Regardless of where you stand on the issue, this video provides a view from 28 years ago when they predict “the day will come when we get all our newspapers and magazines by home computer, but that’s a few years off.”

Richard Halloran - way ahead of his time!

All predicted at a time when the time and cost of transferring data made the whole concept seem ludicrous.

The quote at the beginning of the video is great “Imagine, if you will, sitting down to your morning coffee, turning on your home computer to read the day’s newspaper. Well, it’s not a far-fetched as it may seem. In fact, both local San Francisco papers are investing a lot of money to try and get a service just like that started.”

It seems that Richard Halloran was way ahead of his time!

http://www.youtube.com/watch?v=5WCTn4FljUQ

Matt Scott, DraftFCB

It is not that the internet is a particularly recent invention. It has even had its very own economic crisis. So why are companies still struggling to engage with it?

Of course, every company worth its salt has a website, not least those who have sent their executives to the World Economic Forum in Davos. But the discussions here suggest that many companies are still struggling to move beyond having a colourful website towards really using the internet to their advantage. And to make things worse, hardly any company knows how to cope with the rise of social media – the Facebooks, Twitters, blogs and YouTubes of the digital world.

Digital confidence
Getting the web right starts with the basics: spam, privacy and fraud.

“The internet is seen by many [consumers] as an extremely dangerous place,” says Thomas Stewart of consulting firm Booz & Company. Companies have to tackle the “killers of digital confidence”, he says, from issues such as network security to fraud prevention. This is not just about having a secure website. It begins with basic issues such as being honest and upfront with your customers.
Networking website Facebook suffered a public relations disaster when it started to mine its users’ personal data to show them targeted adverts without warning them about it. In the UK, telecoms firm BT had a similar meltdown over the use of the much-criticised advertising platform Phorm. It is not the adverts that are objectionable, it is not being transparent about it.
Google’s online e-mail service Gmail also shows targeted adverts, but warns customers at sign-up how it works.
Even Amazon has started to explain why it recommends certain products to its customers (“Recommended because you purchased…”). It is not about legal compliance, say the analysts at Booz, it is about getting it right for the consumer.

Losing your business model
The problem is that many companies do not even get that far.

“Most people get the internet only because of a crisis, because they really have to,” says David Brain of PR giant Edelman, pointing at business leaders such as Michael Dell and Bill Gates of Microsoft. Companies that do not get it keep making life difficult for their customers, for example mobile or cable operators that confine customers to their own content offering.
“Many customers want that,” protests a cable executive, “they want their children to be in a safe environment.”
It is a fair point, but most customers have grown up, and all previous attempts to confine them to a walled garden have failed.
Another perfect case study is the media sector. One of the debates here in Davos demonstrates vividly how helpless many old media companies feel when they realise that their audience is disappearing into the digital vastness of the internet.
Hardest hit, of course, are print media. A recent study in the United States by Pew Research suggests that last year more Americans turned to the internet for news than newspapers (with television still ruling the roost).
As old media struggle with new-fangled things like “search engine optimisation” to ensure they stand out in places like Yahoo and Google News, many media leaders appear to be reduced to criticising the editorial quality and credibility of blogs and other online news sources.
Meanwhile, in the real world, the shift goes even further. In China, for example, more people now get their news on mobile phones than newspapers (never mind the fixed-line internet) and making news look good on a very small screen is an art in itself.

The rise of social media
Potentially most disruptive of all, though, is the rise of social media.

“The first thing that companies learn when they start using the internet is that they are not in control. They find it really difficult to abandon their control mindset,” says Mr Brain, who compares the experience to “crowdsurfing”.
But what are social media? At one Davos session, 10 prominent exponents of social media – from former Facebook and Linked-in executive Matt Cohler to Wikipedia founder Jimmy Wales and Techcrunch editor Mike Arrington – came up with 10 different definitions.
The most popular definition proved to be “human interaction in a virtual world”. Hiding behind that description is a teeming jungle of social networks that allows people instant communication with hundreds or thousands of “followers”, “friends” or plain old readers.

How not to use social media
How does it affect companies? Once your unhappy customer would have told 10 friends. Now he can tell 500 and, if you are unlucky, his complaint will be the first thing that potential new customers see when they search for your product on Google.
There are other pitfalls. In one recent example, an account manager with a well-known PR company visited the headquarters of FedEx in Memphis. On the way to the company, the hapless executive told his friends on Twitter that he would rather die than live in Memphis. The trouble is, FedEx people care deeply about their hometown and took offense. Online arguments ensued and a less-than-140-character message soured the relationship with one of the PR firm’s most important clients.
Ironically, the PR had come to Memphis to teach the FedEx communications team about using social media.

Under the radar
The FedEx people were actually trying to do the right thing. They tried to understand social media.
Most companies, though, have not got a clue. The boss of a company that makes it its business to know about technology admitted that 500 people in his company had signed up to Yammer – a social network designed to collaborate on work issues – before he had even heard that this service existed.
Using such networks can provide a huge productivity boost – or alienate your team if you get it wrong.
Others misunderstand social media and try to take control of them. For example, they run sanitised and boring corporate blogs, from which critical customer comments are purged.
Unsurprisingly, an Edelman study found that corporate blogs have the lowest credibility of all content on the internet.
Failing to engage with social media, all participants in the session agreed, could potentially lead to the destruction of a company’s brand. But used the right way, companies can turn customers into partners, through instant feedback that allows constant product development. Even better, done the right way (and with the right product or service), you can gently persuade happy customers to commend you using social media.
That is advertising that no money can buy.

http://news.bbc.co.uk/2/hi/business/davos/7861090.stm

Advertising rises and falls with the economy, though how much is a matter of debate. Randall Rothenberg, the boss of the Interactive Advertising Bureau, a trade association for digital advertisers, points to the remarkable stability of advertising at about 2% of GDP since 1919, when the data began to be collected. This would suggest that ad budgets will move roughly in line with economic output.

But Mary Meeker, an internet analyst at Morgan Stanley, believes that modern ad budgets rise and fall much more than GDP does. According to her estimates, if the economy stops growing, ad spending is likely to fall by 4%. If the economy shrinks by 2%, overall ad spending may fall by 10%. As for the online segment, recent history is cause for pessimism. Between 2000 and 2002, during the dotcom recession, online ad spending in America fell by 27%.

Yet the web has changed a lot since 2002. Back then, gaudy display “banners” on web portals such as Yahoo! and MSN were the preferred technology. These still exist, but they now account for less than 20% of online ad spending. More than half goes to search advertising on Google and rival search-engines, which place small text ads next to results based on the keyword of the query, and charge only when a user clicks on them. In brand advertising, “rich media” ads are taking over from banners. These allow users to interact by clicking, so their engagement can be tracked.

All this makes spending on advertising much less speculative, so that it starts to be treated instead as a cost of sales. This is one reason why online advertising should suffer less than other sorts. This week eMarketer, a market-research firm, predicted that online-advertising spending in America, which makes up about half the global total, will increase by 8.9% in 2009, rather than the 14.5% it had forecast in August. The firm thinks search advertising will grow by 14.9% and rich-media ads by 7.5%, whereas display ads will grow by 6.6%. In short, online advertising will continue to expand in the recession—just not as quickly as previously expected.

Another reason for optimism, says Mr Rothenberg, is that online advertising is making obsolete the old distinction between marketing spending “above the line” and “below” it. In the jargon, above-the-line spending drives brand “awareness” (probably on television) or “consideration” by a consumer planning a purchase (probably in a newspaper). Such spending is often slashed in recessions. Below-the-line spending includes promotions or coupons to whet the consumer’s “preference” for the brand as he nears a purchase, or schemes such as frequent- flyer miles to increase his “loyalty” afterwards. These budgets are more robust.

Online marketing increasingly aims for awareness, consideration, preference and loyalty all at once. Mr Rothenberg gives the example of a rich-media ad for Kraft, a food company, in which a yummy image raises brand awareness, a click reveals a recipe that increases consideration, another click provides coupons and yet another click initiates a game that can be shared with friends. Marketing managers can therefore defend their online budgets as being both above and below the line.

The industry is also cautiously excited about two new forms of online advertising. The first is video. So far nobody has found a way to advertise inside online clips on a large scale. YouTube, which Google bought for no less than $1.65 billion two years ago, is “a huge end-user success,” says Eric Schmidt, Google’s boss, “and we’re awaiting the monetisation.” This is his way of saying that YouTube, despite showing 5 billion video clips a month, has trivial ad revenues. The site is experimenting with text “overlays” inside clips and sponsored videos for specific search terms, but it is early days. “If only we could schedule the revolution,” jokes Larry Page, one of Google’s founders.

If something close to one is in fact near, it may not come from YouTube. Ads on Hulu, a video site that is a joint venture between Mr Zucker’s NBC Universal and News Corp, another media giant, appear to be selling well. Hulu is different from other video sites in that it only shows professionally produced videos, such as programmes and films from NBC, Fox, MGM and Warner Brothers. It runs a relatively small number of short, fun “pre-roll” ads. These incorporate some of the advantages of the web. Viewers can, for instance, vote on how good a particular ad was.

The lesson appears to be that the problem was not the format but the fact that so much of the footage online, especially on YouTube, is “user-generated”. Brands are wary of putting their ads next to amateur clips because they may be boring or offensive. This is less likely to be a problem with professional content. From a small base, says Mr Rothenberg, online-video ads grew from 1% to 3% of all interactive ads in America in the first half of the year.

The other hope is for ads on social networks such as MySpace and Facebook. They are experimenting with a variety of advertising formats, though none has yet proved very successful. Their big weakness is that users go to social-networking sites to socialise, not to shop (as they might on search engines). Their biggest strength is that users spend so much time there. Two years ago 11% of time spent online was at Yahoo! and MSN, two web portals; now their share is down to 5%, and 5% of online time is spent at YouTube and Facebook.

Online traffic, in other words, is moving towards sites where advertising has so far proved ineffective and is therefore cheap. This, says Ms Meeker, presents an opportunity for innovation and arbitrage by clever marketing managers as they cut their conventional ad budgets. It may also provide a glimmer of hope for the advertising industry as it enters recession.

Published in The Economist “Not ye olde banners” Nov 27th 2008