Zero Moment of Truth from Google

Today we're all digital explorers, seeking out online ratings, social media-based peer reviews, videos, and in-depth product details as we move down the path to purchase, says Google, which as a free e-book dealing with the "zero moment of truth" in all shopping. ZMOT from Google:

"Winning the Zero Moment of Truth" is a powerful new eBook by Jim Lecinski, Google's Managing Director of US Sales & Service and Chief ZMOT Evangelist. Jim shares how to get ahead at this critical new marketing moment, supported by exclusive market research, personal stories, and insights from C-level executives at global leaders like General Electric, Johnson & Johnson, and VivaKi.


If you're a marketer, a CEO, a sales rep, or an aspiring entrepreneur, this eBook on marketing strategies and the ZMOT will help you understand this shift in the marketing landscape and show you the strategies it takes to win.

Do Service Providers Earn Back Their Cost of Capital?

To the extent that all U.S. broadband networks rely on private capital to invest in new broadband facilities, the question of financial return for such investments is fundamental. After all, telcos, cable companies, satellite and wireless providers go to private markets for the funding to build their broadband networks, and those investors have lots of choices.

If the financial return, and the risk, of broadband facilities investment do not roughly match or exceed what is available from alternative investments, those investments will not be made, and it won't matter much how much people scream about what they can't get.

In that regard, it is fair to note that many investors no longer consider telecom an especially desirable investment. It is rare these days to find a venture capitalist willing to consider backing a new telecom equipment supplier, for example. To the extent that interest remains, it is centered on mobile and mobile applications.

And there are reasons for that investor caution. Any perusal of industry statistics or quarterly or annual financial reports, at least in developed markets, will show stress around the traditional revenue sources most communications or video suppliers rely on. 

Growth rates are down, subscriber trends are negative in many cases, profit margins are lower than has been the case historically, and there is more competition and a shift of value elsewhere in the Internet, broadband and wireless ecosystems. 

In fact, Bernstein analyst Craig Moffett argues that, over the last decade, the returns on invested capital in communications networks in U.S. markets have been anemic, at best. He argues that economic value creation has been, in aggregate, barely positive.

Wireline networks have the weakest returns on invested capital with a 1.5 percent gain over the last decade. Wireless networks had a meager return of 0.3 percent. Cable garnered a 2.5 percent return. Satellite networks had the best return on invested capital at 5.5 percent. Others, including AT&T, Comcast, Dish,Sprint and Verizon, have negative returns, Moffett argues.

You might argue that though low, those are positive numbers. True enough. But there are borrowing costs, and in many cases the cost of "good will" associated with acquisitions. Add those in and returns can go negative pretty quickly.

It probably goes without saying that potential end user shifts in the direction of over the top video entertainment do represent a threat to subscription video revenues now earned by telcos, cable and satellite companies.

A new study by Edelman suggests U.S. consumers are are disenchanted with their entertainment choices. Only about 17 percent of respondents think entertainment sources today provide “very good” or “excellent value.” That should send up a warning flag about the latent potential demand for different video and other entertainment options. 

Declining entertainment value obviously creates a gap that competing providers might be able to exploit. Unlike many other businesses, though, the video entertainment business is unusually controlled by content creators and distributors, rather than distributors. DirecTV, for example, recently had unusual success with its “Sunday Ticket” service delivering National Football League games, says Michael White, DirecTV Chairman, Chief Executive Officer and President.

Those sorts of issues mean there is potential for alternative distribution methods, so long as content providers are willing to cooperate. For fixed-line access providers, there are other issues, beyond a threat to existing video service revenues, though. Some would argue that fixed networks already have trouble earning a return on invested capital that justifies deploying that capital.

Whether or not a provider of goods and services can remain in business is not a consumer's problem, of course. But the apparent difficulty of making money in the fixed-line service provider business is a key concern for service providers, naturally. 

Beyond that, to the extent fixed access networks are seen as a key underpinning of economic growth, and a "national resource," there are key public policy issues. Specifically, if robust and high-speed broadband access is a "public good," inability to earn a return on invested capital is a broader problem. 

Where is the Value of a Fixed Line?

One often hears it said that “broadband is the anchor service” for fixed-line service providers in the future. One also frequently hears that new value-added services would be a healthy antidote to service providers becoming “dumb pipe” access providers. One sometimes also assumes the growing use of "connected devices" benefits mobile service providers (it does), but not fixed-line providers.

All of those statements are true, but analysts and observers might be missing the growing potential of the “dumb pipe” access business, especially as the home and business environments increasingly feature the use of many different “untethered” devices, and as more users get used to switching even their mobile devices to untethered fixed line connections (Wi-Fi). Razorsight Blog


the value of a fixed-line broadband connection will grow as each additional connected device is added.

In August 2011, for example, the share of non-computer traffic for the U.S. market increased to 6.8 percent. The largest percentage from this share came from mobile devices, which drove 4.4 percent of total digital traffic in the U.S. market. The second largest driver of non-computer traffic was the tablet category, contributing nearly two percent of total traffic.



As the share of U.S. non-computer traffic rose over the past four months, the percentage of that traffic driven by tablets has risen from little more than 20 percent to nearly 30 percent. In May 2011, 22.5 percent of non-computer traffic came from tablets. By August 2011 that figure had grown to 28.1 percent, eating into the share of traffic garnered by mobile devices and other web-enabled devices.

That is but one example of how use of connected devices is changing the value and use of fixed-line broadband connections.



In fact, the GSMA expects the number of total “connected” devices to increase from nine billion in 2011 to more than 24 billion in 2020. “Mobile connected devices” (presumably those with a subscriber information module) will grow 100 per cent from more than six billion in 2011 to 12 billion in 2020.

Do Data Caps Alleviate Congestion?

It is an unquestioned fact that a small percentage of broadband users, on virtually any network, use vastly more data than typical users do. The top one percent of data consumers account for 20 percent of the overall consumption, for example. What isn't so clear is that data caps actually do anything to help manage congestion at peak hours.

Are heavy users the problem during peak hours? The question might seem silly. If the big problem for an access provider is peak hour congestion, then heavy users would seemingly have to be part of the analysis. But the question some would ask is “who are the heavy users, at peak hours?” That might be a different question than “who are the heavy users, over a billing period?”

Some might say heavy users are just good customers. Of course, usage is not revenue. Most access providers might argue that the best customers are those who pay the most each month, while using only as much data as most other typical users. Razorsight Blog

Social Communications Patterns Different from Voice

Those of you familiar with the typical voice usage pattern will find this graphic by Dan Zarella interesting. It shows that Facebook sharing ("communications") happens on weekends, in contrast to voice traffic which tends to happen on weekdays. Contagious content


Some would also note that much website "commenting" and reading tends to happen on weekends as well, suggesting that perhaps people engage in digital communications on weekends because that is when they have time to spend on social sites, read, watch and then share.


  


On the other hand, the data is not completely conclusive. Other studies suggest that the amount of Facebook content creation is fairly even throughout the week, though consumption might be said to peak mid-week, on Wednesday. Facebook shares and reads





But Zarella suggests Twitter "retweet" activity shows yet a third pattern, building during the week and then falling on weekends, suggesting people are reading during the work week, and then cutting back on weekends. People retweet when they actively are reading, in other words, implying that Twitter is getting used less on weekends.





Friday is the best day to get retweets, Zarella says. The click-through-rate of emails ist best on Monday and Saturday, as well. Less content is published on the weekend, therefore more comments are compiled on Facebook on Saturday, says Zarella. Best days for sharing, consuming

Verizon to Launch Over the Top Streaming Service?

Verizon Communications plans to launch an over-the-top video streaming service allowing customers to stream movies and television shows over the Web, Reuters reports. Though the idea might be bold and breath-taking in concept, the initial programming line-up might be rather limited.

Reuters says the package of programming would be limited in scope. If multi-channel video programmers get their way, and they will, the service is highly unlikely to feature any of the video that normally is a staple of cable, telco and satellite video services. That is going to severely limit the appeal of the rumored service. 


Many will see the analogy to Netflix, but the offerings are likely to be quite a lot more restricted than what Netflix offers, for the simple reason that it would cost billions of dollars to get distribution rights even for movie fare, and it seems unlikely Verizon is willing to do that. 


The idea seems to be to create a streaming video service that could reach potential video prospects outside Verizon's fixed network footprint. But that's the sort of deal video content suppliers are most likely to resist, as it threatens the lucrative business programming networks now have with their cable, telco and satellite distributors. 


The new service could be rolled out in 2012, Reuters reports.  Verizon to take on Netflix with Web service

2012 Content Marketing Benchmarks, Budgets and Trends

Some nine in 10 business-to-business marketing organizations, regardless of company size or industry, say they've used content as a form of marketing in 2011, the same proportion as in 2010, according to a study by the Content Marketing Institute and MarketingProfs. Those marketers say they use about eight separate content marketing tactics to achieve their marketing goals. 2012 Content Marketing Benchmarks


Some 60 percent of the 1,092 surveyed marketers say they plan to increase spend on content marketing in 2012. On average, they now spend over a quarter of their marketing budget on content marketing, the study found.

The report, "B2B Content Marketing: 2012 Benchmarks, Budgets, and Trends," provides a detailed look at the findings. Get the full findings here.

One in Four Starbucks Transactions Now Use Mobile Payments

Less than a year after Starbucks launched an app that allows mobile payments, it has hosted 26 million such transactions on iOS, BlackBerry and Android. Roughly one in four Starbucks card transactions is now executed using contactless  mobile payment.


In the nine weeks after it was released, there were three million transactions. But in the past nine weeks, there have been six million, says Adam Brotman, SVP and general manager of Starbucks. One in Four Starbucks Transactions Now Done Via Mobile:


But mobile vastly lags the Starbucks card where it comes to volume. About  $110 million has been reloaded to customers’ Starbucks cards using mobile top up, Brotman says. Some $2.4 billion was loaded onto Starbucks cards overall in 2011.


So 25 percent use mobile payment, but only about 4.5 percent of card top-ups have been conducted on the mobile device. For whatever reason, it appears people are more comfortable using PCs to refresh their accounts, instead of reloading directly on the mobile. 


For those of you who have done both, there might be a simple reason. It is just easier to reload on a larger screen than on a smart phone. 

Is Netflix Business Model Broken?

Wedbush analyst Michael Pachter has downgraded Netflix to "underperform" from "neutral," with a $45 price target.


“In our view, the company’s business model was broken when it raised prices for its hybrid customers, and continued customer defections will require it to invest ever increasing amounts on marketing,” he says. “We estimate that Netflix will spend $800 million on streaming content in 2011, and expect streaming content costs to rise to at least $1.7 billion in 2012, partially offset by approximately $200 million in DVD and postage savings.” Wedbush Downgrades Netflix


One wonders, though. Retail price adjustments happen all the time. It is not so clear that a simple price change, even a change that arguably involves creating two new products where there once was a single product, can break a business model. 


One might argue that becoming a provider of substantial amounts of original content, where the original business had been video distribution, can break a business model. Some have pointed to potential price increases of as much as 60 percent for some Netflix customers. But we are talking about a video entertainment product that costs, at most, about $16 a month, even assuming the biggest price increase.


Before the changes, consumers had been paying about $10 a month for both DVD and streaming access. 


To keep both features costs about $16 a month, and providing users with one DVD at a time and unlimited streaming. Given prevailing prices for a subscription to a service such as HBO, or renting DVDs from kiosks, that really is not an outrageous amount of money. 


One might argue that what "broke" was investor expectations that had bid Netflix up into the $300 per share range. Irrespective of the merits of operating costs around delivery of discs, versus streaming, what really has changed is the Netflix decision to become a provider of more original or unique content, which is a different business than simple video distribution.


The retail pricing changes, and the differences in online distribution compared to postal delivery arguably cannot "break" the business model. But becoming a distributor of unique or differentiated TV programming is a different business from distributing rental movies. 

Clearwire Seeks $300 Million in New Equity

Clearwire Corp. says it will seek $300 million in a new equity offering. Clearwire said Sprint would buy as much as $347 million if Clearwire can raise between $400 million and $700 million. Clearwire Seeks $300 Million in Equity Offering

Cloud Computing Yields Perceived Benefits, But Might Not Save Much Money, Global Survey Finds

About 82 percent of 3,645  cloud computing users surveyed by TNS in eight countries say they saved money on their most recent cloud project. But savings have been relatively small, with
35 percent of U.S. organizations, for example, reporting payback of less than $20,000. Cloud computing ROI

The issue is not whether respondents believe they have seen improvements. The survey indicates that nearly all organizations boost improvements in IT performance following cloud adoption, with 93 percent of all organizations reporting at least one area of IT improvement.

Among the most common improvements, 52 percent of users report increased data center efficiency and utilization, while 47 percent witness lower operating costs post cloud adoption.

And these benefits arrive quickly as 48 percent of organizations see benefits within six months. Overall, more than 80 percent of respondents see gains within six months.

Some 23 percent of all U.S. organizations and 45 percent of U.S. organizations with fewer than 50 employees report no savings, says CSC, which funded the study.

Some 88 percent of Australian organizations see improvement in their IT departments since adoption of cloud, and 82 percent see benefits in six months. However, the cost savings of cloud are not as high as expected. Some 64 percent of organizations say they save under $20,000 or nothing at all after their last cloud adoption project. In particular, cloud computing is not helping Australian small businesses save money, as 95 percent save less than $20,000 or nothing at all. In fact, 48 percent of small businesses say they saved no money.

Eighty-two percent of UK organizations see benefits from the cloud in under six months; 38 percent see benefits immediately. Almost half (49 percent) cite increased data center efficiency and utilization as the number one benefit from adopting cloud.

However, 63 percent of small businesses say their total cost of delivering enterprise services stayed the same after implementing cloud services.

Some 90 percent of U.S. respondents said their organizations experienced IT improvement post cloud. However, cost savings were not as extensively realized. In fact, nearly a quarter of U.S. organizations don’t find any cloud savings.

For the purposes of this survey, cloud computing was defined as “a general term for anything that involves delivering hosted services over the Internet.” The survey further specified five essential characteristics, including that cloud computing was an on-demand self-service with broad network access; involved  resource pooling, rapid elasticity and measured service.

Interviews were conducted between October 2011 and November 2011. Organizations in the United States, the United Kingdom, France, Germany, Brazil, Australia, Japan and Singapore were part of the survey.

None of those results should be surprising. We are early in the process of cloud computing adoption. Some would argue significant changes take time to show clear productivity gains because it takes time for human beings to adapt, and for entire processes to be redesigned around the new technology.

What is Happening in the U.S. VoIP Market?

It’s hard to tell precisely what is happening in the U.S. residential VoIP market. According to the most recent Federal Communications Commission data, there were 32 million VoIP subscriptions in service at the end of 2010, representing a growth rate overall of about 22 percent. FCC data

The 149 million wireline retail local telephone service connections in December 2010 included 40 percent  residential switched access lines, 38 percent business switched access lines, 18 percent residential VoIP subscriptions, and three percent business VoIP subscriptions.

The FCC data suggests that 81 percent of VoIP services bought in bundles, representing in turn about 84 percent of all VoIP subscriptions, were supplied using cable modems, meaning that cable operators sell about 81 percent of VoIP connections in bundles, which in turn represent at least 84 percent of all VoIP subscriptions sold in the U.S. market.

But third quarter 2011 data at the company might suggest either that the adoption rate has slowed fairly dramatically in 2011, or that suppliers other than cable operators or telcos have suddenly begun adding more subscribers than ever before. That seems highly unlikely, based on what has been happening in the U.S. VoIP market so far.

Though telcos and independent VoIP providers have represented some VoIP market share up to this point, the FCC data show it is the cable operators who have been responsible for most of the sales and customer volume.

Company results from wireline voice service providers through the third quarter 2011 might suggest that demand is moderating, since most new VoIP subscriptions are sold by cable operators, and cable sales of VoIP clearly are slowing.

Legacy voice services offered by phone companies have continued to decline during 2011, while "digital voice" line growth from cable operators has slowed. What's happening in fixed line VoIP?

AT&T lost 10.5 percent of its wireline voice connections compared to the third quarter of 2010., Verizon lost 7.6 percent  of its total wired voice lines, and CenturyLink reported losses that would total about 6.8 percent annually on a pro forma basis for the 12-month period ending September 2011.

Offsetting  those loses are incremental new telco VoIP connections. AT&T's U-verse Voice connections increased by 119,000 sequentially while 648,000 subscribers over 12 months. HD Voice makes steady progress in mobile networks

But the volume of activity in consumer VoIP has been driven by cable operators, and it now seems as though sluggish economic conditions or wireless substitution might be issues for cable VoIP services.

But there could be other factors at work. Perhaps few, if any observers think telco voice share will dwindle away to “nothing.” For any number of reasons, including product bundles and customer preferences, the likely ultimate outcome is some reasonably stable market share structure. That means cable will reach some “natural” limit in voice, as telcos might reach some “natural” limit in video share.

It could be that cable operators are reaching the “natural” limits of demand for cable voice products. Comcast, the largest domestic cable operator, now has 9.2  million VoIP lines in service representing a 17.6 percent penetration rate of homes passed at the end of the third quarter 2011, up  from a 16.1 percent penetration rate in the third quarter of 2010.

Time Warner Cablehas 4.6 million voice customers, but added only 5,000 new VoIP lines in the third quarter of  2011.

That dramatic slowing suggests cable has reached a natural limit, but also that strong growth of wireless services now is simply as big a problem for cable operators as it has been for fixed-line telcos.

Wireless substitution continues to slowly grow virtually every year, according to the CDC, which estimated in 2010 that 29.7 of homes had only wireless telephones during the last half of 2010.

Is Competition in U.S. Telecom Now Over?

Reasonable people will differ about the potential implications of the Verizon spectrum deal with Comcast, Time Warner Cable, Bright House, where AWS spectrum owned by the cable companies is sold to Verizon Wireless, while Verizon and the cable companies agree to work together in some ways.

Some will argue the deal means the end of competition, which has been bolstered in the fixed line business by robust competition between telcos and cable companies.


Others might argue that the agreement by the cable companies to resell Verizon Wireless capacity, rather than Sprint or Clearwire service, likewise means less potential competition in the wireless business.



Others will simply point to nebulous language about “working together” that might lead to less competition. Those views could prove at least partially correct. They might also have far fewer effects on competition than many fear.



For starters, cable companies essentially have relied on three different wireless partners for wireless service, first Sprint, then Clearwire and Sprint, and now Verizon Wireless. One might argue that the resale agreement with Verizon Wireless removes key potential cable contestants from future roles as new facilities-based wireless competitors.



But cable companies in the United States, for whatever reason, have not succeeded at any of those attempts since 1994. They are going to resell under their own brand names, using somebody else’s infrastructure, no matter whose wholesale assets they use.



Nor does the deal alter the nature of fixed network competition between Verizon and the cable companies. Anybody familiar with the typical tensions within single entities over wholesale and retail sales, whether fixed or wireless, knows the actual financial interests of those staffs are not aligned.



Lots of firms buy wholesale service from Verizon Wireless, and none of that prevents the firms from competing as hard as they can in the retail markets.

Will USPS Hurt Netflix?

The U.S. Postal Service is proposing, through the rulemaking process, to move First-Class Mail to a two to three day delivyer standard for contiguous U.S. destinations. USPS first class service

Some think that will hurt Netflix DVD by mail performance. Some pundits might be tempted to quip "more than Netflix already has done to itself?"

But there is a countervailing argument. One might argue that users who really "want what they want, when they want it," or who "want it now," already have shifted to online delivery.

Also, users who have DVD by mail plans can choose plans that allow them to have multiple discs out at once. Not too many users really will be able to watch so many discs that delivery actually becomes a big problem.

Slower delivery by the USPS won't help, of course. But it remains to be seen whether it harms the DVD by mail business, which Netflix wants to wean itself off of, in any case.

Most people I know who use the DVD by mail service only watch on weekends. They're just too busy the rest of the time.

Amazon Kindle Fire First Tablet to Challenge Apple iPad?

Amazon's Kindle Fire might be the first "tablet" to get serious traction, other than Apple's iPad. In fact, Evercore Partners' analyst Robert Cihra now estimates the Kindle Fire will represent half of all Android tablet sales in 2012.

Shipments of Android-based tablets are expected to jump from 19 million to 20 million units in 2011 to 44 million to 45 million units in 2012, Digitimes says. 


Some might quibble, arguing that the Kindle Fire is an e-reader, not a tablet. But you might remember Apple CEO Steve Jobs insisting 10 inch screens were a minimum requirement for tablets. Amazon will own 50% of Android tablet market in 2012


IHS iSuppli said Friday that the Kindle Fire is expected to take second place in the global media tablet business in the fourth quarter, behind Apple's iPad. 

Amazon will ship 3.9 million Kindle Fire tablets during the last three months of 2011, according to a preliminary projection from iSuppli.Amazon Kindle Fire sales