Take a Kangaroo to Work Day, Apparently

"Take your child to work?" Heck! Take your kangaroo to work! This little guy wouldn't necessarily be dangerous. A full-grown red kangaroo, however, in the wild, has quite a kick. Enough to eviscerate an unlikely human facing a mad red....don't mess with me kangaroo, mate...

"Soaring Profits" for Broadband Access Providers?

The Phoenix Center says claims by proponents of increased Internet regulation are quite wrong in claiming that firms such as AT&T, Verizon, Sprint-Nextel, Qwest, Comcast, and Time Warner Cable are making "record profits," "substantial profits" or  "soaring profits" that justify further regulation.

Quite to the contrary, those firms are earning at lower rates than the average Standard & Poors 500 firms does, and have done so for the last five years.

The Phoenix Center found that the profitability of the larger broadband access service providers is generally equal to, or below average, for firms in the S&P 500. It would be more accurate to say that profits are "'typical," not "soaring or 'substantial.'

Conversely, content firms like Google and EBay are substantially more profitable than the access providers are,  implying that access providers are not benefiting as much as others in the Internet ecosystem from the surge in broadband adoption and use.

Across all measures of profitability, Google and Ebay are two-to-four times more profitable than the better performing broadband providers.

In fact, the Phoenix Center found that both Wal-Mart and Colgate-Palmolive have much higher profits than the large access providers.

FCC Chairman Julius Genachowski has issued a challenge to the industry for data-driven analysis," according to study co-author and Phoenix Center President Lawrence J. Spiwak. "Accordingly, parties calling for regulation need to present more than just hyperbole about 'soaring' profits -- they need to present facts."

"The evidence shows that BSP profitability is fairly typical of American industry, if not a little low" said study co-author and Phoenix Center Chief Economist George S. Ford, PhD. "Based on available evidence, regulatory intervention based on substantial profitability by large BSPs has no basis in fact."

Verizon and AT&T Equity Performance is a Warning Sign

Communications policymakers in nations where the government does not directly own and control key national carriers in their markets always must balance their preferred regulatory outcomes with the possible responses private firms will make to those initiatives.

Put simply, too much regulatory pressure will lead to reduced investment and innovation, not more. The other issue is that every government considers its national communications infrastructure to be a matter of national interest.

That being the case, most governments will not willingly weaken their own carriers.

So take a look at how AT&T and Verizon equities have fared over the last year or so, compared to the Standard & Poors 500 index. Not so pretty.

What that tells you is that investors believe neither company has much in the way of "growth" ahead of it. In fact, many would argue both companies will increasingly be challenged, in coming years, to stay where they are, given major changes in the underlying business models each company faces.

That suggests policymakers should be cautious about making incorrect assumptions about the underlying financial prospects for the firms that arguably are most important to the national communications infrastructure.

It is not as though either firm were Apple, creating whole new industries and muscling its way into other substantial industries with some regularity. Quite to the contrary, innovation and revenue upside nearly universally are now seen as attributes of the application and handset parts of the communication value chain, not the "access" providers as such.

To be blunt, there may be times when regulatory restraint is the right policy. But there also are times when an industry with national economic and security implications faces enough fundamental challenges that "protection or promotion" is the right policy framework.

It is not the job of other ecosystem participants to worry about the financial health of other segments. But it always is the job of national policymakers to do so, when the issue is the health of the underlying national communications infrastructure.

First-quarter 2010 results posted by AT&T suggest the outlines of the problem. Simply, wireless now is the driver of revenue growth.

But wireless is saturating, forcing mobile providers to find new revenue sources. Also, mobile voice, which has been the segment mainstay, increasingly will come under pressure as landline voice has proven to be a product in a declining lifecycle.

The point is that the appropriate regulatory framework for a fast-growing, vibrant industry is different than for an industry that is fundamentally challenged. That is not to suggest industry executives are unaware of the problems, or that they have failed to show agility in the past; they have.

The point is simply that it might be a grave mistake to assume carriers can bear any burden where it comes to regulations that choke off their ability to create new services and revenues. The financial markets already are signaling their views how the industry is situated.

Technology and Telecom Marketing Spend Up in 2010, Gartner Say

Marketing spending among high-tech and telecom providers is picking up in 2010, according to Gartner. The survey found that 44 percent of survey respondents say their 2010 marketing budgets will be flat compared with 2009, 41 percent will increase and 15 percent are likely to decrease.

In 2009 when more than half of respondents reported their budgets would decrease, compared to 2008. None of that is too surprising.

The perhaps more important conclusion Gartner draws from the results is the possbility that there is a  "new normal" in which companies might adopt "steady state" spending habits that never return to their pre-recession levels. That would not be an unusual thought, either.

At least some observers say the increased ability to target messages using lower-cost media might simply mean that marketers can achieve their objects at less cost than previously was the case.

"Marketing has to continue to look at becoming more efficient and cost-effective," said Laura McLellan, research vice president at Gartner. "For some, this means adopting lower-cost alternatives; for others, outsourcing what was once done in-house; for all, it means revisiting how they plan to support the growth of their companies through traditional and new channels, while keeping the core brands strong."

Thirty percent of these companies expect to increase budgets by between one and 15 percent, while 13 percent of respondents are planning budget increases of between 16 and 30 percent or more.

Even though the ratio of in-house to external spending is planned to be about 1:3 in 2010, fixed and recurring costs are expected to consume the largest portion (23 percent) of the 2010 marketing budget, according to the majority of respondents. That will be followed by sales channel marketing and programs at 17 percent, and 15 percent of respondents identified positioning and external marketing communications.

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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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