How Best Buy Wants to Create Business Value from "Location"

It's easy to get caught up in the hype about "location-based services." It's easy to dismiss the notion as well. But Best Buy thinks it can use the location information that increasingly is part of the mobile experience to bolster its sales, according to the Wall Street Journal.

Berst Buy is using Shopkick to create mobile appliucations for iPhone and Android smartphones that detect when shoppers are in or near stores and offers rewards targeted to them.

Shopkick's apps might also use mobile cameras to enable user scanning of bar codes on items to offer product information, coupons or other marketing offers.

None of that is too extremely cutting edge. Loopt provides special offers and coupons from retailers nearby. FourSquare Labs turns physical locaition into a game, where users "check in" at locations.

The goal of the Shopkick app—which is to launch this summer—is "not just to drive foot traffic, but to turn offline stores into interactive worlds" that are more entertaining to shoppers, adds Cyriac Roeding, the CEO and co-founder of Shopkick.

Shopkick expects to be paid for its performance, such as driving additional sales and bringing in new customers.

CauseWorld has also been testing users' interest in less altruistic motivations. In early April, Causeworld offered users 10% off Best Buy purchases in exchange for checking in. Mr. Roeding said a high single-digit percentage of those who checked in at Best Buy during the testalso used the coupon to make a purchase.

To go mainstream, all of these applications may still have to overcome privacy concerns about allowing one's smartphone—and big companies—to keep track of your location.

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Metaio Crafts Augmented Reality App for Lego

Right now, we seem to be at the "gee whiz" point with augmented reality: you are likely to see a demonstration and say "wow," but not grasp precisely how augmented reality contributes to a business model or incremental revenue stream.

We will have gotten there when we aren't saying "wow" or wondering what the killer app is.

The New Business Paradigm: Popcorn

Nick Thomas, Forrester Research analyst, suggests content business models might emerge in ways
that are similar to what happened in the "exhibition" part of the movie business.

The "popcorn" analogy speaks to the way theater owners make money. Films don’t generally make
much profit for cinema owners. In fact, the revenue model for movie theaters actually is concessions.

Taking a look at media business models that are starting to be challenged in fundamental ways,
Thomas suggests the "popcorn" analogy is fruitful. In other words, content-based companies might
need to look at new revenue streams created around content, if little money or profit can be made from the content itself.

The observation is correct, but complicated. Theater owners make money from popcorn because
they actually cannot make money from selling content, though other entities within the value chain actually can make money directly from creation and selling of content.

You might suggest that in the future, theatrical exhibition might become a vertically-integrated part of a more-unified content distribution business. In fact, that is precisely the situation that once held, but regulators decided that arrangement put too much power into the hands of the studios, so structural separation was mandated.

The point is that under the current regulatory environment, movie studios largely cannot sell popcorn as they are legally barred from being in the theatrical distribution business. Movie theaters are allowed to be in the "sell overseas" business, the pay-per-view, the DVD or on-demand viewing businesses.

Not all options are available for participants in the value chain to make money from the content ecosystem. Licensing, for example, has been a key wrap-around for some content companies who can license the creation of toys, clothing and other products based on cartoon,movie or TV characters, for example.

Performance (live concerts) have become a key driver of revenue in the music business, where at one point it was the selling of records that was the key revenue source.

There is no question but that, under all circumstances, ancillary revenue streams are good for content or copyright owners. The issue is how much potential revenue such ancillary revenue sources might be, and how big they will be.

For U.S. content companies, syndication for TV broadcast, cable TV exhibition, pay per view, international exposition, precorded media and now on-demand have extended the original theatrical exhibition model.

The point is that such ancillary revenue streams have grown over time, but it now appears some of those venues face shrinkage. The whole idea now is what new ancillary revenue streams can be created if demand or profit margins in several of the channels seems to be weakening. "Popcorn" is the right strategic way of thinking about the problem. It will be much tougher to envision, tactically.

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Big Marketers Shifting Online Budgets to Video Sites

About 57 percent of advertisers surveyed by Advertiser Perceptions say they are shifting spending from television to online vide sites, said Randy Cohen, Advertiser Perceptions president.

The study suggets that 70 percent of big ad spenders, those budgeting $10 million or more,  were likely to move money from TV to online video.

Whether any political fallout was a factor, 70% of marketers more commonly preferred to target based on demographics, vs. 59% who more commonly used behavioral metrics.

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Small Cable Operators Think Dumb Pipe Might be a Better Business Model

Not every cable operator thinks over-the-top video is a worse business model than providing cable TV. In fact, some believe providing what might be wholesale services to third parties might actually provide better profit margins than cable TV now does.

"Our video margins are going down year after year," said Colleen Abdullah, the CEO of WideOpenWest Holdings.

Wave Broadband COO Steve Friedman also agreed that the profits from an over-the-top model might be better than the current cable TV business, especially if the new model simply substituted a bandwidth usage model for the current monthly subscription model.

While the dumb pipe model may in fact be better for small operators, that probably is not the case for larger providers.

Probably the worst of all possible outcomes is over-the-top competition from firms such as Comcast, where Comcast sells the video content directly to broadband users, and the local cable modem provider is not able to charge for the additional bandwidth consumed. That is one reason why the dumb pipe model would not work unless some form of consumption-based charging were adopted.

"Over-the-top video will eventually emerge as a challenge to the current model of large, expensive bundles of programming," said Blair Levin, the executive director of the FCC's Omnibus Broadband Initiative. Levin thinks such a move is "inevitable."

The basic tradeoff is that cable operators would essentially trade current linear video subscription revenue for higher broadband access revenues. That essentially was the business decision Qwest Communications made years ago, when it concluded it was better off outsourcing linear entertainment to DirecTV, and building its optical access infrastructure in a way that ultimately is conducive for over-the-top or on-demand video.

"The final inevitability is mobile broadband," said Levin. "We know it's coming. We know it's going to be very, very big."

"In 1994, you could envision as inevitable the Internet replacing existing platforms for communications and entertainment," Levin said. "And based on numerous metrics, that transformation is well underway."

Levin also warned that consumer anger over the cost of cable TV now reminds him of similar sentiment leading up to the 1992 cable act, and that there will likely be "some kind of response, either from the market or from the government," to address those concerns.

Any such move would further limit the upside from linear video and likely propel more movement towards an over-the-top approach.

http://www.lightreading.com/document.asp?doc_id=190749&site=lr_cable&f_src=lightreading_gnews

HD Voice Increases Call Duration, Says Skype

Jonathan Rosenberg, Skype chief technology strategist, says high-definition call quality can increase the length of a voice call 45 percent. That, in turn, could theoretically lead to higher revenues for application or service providers whose services are sold "by the minute." Call duration might have no revenue implications at all if the endpoints are talking on a "no incremental cost" basis, though.

Skype's studies suggest, as you would expect, that audio quality is higher on a high-definition call. The Skype survey suggests there is a correlation between call audio quality and call duration.

With the lowest quality, approximating mobile call quality, the average call lasted about 21.5 minutes. At the highest quality it went about 31 minutes.

It's difficult to say whether the relationship is correlational or causal, though. One variable might be that users on the highest-quality codecs are predisposed to use Skype for conferencing sessions, which would have call duration parameters quite different from a casual voice conversation between two people, for example.

All Online Advertising Does Not "Suck"

No, all mobile or Web advertising does not "suck," as Apple CEO Steve Jobs says. But Jobs probably is right about rich media being an easier way to make ads engaging. Good creative helps, too, as shown by this Google spot for Chrome.