It was about half past six, Friday eveningwhen I sat down for drinks with Brett Bullington in a crowded hotel bar close to the San Francisco Embarcadero where we later would be going to the Social Media Network Party organized by Seth Goldstien. Being in the presence of positive and quality spirits I presented my mission for being in the USA was to introduce more SV companies to business development opportunities which existed in Europe. I understand that most American business strategists claim the market is highly fragmented and full of potential business pitfalls, but is this not anything more than notoriety the Europeans have themselves to thank for? The reality is that Europeans entrepreneurs are rigorously protectionist and a cloud of mysterious smoke and warnings of deprivation and gloom are often exuded to foreign market entrants.

However it was this evening that I began to understand that the current general consensus in SV was in fact considerably more favorable to any kind of business expansion strategy which would include China. A consensus which eludes me to some extent and by asking my colleague Nelleke to write a short market comparative analysis hopefully we will offer some grounded perspective on the subject of China. Nelleke has been working for us in China on a social economic development project for Chinese development of tourism.

E.J. Bertrand
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China’s economy runs on export, well actually import and then export. For those manufacturers that think China’s internal market is massive, think again. Massive yes, buying power no. The average worker in China earns just enough to feed his family. The economic boom in China benefits workers to the extent that their living conditions, housing, health, education, leisure time and public services are getting better. Spending power is as limited as ever, as prices are going up.
A foreigner visiting Chinese cities is easily taken in by the many modern building going up practically overnight and Western companies hanging up their shingles left, right and center. When in Chengdu (capitol of Sichuan, 14 million inhabitants) last year and the year before, the Western storefronts had doubled and it had been impressive the first time. I liked to get my morning coffee at Starbucks across from my hotel, which costs the same or more as in the US, until my official interpreter, a university English major graduate, told me that the price of our coffee was almost equal to a week’s pay for her.

On the main boulevard car dealers showed off their latest models: no Fiat 500, Ford Ka or Suzuki Alto’s here. More like Lamborghini, Ferrari, Porsche. On the corner is a department store, billboards show fashion by Dolce & Gabbana and Armani sunglasses. There is no item in the whole store that costs less than 200 dollars, I explore all 6 floors and find myself in the company of loads of charming sales girls. No wonder, I am the only customer in the place.

My interpreter in Chengdu is excellent, although she has no specific trade vocabulary, she is a fast learner. Different experiences in other parts of the country where the official interpreters assigned to me vary from as little as ‘how are you’ to being able to keep up a simple conversation. Trying to teach these the necessary language skills is an impossible task. A pocket computer is the only way to communicate.

Undeniably there are a few very rich individuals in China. Who has money to spend are multinationals and the government. The government spends its money locally and keeps their employees in company cars, expense account dinners and the newest laptops. The average Chinese Joe earning an average wage cannot afford to buy western made products, he cannot even afford to buy Chinese made products.

Why not export to China:
The dollar has only devaluated 15%. China’s provinces are very autonomous and dealing with government officials is tedious and time consuming. No one speaks English; you always need an intermediary plus a translator. Chinese consumer has no spending power.

SF Chronicle 31/3:
“The Chinese economy today is, in large measure, an assembly platform for American and foreign companies to turn components designed and made elsewhere into final products, and then to export them to the rest of the world. More than 60 percent of “Chinese exports” are, in fact, the sales outside China of multinational firms operating in China.
What Apple says on the back of every iPod is true: “designed by Apple in California, assembled in China” from chips, hard drives and screens made in America, Korea and Japan. Chinese assembly adds only a tiny amount to the value of each iPod.

The iPod is not a new millennium icon because of its components. Nor does it beat the competition on price. iPods are must-have gadgets because of their elegant and simple design, a design created in Silicon Valley, with almost all the profits returning to Apple and its U.S. shareholders.
The final China trade secret is that Americans have benefited from the vast quantities of dollars and Treasury bills (estimated at $750 billion) China has purchased in recent years to manage the dollar-renminbi exchange rate. China-funded credit kept U.S. interest rates low after 9/11 and the dot-com bust, fueling both consumer spending and the rapid run-up in housing prices.

The only way for Beijing to allow the renminbi to appreciate was to sell dollars and Treasury bills, which it has been doing in increasing volumes. But this has put upward pressure on interest rates and tightened U.S. credit markets. China did not cause the subprime meltdown, but the sale of its dollar-based assets will hinder an American recovery.”

Why export to Europe.
The dollar is at an all time low, 50% lower than a few years ago, making American goods cheap. American made products are reliable. Europe is one market: having an office in Paris, Amsterdam or Milan covers what used to be over 30 different countries and markets. Most Europeans speak and understand English. Europeans have a large expendable income.
The additional 17 former eastern European countries that became part of the European Union over the past few years represent a large expansion of affluent consumers and companies with an ever growing buying power.

Nelleke Pruijs for TWESTC
Senior Consultant on Tourism
April 5, 2008

It is becoming increasingly clear that the future of television is undeniably connected to the evolution of interactive video advertising. I’d like to share with you a short excerpt from the 2007 Entertainment, Media & Advertising Market Research Handbook.

“Never has the advertising industry – whose best known product remains the 30 second commercial – faced such wide ranging threats. Ad-skipping devices such as the digital video recorder continue to penetrate homes across Europe and the USA. Even sites which offer video entertainment find it increasingly difficult to catch consumers with traditional ads. Meanwhile the advertisers are becoming more demanding and ask for better proof that the billions of dollars they sink into advertising actually pay off. Here lies a significant opportunity for newcomers to the media and broadcasting industry to rethink traditional approaches and offer advertisers technology which provide alternative ways to target their consumers.”

I’d like to take an opportunity to take a look at the newcomers in this area and along the way share some interesting new video formats. Basically what these companies have on offer are various types of players which can be embedded in any type of website, using the Flash or Javascript protocol.

As this is still an emerging industry you may like to familiarize yourself with terms used for the currently available formats. Currently the most popular format is In-Stream Advertising. Typically they run before (pre-roll) or after (post-roll) a requested video online. In my opinion the most exciting evolution is the User Initiated Ad . Here you are giving viewer the power to click on, roll over objects in a video and trigger events inside or outside of the video. The level of interactivity for both formats is largely dependent on a complex mesh of Flash layers. Currently there are few providers of customizable interactive players and the standard functions are still limited or in development.

The first on my list of companies to watch is the Silicon Valley start up Ooyala.com, founded in 2007 by three Google engineers and well on their way to becoming one of the leaders in interactive and HD video serving. Ooyala already serves most of the content for the Indian Times and has contracts underway with some of the largest US movie studios. Ooyala has developed a player making it possible to serve various types of new interactive video formats including User Initiated Ads. Ooyala proprietory Backlot video management system is an impressive solution allowing for maximum control regarding syndication and tracking of video content on the web. http://www.ooyala.com

A pioneer is Plymedia.com, an Isreali/US company established in 2006. PLYmedia deployed their interactive and multi-dimensional web video platform before most of their competitors and currently offer the best developed User Initiated Ad functionalities. I was especially impressed by the non-intrusive Infoply method which uses a click in screen technique to offer more information on an object in screen. http://www.plymedia.com

Another Silicon Valley company which has been turning heads is YuMe.com. They will be serving InVideo overlay ads as part of Google’s AdSense™ for video beta advertising program. They offer a similar management system to Ooyala.com however in my opinion each company has a significantly different approach to the level of intrusion of commercial content but I think this is a matter of taste. YuME boasts a bewildering number of different formats some of which are available for mobile and IPTV platforms. http://www.YuMe.com

Update 18 april 2008

After having visited the conferences NAB in Las Vegas and Ad Tech San Francisco I feel this post should be updated to reflect a more complete overview of this market space. However I should add that some of these companies should be catagorized as adserve networks so there is more emphasis met on the adserve networking capabilities.

Adjustables.com
Originally a Dutch company which opened a branch in Silicon Valley this year. Adjustables distinguishes itself by offering advertisements (logos, banners, etc.) that float inside online videos, during the play out of the video content. Adjustables provides publishers of online video with advanced technology (patent pending) for integrating ads inside streaming video, less annoying other than just offering pre-rolls.Podtrac.com
A service that connects podcasters and podcast listeners and viewers with advertisers. They match audience demographics and interests with the appropriate advertising for those listeners and viewers and are more of a video adserver with large network capabilities.

AdoTube.com
A low brow video inventory server focusing on ad presentation. Creative functionality includes in-video lead generation campaigns, in-video credit card processing for video monetizing, and a Supervised Contexutalization® approach for contextualizing video libraries. They offer publishing networks but you will need to demo to have a better idea of their reach.

Aditall.com
AditAll is a video advertising community where users can quickly, simply and inexpensively create, produce and distribute video ads. Producers upload video and music clips to the AditAll inventory and set the price for their work. Advertisers can browse this inventory to find, customize and purchase the clip they like best for their needs. As with Adotube it’s early days yet and I can’t tell you much about the market reach.

Mediflo.com
MediaFLO USA, a division of Qualcomm Incorporated, aggregates and delivers premium, TV-quality entertainment and information services to mobile devices over its dedicated nationwide wireless network across the US. Its basically end to end. This is a distribution system which incorporates DRM and offers a product which could appeal to network broadcasters willing to distribute video content over a vast range of 3G capable devices.

Limelight.com
Limelight Networks offers an end to end video content delivery sytem which is used by thousands of entertainment, technology, enterprise, and government entities around the world. They enable any object in their digital media library to be instantly delivered and monetized with DRM. It offers its service over a dedicated fiber-optic network and essentially they target larger broadcast networks.

Videoclix.com has pioneered the clickable video space since 1998. All objects in VideoClix content are clickable, providing a next generation interactive video platform with a robust monetization solution for content providers, and an effective non-intrusive media vehicle for advertisers. The company caters to top producers and advertisers with its end-to-end hypervideo solution that includes: authoring, content delivery network, HD quality player, metrics, syndication, social media and standard IAB display ads. VideoClix helps monetize content through the VideoClix Ad Delivery Network while enabling content providers to bring their own advertisers, sponsors and brand integration deals to the table.

I am sure there are players I have left out, this was more of a reveiw of the companies I have been able to look at recently. However should you come across interesting additions to this list please do not hesitate to post your views.

Its official, I too am infected by the status disease, affluenza, social status anxiety or whatever you want to call it. The pressure to find a cure has taken me down the path of books on the subject of my ailment and hours spent in session with my therapist in an attempt to control this hostile villainous disease from attacking my intrinsic values. I’ve also spent many hours sifting through the photographic data of my youth to jog my memory into remembering what my intrinsic values and pleasures in life actually are. I’ve been flirting with meditation and yoga which has only caused my wallet to deflate and not much toward inflating my feelings of wellbeing.

Meaner than a midlife crisis which used to easily be cured, there are new methods of treatment necessary to combat this virus.

It has me asking, can I not just put a price on my need for the status of emotional Well Being? Marketers are so incredibly smart that the road to commoditizing this new status symbol is well on its way. Should I be convinced that spending money on peace keeper cosmetics and ELLO mobile (the promise: you pay your bills and we give our money to charities) will do me lots of emotional good. It also has a very nice 70’s ring to it.

If there is one fact I have taken for granted in my life and a logical one at that, it is the statement that all the money in the world cannot buy you happiness. There is certainly something very warm and fuzzy about this assumption which many of us will hold dear. Whoever said it had well in mind to keep us from vile sides of the pursuit of wealth, consumeritus, the purgatory where the wantee’s and havee’s congregate.

I rather do despair at the idea that alongside my personal quest to find the deeper meaning in life I will inevitably be a marketing target and be vulnerable to the lure of a prêt a porter range of values and charities invented by ‘free range social marketers. Imagine that ‘using product xyz will help you feel you are playing your part, help us to create a new society where we will all be happy, fulfilled and conscious members of our friendly planet earth’.

But beyond this I am actually helping the world to be a better place and there are bound to be charities which particularly appeal to what I think are my personal intrinsic values.

In fact, it is a brilliant (mis)interpretation of what psychologists believe, actually will help you find your way to a happy, self-fulfilling life, free from status anxiety and depression. Not particularly easy to achieve as it is basically an exercise of self-motivation which essentially must come from within you.

However social marketing is still brilliant because I don’t think many of my intrinsic values differ quite that much from millions of other consumers so I and many others are basically easy targets.

Unfortunately in my opinion it doesn’t mean we are truly on the road to becoming the increasingly conscious society, it just means that marketers have found a way to influence me into thinking there are indeed less strenuous ways to obtain emotional happiness.

For social entrepreneurs (I love this label for its unprofessed ambiguity, for yet have I to encounter the anti-social entrepreneur, a concept which I would find very frightening indeed however exceedingly more realistic and funny as it reminds me of those hilarious Eristoff Vodka commercials. As Oliver James put it in his last book ‘Affluenza’, social entrepreneurs play a key role in unleashing the unselfish capitalist manifesto.

10 years down the line and consumers, having seemingly happily spent millions and billions of currency on charity endorsed products, they will still wake up feeling as depressed as they were ten years earlier.

I was really pleased to see that my colleague Jerome Bertrand (no relation) from the Dutch company Geo-Games produced a short demo video to show how they have been developing a way to offer geo-browsing support and booking transaction sites right from the start - to the finish. It’s not a bad project for now although I still tend to think that the consumer interface needs a bit of work. Please see the demo at : <http://www.youtube.com/watch?v=RWd77jBrlO4

I have spent some time researching the attitudes of SME on applying internet in a business growth strategy. SME’s actually do not use much of the Internet for advertising or to establish new distribution channels.

However, SME’s do recognize the importance of the internet in their business strategy to benefit from growth opportunities it presents. In fact SME’s consider the Internet as a vital contributor for business performance but do not apply resources to this area if; from one side, they don’t have or need a growth strategy or from the other, the value of the internet is not vividly apparent to them.

If a SME business owner has a value perception of the internet, adoption of an internet strategy is never far off even though there is no actual planned business growth strategy.

It could be that these firms see outside pressure from competition using the internet, another could be that the company owner just has a very good knowledge of the IT opportunities.

However with most SME who don’t have a planned growth strategy, the value perception of the internet is generally very low, there is usually no internal IT knowledge and perhaps they can’t see any competitive pressure.

If you will allow yourself to take a step back and look at technology adoption rates from the perspective of a SME business owner we may conclude that a change in attitude to business growth is needed and not necessarily a change in the perception of the internet as a business driver.

Show me the money

Why we ask ourselves are advertisers sceptical about online advertising and yet they will place an expensive ad in the paper without giving it a moments thought?

In my view its because the value is not transparent to all of us. I do not question the fact that my ad in the Sunday Times will be viewed by millions of readers. I read the Sunday Times, I can see my ad, my neighbour will too because I know he reads the Times front to back on Sunday afternoon. Somehow advertisers perceive the value of online advertising differently than offline advertising.

Let me be the devil’s advocate a moment by stating:. If you can’t visually illustrate ad performance, don’t bother selling it!

This may sound preposterous to an experienced online marketer. Think of all the wealth of tracking tools, analysis and performance stats I can provide to my advertiser, the possibilities to track ROI have never been finer!

All true, good arguments, but I’ll buy your ad because I know it pays off. You are telling me it will pay off and your statistics tell me this but I still have a problem visualizing the ad you are trying to sell me, I don’t even know these websites you want to place my ad on. On top of that he is thinking your pitch sounds pretty complicated. “I’m sorry we just aren’t quite ready for this right now and besides we don’t really have the budget.”

Turn around Adrank

So if we need to put the money where our mouth is, we should perhaps come up with a significantly simplified way to help advertisers visualize the ROI of online advertising.

What if we illustrate the return of ads by offering advertising conversion scores directly on the ads themselves and outside of any kind of Google AdRank. Current advertisers benefit by knowing if adjusting their creative format, copy or adblock will increase conversions for them but I’ve already made the decision to use Adwords by then. Potential advertisers should also be able to see how online ads generate leads before their very eyes and it makes the whole AdRank system much more transparent at the same time. No need to get out the case studies and analytic demo kit, get out of the hard sell business and back stuck into the relationship business.