully. I am not so sure that European consumers would pay for this content but some consumers will. All of this will chip away to make the deal look better value but are still comparative drops in the bucket to help raise the WhatsApp ARPU to numbers closer to Facebook.
Partners to enemies?
All of this still makes mobile telecoms operators like Vodafone cheap in comparison to their internet cousins and it isn’t currently clear what their response will be in the coming months. Facebook will have gone from being partner who helps sell more data, to competitor corroding the SMS revenue cash cow.
WhatsApp message volume growth is still accelerating. Has probably now overtaken SMS. pic.twitter.com/KsR85Mplrt
— Benedict Evans (@BenedictEvans) January 20, 2014
Looking at data published on Twitter by Benedict Evans you are looking at a volume of messages that threatens to exceed SMS volumes. And this doesn’t include rival services such as WeChat, LINE etc, just WhatsApp; at least some of those messages will be substitutes for using SMS.
Gosh, where do I start, Nigel Scott asked me what I thought this morning and I replied that I was pulling together my thoughts and that I was gobsmacked at the time; I am still gobsmacked and here are my rather unstructured thoughts below.
Ok lets talk about the valuation in bald terms first. On January 20, WhatsApp announced that it had 430,000,000 active users to date. Let’s be generous and not slice and dice what ‘active numbers to date’ actually means. Let’s also assume that they gained 10 million additional users between January 20 and today. The business has been going since 2009 so that may not be that big a step in terms of value.
When you buy WhatsApp in the iTunes store you pay roughly US$ 0.99 for the application, on Android and other platforms you get to download it for free and then pay US$0.99 each year for the privilege of using the service. For the sake of simplicity I am going to assume that they have done US$880,000,000 in total revenues to date and US$440,000,000 over the past 12 months.
That would put Facebook as paying some 43 times earnings for WhatsApp, I believe that my revenue estimates are on the high side, so I suspect Facebook is probably paying north of 50 times revenue.
If we think about this in terms of price/user then Facebook is paying about US$43 per user for WhatsApp. It’s a high cost of acquisition but not the most expensive paid. My friend Calvin compared this deal to Lycos acquisition by Terra Networks in 2000 in an all stock deal valued at US$12,500,000,000; or US$379 per user. You could double those numbers to get an approximate modern value.
Stock versus cash
Not all money is created equal and that is especially true when it comes to mergers and acquisitions. In both the Lycos and WhatsApp deals discussed above the bulk of the purchase value was in stock. In the case of WhatsApp there is just US$4,000,000,000 in cash, US$12,000,000,000 in stock and a further US$3,000,000,000 in deferred stock for WhatsApp employees.
So essentially Facebook can pay the bulk of the acquisition by printing more stock certificates, a model that Cisco Networks pursued successfully through the late 1990 and into the late noughties. The value of that stock can go higher, or become just 0.84% in the case of Lycos if you were left holding it for long enough for the acquisition of Lycos by Daum.
On the face of it the deferred stock puts a nominal value on each WhatsApp employee of roughly US$60,000,000. Again the risk is deferred, by structuring the the release of the stock over a number of years Facebook puts all the risk on the employees.
Facebook went to IPO at 100 times revenue, so WhatsApp at 50 times revenue paid for with stock valued at 100 times revenue could look like a comparative bargain.
The high cost of looking under the hood
One thing that I found really interesting about the deal was the penalty clause involved between the two companies. If Facebook can’t get the deal to work, it ends up paying US$1,000,000,000 in cash to WhatsApp for looking under the hood.
Now obviously it shows commitment from Facebook that they want the deal to happen, but there is also a high inherent value in Facebook finding out who WhatsApp works and why has it been successful. This is also reflected in the WhatsApp employee earnout value of US$3,000,000,000. Finally it gives us a notional value of how much Facebook thinks it would cost for it to replicate WhatsApp’s success: somewhere north of US$1,000,000,000.
The Facebook IPO Post (I)
The Facebook IPO Post (II)
WhatsApp | Crunchbase Profile
Why Facebook is a dead man walking
Why Facebook is a dead man walking part II?
Why Facebook is a dead man walking part 2.5?
Facebook and advertising or why Facebook is a dead man walking part III?
Facebook: IPO postmortem – a dispassionate analysis
The Facebook | Instagram post
Disclosure: Frank X. Shaw is a former colleague of mine from Waggener Edstrom. We’ve never met in person that I can recall, at that time he was dedicated to the North American Microsoft account.
Before I get into the meat of this post I want to share with you a couple of stories.
Gay rights in Ireland
Rory O’Neill is a LGBT activist in Ireland, in many ways he is the face of the gay community being compere at events like the Pride festival. He appeared on a national television talk show and alleged that some members of the Irish media were homophobic. RTÉ was subsequently threatened by legal action and had to provide compensation to those named including the Iona Institute: a socially conservative lobby group.
This unleashed political debate Irish MEP Paul Murphy called the compensation payments
…a real attack on the freedom of speech…
When John Waters says that gay marriage is ‘a kind of satire’, that is homophobia. When Breda O’Brien says ‘equality must take second place to the common good’, that is homophobia. When the Iona Institute campaign against gay marriage because it is gay marriage, that is homophobia.
This has created an atmosphere in Ireland of enhanced empathy to gay marriage and provided Mr O’Neill with a further platform
The video was shot at the famous Abbey Theatre in Dublin and has been seen over half a million times as I write this, which is a big number given that Ireland has a population of about 4.63 million people according to the latest estimates, this doesn’t include the reach provided by media coverage of the YouTube video. Mr O’Neill has been given a platform and an authority courtesy of his enemies that he otherwise wouldn’t have had.
The next story is that of the UK’s longest running court case McDonald’s Corporation v Steel & Morris; or as it’s better known the McLibel case. A pamphlet was published by a small environmental group: What’s wrong with McDonald’s: Everything they don’t want you to know.
McDonald’s took five people it considered responsible to court over the claims in the pamphlet; three of them apologised and two decided instead to fight the case. The ensuing media circus around the case damaged McDonald’s reputation in the the UK, such that McJobs became a linguistic shorthand for a poor paying job with no prospects (this is actually unfair to McDonald’s at least in the UK).
The point of both these stories is that coming out reflexively against an enemy can be counter-productive. Yet we are seeing this used as a tactic more and more.
One of the most visible proponents of this tactic is Microsoft usually using Frank X. Shaw as the delivery mechanism. The latest example I noticed of this was an open letter to New York Times columnist Farhad Manjoo, but I have linked to more examples about the web.
All of this sits uneasy with me for a number of reasons:
I get completely why it comes about, we live in a 24-hour world, we need to stay influential. We have moved from having a mediated discussion through journalists, fashion stylists, reviewers and radio presenters with audiences to going direct. The brand is the media. PR itself, the way it is practiced as a discipline is about ‘doing something’: what have you time tracked, what’s in the monthly report, what have you done? There are internal clients or agency clients who want to respond right away and PR agencies aren’t a place for people who say no.
Now imagine the brand as a person who responds to every slight, they would be insufferable, a pedant and possibly get locked up. What kind of dialogue does that set up with the audience, what kind of story does that tell. Brands need to move from being the antagonist in a story to being the ‘godlike figure’ that creates an inciting incident and sends our audience hero on a quest.
As my yiddish-speaking friends would say brands need to be a mensch. There you go a new concept Brand Mensch – I should be able to wrangle a book and a speaking tour out of that.
Strategic counsel for today: have your brand be a mensch.
RTÉ MD of Television defends Iona Institute apology and payout as ‘most prudent course of action’ | RTÉ News
MICROSOFT PR HITS BACK AT APPLE: The iPad Is Just Trying To Catch Up With The Surface | BusinessInsider
Microsoft’s PR Boss: Here’s Why I Tweet-Slammed The New York Times’ Review Of Windows | BusinessInsider
Microsoft Responds To Google’s Extortion Claim: “Waaaah.” | TechCrunch
Microsoft honcho pleads with media: ‘Stop picking on us!’| The Register
Microsoft responds to ‘extreme’ Windows 8 criticism | CNet
Microsoft Unleashes Anti-Android Rhetoric Following Facebook Home Event | TechnoBuffalo
Microsoft PR Chief Shreds New NY Times Columnist Over His Advice Column | BusinessInsider
Interesting video discussion that highlights the challenges of measuring ROI on Chinese online advertising markets in comparison to more mature digital advertising markets
I don’t think that the problem is one of demand, but one of a tension between media company interests and advertising interests. The benefits are cross platform comparison, but the challenges are technological and talent from an agency perspective.
You can read about how I got on last year here. This year’s predictions in no particular order:
Amazon won’t do drone delivery in 2014 - The reasons for this are many. Drones are limited by payload, to ability to land, the amount of energy they can hold for flight time and piloting. It is no small feat to fly a single drone let alone a parcel carrying fleet of them. Secondly, what do you do if the recipient isn’t at the landing zone? And we haven’t addressed ill-defined regulatory issues.
Small data – at the end of last year I ended up speaking to a retailer who wanted to do something with their customer database. Looking at it was underwhelming. Just over 200 customer records with only a fraction of them having email addresses. This was an extreme example, a large part of their problem was that data acquisition was done through the till, whilst customers would be paying for goods. Retail staff would then be torn between dealing with customer queues and trying to capture customer data. Hadoop is now bandied around like it is a common tool when in reality it only benefits the largest data sets. 2014 could benefit from a renewed focus on delivering value by sorting out the small data first.
Offline to online integration – companies like cini.me, Verifone and Brightmove media for cinema and taxi advertising respectively are symptomatic of a wider move that integrates online and offline media. The holy grail would be a multi-channel customer journey with correct levels of attribution of sales. We are starting to get there with the right context data sets: location-based weather forecasts, geo-fencing and Apple’s iBeacon
Algorithmic display advertising – Greater cross-media integration would require a greater degree of sophistication in media buying, moving towards algorithm-driven purchases within a real-time scenario. The challenges will be in ensuring artwork is appropriate, rendering formats, transmission; building algorithmic models themselves and demonstrating advertising effectiveness sufficiently well.
Mobile display advertising gets a radical reduction in formats – I had been looking at the different advertising options on mobile platforms and page takeovers seemed to make the most sense, which begged the question why have other inventory options. I suspect that other advertisers may take a similar stance.
Content marketing on OTT platforms – at the moment OTT platforms like WeChat are used predominantly as electronic direct marketing pushing out regular promotions or coupons to the audience. But the platforms also the opportunity to measure the impact of storytelling by weaving the platform into a multi-channel programme alongside video and websites. For the right brands special edition stickers offer an opportunity as well.
Chinese technology brands will finally be successful outside China – Xiaomi’s vertically integrated model of hardware, software and services is looking to expand outside of China to reach a larger Southeast Asian audience. CyanogenMod-based smartphones provide other manufacturers to follow a similar model. Oppo’s N1 was recently launched CyanogenMod edition phone gained Google certification, paving the way for other integrated offering like Xiaomi, so expect software and service innovation. Tencent’s WeChat will break through, based firstly on foreign brands looking to engage with Chinese consumers within and outside the country – expect a bridgehead to be built by the hospitality industry.
Privacy issues won’t change much with consumers – Whilst legislators may wring their hands and engineers build new products consumers won’t do much mainly because of inertia and a sense that it’s just way things are. Don’t believe me? Case in point, how many people do you know have moved their bank account, despite the UK government legislating that can now be done with just one form?
Technology company workers are the new bankers – protests in Oakland over Google commuter buses, technology sites giving Hello-esque coverage of staff canteens and luxury office and East London warping into something similar to Notting Hill a couple of decades ago, coupled with a growing army of working poor is going to create a heady mix of jealousy and the inevitable backlash similar to the student bashing that used to go on in Leeds. Expect some Hoxton twits to get twatted.
The rise of immersion – From the Oculus Rift glasses to a creative agency in Argentina using haptic technology to allow fathers to share with mothers how their child is developing as part of a marketing campaign for a babycare brand – immersive technologies are once more on the ascendancy for the first time since the mid-1990s.
Machine learning will threaten to disrupt programming – The current most popular computer science course at Stanford is machine learning, Qualcomm is looking to make machine learning based processors in 2014, this will disrupt computer programming and the schemas created by programmers across a wide range of applications from enterprise processes and workflows to consumer services like search. Whilst this won’t develop commercial applications in anger in 2014, developers may start to develop distinctly luddite tendencies.
A race to the bottom will bring out hyper-competition in mobile semiconductor suppliers – players like Qualcomm will come under price pressure from the likes of MediaTek and Spreadtrum who will provide high-quality and performance silicon at bargain basement prices to match the needs of Chinese OEMs living on razor-thin margins. Expect new operating systems and web services to take advances of these high performance bargain basement price devices.
Earlier in the month I saw numbers that indicated that the savings of UK consumers dipped to their lowest level in forty years.
So I found this information about smaller e-commerce sales in the UK during December. The smaller volume but better basket value could be indicative of a professional e-tailing marketers. What if, those savings weren’t spent on material goods but instead Christmas groceries? It indicates things are worse than the economic figures make out.
Great presentation by Thoughtful China about the online advertising market in China, the discussion comes from the perspective of ‘big data’ but points out the challenge of data quality and transparency in online advertising.
The presentation is on YouKu so you need to be patient with it.
My colleague Matthias Lüfkens based in Geneva is the prime mover behind twiplomacy.com and the research hosted on the site. He recently extended the remit beyond governments to also address international organisations. Here he presents the findings from the research.
Matthias’ presentation can be found here
Matthias on LinkedIn
A good mix of an overview and retrospective to some former big names like Vignette:
I was talking to colleagues during the week and thought it would be timely answer the question, what does Google moving search click-throughs on to HTTPS mean for PR people?