Sunday, February 25, 2007

Nibbling, gnawing and slowly taking the cream....

I was sent a link to this article by a friend of mine and was asked what I thought... so here it is. (apologies about the link requiring that you register before you read it, but the NY Times article is, to my mind worth the effort).

The article describes the arrival of the "virtual ad agency" which, when you get past the fluff of it, describes an innovative business which uses a pile of stock materials (stock TVC footage, stock creative, stock print templates etc) to offer advertisers the ability to "make their own ads."

That itself is not new - desktop computer applications and web hosting companies have been doing this for years (and to be frank, there is a section of the advertising market that this is perfectly adequate for). What is new, is that these guys are explicitly stating that they are trying to commoditise some of traditonally "easy money" activities of the traditional agencies.

Take, for example, a large agency group who does the ad work for, say a car rental company. I am sure that in addition to the topline agency and production fees, there is a nice little earner in paying the studio juniors to localise the TVC ads for every single location - dropping in the branch address and phone numbers 500 times for 500 local TV stations. Well, not any more. The business model of the"virtual ad agency" seems to include the ability to "self-edit" these TVCs on the fly - pushing the effort and cost to the customer and the revenue and margin away from the traditional agencies.

I am sure that this, in itself, is not going to be the straw which breaks the agency camel's back, but it is yet another sign of the "pressure at the margins" that traditional agencies are facing... a torture by a thousand cuts as one more thing after another gets challenged or changed by this exciting Digital Age age we live in.

How agencies respond (evolve??) will be an interesting space to watch over the next couple of years. As many have already proven, it is hard to "race" into the digital services space since it takes a lot of time, effort and experience to build up quality capability in this space (we have been constantly improving for more than a decade!) and simply throwing money at it won't help. It is time for agencies to really get their heads around where they really add value and to get out of all those things which are outside of this.

As I always say, I really enjoy my job because we get to change the world.... the challenge for some others is learning (fast enough) to live in this new world we are creating.

Tuesday, February 13, 2007

Four-sight in Second Life????

Having just come back from some “time on the island” in Second Life, I decided I would climb down from my virtual soapbox and give my digital one a whirl.

The source of my passion is an article from the Sydney Morning Herald yesterday.

I am in the fortunate position of having a LOT of experience in the Digital Services industry, having founded what was probably one of the very first, if not the first, web development companies in Australia over a dozen years ago. Over this time, I have seen EVERYTHING we have on digital channels “come”, and a fair few things “go.” I was there when we built the first online store in Australia, I was there when we took the first credit card payments, and I was personally chased out of the boardroom of one of our biggest banks who told me firmly “people will NEVER want to do their own banking over this thing called the internet.” I reckon I am pretty qualified to have my say.

In my time in this industry, I have learned that when some of the big things happen, it is important that one doesn’t race to conclusions based on the here and now, but rather that one takes some time to consider the potential.

I remember when the first nerds learned that they could hit the keys on a mobile phone in a certain order and make a tune – a pretty poor rendition of “The Locomotion” soon followed, but we knew then that musical ringtones had potential and that the mobile phone was a platform of unlimited potential (the early subscribers to WAP services were measured in their – low – thousands in the early years and look at that industry now). I remember logging onto my first online auction, a clumsy, unstable sort of affair which relied more on the goodwill of the people involved than it did on the technology and the presentation. I remember the first time we delivered “personalised content” to a consumer via a website, really just a different interface for people who were already customers, rather than new visitors who were yet to buy. In all these cases, we pretty quickly discovered that where we started was only the early execution of a potentially limitless idea. And in all cases, from that day on, we explored, experimented, learned and invented.

At Hyro, we now employ more than 300 people throughout Australasia who share the outcomes of that process of discovery with our clients who are now embracing the reality that Digital Services are permanent, persistent and important.

Second Life is one of those “big things” which is a platform of limitless potential and is an early execution of a very big idea. We have been working on gaining an understanding of the future that Second Life telegraphs for several months now and have ourselves launched into the virtual void with our own island – a place in which we are trialling recruitment of virtual citizens* for real world jobs – acknowledging that the sorts of people we want to work with include people who already “get this Second Life thing.”**

We are learning that the internet is no longer “flat” – built only around page like text and graphics, but has amazing possibilities for new ways of communicating ideas and offers. Rich media is increasingly important and this already goes beyond the materials we create and distribute to things ordinary people devote their time, intellect and creativity to. Some of this is a video in a video site, some of this is virtual commerce in Second Life, some of this is things that are yet to be invented. We are learning about a new style of business – why is there commerce of $US1 million a day in second life? What is of value? Why do people want to trade these things? Why do these communities form? What opportunities do they present? We are learning new technologies, new creative media, new styles of interaction…. We are discovering the potential.

An aside - I do despise simple, reverse engineered statistics such as the claims in the article that there are "only about 3,000" Australians in Second Life at any time, drawn by multiplying the number of active users by the estimated number of total users from Australia. This calculation doesn't take into account time zones (note that Australian's are awake while Americans are asleep) nor does it provide any basis of validation. Truth is, we don't know how many Australians are active in Second Life at any point in time - and this will change throughout the day. Sure it isn't millions right now, probably not even hundreds of thousands, but does it matter? I remember when I got my first mobile phone back in the 80s - we counted the number of people who owned and used these klutzy wirless handsets, with poor battery life and dreadful call quality in the tens of thousands then.... and now, there is more than one mobile handset for every Australian (excluding the aged, the infants and the invalids).

So, is Second Life a waste of time? Not at all. Our recent history is littered with companies who have seen places which should have “naturally been theirs” in this connected, digital world taken by rivals or start-ups (or even worse), all because they failed to see the potential and weren’t brave enough to invest a little time and a little money understanding it before they dismissed it as frivolity.

Maybe there are some lessons there….. the last time this happened, some companies had their backs turned while we got on with the job of changing the world....

* The irony is not lost on me that the very publication which carried the article I am ranting about in yesterday's edition is the same publication that I applaud for promoting our current innovations with content licensing and virtual world recruiting - thanks to the folks at the SMH for the balanced reporting!

**Nice Virtual Photo from the entry point to our virtual recruitment centre of me and my digitally buffed colleague Chris - they didin't name us in the article but we know who we are!