Tim Armstrong, AOL’s new CEO, divides internet history into three phases. The first phase was about access—remember dial-up modems and limited bandwidth? The second phase, when browsers and search engines competed for eyeballs, was about platforms. In today’s third phase, the growth area—what’s going to drive innovation and competition—is content. More than 2,400 publishers, advertisers, and service providers gathered in September at the Internet Advertising Bureau’s annual MIXX Conference & Expo to explore who’s doing what in this exploding area.
Interviewed on stage by Charlie Rose, Wired’s Chris Anderson expanded on the thesis of his new book, Free. Unlike other channels, the Web is having a deflationary impact on the price of content. “The cost of storage, processing, and bandwidth is going down by 50% every year.” This is the economy of bits and savvy publishers need to experiment with “freemiums,” models in which distributing free content in bits is part of a model that generates revenue in other ways: services, advertising, or premium features. One example: the creators of Monty Python reinvigorated DVD sales by posting free high-quality versions of their videos on YouTube.
“Ads are going to look more like content, content more like ads,” predicted Andy Fisher of Razorfish. Disruptive ads will be a thing of the past. “Ads are content,” corrected Microsoft’s Yusuf Mehdi. As an example, he pointed to the Pringles “love is complicated” campaign which found the banner equivalent of “once you pop you can’t stop” in a 128-frame interactive banner ad—most visitors click on all frames! Burger King filmed customers being “freaked out” by learning “we no longer sell whoppers” and viewers responded by creating their own video reactions.
User-generated content (UGC) is the ultimate testimony to a product’s having a successful user experience, and publishers and advertisers clearly prize customer engagement, which pays dividends. Lucas Watson of Procter & Gamble noted that the new Hugo Boss bottle is based on a design submitted by an 18-year-old in Thailand. Most of the video that Twitter king Ashton Kutcher created for KelloggsCares consists of UGC submissions. MyStarbucks has received more than 75,000 ideas from customers—about everything from cup design to menu suggestions—and Idea experts inside Starbucks bring them to top management.
Critical to the next wave of content creation will be creative segmentation. “Small communities is the takeaway,” said Anderson, who launched GeekDad to address his own needs as a father—the site now gets one million visitors a month. Cheryl Guerin from MasterCard has moved beyond age/gender/income demographics. She divides her customers by their attitude to payment: the “comfortably affluent” tend to search for information—she finds them by requiring internet users to click through several pages first; members of the “finances in transition” group, on the other hand, skew toward making entertainment purchases.
But relying on clicks to find your customers would be a mistake, according to comScore’s Gian Fulgoni. A recent comScore study showed that the number of clicks declined 50% last year. Worse, “natural born clickers” are devouring an even larger share of clicks. In 2007, 6% of Internet users accounted for 50% of all clicks. In 2009, 8% account for 85%! Think of them as the Web’s coupon clippers. The same report does have some good news: display + search raises offline sales at retail stores by 119%. Separate findings from Microsoft supported this: Esco Strong reported an Atlas Institute study that people who clicked on a search link were 22% more likely to convert if they had previously seen a display ad.