Business (s)tuff & ideas, objects, tunes & random thoughts
In 2007 some 70% of Turkish citizens where under the age of 30 and almost 26% were under the age of 14. This is fascinating for a person coming from an aging country like mine. In 2008 the population of Spain under 29 is a bit less than 40%.
When considering nearshoring, outsourcing or other externalisation of processes, a number of strategic considerations have to be taken into account. I read a very synthetic (3 points) but spot on approach in Harvard Business Review recently on the subject which I would like to share:
An interesting note: only 6% of companies which outsource are satisfied with the practise (source: HBR).
Commonality identification illustration flow from esi.es
Diagonal scaling is making a site faster by removing machines. The term was created by John Allspaw, the operations manager of Flickr, who replaced 67 dual-cpu boxes with 18 dual quad-core machines and recovered almost 4x rack space and reduced costs by about 50%
Horizontal scaling (scaling out) means adding or removing client workstations with only a slight performance impact. Vertical scaling (scaling up) means migrating to a larger and faster server machine or multiservers.
See a video by CIO of CNET, on scaling out and don’t miss the 8 fallacies of distributed computing… and the 9th one!
The Law of Diminisging Returns, referred to also as variable factor proportions, states that
as equal quantities of one variable factor are increased, while other factor inputs remain constant -ceteris paribus- a point is reached beyond which the addition of one more unit of the variable factor will result in a diminishing rate of return and the marginal physical product will fall.
I think the reason I was associating these 2 is because I thought: In Allspaw’s model of diagonal scaling, this law is not only undermined, but is infact inverted.
Illustration of scaling up and out from the microsoft web applications libraries
I think Spanish bar and tavern tenders have a good lesson in customer relationship management to teach the world. They do two things which are just great.
The first concept is the tapa (analog to a push service). You order a beer or a wine at any bar where food is also served and always get something small to nibble on, usually on bread. This “tapa” is a perfect upselling scheme. If you like it, your tendency will be to order “raciones“ of this same or similar foods on sale at the establishment. After a few wines (this bar side drinking is normally before lunch or diner) you might probably want to sit to diner with your friends. One of the most ancient and best upselling schemes I know.
The second is offering the last shot of digestive liquor on the house. “El orujito se lo da la casa“. You had a great and not inexpensive lunch on tapas and raciones and end it with some pacharán, orujo blanco or some such concoction. Then when you ask for the bill a smiling waiter tells you: “this one is on the house” (refering to the liquor shot). The costs of this are truly marginal to the establishment, and yet it will probably entice you to leave a larger tip before exiting and generate a lot of gratitude. So, more cash to the tip pool and a subjectively (and probably tipsy) happier customer. Win-win was invented in Madrid.
Tapas photo courtesy of wholefoodsmarket
Everyone is trying to persuade me that decline in newspaper readership is making society at large more dis-informed. I don’t think so. Perhaps if you are not a proficient user of available tools (and I am not) you may find yourself wasting important amounts of time trying to retrieve information from irrelevant sources. But it’s fair to say that in the information age we are all struggling with relevance.
I try to find the explanation to this, rather, in the principles of entropy. Entropy assumes that nature tends from order to disorder in isolated systems. Let’s say your throw a pile of books on the ground, disorder is more likely to occur.
A more precise way to characterize entropy is to say that it is a measure of the “multiplicity” associated with the state of the objects. If a given state can be accomplished in many more ways, then it is more probable than one which can be accomplished in only a few ways
The above is a time-arrow vision of entropy. But here is another take on it as disorder, illustration included, thanks to hyper-physics
For a glass of water the number of molecules is astronomical. The jumble of ice chips may look more disordered in comparison to the glass of water which looks uniform and homogeneous. But the ice chips place limits on the number of ways the molecules can be arranged. The water molecules in the glass of water can be arranged in many more ways; they have greater “multiplicity” and therefore greater entropy
More on sister topic information entropy and the second law of thermodynamics, a key to grasping entropy
eMarketer predicts that spending on online rich media and video ads will account for nearly one-fifth of all online ad spending by 2012, up from 9.7% of all online ad spending in 2007.
Check out the IABs draft video ad format guidelines and best practices, released April 2008. More coming out on May 5th.
We already know it. Internet takes young adults away from newspaper titles and newspaper titles do not recover them in their online resources. “Among young adults, 27% said they read national newspapers less since they started using the Internet compared to a 14% drop by the general population“
Oopps… where did they go?
Probability indicates that the large media groups will still own the information space, but it’s the brands, the means of access to information and the sources of credibility (traditionally the national dailies) that change.
Some days ago I read that Google and New York Times have built a layer on Google Earth (get a last upgrade; enable ‘geographic web’), so you can see what’s being written about in the New York Times via the earth map. This access still relies on the brand equity and credibility of the Times as a medium, but it provides yet another step towards non-conventional access channels to credible information.
My questions are: Are a the same few monster media corporations still going to dominate the information space? Will they engulf all the new and upcoming diverse forms of creating and distributing media and consolidate it? What does credible mean to the current young adults? How do you create credibility in the new media space (not just UG ratings)?
In the image Orson Welles as Citizen Kane (William Randolph Hearst) via snd
eMarketer predicts that this year online advertising will grow to nearly $25.9 billion and account for 8.8% of total US ad spending. I know some media players in much more underdeveloped markets who are making this proportion too. Awesome.
Syntegrity is a formal model presented by British theorist Anthony Stafford Beer in 1990. Now a trademark, it is “a form of non-hierarchical problem solving that can be used in a small team of 10 to 42 people. It is a business consultation product that is licensed as a basis model for solving problems in a team environment”. From synergistic tensegrity
Another good description is this one: “a future-oriented approach to the design of democratic management in the sense of the heterarchical-participative type of organization. It is a holographic model for organizing processes of communication, in particular for the (self-) management of social systems. Based on the structure of polyhedra it is especially suitable for realizing team-oriented structures as well as for supporting processes of planning, knowledge generation and innovation in turbulent environments”.
But the really amazing thing that I read recently is that Beer is the brainchild of Project Cybersyn, an attempt by Chile’s Socialist government under Salvador Allende to achieve a real-time, computer controlled planned economy of sorts. The year was 1971.
“A network of about 500 telex machines linking the country from north to south supported all this. A single computer center in Santiago controlled them, using principles of cybernetics. Its futurist design offered the hope of a more participative and less bureaucratic society. The project had the participation of a multidisciplinary group of national and international scientists. Their task was to build a system for distributed decision-making supported by relevant information. But their efforts were interrupted by the coup d’etat of 1973“
Photos from top to bottom: Stafford Beer from The Very Secret Plan; Salvador Allende from Axisglobe; CyberSyn operations room view (futuristic chair design for data reading and analytics)
It seems there are still too many hurdles to mobile advertising picking up big time. I mean, the forecast of emarketer to 2012 (19M$) is still very quiet compared to the overall advertising market size. I think it’s fair to say that one of the hurdles to this advertising format will not be overcome until mobile users stop getting charged a premium for all kinds of services related to the use of this most precious hand-held device.
The table below is a clear indication of this phenomenon, which is just one (but a biggie) of the significant hurdles to be overcome.
In the meantime, have a look at the different types of mobile advertising: mobile seo, mobile search, mobile social media, mobile display, personalised start pages
It seems unavoidable that result based marketing is taking a lead on Internet advertising formats. The last available Internet Advertising Revenue Report from the Interactive Advertising Bureau (IAB/PwC 2006 Full Year Results) indicates the highest growth rates in lead generation advertising formats. Second highest growth segment is classifieds… :)
Can’t wait for the next edition, should be coming out in the coming days. Look out for it and see what changes are taking places in the morphology of Internet advertising spending.
For the condensation of the data in the report, see this table.
The Global Marketing Effectiveness Report (the name sounds very serious, right?) establishes that amongst B2C and B2B marketeers, direct marketing fares as the most efficient channel. It was, they claim, “the #1 medium for marketing effectiveness in 2007″. The survey was made with over 3,000 marketeers worldwide. In the United Kingdom, a mature venue for marketeers, direct marketing is still less than 25% of total marketing spend. (The researchers mention that although all the noise is being made around online and mobile advertising, all the cash is still in the likes of TV and print). However, they consider direct marketing best for 2 main reasons:
It generates engagement; it provides much better response
It makes sense when you consider the same set of marketeers goals in 2008:
Growing company revenue was a key, followed by generating leads for future sales. Infact, only 15% of the surveyed guys were primarily concerned by building long term brand awareness in their marketing strategy. Is brand longevity dead?
Oh, and by the way, marketeers worldwide said that 65% of their marketing efforts had “no discernible effect on consumers in 2007″.
In the image a very unfortunate outdoor advertising campaign by Chupa Chups found in Adweek
In order of value, the SEO company Engine Ready has identified that direct traffic (as in: “they know your brand”) is the most relevant to e-tailers. So the most valuable are those typing URLs directly or bookmarking. Their conversion rate is estimated at 3,3% and they spend (in the US) an average 170$ per order. They’re also very engaged (312 seconds per session; 6 pages viewed on average).
They are followed by referrals, the second most valuable group, but also the one with the highest bounce rate - leaving soon after arrival. To here all clear. But what I found interesting is that the third and fourth positions are, in this order, paid search (1,4% conversion; 138$ per order) and then organic listings (also 1,4% and 117$ per order, but 5 pages per session, which is quite close to the #1).
It’s definitely very interesting data to understand how to optimise the marketing investment and the SEO actions. In any case, it seems organic listings still yield high quality, at least from the amount of pages per session.
In the image, quite off topic, Marc Andresseen, co-founder of Netscape, futurologist and originator of The New York Times Deathwatch
And if this is an undeniable truth: should media business become software business?
Read a very thought provoking take on it from media thoughtster Nicholas Carr in this Forbes.com article
And a definition for the road, from Wikipedia, your everyday CC encyclopedia ;-) Cloud computing is a new (circa late 2007) label for the subset of grid computing that includes utility computing and other approaches to the use of shared computing resources. Cloud computing is an alternative to having local servers or personal devices handling users’ applications.
Illustration care of Dough
The Innovation Radar, first described in 2006 by professor Mohanbir Sawhney and 2 peers, tries to identify innovation beyond product development and R&D, where it is normally silo-ed in traditional analysis. For that they have built a radar which covers 4 major dimensions or business anchors:
What: Offerings a company creates
Who: Customers it serves
How: Processes it employs
Where: Points of presence it uses to take its offerings to market
It’s a nice tool for companies concerned about their capacity and depth of innovative exercise, as it broadens the spectrum beyond product delivery and into value creation.
Spread across these, a company can innovate way beyond product or technology and can also track the status of it’s innovative capacity well beyond them. Infact, from these 4 key anchors the radar provides a vision enabling companies to innovate in these 12 areas:
Offerings, platform, solutions, customers, customer experience, value capture, processes, organization, supply chain, presence, networking, brand
More on using the innovation radar to drive organic growth. Image courtesy of Enterprise Leadership
Today I was reading one of those visionary presentations that you always wonder if the author wrote under the effects of some opiate. But I came across a slide that addresses exactly the 3 questions I was asking myself in the morning when I woke up in the same anxious anticipation that wakes me up every morning since I moved here.
Those 3 questions where masterfully articulated by the author as follows:
Strategic decisions: what business are we in and where are new opportunities for growth?
Operational decisions: how do we structure our business units to most effectively compete for and win market share?
Tactical decisions: which customers are available to us and how can we convince them to chose us over any and all functional equivalents?
Nicely put. Now I continue to rake my mind and scrutinise my peers to answer these questions in the most value adding manner for the business ;-)
More information in AuroraWDC and also in ReconG2
Illustration courtesy of Pay Attention or Pay
The Bogardus Social Distance Scale is a psychometric scale created to measure, in an empirical way, people’s willingness to participate in social contacts of varying degrees of closeness with members of diverse social groups, such as other racial and ethnic groups, homosexuals and so forth.
The scale asks a person to what extent they would accept a certain group. An average result of 1.00 for a group indicates no-social distance. The scale is cumulative (Guttman-esque?) as each item implies acceptance of all preceding ones.
The reason this drew my attention is that I just read about the Roma community in Hungary and found, not to my surprise (unfortunately), the following:
They account for 10% of the population (largest Roma community in any European country)
80% of them are unemployed (In Hungary the average unemployment rate is 7,7%)
In 2005 The Decade of Roma Inclusion was declared
Photo: winner of the Decade of Roma Inclusion Photo Award, 2007. Tunde Erika Palose, The World of Information
Behavioural targeting (BT) anonymously targets Internet users based on observed previous behaviour. It works, some experts say, under a rule based model whereby if a user does X, he is presented with Y, based on application of recency and frequency as key indicators.
Recency informs of how long since the user performed a certain action; Frequency establishes how often
The 3 basic questions BT asks are: where is the user now? where was the user before? what did he do there?
However, what I see as a clear challenge for the model, is that it will need to predict between intent based actions and routine based ones. How to predict intent is something I cannot answer ;-) I like the fact that it is a narrowcasting model versus a broadcasting one, it should no doubt deliver higher relevancy if the rules are efficiently designed and implemented. On the other hand, I still would like to see how to achieve and fine tune this efficiency: recency matters, but what about behavioral profiling; editorial adjacency; media utilisation models; depth of content versus vertical industry consumption…?
Narrowcasting illustration courtesy of Qeam. More information on this topic can be found in OMMA Behavioural
All the noise is made around search advertising, but despite all the hoopla and the rise of video ads and rich content, display advertising online is still fore-casted at 1/5 of all online advertising sales in 2011.
The source of this statement is eMarketer
For an interesting view of ad spend per channel in US Internet until 2011 have a look at the chart below.
Hope you all have a lovely and sunny spring, like Eero.
This is an interesting comment, especially for someone like me who works in classifieds and, in many of the business areas I am involved in, depend on micro formats, contextual ads and, in general, smaller text link type ad revenues much more than display intensive and hyper graphic ad environments.
“Some believe that Google, which is largely dependent on text ads it places alongside search results, is likely to be more immune to an advertising recession than rivals like Yahoo and Microsoft, who earn a greater share of their revenues from display advertisements” (New York Times, 31.01.2008)
Of course I do not believe anyone is immune to a recession, but it’s interesting that micro formats (like classifieds) always seem to fare better in recession-ist advertising environments.
Nevertheless it seems that even the big heroes such as Schibsted, are suffering the impact of the slowdown. I think a good proof of this is the way the Spanish online real estate operations (namely Fotocasa) have shown slower growth in Q4 of 2007. There is no comment yet on what could be the impact on Spain’s Internet darling for the company, the traditionally very profitable and leading Infojobs portal. Print revenue for International Classifieds has gone down 25% versus Q4 2006 and online has increased 56% in the same period.
