71% of Marketing Budgets Have Been Cut

About 71 percent of chief marketing officers say they have seen marketing budgets reduced,

and 51 percent have seen cuts of at least 20 percent, say respondents to a recent Forrester

Research survey.

TV, print, radio and magazine spending has taken the biggest hit, with budget decreases of 67

percent. Branding and advertising budgets have been cut 64 percent, respondents say.

About 52 percent have reduced spending on direct mail. In fact, virtually every category studied by Forrester Research has declined this year.

But a significant percentage of respondents also report they plan to increase nspending in a few

categories. About 47 percent of marketers say they will increase spending on social media,

Web site development, online advertising, and email marketing.

That marketing budgets have been cut should come as no surprise. That happens whenever there is an economic or industry downturn. Nor should the shift of spending towards online, mobile or social media provide much of a surprise. That simply is where users are spending more of their time.

Over the long term, marketing effort always follows audiences.

Sprint Sells 99-Cent Netbook

Sprint is offering new customers Compaq’s 1040DX netbook for 99 cents when bought at Best Buy with a two-year mobile broadband contract costing $60 a month.

The same netbook with service bought from Verizon Wireless or AT&T is $199.99, while a non-contract price is $389.99.

In principle, the tactic is the same used by mobile providers to bundle handsets with service. .

Sprint is fully subsidizing the hardware price in order to gain a two-year service agreement. At $60 a month, the 3G service costs the consumer $1,440, for a gross revenue for Sprint of around $1,050 over two years. So the netbook represents marketing cost.

But some consumer advocates want an end to such bundling practices, arguing that the practice ties customers to a carrier. Up to this point, most consumers might conclude that the significant discounts on handsets are worth the trade off.

In fact, some economists argue that subsidized handsets actually lead to more innovation, as users have incentives to upgrade to new devices frequently. If the general rule is that consumers buy less of products that are more expensive, severing the tie between service and subsidized handsets should reduce the frequency with which most consumers buy new devices.

To the extent that new devices drive new applications, application-based innovation could suffer.

That said, sales of unlocked devices would allow some greater degree of switching behavior. Users of CDMA handsets would have a choice of Verizon and Sprint, while GSM users would have a choice between AT&T and T-Mobile USA.

A new regime of unlocked phones should in principle also spur development of phones operating on both GSM and CDMA, though at the price of higher handset cost. To the extent that rapid mobile handset innovation and adoption lead to higher consumer welfare, regulators might want to weigh the costs and benefits of handset subsidies very carefully.

Children Do Not Like Being on the Same Social Networks as Their Parents

Apparently, children do not especially like belonging to the same social networks as their parents. Or so it would seem, based on 2009 Facebook demographics.

Though Facebook users grew 513 percent in the 55 and older demographic, usage by college and high school age users dropped 20 percent, says iStrategyLabs.

If you have, or have had, teenagers, you are not surprised by this finding.

Click the image for a larger view.

Execs Don't See Network Driving Value

If a recent survey of European telecom ecosystem executives proves accurate, business model changes in the mobile broadband space increasingly will find content providers paying money to access providers for a variety of services, while infrastructure itself becomes a less-crucial driver of network value.

About 81 percent of respondents indicated that traffic shaping and deep packet inspection can help network operators boost their revenues.

Also, some 91 percent said network infrastructure sharing will become the norm as mobile data costs climb.

Both of those findings confirm a belief that at least in the mobile space, revenue and cost sharing mechanisms are likely to change, and relatively soon.

What is a telecom operator’s unique selling point? Overwhelmingly, European telecom executives identified a telco’s service management platform as its core USP with 37 percent of the vote, the Yankee Group says.

Poll respondents also were evenly split on which ecosystem participants would have most profit potential over the next three to five years. Some 32.1 percent thought service providers would, while an identical 32.1 percent thought content owners would have the brightest prospects.

Brand came second with a quarter of the vote. Ownership of network assets—both access and core network—came in lower with 13.2 percent and 11.3 percent of the vote, respectively.

The survey was conducted in April 2009. Some 60 percent of survey respondents work for telecom operators, and the remainder for software and IT services, application providers and media-related firms working with telecom operators.

Prepaid Wireless Site Visits: Who is Up? Who is Down?

If changes in traffic to mobile prepaid sites are a reflection of the amount of consumer interest, MetroPCS, Boost Mobile and Leap Wireless are getting more interest, while Virgin Mobile and Tracfone, historically the leaders, are getting slightly less interest, according to a traffic analysis by Compete.com.

How Much Data Do People Really Use?

At least some people do worry about usage caps, whether for fixed broadband or mobile. Some data from iPass concerning Wi-Fi usage might help shed some light on the matter (click on the image for a bigger view of the chart).

The data show that a typical user consumes less than 211 megabytes a month. Experienced users use less: about 201 Mbytes a month.

Those stats are from the second quarter of 2008, and the iPass data shows moderate per-user growth since early 2007, but nothing exponential.

Mobile broadband as it pertains to smart phones will show a different pattern, in all likelihood. But the point is that the typical user does not consume as much data as one might think.

Broadband Definitions for ARRA Proposals Set at 768 kbps Downstream and 200 kbps Upstream

"Broadband," for purposes of applying for grants or loans under NTIA or RUS broadband stimulus programs, in 768 kbps in the downstream, and 200 kbps in the upstream. As with every other specific rule, this is a minimum, not a maximum.

The provision seems designed to allow different platforms, with different capabilities, to be used. Also, the definitions will allow satellite and wireless broadband networks to qualify.

It probably will not hurt if a particular network has the ability to scale to higher speeds gracefully, either.

First Broadband Stimulus Applications Can be Submitted July 14

The first "broadband stimulus" proposals to either the NTIA or RUS will be accepted starting July 14 and applications will be accepted until August 14.

The Notice of Funds Availability runs about 120 pages so I have to read it first before I can say anything else!

Lower European Mobile Prices Start Today

New price curbs on the cost of using a mobile phone while outside a home state in the European Union took effect today.

The price for a roaming text has fallen to EUR0.11, from around EUR0.29.

Downloading data while roaming now costs a maximum of EUR1 per megabyte at the wholesale level compared with previous costs of about EUR1.68.

An earlier price cap of EUR0.46 per minute for an outgoing voice call has also fallen to EUR0.43, while the cap on voice calls received abroad has fallen from EUR0.22 to EUR0.19.

In addition, mobile operators have been forced to charge for calls by the second after the first half minute, instead of rounding up to the nearest minute, whilst operators must introduce per-second billing from the first second for calls received abroad.

The caps will further fall to EUR0.39 for calls made and EUR0.15 for calls received while roaming from 1 July 2010, and to EUR0.35 and EUR0.11 from 1 July 2011.

59% of WiMAX Providers Expect to Offer VoIP By 2011

Some 59 percent of respondents to a recent Infonetics Research survey globally plan to offer VoIP over WiMAX services by 2011.

As always is the case, market considerations are key. Attackers, with no legacy voice revenues to cannibalize, will be more eager to do so. Providers with large revenue streams to protect will be less likely to do so.

Of the operators surveyed, 41 percent are from Asia Pacific, 36 percent from Europe, the Middle East, and Africa (EMEA), 18 percent from North America, and five percent from Central and Latin America (CALA).

Generation Z: Shift Happens

Though there's a bit of imprecision about the terms Generation X, Y and Z, their behavior is closely watched for obvious reasons: at some point relatively soon, they will start to represent the center of gravity for most products and services.

Generation Z, people roughly born between 1995 and through 2000s, have some characteristics in common with Generations X (roughly born between 1965 and 1980) and Y (roughly born between 1980 and 1994). We perhaps make too much of the precise delineations. But some behavioral trends seem common to all three "generations."

They don't read newspapers.

They tend not to watch scheduled TV, and some would note that even when TV is available, it isn't being "watched," as users are multitasking. They also often have access to digital video recorders and Internet video so "appointment television" doesn't make as much sense to them as it might for older viewers.

They tend to rely on mobiles for voice communications, and in any case texting is an equally dominant behavior.

They tend to trust their peers, even unknown peers, more than they trust experts.

They are used to iTunes, so paying for digital content, or watching some ads to get content at a reduced rate, or for free, might not strike them as unusual.

They are social in a digital way. Communication with “friends” is a primary activity.

Though they might not admit it, brands are important.

To a greater extent than older consumers, they expect to be able to move digital content from platform to platform. In part, that is simply because they know digital content can be moved from device to device.

They use instant messaging or text messaging for communications, they think that email is for their parents.

In part because they have grown up with Web media, mobiles and the Internet, sharing content seems natural.

Most of those behavioral traits have implications for marketing in general, and for Internet and mobile marketing in particular. For starters, new media require new rules and tactics. Each new medium has characteristics that are not well understood at first. That is why early movies essentially were filmed versions of stage plays.

Over time, each media becomes better understood, production values and marketing opportunities change.

Even traditional TV ads do not work as well as they used to, in part because, as media become more personalized, non-relevant messages become ever more annoying.

Also, perceptions of honesty are more important. All three generations have been bombarded from birth with marketing messages and they are fairly adept at tuning them out.

And since social values are strong, advertisers, for example, will have to truly commit to becoming a members of the communities. As a practical matter, that means brands essentially have lost control of their brands, which in many ways are defined by users.

That will be scary, in part because in the new social context, people will criticize what they don't like. Worse, they may simply indicate, by lack of interest, that a particular product is not interesting or relevant.

It's all about "pull," rather than "push," in other words. But since nobody really knows what will work in the new formats, experimentation is required. It will be a big shift.

But as has been said before, "shift happens."

Mobiles More Important than PCs, Study Finds

One reason lots of observers expect mobile broadband to grow in importance is that younger users rely on their mobiles more than PCs.

Or so suggests a new study by Toronto-based SRG. In that study, the mobile device was ranked the most important device by females between the ages of 12 to 24.

That doesn't mean women in other demographics rank mobiles the same way: they don't, yet.

But as some of us have noted for a while, it is important to follow the "youth" demographic because it isn't just a market segment.

Younger users represent 100 percent of the future market. And if younger users behave differently than older users, one has to pay attention. At some point, those younger users will move into different age groups, but likely will retain their behaviors.

Online Usage: Social Networking Grows Most

Users spend more time using social networking sites, less time on communications and more time on content sites in early 2009, compared to 2003, according to the Online Publishers Association.

Users also spend slightly more time using search and slightly less time on commerce sites.

It isn't yet clear how mobile Internet time spent matches up, but anecdotal evidence suggests that the trends should roughly match.

Not many of us would be surprised if use of social networking sites was higher on mobile devices, as a percentage of total mobile Internet time spent.

Click the image to see a larger view.

Network Services Generally Safe, But Only if Economy Does Not Worsen

Consumers say they are least likely to cut or reduce spending on Internet access and most likely to cut back on buying pay-per-view movies downloaded over the Internet, according to a new survey by Alcatel-Lucent.

Consumers also indicate they are likely to maintain spending on VoIP and multi-channel TV services.

They also indicate some other services, including mobile service and landline voice are less likely to be cut than other discretionary spending.

The findings are in line with past behavior during recessions. People say they are highly likely to reduce spending on such things as going out to bars and clubs, eating at restaurants, going to sporting events or renting movies.

But they are resistant to the idea of eliminating communication or entertainment video services. All that depends on the recession not growing worse, though. Should the economy deteriorate further, even network services will get a harder look.

About 29 percent say they will increase spending on communications when the economy improves. But 13 percent say they plan to reduce communications spending even when the recession is past.

At least at the margin, it appears there is some potential for permanent changes in communications spending even after the recession ends. And that always is a concern. People might change behavior during a recession as a temporary measure, but then discover the new behavior suits them, and not return to their pre-recession behaviors.

There's no way to tell, yet, how much that will happen this time. But it would not be unreasonable to predict some permanent changes.

Ads Won't Support Online TV Business

Too many media-related companies mistakenly believe their conventional advertising, subscription or even free business models will simply transfer over to a connected marketplace. They won't, says Diane Mermigas, Mediapost columnist.

But that's a mistake common to other industries buffeted by IP technology, such as the telecommunications, wireless and music industries, for example. The entire global telelcommunications business, for example, is finding itself facing a nearly-complete replacement of its underlying voice revenue model.

Media firms face something similar. Advertising has been 37 percent of all content revenues, and nearly half of all video revenue.

But advertising is expected to comprise only one quarter of domestic online video revenue by 2012. "The economics are simply not there for advertising to support online video, given rising variable costs and limited scale," says UBS analyst Matthieu Coppet.

There are some other, less quantifiable potential issues as well. Most believe online distribution will be more important in the future. The only issue is how important, and how long the change takes.

At the same time, cable TV's key value proposition--more choice--now is running into potential exhaustion. "Choice" is easier on the Internet.

Also, since most viewers watch a handful of channels (possibly seven to 16), adding more channels, and raising prices to match, is going to run out of gas. It seems to me the only issue is when.

There's a reason so many of us spend so much time thinking about evolving business models. If IP technology affects your core business, it also means your core business is going to face huge business model change.

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