The state of the Russian advertising market

In yesterday’s Russian daily RBC, the president of Mindshare Group Russia, Vladimir Rass, conveyed that he expects the ad market will decrease 25-27%, to RUB 195-200bn (EUR 4.41-4.52bn) in Russia in 2009 vs 2008.

• The TV ad segment will fall 20-22%, to RUB 107-110bn
• Outdoor ads by 30-40%, to RUB 27.3-32bn
• Ads on radio by 35%, to RUB 9.1bn
• Ads in printed periodicals by 40%, to RUB 34.56bn

In his opinion, the amount of ads in the Internet will remain at the level of 2008 by the end of 2009, or will grow about 5%. Thus, demand for ads in Runet will total RUB 7.5-7.88bn. Managing Director of Aegis Media for Russia, Andrey Brayovich, supposes that the segments of TV and Internet will overcome the crisis faster. The Russian online advertising market grew by 5% in H1 2009. Original article in Russian here.

Five tips from Larry

I read a good list of tips for entrepreneurs from Larry Page, Google’s co-founder, in the very cool website ecorner. I like number three a lot!

Tip 1: Just don’t settle. Especially with employees, it is very important to find great people you are compatible with.
Tip 2: There is a benefit from being real experts. Experience pays off.
Tip 3: Have a healthy disregard for the impossible. Stretch your goals.
Tip 4: It is OK to solve a hard problem. Solving hard problems is where you will get the biggest leverage.
Tip 5: Don’t pay attention to the VC bandwagon. Don’t start a company just because you can. Instead, have a really good idea that is good regardless of the funding situation.

A Russian demographic catastrophe

Russia’s single and most acute problem is the demographic trend of the country. National Human Development Report, Russian Federation, 2008: Russia Facing Demographic Challenges is a study recently released by the United Nations. This report projects that Russia would lose at least 11 million more people by 2025. According to the study, “in the coming decades, the nation confronts accelerated population decrease; a dwindling of the working-age population; the general aging of the population; the drop in number of potential mothers; a large immigrant influx; and a possible rise in emigration rates”.

“The mortality crisis is one of the clearest manifestations of Russia’s long-term demographic crisis”, the report warns, with the gap between Russia and other developed countries widening since 1964. Further, life expectancy for both sexes was shortest in Russia among 33 European nations, and Russia lags far behind both the United States and Japan.

A two-pronged strategy is needed to reverse these trends, the new report said, calling for the promotion of active and healthy lifestyles on the one hand, and the adaptation of social services and institutions to the needs of the aging population on the other. It also pointed to migration as a possible way to fill gaps and boost the workforce to support economic growth.

In the past 16 years, nearly 6 million immigrants have come to Russia, but the study warned that for migration to be a truly effective solution, Russian society must adjust to accept the newcomers. Another UN report said last year that the population could fall to as low as 100 million in 2050.

More news and analysis here and here. Images of the Republic of Karelia, courtesy of Eero Korhonen.

Finland and the “cleantech” sector

Finland encourages domestic expertise in clean technology, which it promotes worldwide. Testimony of this reality follows.

1. Between 1998 and 2007 Finnish companies invested 337 EUR Million in energy efficiency, saving 7,35 terawatt hours of energy
2. The International Energy Agency has established that “Finland is a model for the world” in combined heat and power generation
3. A whooping 7% of Finnish exports are in clean tech, the highest of any OECD country
4. The number of Finnish nanotechnology companies has tripled since 2004
5. Since the 1990s, Helsinki has increased energy production by 60%, and has also increased air quality

Sources: Helsinki Times and Cleantech Finland

Porter’s Five Forces Analysis: Revise the Classics

Michael E. Porter of Harvard Business School developed Porter’s Five Forces Analysis in 1979 as a framework for industry analysis and strategic development. The goal of the model is to derive the five forces that determine the competitive intensity and, thus, the attractiveness of a market. If profitability is high across the market, it’s attractive; if the combination of forces drives profitability of the market or industry down, it is deemed “unattractive”.

Porter refers to these forces as micro environmental, as they are forces close to the company and which affect it’s ability to serve its customers and make a profit. In the model, should a change occur in any of the forces, the company must re-evaluate the marketplace. Also, it is important to note that the overall industry attractiveness does not mean all companies in it will yield the same profitability, as specific business models within them might allow individual companies to deliver above average profitability.

The model is nice to assess the attractiveness of a market we’re in or planning to enter by stating under each epigraph the reality of the micro environment. The model’s graphic representation is as follows:

The Paper Video Pig

Last night I was looking for information on how to descale a kettle. I found a cool site with all things handy for life. Actually, the site’s slogan is “Get Good at Life”. The place is called Videojug and they basically show you videos on how to do stuff to fix some everyday problems and many other things (like How to Make an Origami Pig or an interview with a specialist on What is Bronchitis).

What I liked was how they are selling video ads. In the screen-shot I have a video about something as bizarre as origami pig making and it has an overlay on the bottom part of the screen. I also find the content is extremely suitable for this format (videos are well executed, pruned and edited, useful and purposeful (for the most part, forgive my examples). So, quality is reliable and acceptable which, for such a utility service, is critical.

As it’s a “solving-daily-issues-by-video-snaps-for-the-masses” kind of place, its content perfectly lends itself for click based non-intrusive video advertising formats.

The Facebook Samovar

Last week Yuri Milner picked up 1.96 pct of Facebook for US$200 M, putting the company’s value at about US$10 B. After doing this, he made the following statement to the media:

We are seeing a fundamental trend on this in Russia – all our businesses are profitable and we believe that the consumption of advertising online will change. Google started this revolution and social networks will continue it. Social networks will allow advertising to be much more targeted.

Milner is CEO of DST (Digital Sky Technologies) with interests in Russia’s e-mail portal Mail.ru, social networks Odnoklassniki.ru and Vkontakte.ru and dating site Mamba, along with others. Russia’s internet audience is Europe’s 4th after Germany, Britain and France, says comscore.

Anyone for comments?

Read That Post

“Experiments are only revealed in retrospect to be turning points”.

I strongly recommend to anyone working in media, or classifieds, or publishing of any kind to read this post.

And now, back to thinking about Aldus Manutius, the Elder.

Good night!

Not Invented Here, Yes Invented Here

I normally get very edgy with people trying to persuade me that standardising is not possible blah, blah, blah or that cultural and national differences provide strong barriers to deployment of certain product groups blah, blah, blah, especially in software or services targeted to some very specific industries (automotive dealers, official ones; real estate agency networks, and so forth).

However, there is always a fine grain and some extra reading gave me some fresh perspective. I think it’s fair to remember that the Not Invented Here Syndrome, first of all, sort of came out of the perceived hard-headiness of software development teams thinking that they must do everything themselves. On the other hand, when looking into reducing fixed costs and passing “out” parts of your key business processes, I find the following quote not just fair but probably quite wise:

If it’s a core business function — do it yourself, no matter what.

Pick your core business competencies and goals, and do those in house. If you’re a software company, writing excellent code is how you’re going to succeed. Go ahead and outsource the company cafeteria and the CD-ROM duplication. If you’re a pharmaceutical company, write software for drug research, but don’t write your own accounting package. If you’re a web accounting service, write your own accounting package, but don’t try to create your own magazine ads. If you have customers, never outsource customer service.

Don’t ask me why I liked this whole post. But I did. Thanks Joel. On the other hand, I recommend reading The Power of Dynamic Value Chains for better and deeper insights.

Transformer. Change Agent. Leader

I follow an interesting blog on marketing and strategy and came across some fine insight about XXIC business transformation needs. Basically the author states that in these times, we need to think way bigger than we used to. The era of large corporations making incremental changes is giving way to the era of small ones making huge predicaments. Of course one would argue that business transformation comes from aligning stakeholders with a shared sense of purpose into new ways of doing business, setting processes or entering a market.

But, in fact, it’s just people (as in individuals, the human subject matter of the mix) who can actually make or break this. And, according to this author, in order to make them tick, you need to maximize purpose, maintain a bifocal focus, and make change safe.

• Maximise purpose: do you see the value and virtue of “co-creating purposes”? If not, get with it!
• Maintain a bifocal view: watch the horizon and keep your eye on the small footsteps – at all times, see both
• Make change safe: nothing matters more to your organisations’ survival, yet nothing scares people more than change. So be aware of what freaks your people out and make sure you address it, making a safer environment for them to take risks and embrace change. “Understand the organisations’ specific fears”; reward change agents.

If you like what you read here, go for the full original post from Idris Mootee to get more insights into this approach to organisational transformation.

Concern – Dissonance – Change

Just came across a great sentence on change: “The first step needed to produce lasting change is profound concern (or dissonance) that the path we are on is no longer working”. This is in the book The Change Masters, by Rosabeth Moss Kanter

Systems thinking

A system is not just the sum of its parts, but the product of their interactions. So, the best parts do not necessarily make the best system. Rather, the ability of a system to achieve it’s purpose depends on how the parts manage to work together, not just how they perform individually. If you apply it to people or teams, the model is a clear exponent of the value of collaborative action and coordination.

Systems thinking looks at organisations as systems and analyses how the parts interrelate and how the organisation as a whole performs overtime. A good example to describe this is Lance Armstrong’s Tour de France victories between 1999 and 2003, where he won each year, but never won more than a few of the daily stages (below see daily stages won each year out of total stages).

1999: 4/21; 2000: 1/21; 2001: 4/21; 2002: 4/21; 2003: 1/21

More on systems thinking from systems dynamics guru Jay Forrester. Also read more on Theory of Constraints, Limits to Growth, Shifting the Burden, Five Whys

Segundamano closes all print business in Spain

I recently read in the blog of the ex-IT Manager of Anuntis Segundamano (the Spanish operation of Schibsted Classified Media) that – as of November 2008 – all print publications of the company in Spain are closing.

They are leaders in the Spanish online market in Jobs (Infojobs and Laboris), General Merchandise (Segundamano), Real Estate (Fotocasa) and Automotive (Coches.net). Segundamano newspaper in Spain has been for 30 years a kind of transactional ‘institution’ for used goods. I think in Madrid almost 100% of the population over 30 knows it as the ‘free ads paper’ and has used it at some point or another to sell a house, get a job or find a car.

By now print was an irrelevant part of the company’s profit (they were issuing only 14 print titles now, versus +160 in summer of 2004). However, they had managed to keep the overall growth by aggressive online positions and pricing and closures of loss-making and non-strategic print titles. According to Juan Carlos’s blog, the flagship title “was not loss making at this time”, but the strategic decision was to close and re-structure accordingly.

Schibsted revealed in it’s interim report of Q3 2008 that Schibsted Classified Media had Q3 operating revenues of EUR 38,4M – 19% less than in Q3 2007. According to the report, “the decline is primarily due to the negative trend of the print publications in Spain”. Operating revenues from online grew 13% to EUR 27,5M in the same period. Online contributed 72% of operating revenues vs 52% in the previous period. Internet made an operating profit of EUR 8,4M vs an operating loss of EUR 1,2M for print.

Classifieds in print are, indeed, on a sliding scale. The general trend in media, according to enduragement’s interesting post, is another relevant signal.

The Bible Seller of the Digital Age

Other day I listened to some interesting comments in a panel in the Internet CEE conference in Warsaw, where the general manager of Google Polska (Artur Waliszewski), the product marketing director of Yandex (Andrey Sebrant) and the sales director of Seznam (Tomas Buril) debated.

When asked about the search eco-system, all three coincided on one mission and some key assets…

All 3 agreed that R&D focus pursues their main search mission: to anticipate and answer in the most relevant manner the questions posed by the people using their engines. In this respect, all efforts on the technology move for relevancy. Up to here, all clear. But then, when establishing the key assets of turning this into revenues, they said something to this effect:

Sebrant, Yandex: direct selling builds trust and is key to the revenue model. In this respect we focus fully in training and certification of our (sales) staff and understand that the only way to build trust is by facing our customers with people, generating trust by having “someone look you in the eye”

Waliszewski, Google: certification and training are keys in the Ad Words ecosystem; without those people to educate the clients, there is no success, however much we optimize and improve our algorithms to achieve search advertising relevancy

Buril, Seznam: we employ 250 in direct sales to get our products to the clients, this is the equivalent of the Google and Yandex effort to educate staff and certify them in order to get to the final customer and show them how to use search advertising

In my understanding what they’re saying here is: our products could be extremely complex on the technical side, but making them come across to the final customers and making money from them is, still and by and large, a direct selling and educational effort.

Could this be true? How do you feel about the issue?

Sahlman on entrepreneurs

Reading an old classic about business planning I came across this quote:

entrepreneurs constantly seek the right mixture of people, opportunity, context, and deal. They anticipate what can go wrong, what can go right, and they try to balance risk and reward

It’s a great comment from William A. Sahlman, one of the greatest lecturers of entrepreneurial management. Just wanted to throw that out there for anyone who wants to pursue his work further.

Consumption metaphors and neural activation

I am still not sure if this is very interesting or very creepy, but let me briefly describe it. Marketing guru Gerald Zaltman has developed a technique over the years called Zaltman Metaphor Elicitation Technique (ZMET) which gets consumers to express their deepest feelings and thoughts about a brand or product -whether they want to or not- via an encounter which goes through a series of phases.

ZMET uses visual and non-visual images gathered and/or generated by consumers to elicit and probe the metaphors that represent consumers’ thoughts and feelings about a topic.

Images are important units of analysis for marketing managers. When augmented by consumers’ explanations during careful probing by an interviewer, the images provide a clear idea of what consumers really think and feel. Almost invariably these insights are far deeper and more clear than the insights of verbal discussions alone. Although many images are visual, images may take other forms (tactile, olfactory, auditory…). Whatever the form (technically, every image is a neural activation), an image represents a thought or feeling consumers have about, say, privacy, treating heartburn and indigestion, or the meaning of art in their daily lives, or what they think a company thinks of them. Therefore, images are referred to as metaphors.

A metaphor is the representation of one thing (a thought, feeling, action) in terms of another thing (a picture of someone screaming, a swimming pool, the color blue…). During a ZMET interview, verbal descriptions of the thoughts and feelings represented by these images are collected to help researchers understand their meaning. Strong evidence exists that these verbal descriptions are far more complete and far more useful to managers because they were stimulated initially by these images (or metaphors).

I am not sure if I would call this ”a well developed research technique” or just a methodology that gives me the creeps. Of course it’s a technique that, beyond consumer products, can be extrapolated to all forms of information individuals receive, making it easier for marketers to lure us into a less cerebral approach to the social and informational environment. Intrestingly enough, if it is true that 95% of thought is unconscious, or as Zaltman calls it, “hidden knowledge”, I can only guess that it’s so very easy to guide us in one way or the other.

Consumer Ethnography [and the secret desire]

As far a I know, a consumer is any organism that cannot produce its own food and must, therefore, get its energy by eating, or consuming, other organisms (or so says the nwrc). It’s also, and more close to my point, a person or organisation that purchases good or services.

Ethnography, in turn, is the part of Cultural Anthropology concerned with the descriptive documentation of living cultures. A kind of fieldwork focused or empirical model of researching and understanding people in their daily life and all dimensions of it.

In this light, marketeers are increasingly turning to a qualitative research technique called Consumer Ethnography which, according to Bain & Co. “uses a variety of methods to study behavior, attitudes and culture to better understand what customers want and how they make their purchasing decisions”.

Accordingly, it escapes the traditional focus group approach and instead uses researchers -trained in ethnographic fieldwork- to observe people (openly or secretly) and interview them where they live, work, play and shop. A detailed analysis of observations reveals consumer motivations and interactions with brands and products, enabling companies to discover new segments, design more satisfying offerings or more effective marketing campaigns.

Ethnography is viewed by a growing number of experts across industries as a core marketing competency and an alternative or supplement to traditional focus groups. This kind of calls close as I studied Cultural Anthropology. But still leaves me wondering how it can manage to identify unmet needs which not even the customer is aware are… well… unmet. The kind of efficiency or utility deficit that you don’t identify until someone more creative or audacious imagines and describes for you…

The future-teller of the classifieds industry

Jakob Nielsen

In September of 1997 Jakob Nielsen wrote a post in his useit library where he stated the following about classified ads and why they are the most suited form of advertising for Internet – but are terribly inefficient in print:

They are a classic pull medium: customers seek out the classifieds when they decide to look for a used car or when they want to hire a house-keeper; most people don’t leaf through the pages just for fun

They are well-suited for computerized searching and sorting: you may want to look only for used BMW cars that cost less than $5,000 or are less than 3 years old, or you may only be interested in a red Z3

They are time-sensitive, but not on a day-to-next-day basis: you want to see all open offers, no matter whether they were posted today or yesterday, or even earlier. As soon as the advertised offering has been sold, the ad should be pulled and not shown to any more customers (a static listing wastes both parties’ time)

Sellers can type their own entries directly into the ad database since they know what they are selling.

Using the hypertext feature of the Web, ads can link to as much background information as necessary; cryptic but space-saving abbreviations go away (hard disks are cheaper than newsprint)
multimedia features can save both buyers and sellers time by allowing potential buyers to learn more about the offering before contacting the seller (just how cute is the puppy? – well, see the photo, or even the movie)

That was 11 years ago. Talk about having a good eye for the shape of things to come. If you want to see an empiric example of this, look at this material on the Schibsted Investor Relations page

Image courtesy of andybudd

Open innovation

Today I found myself again reading about open innovation. One of the underlying principles of this is that in a world of widely distributed knowledge, it’s pretty hard, inefficient and expensive for companies to simply rely on their own research for innovative purposes. Therefore the suggestion is to spin-off, share, license, joint-venture or any variation therein to acquire innovative practises from others and also open your own for others to figure out how your company and theirs could benefit together. It’s a structurally collaborative path to value creation.

Closed innovation in turn goes like this: a company only uses it’s internal knowledge and research and is not open to uses and learnings form others. Quite uncool these days though it was the paradigm before World War II.

I find the premises of open innovation quite enticing ( – inspite of potential headaches to Legal Counsel…?) and I hereby list some of the thinking that governs the model:

Not all the smart people work for us. We need to work with smart people inside and outside our company

External R&D can create significant value; internal R&D is needed to claim some portion of that value

We don’t have to originate the research to profit from it

Building a better business model is better than getting to market first

We should profit from others’ use of our innovation process, and we should buy others’ intellectual property (IP) whenever it advances our own business model

What Sun Tzu and Eisenhower share (but we’re deaf to)

I was thinking today of the treatise The Art of War, written in the 6th Century BC by Sun Tzu and considered the most relevant tome on military strategy and tactics in history. Actually, if you look at the 13 chapters that conform it, you quickly understand how the structure and items proposed have been used more than any in military planning (in East and in West). They have also extended in recent decades to business strategy and planning. Find an ultra-short briefing of these 13 chapters here

There is a very famous quote of this book I came across the other day in Jordan Bortz’s blog which goes like this:

Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.

The reason this caught my attention was a recent debate I witnessed inside my organisation on waterfall versus agile methodologies for software development, whereby some considered waterfall (sequential software development model) as a purely strategic method whereas they claimed agile was purely tactical. I think this is a limitation and narrowing of both methodologies that’s not fair to either.

I believe you can use agile in a full fledged strategic manner as long as you manage agile actions and scrum teams in the context of a clearly visible and well communicated strategic endeavour. Probably managing this obeys a different order and formal logic than a waterfall project, but I am certain agile can be used in a mid or long term strategic context and at the same time respect it’s governing principles.

However, I still hold truth some basic notions, one of which would go something like this, as Dwight D. Eisenhower said:

In preparing for battle I have always found that plans are useless, but planning is indispensable

More also from Damon Poole, who has a bit of a fight on the topic with the above mentioned Jordan.