Of Lies and Lost Opportunities

This week was marked by the usual combination of good fundamentals and hype and hysteria in the media and markets.  The Irish debt crisis, which is objectively solved at this point, has been the source of rumors that have whipsawed stocks and created a new set of reasons for individuals to avoid the markets.  But underneath, companies at the retail level are doing better and forecasting a stronger season, and research firms report that nearly 90% of shoppers still have buying to do.

In advertising, online debate continues to focus on the topic of “click-through rates” or CTRs, which have replaced the simple ad appearances as the desired metric.  The problem is that like anything else it’s possible to game CTRs and even when they’re not gamed, they don’t tell the whole story.  Our research here has shown that “trajectory” is the big issue; Microsoft recently validated that by working toward a “path-based” set of conversion metrics that track from a sale back through the sites/pages that led to it.  The greater level of refinement here is both good and bad.  The good side is that the changes could make online ad performance tracking more credible.  The bad side is that it’s demonstrating how non-credible it is at the moment.  Advertisers tell me that they believe there are no credible studies proving the effectiveness of online advertising beyond conjecture.  That doesn’t mean it’s not effective, but that we can’t identify why it is, and therefore focus on making the “why” work better.

The biggest area of interest for advertising online continues to be video, and there are some interesting trends there too.  Hulu decided to go out of “beta” and lower its base price, which some think is a bad sign but which many network operators are happy to see.  What I’m hearing is that people won’t pay too much of a premium for what is still a best-efforts experience, and the less they pay the more prioritization of delivery might earn.  Not only that, lower retail prices mean that OTT players have less incentive to be in the market, but network operators have much lower ROI targets and can play there comfortably.  Google TV is also apparently laying an egg, much to the surprise of armchair statisticians who have interpreted the drop in cable customers as people “cutting the cord”.

The data shows that 350-odd thousand people were “dropping cable”, but that whole statistical assumption is flawed.  First, there is no tracking of individuals or households here; what gets reported is the net of adds and drops.  Second, there are always people dropping cable because they move, die, consolidate households with another, etc.  That brings up “third”, which is that the thing that impacts all subscription TV is net new households.  Any time there’s an economic crisis, what happens is that fewer new households are formed because graduates and new workers either stay at home with their parents or join to create a group home.  This cuts down on the add part of the equation, and that means fewer customers.  In short, there is nothing we could say about the “cutting the cord” paradigm given the current data, and the experience of Hulu and Google suggests that cord-cutting isn’t a factor.

Staying in the video space, the Senate passed a measure that would allow the Justice department to get a warrant to cut off the domain decoding for pirate websites, and it might also allow them to force ISPs to “disconnect” the routing.  Neither measure would be truly effective in my view, and while I’m a supporter of enforcing copyright law I’m not sure this is the right way to go about it given the risk that it’s not going to work.

Speaking of not working, Australia’s NBN seems to be trapped in the political world.  A vote yesterday on forcing the government to submit the NBN business plan to the Productivity Commission for review failed by only one vote.  While there’s every indication that the public likes the idea of super-fast broadband, there’s an increasing sentiment that the NBN planning is a charade, with too much of the assumptions being hidden for there to be any confidence that NBN will work.  NBN recently named Cisco as the winner for its data centers, something that surprised those who thought the NBN CEO would steer the win somehow more toward is Alcatel-Lucent alma mater.

If things sound sleazy here, don’t be surprised, because according to Harris poll data, people distrust advertising by an overwhelming margin, and other data says they distrust product reviews submitted on retail sites, social network privacy protection, and of course politicians.  What we’re seeing, I think, is a general sense among consumers and also enterprises that they are being duped by everyone.  That makes it much harder to buy things that are perceived as risk-generating, either because of cost or because they push the buyer into an unfamiliar cost/benefit trade.  As I’ve noted regularly, we’re seeing enterprises simply stalled on projects that would raise their IT-to-revenue commitments, because they can’t get any validation of the benefit case.  All of their vendors, they tell me, are either saying nothing useful or are saying things the enterprise believes are objectively lies.  All of this is eroding the influence score that various influence conduits exercise on buyers, with the effect that the total amount of positive influence available at best barely reaches the level needed to induce a decision.  You tell me how that makes sense, dear equipment vendors!

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