Small, Mid-Sized Businesses Have Embraced Online Advertising

Small and medium-sized businesses in the United States are more likely to advertise online than through traditional media, but spend less on online than traditional media.

In August 2009, 77 percent of U.S. SMBs used online for advertising, compared to 69 percent that used traditional media, according to The Kelsey Group and ConStat.

The groups say the August figures represent the first time penetration of online advertising surpassed traditional.

“We have been tracking the trend of digital/online media replacing traditional media over four waves of the Local Commerce Monitor study,” said Steve Marshall, director of research at The Kelsey Group. “The milestone of digital/online surpassing traditional media among SMBs is an indicator of the broad shift to online platforms.”

Note, however, that spending does not necessarily track penetration. Though more SMBs used digital advertising, the majority of their budgets still went to traditional channels. In August 2009, The Kelsey Group found 36.8% of SMBs’ advertising budgets went toward online. That was up more than 14 percentage points over the prior year.

Total annual ad spending among SMBs was down, from an average of $2,734 in August 2008 to $2,092 in August 2009. Spending on Websites and online profile pages, however, was up more than 26% to $769.

New Cables Mean 72% Drop in Long Haul Bandwidth to Africa

What will 12 new undersea cables to Africa mean? Broadband prices on the long-haul networks will drop as much as 72 percent over the next three years, says Pyramid Research. But demand for capacity will grow at 28 percent through 2013 as well.

Click on the image to enlarge it.

The cables will increase Africa’s total international bandwidth from about 6 Tbps to as much as 34 Tbps and will reduce the number of coastal countries without any cable access from 19 to one.

AT&T Gets Unwanted Attention Over iPhone

No mobile service provider wants the attention AT&T is getting about how unhappy iPhone users are about their ability to use their devices, and the industry as a whole does not need such attention at a time when it faces possibly major reregulation by the Federal Communications Commission that could affect industry revenues right at the point that the industry is racing to upgrade its broadband capabiltiies.

One can argue one way or the other about the state of AT&T's 3G network, but there seems little question that Apple iPhone user behavior is so strikingly different from that of other smart phone users that every carrier has to be concerned about what happens as more devices like the iPhone are sold to end users. If most of them start to behave like iPhone users, carriers are likely going to have serious bandwidth problems.

Apple iPhone users consume two to four times as much network data volume as other smart phone users, according to traffic measurement company Comscore. And it also appears that users of the 3G version use 100 percent more data than iPhone users on the 2.5G networks.

So the business problem is fairly clear. An AT&T data plan of $30 a month for just about any smart phone has dramtically different revenue implications. Most smart phone users put light loads on the network for that $30, while Apple iPhone users put heavy load on the network, for that same $30.

Some think the mere expedient of building new 4G networks will solve the problem. It will help--a lot. But even that is not a permanent solution, in and of itself, if other smart phone users start to behave as iPhone users do, and all of them start consuming more video.

Alcatel-Lucent studies show that Web browsing consumes 32 percent of data-related airtime but 69 percent of bandwidth, while email uses 30 percent of airtime but only four percent of bandwidth.

One suspects this situation cannot continue. Either there will be changes to unlimited data plans, such as higher prices, as well as other ways of better matching network load to service provider revenue. Customers won't be happy about that.

But carriers might have to resort to plans that differentiate between the load different applications--especially video--place on the network and charge accordingly. Mobile networks simply do not have the ability to supply the same amount of bandwidth that wired networks do.

As more users switch to smart phones, and start to consume video and Web applications more intensively, push will come to shove. Some observers think many users will start to use their smart phones more than their wireline-tethered PCs for Web application access. Something has to give here.

And one way things could change is if significant shifts of market share were to occur, spreading the iPhone demand over more networks than AT&T's. All the carriers will keep investing in their networks, and all will be under competitive pressure to keep access costs as low as possible. Despite all that, demand might outstrip supply. So change is inevitable.

http://www.nytimes.com/2009/09/03/technology/companies/03att.html?_r=1&hp

Qwest Upgrades to 100 Gbps, But Worries About Future Price Impact

Qwest Communications is enhancing its nationwide network to deliver speeds of up to 100 Gigabits per second to its customer edge sites. This build-out has begun on Qwest’s network and is planned through 2010, though no further details are publicly available at the moment. But potential customers can expect that 100 Gbps local access to the backbone will be available in markets where Qwest already offers Ethernet-based "iQ Networking" and "QWave" data networking services.

But Pieter Poll, Qwest CTO, says he is concerned that, after a few years, optical component limitations could impair its ability to keep its cost per bit in line with customer expectations. The basic issue is that customers consume 40 percent more bandwidth every year and expect prices to remain flat.

That means Qwest has to continue reducing its cost per bit by more than 40 percent every year to keep up, Poll told Telephony Online. And Poll worries that Moore's Law, which generally governs development in the electrical domain, will not be possible in the optical domain.

“In the optical environment, you have basic physics issues in how you can integrate to bring costs down," he says. "There is no Moore’s Law in the optical world."

If that observation proves correct, Qwest wil have to look for cost reductions elsewhere. Operations, marketing, overhead, sales and other costs might have to be cut if the gains cannot be made in linear fashion on the optical network element front.

One suspects optical suppliers will do better than Poll now forecasts, but the challenge appears to be real.

1.3 Exabytes of Mobile Video Consumed in 2017

Portable laptop and netbook users will consume 1.3 exabytes of video content per month by 2017, a sixty-fold increase over 2009, says Coda Research Consultancy. If that forecast proves correct, mobile video will account for nearly 75 percent of all mobile traffic.

The top region for video consumption will be Asia Pacific, which will account for just over half (53 percent) of all video traffic globally. In contrast, Europe will account for 26 percent of all global video traffic, and North America 14 percent.

The Asia Pacific region will be so prominent because mobile broadband will be for many the primary or exclusive way of getting access to the Internet, the company says.

The report shows that two thirds of global traffic using by portables will be on Long Term Evolution (LTE) networks by 2017.

Nokia Ditches Barcelona

Nokia apparently will not be exhibiting at Mobile World Congress in Barcelona in February 2010. MWC is generally considered the paramount global mobility event, so the move probably is one more indicator of potential change of marketing emphasis by equipment and software providers.

It is no surprise that nearly all communications trade shows and conferences have been under pressure for a couple of years as the recession has forced travel cutbacks, as tier one carriers and enterprises have clamped on severe travel restrictions and some enterprises actually seem to be looking to "prove" that videoconferencing actually saves money by reducing travel expenses.

One way to demonstrate such a business case is to force employees to use videoconferencing and other conferencing tools while restricting travel.

Such changes have been occurring rather broadly on the wired network side of the business for a decade or more. In part, global consolidation means suppliers have fewer customers to sell to. Using direct sales channels typically makes more sense in concentrated markets, compared to fragmented markets.

But other changes have occurred as well. Quite aside from those changes, online communication channels obviously have reduced the need for indirect marketing venues, and have allowed for more use of direct channels. Many firms are shifting spending from legacy channels to their own Web channels, for example.

The deep global recession has had an effect as well, but that is a temporary trend. What remains to be seen is the longer term change of marketing techniques and approaches based on use of Web and IP technologies. Among the bigger changes are a shift from "push" to "pull" marketing, for example.

Mobile Video the Next Big Thing?

Mobile video is considered by many to be among the next big things in mobility use and service provider revenue.

It likely also will be a big driver of consumption calculators, bigger data plans and at-home or Wi-Fi connections.

The reason is physics. Video requires two orders of magnitude worth of bandwidth compared to most other applications. That's a 100 times greater load placed on a network and a user's bandwidth cap.

Some people think Wi-Fi is a transitional access technology, to be replaced by mobile broadband connections. That's not likely. In the business world, Wi-Fi is replacing Ethernet wired networks on a permanent basis.

In the consumer space, Wi-Fi is replacing wired connections as well. And in the public space, Wi-Fi is getting much more use by mobile handsets, where the original connected device was a PC. As video consumption grows, users quickly are going to figure out they can reduce pressure on their bandwidth caps by using Wi-Fi as often as possible, and especially for video streaming or downloads.

Mobile video might be the next big thing in any number of ways.

Online and Mobile Video Still Incremental to TV

It still appears that online and mobile video consumption is incremental to regular TV viewing, The Nielsen Company says.

“Although we have seen the computer and mobile phone screens taking on a significant role, their emergence has not been at the cost of TV viewership,” says Jim O’Hara, The Nielsen Co. president. The reason is that consumers simply are increasing the total amount of video they consume.

“The entire media universe is expanding so consumers are choosing to add elements to their media experience, rather than to replace them,” O'Hara says.

Nielsen data also shows Americans are using DVRs more than ever, watching one hour more of timeshifted TV each month than a year ago. Currently, 30 percent of homes in the U.S. have DVR devices.

During the second quarter of 2009, the number of people watching mobile video increased 70 percent from last year and people who watch video online increased their viewing by 46 percent compared to a year ago. In addition, the average American TV consumption remains at an all-time high (141 hours per month) compared to the same time frame last year.

Online usage is relatively flat since last year, though more people are viewing video online than ever before. But adults 18 to 24 watch more than five hours each month.

Short form video (such as YouTube clips) still makes up 83 percent of online video viewing, while name-brand TV network content comprises the majority of mobile video viewing.

Mobile video viewing continues its upward trend, with over 15 million Americans reporting watching mobile video in the second quarter of 2009, an increase of 70 percent versus last year and the largest annual growth yet seen, Nielsen says.

Service Provider Finds Online Portal Really Works

Telecom service providers need to be more active about using Web channels to build awareness of, and purchases of, new services, says Michael Philpott, Ovum practice leader, says.

As matters now stand, most service providers have few on-going consumer touch points, except for the monthly bill, and one might question whether that is the right time to engage a customer's attention in a positive way.

“Often the main points of customer contact for the broadband service provider is when the customer first signs up from the broadband service, and when something goes wrong, with only the odd e-mail flyer in-between,” says Philpott.

"Those few service providers that still have a successful Internet portal are starting to innovate around that as a way of entertaining, helping, communication with and up-selling services to existing clients," he says.

One pilot by a tier-one player in the U.S. market found that such a strategy increased its marketing success rate over traditional methods by 200 percent.

That service provider also found a 615 percent increase in Web traffic fror a music service, as well as a 55 percent increase in new security subscriptions, plus a 20 percent in security service churn.

Impressive numbers, indeed.

Youth Mobile Market Saturated?

In developed markets, mobile ownership has surpassed saturation, says Graham Brown, Mobile Youth analyst. High levels of prepaid ownership combined with multiple handsets and SIMs means that in some markets, such as the Middle East, it’s not unusual to see penetration rates of 300 percent in specific age groups such as students and young adults.

In most developed markets, youth spend 10 percent to15 percent of their disposable income on mobile phone services. Some 15 years ago, the figure was zero. Brown says That means they’ve forfeited spending on other goods and services.

In particular, you can track the decline of cigarettes, chocolates and CD spending against the rise of mobile spending and suggest that those areas have suffered as consumers shifted spending towards mobility.

Global recorded music sales peaked in 1999 at $40 billion. Cigarette use by teens in the United States peaked in 1998. Those might be direct consequences of greater mobility spending. The flipside of this is that to grow, mobile needs to displace spending on other products.

A direct consequence, Brown argues, is that further growth in youth segment telecoms must face a natural spending ceiling. For the most part, that means an emphasis on churn control. And on that score, most younger subscribers are much more tolerant than one might suppose.

"They want a service that is inconspicuous enough to work consistently in the background without their attention," says Brown. While a small percentage, less than five percent, are motivated by the latest offers and handsets, the majority of youth switch only when the network hits the “annoy” button.

"Teens Don't Tweet?" Not True

One of the most actively discussed topics in the Twitterverse over the past couple months has been the idea that teens don’t tweet as much as older demographics, and certainly not as actively as teens who use other popular social networking sites. But that might have changed, abruptly over the last few months.

According to new data from comScore, younger users – specifically those in the 12-17 and 18-24 year-old demographics – are Twitter’s fastest growing audience segment.

The share of visitors to Twitter under the age of 35 is increasing at a breakneck pace. The most notable positive shifts are evident among the 12-17 and 18-24 year old segments, which are coming at the expense of the 35+ segments, comScore says.

“Teens don’t tweet”? In just a few months, that seems to have changed.

What Paid Online Newspaper Access Might Mean for Telcos

Sometimes one can gain useful insight into the business impact IP services pose for one industry, such as communications, by looking at other industries that also are in the throes of a transition to IP-based services that challenge legacy approaches.

One example is the way newspapers are attempting to create new "for free" versions of their products online, as physical distribution remains under great pressure. While some point to the Wall Street Journal as the preeminent example of an online product that has been successful, most newspapers do not have the scale or unique readership to copy that model in a straightforward way.

That is similar to the difference between firms such as AT&T and Verizon Communications, compared to most other providers in the communications market. Strategic options are hugely different for those two firms and the hundreds to thousands of smaller firms without the assets those two firms possess.

So what about newspapers in smaller, often rural markets? Some point out that the online editions tend to cost about 75 percent of the print product prices, and tend to have smallish readership levels (perhaps five percent or less of the print base).

TheDaily Gazette in Schenectady, New York has a paid print circulation of about 44,000, and offers online-only subscriptions for $2.95 a week; while print subscribers pay $3.00 a week for home delivery, can get unlimited online access for just an additional cent a week. Some limited features remain free to view.

After a conversion to paid online viewing, Web site traffic has plummeted by 40 percent in the three weeks since the Gazette started charging for most of its online content.

The Newport Daily News in Newport, R.I. has a paid print circulation of about 12,000.Online-only subscriptions cost $5 a day, $10 a week, $35 a month, or $345 a year. Print and online combo subscriptions cost $11 a month or $100 a year.

Since converting to paid online access, Web site traffic is down by about 30 percent. But the Daily News says the goal is not to generate online revenue but rather drive readers back to print. That might be working, as single-copy paper sales are up about eight percent. In fact, the online product costs more than the print product.

The Arkansas Democrat-Gazette in Little Rock, Ark. has a paid print circulation of about 183,000 readers. Online-only subscriptions, which include access to an electronic edition, are available for $5.95 a month or $59 a year. Print subscribers get online access for free. Apparently print circulation is down about one percent since the paid online program was started.

Revenue from online subscription sales amounts to only about $200,000 a year, modest compared to print revenues.

The Albuquerque Journal in Albuquerque, New Mexico has about 102,000 paid print readers. The Journal charges $110 a year (or $38.25 for three months) for full access to the paper’s website, along with an electronic edition of the paper.

Readers can also pay $185 a year for a subscription to the print edition, the electronic edition and online access. Alternatively, they can pay $153 a year for home delivery and online access.

Between 1,500 and 2,000 people pay extra each month for some sort of additional online access, a number that has “remained fairly consistent” over the past eight years. Paid daily circulation is down about six percent since the newspaper instituted the paid online plans.

The Bend Bulletin in Bend, Oregon has paid circulation of 32,682. Online-only subscriptions are available for $8 a month or $96 a year. Print subscribers pay $11 a month or $132 a year for home delivery, in addition to online access.

There are 1,200 online-only subscribers, or about 3.6 percent of the print base.

Based on those examples, one might conclude that paid alternatives to print circulation have had modest success, and that is partly or primarily intentional. The newspapers want online access to remain expensive enough that it simply makes more sense to pay for the paper version.

Communication servicer providers likely do not have even that option. Unlike newspapers, telcos and cable companies cannot "wall off" customers who have broadband connections from using "over the top" voice or applications. Charging higher prices for VoIP than for legacy voice, for example, therefore is not an option. Unlike newspapers, third party VoIP providers also can supply a fully-functional substitute to legacy voice. That is not the case for local newspapers, for which there is no convenient content.substitute.

But there is one similarity. Daily newspapers, like landline voice, seem to be products for which there is declining demand. Newspaper readership has been declining for more than a decade or two. Landline voice subscriptions have been declining since 2000.

Current newspaper policies about charging for online access might only delay further decline. Likewise, charging higher prices for VoIP service compared to legacy voice likewise seems unfruitful, as users have other functional substitutes. What remains unclear is the long-term consequences of charging identical prices either for VoIP or legacy voice service. Up to this point, dominant service providers have tended to price both products in similar ways.

Unlike newspapers, telcos already have other replacement products to sell, namely wireless voice, wireless data and broadband. So a rational strategy might be to harvest much of the legacy voice business as long as possible, then shifting to a lower-priced VoIP service at some point, when a lower-priced VoIP product can compete well with third party alternatives and the providers actually make less money by sticking with legacy pricing.

Right now, a telco executive would rationally conclude that firms make more money by sticking to higher prices for legacy voice and losing market share to lower-price VoIP services, especially when many see landline voice as a product in the declining years of its life cycle.

That doesn't mean major changes couldn't happen. Nobody yet knows whether service providers can shift to a new features-driven model where the basic access costs little, but powerful new features are what people pay for.

Consider what is happening in the mobile business. In many cases, mobile users pay more for data access, features and service than they do for voice usage, for example.

Still, telcos are better placed than newspapers. Newspapers are in the ad-supported content business. Newspaper execs seem to be using paid online to prop up the legacy business.

Telcos already are multi-product businesses. They are growing new businesses to replace their older business, and only need to harvest their original business, while experimenting with applications that are replacements for that older business.

Unified communications could be the revenue driver, not the minutes of use, in other words.

That's a better place to be.

Apple Approves Vonage for iPhone

Apple has approved an official Vonage VoIP application to give iPhone users the ability to make voice calls over WiFi, as does the Skype app for iPhone.

The restriciton to "WiFi only" is part of an agreement with AT&T to not allow customers to use their network to initiate VoIP sessions using the AT&T 3G network.

The decision does not go as far as many would like, but as far as the current agreement with AT&T will allow. But change will come, though not fast enough to suit some. Over a 10-year period between 1997 and 2007, for example, U.S. communication service providers replaced the nearly 50 percent of revenue derived from long distance charges with an equivalent amount of wireless revenue.

It would be reasonable to suggest that IP services and mobile broadband likewise will, over a possibly similar amount of time, also transition from reliance on voice revenues to a reliance on mobile broadband and data services. In fact, such a transition is virtually required, as 3G and 4G networks do not support the existing voice format for technical reasons.

That said, it is no so clear that all voice will be consumed using any particular VoIP business model. Some portion will be provided by third parties, while some will be provided by the carrier themselves. Over time, though, there is little debate about the relative importance of the voice revenue stream declining while the relative importance of the data streams increases.

Given the already-reasonable retail cost of domestic U.S. calling, VoIP might have the most obvious impact in the global calling market, where per-minute prices are much higher.

That said, a mobile voice capability actually is a bundle of several values. The simple ability to make and take local or domestic calls is analogous to the function of a voice fixed line. Most mobile plans, and most VoIP plans, alrready eliminate the distinction between local and domestic long distance calling. The difference between "unlimited" plans, and "buckets of minutes" also already is being narrowed, at least for domestic U.S. calling.

The ability to place international calls has many product substitututes, including VoIP, but also including calling cards, for example. Email, instant messaging and text messaging are functional, if not complete substitutes as well.

It might take a while, but relatively standard use of mobile VoIP is coming, as it likewise ultimately will come in the landline business as well. But complete change will take quite some time.

AT&T, Sprint Nextel, Verizon Among Top-10 Social Networking Advertisers

AT&T was the leading display advertiser on social networking sites in June 2009, Sprint Nextel was the fourth-biggest and Verizon Communications was the 10th largest advertiser on social networks that same month. About 80 percent of all social networking display ads were placed with just two sites: MySpace and Facebook.

Though most of us probably have not been paying attention, social networking sites quietly have grown to represent more than 20 percent of All U.S. online display impressions, according to comScore Ad Metrix.

MySpace and Facebook each represent nearly 10 percent of total U.S. online display ads, and then there is a classic long tail of advertisers each representing a fraction of percentage point of the overall online display advertising market.

The reason spending is shifting to social networking sites, and to online venues overall, is that advertising ultimately follows people. And leading U.S. communication companies have moved aggressively to follow their potential customers to social networking.

“Over the past few years, social networking has become one of the most popular online activities, accounting for a significant portion of the time Internet users spend online and the pages they consume,” says Jeff Hackett, comScore senior vice president.

“Social networking sites now account for one out of every five ads people view online. Because the top social media sites can deliver high reach and frequency against target segments at a low cost, it appears that some advertisers are eager to use social networking sites as a new advertising delivery vehicle.”

In the month of June 2009, AT&T got two billion impressions (the number of times an advertising item is seen, heard or watched), representing about 30 percent of AT&T's total advertising impressions for the month, across all media. AT&T's social networking ads were seen by more than 87 million unique people during the month.

Sprint Nextel served up 790 million impressions, representing more than 26 percent of its total ad impressions during June 2009, and was seen by 68.6 million unique visitors.

Verizon Communications represented 435 million impressions, representing 10.5 percent of its June 2009 ad impressions, and reaching 54 million unique visitors.

All of those are bigger numbers than I would have guessed.

Clearwire Activates 10 More Markets

As Clearwire activates 10 additional markets, it also is elaborating on service plans that offer casual use in addition to the more-standard monthly subscriptions.

The new markets include Boise, Idaho; Bellingham, Wash.; and eight Texas markets, including Abilene, Amarillo,Corpus Christi, Killeen/Temple, Lubbock, Midland/Odessa, Waco andWichita Falls.

Clearwire mobile and residential plans can be purchased by the day or by the month. Home Internet service plans start at $25 per month; while mobile Internet plans start at $35 per month, or customers can purchase a convenient mobile day pass for $10.

For a limited time, customers can also choose the "Pick 1 Unlimited" plan; offering an unlimited home or mobile Internet for $22.50 for the first three months and $45 per month thereafter.

Equipment options include USB modems for PCs, including WiMAX-only or dual-mode modems that allow roaming on Sprint’s nationwide 3G network service whenever the Clear 4G service is not available.

Pricing for modems start at $49.99, after instant rebate, or may be leased for prices as low as $4.99 monthly.

For residential service, modems can be purchased for $69.99 or leased for just $4.99 monthly. Residential customers can also add in-home voice service with purchase of the "Clear Voice Adapter" for $15, and receive unlimited local and long distance service for just $25 per month.

With the "Clear Spot," any existing, off-the-shelf Wi-Fi device (802.11b/g) can connect to Clearwire’s 4G WiMAX network. The Clear Spot creates a personal Wi-Fi hotspot that travels with consumers anywhere they happen to be within CLEAR’s mobile WiMAX service area.

This $139.99 device is a portable, battery-powered router that seamlessly connects up to eight standard Wi-Fi-enabled devices (computers, mobile phones, portable gaming, consoles, cameras). The Clear Spot is compatible with both the Clear 4G and Clear 4G+ mobile USB dual-mode service options.

Clearwire also sells Intel Embedded WiMAX laptops, including the Dell Studio 17, Studio XPS 16, Latitude E4300, Latitude E6400, Latitude E6400 ATG, Latitude E6500, Precision M2400, Precision M4400 and Vostro 1220.

The company also offers the Fujitsu LifeBook P8020. WiMAX-ready laptops from Lenovo include the ThinkPad line: SL400, SL500, X200, X200s, X200 Tablet, X301, T400, T500, W500 and W700.

Samsung offers the X460 notebook as well as the NC10. The Samsung Mondi is a mobile WiMAX-enabled handheld device.