Mobile Fix: Tipping points

As we boldly march into the New Year, Simon Andrews, founder of Addictive!, looks at some of the major themes that have already emerged for mobile, e-commerce and Facebook.

We’re now well into the New Year and there seem to be some big themes around. The general view about CES was that there wasn’t any significant new story and lots of smart people are articulating a feeling that the revolution has paused. Some are doubling down on their belief that new media hasn’t delivered.

The view we subscribe to is that it’s time to build something new. And we are reminded of the old Seth Godin quote:

“What did you do back when interest rates were at their lowest in 50 years, crime was close to zero, great employees were looking for good jobs, computers made product development and marketing easier than ever, and there was almost no competition for good news about great ideas?”

That’s from 2003 but applies just as well in 2014.

In Davos this week Marissa Mayer talked of a tipping point:

“When you look at mobile, when you look at the bandwidth, when you look at the Internet of Things, it’s going to change everyone’s daily routines really fundamentally.”

She also shared the fact that Yahoo will have more mobile traffic than desktop by the year end (and remember Yahoo is the biggest web property in the US – slightly bigger than Google).

VCs from Andreessen Horowitz talk about a tipping point too – in e-commerce.

“Online retail has strong cost advantages over its offline counterparts and is rapidly taking share in many retail categories through better pricing, selection and, increasingly, service. These offline players have high operational leverage and many cannot withstand declining top-line revenue growth for long. The resulting bankruptcies of physical retailers remove competition for online players, further boosting their share gains.”

The retail world is changing and we’re seeing creative destruction play out before our eyes. And the speed at which it is happening is absolutely stunning. UPS and FedEx had better start building out their fleets, big time – these trends are only accelerating.

So media is undergoing fundamental change. Retail is too. And whilst mobile money innovation has already been disruptive, Marc Andreessen, the inventor of the web browser, believes Bitcoin is just as significant as the PC and the Web and will have a profound effect. (Bitcoin is so, so complicated and this explanation that a five year old can understand is really helpful.)

With these three major industries undergoing huge change (and most other sectors evolving too) there are both threats and opportunities for brands. Understanding what these are and working out how to ensure your brand profits from the changes, has to be the key focus for 2014.

Facebook content – what gets shared and why

As the organic reach of content diminishes, everyone is looking for ways to maximise the sharing they get. Facebook has announced that text-only updates from brands will have reduced distribution – but most smart brands already know a picture is pretty essential.

However, when you dig into what does get shared on Facebook, it gets interesting.

Those publishers who get Facebook tend to do much better than traditional news sources. And they do it with a much smaller number of posts; Huffington Post has nearly 17,000 posts to get into second place. Buzzfeed beat them with just under 3,000 posts. Upworthy came in third with just 220 posts.

A fascinating NewYorker article looks at what drives these viral breakouts:

…two features predictably determined an article’s success: how positive its message was and how much it excited its reader.

There is more to it than this, but the obvious problem is that as more people use the formula it gets less effective. Still, it has worked incredibly well for ViralNova – just eight months old and in 7th place – from just 105 posts. This one man band claims to be very profitable as he looks to sell the business.

If you want to dig deeper, the Facebook data team have looked at how memes evolve on Facebook and see parallels with genes – well worth a read. And our friends at Unruly have some smart thinking and useful tools around sharing and spreading.

But you can be too clever. Two Princeton PhDs have used the maths of infectious diseases to predict the death of Facebook by 2017. Using the rise and fall of MySpace and the fall in searches for Facebook through Google trends, they foresee a rapid drop in usage. Of course it could be that having a Facebook button to press on one’s phone means you need to use search a little less often?

newTV – Netflix & Amazon

We spoke at the MediaTel event on CES this week. Some of the debate focused more on the TV element of the show – which is huge – and there was a view that even in TV, software is becoming more important than the hardware.

Results from Netflix remind us just how much things have changed in TV. Netflix has 33 million customers in the US and accounts for around a third of all broadband traffic in peak times. They have over nine million customers outside the US. Revenue is $1.2 billion and profits soared by 24% to $48 million for the quarter.

Coupled with its success in content, many think Netflix will prompt Amazon to expand its TV business with rumours of an online Pay TV service – with other networks’ content licensed for inclusion. With huge numbers of Kindles out there this sort of move would be logical for Amazon, which is already producing exclusive content for Prime customers. And the company has been rumoured to be looking at an Amazon set-top box too.

One key difference is likely to be around advertising. Netflix says it is not considering advertising but we should expect Amazon to use all that purchase data to sell and track advertising for products it sells.

Of course TV isn’t an easy business, as Intel found: the TV business the company had such big plans for has now been sold to Verizon.

And it is big triple play for companies like Verizon and Comcast who have driven the net neutrality debate – with them now winning the right to decide what content gets priority. This is a clear threat to Netflix, Facebook, Google et al as they don’t want to pay a tax to these gatekeepers. Netflix talked about the issue and says it will encourage members to complain if /when it becomes an issue.

The point was made at the CES event that in the UK, the big triple play companies like Sky, Virgin and BT have a TV focus and could shape the future of the Web here. Given the proliferation of competition we’re not sure we agree, but we should watch for people looking to copy Verizon’s moves over here.

Beacons and payments

The hype around Beacons continues – everyone is talking about them, even as real world implementations remain rare. We think the hype is probably justified; used properly they have the potential to enhance retail and connect mobile to the physical world. But they also have the potential to be annoying spam and we risk training people to keep Bluetooth turned off.

Apple has been the main driver and a new patent shows its ambition – using the technology for payments as well as messaging. This blending of marketing, point of sale, transaction and payment is the big opportunity. Paypal gets this too and we expect use cases to become more complex.

One good example is fashion e-commerce aggregator Lyst, which plans to work with Paypal beacons to give customers location alerts when near stores that stock items they are interested in. Will a smart retailer really let an e-commerce third party message their customers in-store?

Startups focused on Beacons are proliferating but the investment case for these hardware firms seems compromised by the learning that you can use old phones as the transmitter.

This is an edited and abridged version of Mobile Fix – click here to read the full article on Addictive!’s website