Declining Teen Discretionary Spending

Economic sluggishness now is hitting teenager discretionary spending. Total teen spending on fashion declined nearly 20 percent on a year-to-year basis, indicating a "discretionary recession," says Piper Jaffray senior research analyst Jeff Klinefelter.

The survey results, from mall research and classroom visits across the United States, as well as 4,500 online survey responses, shows that total spending trends were weakest for young men with a 15 percent year-over-year decline versus an 11 percent year-over-year decline for young women.

While the fashion category represents 41 percent of the total teen budget in the survey, the retail research team notes this allocation is low compared with the past several years.

Klinefelter says "the current economic challenges are impacting consumers at all income levels and ages, indicated by the low level of average planned spending in the fashion category this spring."

$99.99 Plans Not Cannibalizing Revenue

Based on the most recent first quarter results from Verizon and AT&T, one would have to conclude that the $99.99 monthly unlimited calling plans introduced in February have not cannibalized revenue.

Verizon reports that 13 percent of its new customers opted for the plan while AT&T had four percent of customers choosing the plan.

Since the number of total users paying $100 or more has been in low single digits, at least as reported by Verizon, it seems clear enough that most customers are trading up the $99.99 plans rather than downgrading from more-expensive plans.

Analysts feared a new price war, but carrier executives seemed to have done their homework on this, and predicted the reaction. Heck, they've probably exceeded their expectations. The bottom line was protecting their base of heavy users.

It now appears the $99.99 plans are adding to the base of higher-average-revenue-per-user customers.

One has to careful making cross-country comparisons, but it appears that Japan's NTT user base is talking less than they used to in 2000, though mobile talking appears still to be growing.

One possible outcome of the $99.99 plans is that more people are going to be tempted to "cut the cord" and abandon their landlines, as one of the obvious problems with wireless substitution is that the added call volume can require a shift to a calling plan containing more minutes.

The $99.99 plans take care of that problem.

Widgets Emerge as Ad Venue

So far, social network ad spending is about as concentrated as search advertising is. MySpace alone gets 53 percent. Add in Facebook and two companies control 72 percent of all social network advertising.

It is interesting that widgets have emerged as the only identifiable category among the "other" sites that get some advertising support.

Social Networking Doesn't Drive That Much Advertising

Social networks aren't yet driving a huge amount of online advertising, and might not, say analysts at eMarketer.

An Advantage for Cloud Computing

Come to think of it, computing in the cloud, as a service, might have some important implications for software distribution and use. Piracy, for example, might be far less a problem.

Although piracy of software on personal computers declined in many countries in 2007, fast growing PC markets in some of the world’s highest piracy nations caused overall numbers to worsen—a trend that is expected to continue. Moreover, dollar losses from piracy rose by $8 billion to nearly $48 billion, according to the Business Software Alliance.

Of the 108 countries included in the report, the use of pirated software dropped in 67, and rose in only eight. However, because the worldwide PC market grew fastest in high-piracy countries, the worldwide PC software piracy rate increased by three percentage points to 38 percent in 2007.

“By the end of 2007, there were more than 1 billion PCs installed around the world, and close to half had pirated, unlicensed software on them,” says John Gantz, chief research officer at IDC.

Among the nations studied, Russia led the way with a one-year drop of seven points to 73 percent, and a five-year drop of 14 points. Russia’s piracy rate is still high, but it is decreasing at a fast pace as a result of legalization programs, government engagement and enforcement, user education, and an improved economy.

The three lowest-piracy countries were the United States (20 percent), Luxembourg (21 percent), and New Zealand (22 percent). The three highest-piracy countries were Armenia (93 percent), Bangladesh (92 percent), and Azerbaijan (92 percent).

For some observers, that might suggest a generally non-touted advantage for Web-based and cloud computing. Users cannot steal software that isn't there.

EarthLink Shuts Philadelphia Metro Wi-Fi Net

EarthLink is terminating its Philadelphia Wi-Fi service, after failing to reach agreement with the City of Philadelphia and a non-profit organization to transfer to either the City or to the non-profit the entire $17 million Wi-Fi network, for free, as well as pay cash and donate new Wi-Fi equipment.

EarthLink will continue to provide Wi-Fi service to its customers in Philadelphia during a transition period that will end on June 12, 2008. EarthLink will begin decommissioning the network shortly after the transition period.

That's the story these days: Municipal Wi-Fi is so unattractive a business proposition that assets cannot even be given away.

New Android Apps

Silicon Alley blogger Vasanth Sridharan picks five Google Android applications deemed especially cool or useful.

Android Scan scans barcodes on any book or CD when a user is in a store and will pulls up Amazon reviews. The application also will check local library listings to see if the book is available to check out.

CookingCapsules allows users to look up recipes, find a store nearby to get groceries, and provides step-by-step cooking directions.

Eco2Go calculates the carbon footprint a user leaves every time he or she takes a trip, and buys carbon credits to offset the impact.

Locale is a user preferences tool that automatically adjusts ringing or call forwarding rules when a user is in certain locations. At the office, the phone automatically goes on silent. At home, it automatically re-routes calls to a land line.

TuneWiki is a karaoke application and music player for the Android phone.

Online Ad Prices Falling

PubMatic's Web site ad price index indicates that the economic slowdown in the United States is beginning to affect the online advertising industry, with overall monetization dropping by 23 percent. The PubMatic AdPrice Index is based on data from over 3,000 publishers and billions of ad impressions.

The PubMatic AdPrice Index revealed surprising weakness in monetization for the vast majority of Web sites.
Large Web sites fared the worst while small Web sites managed to maintain their monetization rates. eCPMs for large Web sites (more than 100 million page views per month) dropped dramatically by 52 percent from 38 cents in March to 18 cents April. Medium Web sites (1 million to 100 million page views per month) were nearly flat, with monetization dropping from 34 cents in March to 33 cents in April. Small Web sites managed to improve their monetization, increasing from $1.18 in March to $1.29 in April.

82% Internet Pentration and Rising

Roughly one fifth of all U.S. heads-of-household have never used email, according to Parks Associates. That's not even close to being the most significant implication, though. If the Parks survey data can be extrapolated to the whole population, and Parks Associates believes it can, then Internet subscriptions now reach 82 percent of U.S. consumers.

The most recent annual phone survey of U.S. households found 20 million households are without Internet access, approximately 18 percent of all U.S. households.

“Nearly one out of three household heads has never used a computer to create a document,” says John Barrett, director, research, Parks Associates.

The Parks Associates poll found seven percent of the 20 million “disconnected” homes plan to subscribe to an Internet service within the next 12 months. And "Internet resisters" continue to dwindle.

At year-end 2006, 29 percent of all U.S. households (31 million homes) did not have Internet access. So 11 million more homes have gone online over the past year, if the Parks data can be extrapolated.

One half of those who have never used email are older than 65, and 56 percent had no schooling beyond high school.

User Generated Video Growing Faster than Expected

Because of significant growth in the Chinese market, In-Stat researchers have revised upwards their forecasts for user-generated video use and revenue.

Total worldwide UGV revenue is expected to eclipse U.S. $1.19 billion by 2012. In-Stat projects 160 billion UGV videos will be viewed in 2012.

Individuals who use mobile phones to participate in online video sites are most likely to contribute to the market, both financially and in terms of content, In-Stat argues.

HBO for iTunes?

There are lots of rumors about a possible earlier release of the 3G iPhone as shortages build and we approach the June 2008 date when a 3G-capable iPhone will be released. Something else that actually is more important might also be happening at a faster pace, though.

Since most video viewing is substituted for some other mode (you might watch a movie at a theater, or on a DVD, or as video on demand, or on a premium channel or on broadcast TV), changes in the "release windows" that dictate when each delivery mode can get the content also have the effect of shifting revenue shares within the ecosystem.

According to a report published by Conde Naste Portfolio, Apple is on the verge of offering HBO original programs on iTunes. The programming, which would include hits like the Sopranos and Deadwood, offered at a premium to the standard $1.99 an episode fee.

If true, the deal will be a break in tradition as much for HBO as for Apple, and provide further evidence of a quickening pace of "release window" modifications that have more content going to some form of digital delivery.

As release windows change, so do the financial and contractual agreements that govern when content can be made available. That, more than anything else, will determine how successful downloads, streaming and video on demand can become.

Up to this point HBO has been a nearly-complete hold out in the digital and streaming venue. It now is testing streaming for its current subscribers, but has completely avoided any availability for non-subscribers.

Media Consumption: TV Leads, Internet Grows

Adult consumers in the United States still spend more time in front of televisions than they do online, according to a survey sponsored by the Television Bureau of Advertising industry association and conducted by Nielsen Media Research.

Survey respondents ages 18 to 34 spent over an hour per day more watching TV than they spent more time watching TV than they did in online pursuits, the study found. The gap between time spent online and time spent watching TV is closing, however.

In January 2008, TVB found that 18 to 34 year-olds spent 60.6 minutes more watching TV per day (206.0 minutes) than they did online (145.4 minutes). That is down from June 2006, when the gap was 137.4 minutes: 246.7 minutes for TV and 109.3 minutes online. Moreover, TV time decreased while Internet time increased.

A separate study by JupiterResearch and Ipsos Insight reported results in more discrete age groups and found that TV use actually trailed Internet use among the youngest consumers. As of August 2007, US consumers in the 18 to 24 year-old range went online an average of two more hours per week than they spent watching TV.

Neither study specifically addressed multitasking, which can be significant, especially among younger consumers.

"Young people rarely use just one medium at a time," says Debra Aho Williamson, senior analyst at eMarketer. "Often, when they are online, they’ll have TV or music on in the background."

One might be skeptical about a couple elements of both surveys. The TVB study suggests that adults between 18 and 34 spend 115.6 minutes a day listening to the radio.

The Jupiter and Ipsos survey suggests adults 18 to 24 spend three hours a week listening to the radio.

My totally unscientific experience is that none of my 18 to 24 year olds spend any time at all listening to the radio. For similar reasons, I am somewhat skeptical about "time spent in front of the TV."

Verizon DSL: Changing Metrics

As markets change, so do metrics. It used to make sense to count "access lines." Not any longer. These days it makes more sense to count "revenue generating units." And at least in Verizon's case, it is starting to make less sense to count "digital subscriber lines," as FiOS increasingly becomes the lead broadband access product.

To be sure, broadband access markets also are nearing saturation. Most customers who want broadband already buy it. But as Verizon replaces copper plant with FiOS, DSL connections will decline, to be replaced with optical connections.

IGI Consulting points out that Verizon's rate of net additions of DSL subscribers has been slowing for a couple of years. Again, some of that is market saturation, some of it is FiOS replacement. But rates of increase for any product slow as demand is satisfied. Rates also decrease when product substitutes are offered.

In the first quarter of 2008 Verizon FiOS TV customers accelerated to 263,000, a sequential increase of 16 percent. Verizon now has more than 1.2 million FiOS TV customers,19 percent penetration of marketable homes. Over the past year Verizon has added more than 850,000 FiOS customers.

Total broadband subscribers, including DSL plus FiOS internet increased to 8.5 million up 1.1 million or 15 percent from a year ago. Verizon added 266,000 broadband customers in the quarter. FiOS Internet access customers now represent over 1.8 million subscribers, representing 23 percent penetration of marketable homes.

U.S. Internet Video Watching up 64% Year over Year

U.S. Internet users viewed 11.5 billion online videos during March 2008, representing a 13-percent gain versus February and a 64-percent gain compared to March 2007 viewing, according to comScore.

Google Sites again ranked as the top U.S. video property with more than 4.3 billion videos viewed (38 percent share), gaining 2.6 share points over February. YouTube.com accounted for 98 percent of all videos viewed at Google Sites.

Fox Interactive Media ranked second with 477 million videos (4.2 percent), followed by Yahoo! Sites with 328 million (2.9 percent) and Viacom Digital with 249 million (2.2 percent).

Nearly 139 million U.S. Internet users watched an average of 83 videos per viewer in March. Google Sites also attracted the most viewers (85.7 million), where they watched an average of 51 videos per person. Fox Interactive attracted the second most viewers (54.3 million), followed by Yahoo! Sites (37.5 million) and Viacom Digital (26.6 million).

Altogether, 73.7 percent of the total U.S. Internet audience viewed online video during March, comScore says. The average online video duration was 2.8 minutes and the average online video viewer watched 235 minutes of video.

The Internet is Changing

It is said one of the three largest U.S. cable operators now is using technology from Procera Networks to classify and prioritize packets on a much more granular basis than simple Multi-Protocol Label Switching would imply.

Traffic shaping, though some object to its use, seems not to be an optional practice anymore, as the Internet increasingly is asked to supply real-time services such as voice, video and audio that are tough to deliver with assured quality.

That's a big change for the Internet, to be sure. But it seems an irreversible change, precisely because the Internet and other IP networks now are asked to support real-time services that require quality of service control.

Procera Networks announced availability of the PacketLogic PL10000, the latest in the PacketLogic family of deep packet inspection products and said to be the industry's highest-performance DPI platform, with four times the capacity of its nearest competitor.With up to 80Gbps of throughput, PacketLogic PL10000 is purpose-built with tier one broadband network deployments in mind.

Generally available now, the PacketLogic PL10000 already has four service provider customers from around the world and is currently operating in production networks, said to include at least one of the largest three U.S. cable networks.

Procera Networks systems are used by universities and colleges to manage recreational Internet use at times of peak load, prioritizing academic applications. Some university users say compliance with copyright laws is another reason the Procera Networks solution makes sense.

There's a broader issue here. The Procera approach is in line with thinking that it is not enough to prioritize broad classes of applications. According to a developing line of thinking, service providers need to categorize and control specific applications and specific Web sites, or possibly specific users at specific times of day, not simply "real time" traffic or "email" or "file transfers.

That of course will strike some observers as a dangerous violation of historic Internet "anybody can connect to anybody" norms. But the Internet is changing, not least because users want high-quality voice, video and audio performance, and packet classification is a major tool to allow that sort of choice.

There are, to be sure, anti-competitive implications if an access provider wants to behave that way. One has to assume market forces and governmental action will dampen those impulses.

No doubt about it: the Internet is changing.