Global Consumers Increasingly Trust Earned and Owned Media

Consumer reliance on word-of-mouth in the shopping process, on a global basis, has increased significantly over the last year, Nielsen reports. For marketers, the implications are that earned media and owned media potentially are more effective than ever. 

According to Nielsen’s latest Global Trust in Advertising report, which surveyed more than 28,000 Internet respondents in 56 countries, 92 percent of consumers around the world say they trust earned media, such as recommendations from friends and family, above all other forms of advertising, an increase of 18 percent since 2007. 

Online consumer reviews are the second most trusted source of brand information and messaging, with 70 percent of global consumers surveyed online indicating they trust messages on this platform, an increase of 15 percent in four years.

The survey also showed that nearly six-in-10 global online consumers (58%) trust messages found on company websites, and half trust email messages that they signed up to receive. 

On the Web, four-in-10 respondents rely on ads served alongside search engine results, 36 percent trust online video advertisements, and one-third believe the messages in online banner ads—an increase of 27 percent since 2007. Sponsored ads on social networks, a new format included in the 2011 Nielsen survey, are credible among 36 percent of global respondents.

"Post-PC" Era Doesn't Slow PC Sales, Data Shows

Global tablet sales to end users are forecast to total 118.9 million units in 2012, a 98 percent increase from 2011 sales of 60 million units, according to researchers at Gartner. At the same time, it appears that traditional PC sales also have grown. .

PC shipments worldwide, expected to grow 4.4 percent in 2012, will grow 10 percent in 2013, according to Gartner. That is a bit of a surprise, with all the attention now focused on tablet sales.

In the first quarter of 2012, PC shipments climbed nearly two percent to 89 million units, thogh analysts had predicted a 1.2 percent drop. Those figures might suggest that tablets and PCs now are distinct products in the marketplace. Though substitution will occur in some cases, much as smart phones displace PCs in some cases, all the products will develop specific niches in the computing appliance market, one might argue.

Apple's iOS continues to be the dominant media tablet operating system, as it is projected to account for 61.4 percent of worldwide media tablet sales to end users in 2012, with Android-powered units representing about 32 percent of sales, Gartner says. By 2016, some 369 million tablets will be sold, Gartner estimates.

By way of contrast, IDC predicts that PC shipments will climb from 353.3 million to more than 500 million in 2016. However, the bulk of the growth will come from "emerging markets" not "mature markets", and from portable PCs rather than desktops, IDC forecasts.

In fact, IDC predicts that shipments of portable PCs in "emerging markets" will almost double from 110.0 million in 2011 to 214.7 million in 2016.

One might therefore infer that tablets will represent about 25 percent of “PC” sales in 2012. By 2016, one might argue, tablets will represent 42 percent of “PC” sales.

"Despite PC vendors and phone manufacturers wanting a piece of the pie and launching themselves into the media tablet market, so far, we have seen very limited success outside of Apple with its iPad," said Carolina Milanesi, research vice president at Gartner.

"As vendors struggled to compete on price and differentiate enough on either the hardware or ecosystem, inventories were built and only 60 million units actually reached the hands of consumers across the world. The situation has not improved in early 2012, when the arrival of the new iPad has reset the benchmark for the product to beat."

   Global Tablet Sales  to End Users (Thousands of Units)

OS	2011	2012	2013	2016
iOS	39,998	72,988	99,553	169,652
Android	17,292	37,878	61,684	137,657
Microsoft	0	4,863	14,547	43,648
QNX	807	2,643	6,036	17,836
Other Operating Systems	1,919	510	637	464
Total Market	60,017	118,883	182,457	369,258

Source: Gartner (April 2012)

Verizon, Time Warner Cross sell in Kansas City, Cincinnati and Columbus, Ohio and Raleigh, N.C.

Verizon Wireless and Time Warner Cable are offering financial inducements to new or existing customers of either company in Kansas City, Cincinnati and Columbus, Ohio and Raleigh, N.C. Both firms are selling video, mobile, Internet and TV services offered by either firm.

But the deals seem to be aimed as much at encouraging existing customers to buy additional products from each of the companies, as the offers are aimed new customers.

Either firm earns a commission if it sells the other company's products. But the structure of the deals also encourages purchasing of incremental services by any current customer.

The initial markets are, as one would expect, places where Verizon does not compete with the cable operators for fixed network services.

For Better or Worse, People Want to Use Their Own Devices at Work

Nearly 60 percent of employees surveyed by iGR say they use their own smart phones, tablets or PCs for work, at work, with the full support of their employers. iGR defines a small or medium business as having 10 to 499 employees.

Enterprises are seeing the same trend, according to Juniper Research.

Why "Over the Top" Mobile Voice Isn't Growing as Fast as it Could

Mobile VoIP provided by over the top providers are as big a revenue threat as over the top services are for fixed network providers. But some would argue that adoption of mobile over the top voice faces headwinds for a reason shared by other apps on mobile phones, namely the drain on batteries.

Softphones aren’t making inroads onto smartphones or the desktop because the former lacks battery life and the latter take too long to start up, according to Jamie Romanin, ShoreTel regional director for Australasia.

Battery life now appears to be a constraint for VoIP clients as it already is for users who avoid using other smart phone features to save their batteries.

But those same behaviors might well help mobile service providers provide another element of value for using carrier-provided voice services.

"Headwinds" for U.S. Mobile Service Providers

Mobile data services have for the better part of a decade been the clear near-term driver of revenue growth for mobile service providers, roughly driven by smart phone adoption. So, oddly enough, we now see carriers making tough decisions about how fast they actually can grow those smart phone businesses.

A key issue in recent years has been the practice of subsidizing the retail price of smart phones to spur adoption. But operators seem to be rebelling at the idea of continuing to do so at current levels. In some cases that might mean new fees when upgrading to a new smart phone.

In other cases, carriers will try to convince customers to buy devices that are easier to subsidize. Some will even try to stabilize smart phone adoption rates, adding new accounts, but not as many as might be added if carriers conducted more aggressive marketing.

Those steps will help carriers protect their dropping profit margins, but at the risk of slower smart phone adoption.

"Over the longer term, we believe the wireless industry faces the twin headwinds of 100 percent penetration and, eventually, decelerating smartphone additions as the base reaches saturation," Jefferies' analysts wrote. "Voice revenues are already in decline. We believe a material drop off in the growth rate of data revenues from slowing smartphone adoption, particularly in 2H12, is a growing risk," Jefferies says.

Mobile and Broadband Spending by Consumers Will Grow 18% in 2012

Overall U.S. communications and media spending by consumers, marketers and institutions is expected to reach $1.4 trillion by 2015, giving it a compound annual growth rate of 5.7 percent, according to a new forecast from the private equity firm Veronis Suhler Stevenson. That’s substantially faster than GDP, which has a projected CAGR of 4.4 percent over that period, the report suggests.

The fastest growth by far is in consumer Internet and mobile services, expected to grow 18 percent in 2012.

What Would a "Revolutionary" Apple TV Experience Include?

It's hard to say what Steve Jobs actually mean by “I finally cracked it” when referring to the issue of television experience and appliances, the latter being extremely important for Apple, whose business is selling appliances that disrupt and dramatically improve end user experience.

The answer to the question also is important to the rest of the video entertainment ecosystem as well, as entertainment television could represent the next big growth opportunity not only for Apple, but a huge risk of ecosystem change for nearly every part of the TV business ecosystem.

Was Jobs referring to some new software and navigation method only? Did he mean some new relationship with the content producing part of the ecosystem? Or did he mean some change in TV design and hardware, or some combination of all of those elements?

BTIG Research believes that “cracking” television would entail tying together computer, mobile devices and the living room TV, along with its cloud-based storage system (iCloud). 


Some might argue integrating online and video TV subscription services, to unify the content experience, would be part of the experience. Some might argue that is an interesting first step, but only a half step.


The big awaiting revolution is creation of a "fun and easy to use" experience that allows consumers to watch what they want, when they want it, program by program, without having to buy whole channels they never watch, and do not want. 

Smart Phone Subsidies: Changes Coming

A broad debate has been growing among mobile service providers about the financial impact of high smart phone subsidies on profit margins, and that concern now seems to be headed in the direction of lower subsidies. That could have important ramifications for device suppliers and customers as well as service providers.

For service providers, the effort is to maintain profit margins that have in many cases been hammered by the cost of the subsidies. But the new policies also should slow iPhone sales, and should boost sales of other devices. Consumers will slow the rate of device upgrades and will face higher prices.

The impact on application and device innovation is less clear, but could lead to some slowing of device upgrades, with uncertain but clearly negative impact on new applications that depend on device features and capabilities.

Up to this point, for example, Verizon has not charged a fee to its subscribers when customers decide to upgrade to a new device. But Verizon now will institute a $30 fee when that occurs. For Verizon Wireless, that could add up to $1 billion to Verizon’s annual earnings, and also boost profit margins, BTIG argues.

Smart phones have been very helpful for mobile service providers, boosting average revenue per user by driving mobile broadband subscriptions. But the subsidies generally used to spur sales are bcoming a major drag on earnings, and change is coming. Basically, service providers will have to risk lower sales growth, and less mobile broadband revenue growth, to limit handset subsidies. It might be a Faustian bargain.

In fact, what seems to have happened is that user behavior has changed, with users upgrading those “expensive” smart phones faster than they had generally been upgrading their feature phones, analysts at BTIG say.

As a result, U.S. mobile service providers plan to take steps to reduce handset upgrades as a way of raising operating margins. That is likely to affect sales of Apple iPhones, generally considered the most-expensive device to support.

AT&T, Sprint, Deutsche Telekom, Vodafone, America Movil and Telefonica are among firms planning to take steps that will slow iPhone sales in the coming year.

In the United States, BTIG expects iPhone sales to decline four million sequentially to nine million with the largest impact coming from AT&T, Apple’s largest customer.

In 2011, AT&T represented 17 percent of iPhone sales for the year and 19 percent in the fourth quarter of 2011.  Apple iPhones represent fully 37 percent of AT&T’s post-paid subscriber base and 47 percent of post-paid service revenue, BTIG says.

BTIG estimates 65 percent of AT&T’s post-paid customers either own an iPhone or are in a family plan with at least one iPhone user.  

For AT&T, the financial impact of iPhone subsidies is clear. AT&T profit margins had grown for five straight years beginning in 2005, but reversed in 2010, apparently related directly to iPhone 4 demand and subsidies, BTIG argues.

In January of 2011, AT&T tightened its upgrade policy and eliminated the popular one-year upgrade offers for iPhone owners. BTIG argues the iPhone subsidies have reduced AT&T margins by at least 10 percent in 2011.

So unless AT&T tightens its upgrade policies, company earnings per share would drop. In fact, AT&T says it has built its business model for 2012 around the idea that it will sell no more smart phones, overall, than it did in 2011, about 25 million units.

BTIG analysis suggests something quite significant. Despite the importance of smart phone accounts for growth of key broadband revenue, AT&T has decided to essentially cap smart phone sales to preserve its profit margins.

The impact should be clear: fewer iPhones sold by AT&T, and possibly fewer iPhones sold by other mobile services providers. That could lead to market share gains by other smart phone makes and models, or could spur Apple to produce lower-cost iPhones.

What the carriers hope for is the ability to sustain average revenue per user growth, and higher profit margins.



source: Yankee Group and CNet

Are Tablets "Naturally" Mobile Products?

During 2011, some 33 percent of all tablets sold globally had the ability to use mobile broadband networks natively, according to ABI Research. According to Chetan Sharma, only about 10 percent of all tablets in use actually used mobile broadband networks.

That illustrates both the tablet upside and challenges for mobile service providers. Mobile phones have little value without a service. Tablets likewise have little value without Internet connectivity, but can use any Wi-Fi connection to do so.

In other words, tablets are more naturally suited devices for mobile broadband services than desktop PCs, perhaps only slightly less well suited for mobile broadband than notebook PCs, but not "naturally connected" devices such as mobile phones. U.S. mobile data generated $67 billion in mobile data revenues in 2011, accounting for 39 percent of the overall revenues. For 2012, Sharma expects mobile data revenues in the U.S. market will reach $80 billion.

That is one reason retail mobile stores always sell phones, sometimes feature tablets, but never try to sell PCs, though some have tried to bundle notebooks and mobile broadband services.

That might change, marginally, once more service providers decide to sell mobile broadband plans the way that fixed network providers sell their broadband connections. Essentially, fixed broadband with local Wi-Fi  inherently supports multiple devices on a single account.

Tablets won't become more interesting for mobile service providers until the equivalent "family data plans" are available.

Apple iPhone Share Growing, in Some Demographics?

It just makes sense that if a particular product is a run-away leader in market share, that buying intentions might match that share. Also, it often happens that market share dominance leads over time, to even more dominance.

Rivals to Apple know what happened in the MP3 player market. Many suppliers in the tablet market would be forgiven a fear that Apple is doing in the tablet market what it did in the MP3 market.

The smart phone market arguably has been more competitive, but a new survey by ChangeWave Research suggests Apple could be increasing its share of market, at least among the typically technology-sophisticated ChangeWave audience.

The latest ChangeWave Research survey of 4, 413 respondents suggests 56 percent of those who plan on replacing their phones in the next three months plan to get an iPhone. In a highly-fragmented market, that is a big number.

That might not be reflective of overall market trends, as other studies tend to show gradual market share gains by many rival Android models, with a dip in Apple's market share.

BlackBerry's woes also are clear from the survey. Where BlackBerry once had smart phone market share in the 30-percent to 40-percent range, it now has declined to two-percent to three-percent ranges.

Intuit acquires AisleBuyer: "Showrooming" Antidote?

Intuit has acquired AisleBuyer, which has a mobile application that allows merchants to support e-commerce operations by mobile phone.

Using AisleBuyer, users scan a product’s bar code in a store, see reviews and ratings, as well as pay for a product with a credit card, on the spot. The notion is that  Intuit's small business payment business benefits from extending merchant retail capabilities further in an online commerce direction.

The deal illustrates a key trend in recent months, namely a bigger emphasis in the mobile payments space on "commerce" than crosses the traditional in-store retailing and e-commerce sides of the retailing business.

In other words, retailers seem to be thinking in new ways about "brick and mortar" and online retail. Where it might once have been more common for store-based retailers to see online as the competition, thereby stifling their own online operations, many retailers seem to have shifted their thinking.

Now an online retailing effort is seen as competition with Amazon and other online outlets, not competition with the retailer's own online store. At the same time, there is a new understanding that "showrooming," where potential buyers check out online prices and delivery while in stores looking at merchandise, is a new problem to be solved.

Nobody can tell yet hot successful brick and mortar retailers will be at fending off showrooming, or how the balance between online and physical retailing will change in the future. The Intuit acquisition clearly is a bet on a future that has smaller retailers engaging in both online and traditional retail operations, supporting online shopping both in-store and at all other times.

Why Video Subscription Fees Are "So High"

Licensing fees paid by cable, satellite and telco distributors to program suppliers increased 8.2 percent in 2011 to around $33.5 billion, and likely will grow eight percent for each of the next several years going forward, surpassing $39 billion by 2013, according to Nomura Equity Research.
Just ffour media conglomerates account for 75 percent of this fees, with the Walt Disney Company representing 24 percent of all licensing fees, principally because of ESPN.

Notable: Disney distributes ESPN, which has far and away the highest carriage fees in the business, generating about $4.69 in licensing fees per subscriber, per month, the study shows.
Time Warner, which owns  HBO, TNT, TBS and CNN, represents 21 percent of affiliate fees; Comcast, owner of Bravo and the USA Network, accounts for 16 percent; and News Corp. represents 14 percent of fees.

Re-transmission fees paid to broadcast network affiliate stations totaled nearly $400 million in 2011 and should reach $750 million in 2012, as well.


Obviously, all those fees get passed along to consumers, as Paidcontent notes.

Why "Interactive TV" is Dead

Tablets are displacing PCs and smart phones as the “couch computer” of choice, according to Forrester Research. But even before tablets began to assume that role, it already was clear that "interactivity" with TV was an experience using the Internet. 


One might argue that answers the question about prospects for "interactive TV." Simply, users have voted for "interaction" with TV content using the Internet, mobile devices, Web and apps. There are therefore vastly limited opportunities to build "interaction" into TV content that do not lean on mobile devices, tablets and PCs as the vehicles for interaction. 


Some 85 percent of US tablet owners use their tablets while watching TV, and according to Nielsen, 30 percent of total tablet time is spent while watching TV. 


 Tablets also turn TV into a “dumb” device, Forrester argues.


About 18 percent of respondents surveyed by Forrester say they connect their tablets to their TVs. So much for "smart TVs."


Some 32 percent of tablet owners say they won’t buy a small (less than 24”) TV in the future, apparently because the tablet itself now displaces the small TV.


Consumers are using tablets as personal TVs where they had none before, such as in the kitchen, bathroom, and airports, for example.


The larger point is that "interactive TV" already has become a mass market activity, just not in the way its proponents originally had expected. 

How 4G is like 1G

In one crucial respect, fourth-generation mobile networks using Long Term Evolution represent a return to the global situation for first-generation mobile networks. Though global mobile networks were never completely identical, since multiple frequencies always have been used, LTE is the first generation of networks since the first to offer better prospects for global roaming.


In the second and third generations of technology, there were clear "islands" based on distinct air interfaces. LTE will unify the air interface to a greater extent than has been possible for some time, for example. Time division and frequency division interfaces still will exist, as well as a number of different global frequency bands. 


The main groups of frequencies will include:



700 MHz (US Digital Dividend, various bands) 170 devices
800 MHz (EU Digital Dividend, Band 20) 72 devices
1800 MHz (Band 3) 75 devices
2600 MHz (Band 7) 94 devices
800/1800/2600 MHz 57 devices
AWS (Band 4) 72 devices


But there are "backwards compatibility issues" of some magnitude, though. Some 217 existing  LTE devices also must operate on either HSPA, HSPA or 42 Mbps DC-HSPA networks. Also, 91 LTE devices support 42 Mbps HSPA technology, the Global Mobile Suppliers Association says. 



Some 108 LTE devices support EV-DO networks, as well. 

How Much Can be Done to Improve User Experience for Fixed Network Broadband Users?

Under current Federal Communications Commission rules, fixed network broadband providers cannot prioritize packets, even if such optimization would be beneficial for users of some applications, including any real-time services. That especially is true for users of online video, videoconferencing, voice and gaming, as well as business applications such as remote database access.


But an analysis of data aggregated from 45 U.S. rural communications service providers suggests that rural users behave in ways similar to urban users. There is no significant rural-urban divide in terms of how users behave.

Video streaming was the dominant broadband-enabled application among eight applications studied by Calix. Video streaming accounted for 67 percent of down stream Internet traffic and 13 percent of upstream traffic in the studied networks.

In terms of upstream traffic, business services generated the most, accounting for 53 percent of all upstream traffic.

As other reports consistently show, a small percentage of very-heavy users account for a disproportionate amount of usage. About five  percent of users account for 50 percent of Internet traffic, the Calix report found.

Many would argue that service providers use distinctive usage cases to create customized service packages, at least to the extent current Federal Communications Commission rules allow.

Video and real-time services arguably offer the most-logical opportunities for retail packaging and network management, consistent with existing FCC rules. “A package that targets a superior video streaming experience may offer the service provider the opportunity for an up-sell, and the subscriber with a better experience,” Calix argues.

But what cannot be done, at least on fixed networks, under FCC rules, is to offer a service that prioritizes video bits for such users, as useful as that would be, from an end-user perspective. Nor is it clear that service providers can create “carve outs” for heavy video entertainment users that allow consumption without affecting a usage cap. 


Mobile service providers have more leeway, at least for the moment, to create packages tailored to game users, users of video entertainment or possibly other users of real-time business services.
Report data was drawn from actual Internet traffic monitored in U.S. service provider networks from the fourth quarter (October through December) of 2011.

To download the report,click here

50 GBytes Consumer Per Person, in 5 Years

"In five years a consumer is moving toward a 50 Gigabyte per month usage level," says Leap CEO  Doug Hutcheson. That doesn't mean all, or most of that usage will occur over a wireless network, though.


That figure represents aggregate usage across all networks, using fixed, wireless and public or third-party Wi-Fi access. By way of comparison, AT&T estimated in 2011 that a typical household consumed about 18 Gbytes a month. 


Analysts at  iGR research suggest that by 2016 U.S. end users will, on average, consume about 2.6 GB of mobile data per month. 

If correct, that would imply wireless consumption would be about five percent of total bandwidth consumed by a "typical" user. 

Global Consumers' Distrust Advertising, Trust Word of Mouth

Some 92 percent of consumers around the world say they trust earned media, such as word-of-mouth and recommendations from friends and family, above all other forms of advertising, an increase of 18 percent since 2007, according to a new study from Nielsen. 


You might say such attitudes account for the greater interest in earned media (stories in mass media)  and owned media (sometimes called "brand publishing"). 


Online consumer reviews are the second most trusted form of advertising with 70 percent of global consumers surveyed online indicating they trust this platform, an increase of 15 percent in four years, Nielsen says. 


Nielsen’s survey of more than 28,000 Internet respondents in 56 countries shows that 47 percent of consumers around the world say they trust paid television, magazine and newspaper ads, confidence declined by 24 percent, 20 percent and 25 percent respectively since 2009. 


Still, the majority of advertising dollars are spent on traditional or paid media, such as television. In 2011, overall global ad spend saw a seven percent increase over 2010, according to Nielsen.

Amazon Appstore Gets In-App Purchasing

The Amazon Appstore has added in-app purchasing APIs, allowing developers to offer digital content and subscriptions, in-game currency, expansion packs, upgrades, and magazine issues for purchase within apps, Amazon says. 



In-app purchasing has become a primary way developers make money on their apps, and Amazon needs to keep pace with Apple and Google, which also support in-app purchases. 

Amazon Smart Phone on the Way?

Topeka Capital Markets analyst Brian White thinks Amazon will start selling its own phone later in 2012, and that it could prove to be “more sophisticated than many smart phones on the market,” Forbes reports.


The logical approach would be to optimize the device for content consumption, especially Amazon-provided content, the way the BlackBerry was optimized to support email. 


He adds that “longer term” it might also make sense for the company to make a move into the television business, as well. 


Apple's move into the smart phone business might have seemed dangerous at the time, but at least Apple always has been a manufacturer of computing devices, and a smart phone is a computing device that handles voice communications. 


Google's move into mobility was less logical, it can be argued, except as a key platform for mobile advertising, and is the mirror opposite of Apple's strategy, which is to merchandise content to sell devices. Google wants to "give away" or merchandise mobile software and phones to sell advertising.


Amazon's move into the e-reader and tablet businesses was a similar "make devices to grow the market for our content" strategy. A smart phone would make sense for similar reasons, as smart phones have become major content consumption platforms.