fT Shi
the evolving mArket, PlAyers And Business models in A 2.0 World
Allison CerrA & ChristinA JAmes

The Web has transformed our daily lives. While the Internet of the 1990s was largely characterized by oneway, text-laden information, the Web of today offers a dynamic, interactive, multimedia experience unique to each user. The impact on underlying networks is equally seismic, as operators struggle to address a seemingly insatiable broadband appetite on the part of end users. Developers find themselves in an equally daunting conundrum as many struggle to generate profit in a fragmented world of devices, operating systems and networks. Indeed, the very innovation of the Web is threatened by the increasing cost of capital facing network providers and a lack of profitable business models confronting developers. As the Web has transformed the way we interact and communicate, so too must business models be transformed to address these new opportunities. The estimated $100 billion market opportunity that results when service providers offer a growing web developer community access to powerful network-based capabilities fuels future innovation and creates a new ecosystem of fruitful interdependencies. End users benefit from a better experience, developers benefit from a richer set of capabilities, and service providers benefit from monetizing these currently guarded capabilities. In the end, the impacts to larger social concerns, including those in education, government and healthcare, stand to redefine the landscape for Web 2.0 citizens in a global economy.






fT Shi
the evolving mArket, PlAyers And Business models in A 2.0 World
Allison CerrA & ChristinA JAmes

second edition, January 2011 Alcatel, lucent, Alcatel-lucent and the Alcatel-lucent logo are trademarks of Alcatel-lucent. All other trademarks are the property of their respective owners. the information presented is subject to change without notice. Alcatel-lucent assumes no responsibility for inaccuracies contained herein. Copyright © 2011 Alcatel-Lucent. All rights reserved.

Table of conTenTs
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Prologue The end of the world wide web As we Know It . . . . . . . . . . . . 13 ParT 1: The GeneraTional imPacT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Chapter 1 Baby Boomers: The eternally Young . . . . . . . . . . . . . . . . . . . . . . . . . 29 Chapter 2 generation X: America’s Middle Children. . . . . . . . . . . . . . . . . . . . . . 41 Chapter 3 Millennials: The digital Natives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 ParT 2: The 2 .0 ecosysTem sTakeholders . . . . . . . . . . . . . . . . . . . . . . 63 Chapter 4 The developer Market: 14 Million Creative Minds and Counting. . 65 Chapter 5 Through the looking glass of the Commercial developer . . . . . .77 Chapter 6 Through the looking glass of the enterprise IT developer . . . . 95 Chapter 7 Advertising: The eyes Have it . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 ParT 3: The consumer 2 .0 influence . . . . . . . . . . . . . . . . . . . . . . . . . .129 Chapter 8 Video: The Next unstable Business Model. . . . . . . . . . . . . . . . . . . . 131 Chapter 9 Social Networking: Monetizing Billions of Conversations . . . . . . 151 Chapter 10 gaming: Not a Spectator Sport . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 ParT 4: The enTerPrise 2 .0 imPeraTive . . . . . . . . . . . . . . . . . . . . . . . . .183 Chapter 11 Small Business: The American dream . . . . . . . . . . . . . . . . . . . . . . . 185 Chapter 12 Healthcare: High Stakes, Higher rewards. . . . . . . . . . . . . . . . . . . . 197 Chapter 13 government: Protector, employer, and Servant . . . . . . . . . . . . . . 211 Chapter 14 education: The global Achievement race . . . . . . . . . . . . . . . . . . 223 Chapter 15 IT in the large enterprise: In Search of relevance . . . . . . . . . . . 237 ParT 5: The 2 .0 case for laTin america . . . . . . . . . . . . . . . . . . . . . . . 247 Chapter 16 Brazil and Mexico: A Tale of Two Countries. . . . . . . . . . . . . . . . . 249 Chapter 17 Small Business: latin America’s growth engine . . . . . . . . . . . . . 263 Chapter 18 developers: Brazil’s emerging Market . . . . . . . . . . . . . . . . . . . . . . .275 ePIlogue The evolved Value Chain In A 2.0 world . . . . . . . . . . . . . . . . . . . 285 references. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293

THe SHIFT foreword Foreword | 5 .

THe SHIFT 6 | Foreword .

THe SHIFT > The inTerneT has brouGhT us To a remarkable PoinT in history. It’s an incredible time. There is a political perspective that says this is how it ought to be: network neutrality legislation might make the pipes stay dumb. and social read/write technology across the consumer and enterprise Internet. And yet the pipes are “dumb. the newspaper may stop printing soon and many intelligent people are unafraid that that will lead to a new “Dark Age. cloud computing. But let’s consider another side of the story. undifferentiated by content type or source. 7 Foreword | .” The pipes through which all this Internet and telephony data flows are dumb. they just shoot all the data through. nearly ubiquitous broadband. Employees are Tweeting their bosses. people are legally listening to any music they like (without paying for it). Many factors have converged to make the present a very disruptive time.” We flip and scroll through iPads that look like they are from The Jetsons cartoons— and those futuristic tablets were the fastest product in history to hit $1 billion in sales. rich with innovation and cultural change: Moore’s Law. To a greater or lesser degree.

Those are things that a smart network could offer developers as a service. and made data about the data available for outside software developers to build services around? Not to peek into the darkened bedrooms of movie thieves and miscreants. Maybe hospitals want to know where in the facility a doctor is located and what their professional profile is. interfaces.THe SHIFT What if telecommunications service providers instrumented their data flow? What if they measured. That’s what this book is about. squandering bandwidth and intellectual property. new user experiences. In the parlance of the milieu. The network also knows what’s going on with its own quality of service and it has diagnostic data. and new types of software we didn’t even know we wanted yet. Large quantities of meaningful data are available in real time from the network provider. enterprise IT developers. or on a phone. and education and healthcare workers) are undergoing. better performance. What kind of data can network providers offer a developer community? This is key. but to build value-added services that everyone gains from—on top of an intelligent network. advertisers. and profile of a software user at the end of the pipe. availability. That means there are opportunities for innovation—limited only by processing capacity. It has security and billing capabilities. The network knows the presence. Millennials. and the imagination of a wide-open world of software developers. based on market 8 | Foreword . on a laptop. location. (“Which cardio specialist is closest to the fourth floor right now?”) That’s something a network could expose to a developer. The research you’ll find in this book is evidence that there is developer demand for exactly that. It’s about the unique types of data that network providers can offer a larger ecosystem over which developers can build software and services. analyzed. and mashups. the network provider could offer an Application Programming Interface (API) that can be used by third-party developers to create integrations. policy. more engagement. monitored. who could build an interface to serve up that data in a way the software user at the end can make use of. Cerra and James spend most of this book discussing the cultural changes that various groups of people in society (Baby Boomers. What does that mean? It means new apps.

There’s a lot to be enthusiastic about. This. for security and diagnostics. not just of the consumer privacy landscape. Multiple markets are willing and able to pay for these kinds of features. The different groups have different desires and aims. they argue. This is a book that many people will find informative. according to the many studies. however. They discuss the needs these groups have that could be filled by network provider APIs. but a smart pipe has something to offer them all. for example. serving the opportunities termed “application enablement” in this book. while lowering the cost of basic service? Cerra and James argue that the types of features that could be upsold to developers and consumers could be the source of revenue that pays for the much-needed build-out of more network capacity. What does that money then help pay for? More pipes! Everyone wants more and faster bandwidth and consumers would like to get it for less money than they pay today. that you’ll find in these pages. That’s the best kind of marketing 9 Foreword | . That’s key. In fact they make some bold statements about the primacy of user control over their own data. both original and compiled. The authors are not in the “privacy is dead” camp. but of many places where technology and contemporary culture intersect. whether they are a candidate for Alcatel-Lucent’s services or not. Cerra and James have written here an informative articulation. The authors offer an unusually sophisticated and multi-generational analysis of peoples’ changing requirements for privacy with regard to their personal information. but there are warnings here too. is what network provider (and now book publisher!) Alcatel-Lucent intends to do a lot more of in the future. Consumers and developers want and will pay for the kinds of features that can be built on top of presence and availability data. Value adds built on top of user activity and profile data have to be opt-in. How on earth will providers build out additional capacity.THe SHIFT research and contemporary anthropology.

Their brand rides alongside all the general interest. as it’s the place to go to see a lot of these recombinations of real-time flows of data and functionality from multiple sources put into new contexts and given new interfaces. So that’s a picture of the upsides of this kind of application enablement on the part of network providers. 10 | Foreword . It’s a great place to learn about these APIs that will be mashed up with the kind of data provided by intelligent networks ascribing to the strategy described in this book. That’s the marketing model that’s emblematic of the new Internet that this book is talking about making all the more sophisticated through application enablement. Proponents of network neutrality legislation may disagree with the premise that network traffic ought to be instrumented.THe SHIFT there is. But what about the dumb pipes? Some people say they like their pipes dumb. companies that make a substantial contribution to conversations of general interest. It’s one of those things that you might have to see to believe.com. How will the computing clouds around us know where we are? How will they know what we want to see? How will security be managed and diagnostics run? Intelligent networks could provide exactly that kind of information to the developers of the augmentation applications. Alcatel-Lucent recently acquired the API database. as readers pass the company’s contribution around to a larger number of people. The potential here is so rich that I hope people new to the world of APIs are properly excited about it. Thus the importance of ProgrammableWeb. analyzed. probably. which you’ll see references to later in the book. That larger group includes a smaller percentage but a larger total number of sales prospects. and handled differently. monitoring service. and it’s a picture that’s very well told in the following pages. Cerra and James make mention of this for sure. Some will. analyzed to tease out new hidden patterns and opportunities. but argue that we’ll have to wait and see what kind of legislation comes into play. and news blog—ProgrammableWeb. And we all win.

Marshall Kirkpatrick Co-Editor. There is incredible potential for the development of mutually beneficial technology based on what’s called application enablement in this book.THe SHIFT Meanwhile. Give it a read and imagine the possibilities. the Internet waits for no one. ReadWriteWeb Marshall@MarshallK.com August 2010 Foreword | 11 .

THe SHIFT 12 | Foreword .

THe SHIFT Wide Web aS We KnoW iT TheWorld end of The ProloGue Prologue | 13 .

THe SHIFT 14 | Prologue .

Only this time we weren’t contemplating if anyone would actually pay for faster Internet speeds.THe SHIFT > in 1999 i (allison) was emPloyed by one of The larGesT service providers in the United States. After all. marketing a service that was in its infancy at the time: Digital Subscriber Line. We were eager. We found ourselves in a much more difficult position: How could we keep pace with our customers’ usage when the traffic consumed on the network was growing 15 Prologue | . Our issue was no longer in attracting new customers to the network. we lived in a world where email remained the proverbial “killer app” of the Internet. yet alone pay for. Why would anyone need. many couldn’t help but wonder if it would ever really take off. about its potential. And again I sat in a healthy debate about the company’s broadband service. At the same time. regional service provider. this service could give us a new revenue stream not seen since the days of dial-up. If successful. I recall sitting in several meetings where we held vigorous debates over how to best market this new flavor of telecom alphabet soup—DSL—to the masses. and much smaller. yet cautious. instead we were asking ourselves how we could afford to continue with the flat-rate broadband retail pricing popularized in the 1990s. faster Internet speeds when the 56K modem was perfectly adept at navigating a virtual world largely defined by text? Ten years later I found myself at a different.

But there was something special and much anticipated about the iPhone’s debut. no complicated owner’s manual. And those eager consumers who waited patiently in long lines for the next wireless “it” device would not be disappointed. displacing Yahoo! as the second most popular search engine worldwide. A phone with no keyboard. Less than 2 years later. the iPhone had upped the ante and rocked 16 | Prologue . If YouTube had revolutionized the Web from a one-way. 2007. the site added one more coup to its meteoric ascent as a Web 2. Within a few months of launch. If any company could deliver on these wildly ambitious promises. Mobile phones come and go.0 heavyweight. Fast-forward to another historic date in broadband history: June 29. What started as an obscure video-sharing site marked the shift toward a Brave New Web World. YouTube wasn’t just any web start-up. text-laden experience to a fully immersive multimedia playground. it was Apple. hundreds of curious consumers lined up at retail stores across the United States to get a glimpse of the newest device to hit the mobile scene: the Apple iPhone.THe SHIFT at a rate faster than anyone could have anticipated? The debate around the table—and the landscape around us—had changed radically in the past decade. But this was different. A scant 21 months later. the phenomenon now ubiquitously known as YouTube would sell to powerhouse Google for an astounding $1.65 billion. This certainly wasn’t the first time in history an unknown web fledgling would command a premium on the market. The “superhighway” was littered with investments in start-ups. the iPhone was home to thousands of third-party applications that produced a ten-fold increase in traffic consumed by users. The result was a seismic shift that rippled far beyond user behavior to impact the underlying broadband networks strangled beneath the weight of exponential data usage almost overnight. three unknown former PayPal employees took a quantum leap forward in revolutionizing the Web as users knew it. It sat at the crossroads of two game-changing web trends: the proliferation of user-generated content married with bandwidth-hungry video distribution. and no obtrusive user interface had been the product of pipe dreams. What happened? How did we get here? Just a couple of landmark moments in broadband history show us a hint of the answer: In February 2005. On this date.

indelibly changing the broadband landscape once again. Text-rich environments are the norm. Web 2. Without making professionally generated media extinct.” who would literally grow up in this online. and crowdcasting all changed the landscape from a one-way communication aimed at the masses to a two-way conversation of millions. And that voice would be heard. With greater ease. and higher quality than ever. The 2. texting. Quite simply and subtly. For the first time.0 world. A Web 1. The question was simple: How much exponential traffic could the network sustain given incremental increases in bandwidth over such a short time frame? The question 17 Prologue | .0 world is characterized by professional content providers creating a one-way communication path to consumers. In a Web 1. and quickly replicated on the wireless front. more attractive pricing. paparazzo. And consumers are happy simply to digest media and content made available to them by others. Few could have anticipated such a radical shift back in the 1990s when broadband first reached critical mass. always-on broadband networks delivering speeds once reserved for the enterprise power user and available at mass-market pricing fanned the flames of growth. Further. Soon there was talk of a new wave in the broadband industry. consumers were given a voice. Download speed reigns supreme. Blogging. the consumer is just that—the beneficiary of content provided by others. podcasting. had prognosticators spinning. or artist.THe SHIFT the wireless world with new business models directed at a burgeoning developer community. The proliferation of content produced and consumed would spawn a new generation of bandwidth-insatiable “Millennials. The eXaflood comeTh? The traffic explosion born on the wireline network.0 shift had moved from wireline to wireless networks.0 changed everything. the consumer had become the producer. social networking. The digitization of everything from cameras to cost-effective storage made every user a potential cinematographer. coined the “exaflood” phenomenon. immersive world. consumers became equipped to produce their own content. usergenerated content created a new forum of expression.

While capacity planning is certainly important. Sprint. a trend coined by Intel co-founder Gordon E. and their communications ilk poured money into fatter and faster pipes for end users. if these service providers must continue to make investments in networks in the face of escalating broadband traffic and do so with flat. at the time of this writing. Simultaneously. And. it contemplated the physical capacity constraints of underlying broadband networks. Broadband networks are the product of billions of dollars invested by service providers. a new FCC administration under Chairman Julius Genachowski has issued an industry call-to-arms to equip 100 million US households with 100 megabits per second over the next 10 years. Comcast. they benefit from subscription-based revenues paid directly by end users for the privilege of access. After all. Time Warner. not even it can offset the incremental expense born of an insatiable broadband appetite on the part of end users. cap their 18 | Prologue . how does the next Facebook or YouTube reach an audience over a network capable of delivering its value? Some are turning to the broadband cap as one potential answer. For years. wireless morphed from a voice-driven luxury reserved for the enterprise employee or safety-conscious consumer to an entertainment and communications necessity for the masses. AT&T.THe SHIFT was not grounded in profitability as an end pursuit. if there is no compelling reason for these service providers to continue investing. retail pricing plans. Moore all the way back in 1965. Where do we go from here? Some would argue that the service providers that have invested in these networks simply must continue to do so. But. how can they generate an attractive Return on Investment (ROI) to shareholders? Some point to greater efficiencies in networks themselves. Verizon. And. all-you-can-eat. a more fundamental question was on the table: Who would continue to invest in networks crippled by a seemingly insatiable broadband appetite? Look to history for the obvious answer. akin to Moore’s Law. if not declining. which finds computing power doubling roughly every 2 years. rather. We witnessed broadband speeds accelerate from a paltry 768 kilobits per second (still over twelve times faster than the fastest dial-up service) to well over 10 megabits per second. Rather than offer end users a flat-rate. Though Moore’s Law certainly plays a part in allowing the service providers the benefit of more attractive costs per transported bit. monthly broadband price.

THe SHIFT usage at a specific allotment per month. The cap places the tax of the network largely on the backs of those consuming it the most. Today’s broadband hog is tomorrow’s casual user. This shift simply commoditizes gigabytes on the provider network as opposed to megabits per second. after which point the user pays per byte downloaded. Many would argue with us on these points and refer to several successful examples of broadband caps being imposed elsewhere around the world as proof points in their corner. Bandwidth caps add to the complexity. how do you empower the consumer—particularly parents—to monitor their household traffic and impose limits on children who could easily digest the monthly cap allotment all on their own? You get the picture. however. Prologue | 19 . with broadband levels reaching saturation. While we certainly agree that other service providers worldwide have successfully transitioned from a flat-rate to usage-based broadband pricing model. Marketing bits and bytes is complicated. The challenge remaining. or month. we have added complexity to the system. Network providers remain a utility through which others provide services and applications with perceived value to the user. is two-fold: 1 How does a service provider begin re-educating a consumer base on how usage will be billed under this new model? The industry spent the better part of 10 years explaining to the public what download and upload speeds are and why they are important. but temporal. few consumers could intelligently answer what a megabit-per-second rate really provides. Imagine the complexity associated with educating these consumers on what a gigabyte is or how many gigabytes their household consumes in a day. Further. though they have been educated that faster is better. we submit that there are other. ways to monetize the incremental traffic load on networks rather than through a purely transactional model between end user and service provider. week. and they still fail to establish a richer relationship with consumers and developers that creates enough revenue to cost-justify continued network investment. perhaps better. 2 Caps are interesting. Even today. How does a service provider retain flexibility in adjusting broadband caps dynamically as usage continues to escalate? Yet again.

through a device—to a broad developer community. The shifT: 1 . even a device like the iPhone fails to deliver completely.0 one-way communication Text-laden web environment Broadband for fixed networks Flat-rate broadband pricing Providers aspire to develop the next “killer app” 2 .0 differences 1 . Another lesson from the iPhone is the hunger consumers have for being able to do everything they need to do and access all the data. it’s the value in exposing intelligence—in this case. Consumers want the content they want. social media.THe SHIFT If we begin to look at the broadband network and ecosystem fundamentally differently and more broadly. 20 | Prologue . and any other imaginable content in a seamless way with a simple interface. when they want it. we can discover new business models that go far beyond subscription-based billing between service providers and end users. video.0 Two-way experiences Video-rich web environment Broadband across any network Metered broadband pricing ecosystem of developers leveraged to create apps The need for a new model If there is one lesson the iPhone has taught us. If one device can create this frenzy. With demands like that.000 applications in their arsenal. imagine for a moment if intelligence in networks could be exposed in the same way. communications.0 To 2 . and how they want it. They are armed with well over 300. iPhone users have much more than just a phone. Consider the power of 300. from the most inane and obscure to the most practical and popular.000+ applications limited to one device that has only reached critical mass in the past 2 years.

offering point solutions that tie together traditional communications services.THe SHIFT To fill this need. Right now. broadband modems. Netflix. they must be their own systems integrators. and the cost of devices such as portable digital video devices. HDTVs. The same network is capable of connecting thousands of varieties of mobile devices. and more. They have already decided it is worth their time and their money. What’s phenomenal is that despite the complexity of stringing together these different services and devices. yet that’s exactly what we have today. even a device like the iPhone is. and for their social media profiles. They can buy Sling hardware or software to watch their TV service while away from home. and these limits occur even after significant investment in subscription fees. and even set-top boxes with 21 Prologue | . over-the-top competitors take advantage of service gaps between providers. They can also watch video from on-demand services. But not all of the services users have paid for are available across all of the available platforms. First. specialized set-top boxes. A business model that requires systems integration by consumers to derive maximum value isn’t working well. PCs. They are doing it for video. A consumer runs into the constraints of the walled gardens offered by their iTunes.0 world. While they may be loyal to a particular device. or TV services. many consumers are doing it. such as their iPhone or BlackBerry® smartphone or their HDTV. So what role does the network play? Networks are robust in many ways. consumers are forced to use these makeshift point solutions to achieve their goal of anytime. digital content rights for different platforms. and social media. a delivery system for the applications and services that consumers value. if consumers want to watch video they’ve purchased on different devices. even with all the options available to them. For example. for communications. They can hook up their PC to their television. anywhere access. providers who can offer the most seamless experience across platforms and integrate with new media will hold a strong lure with consumers. Amazon. video. They can load video onto a mobile video device—an iPod or other portable player. they are device-agnostic. like those from Amazon or Netflix. on the PC or on TV if they have a set-top box or special Internet-equipped DVD player. in the end. In a 2.

For now. we will continuously emphasize the roles of privacy. When devices become more powerful. From storage to processing power. in the end.THe SHIFT ease. and send impulse coupons to the customer’s mobile device as a result. so too do networks. and the length of time he spends with each type of media. They are not constrained by battery challenges that are often the bane of wireless devices. this line of thinking does argue that. perhaps within a store’s footprint. we will summarize by saying that consumers must remain in control of their profile and explicit opt-in consent must be granted to ensure the user is protected. security. For those consumer advocates reading this. an end user’s speed 22 | Prologue . networks are powerful. why couldn’t a network with capabilities of reaching even more users across even more devices? Here are just a few examples of the intelligence capabilities that could be exposed: > Presence. The Internet has been characterized as a best-effort medium. Now. This is a symbiotic relationship in the ecosystem. And. > Profiling of an end user. However. Quite the contrary. either exact or approximate. > Quality of Service (QoS). Location can include geofencing capabilities that detect customers entering a particular radius. However. networks are equipped to handle the load equivalent of thousands of devices. they are pervasive. including what websites he regularly visits. this isn’t all to suggest that devices are less important. for those willing to offer some data about their habits in exchange for more targeted offers. the user benefits from a richer experience. In other words. for example. and permissionbased data collection as cornerstones of any business model throughout this book. or availability status. which can optimize an end user’s viewing experience by adapting network performance. the benefits are tangible. Device intelligence allows the network to provide more capabilities. Second. entertainment or communications options. if one device as a platform can attract thousands of developers. of an end user across any device or network type > Location of an end user. Finally. what channels and programs he watches. and not reserved exclusively for smartphones with GPS capabilities but available to the greater mass of feature phones in consumers’ pockets today.

Developers benefit from robust network capabilities that can fuel their next application. QoS automatically tunes a network to provide better performance—or more horsepower— when a consumer needs it (for example. The fewer hops. for example. which can manifest itself in the ability. which can translate itself in a variety of ways. > Storage. and end users benefit from more powerful and richer applications. this worldview is about exposing capabilities in the network in a managed and controlled way to a broad developer community. the better the end-user experience. the faster the transmission. The more distributed the network-based storage of content becomes. We call it “application enablement” in that the network enables smart functionality that delivers greater value to multiple stakeholders across the ecosystem. when temporarily downloading or streaming a video clip). where video transmission can be boosted and content automatically formatted and optimized for consumption through a smaller mobile form factor. Perhaps most obviously. Imagine this capability on a mobile network. which has been popularized by network-based approaches led by Amazon and others. And service providers have strategic storage assets located at the edge of the network. the network can create a secure tunnel—or Virtual Private Network (VPN) type of connection for those familiar with enterprise communications—that can be maintained across a single session as a user switches devices. to charge micropayments directly and securely to an end user’s service provider bill In short. network providers benefit from new revenue streams that can fund the next wave of investment. > Security.THe SHIFT can fluctuate depending on network performance. You may find yourself criticizing this approach in one of two ways: > You may wonder why a developer community would need access to these capabilities. given the proliferation of web-based application programming interfaces (APIs) widely available through sites like 23 Prologue | . The service provider in this equation offers the capability to distribute this storage closer to the end user. in many cases even extending into the consumer’s home. Think of it this way: It takes far fewer hops across the network to download a video located closer to the end user. > Billing.

THe SHIFT 24 | Prologue .

about identifying the tangible assets within the network that could make the next killer app even better. better pie with developers enabled to create new flavors and varieties. Likewise. device manufacturers. If there is no incentive for service providers to continue to fund next-generation broadband networks. This book provides evidence based on a quantitative study aimed at over 2. it is about enabling collaboration between these two worlds such that both benefit.0 world necessitates an ecosystem of interdependencies. its interdependencies are also at risk. It is. this is about reinserting the service provider back into the value chain. innovation is compromised. This is not about slicing up the same pie and offering a strategy that delivers a larger slice to network providers or developers. or vice versa. When one stakeholder group perseveres without damaging the larger ecosystem. investments will stop. given these assets have remained the bastion of the company’s value. advertisers. and service providers to create better end-user experiences. > You may wonder why a service provider would expose the rich intelligence of its network.THe SHIFT ProgrammableWeb and through devices like the iPhone and Android™ mobile technology platform. this is not about randomly exposing network intelligence capabilities to the Wild. Let’s face it. If history is any indicator. This paradigm shift does not place the burden upon the service provider to identify and build the next killer app. recognizing it is just one very important stakeholder of many in a large and complex ecosystem. however. let’s state this differently: The approach argued in this book is about creating profitable and sustainable broadband models across a broad ecosystem of content and application developers. It’s about baking a bigger. Instead. In other words. others stand to benefit. when one group loses. Wild West of the World Wide Web. If we haven’t made it clear by now. In short. generating revenue for everyone. 25 Prologue | . if developers cannot find profitable business models. it does not suggest service providers must profit at the expense of developers. rather. this endeavor is already in the works by someone in a garage or dorm room. It starts from the fundamental argument that a 2. Likewise. This is also not about imposing onerous controls by service providers on a developer community such that innovation is stifled.000 developers in North and Latin America to prove interest in and willingness to pay for these enhanced network-based capabilities.

but can be more limited in precisely predicting the future. we will carefully dissect the underlying motivators and challenges unique to multiple sub-segments. we will incorporate market examples that lend additional support. Since much of technology adoption is shaped by generational attitudes. Gen Xers. and service providers monetize their investments to fuel future innovation. a developer community benefits from enhanced capabilities.0 influence.0 behavioral groups for consumers and specific vertical industries in the case of businesses.0 world. let’s get started. across thousands of consumers. we will cover consumers and enterprises as critical components of our analysis. And. based on extensive research commissioned by Alcatel-Lucent and conducted by Penn Schoen Berland. Further. you as a reader should expect a deeper understanding of the broader ecosystem implications as business models adapt to a 2. It does so with a scientific approach. Since value to be extracted across an ecosystem depends on addressing an unmet need in the market. Now. and advertisers to assess their unique worldview and willingness to pay for smart network capabilities as they look through the 2. including 2. Next. and Millennials to frame how emerging behaviors are creating opportunity for seismic shifts in the value chain. enterprises. we’ll take a look at disruptors within the ecosystem and those with the greatest potential to shift business models: developers and advertisers. since there is significant economic growth in emerging countries. Finally. we will compare and contrast research findings between North and Latin America to distinguish the nuances that separate a mature from developing market.THe SHIFT This book seeks to understand the new business models enabled through a 2. 26 | Prologue . since these end-user markets are not homogeneous blobs. In the end. where the consumer remains in control of his experience.0 lens. we’ll start with a look at Baby Boomers. commercial developers. since research provides directional and strategic insights.

The generaTional impacT ParT 1 .

THe SHIFT 28 .

THe SHIFT baby boomerS The eTernally young BABY BooMerS: THe eTerNAllY YouNg chaPTer 1 | 29 .

Technologies that ease that burden have significant economic and social impact. caring for aging parents took an average of 21 hours per week. outpacing 18–39-year-olds by 53%. and rejecting the notion that they should be “put out to pasture. 30 | CHAPTer 1 . Baby Boomers spend $2.3 trillion annually. social media. which had the total economic value of $350 billion—more than the united States spent on Medicare in 2005. Baby Boomers are redefining retirement and aging— working longer. Marketers shouldn’t fall into the youth obsession trap and forget this demographic.” In 2006. Baby Boomers are interested in and competent regarding technology—particularly products and services that serve their values and lifestyles. apps that leverage increased bandwidth to the home. staying more independent. mobile solutions. increasingly. including video entertainment.THe SHIFT key chaPTer hiGhliGhTs At nearly 80 million strong. and.

BABY BooMerS: THe eTerNAllY YouNg | 31 . running from 1946 to 1964. in an announcement of the network’s November 2006 “New Generation Gap” study. who are now in their power years. but generally starts postWWII.THe SHIFT > when surveyinG news coveraGe abouT The evoluTion and future of technology. highlights Gen Y or the Millennials. it’s all about the youth when it comes to technology buzz. media companies. “The widely accepted practice of primarily targeting younger consumers is just plain wrong. Current estimates of their numbers vary from 76 million to nearly 80 million. Recent research by the network TV Land highlights how mistaken this approach can be for networks.” Apparently.” said Larry Jones. advertisers. and then ends looking forward to the next batch of youth whose name is yet to be determined—maybe Gen Z or the proposed “Generation Alpha. A to Z. it’s easy to think that the discussion begins with Generation X. president of TV Land. There is a clear and immediate need for marketers to rethink this approach when it comes to serving America’s 78 million Baby Boomers.1 The demarcation for the Baby Boom years varies. and companies creating innovative products and services in the technology sector.

and how they remember are profoundly shaped by television. 57% of respondents preferred to call themselves the “TV generation. and witnessing the nation’s most historic moments via television. the shift to color. at least according to the TV Land network.3 Baby Boomers thought of themselves as too young to fall into the category and had negative associations with the label. what they remember. their experience of the world. Kennedy’s assassination 52% • The war in Vietnam 52% • ronald reagan’s term as President of the united States 42% • Nixon’s resignation/Iran hostage crisis / discovery of AIdS 38% (tie)2 For Baby Boomers. What they revealed was that many of the defining generational moments identified by Baby Boomers involved television. The research also revealed that only 17% of qualifying “Baby Boomers” identified with that term.THe SHIFT This study along with TV Land’s “Joy of Tech” study and subsequent research seek to examine preconceived notions about the Baby Boom generation and its approaches to entertainment and technology. Instead.” TV 32 | CHAPTer 1 . ToP 5 culTural evenTs • The birth of cable television 45% • The creation of color television 40% • The death of John lennon 37% • The disco era 33% • The death of elvis 29% ToP 5 hisTorical evenTs • The Space Shuttle Challenger explosion (1986) 57% • John F. They remember getting their first TV.

70% to make purchases.” A recurring theme in TV Land’s research points to Baby Boomers’ being invested in staying current with technology as a badge of honor. outpacing 18–39-year-olds by 53%. yet underserved. Baby Boomers enjoy a true appreciation for the benefits of technological advancement and are still actively involved in its creation and production. up from less than 5% in 2000 • 43% connect wirelessly • 47% use “cloud” • 38% use video-sharing sites • Baby Boomers and eCommerce: 81% use the Internet to research products. and media that ignore them. They are not so old that the pace of technology is as overwhelming or intimidating as it might be for their parents. and not so young that they take it for granted. up from 34% in 2000 • 62% use broadband at home. At the time of the TV Land study. 68% for travel reservations. networks. and 55% for online banking This technological interest and acumen plus their spending make them a rich.3 trillion annually. and advertising. target for products.5 And more than half 33 BABY BooMerS: THe eTerNAllY YouNg | . Baby Boomers know this and indicated a penchant for punishing companies. “TV Land: TV for the TV Generation. up from 40% in 2000. a source of fun. Baby Boomers spent $2. and as a way of staying connected with younger generations. This comprises 36% of the Internet population and 33% of the traffic on any given day. • 72% own a cell phone. key sTaTisTics on baby boomers and communicaTions in 2008 4 • 74% use the Internet.THe SHIFT Land responded with an advertising campaign with the tagline. services.

clarity. they want to watch their content on their own timeline. DVRs. Like their younger counterparts. choice – Over 40% believe a large variety of content options at any given time is “very important. choice. Technologies that improve the quality and vividness of the inhome experience have high value to Baby Boomers as they build “digital nests” with dedicated entertainment spaces equipped with the latest HDTVs and home theater gear.THe SHIFT of respondents in the New Generation Gap Study “claimed to pay little or no attention to ads that they felt targeted young adults while a third said that they were actually less likely to buy those products. and VoD) as the most important factor in their decision to buy entertainment technologies.” Viewing content is seen as a community experience shared with family or with people at work as water cooler talk.7 control – 28% of “Joy of Tech” study respondents indicated timeshifting (TiVo. four key things: control. which research suggests they are willing to pay a premium for if it simplifies their lives and offers them greater options and control. 34 | CHAPTer 1 . clarity – 58% listed “high quality viewing and listening” as very important. and community. not the networks’.”6 So what do Baby Boomers want when it comes to entertainment? According to The Mature Market. community – About one in four believe that “allowing connection with friends and family” (21%) and “helping you keep up with entertainment that friends and family enjoy” (25%) are “very important.” The benefit of variety was multiplied even further in their minds by timeshifting. Great opportunity exists to mine the buying power of Baby Boomers and their desire for high-quality entertainment.

control. with diabetes affecting one in four. by 2030 six out of ten Baby Boomers will be managing multiple chronic illnesses. such as 35 BABY BooMerS: THe eTerNAllY YouNg | . their elder ethos will hinge on self-denial. much as they did with sex and procreation in their youth.10 Today. Their experiences will drive their own expectations when they reach elder age. This generation (especially its later-born members) has experienced a much slower growth in income than the Silent [generation].8 Whereas for previous generations. Boomers have neither saved as much nor been as well insured by their employers — and they expect that public programs like Social Security and Medicare will be cut owing to the size of their generation.9 Though they will likely live longer. retirement was a goal and welcomed stage of life. Baby Boomers are forming an “anti-retirement” ethic and forging a new view of old age where they remain active and engaged in the world they so strongly influenced—in part as a matter of principle and in part because it will be necessary for them to maintain their lifestyles and stay in their homes. In a 2007 article on caring for aging parents. older Boomers are constructing a new social ethic of decline and death. USA Today detailed the move away from nursing homes toward living options that offer more independence.THe SHIFT baby boomers and healThcare Options. much of it will be symbolic only. whereas their youthful ethos stemmed from selfindulgence. To be sure. the first Baby Boomers are reaching retirement age and getting their first taste of aging life in America as they care for their parents. and a sense that they feel younger than their age will also drive desire for home healthcare technologies that allow Baby Boomers to remain more independent as they age and health issues increasingly affect their quality of life. and today faces an insurmountable lag in average household net worth. …[A]ging Boomers will glorify the virtues of self-denial but personally maintain (to the extent their incomes allow) their creature comfort indulgence.

are using today for themselves and elderly relatives. including: • Tracking care and quality of care • Providing transportation • Coordinating treatment plans between medical providers • Administering medications • Supervising parents too ill to be left unattended • Providing daily care such as cleaning. cooking. it would relieve a lot of anxiety. Baby Boomers are going to demand ways for technology to ease these burdens for their own children and allow themselves greater quality of life with more years of independence. these activities and others added up to an average of 21 hours per week for caregivers with aging parents.11 With their interest in technology and increasing integration of technology into their homes.THe SHIFT assisted living facilities and at-home care either at the aging parent’s home or the home of the adult child. Beyond the costs of care. One of the favorite advances was telemedicine—including inhome consultations and monitoring. put in extended time doing what would normally be done for them in nursing home care. adult child caregivers. As one participant put it. In a study commissioned by AARP and Microsoft on Baby Boomers and technology. many of them Baby Boomers. and visitation In 2006. in some cases. focus group respondents talked about some of the key healthcare applications they want and.”12 36 | CHAPTer 1 . If we could do it at home. [My grandmother] gets up at six in the morning to get ready for an appointment at two in the afternoon. “A visit to the doctor is an entire day. which had the total economic value of $350 billion—more than the United States spent on Medicare in 2005.

Enabling more self-directed care that is distributed away from the hospital will be even more important since the size of the retiring Baby Boom generation will create a vacuum of workers behind it. in-home monitoring would include medical devices that relay information to their doctor and select relatives and. and rural communities • widespread deployment and secure access to personal health records • Building connected health systems that expand the scope of care securely outside hospital walls • enablement of all these technologies over the mobile network Technology is central to reducing doctor visits. In their view.000 registered nurses. Another respondent said. that would have saved me about $100.000 in my mother’s apartment. and making it easier for care to be delivered in the comfort of home. facilitating information flow to reduce the burden of record-keeping on caregivers.S. such as: • Increased broadband to homes to provide bandwidth for transmitting medical data and imaging—in urban. Many of these medical applications depend on larger advances in our national communications infrastructure. While some expressed concerns over the invasiveness of in-home monitoring applications. shortage of about 220. suburban. security and control over their data and who sees it could mitigate those fears when balanced against the greater benefits. by 2020 that gap will be over one 37 BABY BooMerS: THe eTerNAllY YouNg | .THe SHIFT In-home monitoring was viewed as an integral part of “aging in place” versus having to move in with relatives or to a nursing home.” Communications and location-based services could also help track patients with Alzheimer’s and other conditions associated with dementia. beyond that. According to the American Hospital Association. there was a U. monitoring of the home itself. “If there had been a monitor to tell me she hadn’t turned off the faucet. “In 2005.

Most of those are users of Facebook. connecting with friends (old and new). 38 | CHAPTer 1 . and business networking. this is not necessarily the case. delivering consumer-side healthcare applications and extending advanced communications services to the home are of vital social and financial interest. but with regard to the Baby Boom generation. Grandma’s on facebook? Of course. Their use of social networking sites certainly lags behind that of their younger cohorts. 20% of younger Baby Boomers (aged 45–54) reported using social media. Baby Boomers won’t be connecting with family just to share their fasting blood sugar readings in the morning. As we’ll see in our discussion of Millennials.”13 The impact of new approaches to care and the role of application enablement will be discussed in the chapter on healthcare. they see social media as a way to stay in touch with colleagues and find new opportunities. The nursing shortage is caused by both increased demand and by the aging of the nursing workforce—nurses are Boomers too. which is the dominant networking site for older adults. As they look to work longer in an uncertain economic climate. up tenfold year over year.14 In January 2010. In a 2009 Pew survey. They also have a strong desire to find out what’s going on in their families’ lives and stay connected to children and grandchildren. One idea is that younger people would flee once they realize Grandma is reading their status updates and checking out their party pics. adults over the age of 55 were Facebook’s fastest growing age group. but Baby Boomers are a growing demographic. The desire for connection has driven a growing number of Baby Boomers to join online social networks.THe SHIFT million.15 The AARP/Microsoft study found three drivers for Baby Boomers’ use of social media: connecting with family. As more Baby Boomers joined their children’s social networks. compared to 9% of older Baby Boomers (aged 55–63). pundits speculated about whether this actually would signal the end of networks like Facebook and Twitter.

One of the defining characteristics for the younger generation is its members’ willingness to share information with less concern about blocking off their personal lives from their professional lives and their families. Owning an iPhone is still relatively expensive—both the device cost and data plan—and the number of people under the age of 18 who can afford one or whose parents trust them with such a device is understandably low. It’s a device for those with their own jobs and their own discretionary income. The February 2010 stats are slightly different. understanding that privacy limitations on a social media site don’t mean that their data isn’t out there. Another idea is that the coming of the Baby Boomers signals the coming of commercialization and corporate influence and reduced utility as a “private playground” for the young. as Facebook has done with MySpace.16 baby boomers are mobile! “94% of iPhone owners are over the age of 18 and an astounding 74% of them are over the age of 25!” EXCERPT FROM A 27-YEAR-OLD’S BLOG ON iPHONE APPLICATION DEVELOPMENT The blogger quoted above was postulating that iPhone game developers don’t know their audience and. In the same period from January 2009 to January 2010. This shouldn’t be shocking. somewhere. So far. that has yet to happen.17 BABY BooMerS: THe eTerNAllY YouNg | 39 . which brings us to a truth that goes even further: One-third of iPhone owners are over 45 and 14% over 55. they are already learning to adjust what they put online. he discovered the “astounding” truth via stats from AdMob. after doing research to prove or disprove his theory. Though a few early adopters may jump ship as a social network that was once on the electronic frontier gets swallowed up by digital suburbs. Facebook use is still growing in the younger demographics. forever. up more than 50% for ages 18–24 and up 88% for ages 13–17. Plus. most stick around—at least until a major new network arrives to supplant the old one.THe SHIFT They are much more accustomed to parental involvement. Now. 87% of iPhone owners are over 18 and 75% over age 25.

healthcare applications that meet two seemingly contradictory needs—the desire for independent living married with continual clinical observation—all within an increasingly compressed budget. Baby Boomers are living longer and will remain a ripe market for advanced applications that fit in with their goals. Otherwise. This generation is the most timestarved of all as they care for elderly parents on one end and Millennials on the other. > Further. so too do application developers and service providers. these are the architects of the TQM era) and providers would do well to listen. They are America’s idealists—the eternally young. values. However obvious the buying power of Baby Boomers should be. 40 | CHAPTer 1 . Providers. more productive lives. and advertisers seeking to earn their fair share of this market should note the following: > Baby Boomers are living longer. > Baby Boomers crave simplicity. Just as advertisers and TV networks need to realize it. they will quickly find themselves out in the cold among a generation that does not place brand loyalty above performance. will find favor among this lucrative market.THe SHIFT PuTTinG iT all ToGeTher Wielding over $2 trillion in purchasing power. Providers and developers should avoid overcomplicating value propositions. Baby Boomers will not be ignored. developers. and lifestyles for some time to come. it bears repeating. Those that allow the Boomers to reinvent themselves with applications aimed at continuous development will reach the pulse of this generation. with Baby Boomers increasingly caring for elderly parents and growing older themselves. They will not be put out to pasture. with about one in eight of the latter over the age of 22 having “boomeranged” back home during these recessionary times.18 They expect consistent and superlative support (remember.

THe SHIFT generaTion america’S middle children X chaPTer 2 | geNerATIoN X: AMerICA’S MIddle CHIldreN 41 .

gen-X leadership will be marked by its pragmatism and lack of sentimentality regarding institutions and traditions. Those along the chain who don’t add essential value may be squeezed out. accountants. mobile phones. energy. the approximately 60 million generation Xers are now coming into their own.” 42 | CHAPTer 2 . advisers) from business transactions. “As consumers and parents on the demand side and entrepreneurs and Ceos on the supply side.THe SHIFT key chaPTer hiGhliGhTs while a smaller generation. They want things how and when they want them. the gen-X roI is “return on involvement”—value for not only their money. and loyalty. and video conferencing. time. “They are already the greatest entrepreneurial generation in uS history.” with generation X. As workers and as consumers. their high-tech savvy and marketplace resilience have helped America prosper in the era of globalization. brokers. technologies that transformed the business world moved into the mainstream consumer world—email. reaching the age where they are taking the reins of corporate and political power. Xers will seek new ways of removing professional middlemen (lawyers. messaging. without regard for inherited systems and ways of doing things. but also their effort.

it is caught between two large and influential generations—from 76 million to 80 million Baby Boomers and 80 million Millennials. As a result. waiting in the shadows. Time Magazine declared: So far they are an unsung generation. In a 1990 article about the newly adult Generation X. ‘Maybe that’s why nobody notices us. Numbering around 60 million born between 1965 and 1980 (with some experts ending the demarcation as early as 1976). and economic instability that laid off their parents. ‘I envision ourselves as a lurking generation.’19 Generation X was the first generation of children born during the new period of legalized abortion. 19. birth control. of Madison. this “baby bust” generation distanced itself from the idealism of their Baby Boomer parents.THe SHIFT > GeneraTion X is in many ways america’s GeneraTional middle child. increasing divorce rates. wis.’ says rebecca winke. geNerATIoN X: AMerICA’S MIddle CHIldreN | 43 . quietly figuring out our plan. hardly recognized as a social force or even noticed much at all.

the rise in divorce. Nor are we its natural heirs.” self reliance. Early analysis of Generation X consistently used the terms: latchkey kids. Generation X is a generation of ingenuity and creativity. arguing that despite its reputation. it was us. look at it this way: it wasn’t the Baby Boomers nor those young whippersnappers from generation Y who tried to download movie clips over a 9600bps connection. author Patrick Neate wrote a defense of the “slacker generation” as it reached middle age. working “80-hour weeks for the noble goal that one day everyone might have access to affordable pornography. I’m not suggesting we invented the internet. starting with the family. Reality Bites (1994). and the specter of Gen X slacker ambivalence was reinforced in popular culture by movies like Clerks (1994). And it took hours and the connection kept dropping and the clip was pixellated to incoherence. and.THe SHIFT Xers learned early on to distrust institutions. particularly with regard to technology.21 And contrary to the slacker moniker.20 Whereas the coming Millennial generation would grow up in a child-centric society with increased parental participation and supervision. Gen X slaved away. lonely. as they aged. distrustful of authority. In 2007. Gen X gained a reputation of “hardening pragmatism.” 44 | CHAPTer 2 . Baby Boomers were sounding the alarm that this new “slacker generation” would never be fit to lead the nation. we didn’t. with their mothers entering the workplace before child care was widely available. alienated. Generation X is defined by the lack thereof. which is a benefit bestowed on our successors. By the 1990s. which drove the entrepreneurial spirit behind the tech boom days of the 1990s. the brave foot soldiers in the forgotten years before victory was inevitable. cynicism and apathy. As a result. and an r-rated popular culture. and—of course—Slacker (1991). but we kept the faith. morally ambivalent. however. many endured a latchkey childhood. and lost. as the adult world was rocked by the sexual revolution. Neate says. Generation X met the new technology with adaptability and independence. we were.

with three in five saying they someday ‘want to be my own boss. In jobs they prefer free agency over corporate loyalty. When Gen X entered the workforce. Over time. flatter organizations. Generation X drove technological and cultural change that later generations will take as a given.’ They are already the greatest entrepreneurial generation in u. and discussions of worklife balance are now de rigueur in the corporate world. Add to that multimedia and mobility applications. their friends. which then gave rise to the smartphone. bringing about flex time. There’s no widespread telecommuting without VPNs. Gen Xers believe loyalty is for themselves. If the balance tips away from serving their purposes. and that has earned them accusations of disloyalty and selfishness from previous generations.22 Employee development. The work relationship is driven by even exchange and mutual benefit. it has also. and a focus on getting the job done as opposed to putting in the hours. however. expanded individual benefits. as noted by generational observers Neil Howe and William Strauss in a 2007 article in Harvard Business Review. email. and their families—not their companies. changing the game for everyone. and audio conferencing. This new approach influenced—and was enabled by—technology. history. The first instance of “worlds colliding” was not your boss looking up your Facebook 45 geNerATIoN X: AMerICA’S MIddle CHIldreN | . their high-tech savvy and marketplace resilience have helped America prosper in the era of globalization.THe SHIFT Pornography aside. they would work extraordinary hours in the hope that there was extraordinary pay off in the end. they brought their desire to work more independently and without rigid hierarchical structures. Gen Xers have changed the work place. As illustrated by the dotcom boom days. ironically. which they expect to payoff now—not in 50 years when they retire. breached the boundary between work and home. They rejected the “put in your time and get your gold watch” model for employee advancement because they know there’s no guarantee of the gold watch. Gen Xers have a roving eye career-wise. These are technologies that started in the business world and exploded into the consumer market.S. While this phenomenon has given workers incredible freedom and flexibility.

such as agriculture. Of course. New entrants—staffed. brokers. custom products. treated as a dumb pipe and classified as just merely transport. Adapt or retire. according to Howe and Strauss. healthcare. the challenges facing service providers—including new entrants.THe SHIFT page. by Gen Xers from the 1990s tech boom to today—are saying: I have 1. Xers will seek new ways of removing professional middlemen (lawyers. advisers) from business transactions. education.23 As free agent workers and consumers. and public works. Generation X is about options and flexibility. at the very least. Those along the chain who don’t add essential value may be squeezed out. If they don’t add value. this approach has profound effects. and services that deliver personalized benefits and bottom-line value. As consumers and parents on the demand side and entrepreneurs and Ceos on the supply side. is viewed as a middleman. Sectors that are currently sheltered from market forces. This shift is reflected in the current era of technological change. Gen Xers focus on end results.000 different ways to deliver services that go over the top and skip service providers. alternative delivery systems. My goal isn’t to ensure their survivability. The explosion of applications development reflects the explosion in entrepreneurialism as much as an explosion in technology. In some ways. if not run. The network provides distinct advantages in this new 46 | CHAPTer 2 . accountants. it was your boss hearing your little Millennial kids in the background on a conference call. then they should and will be forced out or. and commoditization of their resources—reflect the tension between Baby Boomer and Generation X ways of doing business. As Baby Boomers retire from the ranks of national power and Gen Xers move into their place. which blossomed in the post-war era. The service provider network. may find their long-held positions under attack. we believe service providers don’t have to be relegated to the role of middleman.

But the sacred cow is out of the barn and on its way to the slaughterhouse with regard to needing new business models that make new modes of service delivery profitable and sustainable. While entertainment corporations were able to challenge piracy and illegal file sharing. trading them on the Internet. and video streaming to wireless devices. and a personalized.and place-shifted video with DVRs and Slingbox® hardware. time. portable video. Look at the dilemma facing the entertainment industry—movies. portable music library. aka stealing and fencing intellectual property. What did they want? Only specific songs. and broadcast television. As Neate mentions. > Financial crises of broadcast networks—revenue lost from the writers’ strike. and no answers yet on how to adapt video content delivery in a way that will replace the revenue generated in the old business model. Generation X pioneered these alternative delivery mechanisms at home as consumers and at work as developers and businesspeople. geNerATIoN X: AMerICA’S MIddle CHIldreN | 47 . causing ripple effects in the industry: > The 2008 writers’ guild strike and threats of actors’ and directors’ strikes were driven in large part by arguments over revenue from digital media rights. and the rise of subscription cable have threatened the profitability of an advertising-based TV network model. and bypassing the economic model of the entertainment industry. The corporations also had to start changing business models and delivery mechanisms to give young consumers what they wanted at a price point that met their demands. > The growth of DVRs and video on demand. it was Generation X that started downloading video and music files. trends toward online viewing. legal means of fighting the problem alone were not enough. online video. not the whole album. Now consumers are starting to want the same with other types of entertainment: TV and video on demand. and use technology to track and prosecute enough offenders to deliver a chilling effect on the practice. music. dips in advertising revenue.THe SHIFT ecosystem of players.

So what applications do Gen Xers want? enTerTainmenT As already demonstrated. and travel reservations. commerce Generation X leads the generations in its use of e-commerce. Eighty percent have recently made online purchases. including online shopping. Gen X wants portability for its media and accessibility from anywhere. a person could watch recorded shows while on a trip and then delete them to clear out the DVR. Online video use exploded with the Millennial generation. banking. with 31% downloading videos. but why buy the TV service with networks and shows I don’t want? A new business model will emerge. from any device. compared with 71% for Millennials and 70% for Baby Boomers.THe SHIFT What’s next? Not just why buy the album. The fit will be those that figure out how to create profitable markets with—and this is inevitable—brand new business models that are flexible enough to adapt to whatever the next wave of technology and consumer demand brings.” as one Baby Boomer colleague recently declared concerning the current TV advertising/entertainment model. 48 | CHAPTer 2 . Only the fit will survive. compared with 38% of Millennials. vacation videos could be uploaded to be seen on the set-top box by family members back home.24 Their desire for flexibility will also lend itself to multiscreen video applications that allow them to control and view their home entertainment from anywhere they have a network connection. will not be a sufficient answer for Generation X and certainly not for Millennials and subsequent generations. but Generation X is now catching up. The resolution to these and other questions will be somewhat Darwinian. Or. For example. How do you handle advertising? Do you need advertising? How do subscription fee deals between providers and networks change? How do production studios make enough money to continue creation of new content? Are networks as we know them even necessary to that process? “That’s the way the system is set up to work.

such as opt-in mobile advertising. Shoppers’ experience with these tools and techniques taught them that the time invested in incorporating the tools into the shopping experience. mobile couponing.e. PuTTinG iT all ToGeTher Gen Xers are America’s most misunderstood generation. Gen Xers hold firm to the pop culture ties that bind them (think of the nostalgic shows about the 1970s and 1980s as evidence). This also points to a generation that values entertainment more than their generational counterparts. yielded a significant return (roI) in terms of both dollar and time savings.25. While they may be easy to overlook. developers and service providers should remember the following: > With the birth of the PC and video game console during their formative years. they are literally squeezed in the middle of these behemoths. Remember that household television sets began multiplying and cable channels proliferating during their childhood years. coupons. etc. that are intended to deliver information and value. comparison sites. i. opt-in emails. > Gen Xers also appreciate entertainment. but they are bringing their sense of pragmatism to their shopping behaviors. geNerATIoN X: AMerICA’S MIddle CHIldreN | 49 . more involvement in the process.. As such. 26 Generation X is also now entering its peak spending years.THe SHIFT and 65% have recently used online banking. and mobile wallet services. meal planning tools. particularly in the current recession.27 As the trend toward mobile data increases. Gen Xers are the original technology enthusiasts. With a fraction of the purchasing power of either their Baby Boomer or Millennial counterparts. applications that further support their new ROI in mobile e-commerce. compared with 57% for Millennials and 51% for Baby Boomers. They are now defining ROI as “return on involvement”—the return on their use of online tools. will also be attractive for the Gen X cohort. search.

And. corporate layoffs. And. or they will simply find ways around the traditional models. Minimize the fine print and allow these users to remain in the driver’s seat (with privacy controls. If not for a share of their purchasing power. Their trust must be earned. and AIDS (just to name a few). the Cold War. as America’s original technology enthusiasts. Gen Xers may suffer the proverbial middle child syndrome. 50 | CHAPTer 2 . for example). Gen Xers will push those in this value chain to earn their business. as they have done with online music and video.THe SHIFT > Gen Xers are the “Me” generation. providers would be wise to keep tabs on Gen Xers to avoid being disintermediated by them. the bankruptcy of Social Security. but those who seek to understand the misunderstood stand to grab a piece of their $125 billion purchasing power. These are the children of divorce. that’s enough to give this misunderstood middle child a very loud voice. and it is easily lost with this segment.

THe SHIFT millennialS The digiTal naTiveS chaPTer 3 MIlleNNIAlS: THe dIgITAl NATIVeS | 51 .

They expect a twoway conversation. wireless voice and data. but they demand transparency and authenticity. 52 | CHAPTer 3 . and have learned to handle the information overload. digital music and video.” Interactivity and two-way information exchange trump one-way. Social networking appeals to their sense of community and desire to share and crowdsource information.THe SHIFT key chaPTer hiGhliGhTs Many technologies have near ubiquity with Millennials: texting. broadcaststyle communications and technologies. “They’re used to multi-tasking. Millennials have a strong belief in their importance as individuals and as a collective generation. The assumption that Millennials don’t care about privacy is a false one. They have different views of the boundaries between public and private and a greater willingness to share. what’s more. social media. growing up digital has encouraged this generation to be active and demanding enquirers. Most have no experience of the world without portable. and online video.

of all The names and characTerisTics ascribed to the 80 million plus members of the Millennial generation. It’s another thing entirely to have no recollection of pre-digital music and. we didn’t have tweeting then. “digital native” strikes at the core of what distinguishes this generation from any other that preceded it. So some of the data that we can look at in other areas about MIlleNNIAlS: THe dIgITAl NATIVeS | 53 . for some in the Millennial group. It’s one thing to move from vinyl to 8-track to cassette to digital compact discs to digital online music over the course of a generation. The rapid shift in technology also makes it difficult to make comparisons between this generation’s use of technology versus that of generations past. living in a world without ever doing things the “old way” reflects a dramatically different life experience. we don’t know what gen Xers did when they were 18 in terms of tweeting.THe SHIFT > diGiTal naTives . While Generation X grew up witnessing rapid shifts from old to new technologies. no experience buying music that can’t be loaded onto an iPod. The landscape is so different that actually asking Millennials or any other generation what their media use is like versus what previous generations did is impossible to do because tweeting and a lot of these technologies didn’t exist.

then college. to the annoyance of Boomers and Gen Xers alike. 54 | CHAPTer 3 . Mary Crane. The 1970s featured demon children in The Omen. a former White House chef who now consults with businesses on generational issues. in the workplace. Neil Howe. about a host of other things that we can do longitudinally. You remember. co-author of Millennials Rising: The Next Great Generation. It was all these cuddly baby movies. “Helicopter parenting” or “defense attorney parenting” debuted first in school. and the number of fathers present in the delivery room went from about 20% to 65%. In a 60 Minutes report in 2007. Others are Gen X parents who grew up as latchkey kids and who place more emphasis on work-life balance and being physically present for their children. Parents of Millennials emphasized being their child’s protector and advocate in the outside world. we can’t do when it comes to media use. 28 Another key factor distinguishing the Millennial generation is what critical Baby Boomers and Gen Xers would call “coddling. 29 At the same time. and Damien. the baby-proofing industry took off. and constant contact enabled by technology. about morality. says one indicator of the change in attitudes about parenting for Gen X to the Millennials is the change in movies about parenting. Rosemary’s Baby.” and others might describe as more intensive parental involvement and tailoring of family life around the children— scheduled sports and other extracurricular activities. when the first Millennials were born. increased presence in the classroom. we saw the appearance of baby-on-board bumper stickers all across America. Baby Boom and Parenthood and Three Men and a Baby started coming out. and now. In 1982. right? And suddenly all those child-as-devil movies— no one wanted to watch them.THe SHIFT religious attitudes. talked about the extension of parenting into the workplace. Some of these parents are Baby Boomers heavily affected by the advent of child psychology and a desire to break away from the “children should be seen and not heard” philosophy of parenting.

” 30 The report from Morley Safer. you go to employers. Ironically. this same 60 Minutes report revealed the dangers of dismissing this generation as soft. who predates even the Baby Boomers. we are the most world-wise and adaptable people on the planet so far and we lived our lives being talked down to this way by the genX eeyores and their stoned Boomer parents and we have really had enough. saying. don’t you dare look down your nose at me. Millennials sounded off. “But my little Susie or little Johnny didn’t get the performance evaluation that I think they deserve. My generation is poised to be the best since wwII. self-sufficiency. or a work ethic. chronicled the disdain some in older generations felt for the newly employed Millennials. and without focus.THe SHIFT Career services departments are complaining about the parents who are coming to update their child’s resume. and they’re starting to express concern now with the parents who will phone Hr. so mind your p’s and q’s or we’ll take away your social security. …You spent 4 years and tens of thousands of dollars going to college. And in fact. I’ve been required to learn more in my first 20 years of life than you were required to learn in the first 40 years of your life. experience is the only thing that makes you my superior. Every generation thinks successive generations are sending society down the tubes with 55 MIlleNNIAlS: THe dIgITAl NATIVeS | . In the online comments section accompanying the video and a transcript for the report.com and I became equally adept. and even that can become a liability as your experiences in 1978 have little bearing on the reality of 2009. Some of the intergenerational bickering is simply par for the course. I spend 4 months and maybe $300 on books from Amazon. entitled.

No doubt in 30 years. However. or shopping mall—is now spent in virtual spaces via social media and gaming. The protective “coddling” and the fears behind it could be one reason Millennials use technology the way they do. As researcher Danah Boyd put it in a Pew Research Center panel discussion: what we’ve seen is the rise of social network sites at a time where. 75% of Millennials aged 18–29 use a social networking site. starting really with teenagers. Millennials will be shaking their heads at society and wondering what went wrong while their kids call them dinosaurs. they’re in a social situation where they don’t have the same kinds of freedom and flexibility that we took for granted in older generations. texting. and over 50% of Millennials have been using social networking sites since 2006. And so fear is a huge component of it. This whole thing that we grew up with.31 The time previous generations would have spent unsupervised in physical gathering places—soda shop. and a strong belief in their individual and collective importance. The Pew study also highlighted that: 56 | CHAPTer 3 . … Fear has been unbelievably pervasive in what we’ve seen with teenagers. they weren’t allowed to leave their home. In a Pew Research Center study published in February 2010. and it’s continued on into young adults such that a lot of teenagers that I went and interviewed. adaptability. their comments reveal key attitudes of their generation: focus on globalism and connectedness. has pretty much disappeared.THe SHIFT their laxity and sense of entitlement. and instant messaging also free them up to connect with friends in their heavily scheduled and structured lives. Each new generation thinks what went on 30 years ago has no bearing on their world. sandlot. equivalency between traditional institutions and new modes of learning and living. you know. be on your bike. Millennials have been brought up in a world that sought to protect and preserve self-esteem and to champion how special each child is simply for being. get home by dark kind of attitude.32 Social media.

57 MIlleNNIAlS: THe dIgITAl NATIVeS | . compared with 63% of gen Xers (twelve texts) and 35% of Boomers (five texts) millennials are far more likely to have posted video of themselves online – 20% reported doing so versus just 6% for gen Xers and 2% for Boomers.THe SHIFT millennials are more wireless – 62% of Millennials reported using wireless Internet away from home compared with just 48% of gen Xers and 35% of Baby Boomers. Millennials balance that desire with how their behavior might impact getting into college or getting a job down the road. With Generation X. As we saw with the Pew study. As they bring their personal selves into the workplace. millennials text more and more often – 80% of Millennials texted in the previous 24 hours. sending an average of twenty texts. more than three times as many Millennials as Gen Xers reported posting video of themselves online. aPProach To Personal Privacy Millennials are comfortable sharing more of themselves in an attempt to connect. but no landline. gadgets. the desire for worklife balance drove changes in business technology that eventually made their way to consumer applications. With Millennials. The ways in which they judge what they have to lose and what they have to gain by exposing personal information are driven by similar motivations as for youth in times past. The effect on technology is a reverse shift from the changes that took place as Generation X entered the workforce. Forty-one percent of Millennials have a cell phone. the change is being driven the other way. being yourself—or a more provocative version of yourself—could be your ticket to fame and maybe fortune. they’re bringing their personal technologies. In the world of reality TV and YouTube celebrities. but with a new value placed on being noticed by their peers or maybe even the larger world. and philosophies with them—pushing consumer technologies into the enterprise and changing the game once again. compared with 24% of gen Xers and 13% of Boomers.

Facebook. Perhaps the most radical impact of Millennials on the workplace will be triggered by their inclination to freely share private information and their expectation that others will reciprocate. but the impact of social media on perceptions of how they judge those behaviors may have already been altered. Friendster. A 2009 Monitor Group report looked at Millennials on the job. The secret shared with a friend could only become public with an active breach of trust. … Human resource policies and. And so we’ve shifted in our values and attitudes toward that and toward what makes you an authentic young person. Their natural inclination toward openness is changing the rules for everyone. public through effort. They are also accustomed to high levels of structure and supervision. and other intimate details of their employment relationship.33 The assumption that “youthful indiscretions”—to borrow a phrase from George W. bonuses. and other social networking 58 | CHAPTer 3 . and they have accepted these measures in the interest of safety. information that you shared in a physical gathering place—such as the school yard—would be private by default. This is the system in which they grew up. Bush—must negatively impact how you are perceived is not as readily accepted. many years ago. to a greater extent. information is public by default.34 Millennials place a high value on transparency and authenticity. Many. In the past. tend to assume that people won’t talk about salaries. That assumption won’t be safe as Millennials come into the workforce with a decade or more of exposure on MySpace. In the virtual meeting place. and age. The threats of Columbine and 9/11 introduced new levels of security and surveillance. managerial practices. you wouldn’t have been able to become a presidential candidate or a viable president if you had admitted to drug use. And then we had Bill Clinton who didn’t inhale and then onward and onward with george Bush and Barack obama. private through effort.THe SHIFT How they weigh these elements changes depending on their social class. Their commitment to being themselves entails being more open. future plans.

and research. Crowdsourcing. Mark Bauerlein. Technologically and in business. For example. is going out the window.35 So what do they want with regard to privacy? Again. this means full disclosure and consistency of policies so that users are in control of their information. Not only do they want a more interactive and collaborative learning experience. it is our own intelligence that flattens into artificial intelligence. the traditional classroom format. There’s already evidence that they will openly share salary information. particularly traditional for colleges and universities. Personally.37 Recent conversations in the ivory tower have surrounded whether Millennials’ penchant for multisourcing information is a good thing. and collaboration. this means: Be yourself and be who you say you are. transparency. In the article. exchange. where “as we come to rely on computers to mediate our understanding of the world. Social networking. Information coming down from authoritative voices on high is likely to be questioned and weighed along with their own thoughts. experiences.THe SHIFT sites. They expect their voice will be heard and that it carries weight. “Is Google Making Us Stupid?” Nicolas Carr questions whether we are turning into the movie 2001. and development plans— testing the integrity of the organizational systems. One professor at Emory University. Mashups. everyThinG is a Two-way sTreeT To the Millennial. It means when something changes.36 It means clear choices to opt in and opt out. Comments sections on news sites. a topic we will explore further in our chapter on education. they actively interact with it. they are notified in plain language about what has changed and how they can adapt to maintain a comfortable level of privacy. they are now conditioned to be more responsive to this type of learning by their experiences with the Internet and new communications technologies. They have grown up in a world where they don’t just consume media.”38 59 MIlleNNIAlS: THe dIgITAl NATIVeS | . life is about connection. The Dumbest Generation: How the Digital Age Stupefies Young Americans and Jeopardizes Our Future (Or Don’t Trust Anyone Under 30). coaching conversations. went so far as to write the book. Students no longer respond to being talked at for an hour while they furiously take notes.

the teacher is the broadcaster.THe SHIFT Don Tapscott. My research suggests these critics are wrong. Tapscott argues.39 Whether Tapscott is correct that Millennials’ brains have so quickly evolved to function as he describes. the academy is in need of big changes.” … The broadcast model might have been perfectly adequate for the Baby Boomers. and have learned to handle the information overload. watching 24 hours a week of television (not to mention being broadcast to as children by parents. you’re an empty vassal. … The formula goes like this: “I’m a professor and I have knowledge. get ready. In fact television viewing is dropping and TV has become nothing more than ambient media for youth—akin to Muzak. They expect a two-way conversation. as citizens by politicians. You’re a student. growing up digital has changed the way their minds work in a manner that will help them handle the challenges of the digital age. which means. growing up digital has encouraged this generation to be active and demanding enquirers. In the industrial model of student mass production. here it comes. the fact remains that they have expectations for an interactive experience in nearly all aspects of their lives. 60 | CHAPTer 3 . But young people who have grown up digital are abandoning one-way TV for the higher stimulus of interactive communication they find on the Internet. author of the 1999 book Growing Up Digital and the 2008 follow-up Grown Up Digital. They’re used to multi-tasking. Sitting mutely in front of a TV set—or a professor—doesn’t appeal to or work for this generation. what’s more. and you don’t. who grew up in broadcast mode. as students by teachers. and when they entered the workforce as employees by bosses). responds to sentiments like these in an article posted in the online publication Edge. rather than waiting for a trusted professor to tell them what’s going on. they find out on their own on everything from google to wikipedia.

MIlleNNIAlS: THe dIgITAl NATIVeS | 61 . However. And.”40 PuTTinG iT all ToGeTher As the first generation to grow up with digital media. No. > Millennials are acculturated to multitasking. Interactivity plus the same preferences for seamless time. If providers can grab and keep it longer than their competition. Nor will they spend all of their time isolated in front of a PC. they’re avid consumers. His goal is to point out how universities must change to avoid obsolescence. and for good reason: > Millennials share the idealism of their Baby Boomer parents. Millennials do want a more interactive and mobile entertainment experience. it’s about multiple media simultaneously. They pay with their attention.THe SHIFT Tapscott’s comparison between traditional college lectures and broadcast television is an interesting one.” If they have “a delivery system that meets their behavior. While we would disagree that Millennials are abandoning TV altogether. They pay with more than just their wallets.and place-shifted media that older generations want are going to be differentiators in the near term and table stakes over the long haul. and online games. They are the “We” generation. it’s questionable whether broadcast television itself has even prepared for the shifting attitudes and behaviors of the viewing audience. their needs. Millennials are the most likely to be associated with technology adoption. Cause marketing has a viable role to play among these idealistic activists. young people are “not interested in the old delivery systems. they are using the technology for far more than just checking what their buddies ate for breakfast. their personality. They will not sit idle in front of a television for hours at a time as their Gen X predecessors did in their youth. for this generation. social networks. they stand to inherit their share of $200 billion in Millennial purchasing power (not to mention the portion of Baby Boomer spending Millennials also greatly influence). fully connected and socially conscious. Technology is immersive to them—an extension of themselves. As one Pew researcher put it.

and multitasking machines. Technology can help narrow the achievement gap currently facing the United States when compared with its global peers. > This is the first generation to compete in a global economy. Millennials live in their own world—one they create and shape every day in their 2. or on demand and. they are the most demanding for content and communication on their terms. wide-eyed idealists.0 environment. That is. Eighty million strong helps explain why this market captures the majority of headlines.THe SHIFT > These are the original prosumers. Opportunistic providers and developers will tap into this highly collaborative segment to allow them to not only sound off about brands. if only capturing their attention was as easy. broadband. Now. Expect the implications to the education sector (both K–12 and higher education) to be significant. as such. they are both consumer and producer—of their online environment and of the services they use. They do not know of a world without digital media. 62 | CHAPTer 3 . They are consummate collaborators. but to help create new services.

0 ecoSySTem STaKeholderS ParT 2 .THe SHIFT The 2.

THe SHIFT 64 .

THe SHIFT The developer marKeT 14 million creaTive THe deVeloPer MArKeT: 14 MIllIoN CreATIVe MINdS ANd CouNTINg | chaPTer 4 mindS and counTing 65 .

end users are placing incremental pressures on service providers to innovate quickly. 66 | CHAPTer 4 . web-based protocols are the norm. At the same time.0 ecosystem. developers are multiplying in numbers.THe SHIFT key chaPTer hiGhliGhTs developers are significant players within a 2. Service providers attempting to attract developers must speak their language. A service provider attempting to discover the next killer app on its own will find itself hard-pressed to respond to an increasingly fickle customer base. By exposing network-based capabilities that serve to enrich the development process. opportunistic providers are best served leveraging—rather than attempting to compete against—this growing army of talented creators. Service providers must ensure network-based capabilities are exposed through this type of common framework to attract the greatest number of potential developers. service providers can tap into the creative muscle of this market to create new services efficiently.

All point in one conclusive direction: The application developer market is exploding and its peak is currently nowhere in sight. another individual will be entering the developer ranks in North America. macroeconomic conditions must sustain a viable business case—one based on increased revenues and/or decreased costs—and an infrastructure to enable development. the crowdsourcing groundswell. there are: > Nearly 2.com. Let’s look at each one. of course. but where more and more of our lives are spent—in the virtual world. a develoPer is born every 8 minuTes.000 mashups > An estimated 14 million developers worldwide in various disciplines.000 developers on TopCoder.THe SHIFT > in norTh america. and a movement toward web-based services. comprising over 5. To support this growth. with over 6 million involved in Web 2. That means that. in about the time it takes you to read this chapter. Respectively.500 Application Programming Interfaces (APIs) on ProgrammableWeb. 67 THe deVeloPer MArKeT: 14 MIllIoN CreATIVe MINdS ANd CouNTINg | .41 Not physically. these factors are satisfied by exponential end-user demand.0 development42 > Nearly 275. At the time of this writing.com—a site that epitomizes the definition of “crowdsourcing” (more on this later) We could go on with a list of seemingly endless statistics.

As an example. the annual growth rate for netbooks cratered from 641% the year before the iPad’s introduction to just 5% growth the year after. If correct. we must once again point to a more recent case study that demonstrates just how fast user appetite is growing and changing. These impressive results helped Apple attain over $2 billion in sales for the iPad in the quarter it launched. the iPad.44 Early ripple effects into the competing netbook category had some analysts questioning how far the iPad could go in making device alternatives all but obsolete.46 Beyond the sheer numbers of buyers.8 billion in quarterly revenues just 10 years earlier. applications. the entire company generated $1. Further. Piper Jaffray analyst Gene Munster recently predicted Apple will sell 21 million iPads in 2011.7-inch touchscreen and multiple wireless connectivity options. 28% instead of an e-book reader. it would appear this is only the beginning of the iPad’s meteoric ascent. the willingness to pay is also on the uptick. the way they had to the iPhone. Morgan Stanley found iPad consumers to be former prospects for multiple device categories. the iPad set the new benchmark for the connected appliance category. Apple sold one million iPads at an average purchase price exceeding $500. it took the iPhone more than twice as long to reach the same unit penetration at a lower price point just 2 years ago.45 Beyond impacting netbook growth. In comparison. To put this in perspective. the iPad generated more than 5. and downloads. that would place iPad sales above Mac PCs—just one year after the former’s launch. at the risk of being branded Apple zealots. With a 9. And consumers responded in droves.43 And. and. On April 3.THe SHIFT eXPonenTial end-user demand We have already extolled the virtues of Apple with its release of the iPhone. In its first month of launch. It took almost 2 years to reach the same penetration with the iPod. but with even greater vigor. Barclays Capital recently predicted the iPad’s momentum would place downward pressure on netbook price points from just over $300 to sub-$200. At an average price of $650 (including accessories). Apple debuted its latest “it” device. some of which are still nascent on their own: 17% selected an iPad instead of a portable game player. and 44% instead of a laptop. 2010. reaching one million iPad sales in its first month by itself is 68 | CHAPTer 4 .000 applications and over 12 million downloads in its first month alone.

the proportion of revenues earned through the iPad app store pale in comparison to its hardware sales.THe SHIFT impressive. You could argue that this is a function of a more early adopter profile for the device combined with a larger form factor that provides fertile ground for higher-priced multimedia gaming. willingness to pay for applications increases. thanks to the company’s success with 69 THe deVeloPer MArKeT: 14 MIllIoN CreATIVe MINdS ANd CouNTINg | . With the iPad’s current trajectory. with 80% available at a price for the former compared to 73% for the latter. Or. As evidence. as we have seen with the seismic shifts with just one company in only one decade. According to a study by analytical firm Distimo. not only are iPad customers willing to pay more for the device but also for the downloads when compared with their iPhone counterparts. And. This 70/30 revenue split between Apple and its developers has become so popularized. consumption translates to topline growth for Apple. years have been replaced with months. while the ongoing sales of applications provide future revenue potential and supplement the onetime revenue boost of selling the device alone. As consumers migrate to the iPad. with over $2 billion in quarterly sales from one device alone. This is due. the average price of an iPad application is $4. to the relatively small portion of revenues Apple collects with the sale of each application—30%. current user behavior is no longer a reliable predictor of future consumption. entertainment.47 What does it all mean? Many of us have grown up in a time where reaching critical mass for a particular service or device meant considerable marketing muscle over several years (for example. And. In any case. these assumptions are less relevant every day. and you once again have an ongoing revenue stream that exploits an evolving business relationship with these users. in large part. and business applications. the study suggests that the ratio of paid applications on the iPad exceeds that of the iPhone. And. assumptions based on historic consumption are only as valid as a relatively unchanged communications landscape.82 for the iPhone. Further. Clearly. it could also reflect the changing appetite patterns as consumers drift toward a new connected device category. In today’s world. it will reach the 10% penetration threshold in less than a year. throw in the application downloads. it took the mobile phone 20 years to reach 10% penetration of US households). However.67—22% higher than the average of $3.

48 Clearly. “The Rise of Crowdsourcing. Apple’s model is one of differentiation: favorable developer pricing yields a greater number of applications. This is just one example of how escalating demand has been satiated by tapping into a new army of developers ready and willing to create their next masterpiece for fame or fortune.” a term coined by writer Jeff Howe. it will be some time before the sales collected through the App Store come close to rivaling those derived from hardware. of which Apple takes 30%.43 billion. one where a 30% cut of the revenues is easily justified in an attempt to attract more developers to an already growing app storefront. the lion’s share of revenues earned will be deposited in the developer’s bank account. it’s a pittance in comparison to the $2 billion in quarterly sales the company collected in iPads alone. Analyst Gene Munster estimates that sales since launch have been $1. 12 million monthly downloads at an average price of $4. that few even mention alternative business models. storage. According to an analysis by Piper Jaffray. equates to approximately $50 million back in the company’s coffers for the quarter. multiplied by its 30% cut of the revenue.67 for the iPad.7 billion over the same period of time. Though Apple certainly stands to earn incremental revenue with this approach. And. The crowdsourcinG Groundswell In June of 2006. gross profit generated through the App Store has been $189 million—compared with the company’s overall gross profit of $33. Apple has recently introduced additional revenue-sharing options for advertising and virtual currency. though others certainly exist.THe SHIFT the iPhone. Apple’s App Store has generated less than 1% of the company’s overall profits since it opened its virtual doors in June 2008. Apple’s business model is built upon using its popular App Store to pull through demand of its devices—not a bad business model when one has a hardware horse in the race. While burgeoning end-user demand delivers 70 | CHAPTer 4 . the profits from Apple’s App Store are even slimmer. While this is respectable for one quarter’s work. and. Wired magazine printed an article. Again. which attracts end users with evolving appetites. and delivery. In Apple’s case. when you wring out costs. Excluding costs associated with credit card transactions.

design a prototype of the program or service. including those in IT. at a minimum. the length of time to progress through this entire cycle varies with the complexity of the program or service being introduced. crowdsourcing is a means to address resource constraints. Typically. decide upon the target market or typical user profile. the web development community is booming. companies are facing the challenge of doing more with less. These constraints are manifested by 71 THe deVeloPer MArKeT: 14 MIllIoN CreATIVe MINdS ANd CouNTINg | . 11 release the program or service to the general market.dummies. 10 debug any problems identified through beta testing. debug any problems identified through alpha testing. This dichotomy represents a fascinating inflection point for companies and is reflected through a concept derived from another famous Wired article. expense budgets found in “discretionary” projects. or “friendlies.” to test (also known as beta testing). While enterprise IT budgets are being scrutinized or slashed.com): 1 2 3 4 5 6 7 8 9 develop the idea. Now more than ever. In a brick-and-mortar world. Despite these challenges. Pick one or more programming languages. 12 Continue with the debugging process for any unforeseen issues following rollout. the normal development life cycle has not changed materially. “The Long Tail. But. are at risk of elimination or. distribute test copies for people. which explores how the challenge of scarcity is addressed by a virtual economy. Make a hardware choice for output and identify associated requirements. To develop a new service or application. consider the following as a new take on the traditional twelve-step program (compliments of www. Test the program (also known as alpha testing). the cycle itself reflects the rigor associated with a successful launch.” Wired editor Chris Anderson identified and coined this phenomenon.THe SHIFT increased revenue potential. write the program. reduction. Now. we are challenged by physical constraints.

just as the “Long Tail” allows retailers to offer more in a virtual world. companies can tap into an army of nearly 275. Developers respond with their solution or program. For example. On TopCoder.000 soldiers—and that’s representative of just one development community.com. to create a new application or service. That is to say. This comes down to 72 | CHAPTer 4 . since the company can tap into the large and growing community of talent. The community then vets the responses to help select the winners. Enter crowdsourcing communities like TopCoder. it circumvents the traditional recruiting process and bypasses the need to rely upon its own scarce IT resources to accomplish the task. it is also represented in the enterprise IT resource constraint challenge referenced earlier. and the incremental cost of offering these niches becomes palatable in an economy unencumbered by physical constraints. Not only does the company benefit with a project that is guaranteed to come in on time and within budget.000 developers from a variety of disciplines. Just as scarcity exists in a physical retail environment. it also can be applied to companies seeking to offer more services and applications by tapping into a virtual economy of developer resources. As such. it’s difficult to compete against nearly 275.” Though that example reflects the way a virtual world addresses physical constraints to attract greater niche markets. But. Developers are rewarded with remuneration and respect by their peers (an important psychological by-product we will explore in the next chapter). more popular items tend to win favor over less popular fare. the aggregate sales of these less popular items outnumber the sales of the bigger hits. its underlying premise involves scarcity. The millions of niches that result comprise the now famous “Long Tail. It is guaranteed not to exceed budget parameters given the pay-for-performance business model employed. who are compensated with cash or prizes by the company. No matter how smart or talented a company’s development resources may be. in the virtual world. it also gains the critical and elusive speed-tomarket advantage. The enterprise benefits by establishing a clearly defined price and timeline for its development project. Companies post a challenge to the community—for example. physical stores have limited shelf space in which to stock items.THe SHIFT practical economic limitations. Further.

In the spirit of full disclosure. one that addresses the growing organizational challenges faced by enterprises every day—and another macroeconomic factor that helps explain a booming developer marketplace. Developers can accelerate the process by leveraging the work of others—in other words. For those in the audience who lack technical depth as we do. let’s turn to Wikipedia for a brief explanation. Rather than focus on the intricate complexity of a communications protocol. by reusing functionality from existing software services to create entirely new applications. This represented a breakthrough in crashing the critical path of program development.THe SHIFT numbers—both dollars and cents and brilliant minds. TopCoder’s premise is simply brilliant: Instead of competing against this virtual brain trust. what has changed in the past few years to catapult us into this brave new world of development? Look to the enterprise for a trend that started well before this development movement inspired millions: the birth of service-oriented architecture (SOA). A company would be hard-pressed to compete with the millions of developers in the marketplace. neither author professes to be an expert in programming architectures or languages. interoperability between different systems and programming languages allows integration between applications on different platforms through a communications protocol. In order to meet the requirements for SOA. But. it’s a bit like putting the cart before the horse. the principles of SOA are straightforward and logical. Originated in the enterprise. the developer is instead allowed to concentrate on the true application functionality itself. Despite this. In other words. the principles of reuse and interoperability are satisfied. The web-based services movemenT We’ve covered how supply and demand factors shape an accelerating developer marketplace. without an infrastructure to enable and support said development. Both supplier (developer) and consumer (company) benefit and voilà—we have another innovative business model at work. leverage it. THe deVeloPer MArKeT: 14 MIllIoN CreATIVe MINdS ANd CouNTINg | 73 . Since SOA is based on a modular architecture. SOA was a means to accelerate and simplify the intricacies of development by modularizing the approach.

Web services are based on APIs. Consider it a common language that 74 | CHAPTer 4 . An API is an interface that allows a program to interact with other software or networks. web services are the fuel that propels the developer market forward.THe SHIFT Profound as that may be. how does it relate to the web developer market that is the focus of this chapter? Think of SOA as the grandfather of web services. And.

Again.0 world. These network capabilities can now be identified via web-based APIs familiar to a development community that is programming with these tools today. Service providers can exploit the crowdsourcing groundswell by exposing their own APIs. converges with service provider networks to create an intersection of new opportunities for multiple stakeholders in the ecosystem. service providers can tap into the expertise of millions of fluent developers to create new services for their end users. > Rather than compete against the millions of developers globally. speed-to-market is attained and the developer is able to optimize his scarcest resource—time. service providers should leverage this virtual brain trust to accelerate development efforts and tap into unserved or underserved markets. QoS. By exposing these network capabilities using a web services approach. Here’s where a burgeoning developer market. Developers benefit by tapping into new network-based capabilities to enhance or create new applications. The result: a trifecta of macroeconomic forces that positions all stakeholders for greater economic potential by extracting greater benefit across the value chain. we referenced multiple network capabilities that an operator could exploit. and leverage the work of others to create something new. > Developers value their community.THe SHIFT enables one program to speak to another. profiling. propelled by a web services approach and supported by escalating user demand. In the first chapter. End users benefit by consuming new services that are more robust in functionality. Service providers benefit by leveraging instead of competing against the time and talent represented by a broad development community. Reuse and recognition are accepted norms in development circles. consisting of mashups from previously existing applications. location. web developers are able to use APIs to create brand new services. such as presence. and the like. In this way. > Providers attempting to attract developers should look to common webbased architectures to appeal to larger numbers THe deVeloPer MArKeT: 14 MIllIoN CreATIVe MINdS ANd CouNTINg | 75 . PuTTinG iT all ToGeTher > Developers represent a growing community of critical stakeholders in a 2.

your own observation of the changing environment around you. what passions motivate them intrinsically? Let’s explore in our next chapter. they do little to address the developer mindset contained therein.THe SHIFT By now. has likely convinced you that a new marketplace is being created through the growing development community. While macroeconomic factors point to how such a market is created and sustained. If supply and demand activate this community. if not the evidence from this chapter. 76 | CHAPTer 4 .

THe SHIFT Through The chaPTer 5 looKing glaSS of The commercial developer THrougH THe looKINg glASS oF THe CoMMerCIAl deVeloPer | 77 .

and network-based APIs represent an opportunity for a new business model overwhelmingly favored by this audience.0 value chain. in some cases. Further. There is also a place for a variety of business models aimed at the developer community.THe SHIFT key chaPTer hiGhliGhTs The universal currency uniting all developers is time. This finding suggests service providers have a right to play in a new 2. developers are attracted to and willing to pay for network-based capabilities that enrich development. • Commerce can go beyond billing of services to incorporate marketability of a developer’s application. despite the proliferation of free APIs available today. Service providers that understand this underlying motivator and create value propositions to accelerate the development cycle will find a receptive market. such as properly priced per-dip models. while the 70/30 revenue-sharing model has been popularized. developers prefer alternatives. bundles comprising web. • Community should be acknowledged and respected. 78 | CHAPTer 5 . Service providers should employ the “3 Comms” model in targeting developers: • Communication of network-based capabilities should be in a construct familiar to developers.

go-to-market support. The correlation to increased sales is not far behind. but in the more complicated intrinsic motivating factors. In 2009. The premise was straightforward: These developers used APIs in their efforts. profile. we live in a world where thousands of 79 THrougH THe looKINg glASS oF THe CoMMerCIAl deVeloPer | .THe SHIFT > Those of us in markeTinG aPPreciaTe The imPorTance of understanding what motivates a buyer. Alcatel-Lucent explored developer attitudes toward leveraging the network as a platform in creating new applications by incorporating intelligent capabilities such as presence. Would they care to procure new API functionality from a network provider? Could the latter actually offer something uniquely valuable that was not already available through other alternatives? Remember. At the end of the day. you must understand your target—not just in the simply identifiable external demographic categories. once one understands the motivations and passions of the target market in the context of the product or solution offering. As many marketers will admit. relevant messaging. and value propositions soon follow. In the case of the developer. this involves a deeper understanding of that specific worldview. and location of end users. we are bombarded with thousands of marketing impressions each day with advertisers eager to target these costly messages to those of us most likely to buy. This goes beyond ability and willingness to pay. As consumers.

the mantra of the “3 Comms”—Communication. it must first convince him to afford it his effort. What were the current pain and entry points for a new contender to gain a foothold? The commercial develoPer’s currency: Time Not all developers are created equal. one common currency unites them: time. or aspires to create a new web mashup using APIs on sites such as ProgrammableWeb. In a series of developer focus groups commissioned by Alcatel-Lucent 80 | CHAPTer 5 . For others. and Commerce—helps accelerate a developer’s creation. Note that money is not the common denominator. we had to delve into the developer mindset. A developer could build his creation without paying one tangible cent due to the widespread availability of free APIs. before a provider can convince a developer to open his wallet. If APIs are ingredients and the end product is a new service or application. then motivators surround crashing the development cycle. time is a consistent factor of investment. the more the developer is empowered to create. The more a provider can simplify the relatively mundane parts of the process. the opposite prevails. Therefore. For some. As we consider the development process covered in the last chapter. But. for fame or for fortune. And. whether the pursuit is as a hobby or career ambition. development is a hobby with fame being more important than fortune.com. did the service provider have a right to play in this space by exposing its own network-based capabilities to a fluent developer community? Before we could answer the question. If time is the common currency. While the motivating factors governing each of these developer groups vary significantly. think of these individuals as IT professionals developing new applications for their company. Community. for others. Their end product varies depending upon their orientation.THe SHIFT APIs are readily available—whether one wants to develop for a device. communicaTion Development is as much art as it is science. such as the iPhone or Droid. their output is the direct result of the enterprise for which they work.

The more standard and universal the language (and even the construct. that are based on common web principles of design. is evidenced on popular sites. not only will it alienate developers who are not accustomed to the style. service providers should incorporate simple. problems are solved. The bottom line is this: To avoid repelling developers. one only need peruse the latest articles on web development to find a clear movement toward lightweight architectures. In our focus groups. the easier it is for the developer to focus on his message—in this case. it is no different. the importance of community unites developers in a microcosm only they truly value and understand. many can attest to the challenges in exchanging the most basic of information when we don’t start from the same semiotic system. or architecture. sometimes to the detriment of the message we are attempting to communicate. There are countless programming languages one may use in development. Communication can be a deterrent or an attraction. his application. symbols. In this case. as they are called. In fact. communiTy If architecture choices influence how a developer communicates with code to build a new application. but it makes the development process itself more difficult. For those of us who have traveled to foreign countries. This is not a book about programming architectures and languages. As humans. which is to share meaning and express ourselves. If a provider offers a more complex language alternative. not on translation.THe SHIFT in 2009. and peers 81 THrougH THe looKINg glASS oF THe CoMMerCIAl deVeloPer | . where our language is not the native tongue. such as REpresentational State Transfer (REST). a common theme emerged: simplify communication. such as Facebook and Amazon. The community is what separates a developer from a layperson. we are accustomed to communicating with one another using mutually understood combinations of sounds. For developers. The last chapter explored how web-oriented architectures allow developers to reuse the work of others to create new mashups. Language is a construct we use to reach the end goal. gestures. The language style and construct are to be used as a means to an end—a tool for designing a developer’s creation. his exchange of ideas with others is found in his community. It is where ideas are exchanged. in which it is represented). the proliferation of RESTful APIs. and expression. familiar architectures that allow developers to focus on their creation. However. the language barrier becomes the focus.

Consider the following case in point. is the lack of the proverbial single throat to choke when things go awry. There’s no monetary reward in play—just the opportunity to win the respect of one’s peers. where the community is the provider. Developers come from a very different paradigm—one where access to aggregated expertise and intelligence found across a broad community is more important than instantaneous “support” provided by a novice representative. Explore crowdsourcing sites such as TopCoder. it can often be seen as an equally important factor within applications themselves—a case where a developer’s creation is many times a reflection of his values. and work of others. Foursquare is a popular mobile application with over 3 million members that allows its users to tag locations visited. Just as community has a profound influence in the development process. it isn’t without drawbacks.com (which was covered in our last chapter) and you will quickly discover the importance of respect as a reward that sometimes rivals remuneration itself. Developers want something to augment. Here is where the developer brings his creation to market. whether the developer is interested in fame or fortune. either for sale 82 | CHAPTer 5 . Tag a location more often than anyone else in the community and be named Mayor of the venue. Community is therefore a powerful psychological influencer. A challenge in today’s Open Source world. not replace. While community is an indisputable heavyweight in accelerating a developer’s speed-to-market by leveraging the ideas. But. talent. the forums they produce and consume every day. A provider that unlocks this code could find itself in a competitively superior position.THe SHIFT are recognized. forums provide answers. commerce Commerce is where reward is exchanged. Note that service providers come from a world of 24x7x365 support—one where answering the phone in seconds means the difference between keeping or losing a customer or between paying or avoiding a fine imposed by a regulatory agency. developers in our focus groups certainly expressed a preference for additional support options that could stop the buck where accountability resides. To whom does the developer turn when he encounters a problem? Sure. You will also see community as an influencer in applications developed today.

Today. the results show that a rising tide definitely lifts all boats.THe SHIFT or for buzz. This is not surprising. according to the Cellular Telephone Industry Association (CTIA). The number of text messages increased by nearly 50% nationwide in 2009 to reach an astounding 4. they want to build their creation once and have it available on as many storefronts as possible. and thereby have the same applications available. that are far more valuable to the marketplace when exposed and standardized across multiple service provider networks. (Hence the reason providers avoiding webbased architectures may soon find themselves out in the cold. such as location. where is their differentiation against one another to acquire and retain customers? It’s a provocative question and one that deserves further exploration. look no further than the marketplace around us where advertising a product has its roots in the concepts of reach and frequency. And. a mobile customer could not send an SMS message to his friend if the two were not customers of the same service provider. We have been trained since youth that eyeballs matter. How many people can I reach and how frequently can I affordably bombard them with my message before the Law of Diminishing Returns is hit? Developers expressed this same desire in marketing their application. recognize that a service provider’s desire for differentiation and a developer’s interest in standardization may coexist. attract the same developers. First. Consider Short Messaging Service (SMS) as a fairly recent example of this fact. we know that SMS is fully interoperable between carriers. responses tended to converge around reach as a critical variable. developers want exposure to as many eyeballs as possible to have the greatest chance for success. for the first time in the United States.9 billion text messages sent and received each day. there was a time in the not-so-distant past when SMS was a closed standard. 83 THrougH THe looKINg glASS oF THe CoMMerCIAl deVeloPer | . That is. To be clear. Clearly. And. When we asked developers in our focus groups for the more important considerations that influence their choice of providers. There are certain capabilities. the amount of data traversing mobile networks exceeds the amount of data in cellular voice calls. Though hard to imagine. this trend is the function of multiple factors. That is. which seeks differentiating applications to retain customers. If all service providers expose the same capabilities.) This is a potential point of conflict for a service provider.

In other words. The latter is used more in quantitative research where you force a respondent to make complex trade-offs through a series of questions to statistically determine which variables have the most profound influence on choice. Indeed. Service providers can inoculate the reach concern by offering the developer greater discoverability alternatives—a point we will discuss later in the chapter. The two are not one and the same. They are simply often incapable of expressing the true underlying motivators to an initial response. differentiation of services will prevail.. one could point to the interoperability of SMS as the first enabler of the wireless data movement.g. Research respondents don’t intend to be manipulative and certainly aren’t clueless. If a service provider is interested in holding a particular application exclusive to its customers. More sophisticated research techniques involve laddering and revealed preference. you fall victim to a classic mistake in research—taking at face value what respondents say they want. The former is used more in exploratory research by asking a respondent a series of “Why” questions following his initial response (e. While standardization certainly benefits both developers and providers in some cases. Both methodologies are derived from the premise that respondents have latent desires that are often masked through a filtered answer. developers actually crave discoverability.THe SHIFT including the proliferation of smartphones and other connected devices. While reach was often mentioned as a top-of-mind response. However. in others. some of the biggest debacles in marketing’s history (New Coke comes to mind as the poster child) are based upon simply asking respondents what they want and delivering the same. if a service provider craves differentiation. one has a challenge in having his app discovered. what does a developer demand in exchange? If you leap to the answer of reach. “Why is that important to you?”). “Why do you feel that way?”. Alcatel-Lucent used both techniques in our developer study (laddering in our focus groups and revealed preference in a follow-up quantitative phase). it must neutralize the reach objection offered by a developer. In a sea of hundreds of thousands of iPhone apps. despite the millions of eyeballs reached by an iPhone today. 84 | CHAPTer 5 .

Because this design forces the developer to make choices. Alcatel-Lucent was interested in identifying the same for the commercial developer. The results may surprise you. to the number of potential customers reached. to the price points provided. Each bundle was composed of differing APIs. support options. to the type of support offered. Developers make decisions based on a complex set of variables—from the types of APIs made available. it is more reflective and emulative of the real-world market conditions developers face each day. In our discrete choice exercise. Each of these is important in the developer mindset—but there are those that are more important than others. or the pinnacle of our full potential. This factor alone had the most profound influence on a 85 THrougH THe looKINg glASS oF THe CoMMerCIAl deVeloPer | . we were able to identify the most important variables on a developer’s choice through a complex statistical analysis. Our goal was to identify the underlying Hierarchy of Needs that addresses how developers actually make decisions when asked to trade off these variables. developers were asked to select a preferred bundle from multiple sets of two options. After having each developer complete this exercise several times. To do this. The model has been used in psychology and marketing to explain how complex decisions are made and what fundamentally drives us as human beings and consumers. The mosT basic need: The value of The aPi iTself In a world of thousands of free APIs.200 of whom are in the United States). and reach.300 commercial developers in North America (over 1. Taking a page from Maslow’s Hierarchy of Needs. The premise was based on the hypothesis that humans require more fundamental needs to be fulfilled first—such as the physiological needs of hunger and thirst—before we can ultimately evolve to the epitome of self-actualization. price points. it may come as a shock that the most important variable influencing a developer’s choice was the functionality of the API itself. we used an experimentally based research design conducted among 1.THe SHIFT The commercial develoPer’s hierarchy of needs In 1943 famed psychologist Abraham Maslow proposed his Hierarchy of Needs to explain the underlying motivations governing human beings.

THe SHIFT 86 | CHAPTer 5 .

To attract so many developers among the least popular APIs tested suggests a void in the marketplace for even more powerful functionality. Specifically. more than one in three still expressed a strong likelihood of usage among the least popular network-based APIs of the bunch. In comparison. Developers love cool. And they enjoy the art of the possible. service providers must change their perception of support to this audience. The bottom line is: A developer wants the buck to stop when the community cannot solve his problem. In fact. We discovered in the focus groups that developers are often first and foremost creators. bundlinG: more is more Interestingly. there is an opportunity for more robust functionality that ups the cool ante. the results of the quantitative study proved that the art of creation was more important than any other factor. developers were almost as likely to select a bundle with far less costly support alternatives. Alcatel-Lucent tested the impact of various levels of support from basic (such as email and moderated forums) to advanced (such as 24x7 support for developers and their customers) on a developer’s willingness to pay. Interestingly. when specifically asked. develoPmenT suPPorT: one ThroaT To choke Reinforcing the importance of community mentioned earlier. the more robust 24x7 support options did not garner sufficient incremental developer participation in terms of willingness to pay to offset their costs. While developers are interested in one throat to choke.and access-agnostic APIs popped to the top of a developer’s expressed interest and latent desires. providers must next offer support options to attract developers. the next most important factor governing developer’s choice is closely related to the first. While the most important factor is the value of 87 THrougH THe looKINg glASS oF THe CoMMerCIAl deVeloPer | .THe SHIFT developer’s selection. but that accountability need not reside in a costly 24x7 support mechanism nor should it replace the community itself. And. such as email and moderated forums. Despite the thousands of APIs available today. In fact. nearly 50% of developers who are involved in negotiating API costs or determining the price point of a retail application would be very likely to use the more popular network-based APIs from a list of 17 tested. device.

and commerce framework. The result is a more powerful creation developed more quickly. through a common communication. As mentioned earlier. such as those from presence and location. How could this be? Are developers not in the same market that you and I live in every day—one where bundling equals discounting. The more you bundle as a consumer. The trick to the bundle has always been around price discounts. In a market where consumers must be compensated for putting all of their eggs in one service provider’s basket. with two deserving special attention. In the developer’s situation. markeTinG suPPorT: Give me more The next rung on the hierarchy ladder is even greater support options. whether considering value meals at McDonald’s or the latest service provider packages? This would assume the developer’s primary currency is money. video. Developers 88 | CHAPTer 5 . community. Service providers have a trusted billing relationship with their end users. this notion of bundling makes sense. developers are likely to pay up to twice as much for APIs that are bundled together than when offered discretely. with cybercrime on the rise. And. Consumers win by earning a discount for their loyalty and volume purchases. However. the more of a discount you receive from the service provider. Calling feature bundles have been around for decades.THe SHIFT the API functionality. the third most important determinant attribute is the way in which these APIs are bundled together. That is. they also must change their perception of bundling. the virtual world can be a scary place. and service providers have evolved in recent years to triple-play or quad-play bundles that incorporate voice. It has been a fairly straightforward model that has grown in popularity in recent years. just as service providers need to change their notion of what support means to a developer. it is not dollars and cents that developers universally shell out. Bundles afford the developer more time by packaging together complementary APIs. and mobile plans. Service providers are often rewarded with lower churn—that is multi-play consumers tend to have lower attrition than their single-play counterparts. The first involves a basic necessity in retailing one’s product—billing a customer—an asset a service provider clearly can offer. broadband. but time. bundling is a case where more means more. Bundling is no stranger to the service provider.

Specifically. In a world of hundreds of thousands of applications on one device alone. It is also among one of the primary needs that must be fulfilled to satiate a developer’s appetite. This speaks to the point that money is not the primary mode of currency. The second point is more interesting. This unique intersection of aggregated customer profiling and a secure billing environment places the service provider in a competitive position for attracting developers in need of advanced support. What is perhaps more surprising is the type of business model that prevails for maximizing revenue potential among service providers. and its attractiveness only increases as emerging micropayments via mobile devices become more popular. we asked him to estimate two variables: 89 THrougH THe looKINg glASS oF THe CoMMerCIAl deVeloPer | . We tested two different business models in the bundling exercise: a revenuesharing model (one where the developer shares a percentage of revenue collected with the provider. Once the developer selected his preferred bundle in each set. Price: noT The be-all and end-all It may surprise you to see that price finally comes up as a critical factor in influencing a developer’s participation and willingness to pay. third-party network-based intelligence that identifies the ideal price point for an application based upon aggregated user preferences for those most likely to purchase it scored particularly well among developers as an important variable influencing willingness to pay. Further. similar to options offered by some web providers). consumers overwhelmingly trust their service provider over their application developer when considering whether to share such information. as we have explained throughout this chapter. similar to the one popularized by Apple) and a per-dip model (one where the developer pays the provider each time an API call is made. developers are swimming in a complex competitive environment. as we will discover later in the consumer chapters. And.THe SHIFT want to tap into this billing asset that a service provider can offer. developers are hungry for information and tools that help them optimally price their applications. as evidenced by our research.

” In 2009. or called. we were able to calculate the estimated revenue derived for a provider under either a revenue-sharing or per-dip model. our study found that. As such. While the site has introduced several advertising alternatives to generate revenues. That is. This preference exists particularly as the estimated retail price for the application increases. with a per-dip versus revenue-sharing model.THe SHIFT 1) the estimated retail price for an application relying upon the APIs in the bundle and 2) how many times per day across an estimated number of users the API would be triggered. The results were provocative. Look no further than the Web for evidence of very popular and creative applications without a sound business model to accompany their “success. at the time.49 YouTube clearly had the audience. We can hear the collective gasp of those reading this. without disenfranchising developer participation. based on developers’ estimates of usage and retail pricing potential. service providers actually stand to earn more revenue through a per-dip model based on the developer’s own estimates of retail price opportunity versus usage of the APIs. What they often lack is a means of making them profitable. Our study revealed that there are very few commercial developers who also have a solid financial orientation. Rather. working independently or in small groups with other developers and without specialized business resources. businesspeople second. the more money the developer assumes he can earn for an application that uses the API functionality. it was wildly unprofitable and. developers are creators first. In so doing. which made it several times less profitable than many traditional newspapers suffering from lost audience. Many developers have very creative ideas. We are not suggesting that developers cannot be businesspeople.65 billion from Google. Credit Suisse put YouTube on a path to lose $470 million. the more 90 | CHAPTer 5 . service providers stand to make more money. Tools that support their profitability and allow them to focus on development are attractive and needed. so let’s explain further. Not only did developers not have an aversion to a per-dip model (meaning that the number of developers selecting a per-dip bundle was comparable to that of the revenue-sharing alternatives). They are highly specialized in their technologies. unsustainable when its founders collected $1. it just didn’t have a profitable way of monetizing the traffic.

as we discussed earlier. You could interpret this data to suggest many developers struggle with the business side of their equation. force the developer to evaluate reach among the multiple other trade-offs made in a more complex decision. The final facTor: reach As we mentioned earlier. Revenue-sharing does well among those developers who “low-ball” the estimated retail price of an application using the functionality. After all. Therefore. And. will appeal to the needs of multiple developer groups. without deterring developer participation. and it is the variable with the least influence in persuading participation or willingness to pay. What developers really want is discoverability. The bottom line in this analysis is: Providers offering a combination of business models. as the market moves toward higher-priced applications. But. the data suggests that a service provider could earn up to twice as much revenue. What we are seeing is evidence for the high marketability of business-oriented tools and information that support a developer in gaining fortune. Finally. Reach is one means to this end. bundling web-based and network-based APIs offers an attractive business model in itself. A service provider offering network-based intelligence that allows a developer to understand his market helps maximize revenue potential for both players in the ecosystem and creates more value for end users. developers have a passion for creation—not necessarily economics. if reach comes with a storefront where a developer’s application is one of several hundred thousand. the need for these advanced business intelligence tools actually surpasses the importance of pricing for the APIs itself. with a per-dip versus revenue-sharing model. at the risk of sounding like a broken record. But. And. How could developer participation stay constant in spite of what amounts to a twofold price increase? Is the market really that inelastic? We would argue not. 91 THrougH THe looKINg glASS oF THe CoMMerCIAl deVeloPer | . not just fame. ask a developer outright for his most important factors for participation and reach will certainly pop to the top of the expressed list. including revenue-sharing and per-dip varieties. per-dip not only affords the service provider greater revenue potential but also tends to attract more developers than a revenue-sharing option. further reinforcing the point.THe SHIFT likely he is to prefer a per-dip business model.


the creation may be lost in the clutter. Service providers seeking to gain exclusivity for an application have a bartering chip on the table: don’t focus on reach but discoverability. In fact, based on the quantitative study by Alcatel-Lucent, nearly 50% of commercial developers who are actively involved in negotiation or pricing decisions indicated they would be much more likely to offer at least 6 months of exclusivity for their application in exchange for guaranteed search discoverability on the provider’s storefront. Further, more than one in three actually prefer to develop for a more regionalized, localized provider than a large, national alternative. Perhaps these developers have a niche that can be better fulfilled by a local operator. Perhaps they associate a smaller operator with a more nimble, developer-friendly orientation. Whatever the reason, the preference for this significant minority is clear. Don’t assume that a provider with fewer eyeballs can’t compete against a perceived heavyweight. And, don’t conflate reach with discoverability. The two are not one and the same. Service providers offering options to enhance a developer’s chance of having a creation discovered will find a viable value proposition. It’s not about the total number of eyeballs on the storefront per se, but how many of those users are in a developer’s sweet spot and how likely they are to be exposed to the application. Providers that shift the debate to these more meaningful concerns will be speaking to a developer’s latent motivations, not simply expressed interests.

PuTTinG iT all ToGeTher Quantitative evidence from over 1,300 commercial developer respondents suggests the following: > Service providers have a right to play in this space. Not only do developers value the APIs that could be offered by a network provider, the functionality of these APIs is the most important factor in influencing a developer’s participation and willingness to pay. > Support is critical, but not all support is created equal. Developers value their community and the collective wisdom it produces. However, they




also want accountability when these forums fall short of fixing the problem. Offering low-cost support options, such as email and moderated forums, attracts almost as many developers as much more costly alternatives, such as 24x7 live help desks. Further, sweetening the pot with advanced support options, such as billing on behalf of the developer and offering networkbased intelligence tools to help identify the optimal price point for an application, is a void that can be uniquely fulfilled by the service provider. > Time is their currency. Don’t assume price is the be-all and end-all. Before service providers can convince a developer to open his wallet, they must first convince him to give his time. As such, time-savers, such as unique bundling approaches, generate significant revenue potential for the service provider and address a developer’s most precious and scarce resource. > Creation is their passion; business is a necessity. Don’t assume revenuesharing is the only viable business model alternative. Providers offering a combination of business models will appeal to multiple segments in this nuanced market. > Don’t conflate reach with discoverability. Smaller providers that satisfy a niche and/or offer advanced discoverability options can easily attract more than one in three developers to their proposition. Further, the value of the API functionality itself can neutralize any perceived reach advantage offered by a provider.

The evidence supports a viable commercial developer market for intelligent network-based capabilities. These developers are attracted to robust APIs that simplify the development cycle. Would the same hold true for those building within the enterprise? Turn the page to discover the interests and motivators for the IT developer.

THrougH THe looKINg glASS oF THe CoMMerCIAl deVeloPer








Through The

chaPTer 6

looKing glaSS of The enTerpriSe
iT developer
THrougH THe looKINg glASS oF THe eNTerPrISe IT deVeloPer |



key chaPTer hiGhliGhTs
Service providers attempting to address the enterprise IT developer must first earn his trust. This is an intangible toll paid by this audience and is incremental to the time currency covered in the last chapter. enterprise developers are accustomed to leveraging the network for performance beyond simple connectivity. As such, this audience demonstrates a higher willingness to pay than their commercial developer counterparts. enterprise developers also expect more from their service provider. while commercial developers are more tolerant of leveraging their community for support, the enterprise developer expects the buck to stop quickly. As such, there is an expectation and willingness to pay for more costly support options. For this audience, bundling is a case where more equals way more. These developers are willing to pay up to three times more for a bundle of APIs when compared with the revenue potential of each API offered discretely.





> a 2009 mcafee sTudy amonG iT decision makers across

seven sectors and fourteen countries revealed a sobering landscape. Over half of these executives represented organizations victimized by large-scale denial-ofservice attacks. On average, respondents estimated that 24 hours of downtime resulting from said assaults cost their organizations over $6 million. More startling, 40% predicted such an incident would disrupt their sector within the next year. As such, it comes as no surprise that over 90% of executives indicated security was either “vital” or “very important”.50 What is surprising is that security reigned supreme as the top factor when making IT investment and policy decisions—surpassing cost-based drivers despite the recession. In similar news, Amplitude Research’s seventh annual “What Keeps Network Administrators Up at Night” study found a dramatic increase in those worried about security breaches. Among the 353 network administrators, nearly 40% were kept up at night due to this concern compared with only 27% the prior year. Even more revealing, the study found a statistically significant relationship between how concerned network administrators are about employee use of social media and how worried they are about a security breach to their network.51 The concern is merited. Consumer Reports recently found that 10% of people using social networking sites have been the victims of a security breach. More than

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the stakes are much higher. the notion was not exactly a new idea. cloud computing is “Internet-based computing. IT professionals face two ends of the extreme: smart networks powering dumb terminals or smart devices that rely upon dumb networks merely for connectivity. look no further than cloud computing as the recent headline grabbing attention from this audience. the above examples highlight the clear point of distinction: For the enterprise developer. software and 98 | CHAPTer 6 . and the reality lies somewhere in the middle of the continuum for most enterprises. there is an incremental toll that must be collected from the IT developer—his trust. Of course. According to Wikipedia. leaving themselves vulnerable to cybercriminals trolling for their next victim. While time may be the universal currency uniting all developers as discussed in our last chapter. that it will offer a lower total cost of ownership (TCO) when compared with IT decision maker do-it-yourself alternatives.52 While several similarities exist between the commercial and enterprise IT developer. A simple Google search on the topic renders more than 40 million matches. this is a gross simplification of the options available. These individuals have a responsibility for protecting company assets and information as a fundamental requirement before pursuing development interests that may benefit their employer. When Alcatel-Lucent spoke with several IT decision makers through focus groups in 2009 about offering them greater access to more network features. that any information transmitted or stored outside the protected confines of the enterprise wall will be securely maintained. whereby shared resources. In fact.THe SHIFT half of these social networkers post sensitive private information online. He must trust that the vendor of choice will respond quickly and effectively to any problems. most of all. and. This factor places these developers in a different league worthy of examination. The point is that enterprises have relied on some factor of performance or intelligence from their networks that moves beyond basic connectivity for some time. no sTranGers To The cloud The notion of relying upon networks for intelligence and performance is as old as computing itself.

And. Among our focus group participants. like cloud computing. it is now more relevant than ever. at the risk of offending some. security was the leading concern among those who have not yet adopted cloud computing. mobility. application enablement requires enterprises to trust the network in protecting their content. and reliability as the primary motivators for their foray into the cloud. a provider could entice over half of these non-adopters to increase their organization’s likelihood of using cloud computing. Instead. Like cloud computing. the very topic of security raised the temperature of the room. Alcatel-Lucent discovered that conventional wisdom is not always reality. respondents were eager to offload a headache that literally keeps them up at night.) 99 THrougH THe looKINg glASS oF THe eNTerPrISe IT deVeloPer | . Not surprisingly. Given the similarities to the two topics.THe SHIFT information are provided to computers and other devices on-demand…. our data reveals this is the least persuasive argument for adoption. (They used much more colorful language to express this point but. On one hand. Yet. Specifically. In a survey among 550 large enterprise IT developers in the United States. And the parallels to the topic of this book cannot be ignored. respondents were more likely to cite functionality. while one may assume that the prevalent reason for adopting cloud computing is one of economics (the smarter the cloud. the mere notion of handing over responsibility for such a sensitive issue was downright heresy. the less must be spent on intelligent devices).” The underlying concept dates all the way back to 1961. While security is the primary objection. application enablement leverages resources within the network to enhance device performance. we will let you use your imagination. nearly half of whom are adopters of cloud computing. if it were sufficiently addressed. For example. we also found data to support the overwhelming importance these enterprises place on protecting their company’s data and assets. we wanted to delve further into cloud computing as a proxy for how enterprises may react to application enablement. the buck stops with them in the event of a breach. Their proverbial tails are on the line to protect the assets of their companies. Like cloud computing. application enablement allows users to access information from any device. As many of our respondents put it. not some faceless provider’s. On the other.

the significance of security was further validated when respondents were asked to consider network-based APIs. Support can be a differentiating magnet for new entrants in this field. or worse. they are far less tolerant when the crowd fails them. Since more is at stake—including the performance of their employer—a system glitch. Most recently. security was the dominant motivator. Make no mistake—as seen in the headlines and corroborated by our research and other sources. Visa. When asked for the most important characteristic a provider offering such capabilities could deliver. and Mastercard. While these enterprise developers share a commonality with their commercial brethren in using forums for support. The assaulters used denial of service attacks to attempt to crash the sites of their victims. Unlike the commercial developers. 50% of respondents cited security in transmitting or storing their data. these respondents were much more likely to expect and willing to pay for highmaintenance support options. it must raise the bar on support to keep them. no Pushovers on suPPorT If a provider must first address the security concern to gain access to this discriminating audience. meltdown. Not surprisingly. respondents who were more likely to select a network service provider as their preferred partner were also more likely to 100 | CHAPTer 6 . However. particularly service providers.THe SHIFT Among our survey participants. PayPal. including 24x7 live help desks. the security concern is legitimate and pervasive. However. Microsoft and Google commanded the mindshare preference among these developers—outpacing popular service providers like AT&T and Verizon by an order of magnitude. fanning the flames of security worries for enterprises far and wide and bringing cyberterrorism to the forefront of mainstream news. As in the McAfee study. all of which denounced their support for the now infamous website WikiLeaks. opportunistic providers who address this issue stand to inherit significant market share by cashing in on the trust paid by these discerning enterprises. is unacceptable. dwarfing the percentage of respondents who pointed to price as the key concern (less than 20%). We asked respondents to indicate which thirdparty provider they would be most likely to select for APIs. the latest crop of cyberterrorists set its sights on Amazon.


attribute their preference to an expected level of customer care not expressed by those selecting Microsoft or Google. Support is an expectation but it can also be a competitive advantage for a new entrant with a perceived strength in this area.

no comPromisers on TasTe Our commercial developer study revealed an audience eager to use and pay for network-based APIs. If commercial developers are the enthusiasts, enterprise developers are the extremists. That is, respondents were much more likely to either love or loathe network-based APIs depending on their functionality— and their willingness to pay fluctuated commensurately. Among the more popular (and higher valued) APIs were: > A profiling API that allows tracking of application and service consumption of enterprise users to allow for better forecasting of IT departmental needs > A storage API that centralizes information and content over a highly secure and reliable network accessible from any device > A presence API that provides for real-time messaging capabilities across any device in use by the user (this API was also a top performer among commercial developers) For these APIs and others, enterprise developers expressed a much stronger willingness to pay than their commercial counterparts. However, on the opposite extreme, certain APIs were so unappealing, their mere inclusion in an offering had a negative impact on respondents’ willingness to pay. Among them were: > A profiling API that renders content to an employee or customer based on their preferences across any device (for technophiles in the audience, think of these as network-based cookies) > A quality of service API that temporarily allocates more bandwidth to an employee, group or application for a period of 60 minutes

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> A presence API that intelligently finds an end user based on the device that person is using at the time Interestingly, the APIs for which respondents had a higher willingness to pay tend to center around efficiency gains at the management level more targeted toward groups of employees. An API that tracks network and application consumption across departments facilitates better management of the IT budget. One that stores content in a secure and highly reliable cloud allows for better management of information across multiple users. An API that provides for universal messaging across any device enables better management of communication to large teams. On the other hand, those with a lower (actually negative) willingness to pay were more likely to revolve around individuals. Persistent network-based preferences that follow a user across any device were not in favor. Intelligent call forwarding APIs to find a particular party also did not perform well. Critics in the audience may immediately point to the API that allows users—or groups of users—to temporarily boost bandwidth as the conspicuous exception to this rule. Why would this API rate so negatively if, in general, APIs benefiting groups tended to perform well? Most would assume this would be a particularly hot item in an enterprise, where productivity can be measured in dollars and cents. However, enterprise developers clearly panned this API as low-value. Based on our focus group research aimed at this same audience, we believe the point lies in expectation. These network-savvy developers expect the network will perform at the service level agreements (SLAs) dictated in their contracts with service providers. We found a strong negative reaction to any API that may suggest the network SLA was not delivered on a 24x7 basis and, as such, would require any “boosting” in performance. This argument assumes these developers have appropriately forecasted their bandwidth needs in the first place—perhaps a reason why the profiling API that monitors IT consumption patterns across the organization performed as well as it did. These developers want smarter tools that allow for better forecasting, which, in turn, precludes a need (and appetite) for APIs that address the unexpected. Since security has been such a strong theme in this chapter, we would be remiss in omitting how it fared in the mix. When asked which APIs these developers would be most likely to use, one focused on creating and maintaining a secure,




authenticated connection across any device was at the top of over twenty APIs tested—with more than one in three enterprise developers indicating they would be very likely to use this API if it were made available. The security influence remains powerful even when represented as an API competing against several robust functionality alternatives. The stakes are clearly much higher for this audience and, as such, items like security, support, and performance are non-negotiable. And, as the data reveals, this reality leads to more polarizing opinions on API appeal. Enterprise developers are loath to compromise. However, for APIs they value, they exhibit a much higher willingness to pay when compared with their commercial developer counterparts. In fact, more than six in ten would reallocate their IT budget to obtain the APIs tested in the study if they were made available. But, service providers should take caution. APIs that do not deliver perceived value are met with a commensurate, polarizing disdain that places this audience in a league of its own.

Time is noT on Their side While the differences for this segment have been discussed, we cannot ignore the universal bond that unites the enterprise developer to his commercial ilk—the currency of time. Several findings indicate that this tenet is stronger than ever for this audience: > When asked for the top benefits third-party APIs currently provide their organization, over 50% of respondents cited a reduced strain on internal resources (the top benefit reported). > When asked for the top challenges associated with third-party APIs, more than one-third of respondents pointed to time-consuming process requirements (the top challenge indicated). > And, perhaps most convincingly, enterprise developers are willing to pay up to three times more for APIs configured in a bundle versus those sold separately. As in the case for the commercial developer, for the enterprise developer bundling is a case where more equals more—or in the latter’s case, way more.
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Hence, while trust is an incremental toll paid by enterprise developers, it does not negate time as a currency. Options that allow these developers to design and build faster with fewer human resources are attractive. And, since network-based APIs allow for development across multiple software and device platforms, these alternatives offer tangible value to a time-starved enterprise market.

PuTTinG iT all ToGeTher The enterprise developer shares some perspectives with commercial counterparts. Like commercial developers, those in the enterprise expect communications interfaces to enhance, not impede, development efforts (recall that SOA, the predecessor to common web-based architectures today, originated in the enterprise). Like commercial developers, those in the enterprise consult with one another in forums for sharing and support. And, most importantly, enterprise and commercial developers are both time-deprived and value this critical resource above all. However, the differences between these groups cannot be denied and have implications for providers attempting to tap into the enterprise: > Security is both the challenge and opportunity when addressing these developers. As many in our focus groups put it, their reputations are on the line in the event of a security breach. And, as the headlines corroborate, one security mishap translates to millions of dollars in cost or lost equity to a corporation. In short, security is not an option. It is the table stake by which a provider earns the right to play in this space. > Enterprise developers are far more discriminating. They love some APIs and loathe others. While this audience is hit or miss, the hits are big. Therefore, they may be more selective than their commercial brethren, but they also reward providers with a much higher willingness to pay. > Enterprise developers demand support. Unlike commercial developers who are more content to rely on the power of the crowd to address questions, these individuals expect the buck to stop—and stop quickly. If security is the ticket for admission to this market, advanced support options, such as 24x7 live help desks, keep a provider’s seat at the table with this audience.





> Time is a scarcity. This fact can be viewed opportunistically (such as through bundling of APIs that increases willingness to pay up to threefold). It can also be an impediment to a provider that just doesn’t get it. Remember, the key challenge in using third-party APIs for these enterprise developers today is time-consuming process requirements. If a provider burdens the developer with complex processes, any value perceived in bundling will be quickly eroded. As the past two chapters have illustrated, the developer market offers a largely untapped reservoir of incremental revenues for providers of network-based APIs. In turn, these developers benefit with improved functionality and faster speed-to-market. The question now becomes one of determining whether commensurate value exists for other stakeholders in the ecosystem. Let’s explore how advertisers stand to gain in this evolving value chain.

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THe SHIFT adverTiSing The eyeS have iT chaPTer 7 AdVerTISINg: THe eYeS HAVe IT | 107 .

with nearly 2. mobile commerce. impressions are king. Identifying the “right” eyes means gathering more data on users and balancing the need for data with the consumer’s right to privacy. success meant getting a brand in front of as many eyes as possible. and a belief that “traditional media are no longer the most effective way to build brand equity. users check their mobile devices 100 times a day on average (200 if they’re a teenager). that means getting the brand in front of the right eyes and facilitating interactivity. “Seventy-one percent of agency respondents said they expect online ad spending to experience significant share growth in the next 2 to 3 years. ad inventory from behavioral ads is worth twice that of non-targeted inventory. More people in the world have access to mobile phones than to running water.” According to the National Advertising Initiative. In the past.5 times the click-throughs.” when asked why. respondents cited behavioral targeting. As the new mass medium. Now. e-commerce. improved measurement and accountability. speed of campaign execution. and more to turn impressions into awareness and then into sales as directly and measurably as possible. mobile technology is the next frontier for advertising.THe SHIFT key chaPTer hiGhliGhTs with advertising. 108 | CHAPTer 7 .

The explosion of the Internet goes hand in hand with one of the key ways companies seek to monetize it—advertising. Consumers have gone 109 AdVerTISINg: THe eYeS HAVe IT | . a company that swallowed up failed free Internet access copycats and. online adverTisinG reached $20 billion in revenue in the United States.0 ecosystem—from newer companies like Google to TV networks. a free ISP hoping to sustain itself on display ads. In 2000. Freei. Freei was ultimately acquired by NetZero. More recently. by 2001. advertising is a key piece of revenue for companies within the 2. New media for advertising are also trying to establish themselves as part of the marketing and advertising mix. We say “seek” to monetize because the road to online advertising pots of gold is littered with failures. video sites Hulu and YouTube launched with ad-based models and have yet to prove their profitability. It took newspapers 127 years to accomplish the same thing. Hulu—a tight partnership of broadcaster networks—has tinkered with its ad model and added paid content. 37 and 25 years respectively. and YouTube got an influx of cash from its Google acquisition on the promise that there is money to be made somewhere. began charging for its services. and broadcast TV and cable TV. went from IPO to bankruptcy in 6 months.THe SHIFT > in jusT 13 years. Nevertheless.

” The chanGinG adverTisinG miX The same survey of marketers found them planning significant shifts in spending away from traditional one-way consumer engagement.” The movement toward online marketing has meant advertisers and agencies forming new partnerships “to access deeper data and analytic capabilities and expand into high-growth platforms such as mobile and social networking. respondents cited behavioral targeting. let’s start by looking at how advertising works in traditional media. shifted time and attention to social media. “71 percent of agency respondents said they expect online ad spending to experience significant share growth in the next two to three years. In developing new technologies and business models that include advertising as a revenue source. Wherever consumer eyes go.”53 When asked why. therefore. and a belief that “traditional media are no longer the most effective way to build brand equity. Plus. the new technologies provide advertisers and agencies capabilities they don’t have with traditional print and electronic media. plus the PC. and spread their TV watching across more varied broadcast and cable network options. but there are numerous applications that fall into those broad categories.THe SHIFT more mobile. improved measurement and accountability. interactivity and personalization are integral for customer engagement and. advertising will follow. attracting advertisers. But then comes the question of what this looks like and how it will work. According to a Marketing & Media Ecosystem 2010 survey conducted on behalf of leading industry groups. The marketing survey points to spending increasing for “digital” and “mobile” advertising. What kind of advertising can the 2.0 world offer? How do advertisers reach their targets? To understand the new media advertising world. speed of campaign execution. Print media (newspapers and magazines) 110 | CHAPTer 7 .

The industry has developed systems for consolidating ad inventory. and provide billing information. which now allow agencies to book the campaigns. track success metrics. producing ads. Integration of new and old ad media campaigns—buying. and billing—is still a fragmented business. Agencies act as brokers. a fill-in-the-blank consumer packaged goods company or auto manufacturer has purchased ad inventory in The New York Times. leveraging volume ad buys to decrease pricing and streamline ad placement for advertisers. Agencies also coordinate the advertising campaigns—developing concepts. the Monday night lineup of CBS. Traditional and online advertising each 111 AdVerTISINg: THe eYeS HAVe IT | . marketers get it: They need to catch up to where the consumer is SOURCE: MARKETING & MEDIA ECOSYSTEM 2010 SURVEY AND BOOZ & COMPANY ANALYSIS In the end. and managing the advertiser’s budget. and local morning drive-time talk radio stations. radio) sell advertising inventory—or ad space—to advertisers either directly or through advertising agencies. GQ Magazine.THe SHIFT and traditional electronic media (television networks. tracking. local TV stations.

and discounts.THe SHIFT have their own tools. They are launching Facebook pages and Twitter feeds to keep interested consumers up to date on product news. As social media grow as a resource for pre-purchase decision making. Marketers are moving from a broadcast-based marketing relationship with consumers to a relationship that more explicitly considers how traditional paid media drives “earned media”—where consumers directly engage with 112 | CHAPTer 7 . Already some brands are using social media in an attempt to engage more deeply and personally with their customers and establish an online relationship with them. brands will expand their presence. this is where social media become places for brands to intersect with consumers as they exchange these personal recommendations in a way never available to them before. Social networking is great for uniting the personal intelligence of your family. systems used for traditional media have expanded to include new media advertising. trusting personal recommendations predates the upswing in web-based technology. goes much beyond display advertising. however. In our chapter on social networking. but as people become more accustomed to connecting to their personal network online. Advertising for mobile devices is still establishing its rules of engagement. Of course. we will discuss the growing consumer trend of using social media as a filter and navigator for the vast amount of information online—including to research products and services before buying. and business models. social media & markeTinG One new area of focus for online advertisers is social networking sites. marketing themselves as helping advertisers make sense of new media marketing platforms. For now. offerings. and agencies and software companies specializing in new media and/or mobile advertising spring up every day. friends. and colleagues with the reach of technology to gather personal testimonials and horror stories. processes.54 Use of social media in marketing. Facebook alone now consumes 7% of time spent online around the world with social networking as a whole totaling 12% of an Internet user’s time.

display advertising alone hasn’t been a huge money maker for social networking sites. Low click-through rates caused social media revenue to grow just 4% in 2009.56 But. and the brand has no direct control over its appearance. Organic impressions occur when a friend “fans” a brand page or when a friend incorporates a brand mention or a link to brand content in their status or wall. if one hundred of Bob’s Facebook friends like a certain new video release. Thus far. Finally. For instance. An organic impression shows up in a user’s news feed. there are organic brand impressions. more than one in three advertisers indicated they would be very likely to use such functionality if it were available. which includes the name of a network friend who has already become a fan of the brand. because these mentions now occur in the public space. However. earned media opens up new market potential. despite exponential user growth. AdVerTISINg: THe eYeS HAVe IT | 113 . In fact. Alcatel-Lucent canvassed over 1.200 advertisers in the United States to solicit their interest in a variety of next-generation advertising services. companies do have more awareness than ever of how consumers are responding to their brand—either positively or negatively. The next type of advertising is a homepage ad with social context. coupons and downloading options would be sent automatically to Bob. At the top of the list? A capability that works with social media sites to deliver advertisements to a user based on interests and behaviors of their friends and family.THe SHIFT the marketing messages and pass them along to their friends. to $1. This is a mix of paid and earned media. the largest market for social media ads.55 On Facebook.2 billion in the United States. The web-based aspect of this engagement has also made it much more measurable. Advertisers like the option of being able to capitalize on the billions of conversations and expressed preferences on social networking sites every day. paid media includes the paid display ads that appear on a user’s home page along with the option to become a fan. In 2010. which has inspired new ideas and research on the relationship between “paid” and “earned” media and their respective impact on brand perceptions.

each time the online ads significantly boosted awareness. demographic targeting helped them create a successful customer engagement campaign to promote three movies in 2009. it had better go mobile. ad inventory from behavioral ads is worth twice that of non-targeted inventory. District 9 was aimed at young men. Awareness of the films was measured after the TV ads had run and then again after the web ads had run. to deliver content. ads.5 times the click-throughs. And 114 | CHAPTer 7 . The studio ran a series of ads on Facebook promoting three of its films they had just featured in a traditional television campaign. and purchase intent when advertising was combined with organic impressions. brand awareness.59 mobile adverTisinG The next area of focus for the next generation of advertisers is mobile. The use of social media lends itself naturally to behavioral targeting.58 As suggested by the Nielsen study. and articles personalized for the user. For Sony Entertainment. What creates value for marketers is the ability to tie social media use with the use of other media and with a wider set of consumer activities. the campaign was effective because it balanced the reach of a paid social media ad with reach of another mass medium to drive increased consumer participation and engagement. Ad recall and brand awareness tripled—from 10% to 30% and from 4% to 13%. with nearly 2. using a consumer’s web searches and websites visited.57 The reach of social media is also combined with the ability to use basic profile information—gender and age—to target ads.THe SHIFT Facebook engaged Nielsen to measure the effectiveness of paid and earned media and found significant increases in ad recall. respectively—and purchase intent quadrupled from 2% to 8%. Julie & Julia at middle-aged women and The Ugly Truth at younger women. If advertising goes where the consumer’s eyes go. particularly those that create more organic impressions. According to the National Advertising Initiative.

the personal nature of the mobile device plus the growing set of activities executed on the phone allow network providers and—by extension—marketers to gather more user information in aggregate to segment and target the mobile audience. predicting that smartphone shipments will exceed those of PCs by 2012. with smartphone sales increasing three times faster than PCs. the mobile advertising market was worth $2. 8 only mobile enables augmented reality (as a consumer-oriented mass media device).61 Morgan Stanley is equally bullish. Worldwide. and the Internet. Mobile is always on. only mobile is always present at the creative impulse. radio.64 In addition to delivering the eyes. Most people don’t share their phone—even with a spouse. Users check their mobile devices 100 times a day on average (200 if they’re teenagers) and sleep with their phones turned on and within arm’s reach. More people on the planet have mobile devices—75% of the world’s population by the end of 2010—than access to running water.THe SHIFT signs are pointing that direction. Mobile is permanently carried.63 Mobile provides a ubiquity that has captured the attention of US consumers. According to Informa Telecoms & Media. TV. only mobile captures the social context of consumption. 1 2 3 4 5 6 7 Mobile is personal. mobile encompasses all the capabilities of print. AdVerTISINg: THe eYeS HAVe IT | 115 . recordings. cinema. according to Gartner.60 This exponential increase seems reasonable given the current trajectory of mobile growth. Mobile has a built-in payment method.3 billion in 2009 and will be worth more than ten times that—$24.1 billion—in 2015. Mobile has the best audience measurement. plus eight unique qualities that make mobile superior to them all. the ubiquity of mobile is much the same.62 Industry guru Tomi Ahonen has declared that as the seventh mass medium.

PC. With mobile. and online behaviors) when made available to their mobile provider. Delivering ads to the consumer via a mobile device can be accomplished in such a plethora of ways. and some details about what they do—their social context. In fact. on TV we can only catch 1% of audience data.THe SHIFT AMF Ventures measured the relative performance of three media for audience identity. the one capability that tied the social media service mentioned earlier in popularity involved tracking a user’s behavior across all devices connected to the network (mobile. 10% of audience data. we can capture 90% of audience data. But on mobile. Advertising will need to be more than an enticement to buy.000 US consumers. where they are. It needs to foster an ongoing customer engagement that builds brand loyalty. And. the mobile provider earned more “trust” votes in this poll than people respondents knew personally. The implications of profiling a user’s behavior on the mobile device are not without challenges. Not what we consume (or when. the messages become part of a relationship. Among the advertisers in the Alcatel-Lucent study. or where) but with whom. As sellers gather more information about those who are buying and deliver targeted messages that address a consumer’s needs and interests. advertisers are enthusiastic about gaining access to such information to better target their efforts. on the internet we can capture far more. over 50% indicated increased comfort of sharing sensitive profile information (such as location. TV. it can be confusing for advertisers and complicated 116 | CHAPTer 7 . and the list goes on).65 Companies like Xtract are pulling this data from service provider networks to help them track behaviors that indicate churn for customers and their social communities as well as helping them monetize the mobile network with targeted third-party advertising. However. consider this: In an Alcatel-Lucent study of 2. Targeting and personalization are key promises of mobile advertising. presence. you know where consumers live. game console. … only on mobile can we capture the social context of our consumption.

and Microsoft has made noise about bidding for Millennial Media. there is an ecosystem of “owners” who have the ability to implement a mobile advertising solution. as of this writing. In the acquisition announcement. and mobile website owners are just a start. one of the last independent mobile ad networks. MTV. There are also mobile ad networks that bring these players together. 117 AdVerTISINg: THe eYeS HAVe IT | . Google also emphasized its continued focus on search.”66 Whether this is true given the passivity of waiting for consumers to search and the increasing desire for interactive customer engagement on the part of brands. and Best Buy in its network. AdMob had 9. AdMob was one of the first companies to provide ads embedded in mobile applications. reaching 80% of the nearly 67 million unique mobile users. while providing a means for agencies and brands to book and measure campaigns by cost per click or page view. radio stations. “search advertising will remain the central way that many businesses connect with consumers on mobile devices. Millennial Media took over the #1 spot for impressions from AdMob. Mobile carriers. Who are the media owners selling advertising inventory? With traditional media. Google/AdMob Millennial Media Millennial Media is. etc. which has built its business without exclusive ad agreements with the philosophy that publishers should use multiple ad networks.000 applications and top advertisers like Diet Coke. newspapers. Google immediately announced mobile advertising plans sprouting from its $750 million acquisition of AdMob. this is a much simpler question—TV networks. Disney. Winning approval from federal regulators in May 2010. These mobile ad networks provide platforms for developing and serving ads in mobile websites or applications. Google acquired AdMob. Prior to the Google acquisition. In March 2009. Each has a different set of required players and processes. There’s been a spate of acquisition in this space as the usual Web 2. Apple acquired Quattro Wireless to launch its iAd offer.0 suspects race to position themselves. device manufacturers. application developers.67 All the major media companies use Millennial. In mobile media. saying.000 mobile websites and 3. Google owns search in the online ad space and would like to extend that dominance to the mobile arena.THe SHIFT for agencies.

Apple’s position as the #2 smartphone handset behind RIM’s BlackBerry will help them avoid trouble. including verbiage in developer’s terms that prevents thirdparty advertising platforms from collecting the kind of user data that enhances ad targeting—such as location information.THe SHIFT Microsoft Mobile Advertising Microsoft offers integrated display advertising across its mobile. Microsoft has established relationships with other key partners like Verizon Wireless.68 The Microsoft ad exchange will allow multiple ad networks to bid on mobile display ad inventories at the time an ad impression is served to a consumer on the mobile web or in applications. This was borne out when.69 The many oPTions on mobile Paid search and display ads dominate the offerings for these ad networks. CNBC. which means users will become more sensitive to the data consumed by their applications. nearly half (47%) of Internet 118 | CHAPTer 7 . including rumored acquisition target Millennial Media. and product scanning. Apple provided details about the offer. an eye-catching but data-hogging multimedia commercial. While this is expected to attract anti-trust attention from US regulators. In 2009. mirroring the online advertising world. and Fox Sports. and gaming platforms and is developing Bing with new capabilities targeted at improving the mobile search experience and leveraging the uniqueness of mobile using context. PC. Microsoft. With the release of Windows Phone 7. worse. This move in effect shuts out competing platforms from Google. Apple iAd Announced in April 2010. and others. Apple iAd was viewed as just another step in Apple’s desire to control the customer’s experience of their brand from end to end within their walled garden. Microsoft is highlighting the phone’s screen real estate available for advertisers and real-time bidding available through the Microsoft Advertising Exchange for Mobile. the breadth of the Apple developer community has the ad industry highly interested in what new ad formats and ideas are forthcoming. A user won’t want to pay for a free app by paying to receive an ad or. On the plus side. Another issue is the end of the unlimited data plan for new AT&T iPhone subscribers. in June. Microsoft partnered with numerous companies to develop the exchange. MSNBC. location.

including past ad creative produced without a watermark. most of the 300. embedding a mobile. Just point your phone at an image in the magazine and be taken to video of a car.70 Today. Fingerprinting takes image recognition a step further. Mobile users search using Wireless Application Protocol (WAP) or mobile web browsers. There is also audio digital watermarking. digital watermarks. Right now. or some other kind of information. Given the most common price for paid apps is 99 cents. and use image recognition technology to link a consumer 119 AdVerTISINg: THe eYeS HAVe IT | . An advertiser can take any image. and 35% went to display advertising.000+ applications from Apple represent more of an ad inventory glut of unknown value. digital experience into the magazine. and fingerprinting to merge mobile with traditional media. it recognizes the inherent uniqueness of an image—like the swirls of a fingerprint—comparing it to a database of pre-registered.71 However. a website. in-app advertising is the revenue stream for many hopeful app developers.THe SHIFT advertising dollars went to paid search. which offer news that draws frequent visits. Display ads appear on mobile websites or are embedded in mobile applications. Visual digital watermarking works much the same way except that the readable image is invisible to the naked eye.72 All editorial and ad content is digitally watermarked. Rather than keying in on an embedded image. so it doesn’t interfere with the aesthetics of an ad or piece of video content. advertisers who choose to promote their products and services via online ad platforms may extend their dollars to include the mobile ad platforms as part of their campaigns. Many of us are familiar with reading barcodes with our camera phones to link to additional information like movie trailers or pricing comparison sites. Spanish car magazine Autofacil has used watermarking to revitalize its print product. very few apps get enough downloads and enough repetitive use to generate real income. Another option for mobile advertising uses content identification technologies like barcode scanning. mapped images. Many of those that do come from companies with established brands on the mobile Web—like ESPN and The Weather Channel. which embeds an undetectable audio cue in a piece of audio. like many others who pinned their hopes on advertising dollars.

coupon codes. standardized approach to mobile advertising. And that problem is likely to only get worse until we see some substantial consolidation among oS developers and application distributors. For example. developers. That fragmentation is exacerbated by the rise in the consumption of applications and the emergence of in-app ads that—while enormously promising—provide just one more subset of platforms for advertisers to address. Most will not be. with take rates for a service incorporating SMS or MMS ads comparable to those containing a PC. a carrier might have one million customers. This endless diversity of devices and standards is one of the main challenges to an industry-wide. and barcode coupons that can be scanned at the point of purchase. just 17% of mobile subscribers in the United States carried a smartphone. The fourth option for mobile advertising is messaging—Short Message Service (SMS) and Multimedia Messaging Service (MMS). links to the mobile web and. respondents expressed a surprising tolerance to such mobile-based advertising. a richer media experience with audio. more interactive experiences with consumers— even with regular TV and print content. In the same AlcatelLucent study of US consumers. and providers should be encouraged that the presence of mobile ads did not create an aversion to a service as one may assume. A basic mobile phone may offer text messaging and nothing more. the emergence of mobile bandwidth caps may hamper this appetite. At the end of 2009. Messaging campaigns require strict opt-in policies to avoid spamming the consumer with unwanted messages. each with a device. but advertisers.73 120 | CHAPTer 7 . video. Clearly.THe SHIFT to additional content. Some of those devices are smartphones. This is one option that is uniquely mobile.or television-based advertising model. which would enable effective execution of ad campaigns consistently across the customer base. These technologies have great impact on brands and media looking to create richer. but allow delivery of ads. with MMS. The available ad inventory for mobile advertising is the mobile customer base in combination with the advertising options available on each device. If the advertising is geared for a smartphone— that is applications for iPhone or Android devices—an advertiser is missing a huge portion of the ad inventory.

providers can incent the customer base to opt in for advertising offers. and measure results. and make that inventory available to advertisers. combininG mobile search and messaGinG One interesting entrant in the mobile search game seeks to leverage the unique elements of mobile through messaging and gain an advantage of online search options exported to mobile. By leveraging their relationship with their customers. Standards for interoperability are already established. Another reason is that copying advertising options from other media (paid search and display ads) is an incomplete strategy that doesn’t provide the customer engagement possible with mobile media. to any device regardless of form factor also scored particularly well among developers. Aggregation of the mobile messaging inventory is an entry point for the service provider in the advertising value chain. MMS. which goes a step further by providing a hosted solution to aggregate ad inventory across multiple providers. IM. This method is difficult to scale—scalability being a benefit offered by ad agencies who allow brands to buy placement across aggregated inventories. Optism offers the campaign booking tools that allow agencies to buy media. Messaging offers two-way communication with the customer that can be instantaneous or on the customer’s own terms. Alcatel-Lucent launched its Optism Mobile Advertising offering. some brands offer messaging-based marketing directly to customers using opt-in codes that require a customer to pay to send and receive messages from brands. and email. track. execute. In April 2010.THe SHIFT This is one reason why industry watchers like Tomi Ahonen promote messaging as the key mobile advertising option. while giving providers control over what campaigns go out to their subscribers. the ability to send a variety of messages. Currently. And. Users can also sign up for the service online and get specific content targeted for 121 AdVerTISINg: THe eYeS HAVe IT | . as was evidenced through the Alcatel-Lucent study. allow them to set their interests and preferences. ChaCha offers a messaging-based answer service and a voice-enabled search service to users who either text their question to 242242 (“CHACHA”) or call 1-800-2CHACHA. On the agency side. like Google. further proving the power of messaging in mobile and other environments. Launched in 2008. including SMS. and tweak campaigns on the fly.

Advertisements. actual humans who research and log answers for the service. The ad campaign won a Mobi award for “Best Location-Based Mobile Campaign. asserts that ChaCha is “#1 in real-time mobile answers. they get a response in less than 3 minutes from one of ChaCha’s 55. For example. CEO and co-founder Scott Jones described the differences between desktop and mobile search. personal topics Mobile searchers are looking for specific answers—often to drive an immediate purchasing decision—within a short amount of time and on devices with screen sizes and variable download speeds that can make clicking back and forth through results a frustrating experience. who is also one of the pioneers behind the music information database that drives iTunes.”74 In a presentation to the Mobile Marketing Association. ChaCha and a national movie theater chain pushed location-based ads for an Indianapolis-area theater showing Twilight Saga Eclipse to females aged 13–30 for a week prior to the movie’s opening. are pushed to the user during the wait time. The impact was a 23% uplift in ticket sales for the advertised theater over the chain’s other local theater.75 desktop Solitary Fixed location 3+ hours Sift through results Frequently click around often research-oriented mobile Social on the go 3 minutes Top 3 results or less Almost never click through Timely.THe SHIFT them.000 guides.” citing Nielsen numbers showing it recorded double the unique mobile transactions of Google in 2Q2010. including targeted ads for users who’ve opted in. 122 | CHAPTer 7 . Jones. contextual. Once they’ve asked a question.

However. Despite the notion that broadcast TV is free. offering its network TV content for free to consumers has brought Hulu just enough advertising revenue to cover the cost of delivering the service. as we saw in the Marketing & Media Ecosystem 2010 survey.78 To overcome the profitability challenge. about what it costs to deliver video of that quality. Hulu won’t comment on its economics. movies—still lend themselves to larger screens. in reality. using technologies that reach across mobile platforms without relying on smartphone capabilities. More than half. and it appears to be about 50% sold out.THe SHIFT ChaCha is an example of yet another way to capitalize on the immediacy and personalization of mobile. have thus far generated more press than revenue. As reported in a March 2010 article in Advertising Age. America still has more TVs in each home than people. it introduced Hulu Plus. 54%. which the company’s website describes as “an 123 AdVerTISINg: THe eYeS HAVe IT | . Full-length video—shows. 90% of Americans are paying for their TV. Hulu is netting pennies per viewer per hour. agencies expect to spend less money on one-way ad media. when 70% is paid back to networks. not all content will be consumed on mobile. The TV business—even broadcast networks—are now 50% ad-supported with approximately $68 million coming from ad revenue and $68 million coming from TV subscriber fees from cable. but if you consider that it’s selling video ads and companion banners together in the $40 CPM range. Tv and video adverTisinG As ubiquitous as mobile is and will be in the future. Hulu made several moves in 2010.76 Delivery of these services to the home TV or PC relies heavily on advertising revenue to make them profitable. including more than 30% less on TV advertising. First. Despite growth in online and mobile video. and IPTV. satellite. such as Hulu.77 Ad-based online video sites. of Americans have three or more TV sets in the home. sports.

Warner Cable launched Qube. though the exact mix of ad and subscription revenue isn’t disclosed. CEO Kilar has said that over 40% of revenue in the online video industry comes from advertising. Hulu has worked to improve its ad delivery with more targeted advertising.THe SHIFT ad-supported subscription service.” This doesn’t mean that ad-supported content goes away. inTeracTive Tv adverTisinG Attempts to create an interactive advertising experience on television are not new. Cable networks are hesitant to offer full-length programs online because they heavily depend on subscription fees. according to Advertising Age. “increasingly becoming an endangered species. Hulu profiles its users based on their viewing history and claims it can tell with 99% certainty whether a viewer is male or female by looking at their choice of content. Targeted ads on Hulu. As long as consumers are still watching television. However.81 The bottom line is: Pure ad-supported online and broadcast video content as we know it is. Thirty years ago. Second. a two-way interactive cable system in Columbus. CEO Jason Kilar says. advertisers will continue to be interested in supporting video content. in part. failing because of bandwidth constraints. and the nature of TV advertising must evolve with the times to become more interactive and offer greater return.”79 Hulu Plus is. bandwidth-to-the-home has grown and network infrastructures are vastly more equipped to handle two-way data flow. other ventures including WebTV and AOLTV came and went. 80 Hulu’s primary source of revenue is still through advertising. 124 | CHAPTer 7 . Hulu plans to start personalizing ads by addressing users by name. get a 10% response rate and have made its ads 55% more effective than traditional channels. an attempt to attract popular cable programming. and they don’t want to cannibalize their business. the video entertainment business model will be a mix of ad-supported and subscription-based. For example. In the 1990s. but then dropped it. Ohio. Comedy Central’s The Daily Show initially authorized its content for Hulu. Today.

Within the advertising applications. using audio or video watermarking and fingerprinting. Cable companies are rolling out set-top boxes enabled with the Enhanced TV Binary Interchange Format (EBIF).” embedding audio watermarks that would trigger an iPad app to launch with additional content about characters and storylines. which will reach a projected 48 million cable subscribers by 2012. using the service provider as a billing intermediary or having the customer link the loaded widget with an 125 AdVerTISINg: THe eYeS HAVe IT | . TV advertising can also be merged with mobile.83 The show failed. As mentioned earlier. or with an on-screen prompt for the viewer to launch the application by pushing a button on the remote unbound applications – A widget overlay or branded microsite or interactive virtual channel Portals/walled gardens – dedicated information portal bundled with customer care features Entry points into the interactive ads can be presented to the viewer in numerous ways.THe SHIFT The advertising is distributed by the TV service provider or directly to an Internet-enabled TV or other connected device. but ABC is looking to integrate the technology into other shows and as an opportunity for brands. full screen with the channel reduced to a picture-in-picture. advertisers can also turn the television— or mobile device—into a point of purchase. from a banner on a menu or pause/delete screen to interactive tags inserted onto the screen while viewing. such as a Blu-ray Disc™ player or gaming console. The ABC network tested the technology with its now defunct show “My Generation.82 Interactive TV ads are delivered in three primary ways: bound applications – Ad content tied to a channel and displayed as an overlay. which prompt the viewer to click a button to receive additional content. The ads can link to web content pulled into a widget displayed on the screen or to rich media content like video on demand with information about offers and discounts.

For interactive TV advertising. In other words.” However. but also the touch points for advertisers. generating revenue is infinitely better than tracking TV ratings and changes in brand recall. With the emphasis on ad success measurement. PuTTinG iT all ToGeTher In the 1990s. providers that 126 | CHAPTer 7 . its popularity has been replaced with “owning” information about him. and enrichment of the customer-brand relationship. Right now. as well as with mobile advertising. Times have changed and these segments will not be “owned. Interactivity drives more immediate customer engagement. there is an apparent paradigm shift underway and nowhere is it more visible than in advertising. the big idea in communications involved “owning” the customer.THe SHIFT online account (like Amazon. or non-brand loyal Baby Boomer is about as naïve as attempting to rule the universe. Providers were seen to be in a position of power if they held the billing relationship with the customer or monopolized their attention with a portal or walled garden (remember AOL as the classic example?). the TV and/or connected device serve as a portal to the customer’s online account. Service providers offering triple play services also have the opportunity to converge not only the customers’ services across multiple screens. closing the loop between awareness (seeing the ad) and action (making a purchase) in the customer buying cycle. content provider. that is something no other player in the advertising ecosystem can offer. but it’s up to providers to recognize and seize that advantage. adding even further value in terms of reach. In this case. Opportunities are nearly limitless for application developers to create new ways for a viewer to interact with the service provider. or brand through the two-way TV interface.com) where payment information is already stored.” as Tomi Ahonen put it. If “owning” the customer is irrelevant. Today. disruptive Gen Xer. measurement. assuming you can “own” a fickle Millennial. the service provider has the benefit of already owning a billing and payment relationship with the customer that brands could leverage to turn the consumer devices into points of purchase at the moment of “creative impulse.

location. have a new role to play in this game. in turn. The days of “spraying and praying” one’s advertising message across a slew of channels. Reach is being replaced with targeted impressions. technology cannot substitute for sound business judgment.THe SHIFT are able to know more about a customer (in the way of preferences. there are a few pitfalls to acknowledge before jumping head-first into what could be the shallow end of the pool: > No one can control the customer. and presence. and profiling of end users. they will empower trusted providers with more information. and mobile) will play a unique role in the value chain. Awareness advertising is giving way to performance-based metrics. like presence. However. Companies looking to tap into these new advertising opportunities must start 127 CHAPTer Here | . The customer must remain in control at all times. He controls who has access to his profile and when such access is permitted. Attempting to obfuscate or complicate in this realm will only serve to disassociate providers from their market. Customers must have the option to opt in with full transparency. location. providers should not even aspire to it. Providers that can address this need will tap into another part of this evolving value chain. The provider that possesses the greatest amount of trust by the customer stands to inherit the earth. > Aggregators that enable advertisers to create an ad one time and have it optimized and transmitted across any device (including TV. PC. it all starts with trust and can easily end the same way if a provider fails the customer at any point in the cycle. Advertisers are eager to eliminate the complexity within today’s fragmented media and device markets. This information. Critical network capabilities. However. Control empowers customers. hoping to garner enough reach and frequency to move the revenue needle (but with virtually no evidence to support one actually did) are quickly coming to an end. to name a few) will find themselves in an interesting position to potentially monetize such information. In turn. can be parlayed to an advertising community willing and able to pay dividends. > Trust becomes the new currency of the relationship. However.

And.0 world. Advertisers and developers get hard metrics on performance. Consumers remain in control and receive targeted and relevant advertising. Users must remain in control of their profile at all times—no exceptions. And. while honoring their customers’ interests. advertisers will finally be able to demonstrate their ROI with clear performance metrics.THe SHIFT first with consumer trust. not hypothetical estimations. Service providers monetize their trusted relationships with consumers. 128 | CHAPTer 7 . Providers that earn this trusted relationship will find themselves in a unique position to monetize this information. the entire ecosystem benefits with this trifecta that makes advertising effective and relevant in a 2.

0 influence ParT 3 .THe SHIFT The conSumer 2.

THe SHIFT 130 .

THe SHIFT The neXT unSTable buSineSS model video chaPTer 8 VIdeo: THe NeXT uNSTABle BuSINeSS Model | 131 .

The traditional system for producing TV and movie content is deeply entrenched and will be difficult to disrupt. web-enabled entertainment devices also bring the opportunity to deliver app stores to the living room. customer-centric video offerings such as multiscreen with the ability to access and manage all media seamlessly across platforms. However. Seventy-two percent of online-only viewers are between 18 and 34.86 TVs and 2. This number is still minute considering the over 280 million households with TV service. and turning TVs into a point of sale device can provide additional revenue. providers should look to deliver high-value. which opens new revenue opportunities. targeting. but consumers’ demand for more convenient video delivery. By year end 2011.5 people.6 million households. à la carte video. 52%. To keep customers paying for video services. and the expectation of free content will put pressure on that system to innovate and to restructure to squeeze complexity and cost out of production and distribution. and the fact that the average household has 2. most online video viewing. 132 | CHAPTer 8 . interactivity. occurs on the scatter of sites emerging in the long tail. The concern: cord cutters (or cord-never-havers) skew younger. more time spent than on the rest of the top twenty-five sites combined. on the advertising side. the number of cord cutters is expected to grow to 1.THe SHIFT key chaPTer hiGhliGhTs YouTube accounts for 26% of total time spent watching online video.

It started with music. Cynthia Littleton said this: Perhaps the single biggest change that showbiz has grappled with this century is the loss of so much of the control it once wielded over the production. or that a $15. The enTerTainmenT indusTry maGazine Variety published an article looking back at the 2000s. and iPods. Consumers have more say in when and how they decide to see a movie or watch a favorite TV show. file sharing. It’s maddening to many in the biz that ticket buyers and TV watchers are more fickle. and exhibition of filmed entertainment. and now the consumer trend toward “when I want. the growth of alternatives for the eyes of the consumer has dramatically shifted the landscape of entertainment. how 133 VIdeo: THe NeXT uNSTABle BuSINeSS Model | .84 Maddening as it may be.000 times bigger. simply because there are so many more options.THe SHIFT > aT The end of 2009. Summing up the decade that began before the introduction of the iPod. or forgo those leisure-time traditions entirely for a vidgame or an online pursuit.000 horror pic with great Internet buzz can outshine movies with budgets 1. distribution.

86 TVs and 2. That is illustrated most starkly by “cord cutters”—those who forgo pay TV entertainment altogether in favor of online options.000 US households dropped their pay TV service to rely on online and over-the-air video. more time spent than on the rest of the top twenty-five sites combined. However. but that is also the same number of subscribers forecasted to be added in 2011.5 people.THe SHIFT I want” entertainment is changing the TV and film industries. it could indicate slowed growth.6 million households.85 YouTube accounts for 26% of total time spent watching online video. particularly since the online-only TV viewing audience skews younger. Right now. according to the Convergence Consulting Group. according to Nielsen. By year end 2011.87 While that doesn’t make a significant dent in the overall numbers of households. occurs on the scatter of sites emerging in the long tail. In 2009. many of which are free. about ten times the growth rate of TV viewing. with the average household having 2. 134 | CHAPTer 8 . the number of cord cutters is expected to grow to 1. there are over 280 million US TV viewers. this represents just 3% of online viewers. Seventy-two percent of online-only viewers are between 18 and 34. ComScore reports that online video viewing grew 42% in 2008.86 By comparison. most online video viewing. 52%. 800.

but they are still watching TV.89 VIdeo: THe NeXT uNSTABle BuSINeSS Model | 135 .574 281. TV. 2009 But do people truly prefer watching their video entertainment on their PC or mobile device? In some cases.746 0.0% us Tv and video consumption (in thousands) SOURCE: NIELSEN.986 19. DVDs.651 5.110 159. College students in dorms or small apartments who must have a computer may choose a quality laptop with a high resolution monitor because it takes up less space and because it can be used for classwork.240 32.297 79.164 12. costing a household an average of $70 per month for 240 hours of TV entertainment. gaming. Ten million households in the United States connect their PC to the TV to be able to watch that content in a larger format.722 230.THe SHIFT 2Q09 1Q09 2Q08 %diff yr To yr watching TV in the home watching timeshifted TV using the Internet watching video on Internet using a mobile phone Mobile subscribers watching video on a mobile phone 284.88 And pay TV earned providers over $84 billion in subscription revenue in 2009.9% 82.533 62.267 13.4% 233.419 9. ComScore’s survey also found that the TV viewing experience—audio and video quality and overall experience—is preferred over online viewing. and more.396 284. maybe.4% 15.2% 191. once they have more money and more space.962 131. However.035 163.004 70.4% 133. would they really prefer to watch Avatar or the Super Bowl on an iPad? Viewers’ attention is split more than ever.102 119.436 221.

chief executive for the North American operations for international media services company MPG. viewers can catch up on shows via iTunes. phrased it well at the network “upfronts” following the 2007–2008 writers strike. whether they’ve dropped TV service or not. TV service providers must 136 | CHAPTer 8 .000 consumers cutting the cord on TV? Or on the business model of TV? Charlie Rutman. not a declining interest in video entertainment. and a small set of cable shows. and DVD releases. streaming from Netflix or Amazon. and I want to do it for free with minimal advertising.”91 Even if not all shows are available during their TV run. including HDTV antennae. are available for free online. I have better things to do. It’s about why these people are cutting the cord and what it says about the wider viewing public.”90 When consumers talk about why they’ve moved away from cable. “We’re in a world where it’s not about TV. they talk about economics. a grad student and video producer: “I don’t want an arbitrary television schedule telling me when and where I’m supposed to meet it every night or every week. I want to be able to download it and listen on the bike or watch on a plane. Otherwise. Why is this? 1 Money – The plethora of free online video content. and IPTV providers. satellite. Take it from cord-cutter Danny Ledonne.THe SHIFT Consumption of video content remains high. … [Networks] are not in the TV business. …I want to watch when I want to. 2 Choice and convenience – The flexibility of delivery and mobility reigns supreme. A 2009 Washington Post story mentioned one 23-year-old cord cutter who said. Some TV viewers also opt for over-the-air solutions.com.”92 The shift in video entertainment is about more than just cord cutting. they’re in the video content business. it’s about video. Nearly all network television shows. So are those 800. They talk about how the monthly fees they pay no longer deliver value compared with other video content options. “I wouldn’t say that watching TV online is about saving money because it was never something that I expected to pay for in the first place.

As challenged as various aspects of the business model may be. as we’ll discuss. The customary nine-month TV season has changed in recent years. Networks like the idea of locking in income well ahead of time. (The upfronts are the networks’ annual unveiling of new shows where networks pump up their fall schedules and sell their ad inventory upfront. from production studios and networks to creative unions to advertisers across the consumer landscape to Nielsen and its ratings system. the main players are skeptical of alternatives. but had loyal fan bases. and go on hiatus for the summer when networks show re-runs. The writers strike pushed the issue even further. These shows had shorter seasons (read: cost less). locking in income well ahead of time. began launching new series over the summer and mid-season and gaining traction when network series were on hiatus. Of course.) Players on both sides are hesitant to walk away from the system that generates billions of dollars in revenue for those involved. Business Week explains their skepticism: “The makers of movies and TV shows are attached to the billions they receive from cable companies and are understandably reluctant to engage in grand experiments with upstarts 137 VIdeo: THe NeXT uNSTABle BuSINeSS Model | . as the declining appetite for repeats met the softening economy in 2008. Advertisers widely praised networks’ willingness to move to more year-round launches of new content and the resulting reduced demand for them to purchase their entire ad inventory each spring at the upfronts. The business model for producing television has remained relatively unchanged since the dawn of the soap opera in the 1950s. Shows launch in the fall. this issue is much bigger than the business relationship between TV service providers and their customers. In a recent article. and a vast web of corporations across different industries is built to operate within that model. Buyers like securing better rates than they might get later after a show is a hit.THe SHIFT deliver more flexible delivery options along with answering the money question to create value—whether it means offering new services that beat cheaper options or leaning on content providers to nix free because it may cannibalize the revenue stream. who relied more on subscription fees than ad revenue and the TV calendar driven by it. running roughly from September to May. The solution will probably entail both. And why? Because cable networks.

Story ideas and writing for free didn’t make the Writers Guild of America (WGA) very happy at all. ABC brought it to the network. but consuming more and more alternatively developed content that doesn’t pass through Hollywood. viewers would get a screen credit. new media consultant and teacher at New York University. The show was billed as “By Moms. It began as a web series that solicited story ideas online from mothers. For Moms. Once inside the studio system. and not only are they watching network content online. Instead. the networks are trying to find ways to absorb alternative technologies and content into their system. but people who do the work should get paid for it. Commenting on the demise of In the Motherhood. Clay Shirky. Early low ratings killed the series after just four episodes. said: 138 | CHAPTer 8 .” The tight integration between the viewers and the creators made the series a hit. he added. About Moms. The view from inside Take the example of the sitcom In the Motherhood. “By Moms” went out the window in favor of union writers.000. In response.”93 But consumers don’t care about their business models.’ says WGA spokesman Neal Sacharow. So the idea was scrapped. ‘It’s not our goal to curtail experimentation. Seeing the success of the web series. Submissions from viewers would continue. “‘This kind of call for submissions is not allowed for in the contract.’ These kinds of submissions deserve the WGA minimum. but authors of the winning ideas wouldn’t get paid. which is roughly $7. Gone was the one element that provided the personalization that hooked women in the first place. illustrating how innovators can use interactivity enabled by technology to drive increased customer engagement and loyalty.THe SHIFT touting unproven business models. allowed them to vote for their favorites and then incorporated the winners into future story lines. And that’s where things went awry.”94 Producers certainly weren’t going to add the cost and headache of compensating mothers across America and dealing with amateur contributors under union rules.

host. Not one dime changed hands anywhere between creator. even online. As of June. Clay Shirky brings up a YouTube hit: The most watched minute of video made in the last 5 years shows baby Charlie biting his brother’s finger. or their stories.e. combined (174 million views and counting). cats that play the piano. YouTube) is another example of the traditional content producers being squeezed. (Twice!) That minute has been watched by more people than the viewership of American Idol. traditional TV programming. over 200 million people had watched Charlie bite his brother’s finger. and the Super Bowl. Ridiculous as it may seem. Why pay a writer when some viewers are just as interested in the things Snooki might say while drunk in a Jersey Shore hot tub? The writers are in the position of having to protect their role in the content creation process. the union is reacting to a system that is squeezing out scripted shows in favor of reality TV and game shows. in one take..THe SHIFT The critical fact about this negotiation wasn’t about the mothers.” At the end of 2009. or how those stories might be used. is competing for viewer attention with baby Charlie. between entities incorporated around a 20th century business logic. Shirky was writing in April 2010. and endless Beyoncé wannabes singing “Single Ladies. and viewers. The critical fact was that the negotiation took place in the grid of the television industry. GigaOM did a survey of online video enthusiasts:96 VIdeo: THe NeXT uNSTABle BuSINeSS Model | 139 . and entirely within invented constraints. No professionals were involved in selecting or editing or distributing it.… ”Charlie Bit My Finger” was made by amateurs.95 One might just blame the writers union for its inflexibility. which employ limited stables of writers. Dancing with the Stars. with a lousy camera. However. User-generated online content (i.

which was initially done because they would be introduced for a shorter summer season as an alternative to re-runs. like the hour-long drama. producers. and Dancing with the Stars (ABC). It costs $3-5 million per episode to produce an hour of primetime broadcast television. and left a bad taste in the mouth of everyone involved—writers. Second. which took original programming off the air for 100 days. Why? Money. they have subscriber fees to supplement revenue. the hour-long drama and the 30-minute sitcom have been replaced on many nights by reality TV and game shows like American Idol (Fox). and turning a profit requires producing enough episodes to get the series into syndication. actors. Together. The studios have become highly risk averse. causing a trickle down effect that has threatened agencies focused on lesser known talent and offers TV and movie creators shorter leashes on budget and performance in the ratings or at the box office.THe SHIFT 63% viewed user-generated content like videos on YouTube 37% viewed video on social networking sites like Facebook 32% viewed TV programs on broadcast websites like NBC. Cable networks have had some success offering up the traditional formats. The Biggest Loser (NBC).98 TV series are deficit financed. Part of the fallout from labor angst has been an increased focus on surer bets. series get a much shorter time to build an audience. and viewers. Third. as well as actors and directors who narrowly avoided their own strikes. they order a limited number of episodes. profitably and with 25%–30% lower cost than equivalent broadcast programming.99 First. You don’t have to pay for higher priced actors and for writers to produce a season’s worth of scripts. The New York Times reports that FX’s 140 | CHAPTer 8 . Today. they have high international orders.com 27% viewed TV programs on aggregators like Hulu The launch of In the Motherhood followed on the heels of the late 2007 writers strike.97 Once the anchors of a network’s offerings. knocked down ad revenues. and most importantly. It’s now par for the course. new media and reality TV are generating anxiety for writers. Survivor (CBS). with some shows going over $10 million for big-name talent. For example. At the heart of the strike? Arguments over distribution of profits from new media.com or CBS.

As Kit Eaton wrote in Fast Company: “what the online video business does reveal is that Hulu is less about delivering futuristic TV experiences for its users. While ads still deliver billions in revenue. It’s also a nice little system that gives these content providers a claw-hold in future TV delivery models. but it’s an ongoing question whether they’ve turned a profit. broadcast TV dramas are generally more profitable—ironically because they get long-term revenue from syndication to cable networks. and NBC Universal. Hulu.100 And syndication requires production of at least 100 episodes. profitability for the networks increasingly depends on subscription fees. typically a five-season run. Hulu also introduced more personalized ads with improved targeting and user profiling.” 102 VIdeo: THe NeXT uNSTABle BuSINeSS Model | 141 . Lastly. and the mix of subscription fees has created a new business model that networks are invested in developing. But upfront. the cost of serving ads has been distributed between Hulu and content partners. Over the long haul. Broadcast networks have seen advertising dip as brands begin spreading their budgets across new media. DVD sales become a strong revenue source. but in 2009. a joint venture between ABC/Disney. Advertising isn’t enough to sustain content delivery either to the TV or to the PC. for dramas that catch fire with a loyal audience. Fox. and more about being a money mill to generate cash for its TV show producing lords and masters.THe SHIFT Damages is sinking in the ratings. the trend toward new media will continue. In addition. In 2010.101 Viewers and ad revenues have increased. but has international orders for $2 million per episode. allows those networks to capture some of that revenue themselves. the advertising dollars just covered the cost of distribution—hence the explanation for the launch of its premium service. Hulu is expected to make more than $240 million—more than double the $108 million it drew in 2009. the risk and cost associated with launching a show makes cable a safer bet. and as we mentioned in our chapter on advertising. Hulu and YouTube have lots of viewers and the media abounds with grand revenue estimates. In the end.

How long can that continue given the growing number of people who have already decided the price isn’t right. Hulu Plus. reiterating that “Hulu. “In order to keep growing those fees.104 Now. the analyst is correct.103 Embedding the Hulu Plus application in consumer devices has also become a way for Hulu’s network owners to get their piece of the connected TV and set-top box pie. Broadcasters and content producers still look to subscription fees for substantial revenue. Jason Kilar.106 So who gets blamed? Everyone. in the end that cost will be passed on to consumers. however. which has refused to re-open negotiations. one of the caveats for many online 142 | CHAPTer 8 . the product isn’t worth it.107 In one sense. (networks) have to deliver some blockbuster programming. battles between Scripps and Cablevision in the northeast resulted in 3 million homes in New York. isn’t a guarantee and deals are often worked out on a provider-by-provider and region-by-region basis. NBC Universal’s TV arm relies heavily on its cable properties like MSNBC. Eighty thousand viewers complained to Cablevision. has said as much himself.105 Getting more money out of the TV service providers.3 billion in fees basic cable networks will get in 2014. For example. In fact. and New Hampshire losing the Food Network and HGTV. at least in part. and they have other options? Charging people more for a product that is in essence the same certainly won’t help.” said SNL Kagan analyst Robin Flynn. Assuming providers do pay the networks additional fees. and Netflix have all been consciously designed … not to be a substitute for pay TV services” as they lack sports and other content. and Bravo for income. which research firm SNL Kagan estimates could be more than $1 billion this year and reach $2 billion by 2014.THe SHIFT Hulu CEO. NBC itself and the other broadcast networks are trying to get a piece of that action. New Jersey. USA. Squabbles over providers paying the fees to carry certain networks— both broadcast and cable—have resulted in loss of access to TV content for subscribers. which is still well below the $37. And that only provides more reason to opt out of the system (and their business model) altogether.

It’s easy to see the ways in which collapse to simplicity wrecks the glories of old. who get to say what happens in the future. instead of changing the system. or development deal. But there is one compensating advantage for the people who escape the old system: when the ecosystem stops rewarding complexity. it is the people who figure out how to work simply in the present. making their living in different ways than they used to. 60% of TVs will be shipped with Internet connections and 70% shipped with embedded applications.109 This is in addition to the Internet-connected set-top 143 VIdeo: THe NeXT uNSTABle BuSINeSS Model | . Content will always be important. Clay Shirky writes: when ecosystems change and inflexible institutions collapse. Upping the ante on what’s in TV shows that are produced and distributed in the same system without addressing escalating costs for big-name talent. abandoning old beliefs. the answer has been about shoving new technologies and new ideas into the old system. power lunch. Too often. But this also takes us back to Charlie and his brother’s finger. and threatened revenue sources doesn’t address the core problem. driven by applications development. but new players. Tv: The new aPP sTorefronT By 2015. Continuing his discussion of entertainment business models broken by their own complexity. heart-string-tugging moment that they can connect with for free and without a single pitch meeting.THe SHIFT video solutions—over the top and the cable companies’ TV Everywhere initiative—is the lack of some of the most attractive TV content. limitations on studios’ ability to cut production costs. rather than the people who mastered the complexities of the past. their members disperse.108 So what is the way forward? This remains to be seen. which is on subscription-based cable channels that have been more hesitant to strike content deals with services like iTunes. Baby Charlie gives viewers a blockbuster. trying new things. will shape the future of video content delivery and the nature of TV services.

of the Netflix users who have home broadband. and CinemaNow. This recipe lends itself to exponential bandwidth demands of the underlying broadband networks providing this instant viewing experience. according to GigaOMPro. there is evidence to support Netflix’s cannibalization of paid TV service. and MGM films. this means to get an application in the market there are numerous approvers—the service or app store owner and each device manufacturer. Thus far. and other devices now in American living rooms. which owns the digital rights to Paramount.m. 8% view the content exclusively on their TVs and 24% use both their PCs and TVs.THe SHIFT boxes. and others like it.114 Netflix is paying $900 million over the next 5 years for the privilege of including newer movies like “Iron Man 2” in its instant streaming service. gaming consoles. combine the convenience of online viewing with the preferred experience of TV viewing. Yahoo! Yahoo! was one of the first to get its platform integrated into consumer devices. Twitter. Lions Gate. and e-commerce directly to the TV with remote control navigation. and 10:00 a. For developers. with Netflix now accounting for 20% of the downstream Internet traffic in the United States between 8:00 p.110 Available widgets include social media apps from Facebook. Part of the trade off for digital distribution is longer wait times for content. with 37% of Netflix subscribers between the ages of 25 and 34 saying they use Netflix instead of a paid TV service and 30% of its customers aged 18–24 stating the same. Netflix. from its launch in mid-2009 to September 2010. which will be essential to its long-term survival. Blu-ray players. Blockbuster.m. and VUDU are already leveraging that capability with apps embedded in devices that provide video streaming. The Netflix “Watch Instantly” service allows subscribers to stream content instantly to their PCs as well as via set-top devices. interactivity.113 Netflix announced in September 2010 that it would begin streaming a new cache of movies from Epix. 144 Netflix | CHAPTer 8 . Another downside for Yahoo! and others rolling out embedded TV applications is fragmentation due to the number of providers and devices. Yahoo! is still exploring how it can serve up advertising.112 Further. and.111 The Netflix service. Companies including Yahoo!. and Flickr and streaming widgets from Amazon.5 million TVs. Yahoo’s Connected TV platform had shipped with 3. one-third use the service exclusively on their PCs.

In addition to embedded applications. Google’s offering is very similar to what’s already on the market. and Toshiba. and a full version of the Adobe® Flash® player. 145 VIdeo: THe NeXT uNSTABle BuSINeSS Model | .THe SHIFT but it’s one Netflix is willing to make as it shifts away from physical distribution models—a move that will allow Netflix to reduce or eliminate the $600 million the company spends annually in postage. On the other hand. Google TV combines an Android-based embedded application platform. and Intel executives were executives from Best Buy. LG. Google TV In May 2010. such as Boxee and Kylo. There had been resistance from content owners worried about cord-cutting among pay-TV subscribers. it’s Google. Sony. Its influence will only increase following its $100 million acquisition by Walmart in February 2010. designed to provide the same online video content access by connecting a PC to the TV. including Vizio. Sony Chief Executive Howard Stringer also announced. Consumers get Google TV either in the form of a Logitech set-top box or embedded in Internet-enabled Sony TVs. which he cited as more robust and comprehensive than the company’s own Bravia Internet service.”116 On one hand. there are browser-based platforms. which launched in the fall of 2010. “Sony was likely to gradually adopt Google’s software. Boxee and VUDU both added access to the Hulu Plus paid premium service in November 2010. Google announced the “Google TV™” platform. Samsung. At the Google TV announcement. via a partnership with Intel and Sony. for its other Internet-connected TVs. and Adobe. Backed by the world’s largest retailer. Dish Network. and also on stage with the Google.115 VUDU VUDU is focused on delivering online video to the TV with a proprietary encoding format optimized for screens over 40 inches and has numerous deals with TV manufacturers. providing greater functionality than what’s available from within an embedded app. a version of the Google Chrome™ browser. VUDU gains significant leverage with device manufacturers. The advantage of browser-based platforms is that they can take advantage of the capabilities of the PC’s CPU and operating system. However.

and Fox—have all refused to pony up their content. and MTV. in close to a real-time model? what happens when marketers demand the same accountability in TV that they do from digital. Viacom has pulled access for its properties. and we’ll be able to deliver a targeted TV message. Even Hulu. it will be hard for the industry to capitalize on the hope for Google’s entry into this space—its advertising advantage. Google already has a strong relationship with advertisers via its online and mobile search properties. including Comedy Central. Google is releasing a developer toolkit for TV-based apps and a new version of the Android Market in early 2011. Applications developed for Android mobile devices will also work on the Google TV platform. NBC.120 146 | CHAPTer 8 . most important shopping days of the year.THe SHIFT Unlike the niche players that have popped up in this space. blocks Google TV users. and TV truly morphs into a digital platform?”119 The possibilities for Google TV will be wide open for development. 117 Industry analysts also point to the 10%–15% premium for the Blu-ray players and TVs and lack of clear value proposition for Google’s trouble. The four major networks—ABC. Plus. One Hollywood industry watcher promoting the promise of Google TV and updates to the Apple TV platform asked: what happens when TV [ad] inventory is no longer a gamble? what happens when we no longer need to guess on the audience for new shows—when the platforms will tell us what the actual audience is. the busiest. Google has the influence to achieve what others couldn’t with regard to standardization and ubiquity. What it doesn’t have are attractive TV content partnerships. CBS. Without content and viewers. Nickelodeon. which has made its Hulu Plus content available to other consumer devices.118 Slow sales prompted Sony to announce a $100 price cut for its newest Google TV the weekend after Thanksgiving.

Apple also eliminated storage on the device. As one blogger put it. Instead. As Paul Sweeting at GigaOM Pro reported. pitting its Video on Demand application on numerous consumer platforms up against Apple’s walled garden approach. and user interfaces. media portability. speaking at the “All Things Digital” conference in May 2010. it announced the availability of 99¢ TV show rentals for standard and HD content. Jobs described what he sees as a go-to-market problem with the digital living room and the “subsidized business model that gives everyone a settop box for free or for $10/month. and in the end. The cheap TV rentals are an iTunes offer that initially includes just Fox and Disney network properties. YouTube. according to Jobs. Although. 147 VIdeo: THe NeXT uNSTABle BuSINeSS Model | . and a consumer-friendly price point won out. I count three devices in my house with Amazon Video on demand. “The only answer.THe SHIFT Apple TV Announced by Apple CEO Steve Jobs in fall 2006.”122 He declared that this quells innovation and results in a living room full of divergent set-top boxes.com immediately countered the same day with its own 99¢ TV content. Interestingly.’”123 Consumers don’t seem to be turning away from adding more boxes to their TVs just yet—if it means getting the content they want. we talked about the wide speculation around the next Apple TV device. business models are ripe for change as long as they require consumers to be living room network integrators/technicians just to get their needs met.”121 In the first edition of The Shift. At the same time that Apple announced its new hardware. the prognosticators who bet on leveraging cloud storage. In addition to the reduced size and reduced pricing. announced at the end of August 2010. “[T]his move from Amazon should make some consumers look closely at their current equipment before dropping $99 on the new streamer. the box— just one-quarter the size of its predecessor—streams content from the cloud and the Internet (via iTunes. Amazon. and Netflix). the consumer electronics leader hoped to change that. is to ‘go back to square one and tear up the set-top box and redesign it from scratch. One clue came from Jobs himself. With Apple’s latest Apple TV product. as we mentioned in our introduction. Apple TV didn’t meet with nearly the same success as other recent Apple innovations. remotes. The new Apple TV has built-in Wi-Fi® for simpler integration into the home entertainment setup.

and any other device it might come up with. an all-Apple TV everywhere service. wherever the consumer’s eyes go. That revenue will be in the mix with subscription and per-use fees for access to a blend of media services and applications across platforms. the iPhone. cable networks. So advertising will continue to be part of the revenue mix and will require audience measurement. the television would finally become engaging. With access to millions of applications—including games—on a big screen.THe SHIFT Sweeting explains why a move toward a cloud-based media service makes sense: Its goal is likely to be to provide seamless.”125 Gaming is a highly lucrative market where neither Apple nor Google have a traditional play with a gaming console for the living room. the various players will organize around that fact despite the tenuous relationships between talent. In addition. As we covered in our chapter on advertising. cloud-based access to content—both your existing libraries and what you acquire— across the TV. Those who don’t won’t survive. and on and on. like Google. Our own consumer research dovetails with the direction of the video innovators. but the video content industry will continue without them. the iTunes App Store will eventually serve as Apple’s platform for delivering cloud-based subscription and on-demand content aggregation services— including video content—across multiple Apple devices—in effect. Thus far. TV service providers.124 Another consistent note among the prognosticators was: “The glaring opportunity is for Apple to bring the App Store to TV. the iPad. broadcast networks. ad dollars will follow. Netflix. Consumers are willing to pay for seamless 148 | CHAPTer 8 . The shifT Toward consumer-cenTric video All signs point to a shift in the video entertainment business that will sustain video delivery across platforms because that is where consumers see value. and others. Apple still has no living room gaming play. Somehow. local affiliates. Apple. production companies. but the Apple TV box certainly provided an interface for new applications.

that profile information will need to be aggregated. and about personalization. Indeed. not television schedules. PuTTinG iT all ToGeTher However you slice it. which requires centralized identity management. gaming. the foundational business models supporting video delivery since the introduction of television are on shaky ground.THe SHIFT delivery of entertainment across all their devices with the same quality and features they get when they are sitting on their couch. timeshifting is a given and placeshifting has become commonplace. this is about content. In addition. they want a blend of traditional video content (TV. Internet. The question is: Who is in the best position to provide profile management not only for these services. Video is bandwidth-hungry. and communications? Plus. service providers looking to monetize the exponential bits and bytes traversing their networks are wise to examine the new breed of video enthusiasts: > Despite having significantly lower willingness to pay than other respondents (including gamers and connected parents). they should be active players. and management of the user’s digital rights—not for intellectual property but for video sharing between users in a social network. Cable and IPTV companies are seeking better monetization of their video investment. Any provider of video services must be in the position to support a unified service profile across the variety of media sources. so that some form of targeting and ROI measurement can be provided to advertisers. Accordingly. and regardless of how the industry shapes up. and they are more likely to look to service providers for support. but video demands highly capacious networks. but for the blended applications combining social networking. and mobile—more than developers of over-the-top offerings. not devices. billing.000 online video enthusiasts in North America shows that these consumers trust their service providers—phone. We believe this is where the service provider offers the strongest value. in order to support any kind of ad-based revenue. As such. Our research of 1. movies) with user-generated content— from sources like YouTube or personal video content generated by themselves or their social network. Not only are video business models under pressure. video enthusiasts 149 VIdeo: THe NeXT uNSTABle BuSINeSS Model | .

These users are more likely to prefer a monthly fee plan versus pay-per-use or one-time fee options. providers should offer services with nominal monthly fees. > Like their Web 2. The seismic shifts to the video business model make the abandonment of landline phones look uneventful by comparison. To capitalize on the benefits. Plus.THe SHIFT will pay for enhanced services. Specifically. Among the APIs tested. 150 | CHAPTer 8 .0 counterparts. > These consumers are primed for higher quality video. > The business model matters. players must be willing to break ties with conventional thinking and business models and embrace an increasingly tech-savvy audience. This is the one-two punch that puts a service provider in a unique situation to augment lower subscriptionbased fees with targeted advertising revenues for a segment acculturated to advertising-based models. multiscreen services that allow the seamless shifting of content from device to device and augmented reality services that provide visual recognition of an object viewed through a mobile device (such as a movie poster) and render a related multimedia asset back to the user (such as a movie trailer) for action (such as ordering the movie for delivery to the user’s TV set-top box or mobile device) command high interest and willingness to pay from these consumers. these users are very tolerant of highfrequency advertising as part of their service definition. QoS scored particularly well among this bandwidth-hungry audience. Indeed. they are more likely to trust their service provider over their application developer with sensitive profiling data. Doing so could mean the difference between survival and extinction. To optimize revenue. video has the potential to simultaneously be the biggest disrupter and opportunity for stakeholders across this ecosystem.

THe SHIFT moneTizing billionS of converSaTionS Social neTWorKing SoCIAl NeTworKINg: MoNeTIzINg BIllIoNS oF CoNVerSATIoNS | chaPTer 9 151 .

As pervasive as sites like Facebook may be. and policy changes must be clearly communicated in plain language. in advance. which (as mentioned in the advertising chapter) increases the value of ad inventory. Social networks offer the means for behavioral targeting and increased brand-consumer engagement. Social networking is here to stay because it suits the “socializer” behavior patterns of the next generations and provides connection and community in this high-tech world. It’s about leveraging the role social networking as an activity plays in the lives of consumers in numerous ways to build trusted. interactive relationships that generate more revenue. Monetizing social networking isn’t just about putting display ads on social networking sites like Facebook. not a website. social networking is an activity and mode of communication.THe SHIFT key chaPTer hiGhliGhTs Seven percent of the world’s time spent online is spent on Facebook and two out of every three global web users visited a social networking site in december 2009. making it a potential threat to paid search advertising. Privacy. privacy is key—all requests and uses of consumer data must be opt-in and transparent. 152 | CHAPTer 9 . privacy. Social networking sites are becoming a resource for consumers seeking personal recommendations and buying information.

but it certainly makes attractive headlines since people throughout time have loved to complain about “these youth today. Twitter.” The more pertinent conversation for our purposes. Social media are the websites. social networking as an activity and way of communicating is already shifting Internet business models and opening up new angles for marketers to increase customer engagement.THe SHIFT > The buzz around social neTworkinG and media is fascinating from a sociological and cultural perspective. is about how the rapid growth of social networking as a player in the Web 2.0 world can be leveraged successfully to create business opportunities for the applicationenabled ecosystem. Social networking is the activity and way of communicating that people practice. and so on that are the forums for social networking. MySpace. Whatever we might think about the positive or negative impact of particular social media. however. social networking has become a bellwether for the health (or ill health) of society at large as older generations bemoan how younger generations are too open online and don’t seem to care about propriety or privacy. Whether this is true is debatable. In the press.—including Facebook. etc. In our conversation. SoCIAl NeTworKINg: MoNeTIzINg BIllIoNS oF CoNVerSATIoNS | 153 . we’ll differentiate the terms social networking and social media. applications.

THe SHIFT The rise of social networking as a practice has made social media a force in our cultural. and Yahoo!. who represented 37% of total respondents. while still a smaller percentage than those who use search engines or portals like Yahoo! or MSN. Facebook is the big climber. in August 2010 US web users spent more time on Facebook than on Google. two out of every three global web users visited a social networking site in December 2009. technological. consuming 7% of the world’s time spent online and becoming the fourth largest site in terms of reach. The ThreaT To Paid search As we mentioned in our chapter on advertising. paid search is the big dog on the block of Internet ad revenue. whom Gibs calls “socializers.128 Overall. Jon Gibs. comprising nearly half of online ad dollars spent.” 26% agreed with the statement. Today. what comes up during a web search is a dominating factor in their decision making. and personal lives. Microsoft. a media analyst for Nielsen Research.” versus 18% of portalists (viewers of customizable portals and topic-specific sites. 127 And while the reach of the search and portal sites may be higher. There is a segment of the online population that uses social media as a core navigation and information discovery tool. which failed to reach mass adoption in North America. “There is too much information online. For the first time ever.126 There are exceptions to Facebook’s dominance in a few countries. like CNET). Today. conducted a study of how Internet users discover content and made a significant discovery. For example. however. agreed. 154 | CHAPTer 9 . Only 5% of searchers. it is a significant figure. That dominance. behind only Google. in Brazil. Gibs offers a reason why social media may be a preferred means of navigation and content discovery for a subset of web users. may be changing. search is being augmented more and more with other Internet navigation options. roughly 18% of users see it as core to finding new information. Google’s social media outfit. The presumption is that when users are searching for information to make purchasing decisions.129 Of these 18%. Facebook and YouTube draw much more of users’ time. Facebook’s reach is just 20% compared with 72% for Orkut.

130 The idea that social media will overtake search. In our chapter on the Millennials. appears to be reaching its limits. popularized by google.132 Gibs doesn’t provide a demographic breakdown of socializers. is echoed by the GigaOM Pro report. this is particularly true and has led to companies like ChaCha. And this thought plays out in the data. This is key because Socializers gravitate toward and believe what is shared with friends and family. and searchers. If your friend creates or links to the content. challenging.THe SHIFT Socializers trust what their friends have to say and social media acts as an information filtration tool. we discussed that generation’s shift away from one-way communication delivered from an authoritative source (a newspaper.” which states: In our modern. then you are more likely to believe it and like it. portalists. may be challenged by content discovery mechanisms that provide a guide to navigating the overwhelming volume of information online. a college lecturer) and toward more interactive communication where the recipient is an active participant in creating. and shaping the information that 155 SoCIAl NeTworKINg: MoNeTIzINg BIllIoNS oF CoNVerSATIoNS | . but some evidence suggests younger generations are more likely to be socializers. As user interaction with the Web becomes more mobile. quickly. Think about the shifting generational view of information. if not make it obsolete. but one that also gets 20 million hits each month to the archive of answers on its website. while this seek-search-and-consume methodology has become part of our basic Internet behavior and turned google into a gazillion dollar company. highly networked lives it is getting increasingly difficult to find relevant information on the web. a mobile service by design. such as product information used to make purchasing decisions. “Why Google Should Fear the Social Web. The 10 blue links paradigm.131 This doesn’t mean that search goes away. but it does mean its dominance as a source of information. it may be time for us to look for alternatives.

When Nielsen asked consumers which form of “advertising” they trusted: 90% said recommendations from people they know 70% said consumer opinions posted online 70% also said brand websites 69% said editorial content. We discussed the impact of this fact in more detail in our chapter on advertising. Permission-based marketing is the key to gathering the consumer data needed for more targeted advertising that builds stronger brand relationships without turning off consumers. Second. 61% for newspapers. Social networking and media clearly facilitate the ability to reach out for those recommendations and crowdsource buying information. I trust my social network and its response to me is truly personal. choices for dining out. 59% for magazines. 37% online video ads. 55% for radio and billboards New media advertising rated low by comparison: 41% trusted search engine ads. objective recommendations carry more significant weight. Microsoft and MIT surveyed some Microsoft employees and summer interns on what questions they ask their social networks. the higher ranking for opt-in emails and the very high ranking for brand websites suggest that information delivered directly from the brands that is sought (by visiting the website) or asked for (through opt in) garners trust from consumers. like newspaper articles Traditional media advertising rated just behind objective recommendations: 62% trusted TV ads. and information about product use. First. Many of the questions involve some kind of purchasing decision—product recommendations. and 24% mobile text ads—except for opted-in emails. While it doesn’t offer a quick response like Google.THe SHIFT person will ultimately receive. And what better crowd than their online networked community? I can search Google for information about restaurants and hotels in Denver or I can ask my “tweeps” or pose the question in my Facebook status. buying options. which scored 54%133 Two key ideas emerge from the Nielsen data. Today’s search 156 | CHAPTer 9 . 33% online banner ads. Today’s users crowdsource their information.

COM BLOG POST. anyone?? I am hiring in my team. do you know anyone who would be interested? Could any of my friends use boys size 4 jeans? opinion 22% Factual knowledge 17% rhetorical 14% Invitation 9% Favor 4% Social connection 3% offer 2% SOURCE: “WHAT DO PEOPLE ASK THEIR SOCIAL NETWORKS?” GIGAOM. the flood of information on the web affects older web users as well. which adds a unique wrinkle to the social networking privacy debate. HTTP://GIGAOM. While this is a sample that probably skews younger and more technologically engaged than might be average. FEBRUARY 22.COM/2010/02/22/WHAT-DO-PEOPLE-ASK-THEIR-SOCIAL-NETWORKS/ And at any rate. As mentioned in the Baby Boomer chapter. Consumer inquiries via social media are a marketing opportunity for brands to create more responsive customer engagements. as we’ll see later. QuesTion TyPe recommendation PercenT 29% eXamPle Building a new playlist – any ideas for good running songs? I am wondering if I should buy the Kitchen-Aid ice cream maker? Anyone know a way to put excel charts into laTeX? Is there anything in life you’re afraid you won’t achieve? who wants to go to Navya lounge this evening? Needing a baby sitter in a big way tonight.THe SHIFT engine tools are expanding the visibility brands have into their social networking mentions.. the results are still quite interesting. 2010. this generation is under 157 SoCIAl NeTworKINg: MoNeTIzINg BIllIoNS oF CoNVerSATIoNS | ..

once again. Truly personal recommendations. and Netflix preferences. “do I need more information? The problem becomes filtering and sorting—you have all this information coming at you. would be even more welcome. and narrow purchasing decisions. And then how do you make sense of it?” Said another: “It’s getting harder and harder to sift—there’s far more information out there than one person can absorb. It could be considered an invasion of privacy if search engines used previous search information. which cannot be mined by a machine.”134 Personal recommendations—even from mostly strangers—are a welcome way for these older users to focus their searches. There’s no such expectation from public conversations. one can assume. technology itself will help with the issues of control and too much information: “I love things like the Amazon suggestions.THe SHIFT significant time pressures and craves simplicity as a result. As one blogger who believes Twitter will be the new search engine wrote: “Search engines have no personality and don’t engage in conversation. And while there are certainly privacy concerns with social networks. Search engines can only get so personal before privacy groups start screaming. Those interests and preferences are available to their social networks in addition to data gleaned from face-to-face communication and personal relationships. that appeals to me. users decide what information they want to share with their friends. There are so many choices we have everywhere. we mentioned the application of web crawling and data mining tools to social media to provide brands with an enhanced view of consumer behavior and 158 | CHAPTer 9 . in the end. Baby Boomer participants in an AARP focus group discussed looking for new ways to navigate the online world. what does it mean and how do you shut out the part that doesn’t matter to you. get feedback.”135 Behavioral TargeTing: Boon or Bane? Earlier.” … [M]any thought that. so for someone to narrow it down for you.

get rid of it on Facebook. The next step for brands is to apply the knowledge they gain to deliver targeted or even personalized advertising and marketing. As to be expected. As one blogger predicted in December 2009: The real trouble will start when Facebook starts sharing these status updates with the search engines and other third parties. Negative responses flooded the press in April 2010 when Facebook announced that it has partnered with sites—Microsoft Docs. at least from the prying eyes of a stranger. even if that’s where the content originated. and it’s usually gone. … up until now. and making decisions about what this means about you in order to “personalize” your web experience. At the heart of the concern is perceived consumer discomfort with unknown eyes on the Internet keeping track of where you’ve been.THe SHIFT preferences. what you’ve been doing. Have you fanned your favorite band’s Facebook page? That’s the music that shows up on the Pandora home page when you visit the site. targeted marketing that takes advantage of the data that is collected on subscribers via social media takes many hits in the press as consumer groups raise concerns about privacy issues. In the case of Facebook and its partners. Naysayers argue that people are not participating in social media to be sold stuff—no matter how attractive what they do there may be to marketers. this means delivering content such as articles and ads that are tied in with aspects of your Facebook profile. While studies show 159 SoCIAl NeTworKINg: MoNeTIzINg BIllIoNS oF CoNVerSATIoNS | . Facebook alone has maintained control over the vast majority of content uploaded to the site. Another problem arises when your social media updates aren’t just stored within the walls of that application anymore. doesn’t mean getting rid of it on the Internet.com. Pandora and Yelp— on a new feature called “instant personalization” made possible through its Open Graph programming interfaces.136 Opening up profiles for indexing on search engines keeps information around for much longer. But how sensitive are people to privacy concerns over commercial “intrusion” into their social networks? The answer is somewhat TBD. Getting rid of it on the social networking site.

20% of younger Baby Boomers.THe SHIFT that younger generations are more comfortable sharing information online. Sixty-four percent of respondents to a March 2009 TRUSTe-sponsored survey said they would choose to see only online ads from online stores and brands that they know and trust. 25% of those aged 50–64. Will they age out of their open attitudes? At the same time. according to a recent Pew Research study. and 20% of those aged 65 and older > Changing privacy settings – 71% of social media users aged 18–29 have changed the default privacy settings on their profile to limit personal information versus 55% of users aged 50–64 > Deleting unwanted comments – 47% of social media users aged 18–29 have deleted comments that others have made on their profile versus 29% of those aged 30–49 and 26% of those aged 50–64 > Removing their name from photos – 41% of social media users aged 18–29 say they have removed tags to identify them in photos versus just 24% of users aged 30–49 and only 18% of those aged 50–64137 Of course. This same Pew study offers some key statistics about web users aged 18–29: > Taking steps to limit personal information available online – 44% of young adults say they do this. compared to 17% of Gen Xers. which did trend down 6% year over year. they are paying more attention. compared with 33% of adults aged 30–49.138 160 | CHAPTer 9 . Today. it is possible that younger demographics are doing more embarrassing things that must be edited out of their increased presence online. but regardless. no one yet knows if this is generational or maturational. Yet. and 15% of older Baby Boomers. statistics show that younger demographic groups actually filter what information is available about them online more actively than older groups. and 53% said they would take an anonymous survey about their preferences in order to limit ads to those that are relevant to them. half of respondents are uncomfortable with advertisers using their browsing history to serve relevant ads. one in three Millennials shares at least five pieces of information online for others to see. More conflicting statistics are available concerning targeted online advertising.

0 consumers reveals a similar story. Consumer education about how information is gathered and used also contributes to the openness that can reduce fears and prompt consumers to embrace the benefits of targeting that they themselves recognize— establishing a relationship they have with brands they like and trust. and there’s been plenty. want control over their options and transparency from those providing the services. such as Diaspora. a “self-described ‘social operating system. how veiled these changes seem to be. The social media world has responded by offering up new “un-Facebook” sites that work on an opt-in rather than an opt-out basis. Much of the anger directed at Facebook. complete with a new privacy guide and video tutorials to help users gain the control they want. online activities) overall.io. > Having control over who saw their information was more important than having control over when others had access for all demographics. a “privacy aware. and people they know. do-it-all. personally controlled. > When told they would have also have control over who saw their information or when others saw their information. TV.THe SHIFT So therein lies the conundrum: Even though studies point to how effective targeted ads are and how much consumers prefer them. 140 Our research across 2. > About 40% of consumers were “very comfortable” sharing their availability information with trusted service providers (Internet.000 US Web 2. open source social network” founded by students at New York University. take rates for being “very comfortable” sharing information went up to nearly 50% across the three categories (availability. This has led to a lack of consumer trust in social media and in online advertisers. They. is over how often the site changes its privacy policies. as we say repeatedly. and Pip. > Thirty-two percent of respondents were “very comfortable” sharing location information and information about online activities. and how flippant Facebook leadership has been in the past when answering questions about user privacy. and mobile). consumers are nervous about exposing their information in order to make that possible. location.’”139. except for SoCIAl NeTworKINg: MoNeTIzINg BIllIoNS oF CoNVerSATIoNS | 161 . Facebook has responded by rolling out “simpler” privacy controls in June 2010. application developers.

The friend finder application also includes some location-based information. 53%). 55%) and for urban consumers (44% vs. using a site like Foursquare. you can become the Mayor of your favorite Thai restaurant or the Starbucks closest to 162 | CHAPTer 9 . providers and application developers can monetize those preferences if they provide access control to mitigate privacy concerns. in some cases. Of the applications we tested. a mode of communication that extends a person’s natural inclination to connect. … Presence Another outcome of our consumer research was the importance of presence to social networkers. but they were most interested in applications that gathered presence information from friends in their network. it has intrinsic value to consumers. … Location As we mentioned in our developer chapter. In the end. As a single network API. The key to monetizing social networking through media is to maintain that value for the consumer so when you combine it with other applications and activities. willing to pay for them directly. Consumers also have to be interested in the resulting applications and are.THe SHIFT with location information for consumers aged 30–44 (42% vs. Not only were consumers most willing to share their presence. a conversation. social neTworkinG Plus… These discussions reinforce the importance of seeing social networking as an activity. the question always comes back to value. not a website or a widget. social networkers were very interested in an advanced friend finder application. Bo. presence was the most popular capability as indicated by our respondents. As an activity. Consumers like having messages and services targeted to them and enjoy the benefits of sharing information to connect with others. which would allow a user to contact friends on their most accessible devices and know when they are in close proximity to a favorite location where they can meet. your offerings aren’t just of value to marketers.th groups showed a strong preference for being able to determine when they were sharing where they are.

not a teenage boy living in his parents’ basement as one might expect. and Happy Aquarium. Women make up 55% of social gamers in the United States and almost 60% in the United Kingdom. just 29% of males. monetizing the consumer’s desire for controlled connectedness. and now your network has just seen your personal recommendation and is prompted to check out that business. 163 SoCIAl NeTworKINg: MoNeTIzINg BIllIoNS oF CoNVerSATIoNS | . … Gaming Social media gaming has become a big business and changed industry ideas about gamers. They also have less interest playing against strangers online and more interest playing with friends in their social network. Tie that together with Facebook or Twitter or use Facebook’s Places feature. They are among the most avid social gamers with “38% of female social gamers saying they play social games several times a day. opening the lucrative gaming market to new users. coupons. Together. Who is the average social gamer today? A 43-year-old working mom (48 in the United States). most often playing with their friends. They are mostly free and don’t involve the intricacies and violence of traditional gaming. etc. Not only can service providers open up the network for blending all a user’s services with a socializing component. developers and providers can turn the social networking trend into a wealth of market opportunity. Social gamers skew older and more female because the games are simpler to play without additional equipment over shorter time periods. delivered to the mobile device as a reward for customer loyalty or referrals. For developers. Social networking plus gaming has created applications of universal appeal. advertisers are keen to jump on board with enhanced business models that also provide value for consumers via offer notifications. vs. social networks opening up their applications is creating opportunities for new mashups that capitalize on the “socializer” trend.THe SHIFT your house. And. Adding the capabilities of the service provider magnifies that value even further. Farmville. Working moms don’t have hours to spend to get to the next level of a game with a headset and special controllers.”141 Much of this is due to social networking games like Mafia Wars. but they are a trusted partner in a position to ease consumer’s privacy concerns.

providers should let this price-sensitive audience ease into a commitment by offering services for a nominal per-use fee. and preferences of their friends. location. Consumers must remain in the driver’s seat and the roadmap must be clear and conspicuous. connected parents. However. Herein lies the very interesting paradox that makes tapping into these social networkers so challenging. Instead. Anything short is unacceptable. consumers must remain in full control of who has access to their information and when that access is granted. > Providers should never underestimate the importance of privacy. it is all about trust. Privacy must be opt-in and temporal. That is. Providers seeking to optimize revenues among this price-sensitive base should offer the features on a per-use basis. > The business model matters. especially when consumers are accustomed to free service and sensitive to privacy considerations. and profiling. and online video enthusiasts).THe SHIFT We’ll discuss social gaming in more detail in our next chapter where we will show more examples of how the two worlds of social networking and gaming are increasingly colliding. And. they are less comfortable sharing such information about themselves. PuTTinG iT all ToGeTher Social networking is here to stay. including presence. > Social networkers are the most price-sensitive of all groups tested (including gamers. As a start: > These users are interested in obtaining more information about their social circle. the good news for network providers is that these respondents are more likely to trust their operator 164 | CHAPTer 9 . Monthly and one-time fees are less attractive to this audience. including the presence. they are still willing to pay for certain capabilities. Privacy settings must be simple. location. That said. one must offer these users incremental value. The challenge for those in the ecosystem is in attempting to monetize what is now a Web 2. and fully controlled by the consumer.0 behemoth. > For this segment. To do so. transparent. Providers choosing to bury their privacy policy in an onerous licensing agreement will pay the ultimate price—lost trust among these consumers.

Perhaps the best reflection of this new era of social engagement comes from our focus group respondents who were self-professed experts on the topic. But. Isn’t that potential worth the challenge? SoCIAl NeTworKINg: MoNeTIzINg BIllIoNS oF CoNVerSATIoNS | 165 . For them. They want access to the most sensitive details of their friends’ lives but are uncomfortable sharing such information about themselves. Combine this with an audience that is also highly tolerant of advertising in their service definition and an operator has the potential to succeed where so many before have failed—monetizing the profile of these users by brokering the relationship between them and advertisers.THe SHIFT over their application developer with sensitive preference data about themselves. Perhaps these multiple layers are what make this segment so difficult to target. friends and narcissists. They are simultaneously voyeurs and exhibitionists. social networking is a chance to connect with others on their time. an opportunity to maintain friendships when traditional modes of communication fail and a chance to be at the center of their virtual world. players who are willing to embrace this complexity stand to monetize a growing army of hundreds of millions.

THe SHIFT 166 | CHAPTer 9 .

THe SHIFT gaming noT a SpecTaTor SporT gAMINg: NoT A SPeCTATor SPorT | chaPTer 10 167 .

Hard-core gamers have a high willingness to pay for API bundles that support their gaming experience and competitiveness. and the advent of social media gaming has greatly diversified the gaming audience.THe SHIFT key chaPTer hiGhliGhTs The stereotype that the average gamer is a socially isolated teen-aged boy is inaccurate. gaming is a nearly $20 billion market. Casual gaming provides significant marketing and advertising opportunities for brands. Social gaming is rising in popularity as the lines between gaming and social networking become increasingly blurred. 168 | CHAPTer 10 . including the ability to accrue points through play as currency in online promotions. gamers are 57% male and 43% female.

The game Call of Duty: Modern Warfare 2 grossed $401 million the first day. In truth. At the Mobile Marketing Forum in New York in June 2010.THe SHIFT > Today. The assumption about gamers is that they are all pale. Yes. increasingly.142 Rabid. However. teen-aged boys living in their parents’ basements and playing video games with their friends. But increasingly. for some in that demographic. yesterday’s teen-aged boys are today’s grown Millennial and Gen X men who are still gaming and for whom video games are a central part of family time. hardcore gamers bring big dollars. replaced TV watching as the all-time entertainment pastime. Elizabeth Harz. The movie Avatar grossed $232 million its opening weekend. Younger kids of both sexes are gaming— through consoles at home. Women are gaming more than ever on the Nintendo® Wii® and via social media. one ouT of every four enTerTainmenT dollars is spent on games. gaming has actually expanded beyond what people expect. delivered a keynote address and shared some demographic information about the gaming community: 169 gAMINg: NoT A SPeCTATor SPorT | . teen-aged boys are big into gaming. on mobile phones. their computers and. senior vice president for global media sales at gaming company Electronic Arts. Gaming has. it’s not just hardcore gamers bringing in the money.

Atari became synonymous with home video games and sold 30 million units. In 2009. who conducted 170 | CHAPTer 10 . the industry had record-breaking sales in December. That increase for portable gaming devices is set against the largest decline of the year—home console hardware. down 13%. Consumer market research company The NPD Group. down 8% over 2008 in a softening economy that saw people cutting back on discretionary spending. The other uptick in the sector was a 6% increase in revenue from portable hardware. At the end of 2009.144 Growth in the gaming market has not only included increases in sales. and accessories—was nearly $8 billion. and 81% of them have children who are also gamers Ages range across demographic groups. but new means of distribution—including online gaming.THe SHIFT gamers skew slightly male: 57% male to 43% female one-third of players are parents.143 It was overtaken long ago by gaming consoles like Sega Genesis and the early Nintendo systems. the US video game market—portable and console hardware. but are mainly 18–44 ages 12–17 18–24 25–34 35–44 45–54 55–65 % of gamers 7% 18% 24% 22% 13% 6% Home video gaming gained widespread popularity in the United States with the Atari 2600. introduced in 1977. it reached $19.66 billion. Still. suggesting people put off their purchases until the holiday season. software. By 2000. 20% of games were digitally downloaded and 54% of gamers reported that they played games online.

for instance. The iPhone. the iPhone and iPod Touch 171 gAMINg: NoT A SPeCTATor SPorT | . the balance of revenue between hardware and software is bound to shift. putting up a slide that read: “No multi-touch user interface games are expensive No app store No iPod”146 Many of the games in the App Store are under $10 versus $25–$40 for a portable console game.and Androidbased devices are attracting developers. Mobile gaming is also taking hold. it’s unclear which business models are working in this space.145 new CompeTiTors. While mobile gaming doesn’t replace the experience of a home gaming system on a large-screen HDTV. At an event in September 2009. also found that online gamers’ purchasing habits remained steady throughout the economic downturn. Apple SVP. is attracting a lot of attention given the dizzying array of game apps available for this device. Social media networks have emerged as the hot venue for online gaming. talked about how other portable players compare to the iPhone and iPod Touch. the market for portable devices—let alone home consoles—faces serious threats. Phil Schiller. Apple has been direct in its attack. Part of this difference is the result of different markets. Much of the App Store games are simpler and aimed at the casual gamer market— think Words with Friends. new plaTforms As the gaming market moves forward. due to the huge number of subscribers these are attracting.and graphic-intense games—like Call of Duty. The Sims and World of Warcraft. But still. has advanced to play a bigger role and the iPhone. and as the number of mobile gaming applications and the sophistication of smartphones grow.THe SHIFT the survey. according to analyst Anita Frazier: Mobile gaming. Console games typically appeal to more hardcore gamers who play development. in particular.

THe SHIFT certainly challenge the portable console gaming devices with their unique interface. multipurpose functionality.1 80 SOURCE: ADMOB MOBILE METRICS.147 iPhone Average Age % under 17 App downloads/month Paid app downloads/ month Min/day using apps 37 25 8. upgrading a computer wouldn’t mean possibly losing your games.8 79 iPod Touch 23 65 12. The market exists for new kinds of scaled-down devices that can serve as gaming consoles as well as access devices for online video.1 1.000 games and counting. Many expected that it would be a small device like an “iPhone without a screen” that offered living room access to media content stored in the cloud as well as to the App Store. since Apple didn’t—and still doesn’t—have a play in the gaming console business. president of the Japanese research firm Enterbrain. One analyst wrote about the “glaring opportunity” offered in such a scenario by gaming. on any device. Some thought the platform might include games. With the use of cloud computing. not just the iPhone. “We are going to move away from a market where it’s the hardware that fights 172 | CHAPTer 10 .148 The thought was that cloud computing would offer benefits not only for online video. The iPod Touch is a key platform. and users could access their gaming data from anywhere. The average age of an iPod Touch user is 23. but also for gaming.6 100 android 35 24 8. and they download and use more applications than users of the other platforms. we mentioned the speculation in early 2010 about the next version of Apple TV. Hirokazu Hanmura. JANUARY 2010 In our chapter on video. According to AdMob.7 1. The hardware will be less important. At a video gaming conference in Tokyo in 2009.8 1. 78% of iPod Touch users are under 25 and 65% of users are under 17. and instant wireless access to over 21. said software is the future of gaming.

However. While serious gamers make significant investments in hardware and accessories. complexity of development. Its social gaming inventory draws a daily audience of 19 million who spend more than 22 minutes 173 gAMINg: NoT A SPeCTATor SPorT | . Simon Jeffrey of iPhone gamemaker Ngmoco. Gaming companies—Sony. Wii provides easier-to-learn games with a less complicated interface. One GDC participant. “The sexy emergent part of gaming. The focus is on $250. often to the exclusion of the gamer who doesn’t want to dedicate hours upon hours with a headset and complex controller to reach the next level of a game. There are games for Windows Mobile®. … We are going to be moving to an era when different software stores fight against each other. Nintendo.THe SHIFT against each other. said. there was a separate event just for the iPhone—the iPhone Games Summit. Apple’s app storefront has already emerged as a serious gaming platform.000 games. He went on to give a nod to the competition. What the App Store games—and Facebook—have taught gaming companies is that there’s a large untapped market for games that may not command the same $40 price. but Windows® phones are currently marketed as more business-oriented. rather than $25 million.”149 new cusTomers The casual gaming market should not be overlooked.”150 Jeffrey may be biased since his company’s bread and butter is the iPhone. this doesn’t preclude Microsoft from getting more serious about the mobile gaming space as they see the market potential. For the first time.is next-gen mobile. Microsoft comes at its competition with iPhone from within the smartphone arena. led by the iPhone.. noting that Android should “emerge as a serious gaming platform” and Windows Mobile 7 “has wind in its sails. the evolving emphasis was clear.” According to smartphone applications analytics group Flurry. but the graphic intensity. and price tag for games are the same. and Microsoft—have focused primarily on the hardcore segment.. but the figures he notes are telling. Nintendo broke away somewhat with the introduction of the Wii in 2006. At the Game Developers Conference (GDC) in March 2010. the casual gamer keeps things much simpler—and cheaper. but they also require less money and effort to develop.

that places the size of this audience somewhere between NBC’s Sunday Night Football and ABC’s Dancing with the Stars and only 4 million pairs of eyeballs shy of the top show in American primetime television. The iPhone games and apps are largely diversionary.THe SHIFT per day with the applications. a phone vs.152 In the spring of 2009. Peter Dille. followed up with this: Consumers that want to carry a PSP are primarily gamers and I think there’s a big difference in the types of games you can play on a PSP versus an iPhone.. Nearly 75% of those supporting mobile said they are targeting iPhone and iPod Touch development—more than double those who said they support Nintendo DS and Sony PSP. So it’s really coming at the market with different perspectives. resulting in an uptick of independent gaming developers and developers working for smaller companies. Over 70% of developers said they were developing games for PC or Mac. Plus. Development cost matters. Fox’s American Idol. any programmer can develop an App Store game by buying the $99 developer kit and doing the work. up to 25% from 12% in 2008..151 Game Developer Research reports that the economic downturn led to layoffs in the gaming industry. Sony proclaimed that the iPhone market is a “separate” business from the portable Sony PSP and no threat. The study also revealed that support for mobile more than doubled in 2009. 174 | CHAPTer 10 . creating games for app stores would be appealing. And since developers surveyed in the report listed ease of development and market penetration as the key factors in deciding which platforms to use. a gaming machine. In terms of reach. Developers for Nintendo and Microsoft Mobile 7 must be approved in advance. 41% developed for console games. Sony Senior Vice President of Marketing. While the price points and competition make it a competitive business. By comparison. whereas we’re a gaming company and we make games for people who want to carry a gaming device and play a game that offers a satisfying 20+ hours of gameplay. the ease of entry is still very attractive. including browser and social games.

such as profiling. sound a lot like what you’d find in the iPhone’s App Store. For them. our gamers perceived their avatars as an extension of their physical selves when discussing certain network capabilities. small-scale video games aimed at the upcoming PSP Go handheld. In fact. more family-oriented games—a key target for the Nintendo Wii. In fact. including social networkers. the Wii has become the dominant gaming platform for women. Alcatel-Lucent focus group research reveals that gamers are the most socially active of any of their Web 2. social networking is a more superficial view of relationships. That said. and PacMan Championship Edition. When asked how gaming compares to social networking. Just a few months later. presented a breakdown of console gaming in the United States in November 2009. For them. just under 12 million. Reggie Fils-Aime.”153 Although Sony insists it isn’t in competition with smartphones. There are 45 million players of which 26% are female. our focus group respondents were clear: there is no comparison. Of those women. Sony introduced the PSP Minis. casual gamers are also interested in less violent. 11% are on the Microsoft Xbox 360® and 9% are on the Sony PlayStation 3®. Gaming is where true connections are formed. the move clearly illustrates an intention to capture customers who have less than 20 hours to spend mastering a game. which one blogger described as “a line of low-price. including Air Hockey. President of Nintendo America. As a result. Bowling. 80% are on the Nintendo Wii. In addition to having less time than the hardcore gamer. the experience is more than the thrill of gaming itself.154 social GaminG Gamers are a social breed. For other focus 175 gAMINg: NoT A SPeCTATor SPorT | . The list of planned games.THe SHIFT This declaration was either bluster or bluff and probably the latter. Gamers love their friends more than they hate their enemies. many in the group agreed that there is an intersection where these two activities collide quite naturally.0 counterparts. it’s about connecting with others who share the same passion.

But. Social networking in gaming isn’t anything new. And. Ever since Internet access was added to gaming consoles. over the same time 176 | CHAPTer 10 . preferences are about their avatars. developers have moved to sites like Facebook and MySpace to expand social gaming. the video gaming audience increased 28%. Then came a 28% increase in late 2008. This social gameplay was obviously extended to PC gaming. profiling takes on a whole new meaning. our gamer respondents represented the collision of physical and virtual worlds. for gamers. described the phenomenon in his blog. The wii had been in the market since december 2007. After several late nights. which his researchers initially thought was an error. video gaming in the united States held at those higher numbers. There are games with more subscribers out of Asia that are not translated for the Western market. This speaks to the popularity associated with social gaming—particularly via Facebook. SkipLogik. over the following quarters. much analysis. CEO of Interpret. But. From Q3 of 2008 to Q3 of 2009. Michael Dowling. a new media research company. so we attributed some of that growth to it. which has had a dramatic impact on the number of people gaming and has diversified the gaming audience. For them. another interesting trend was emerging that was slowly proving to be a major factor in expanding the gaming audience—social networking. gamers could play with and/or against their friends and make new friends in the gaming world. the next phase of social networking for these gamers involves developing virtual relationships between their avatar and others. we determined the data was correct.THe SHIFT group respondents. culminating in massively multiplayer online (MMO) games like the well-known World of Warcraft. profiling pertains to divulging one’s personal preferences and online habits in exchange for better targeting of advertisements and offers.155 With the rapid growth of social networks. not themselves. World of Warcraft has over 12 million active players and is the most popular MMO in the West. You see. making it almost impossible to disassociate one from his virtual self. He talked about tracking gaming in a variety of media every quarter for the past 3 years without much change in the size of the gaming audience. and the harried nerves of our analysts.

the clear winner involved rewarding gamers for virtual achievements with physical coupons and 177 gAMINg: NoT A SPeCTATor SPorT | . did a survey to profile social gamers. or just buying credits.158 For many. Between 3rd and 4th quarter of 2009. commenting on the PopCap study.157 > Two-thirds of social gamers also play other video games. a maker of social games. and allows users to connect socially with their friends within the context of the game. social gaming reinforces the core appeal of social networks. it’s Facebook that reminds them it’s their friend’s birthday on Thursday or tells them their cousin just got a new job or broke up with her boyfriend. The result? The average social gamer in the United States is a 48-year-old woman. 28% 2–3 times per week. as with the Wii. Friends will water your virtual crops while you’re on real vacation or lend you money to buy weapons. > 39% of their time is devoted to social games. a user can send virtual drinks. social networking grew by 56%. and 4% once a week or less Social gaming requires less time.THe SHIFT period. 14% on a handheld gaming device. family and colleagues. no special equipment. 22% on a console game system. 32% once a day. Facebook has now become as important to gaming as other casual gaming sites. and 30% to hardcore games > 52% access games on the computer. including both casual and hardcore games. 12% on mobile phones > 36% play several times per day. Facebook surpassed Yahoo! as the number one casual gaming website among casual gamers. flowers. social gaming has high appeal with women.” said Robin Boyar of Thinktank Research.156 Again. Within this virtual social context. and birthday cake to their friends.000 hard-core gamers in North America. 31% to casual games. “With more than 80% of social gamers stating that playing social games strengthens their relationship with friends. There’s no reason those virtual gifts couldn’t be real money or coupons earned through playing games online. PopCap. viewing advertising. in assessing the attractiveness of several new gaming applications among 1. In fact.

made a plug for Zynga as a developer-friendly environment: I want indie developers to know that this is a good space to make games and get visibility. Indeed.159 By comparison. virTual $5 billion markeT caP A winner in the social gaming explosion is Zynga—maker of FarmVille. publicly traded Entertainment Arts (EA)—maker of monster successes like Madden NFL. virTual croPs. the game’s general manager. etc. scores.9 billion as of June 2010. noT hiGh mainTenance Still. If you develop a great game. there are the hardcore gamers who show a strong willingness to pay for new services to enhance their gaming experience and gain a competitive advantage. Zynga has over 235 million users. people will find it and play it. Mafia Wars. The Sims. In an interview at the conference. and the new FrontierVille games famously available via Facebook. opening up the opportunity to allow them seamless integration of their activities.160 hiGh dollar. these two worlds are converging. Bill Mooney. across platforms. and Farmville launched in the App Store at the end of June. You don’t have to wait years and years to make it happen. and enhancing their connection with their social network. as social gaming users spread their time across different gaming media fairly evenly. the second most popular application combined gaming with social networking. and financial analysts say the private company may haul in $500 million in sales in 2010 and estimated its market cap at $5 billion in April. Our own research showed that gaming is one of the most lucrative opportunities in the 178 | CHAPTer 10 . allowing gamers to represent themselves as their avatars when connecting with others outside of the game experience. virTual enemies. Farmville won the first “Best New Social/Online Game” Choice Award at the GDC in April. Users can also play the games via MySpace. Interestingly. Yahoo! and other sites. and Rock Band—had an actual market cap of $4. People loved farmville and were playing it before we spent any money on advertising.THe SHIFT merchandise.

movies. and online video enthusiasts—gamers had the highest take rate for new services and delivered the highest average revenue per potential customer by several orders of magnitude. Would they follow the pattern of online video and social networking and have a reduced willingness to pay? Possibly. There’s the “freemium” market where gamers play for free and then pay to have additional advantages within a game. it’s starting from a baseline service that they expect to get for free. The data isn’t surprising. In application stores. etc. are another option. Each service combined gaming with a varying mashup of network APIs—presence. branded games that tie into larger marketing campaigns for music. A viral marketing campaign might also give them extra benefits for inviting friends to download the game. The outcome revealed gamers’ favorite APIs and their relative willingness to pay. it makes sense that gamers would value an asset that helps them know when their friends are 179 gAMINg: NoT A SPeCTATor SPorT | . Hardcore gamers. social networkers. Whatever new services they’ll pay for. Think: a new kid’s movie that has merchandising tie-ins can offer a free game where kids can play to earn sneak previews of additional content or credits toward online purchases. on the other hand.THe SHIFT Web 2.0 world. who selfidentified as playing at least two massively multiplayer online role-playing games (MMORPGs) for at least 7 hours per week. One other potential opportunity to head off reduced willingness to pay is to take advantage of the mashup that gamers liked the most—game-play rewards. Compared to our other tested groups—parents. Another opportunity lies in building services using the clear favorite API for gamers: presence. How this data would translate for casual gamers is unclear. from the one-time cost of a console game to the ongoing monthly subscription fee for an online game. considering other audiences are not accustomed to paying for online video or social networks. storage. We tested several new gaming services with active gamers. Many games in the App Store and on social networking sites are free. are quite used to investing significant money for their pastime. food service. A provider of gaming services could offer brands the opportunity to promote products via coupons and credits for online purchases. and QoS. which may appeal to competitive casual gamers. Given the increasingly social nature of gaming. We asked about user preferences as well as how much they would pay for the various services.

Gamers. For gamers. making them a lower-maintenance segment to service (compared with the groups mentioned above) > Have no clear preference for a billing model (such as a monthly or peruse fee for an application) but do have a clear aversion to one-time fees. like the other Web 2. Gamers: > Have a much higher willingness to pay for services enhanced with network-based capabilities. based on take rates. far fewer gamers were likely to turn to their service provider as their first response. high-dollar (in the form of a much higher willingness to pay) does not translate to high-maintenance for a network provider. service providers are better served avoiding one-time fees when targeting the gamer segment as potential revenue is sub-optimized with this approach. compared with 63% of parents. The greatest opportunities are in blending all of a provider’s assets to enhance the increasingly social and mobile aspects of gaming. and 44% of social networkers.THe SHIFT available and connect in real time. and connected parents) > Are more likely to pursue other channels for support in the event their favorite application is not working. and storage (compared with social networkers. The support channels gamers prefer reflect their online sophistication. with gamers much more likely to engage in online forums than their Web 2. That is. the greater a gamer’s willingness to pay.0 counterparts. you may want to rethink your strategy. such as allowing users access to their services from anywhere through network. or service definition. 180 | CHAPTer 10 .0 consumer groups we tested. only 35% of gamers were likely to pursue their network operator. increases willingness to pay as much as 34%. In this case. such as presence. Specifically. are willing to pay more for more robust services. PuTTinG iT all ToGeTher If you are a provider or developer and are not in the game of servicing gamers. online video enthusiasts. QoS. bundling multiple APIs together into one massive mashup. The more powerful the service.or cloud-based services. Specifically. 48% of online video enthusiasts. when asked whom they would be most likely to initially contact for assistance in the event their favorite gaming application was not working.

and location Gamers have grown up from the Atari generation of the 1980s. In fact. including preferences. However. Providers should not take this one too far. gAMINg: NoT A SPeCTATor SPorT | 181 . the advertising must be unobtrusive to the gaming experience. their acceptance of advertising that does not disrupt the gaming experience creates yet another revenue stream to tap into this lucrative market. gamers are among the most socially connected 2. And. perhaps it’s time to get off the sidelines. If you’re not servicing gamers. we are not suggesting that tolerance for advertising translates to purchase intent. First. They are also more sophisticated in caring for their support needs. Gamers. Finally.0 enthusiasts we examined in our research. given gamers are a high-dollar segment who are also at least tolerant to heavy ad rotation bodes well for those servicing them. like the other audiences tested. presence. second. This is no longer an activity for the socially isolated. were equally likely to take a service with up to three times the number of advertising impressions.THe SHIFT > Are surprisingly tolerant of service definitions with a high frequency of advertising impressions. > Are more likely to trust their service provider over an application developer when sharing sensitive contextual information about themselves. They have a passion for their pastime and a willingness to pay for their addiction.

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comprehensive support alternatives. multiple secondary sources point to this segment’s need to deliver revenue growth. placing networkbased security options on par with more expensive. applications that address this challenge will find a receptive market. As such.THe SHIFT key chaPTer hiGhliGhTs Small businesses represent the growth engine of our economy. Small businesses crave security. This market is surprisingly receptive to advertising. providers attempting to address this market have found its fragmentation challenging. 186 | CHAPTer 11 . they find themselves in an unenviable position—sandwiched between the behemoth markets of large enterprises and consumers. offering an opportunity for advertising-subsidized business models. Simplicity is key for this audience. Accordingly. given the recessionary times. Providers should avoid over-engineering services with complex functionality and billing options or face sub-optimal revenues as a result. Yet.

travel 187 SMAll BuSINeSS: THe AMerICAN dreAM | .THe SHIFT > enTrePreneurshiP is The hearTbeaT of The american dream. with 84% of respondents reporting a positive reaction).” and “the federal government. this was the highest figure of any entity assessed. even churches and synagogues.” In fact.500 American adults in March of 2010 found that small businesses outranked the media. corporations. including “capitalism. Don’t believe us? Consider the following: A 2010 Gallup Poll found that “small business” received the most favorable reaction from respondents when compared with six other terms. “entrepreneurs” also fared well. found that 80% of respondents regularly patronize small businesses over larger chains. 95% of Americans polled indicated a positive image associated with the term (interestingly. Perhaps that helps explain why Americans are in love with small business.162 Finally.161 A separate poll by the Pew Research Center conducted among 2. Surprisingly. an online marketing services provider that works primarily with small and medium-sized companies. Respondents cited their top three motivations as community support. and government in their contribution to society.” “socialism. a 2010 survey released by WebVisible. which earned favorable ratings from only 63% of respondents in comparison. More than 70% of respondents said small businesses positively affect society.

000 new jobs. In fact. only 17% of those surveyed stated they do not choose small business over larger chains. entered a new market. Maybe that’s because small businesses represent more than 99% of all US employers and have created 64% of all new jobs in the past 15 years according to the US Small Business Administration. according to the EU Flash Eurobarometer. In fact.167 In fact. the figure was 44%. which helps US companies expand internationally. lest you believe that the impact of small business is relegated exclusively within the confines of the US border. that job creation figure has been as high as 80% in recent years). Indeed.165 Indeed. up 3% over 2009. surpassing Uncle Sam. with 66% of European CEOs saying small business will be the primary source of job creation in their countries through 2011 (compared with 40% of US CEOs).168 Perhaps these bullish estimates reflect the point that small business is a pivotal growth element in any economy.166 And. That represents a 3% increase over 2008.169 188 | CHAPTer 11 . for all the optimism that Americans have toward small business. public companies. In all cases. or increased their international penetration in 2009. with 61% of Americans indicating they would prefer self-employment to working for someone else. the Organization for Economic Cooperation and Development (OECD) reported that in 2008. small business is the American dream. In contrast.163 This final study would corroborate that respondents’ positive beliefs about small businesses are translating to increased patronage of these establishments. the self-employment rate in 25 European countries was higher than in the United States and was lower only in Luxembourg. and personalized attention. or new ventures in their countries. a higher share than in 25 European countries. according to a recent NYSE Euronext CEO Report. (In Europe. the US Commercial Service. which defines a small business as one employing 250 or fewer employees. Intuit’s Small Business Employment Index reported that small businesses in the United States generated 49. CEOs across the globe predicted more job growth from small business than from the government. it may surprise you to learn that small business currently accounts for less of the total economic activity in the United States than in many European nations. and even organized religion in its societal impact and favor. For CEOs in the rest of the world. reported that 23% of its clients exported for the first time.164 In 2010. big business. confidence in small business is even stronger overseas.THe SHIFT convenience. these surveys support that small business is no small wonder.

With hundreds of thousands—if not millions—of developers creating new products and services for these entrepreneurs. sophisticated communications needs. Bush. and significant growth potential. Confidence among US small businesses rose in May of 2010 to 189 SMAll BuSINeSS: THe AMerICAN dreAM | . the question now turns to one of attraction among these small business entrepreneurs. Yet. Compass Intelligence estimates Information/Communications Technology (ICT) spend of businesses with 5–99 employees to reach nearly $280 billion by 2012.THe SHIFT Small business is not small potatoes in the telecommunications world either. typically offered to large enterprises. And. when the Clinton Administration popularized this slogan in its campaign defeat against George H. few could have imagined this politically incorrect statement would have seemingly timeless relevance. making this mantra most appropriate for this segment. There are too many of them to be treated as a custom market with the same costly go-to-market tactics. service providers challenged by the fragmentation of this market have an alternative to the more onerous do-it-yourself service creation options. Indeed. sTuPid It’s ironic that such a politically incorrect battle cry actually originated in politics itself. Do small businesses perceive value in network-based intelligence when said capabilities are inserted into new or existing services? Alcatel-Lucent sought to answer this question by canvassing over 800 small and medium-sized businesses in the United States—all with 100 employees or less. W.170 Despite the opportunities. this audience has been a challenge to providers attempting to cash in. sandwiched between the behemoths of mass-market consumers on one end and large corporations on the other. typically more common in mass consumer markets. Given their unique buying behaviors. the economy itself weighs heaviest on small and medium-sized business owners. such as face-to-face and dedicated account management options. As recessionary times once again abound. since research demonstrates that commercial developers have an appetite and willingness to pay for network capabilities. And. small businesses are perhaps the most lucrative segment of the user market where application enablement makes the most sense. they are too complex in their buying needs to be treated with the same one-size-fits-all packaging and media options. iT’s The economy. small businesses suffer the proverbial middle child syndrome.

Interestingly. if not politically incorrect. attracting financing. DC. marketing and sales surfaced as the top priority among the seven.172 As this evidence supports. The study found that 30% of respondents cited “poor sales” as their top business concern. only reducing overall operational expenses scored better. cited by 44% and 37% of respondents. We asked respondents to indicate their top three factors that drive decision-making from a list of ten possibilities. Despite this uptick.THe SHIFT the highest levels in 8 months according to the National Federation of Independent Business. doing so creates consequences in customer acquisition and service. including managing cash flow. and acquiring talent. respectively. current recessionary times place a priority on growing topline revenues among these small business owners. saying that was first coined by a lead engineer at Lockheed. While it can be tempting to over-engineer a product or service. small businesses still lag larger companies in their optimism for the future. Travelers polled 101 small business owners in May of 2010 at the US Chamber of Commerce America’s Small Business Summit in Washington. selected by 50% of respondents. up a point from April. Our data found the same. Respondents were asked to rank their top priorities from a list of seven. Up until now. Look no further than the decision makers in our study for evidence to support this credo.171 In yet another study. As a reminder: > Consumers were willing to spend approximately 25%–35% more for a service with three capabilities operating simultaneously when compared against a service using any one capability on its own. sTuPid Another popular. In fact. pertains to designing for simplicity. keeP iT simPle. Creating revenue streams and increasing customer satisfaction scored in the top three. signaling a more upbeat attitude about the economy 6 months from now. outperforming critical financial drivers in the race. 190 | CHAPTer 11 . we have largely praised the concept of bundling as it pertains to creating new functionality in services.

less can be more. For this critical parameter. Let’s take each finding in turn. their appetite is less than that of their survey counterparts. “Keep it Simple. the bundling opportunity takes a different twist. For this audience. First. bundling represents increased revenue potential but there is a law of diminishing returns at play. for these entrepreneurs. > Enterprise IT developers were willing to spend up to three times as much for bundles of APIs when compared with the revenue potential of each API sold separately. they are a visible representation of the now popularized tenet. This range is significantly lower than that seen from the other survey groups above. the inclusion of more features or functionality begins to decrease willingness to pay in some cases. After this revenue-maximizing point. It comes as no surprise that differences abound in this highly fragmented market. even when comparing a basic firm characteristic—the number of employees.” size does maTTer Small and medium-sized businesses are as unique as their owners. 191 SMAll BuSINeSS: THe AMerICAN dreAM | . It’s almost as if this audience is unafraid of saying when enough is enough. Specifically. For this audience. Not only is this audience less attracted to bundling when compared with the others listed above. Too many features and too much functionality begin to erode value of the service. the addition of weaker performing APIs (as measured by functionality within a service definition) brings down the value of the overall bundle. services consisting of bundled network capabilities garner about 5%–20% more revenue than those represented by single functionality. Inserting more complication in the system sub-optimizes willingness to pay. Stupid. Second. the inclusion of additional network capabilities increases willingness to pay—but only up to a point in which revenue is maximized. Hence. For small and medium-sized businesses. though this audience will increase its willingness to pay for bundled network capabilities. two findings in particular are worth mention.THe SHIFT > Commercial developers were willing to spend up to twice as much for bundles of APIs when compared with the revenue potential of each API sold independently.

smaller firms (those with 19 or fewer employees) tend to have lower willingness to pay than their mid-sized counterparts (those with 20–99 employees)—when compared on a revenue-per-employee basis. This first point is true when considering the stickiness. we find that both increase with the size of the organization. when it comes to interest and willingness to pay. which scored particularly well—it must first address this employee policy gap. 32% of medium-sized organizations (those with 20–99 employees) responded affirmatively. For a service provider looking to incorporate some of the more sensitive contextual APIs into their service definitions—especially presence-based capabilities. small and medium-sized enterprises were equally drawn to QoS capabilities (including the abilities to temporarily boost bandwidth or diagnose how an application is performing across the network) and presence APIs (including the abilities to click to connect with or send messages to multiple individuals based on the devices they are currently using). A provider may well find itself in a position where small enterprises gravitate toward APIs without the employee policies in place to authorize said functionality. offering advanced network capabilities generates incremental revenues for providers by attracting new customers and retaining existing ones. including content and media consumption. In a finite market. in a provider’s go-to-market approach.THe SHIFT First. 192 | CHAPTer 11 . size matters once again. In short. only 10% of very small (those with 1–5 employees) and 20% of small (those with 6–19 employees) organizations indicated the same. and time spent on the network. the size of the firm has something to do with how network features and functionality are evaluated. For these network capabilities. Second. a provider may spend up to six times the expense to attract a new customer to take the former’s place. While revenue potential may differ. For every subscriber that deactivates service. bandwidth consumed. It’s no wonder that retention and loyalty are critical measures in this space. and both opportunities are positively correlated as the employee size of the customer’s enterprise increases. when it comes to how these organizations perceive sensitive profiling information about employees. of a service. or retention factor. churn is the enemy. That is. Again. When asked if their organization currently has policies capable of monitoring employee behavior. regardless of firm size. In contrast. if not outright addressed. the attraction to particular network capabilities is similar. This gap must be recognized.

When pitting security (as expressed by services being offered over a secure network) against five competing value-added options. Among the findings were the following: > Indefinite discounts of 20% off the cost of a service attracted more than enough incremental respondents to justify the cost of the discount. Among them was an increase in the number of targeted threats focused on enterprises. the mere presence of a service traversing a secure network alone rivaled a very expensive support package inclusive of localized account management and a live IT help desk. our old friend security once again sits in a prominent position at this table. these decision makers are eager to trade their attention (and even that of their employees) for money back in their wallet. and the opportunities are fraught with disaster. a provider can neutralize the discounted revenue per respondent by making it up in volume with incremental demand. We once again put security to the test among this audience. Symantec recently released its Security Threat Report volume XV. Note that this analysis does not even factor in the incremental advertising dollars afforded a provider under this approach. which highlighted trends in cybercrime in 2009. In a fragmented market where dedicated account support is all but non-existent. 193 SMAll BuSINeSS: THe AMerICAN dreAM | .173 Intersect this cybercrime trend with the rise of social media in the small enterprise sector. And. In this case. these entrepreneurs demonstrate what makes them savvy businesspeople in the first place: they are open to a good deal. The findings were a bit surprising.THe SHIFT securiTy rivals suPPorT In matters where differences between these enterprises were less pronounced. If this point does not put the security threat in perspective. in a market where advertising can subsidize the cost of a service. This point bears repeating. we’re not sure what would. The report found that attackers were using information made available on social networking sites to launch direct attacks at particular firms or company individuals. We asked respondents how likely they would be to subscribe to a service that was discounted over a period of time in exchange for a set number of advertisement exposures to their employee base. won’T be fooled Finally. it rivaled the most comprehensive support package in attracting respondents’ interest and increasing their willingness to pay.

the 20% discount in exchange for advertising could be as little as 6 months. > In cases of more attractive ad formats tested (such as video. Providers and developers should avoid overengineering services or face sub-optimized revenues as a result. They are too many in number to be treated with customization. All firms in the sample were amenable to advertising as an option to subsidize their communications costs. they should keep billing options simple to preclude any surprises. for example). if consumer and CEO confidence levels are any indication. They are savvy entrepreneurs looking for ways to grow their topline despite a recession. PuTTinG iT all ToGeTher Small and medium-sized businesses are not without their challenges. this is a very direct mantra but it speaks loudly for this audience. And. They are willing to sacrifice their attention in exchange for a compelling discount. And. Willingness to pay and stay both exist and are positively correlated to the size of the firm. The tenets for providers and developers looking to tap into this space are straightforward: > These entrepreneurs see value in network-based capabilities when inserted in service definitions. When we tested various billing options among this audience. This audience does not suffer fools gladly. > Keep it Simple. The evidence suggests that advertising is an area of interest among these respondents—one that will also result in incremental revenues for providers. monthly billing 194 | CHAPTer 11 . advertisers would be wise to take notice. showing that preferential ad formats require less of a discount period to attract buyers. our economy directly depends on their success.THe SHIFT > This was a case where size did not matter. which is a good news story for providers and developers alike. Likewise. Yes. Stupid. They are too complex in their needs to be handled with a one-size-fits-all approach. given the economic growth this audience is expected to stimulate over the next few years.

and its lack of dedicated IT support when compared with that of its large enterprise brethren make this segment ripe for attack. let’s turn our attention to another hot topic in today’s headlines: the healthcare segment. Otherwise. as their larger counterparts. The confluence of cybercrime trends. What this segment lacks in technical prowess is more than made up for in business savvy.THe SHIFT far exceeded any per-use alternatives in maximizing a provider’s revenue potential. With small and medium-sized businesses ready and willing to participate. A market where fragmentation was once their most significant challenge can now be their biggest opportunity in an application-enabled world. > Providers and developers should recognize the limitations of contextual APIs as they pertain to company policies that allow or prohibit their use. the pent-up demand for such services will be thwarted by insufficient privacy policies inherent in these organizations. social media adoption among this audience. These arguments point to an interesting and practical course for service providers. that service providers can make up any discounted revenues with incremental volume. Service providers who understand this threat and offer network-based security as a table stake stand to gain. The challenge is that this segment is equally attracted to these capabilities. This doesn’t even cover the upside associated with the advertising itself. particularly those in the presence category. Simplicity is key when dealing with this audience. Service providers must acknowledge if not outright address this gap in their go-to-market attempts. > Security is a must. They are open to new advertising models—so much so. > Advertising should not be ignored. SMAll BuSINeSS: THe AMerICAN dreAM | 195 . but particularly deficient among very small enterprises (those with five or fewer employees). The presence of employee policies to authorize such services is low across the board among these firms. It alone rivaled the most comprehensive (and expensive) support option.

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to attract talent and optimize patient care. remote healthcare monitoring solutions place the patient at the center of his care and allow providers and developers an emerging growth opportunity. healthcare decision makers are the most enthusiastic of all vertical segments tested as it pertains to their interest in network-enabled applications. 198 | CHAPTer 12 . Meaningful use requirements associated with electronic health records place unprecedented demands upon secure and reliable networks. given these trends. such as eICus. geographically challenged facilities are turning to remote healthcare alternatives.THe SHIFT key chaPTer hiGhliGhTs The recent healthcare reform movement represents significant opportunity for ICT providers in this market.

90% of US healthcare leaders and 84% of global healthcare leaders indicated that information technology will be a “key factor” for transforming healthcare today and in the decade to come. polled 590 leaders of health plans.THe SHIFT > browse any major news PublicaTion These days and you’re bound to find ample content surrounding the current healthcare debate. the impact of IT and communications on this critical sector has never been more significant. While we can wax poetic about the opportunities afforded through such transformation. 2010. employers. and the means by which chronic disease is prevented and managed. The stakes are major: Healthcare reform to cover nearly all legal American citizens at a cost of roughly $1 trillion over the next 10 years. the methods used to access medical expertise. and pharmaceutical and life science firms in 20 countries. And. conducted in April. while this bill will be funded through multiple cost-reduction or revenue-generating options.174 The survey. physician groups. That’s because ICT stands to revolutionize the way patient care is administered. providers. HIgHer rewArdS | . 199 HeAlTHCAre: HIgH STAKeS. perhaps the argument would be more credible coming from those within the healthcare industry. According to a recent PricewaterhouseCoopers (PwC) study. government.

Healthcare is extremely complex. 42% of respondents reported meeting meaningful use criteria. Likewise. True to a classic behavioral modification model. efficiencies in this sector take on new meaning. Further. or bridges geographic boundaries separating medical experts. all of America’s medical records are computerized. The set of criteria to measure compliance is extensive. the plan uses a carrot and stick approach. Caregivers enter the field with the noble intentions of curing the sick and saving lives. But. With patient care as the desired outcome. access to funding and talent are imperatives. as we will prove. when asked to identify their single IT priority over the next 2 years.” Shortly thereafter.THe SHIFT Whether ICT enables preventative care. we will cover how healthcare decision makers evaluated Application Enablement in an environment where seconds can literally mean the difference between life and death. The Hippocratic Oath becomes the compass by which new technologies and enablers may be measured. ICT has an important role to play in this story.175 “Meaningful use. allows clinicians to spend more time with patients. the American Recovery and Reinvestment Act was approved. “We will make the immediate investments necessary to ensure that within 5 years. those who have failed to adhere by 2015 will find their Medicare reimbursement payments adversely affected. As the United States seeks to insure tens of millions more Americans without breaking the bank in the process. Nearly half who predicted their budgets would increase cited meaningful use as a driver. Let’s examine the role of ICT in transforming this critical field—all while supporting its noblest of intentions. its significance in this game has never been greater. Later. fundinG—a whole new “meaninG” Nearly three-quarters of respondents to the 21st Annual Healthcare Information and Management Systems Society (HIMSS) Leadership Survey reported they expect their IT operating budgets to increase in 2010—that’s up from 55% of respondents who indicated the same in 2009. and with it some $36 billion in funding to make this ambition a reality. its passion is straightforward. To demonstrate “meaningful 200 | CHAPTer 12 .” The seemingly innocuous phrase stepped into the limelight shortly after President Obama—2 weeks prior to taking his elected position in January 2009—prophetically proclaimed. And. Financial incentives are available for those practitioners and sites jumping on board quickly.


use” of electronic health records, doctors and hospitals must meet 15 and 14 core objectives, respectively. Among some of these, doctors would need to provide patients with an electronic copy of their health information on request. Doctors and hospitals would need to demonstrate that they can “electronically exchange key clinical information.” And, since dollars and cents are at play, this new standard of electronic health certainly has the attention of the medical community. At the heart of meaningful use is the electronic health record (EHR). Today, most hospitals and healthcare practitioners wade through a sea of paperwork, much of which must be maintained and secured for several years under current regulations. A patient with multiple practitioners and a lifelong history of medical visits often finds himself the subject of fragmented recordkeeping. Caregivers requiring the efficient exchange of patient information—particularly for complex cases—must frequently rely upon archaic search and retrieval capabilities inherent in paper-based systems. For example, a recent study by Jackson Healthcare across nearly 2,500 nurses found that only one-quarter of a 12-hour shift is spent on patient care, with the vast majority of the nurse’s remaining time being consumed by paperwork activities.176 Digitizing patient information and making it accessible across clinician and hospital boundaries addresses this challenge and optimizes patient care. To be fair, moving to an EHR approach is not without its challenges, notably the onerous transition required to repopulate paper-based notations into an electronic record and the user intervention necessary to do so. However, for early adopters of EHR systems, initial results are promising. Long before meaningful use was ever in the headlines, leaders at Sentara Health System envisioned a brave new world of electronic patient records. As one of the earliest adopters of an EHR system, results across six hospitals in 2009 were nothing short of extraordinary, as Sentara: > Achieved $9.3 million in benefits associated with reduced lengths of stay and decreased adverse drug effects > Attained $9.4 million in savings associated with improved retention of nurses and lower overtime and contractor costs (key accelerants to nursing turnover)

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> Increased the number of outpatient procedures at a dollar benefit of $4.4 million—essentially by improving efficiencies and doing more with less > Avoided more than 88,000 medication errors The bottom line? Sentara exceeded its projected $17 million return on investment by $12 million in 2009.177 Not too shabby for a system that also optimized patient care in the process. In fact, analysts at Thomson Reuters recently pegged the estimated annual savings associated with such system improvements to be $50 billion across the industry, simply due to avoidance of duplicated tests and inappropriate treatments made possible by electronic records.178 With significant time, resources and money riding on healthcare reform, the pivotal aspect of electronic patient records has profound impact on network providers. If we have been impressed by how the digitization of content, such as music and movies, has changed how we consume entertainment, imagine the tsunamic effects of transforming our healthcare identities in the same way. Not surprisingly, the key concern among both patients and practitioners rests in the security of such sacred content. A study by Harris Interactive found that over 70% of consumers have “significant” concerns about the security of electronic health records.179 Similarly, another study by the California HealthCare Foundation found that two out of three Americans are concerned about the privacy of their health information.180 The concerns are warranted. Take the following: > According to the 2010 HIMSS Analytics Report: Security of Patient Data, critical gaps were found in data security, with hospitals dedicating more time to breach response than to breach prevention. The number of healthcare organizations that reported a breach increased to 19% of respondents—up from 13% the previous year. These organizations tend to underestimate the financial burden of such breaches, despite regulatory penalties that can reach up to $1.5 million alone.181 > Per the HIMSS Leadership Survey, 34% of respondents indicated an internal breach of security was their top concern, and nearly one-quarter said their organization had a security breach in the past year.182


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> SecureWorks, an information security service which protects over eighty healthcare companies in the United States, reported that attacks against these clients doubled in the fourth quarter of 2009.183 Despite these security concerns, current reform investment initiatives will support the adoption of electronic health records within the next few years. Opportunistic service providers and developers will see this revolution as the next step-function in growth for this critical sector. And, network functionality, such as security, QoS and contextual capabilities may prove instrumental in accelerating this change.

careGiver—bridGinG The diGiTal divide As the healthcare landscape becomes even more fiercely competitive, access to talent is a key weapon in the battle. Patients select doctors. Doctors select facilities. In this circle of life, those able to attract the best clinicians can use these experts as the proverbial Pied Pipers in the equation. And, technology is fast becoming an attractor, if not equalizer, in this race for the best. Let’s take a couple of examples. We’ve discussed how EHR will remain at the center of incentives and penalties for healthcare providers over the next several years. However, it is also a key attractor for technologically advanced physicians. According to a recent study by Epocrates, 84% of medical students had experience with electronic medical records during their clinical rotations, and 90% indicated that such functionality would be an important factor in choosing where to practice medicine.184 And, if digitization of patient content serves to attract a new breed of technologically advanced practitioner, the underlying networks transporting these bits and bytes are the great equalizer for geographically disadvantaged facilities. Among the latest trends for rural hospitals is the rise of the eICU. Unfortunately, you have likely been affected by an ICU incident—either directly or indirectly—and therefore may be all too familiar with typical ICU care. The traditional approach of caring for an ICU patient involves doctors making rounds at prescribed intervals with caregivers monitoring patient

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activity the rest of the time. The challenge is apparent for a large hospital in an urban market—limited specialists to attend to multiple critical care patients. Imagine how much more the problem is exacerbated in rural America, where access to specialists is even scarcer. Approximately 250 hospitals in the United States have turned to the eICU as one remedy to a complex problem. By remotely connecting specialists with patients through instant multimedia capabilities (including realtime videoconferencing and collaboration functionality at the patient’s bedside), these geographically disadvantaged institutions are tapping into a breed of technologically sophisticated specialists. And, the benefits surpass talent acquisition. Officials from Union Hospital in Clinton, Indiana report that the program has resulted in a decreased patient stay of 26%, allowing the facility to admit 18% more ICU cases. 185 The Leapfrog Group, a consortium of large employers, estimates 54,000 people a year could be saved if every US ICU case were co-managed by a specialist— an impossible feat without technology due to the scarcity of specialists available. As a case in point, we’ve already mentioned Sentara as an early adopter of EHR. Not surprisingly, this innovator was also among the first to adopt an eICU system. Based on death rates before and after the system was introduced, the pioneer estimates that its eICU has saved nearly 500 patients who would have died in traditional care—all while decreasing the cost per ICU case by nearly $3000, or 25%. 186 Finally, if networks bridge the distance between talent and facility, devices level the playing field for a new wave of mobility and computing. We discussed the commercial success of the iPad in an earlier chapter, but the potential impact of this device and others like it stands to catalyze this industry forward into a brave new mobile world. As an example, Kaweah Delta Health Care District in California plans to buy more than 100 iPads in the next couple of months. Beyond the mobility the device affords (especially critical given the movement to EHR), the facility also estimates cost-saving benefits. Its emergency department can substitute one Computer on Wheels (COW) at $7,500 for three iPads costing $1,500—all without compromising functionality or patient care.187


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PaTienT—from PassivisT To ParTner It’s hard to imagine life before the Internet. At one time not so far in the distant past, patients lacked the wealth of information now readily available through a few mouse clicks on virtually any identifiable condition. Information empowers. And, the Internet has done wonders in creating a new breed of educated and empowered patients. While the Internet’s impact has been impressive on its own, the same networks that connect patients to information can further redefine the landscape of preventative care. If the Internet connects individuals to sources, the next wave of innovation links patients to caregivers. We are not simply speaking of Web 2.0 tools akin to social media, though these have certainly facilitated a new doctor-patient relationship. This concept goes far beyond communication. We are referring to ICT as a critical enabler in the ongoing management of chronic diseases. If the Internet evolved the patient from passivist to participant in managing health, this new era promotes the patient to partner. Take home monitoring devices as one example. With healthcare savings derived from a greater focus on patient involvement in care, placing the individual as an active partner—as opposed to a passive bystander—of treatment, imposes a new level of accountability with measurable results. A study conducted by Kaiser Permanente Colorado, the American Heart Association, and Microsoft put this theory to the test among 348 patients divided into one of two groups: home monitoring or usual care. The former group received a blood pressure device with a USB connection that allowed users to transmit regular readings to a secure network server. Clinical pharmacists were then able to access these results and consult with these patients on medicinal adjustments. The control group had no personal monitoring capabilities available. After 6 months, 58% of patients with the monitoring device had lowered their blood pressure, compared with 38% in the control group.188 Though further study is required, the preliminary results are an encouraging indicator of the ICT potential in placing the patient at the center of care. And, if extending patient care unobtrusively into a home environment changes the landscape once again, the EHR puts the patient in the driver’s seat. With boundaryless collaboration, consultation, and communication between physicians, patients,

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specialists, and clinicians, the possibilities in this space are equally boundless. In fact, according to the previously mentioned survey by the California HealthCare Foundation, consumers engage more in their own healthcare when they have access to their personal health record.189 That is, consumers with online access to their health information pay more attention to their health. Once again, underlying networks are a key enabler to this powerful end.

aPPlicaTion enablemenT in The healThcare environmenT The expected transformation to our healthcare environment will make history in the next few years. But, how does Application Enablement fit into this story, if at all? Alcatel-Lucent canvassed 300 healthcare decision makers to determine how capabilities within the network, such as quality of service, security, and contextual functionalities, may serve to accelerate this transformation. Among the findings: > When asked to evaluate over a dozen new ICT service definitions, decision makers favored those that optimized clinician workflows or facilitated preventative medicine. - In an industry where seconds matter, it comes as no surprise that one of the most valued applications, based on respondents’ willingness to pay, involved the seamless shifting of communication from various modes (for example, escalating from a voice to video call in one session) in a collaborative environment. - Given all of the discussion surrounding EHR and the role of the network in facilitating the transport of such content across devices and individuals, another top performing application incorporated QoS optimizers during periods of network congestion. (For the non-technophiles in the audience, think of this as having a smart network that can detect when more bandwidth is needed and can temporarily give you a boost when transmitting large files.) - Finally, given the rise of home monitoring, the capabilities afforded through an unobtrusive network medical monitoring device also garnered high willingness to pay among respondents. Interestingly, in a separate module of our research aimed at


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. Not surprising when you consider the emerging health challenges facing Baby Boomers as discussed in that chapter. the healthcare segment is unique when compared to all others in that it perceives location characteristics as more attractive and with a higher willingness to pay than its vertical counterparts. such as being able to physically locate the nearest clinician to a patient.THe SHIFT connected parents. . this point is validated through our study.Presence capabilities.Storage and QoS capabilities that provide for the transmission of electronic patient records to any device. > In terms of security.Advanced security options. One in five healthcare decision makers would place a very high priority in obtaining the applications tested. . and optimized for delivery across the network. respondents indicated higher take rates for services noted as traversing secure networks. HeAlTHCAre: HIgH STAKeS. > Healthcare decision makers are among the most enthusiastic of all vertical segments tested. With the earlier examples surrounding security breaches and mounting concern among both patients and practitioners. also performed well. also scored well in terms of willingness to pay. In fact. received particularly high marks from respondents in terms of both interest and willingness to pay. compared with one in six across all segments. scored particularly well in this time-crunched environment. such as being able to seamlessly and automatically click to connect to a clinician based on the most accessible device.Location capabilities. the results corroborate the challenges faced by these decision makers: . HIgHer rewArdS | 207 . respondents also placed a remote health monitoring solution among their top favorites of next-generation services. such as biometric identification. > When looking at which network capabilities had the most profound impact on influencing a respondent’s willingness to pay for a particular service.

However. they should also provide incremental capabilities for niche audiences willing to pay more for innovation. Like its large organization counterparts.THe SHIFT PuTTinG iT all ToGeTher The healthcare sector is poised to make history. with many facilities operating at or below breakeven points. End-to-end network security is a table stake. Providers should offer the basics in a world where simplicity is craved. the more likely the decision maker is to restrict its access to a more finite employee population. ICT can be foundational to this transformation. This is a market where seconds count. But. Patient care is at the heart of this sector. EHR. ICT stands in a unique position to simultaneously provide enhanced patient care options while improving efficiencies (as the cases of eICU. Providers should offer comprehensive support options. Security takes on a whole new meaning with this segment. though they also won’t get past the front door without it. Any application that improves patient care will grab attention. > Security and support are second nature. The result would be decreasing revenues for service providers that bundle too many capabilities in an offering. when possible. 208 | CHAPTer 12 . these healthcare decision makers are likely to reduce take rates on overly complex service definitions. but providers seeking to insert value in this ecosystem must heed the following: > Providers should follow the Hippocratic Oath as the compass. the more advanced the service. > Less is more. including standard 24x7 live help desks. Providers should think of network security as their ticket just to earn the right to play the game. and remote home monitoring illustrate). In other words. and providers won’t earn much more in willingness to pay by offering this fundamental requirement. doing more with less is more than a trite saying on a coffee cup. But. enhanced with dedicated and localized account management. those offering advanced biometric techniques (such as voiceprint authentication for callers) will appeal to this security-conscious audience that is willing to pay more for more robust performance.

And. HIgHer rewArdS | 209 . rather than vice versa. HeAlTHCAre: HIgH STAKeS. patients benefit. Once technology begins to work for practitioners. providers are primed to support this transformation for a technologically fragmented segment. research supports that leveraging the network as a platform offers this potential to providers looking for their place in this value chain. And. isn’t that what healthcare is all about in the first place? Now that we’ve explored how regulatory reform is changing the complexion of this market. With regulatory reform providing incentives to this market.THe SHIFT The iPad has already demonstrated the power of a platform in attracting developers that can design applications tailored to this market. let’s turn our attention to a market that is no stranger to regulation itself—state and local governments.

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THe SHIFT governmenT proTecTor. employer. and ServanT goVerNMeNT: ProTeCTor. eMPloYer. ANd SerVANT | chaPTer 13 211 .

Technology has a role to play in addressing this dichotomy. on one hand. governments have a penchant for contextually based services—those that enable employees to find one another quickly based on presence information. At the same time.THe SHIFT key chaPTer hiGhliGhTs governments are in an interesting predicament. 212 | CHAPTer 13 . as an example. they must respond to an increasingly collaborative constituent base and embrace transparency in communications. given this challenge. they must protect information central to our nation’s and their citizens’ security. on the other. they are more likely than their vertical counterparts to have employee policies in place that enable such services to be introduced within their organizations. governments place security as a higher priority—and value—than the most comprehensive customer support package.

It’s a complex labyrinth of federal. the Justice Research and Statistics Association identified over 250 information-sharing systems supporting just 35 states and Canada—over seven systems. consider this counter-argument. and local agencies. collects more revenues than many Fortune 1000 companies today and alone employs close to 20. and local governments employ roughly 20 million people. And. eMPloYer. Not all 20 million government employees must work together. state. on average. to further the point. Walmart. per state!190 goVerNMeNT: ProTeCTor.THe SHIFT > how many emPloyees are in your comPany? a few hundred? Several thousand? Tens of thousands? Process this factoid: US federal. state. which comes in at slightly more than a million US employees by comparison. Critics in the audience are calling “Foul!” right about now. dwarfing the largest single private employer. and local agencies exacerbates an already challenging problem in attempting to connect so many individuals in the first place. ANd SerVANT | 213 . proving that even the humblest of these government entities can rival the size and scope of our nation’s largest enterprises.000 people. state. This staggering number gives the government the unquestionable moniker as the nation’s largest employer. Rhode Island. Imagine attempting to collaborate with 20 million co-workers. The smallest state in the Union. the very complexity of multiple federal. In 2006. You would be right. But.

and collaborative. constituents expect and even prefer to use social media tools to engage with their public leaders. such as 9/11 and Katrina. When you consider constitutional freedoms. may be at stake. President Obama may be on to something. That same month. citizens who are highly satisfied with a federal government website are 52% more likely to trust the government.193 On the other hand. are painful reminders of what can happen when communication breaks down. Recent examples. The independent organization. transparency 214 | CHAPTer 13 . This point couldn’t have been made clearer than when Facebook reported it accurately predicted more than 70% of the 2010 Congressional races. based on the number of fans the candidates had earned on the site. which measures satisfaction ratings across several industries. it hardly trails the private sector in its need to share information urgently. it’s the government. participatory.191 And. interoperable communications. discovered a simple truth in its latest study: Transparency builds trust. if not very lives. the same open philosophy and social connectedness he so successfully fostered while on the stump prevail in his current administration. government leaders face an interesting and unenviable dichotomy. If results from the American Customer Satisfaction Index (ACSI) are any indicator. According to the study.192 To the extent trust translates to votes.THe SHIFT Despite (or because of ) its enormity. And yet. That’s not our opinion. If any entity needs seamless. For government agencies. the dynamic becomes much more interesting and challenging. And. It’s the direction as laid out by President Barack Obama—both in his former life as a candidate on the campaign trail and as outlined in a memo he penned upon taking office. TransParency builds TrusT (and risk) Government should be transparent. In February of 2008. security breaches or lapses in communication translate to far more than just lost dollars and cents. The vision is not surprising from a candidate who revolutionized campaign fundraising using social media weaponry. On one hand. the confluence of a new administration’s promise for transparency intersected with an increasingly techsavvy. challenging Republican candidate John McCain managed to raise $11 million for his presidential bid. the government often finds itself lagging the private sector in technological advancement. then Candidate Obama raised $55 million using social media and the Web. connected constituency marks an interesting time for providers serving this space.

Let’s examine each end of this dilemma. 70% agree we should use “the computer power and expertise of private companies to improve information technology departments in government agencies. satisfaction for offline government services had been dropping. In contrast.194 In short. at the time. it received over 2.THe SHIFT in communications and information-sharing creates risk in the system. Florida hosted its first e-town hall meeting (a live. was at the highest level since measuring for the index commenced in 2003. citizens have become acculturated to a hyper-connected society.000 replies via Twitter and Facebook within 48 hours of asking the question via the sites. they become more participatory when they do. Here are some examples: > Based on a study of 1. there is a growing expectation that governments do more with less by adopting these newer technologies. citizens are more satisfied with tools that facilitate virtual transactions and communications.”197 215 goVerNMeNT: ProTeCTor. ANd SerVANT | . or at least should be. > When the federal government was interested in taking the pulse of the American people to capture their thoughts on the next major discovery breakthrough. an average conventional town hall meeting gathers 100–150 attendees. generating over 300 published comments from this audience. Consider the following: > The previously mentioned ACSI study also shows that citizens’ perception of e-government services went up for a second consecutive quarter in 2010 and. These offer a better alternative for most than waiting in onerous queues at their local agency or on the phone. more cost-effective than other alternatives. eMPloYer.196 Citizens have also been educated that virtual capabilities are. virtual event where local citizens can engage via their computers).” Further. In comparison. Not only do they prefer to interact with 21st century tools.000 viewers and 602 blog readers. it attracted over 1. 92% believe “public agencies should make better use of new technologies to cut government spending and improve efficiency.195 > When Pinellas County. First.000 US registered voters conducted by Google and Clarus Research Group. As such.

using developers and popular app storefronts to further its cause.THe SHIFT > According to Google. and integrity in the cloud. multiple other studies corroborate it also imposes risk for those serving them. security worries have reached a fever pitch. However. county. In the same study.199 Citizens’ enthusiasm for a more open government is met in measure by a tempered reaction from public officials who respect the sanctity of sacred information. concerns over security pour cold water on this otherwise hot trend. Government officials are the former architects of a “need to know” worldview. Not surprisingly. led by the pioneering efforts of New York. In total. over 70% of voters want their state and local government to consider the same solution. a nonpartisan think tank.198 > In addition to e-town hall meetings generating significantly more traffic. Seventy percent of respondents were most concerned about data security.202 At the time of this writing. The Pentagon issued its “Apps for the Army” challenge to the developer market. multiple examples point to a government tapping into a new wave of innovation. Los Angeles saved more than $1 million per year after outsourcing the hosting and management of its email system. privacy. more than 350 applications using public information are now available 216 | CHAPTer 13 . Notably: > A survey among 300 state. despite these legitimate concerns. Developer competitions offering prize money for applications that leverage public data are becoming more commonplace. Oregon. nearly three out of four government officials polled were uncomfortable using social media to share information. and municipal tax collecting agencies found 70% of respondents unwilling to put document or payment automation in a cloud-based environment (Sources: The Association for Work Process Improvement and International Accounts Payable Professionals). Washington. If the ACSI study proved transparency builds trust among constituents.200 > According to a study by EastWest Institute. costs are up to 66% less than the traditional face-to-face alternatives. with US intelligence and actual lives put at risk with the WikiLeaks exposure. and Portland.201 > A study commissioned by Lockheed Martin Cyber Security Alliance found one-third of government IT decision makers unfamiliar with cloud computing with a similar percentage distrusting of it.

Respondents showed high interest and demand for the ability to do the following: > Send automatically formatted text. in the spirit of transparency. Given our preamble on the increasing transparency of government and convoluted interworking relationships between disparate agencies.0 development platforms to do so evaluate network-based capabilities that could accelerate the same? Alcatel-Lucent canvassed 300 state and local government decision makers to find out. we can assess how these capabilities affect respondent demand. we disguised network-based API functionality in the form of service definitions identifiable by respondents. eMPloYer. ANd SerVANT | . we tested over a dozen applications and measured interest and willingness to pay for each. according to a recent study of over 500 decision makers released by the Computing Technology Industry Association (CompTIA). participatory. when it came down to measuring what service functionalities most moved the respondents’ willingness to pay. how does a government aspiring to have a more transparent.THe SHIFT to further engage citizens.203 And. and collaborative working relationship with its constituents and already leveraging popular 2. To this end. it is not surprising that communication-oriented services reigned supreme. email or IM messages to co-workers or constituents based on the device currently in use (as a reminder. And. one-third of government IT professionals expect to execute a social networking initiative within the next year. This was the case whether the application facilitated better internal cooperation or a more participatory engagement with constituents. with or without stimulus funding. this API also took top honors among developers) 217 goVerNMeNT: ProTeCTor. Each service was a composite of several network-based APIs working in harmony. sPeakinG volumes Similar to other end-user segments. presence-based capabilities took the prize. By first understanding which applications were most appealing to these decision makers and then dissecting those services into distinct API functionality.204 So.

dedicated and localized account support.THe SHIFT > Automatically have a call redirected to a person based on the most accessible device > Determine the status of a person. this point speaks volumes. especially for a market enamored with presence-based APIs that can determine the availability or status of an employee. the majority of respondents pointed to increasing employee productivity (56%) and reducing operational expenses (52%). Further. Specifically. communication enablers are critical factors of persuasion. Among these: live 24x7 help desks. end-to-end network as being more valuable than one surrounded by the most comprehensive of support packages. it couldn’t rival the demand for a secure network underlying the services. this segment is the most likely to have policies in place that mitigate employee privacy concerns with contextual APIs. and deployment training classes for new services. That’s an encouraging indicator. respondents evaluated any service traversing a secure. And. When it comes to communicating. Privacy is noT a barrier Interestingly. moderated email forums. including content and bandwidth consumption or time spent on the network. Security by itself is more important than responsive support. when considering new services that deal with 218 | CHAPTer 13 . securiTy is noT an oPTion As we did with other customer segments. Given their current challenges in collaborating with one another and their constituents. 69% of respondents indicated their organization has policies capable of profiling or monitoring an employee’s behavior. based on their evaluation of services and functionalities contained therein. these decision makers can’t seem to get enough real-time information. While a comprehensive support package encompassing all of these elements performed well enough to influence interest and willingness to pay. we asked these decision makers to evaluate multiple value-added options as part of a bundle. That is. including current device in use and available bandwidth When asked for their key priorities in allocating budget and resource requirements.

presence. They must be more vigilant in safeguarding information to protect their citizens. Indeed. Governments are more likely to have natural silos associated with unique agencies and jurisdictions. or profiling of employees. To this point. this new paradigm challenges the core of government thinking and opens the door to speak about innovation in a much broader sense than merely technology to these decision makers. This puts these decision makers in a bit of a schizophrenic stance—one that must balance open communications within a protective framework. For providers and developers addressing this estimated $100 billion ICT market. ANd SerVANT | .THe SHIFT location. for the people. it is connecting the people— both internally and externally—that sustains the lifeblood of a functional and transparent government. Governments are of the people. IBM recently released a global study of government CIOs (over half of whom were in the United States) and found that 50% of state and local governments identify business model changes 219 goVerNMeNT: ProTeCTor. Only 15% report that existing policies are insufficient and would first need to be defined and agreed to before such services could be introduced in their organization. imagine the complexity of doing so within a government. The bottom line: The majority of state and local governments are well positioned to introduce contextualbased services without violating employee privacy policies and exhibit healthy willingness to pay. And. 60% indicate existing policies are sufficient to protect employee privacy concerns with an additional 24% in the process of implementing such guidelines. eMPloYer. and by the people. PuTTinG iT all ToGeTher If you think communicating in a private enterprise has its challenges.205 consider the following: > Recognize that governments are juxtaposed between two opposite extremes: the escalating expectation of Government 2. They are more likely to trail the private sector in adopting newer technologies. These factors create the perfect storm of opportunity for providers tapping into this communication-challenged market.0 services from an increasingly tech-savvy constituency balanced against the imperative to safeguard sensitive information.

This places these leaders in a comparable category to their private sector counterparts. Similar to their counterparts in other large organizations. > Exploit presence-based capabilities that intuitively find individuals connected to the network. This is a case where the incremental price associated with a richer service definition is more than offset by decreased estimates of employee usage.0 world. with 54% of the latter indicating the same. > Prioritize security over support. these decision makers place a higher value on network security over even the most comprehensive of support options. The more germane questions are how and when service providers will insert themselves in this dynamic value chain. these decision makers are interested in purchasing sophisticated services. As of this writing. Keep in mind that this is not a function of demand decreasing with a bundle. Government leaders are increasingly aware of the opportunities and challenges before them in a 2. but governments are more likely than any other vertical segment tested to have policies that address associated employee privacy concerns. The question now becomes “when” such opportunities will materialize. However. per-month business model overwhelmingly favored by this audience. they are also inclined to curtail expectations of how many employees would have a need for such advanced technology. Application Enablement offers new business models for all within the ecosystem and is one potential remedy to an ambiguous and escalating challenge for these public CIOs.THe SHIFT as one of their greatest challenges. fewer employees translate to lower revenues for the service provider. We’ve explored the “how” in this chapter. these decision makers are more likely to exercise judgment when evaluating more complex service definitions. In summary. The result is that more robust services are associated with fewer employees being offered access. Not only are these highest in demand. That is. 220 | CHAPTer 13 . That is. > Simplify the functionality. local jurisdictions are experimenting with textbased 911 capabilities and governments are rewarding entrepreneurial developers for innovative applications that serve the public’s interest. Both are critical to governments but. the question is not if governments are interested in Application Enablement. the more sophisticated a service. when betting with their wallets. with a per-employee. the more discriminating this audience is in estimating the number of potential prospects within their organization. And.

THe SHIFT And. CHAPTer Here | 221 . that answer is now up to you. for many reading this book.

THe SHIFT 222 | CHAPTer 13 .

THe SHIFT educaTion The global achievemenT race eduCATIoN: THe gloBAl ACHIeVeMeNT rACe chaPTer 14 | 223 .

As such. For educators. is now making its mark in the K–12 space. services seen to enrich the learning experience while affording academic control will find a primed market. Some countries outperforming the united States in critical achievement objectives spend more on classroom technology on a per-student basis. Many view education as the harbinger of our economy’s health. Several trends point to the increasing role of development and technology in this space: • The digitization of content. • The virtual classroom. born and popularized on college campuses. • The technology adoption of a generation defined by its collaboration habits will serve as a strong gravitational pull for educators seeking to attract and retain the attention of Millennials. 224 | CHAPTer 14 . the student remains at the center of the debate. educators must balance the desire for academic freedom with the requirement to protect academic integrity. similar to what was witnessed in the music industry. is primed to revolutionize the classroom environment as devices become more capable and affordable.THe SHIFT key chaPTer hiGhliGhTs The united States is increasingly being challenged in the global academic race.

206 Make no mistake: The United States’ position as a superpower is increasingly correlated to its ability to keep pace in a global academic race. Specifically. it’s almost inconceivable to imagine our country facing a labor shortage anytime in the near future. While unemployment will remain a factor for job seekers for some time. that is precisely what a recent report by the Georgetown University Center on Education and the Workforce predicts. an index that measures 15-year-olds’ performance in reading. And. the current landscape is sobering: > According to the 2006 Program for International Student Assessment (PISA). As such. companies seeking college-degree holders may soon find themselves in a quandary. The estimated shortage averages to an annual deficit of 300.000 college graduates between 2008 and 2018. Much of this change can be attributed to the rise in technology in the workplace and its associated cannibalization of blue-collar jobs. Yet.THe SHIFT > as The uniTed sTaTes sTares down The barrel of a double-digit unemployment rate. it appears our country is lacking in developing candidates for a new “college economy”—one represented by a shift in degree-holding positions from 28% in 1973 to 42% in 2007. 225 eduCATIoN: THe gloBAl ACHIeVeMeNT rACe | . education is taking center stage as the harbinger of our economy’s health.

210 Interestingly. The result from this growing academic gap to Gross Domestic Product (GDP) is staggering and sufficient for everyone—whether a parent or not—to take notice. according to Education Week and the Editorial Projects in Education (EPE) Research Center. A report by the Consortium for School Networking (CoSN) found that countries like Scotland and the Netherlands significantly outspend the United States in ICT capabilities in the classroom. only one in five students in grades 9–12 said they were definitely interested. According to a 2009 McKinsey report. and Latvia.207 > The percentage of American students earning a high school diploma has dropped for the second consecutive year. translating to 11. In fact. Some point to the lack of technology investment in US education as a key contributor to deteriorating performance. Specifically. both of these countries outperform the United States in both math and science literacy. compared with $10.10 in the UK. Technology. At its peak in 1969.THe SHIFT mathematics. the same is true for the mathematics measure of the Assessment.44 on ICT per student at the federal level. Croatia.208 > When the national nonprofit group Project Tomorrow gauged high school students’ interest in pursuing a career in Science.80 in the Netherlands and $20. coupled with the United States’ lagging global literacy in these areas per the PISA results.8% in 2007. the United States ranked behind 28 countries in the latter category (including Estonia. in comparable terms. the national graduation rate was 77%. Sadly. the United States spends approximately $5.000 fewer graduates in 2007. had students from the United 226 | CHAPTer 14 . The percentage of students earning a diploma in 4 years decreased from 69.2% in 2006 to 68. where the United States again scored below the OECD average. and science literacy every 3 years across 57 countries. Engineering or Math (STEM). foreshadows an ongoing shortage of US candidates for these positions and a resulting need to offshore these valuable jobs. per the PISA results.209 This lack of interest. to name a few). with 31 countries performing better on this attribute. the United States scored below the average of the 30 countries included from the Organization for Economic Cooperation and Development (OECD) for this index.

in it you will find your iPod or other MP3 device. Nook.211 In another study by the Alliance for Excellent Education. and enhanced learning techniques have long-term impact as to how this space will evolve over the next several years and even greater implications to our country’s long-term global standings in this intensively competitive academic race. never judGe a book by iTs device If you want to see an industry transformed by the digitization of content. analysts estimated that if dropouts were reduced by 50% in America’s 50 largest cities. leaving retail giant Walmart in a distant second place of 12. e-readers like the Kindle. some industry estimates place e-books as high as 20%–25% of the market by 2012. According to the Association of American Publishers.7% of music sales.3 trillion higher. the US GDP in 2008 would have been $1. the virtualization of the classroom. increasing state and local tax revenue by as much as $536 million. If you are like half of the population. 227 eduCATIoN: THe gloBAl ACHIeVeMeNT rACe | .212 Education is the catalyst to a healthy long-term economy.214 Ten years.THe SHIFT States performed as well as the average student in the best-performing nation. schools and universities seeking to learn from the music industry’s mistakes are positioning themselves to exploit this emerging trend.5%.1 billion per year. Hot topics surrounding the digitization of content in our schools. look no further than your pocket for the revelation. ICT is at the center of sweeping transformation for this sector. but e-book sales tripled to $313 million. While physical book sales clearly dwarf those represented by e-books.215 And.9 billion. One industry.213 Billboard reported that Apple is now responsible for 26.8% in 2009 to $23. and iPad are hoping to repeat for the publishing industry. Digital content and its portable devices swept the music industry by storm. the graduates’ extra earnings would have amounted to approximately $4. leaving many executives and recording labels ill-prepared to address the change to their business model. US book sales dropped 1. given youth are typically among the frontrunners of technology adoption. What MP3 players did for music. PricewaterhouseCoopers recently predicted that digital music sales in the United States will exceed physical by next year—just 10 years following the debut of the iPod. Complete transformation.3 trillion to $2. And.

popular e-readers are not designed for textbook use today. the device currently lacks any remote monitoring capability. which prevents a teacher from viewing what a particular student or group of students is doing on the device—a critical function for a learning environment. Want to buy a book for the Kindle and then read it on your Nook? No can do (at least. E-readers are a giant step forward in many ways—slim and lightweight packaging. the University of Virginia’s Darden School of Business found that eight in ten students engaged in a Kindle pilot would not recommend the device to an 228 | CHAPTer 14 . long battery life. as such. Does one wait for the all-in-one device or purchase a more affordable. Specifically.4 billion in 2009 alone. its merit is more relevant today than ever before. like the iPad. reaching a staggering $51. 74% of students preferred printed textbooks for their college courses. According to a study by the National Association of College Stores (NACS). with the convergence of e-reader functionality into new tablet devices. When content becomes digitized and non-protected. the value of illegally downloaded software worldwide exceeds the GDP of 100 countries. And. current limitations with the iPad must be addressed to accelerate adoption within schools. the road ahead is paved with challenges. this point raises a challenge to schools attempting to standardize the student experience while simultaneously leaving all doors open to acquire the greatest breadth of content. replicating it illegally becomes a pastime for those with idle hands and nefarious intentions. different protection standards exist for various e-readers. DRM is an answer to a content provider’s concern over piracy of his creation. and intuitive interfaces to name a few. According to the Business Software Alliance (BSA).THe SHIFT However.216 Publishers and authors clearly want to avoid this pitfall and. many schools are left pondering when to pull the trigger. Corroborating this finding. given their smaller screens and black-and-white output. if current estimates are accurate. > Device limitations remain. though limited. Among them: > Digital Rights Management (DRM) challenges currently limit the exchange between many e-readers.217 > Student acceptance is questionable. This concern dates back to software itself and. But. not today). if the former option is pursued. e-reader today? If the latter option is taken. And.

Stanford University is moving to create its first “bookless library. Specifically. regardless of form factor. not if. Virtual campuses are not a new concept in the higher education space.000. schools are encouraged to pursue innovation in equipping children with 21st century skills (those enabled by a technology age). and flip back and forth between textbook pages easily. distancelearning enrollment continues to grow faster than overall college enrollment numbers. take notes. Finally. The world is my classroom Welcome to Greenfield.”218 These studies demonstrate the need to overcome practical usability hurdles if e-readers or tablets are to be widely accepted by students. Massachusetts. And. Despite these hurdles. America.” and the Illinois Institute of Technology will provide a free iPad to all incoming freshmen at the start of the next fall semester. According to numbers released by the Instructional Technology Council (ITC). the future home to Massachusetts Virtual Academy at Greenfield.THe SHIFT incoming business school student. This forward-leaning school district is taking advantage of an obscure provision in the state’s sweeping education reform law signed in January of 2010. And. e-books will reach critical mass on college and K–12 campuses. Among the frontrunners: Clearwater High School has announced plans to replace textbooks with e-readers next year. The quintessential picture of Small Town. jumping by 22% in American community colleges during the 2008229 eduCATIoN: THe gloBAl ACHIeVeMeNT rACe | . Population: 18. a study released by the Student Public Interest Research Groups (PIRGs) showed that seven in ten college students prefer printed textbooks “if cost is not a factor. Greenfield will be among the first to create a public school that exists almost entirely in cyberspace. As e-readers gain popularity for academic use and more content becomes digitized and stored in the cloud. the current momentum is one suggesting a question of when. open to students across the state from kindergarten through Grade 8. the network has a critical part to play in safeguarding these assets and optimizing the user experience. Among the complaints: students missed the ability to highlight text directly.

As this groundswell continues. For those who aren’t. Massachusetts state officials report that approximately 40% of school districts had at least one student enrolled in an online course in 2009. the organization found 51% in grades 6–8 relying upon collaboration tools to communicate with peers and 28% to interact with teachers in completing schoolwork. with more than one-quarter of US college students participating in at least one web-based course during the fall 2008 semester.219 Another study by the Alfred P. Despite the encouraging growth. consider the following: 230 | CHAPTer 14 . a stigma still prevails among some educators. The results are more pronounced as the student ages. Sloan Foundation found a 17% increase in online course enrollment. Among students.THe SHIFT 2009 academic year. According to the same study. as Sloan found only a third of chief academic officers agreeing that their faculty “accepts the value and legitimacy” of online learning. the need for real-time collaboration tools intensifies. a figure that has held steady since 2002. Nonprofit group Project Tomorrow found 67% of district administrators and 51% of principals agreeing their ideal “school of the future” would include the use of collaborative tools. More than 60% of high school students use collaborative tools to engage with peers and more than 40% to communicate with teachers in the same way. the virtual classroom is now gaining traction in the K–12 space.221 Advocates behind the approach cite expected improvements to the statewide dropout rate. three-quarters of campuses with online programs said demand increased over the past year and two-thirds of colleges that do not offer web-based classes indicated student requests for such. offering students struggling to adhere to the rigidity associated with the traditional brick-and-mortar alternative a flexible and convenient option.220 While born and popularized on the college campus.222 ouT of The habiTs of babes Those of you who are parents of a teen or tween are all too familiar with how today’s youth use technology as an extension of their lives.

And. because this generation embraces multitasking—the use of more than one media simultaneously—they manage to squeeze in a total of 10 hours and 45 minutes into that roughly 7. children devote an average of 7 hours and 38 minutes per day to consuming entertainment media. However. One in three teens sends more than 100 texts per day.226 Anyone who has struggled to capture and keep the attention of a Millennial can certainly identify. the results are not merely self-serving. nearly half who take phones to school text at least once a day in class.224 > According to a Kaiser Family Foundation study of 8–18-yearolds.225 > A separate study by Stanford found that while college students are prone to multitasking behavior. attention. as some studies report benefits to the learning process.223 > Nielsen shows that smartphone usage is 12% higher in households with children than in those without.5-hour period. texting has become the de facto standard of communication among teens. higher-sensory learning experiences into their classrooms. Fifty-four percent of teens report texting with their friends daily compared with 33% who speak face-to-face with their friends daily outside of school. A study administered by PBS and funded by the Department of Education found iPhone apps can increase a child’s vocabulary acquisition by as much as 31% within 2 weeks. and cognition (though critics point to the violence in these games as significant deterrents to any instructional gains acquired). a factor potentially attributed to the presence of children as influencers. 231 eduCATIoN: THe gloBAl ACHIeVeMeNT rACe | . > According to a Pew report. more than 90% of college students use Facebook or MySpace regularly. The study revealed that heavy multitaskers tended to be worse at filtering out unimportant information than their low-multitasking counterparts. what’s a school administrator to do? Several are jumping on the technology bandwagon to incorporate higher-tech.THe SHIFT > According to a recent study by San Diego State University.229 Further.228 Researchers at the University of Rochester found that first-person shooter games can improve vision. they actually aren’t very good at it. And.227 With all of these distractions competing for a student’s attention.

video. First. our educators must first be convinced it will support. such as helping someone being harassed. 76% of teachers were worried such mobile devices would be a distraction in their classrooms. academic integrity. Teachers are a critical piece to this puzzle and data from Project Tomorrow suggests we have a long way to go in building confidence among these skeptics. Next. leading some 44 states to enact laws prohibiting the bullying of students in school and online. writing.0 tools to have students collaborate with one another on in-class group assignments. And. Instructors need tools that facilitate collaboration among students without compromising the learning process. and network security. some educators are turning to the popularity of wikis and other 2.THe SHIFT researchers at the State University of New York in Albany reported that students who play pro-social games that promote cooperation are more likely than others to contribute in real-life situations. the results will be a sub-optimized approach to what otherwise could be possible. and math. As examples. Fueled by the proliferation of social networking sites and the anonymity afforded through popular teen applications like Formspring—where peer insults previously plastered on the proverbial bathroom wall are now posted on the Web—this area will be one of consternation for educators for the foreseeable future. not deter. protecting academic integrity becomes increasingly important. For example. Up to 35% of young people have been the victims of cyberbullying.231 Before technology will fully be embraced in the classroom. while 58% of principals included a mobile device for every student as part of their vision for the ideal school of the future. While 46% of teachers admit to using software-based tools to facilitate learning in reading.230 The challenges associated with educating a hyper-connected. the learning process. podcasts. protecting our children becomes increasingly challenging in a virtual world. or real-time data in their instructional techniques. per a 2008 Centers for Disease Control report232. less than 25% are inclined to using game-based learning environments. Researching Thomas Edison now becomes a group 232 | CHAPTer 14 . multitasking and device-wielding generation should not be underestimated. short of capabilities that protect our children.

Finally. let’s explore how administrators and educators evaluated Application Enablement as a means to address the issues ahead. Perhaps that explains why college CIOs from the latest EDUCAUSE study ranked security in their top three IT issues for 2010. eduCATIoN: THe gloBAl ACHIeVeMeNT rACe | 233 . Here. The problem becomes more significant in higher education. fewer than one in five was very likely to select services associated with better interdepartmental communications. educators are more inclined to select services that facilitate the classroom as a community. More than one-third of respondents indicated they would be very likely to purchase each of these services if it were made available to them.233 iT’s abouT The sTudenT Now that we have covered the landscape of opportunities and potential pitfalls in an area directly linked to our GDP. these decision makers overwhelmingly favored services that enhance remote learning environments and secure communications between multiple parties and devices—particularly between faculty and students. these campuses tend to be ideal breeding grounds for the next hacker with lots of time on his hands and technology proficiency in spades. protecting the network itself becomes challenging in a world where device adoption exceeds the norm. the balance of preserving academic freedom while protecting educational integrity is compromised. if a test on the inventor devolves into students using electronic means to cheat.THe SHIFT online exercise with a possible final output being a Facebook page associated with the legend. And. However. it is first and foremost about the learning environment. A distant runner-up in this race is facilitating better internal communications among themselves. In comparison. First. Out of over twelve applications tested by Alcatel-Lucent among 300 educators. Remote monitoring capabilities and network administration rights become increasingly important in this new learning era. students expect networks to equip any device brought on campus—from the tablet to the e-reader to the mobile device to anything in between. For these educators.

localized account support. the importance of network functionality as dictated by a hyper-connected student population rises to the top. This is a clear example of a highly fragmented device population most evident at these schools and on these campuses. when examining the role of specific network capabilities in influencing willingness to pay for new services. as educators were unique in their penchant for QoS attributes. The capabilities included: > QoS capabilities that automatically format content and optimize it for delivery over any device (remember the e-reader DRM challenges mentioned earlier as a current challenge?). based on the device most accessible to each. troubleshoot network performance and connectivity issues across any device. And. security was seen as more important than the most comprehensive support package surrounding a service. and maintain a seamless session as the user moves from one device to another reigned supreme. while training classes were among the lowest value-added support options for other vertical segments. it should come as no surprise that the New Media Consortium recently identified cloud computing as one of the emerging trends to hit K–12 schools in the next few years. 234 | CHAPTer 14 . again. a service described as traversing a secure network was more influential in moving a respondent’s interest and willingness to pay than one supported by a live IT help desk. That is. With our earlier commentary on the digitization of media in this space. educators responded fairly well to this idea. moderated forums.THe SHIFT Next. and seamless messaging functionality to any device were also popular. reinforcing the earlier point that educators must first be comfortable with the technology before widespread adoption in the classroom will be optimized. To this latter point. our analysis reveals secure storage accessible from any device as a key determinant among these decision makers when evaluating new technology services. > Finally. > Like their state and local government counterparts. and training classes. secure network storage options were also instrumental in influencing willingness to pay. > Presence capabilities that allowed for automatic and intelligent connection to one or more parties.

further exacerbating the problem. And. This brings a unique complexity to this world. network capabilities that enhance performance. with a willingness to pay that was two to three times larger on a per-employee. the role of a secure network will continue to grow in relevance. by a provider. healthcare. And. lest you believe that these student technophiles are less reliant on IT for their needs. Students are more likely to adopt technologies faster than mature segments. > Offer security as a table stake.THe SHIFT PuTTinG iT all ToGeTher Educators are a segment primed for technology. the fewer revenues are likely to be collected. and finance). More devices breed the opportunity for more problems. educators were the least price-sensitive when compared with their counterparts in the other verticals tested (including government. The investment in ICT in the classroom made by other countries has many questioning whether this commitment is contributing to global student achievement rankings that leave the United States significantly behind. with current device limitations associated with remote monitoring and the need to provide administrative rights based on the classroom exercise at hand. providers and developers should: > Recognize that this sector is most influenced by a hyper-connected student population. Security within the network is critical to both. Like their large-enterprise and vertical counterparts. Specifically. our research suggests significant opportunity for new services tailored for this market. in aggregate. a study by Eduventures and Cengage Learning found only four in ten college students saying they receive adequate support for education technology tools on campus. provide secure storage. Security outranks the most comprehensive of support packages in influencing willingness to pay. To tap into this growth. And.234 As such. troubleshoot problems. per-application basis than that of their peers. the more sophisticated a service. This is due to the restriction these decision makers are likely to impose upon those 235 eduCATIoN: THe gloBAl ACHIeVeMeNT rACe | . while EDUCAUSE predicts that higher education technology budgets will remain flat (if not decrease) for the foreseeable future. Educators must simultaneously preserve academic freedom while protecting academic integrity. and allow for seamless messaging and communications across any device reign supreme for this segment. > Keep it simple—at least initially.

236 | CHAPTer 14 . Providers offering these educators the option of training classes with any new technology deployment will discover an audience willing to pay for such instruction. Remember. full momentum will never be realized. If that doesn’t get your attention. this is a case where trillions of dollars in GDP may be at stake. check your pulse. this market is primed for providers and developers that understand the unique complexities of being an educator in a 2. And. If teachers are not comfortable integrating ICT tools in their curriculum. more sophisticated services are likely to find a welcoming home as these educators attempt to keep pace with the next generation of technologically fluent students.0 world. educators value education. Successful providers will incorporate this commonsense approach within their offerings. > Understand that technology acceptance stops with the instructor. the role of ICT has never been more significant. As evidenced through our research. As ICT becomes more integrated in the classroom environment. As our children continue to be lapped in the global academic race.THe SHIFT within their organization who have access to such robust functionality.

THe SHIFT iT in The large relevance IT IN THe lArge eNTerPrISe: IN SeArCH oF releVANCe | chaPTer 15 enTerpriSe in Search of 237 .

Security is central to the CIo agenda and is even capturing greater mindshare among Ceos. The latter are more likely to curtail estimates of employee usage (and hence. Providers attempting to address this fragmentation should expose multiple capabilities to a developer market capable of building applications for each niche. revenue opportunity for providers) when a service becomes more complex. Appetite for services depends on the segment in question.THe SHIFT key chaPTer hiGhliGhTs The role of the CIo is experiencing significant transformation. 238 | CHAPTer 15 . these individuals are being seen as change agents within their organizations and must balance IT requirements with Ceo agendas. the employees and decision makers within their enterprise) to tune service offerings. Increasingly. Financial enterprises prefer services that enrich relationships with their customers. general enterprises gravitate toward services that optimize internal communications. Providers must equip IT developers with diagnostic tools about their customers (in this case. it is the opposite for enterprise decision makers. while bundling is a case for increased revenue potential among enterprise IT developers.

what do you get when you mix recessionary times with a cost-center reputation and perceptual gaps between CIOs and their business peers? A challenging and often misunderstood role for those in the IT space and ongoing questions about the evolution of the CIO. Chief Information Officers (CIOs) “don’t get no respect. nearly half of CIOs report that Information Technology (IT) is still considered a cost center. And.235 So. Rather than embrace Dangerfield’s philosophy.THe SHIFT > To channel The famous lasT words of laTe comedian Rodney Dangerfield.236 While fatalists may be quick to prophesy the death of the CIO. when two multibillion-dollar private companies decided in 2009 not to backfill their CIO positions at precisely the same time. we prefer to view the landscape through a different lens. less than one-third of business leaders in the enterprise agree. In fact. one reading the tea leaves from market examples and research data could form that conclusion. Even worse.” Certainly. over 60% of CIOs have canceled or postponed projects over the past year due to economic pressures. over half of these CIOs believe they are responsible for setting technology investment priorities despite being relegated to a cost center function. some were left wondering if the bell tolled for others occupying the role. CIOs would be better served taking a page from talented songwriter 239 IT IN THe lArge eNTerPrISe: IN SeArCH oF releVANCe | . According to the State of the CIO report.

and finance roles—in general and financial enterprises with 100 or more employees to find out. The good news is that CIOs are aware of these shifting sands and are rising to the challenge in droves. And.” And. implementers and prognosticators. how do decision makers in the large enterprise view the attractiveness of network-based capabilities as a potential salve to these issues? Alcatel-Lucent canvassed 600 decision makers— the majority in IT. Further. The same State of the CIO report finds three-quarters of CIOs identifying the alignment of IT and business goals as a management priority—the top concern mentioned.THe SHIFT Bob Dylan: “The times. or so the philosophy goes. executive. and escalating customer demands abound. operations. As trends surrounding cloud computing. in the case of our research. “the customer is always right. increasing cost pressures.” It seems this is a question with an answer that is easily debatable on either side. They are simultaneously strategists and tacticians. is a bit like asking which came first. 240 | CHAPTer 15 . living by the adage. a business leader’s perspective on which of these two stakeholders is more important depends to a large extent on the industry of choice. the majority also agree that long-term strategic thinking and planning will be the most critical personal competency needed by their organizations in the coming year.237 For these reasons. On one hand. Treat your employees well and they will respond in kind to your customer. these individuals must maintain the basic blocking-andtackling required to sustain operational performance in their organizations. emerging security threats. On the other. the relevance of the CIO at the executive table is directly dependent on his ability to evolve accordingly. Many companies espouse the opposite. they are a-changin’. The cusTomer (or emPloyee) comes firsT Asking the question of which is more important. technologists and business thinkers. these leaders must be attuned to the corporate strategy in order to anticipate the commensurate ripple effects to future ICT requirements. the CIO role is more complex and challenging than ever before. the chicken or the egg? Southwest Airlines famously created a culture where the employee comes first. the customer or the employee.

the customer comes first. and collaboration capabilities > A service that allows employees to dynamically boost network bandwidth during times of need > A product that detects and troubleshoots potential IT problems across the network and supports forecasting of IT consumption needs > A service that allows employees to dynamically and seamlessly shift from multiple modes of communication (including IM. the network ingredients that were more likely to influence a financial decision maker’s willingness to pay for a service were rooted in profiling capabilities of the end user. these executives were more inclined to select those that optimized communications among external customers. video. When asked to choose from over a dozen new services.THe SHIFT For those in the financial segment. email. text. and video conferencing) with the click of a button IT IN THe lArge eNTerPrISe: IN SeArCH oF releVANCe | 241 . secure and accessible storage of these customer preferences was equally attractive to these business leaders. In contrast. phone call. rather than between internal employees. those decision makers represented by a general mix of industries (mostly from manufacturing) preferred services grounded in employee productivity benefits. as evidenced by the more popular applications selected by these decision makers. Likewise. Among the more popular tested were: > A service that displays personalized customer information (such as account history and previous contact information) on incoming calls > An application that provides the decision maker with a view of the customer’s preferences and browsing history across any device to support more targeted advertising efforts (both of these services would be subject to the customer opting in to having such information shared) > A product that stores client financial records in a secure server accessible by any employee on any device to optimize customer interactions In turn. including: > An application that optimizes employee productivity in meetings through advanced voice.

and vice versa—especially as it pertains to the security hot button. securiTy or suPPorT? yes. not simply expressed needs. their evaluation of services proves otherwise. Suffice it to say. there is virtually no difference in their assessment of key business priorities. In all cases. employee productivity translates to better response times for customers (akin to the Southwest philosophy). CIOs will be expected to serve both masters. while these audiences may differ in the value ascribed to internal versus external communications. and maintain session quality across fragmented communication modes. To our earlier commentary on the role of the CIO evolving. the role of the employee as the critical stakeholder becomes clear in both the winning applications and network enablers for this segment. We won’t continue to beat the security horse (since we have already mentioned it significantly in other chapters). Perhaps for this audience. enterprises across the board place a value on services traversing a secure network. Note that. Please . Among the more fascinating findings. Here is what is more interesting. if at all. Specifically.THe SHIFT Accordingly. both groups selected reducing operational expenditures and increasing employee productivity in their top two priorities. Or. respondents were more likely to be influenced by network characteristics that boost performance. When asked to identify the key motivators in determining how resources are allocated. PricewaterhouseCoopers surveyed 7. perhaps this is a case where attempting to parse out which customer—internal or external—is more important is as fruitful as pondering if the chicken or egg came first. While improving customer satisfaction ranked fifth in priority among financial decision makers.200 C-levels in 130 countries to assess how the recent recession is affecting investments in information security. there is secondary evidence to support that these leaders are beginning to think more like their CEO. when asked to select from a list of seventeen possible strategies for meeting security objectives in the context 242 | CHAPTer 15 . Both are interconnected and. in research design. identify and troubleshoot problems. the greatest network value rests in QoS capabilities. for these decision makers. Perhaps this is a classic testament to the importance of peeling beneath the surface to discover latent desires. in an increasingly blurred IT landscape.

Recall that we saw the exact opposite effect among enterprise IT developers. In turn. this behavioral tendency among decision makers to contain access to a select group of “power users” results in lower total revenue potential. For these individuals. education. bundles of APIs translate to a simpler. services. Both financial and general enterprise leaders are likely to increase demand and willingness to pay for a service encapsulated with responsive support. The case aGainsT (and for) bundlinG One of the leading factors driving the elasticity of demand between general enterprises and their vertical counterparts involves bundling. moderated forums. and training classes.THe SHIFT of the economic downturn. and network capabilities when compared with any other business segment tested (including finance. Our data also suggests a strong willingness to pay for the most comprehensive of support packages surrounding these services. Their response is taken from a page of the CIO playbook: increasing the focus on data protection. the answer from CEOs and CFOs may surprise you even more. faster development 243 IT IN THe lArge eNTerPrISe: IN SeArCH oF releVANCe | . However. the former group has the highest willingness to pay for support. It is quite another to state the opposite. And. and healthcare)—by several orders of magnitude. In a case where a provider earns revenues through a monthly fee per user (overwhelmingly the favored business model as selected by these respondents). one area catalyzing the convergence in thinking between these functional leaders is security—yet one more aspect reflecting how relevant this topic will be for years to come. The more sophisticated the “bundle” (or service) becomes. In fact. general enterprise decision makers demonstrate a much higher willingness to pay for this option than their financial segment counterparts. localized account support. inclusive of 24x7 live help desks. Consistent across all segments is a tendency for decision makers to restrict the number of users— and hence demand—for a service that is a composite of several capabilities. the more likely these decision makers are to restrict its use to a more limited number of employees. CIOs appeared to channel their CEO and CFO counterparts: prioritizing security investments based on risk.238 It is one thing to suggest CIOs are beginning to think like the CEOs they serve. government.

and you’re likely to be rebuked. Since we didn’t beat the dead horse on security. These individuals are willing to pay up to three times more for a bundle of network capabilities when compared against the total revenue opportunity of each API offered separately. in the case of a decision maker allocating funding to secure new enhancements. And. in fact. The case for (and aGainsT) adverTisinG Ask an individual outright if they “like” advertising. But. However. each is also a consumer at the end of the day. It should come as no surprise that. when asked if they would subject their employees to advertisements in exchange for up to a 20% discount off a service. This is a case of classic price elasticity. However. we would also submit that this is a case where IT developers. that a provider stands to earn more revenues with the 20% discount than with no advertising subsidization at all. The lower price is more than offset by incremental demand. that represents tangible value to an audience with limited time and resources. Even though the respondents in our survey are senior decision makers of large enterprises. understand the value of being able to develop more quickly in a time-compressed world.THe SHIFT process. 244 | CHAPTer 15 . That is. very familiar and encumbered with cost pressures today. we are each subjected to thousands of advertising impressions per day and more than tolerate their presence in exchange for services (think of television advertising where one “pays” with attention in exchange for “free” programming as the classic and still prominent example). the over-engineering of a service can have the exact opposite effect. And. More complicated functionality creates a mindset for a more limited employee population. demand for a service subsidized by advertising increases more than the value of the discount. we have not even calculated the upside revenue potential from the advertising itself in the equation. they responded favorably—so favorably. Are IT developers simply out of touch? Are they so completely infatuated with new technology that they grossly overestimate its value to the customers within their companies? There may be some truth to this argument. indulge us on this nag: The developer’s currency is time and it is perhaps nowhere more clearly reflected than in his perceived value of a bundle compared with that of his end users.

For any of these fixed periods. However. General enterprise leaders are more attracted to applications that streamline internal communications. Arming CIOs with this analysis not only gives them deeper insight into their customers’ needs (thus making them more relevant within their organization). In other words. IT developers) overestimate the value of sophisticated services when compared with decision makers in the enterprise. like every other audience analyzed. As they begin to think more like their CEOs. As examples. the perception of the latter shifts depending upon the business need. This phenomenon was only realized when the discount was offered indefinitely rather than for a discrete period of time. the CIO. these individuals are earning a seat at the executive table and are increasingly being looked to as change agents within their organizations. advertising subsidization resulted in lower total revenue potential for the provider. Not only do their employees (in this case. it also optimizes the revenue potential for the provider. and in particular. 12 or 24 months. providers must enable these IT employees. PuTTinG iT all ToGeTher Large enterprises are no more complex than any other stakeholder examined in this ecosystem. to better understand how said functionality can be incorporated in practical—rather than overengineered—services more likely to be adopted by a greater population of users within the enterprise. such as 6. they have a unique perspective that drives interesting peculiarities: > The economic downturn may be a blessing in disguise. Exposing multiple network capabilities simultaneously and in a bundled fashion addresses the IT developer’s scarce resource of time.THe SHIFT However. in turn. > Complexity abounds for the CIO. there is a catch. But. face a complex paradigm. IT IN THe lArge eNTerPrISe: IN SeArCH oF releVANCe | 245 . the discount was not offset by sufficient incremental demand. CIOs are expected—and understand the need—to align IT resources with business priorities. financial leaders are more likely to value services that optimize customer engagement. Providers.

neither captures the state of the CIO’s world as perfectly as one who lives in it. Pat Toole. the case for incremental revenue potential is confined to an indefinite discount period. once said of his professional peers. network performance and profiling capabilities create new opportunities to optimize customer engagement and enhance employee productivity. “If they [CIOs] don’t come out of that cost-cutting mode and help drive the transformation of their company. Cost pressures persist. they are a-changin’” for CIOs. As these leaders align IT priorities with CEO agendas. Providers are advised to go all the way with advertising. Rather than admiring the problems surrounding them. But. CIO of IBM. they’re going to be irrelevant. And. We’ve quoted comedians and songwriters. leveraging the network as an asset is a concept familiar to this ilk.THe SHIFT > A service subsidized by advertising is attractive to these decision makers.”239 We couldn’t have said it better ourselves. Lines between employees and customers are blurred. It is evident that “the times. Security challenges abound. or not to go at all. But. effective CIOs are evolving to adapt to these changing times. 246 | CHAPTer 15 .

0 caSe for laTin america ParT 5 .THe SHIFT The 2.

THe SHIFT 248 .

THe SHIFT brazil and meXico chaPTer 16 a Tale of TWo counTrieS BrAzIl ANd MeXICo: A TAle oF Two CouNTrIeS | 249 .

a multifunctional service composed of multiple APIs decreases revenue potential for providers and developers in Brazil. targeted advertisements. whereas the opposite is the case in Mexico. the case for bundling differs. with Brazilians favoring capabilities that provide for richer entertainment and Mexicans preferring those with a security orientation. That is. location. like their North American counterparts. while per-use payment is the preferred business model in both countries.THe SHIFT key chaPTer hiGhliGhTs Brazil and Mexico stand at the brink of economic transformation. Advertising frequency decreases willingness to pay for services. 250 | CHAPTer 16 . with projected willingness to pay even higher than that found in North America in some cases. however. this deficit may be neutralized through the use of personalized. latin American consumers overwhelmingly trust their service provider over an application developer when it comes to sharing sensitive contextual information about themselves. such as presence. though their starting points and journeys are as different as the sociopolitical climates that define them. and online habits. which are more favored by consumers in both countries. each market possesses a consumer appetite for networkenabled services. Consumer attitudes toward network-enabled functionalities reflect the current landscape of the countries they call home.

are poised for significant growth. two countries in particular. In his novel.THe SHIFT > in 1859. In much the same way. Western Europe. charles dickens made liTerary hisTory wiTh his fictional masterpiece. though fictitious in orientation. Emerging countries have earned their place in the spotlight. The legendary story. these countries reflect the promise of an emerging middle class ready for its moment of economic prosperity.240 In Latin America. even if their starting points and trajectories are as different as their unique market complexions. and other established markets have struggled to keep pace in recent years. BrAzIl ANd MeXICo: A TAle oF Two CouNTrIeS | 251 . Brazil and Mexico. Paris and London. Despite their differences. as the developing world has almost singlehandedly accounted for our global GDP growth while the United States. A Tale of Two Cities. Dickens cast a story of rebellion. and ultimate redemption set in two cities. amidst the tumultuous backdrop of the French Revolution. sacrifice. drew its inspiration from history as Dickens brilliantly captured the struggle of a burgeoning middle class in search of economic prosperity. a societal revolution is occurring today on the global stage.

wield the third largest economy globally behind the United States and the European Union. This staggering increase in abductions is leading to a new booming industry estimated at $80 million per year. In particular. with kidnapping rates soaring by over 300% in the past 5 years. the drug war has taken its toll on the economy. Unfortunately. mobility is a seemingly indispensible element for a nation under the weight of violent unrest while simultaneously standing at the precipice of economic freedom. That equates to about $10. BMI estimates that Mexico will reach 105 million mobile subscribers by the end of 2014. reflecting the addition of 3.241 The fear of extortion is a daily reality for citizens in some parts of the country.245 the socioeconomic impact of this drug war reflects the current battle of a country whose revolution is more than an annual commemoration. in a sad twist of events reflecting the current 2. Market analyst Biometrics Market Intelligence (BMI) recently reported the mobile market grew by 3. the potential for telecommunications as an economic growth engine cannot be ignored. reaching a penetration rate of over 94%. bulletproof cars.246 Despite these challenges.247 This growth is leading to significant investment 252 | CHAPTer 16 .000 deaths in less than four years. or roughly 2. when combined.0 times.THe SHIFT meXico: The uPrisinG of a new revoluTion It is almost surreal that Mexico recently celebrated the centennial of its revolution.000 news headlines telling the horrific story of a drug war responsible for more than 28.243 Beyond these physical threats and casualties. as the country finds itself in a state of violent upheaval and societal unrest. now represent a macabre necessity for the safety-conscious middle class. given that about half of Mexico’s 107 million people still live in poverty despite its status as the twelfth largest economy in the world.3% of Mexico’s $450 million per month average in monthly natural gas revenues.22 million new customers and putting the country on a trajectory to attain 8% growth in 2010. drug gangs have resorted to flaunting their violent conquests via YouTube videos.244 And. a luxury once reserved for the elite upper crust.242 And.5 million per month. it also overshadows the economic potential of a country recently identified with nine others that. with state-owned Petroleos Mexicanos reporting approximately $350.9% in the first 6 months of the year. A Google search of “Mexico” renders over 1.000 in lost natural gas production daily due to physical threats against its employees who are attempting installations in northern Mexico.


in the market by incumbent provider America Movil, which recently reported its plans to spend approximately $8 billion a year in its networks through 2014. And, providing yet additional opportunities to citizens in a market where mobility is more ubiquitous than banking, the provider has also recently announced its intention to offer financial services to about 50 million people in Mexico who have mobile phones but no bank accounts.248 Intersect this mobile wallet capability with the growth in mobile advertising options we discussed in an earlier chapter, and one can easily imagine a new impulse economy of micropayments fueled by mobile advertising and transacted via a mobile device.

brazil: The Promise of a new day If Mexico is embattled with strife, Brazil is brimming with promise, thanks in no small part to two events that will capture the globe’s attention in coming years: The World Cup and the Olympic Games. Both projects will bring significant benefits to the country in the way of investments in airports, roads, urban transportation, and hotels, just to name a few. In 2010, Brazil’s GDP growth is expected to reach 7.5% with 20% of the increase attributed to infrastructure projects.249 The Olympic Games alone are estimated to generate more than four times their investment of $6.5 billion to the country’s economy between now and 2027 and more than 120,000 jobs a year by 2016.250 Indeed, Brazil is in the midst of its own uprising, reflected in the might of its growing middle class. A few decades ago, a fraction of Brazilians, roughly 30 million, held most of the country’s buying power. In just the past 8 years, the middle class—known as Class C in Brazil—has swelled by 30 million, now representing 100 million of the country’s 200 million inhabitants and propelling the world’s eighth largest economy to an impressive growth rate. Most promising, this is a country where 20 million people have risen out of poverty since 2003.251 As most of the globe struggles with a recession, Brazil’s $1.3 trillion economy is booming, surpassing India and Russia with a per-capita income twice that of China and creating over 2.2 million formal jobs in the past 9 months, a record for the country.252 The rise of the middle class translates to a rise in consumption. In 2009, 4.5 million cars were sold in Brazil, more than double the rate in 2003. The number of credit

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cards issued to consumers has increased 438% over the past decade. Airplane boardings have risen 70% in the past 6 years.253 And, the growth of Brazil’s telecommunications market is equally remarkable. With an online population of more than 80 million, Brazil is South America’s largest Internet market and now has more Internet users than any single country in Europe, according to Forrester Research.254 These online users are no strangers to social networking. LinkedIn reports Brazil is one of its two fastest markets in growth (rivaled only by China).255 comScore ranks it second behind Indonesia in Twitter popularity, with 20.5% of Brazilian Internet users over the age of 15 tweeting (compared to just 11.9% of the US online population). In fact, Brazil leapt into the record books of pop culture in the summer of 2010, when clever, albeit mischievous, Brazilian Twitterers made the phrase “Cala boca, Galvao” one of the most popular retweeted phrases globally. Puzzled by the meaning of the phrase, English-speaking Twitterers were duped into retweeting it when told that doing so would result in a 10-cent donation to save a rare Amazon bird on the verge of extinction (a “Galvao”). In actuality, Galvao was the first name of Galvao Bueno, a Brazilian sportscaster who irritated many with his pronouncements during the World Cup. The phrase’s literal translation was a rebuke against Galvao, who was told to “shut up.” And, it will be immortalized as one of the most popular tweets of the year, thanks to the wit of a socially connected Brazilian online population.256 Finally, although Google has yet to make a dent in social networking in most of the world, it has done so in Brazil with its site Orkut. In fact, over 51% of Orkut’s total traffic comes from Brazil, with over 36 million unique visitors in September 2010 from Brazil alone.257 In comparison, Facebook attracts roughly 9 million Brazilian visitors per month, according to comScore.258 Perhaps this gap helps explain Facebook’s recent introduction of a new tool that allows Orkut users to link their profile with their account on Facebook.259 The growth in telecommunications is not limited to online activities in Brazil, as mobile usage reaches new heights. The country’s mobile penetration rate topped 100% in October of 2010 according to Brazilian telecommunications regulator Anatel.260 That means there are now more registered mobile phones than there are people. The growth in mobile usage


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and economic value are correlated, and one could question which causes the other. One study finds that adding ten mobile phones per 100 people in a typical developing country increases GDP growth per person by .8 percentage points.261 And, the wave of mobile broadband growth fueled by 3G networks is already in full swing in the country, with Morgan Stanley estimating a 148% increase in subscriptions over the past year.262 Affordable smartphones will further catalyze this demand with Pyramid Research bullishly anticipating that Brazil may see its first sub-US$100 smartphone in 2011, compared with current price points in the US$200–$300 range.263 If accurate, the price point will offer a swelling middle class the benefit of affordable mobile devices capable of fully leveraging the capabilities of a 3G network. Despite their many differences, one thing Brazil and Mexico share is the potential for future economic growth, spurred in part by a developing communications infrastructure. To that end, Alcatel-Lucent sought to evaluate consumer appetite for network-based capabilities under an applications enablement framework. We solicited the input of 1,000 mobile and broadband users in Mexico and Brazil and measured their willingness to pay across 19 next-generation service definitions composed of 22 network APIs. The results confirm a rosy outlook for communications services despite inherent market differences that reflect the diversity of these national cultures.

service definiTions reflecT markeT condiTions Despite Mexico and Brazil being at two very different turning points in their histories, consumer interest in next-generation communications services is equally high. The least popular service out of 19 tested still attracted nearly one in five consumers by their indication to be “very likely” to purchase the application if it were made available to them. For the most popular service in the bunch, the interest level jumps to nearly one in two consumers being “very likely” to purchase. In both Mexico and Brazil, there is more alignment around the most popular services than there are differences. Among them: > An advanced Caller ID service that, among other things, reflects the current location and social networking status update of the incoming caller

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> A gaming application that offers consumers profiling capabilities of other gamers who match their skill set (whether they are logged into the game or not) and provides storage of virtual rewards collected, purchases made, and recorded games made accessible from any device > A service that optimizes communications and entertainment activities within the household, including the capability to store familial records and entertainment files in the network and a geofencing option to automatically detect when a family member has arrived home based on the location of one’s mobile device. While equally popular in both countries, a deeper dive into what features drive willingness to pay reveals the reality of very different market landscapes. In Mexico, the appetite for security at multiple levels is clear. Out of the 22 network APIs tested, the one with the highest influence in moving a respondent’s willingness to pay for a service definition involved biometric authentication, such as voiceprint identification, to restrict use of the service and access to network-based content to only those authorized. In fact, the value of security is so strong in Mexico that a service traversing a “secure network” increases willingness to pay by over 20% compared with the same service where such a distinction is omitted. (In contrast, this designation increases a Brazilian’s willingness to pay by less than 10%.) Additionally, the impact of security paints a different picture of what Mexicans are willing to pay for and expose about themselves relative to their Brazilian counterparts. Location-based APIs were among the lowest revenue producers among Mexicans, with the ability to locate a mobile device faring the worst of the 22 tested. (In contrast, this was among the top revenue-producing APIs in Brazil.) In fact, for Mexicans, one of the only service definitions where location was perceived as an attractive attribute was in the case of remote healthcare monitoring of chronic diseases, such as diabetes, whereby the exact location of those under care could be detected at all times. In a country with one of the largest Type 2 diabetes populations in the world and where the market for diabetic care is expected to exceed $1.2 billion in 2014, service providers and application developers would be wise to take notice.264



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In the case of what Mexicans are willing to share about themselves, the trusted role of the mobile provider could not be clearer. Interestingly, Mexicans are more comfortable sharing such contextual information with their mobile operator than they are with people they know. While the same finding holds true in Brazil, it is much more pronounced in Mexico, with well over one in two consumers expressing they are much more comfortable in exposing presence, location, and behavioral habits to their mobile provider, compared to just over one in three who feel the same way in Brazil. If Mexicans are drawn to security-conscious service definitions that enhance personal safety and well-being, Brazilians reflect their culture’s appetite for entertainment on the consumer’s terms. For Brazilian consumers in our study, the most attractive service definition in terms of both interest and willingness to pay dealt exclusively with entertainment—from receiving personalized content recommendations based on viewing habits to watching the programming on demand, on any device, and with seamless shifting (the ability to pause a program on one’s television and resume it automatically from that point forward on a mobile device, for example). While location and QoS capabilities were less attractive in Mexico, these functional ingredients successfully drove up willingness to pay in Brazil, where the ability to receive entertainment on demand and optimized for consumption over one’s current network and device reigned supreme. At the same time, the impact of a provider’s brand in influencing a consumer’s willingness to pay reflects the power of Google and popularity of social networking in Brazil. Specifically, a service offered by Google commanded more than a 20% premium in terms of willingness to pay in Brazil (even higher than a service offered by local service provider incumbents). The same was not the case in Mexico, where the Google brand scored below the average and well below Telmex, the incumbent service provider, which itself attained a more than 20% premium in willingness to pay. Why the significant difference in Google’s performance, where its brand value translates to an unmistakable premium in Brazil and yet represents a pricing disadvantage for the company in Mexico? We would submit it may have something to do with the popularity of Google’s social networking site, Orkut, in Brazil. To put a finer point on how popular Orkut is, Google vice president, Marissa Mayer, has even admitted, “You talk to people in Brazil, they’re like, ‘Oh, Google – you mean the subsidiary of Orkut?’”265

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The clear case for The riGhT model – and The noT-so-clear case for bundlinG Perhaps there is no area in which Brazilians and Mexicans agree more fervently than in the business model that is favored by both. You may recall from the North American consumer study that no one payment model prevailed across all consumer groups (with social networkers favoring a per-use model, online video enthusiasts preferring a monthly model and gamers revealing an aversion to one-time fees). While North America reflects complexity in its ideal model (one where the provider’s or developer’s revenue is maximized), Brazil and Mexico reveal simplicity. That is, there is absolutely no doubt that a per-use model is favored overwhelmingly by consumers and, as such, has the potential to maximize revenues for providers and developers. This finding reflects the popularity of prepaid subscriptions in both countries, where one pays upfront for a specified number of uses. In Brazil, for example, 82% of registered mobile phones are on a prepaid account.266 Unlike North America, where bundling multiple APIs in a service clearly resulted in a higher willingness to pay among consumers, the situation is a bit more complex in Latin America. In Mexico, where the average willingness to pay is somewhat lower than that found in Brazil, the opportunity to increase revenue potential rests in bundling multiple APIs in a single service definition. That means that a service where two or more APIs are combined yields roughly 10% higher revenue potential for a provider or developer than that of independent services operating with a single functionality. While the revenue boost is not as high as what we discussed for the North American market, Mexico is again a bundling case where more equals more. The same cannot be said for Brazilian consumers, where increasing the functionality of a service by combining the capabilities of multiple APIs actually results in decreased revenue potential for the provider or developer. In Brazil, consumers follow the adage, “less is more.” For this market, consumers are attracted to simplicity and core functionality. Overcomplicate a service and suffer the consequences of lost revenue potential.



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If targeted advertisements are offered (as opposed to generic impressions). Revenue potential decreases precipitously across most segments as the frequency of advertising impressions increases. 259 BrAzIl ANd MeXICo: A TAle oF Two CouNTrIeS | . Unlike North American consumers. the number of Internet users in Latin America has been increasing at about double the rate of population growth. Mobile is even more popular for many countries in the region. a consumer’s willingness to pay for the service—even when a high frequency of ad impressions is incorporated—rivals that of a service that includes no advertising at all. you are reading the right chapter of this book. developers. who tested as having a surprising tolerance to highfrequency advertising models. We were curious about the tolerance for new forms of advertising across online and mobile environments. and advertisers. online and mobile advertising will be bolstered by increased penetration of these services. Latin American consumers are not so forgiving. Brazil and Mexico. if you guessed that the potential for advertising growth in the region is correlated to the two largest countries in the way of population and economy. we did stumble upon a finding that should give hope to providers. According to their estimates. developers and advertisers alike. where about half of the population had Internet access and about two-thirds had mobile phones at the end of 2009. While a provider or developer may more than offset the decreased revenue potential of consumers who will certainly not pay the same price for a service that includes ads versus one that does not. provides fertile ground for providers. although these Latin American consumers are less tolerant of high-frequency ad models than their North American counterparts.267 And. We tested the influence of advertising on a consumer’s willingness to pay (and a provider’s ability to maximize revenue through an advertising-subsidized. The use of personalized. their preference for targeted advertisements combined with healthy growth rates in online and mobile populations. from a low of eight times to a high of thirtytwo times per month for a particular service. or “freemium”-based approach). targeted advertisements can alone neutralize the negative impact on willingness to pay for some segments of the population.THe SHIFT The case for TarGeTed adverTisinG eMarketer recently predicted that ad spending in Latin America will grow anywhere from 6%–9% annually through 2014. While television will retain the majority of these dollars through 2012. So.

profiling. this single per-use business model is overwhelmingly preferred by all consumer groups in the Latin American study. such as a consumer’s presence.THe SHIFT PuTTinG iT all ToGeTher Emerging markets will drive global economic growth for some time to come. whereby the consumer remains in full control of this contextual information at all times. However. offers unique opportunities to serve targeted ads to this market. profile. who favor simplicity and core functionality over complex service definitions. developers. In Brazil. and advertisers interested in riding the wave of growth in communications services. And. there is a stronger inclination to location and QoS capabilities that enhance one’s entertainment experience. the importance of security—whether in serving to protect safety as with location-based services or in authenticating credentials as with biometric capabilities— should not be ignored. > The optimal business model for maximizing revenue potential is prepaid. While bundling APIs results in greater revenue potential in Mexico (similar to the North American market). it is the opposite case for Brazilians. Here are some specifics: > Healthy appetite exists in Brazil and Mexico for services that incorporate network-based functionality. both offer a market for providers. Not only are online and mobile subscriptions growing at a rate faster than the population. the markets with the largest population and economy are Brazil and Mexico. the case for bundling is not nearly as straightforward. like presence. although these two countries could not be further apart in their current socioeconomic climates. such an opportunity does not replace the requirement for an explicit opt-in approach. > These markets are primed for advertising. the use of targeted advertisements alone can mitigate a lower willingness to pay among consumers as advertising impressions increase. 260 | CHAPTer 16 . and location. In Mexico. Using contextual APIs. These unique differences reflect the current state of affairs in each market. In Latin America. > At the same time. Unlike their North American counterparts where the preferred business model varies depending on the market segment. and QoS.

Brazilians will soon take center stage as the hosts of two of the most popular sporting events in the world. And. for those who recognize the potential of these emerging markets. While Mexicans wrestle with a new revolution of violent unrest. As Dickens so memorably penned more than 150 years ago in his masterpiece. the best of times is yet to come. “It was the best of times. it was the worst of times. Communications services definitely have a role to play in this revolutionary transformation.” so is the case for these two nations standing at the brink of economic prosperity. BrAzIl ANd MeXICo: A TAle oF Two CouNTrIeS | 261 .THe SHIFT Brazilians and Mexicans find themselves at an interesting turning point in their cultural history.

THe SHIFT 262 | CHAPTer 16 .

THe SHIFT Small groWTh engine chaPTer 17 buSineSS laTin america’S SMAll BuSINeSS: lATIN AMerICA’S growTH eNgINe | 263 .

Small businesses are not merely more sophisticated consumers. In an Alcatel-lucent primary research study. 264 | CHAPTer 17 . many are ill-equipped with company policies to introduce services that incorporate these capabilities. representing a compelling business case to mitigate churn risk. with Mexico showing the most impressive strides among any of its regional counterparts in doing so. Approximately 90% of latin American small businesses in our study would be likely to stay with a provider that offered network-enhanced services. they differed from their consumer counterparts in selecting which specific API functionality most moved the needle on willingness to pay. such as presence and profiling. among others. latin America is uniquely poised to develop an economic climate conducive to private growth. and in their choice of payment model. Providers and developers must understand and prepare for this hurdle before attempting to address this demand. while small businesses in our study tend to like contextual APIs. in their preference or aversion for bundling these capabilities.THe SHIFT key chaPTer hiGhliGhTs Small businesses are the growth engine of any sustainable economy.

THe SHIFT > in his socioeconomic Thesis. questionable incentives for informality. as many economists would argue. Among the reasons cited for Mexico’s strong showing in the report 265 SMAll BuSINeSS: lATIN AMerICA’S growTH eNgINe | . Mexico took top honors among its Latin American peers.269 But. which fell to 127th place by comparison. and shows the country’s economy trailing those of Southeast Asia and Eastern and Central Europe.268 If historic performance is any evidence of success. placing 35th in the overall global rankings and trouncing the largest South American economy. including Brazil. explaining Mexico’s seemingly unending battle for prosperity amidst the challenges of poorly functioning credit markets. and an export market that competes with China. The author points to an economic growth rate that places Mexico below most of its Latin American peers. In its “Doing Business 2011” report. Hanson may be on to something. small business is the lifeblood of economic prosperity and. “why isn’T meXico rich?” author Gordon Hanson laments the lackluster economic performance of a nation struggling for growth despite numerous attempts at economic reform. distortions in the supply of non-traded inputs. if the World Bank has it right. where the independent organization assesses business regulation in 183 economies. Brazil. Hanson presents a compelling case. there may in fact be a new page turning for Mexico.

And. Look no further than the blatant differences between consumers and small businesses in our Latin American study. Rather. the number of registered businesses increased by 5%. efficiency gains in dealing with construction permits. efficiency. consumers benefited from the increased competition with an estimated 0. entrepreneurs are often treated with consumer-based services wrapped in a consumer-based marketing approach. Moreover. there’s the matter of the optimal 266 | CHAPTer 17 . service providers.8% in affected industries.270 If small businesses are the primary source of job creation and economic development within a country. and advertisers clearly have a viable role to play as communications services can favor a small enterprise across all of these business-minded goals. The results reflect a market with a potential limited only by a provider’s willingness to understand the challenges of a segment as unique as the entrepreneurs comprising it and the courage to debunk the myths that otherwise shackle one’s success in serving small businesses. It’s not that providers are naïve. and favorable policies that encourage access to credit.6% reduction in prices. myTh: enTrePreneurs are merely more soPhisTicaTed consumers A common mistake made by providers is to assume that small businesses will settle for souped-up consumer services. First. many simply lack the scale necessary to offer these entrepreneurs richer services and support compared with that already provided to the consumer masses. and employment rose by 2. and revenue-generating opportunities in mind. Alcatel-Lucent assessed the appetite for next-generation communications services and network-based APIs across 600 small businesses (those with fewer than 100 employees) in Brazil and Mexico. Thanks to simplified municipal registration formalities for firms in Mexico. then providers can tap into the entrepreneurial spirit of this market with productivity. it is a patently offensive and potentially fatal misstep.THe SHIFT were its electronic capabilities to simplify the administrative process of starting up a business. So. developers. The resulting benefits to businesses and consumers were apparent. To subject these small businesses to a onesize-fits-all consumer mindset is not merely as innocuous as failing to tune one’s marketing efforts.

the less the small business decision maker is willing to pay. the more ads required by the service. the opposite is the case for Mexican small business decision makers. (Note that this does not suggest a provider would have to pay these respondents to take the service. the opposite is true for small businesses. revenue potential among small businesses tends to be inversely correlated to advertising impressions within the service definition. Providers. there’s the issue of what network capabilities are most influential in increasing a respondent’s willingness to pay. that’s where the similarities end. Next. But. In short. in general. While consumers in Brazil and Mexico were clear in their preference for a per-use approach. there’s the issue of bundling. Unlike their consumer counterparts.) Mexican consumers didn’t care as much for QoS functionality. location APIs were among the most attractive tested. where targeted advertising ameliorated an otherwise negative impact to willingness to pay. Let’s turn our attention to advertising. there are far more differences than similarities among consumers and entrepreneurs in these markets. In contrast. Brazilian small businesses revealed an opposite inclination. In contrast. QoS was one of the strongest performing API categories among Mexican small businesses. Meanwhile. in general. developers. In contrast. For Brazilian consumers. Finally. where the general trend is to eschew complex service definitions and punish providers with a lower willingness to pay. where bundling APIs. Brazilian small businesses loathed these capabilities and voted as such with a negative willingness to pay. While Mexican consumers were willing to pay more for services composed of multiple APIs.THe SHIFT business model. that is. The presence of targeted ads among these decision makers can result in a further hit to a provider or developer’s revenue potential by as much as 21%. but it does reflect just how unattractive these decision makers find these capabilities as incorporated in services they may otherwise purchase. as measured by their interest and willingness to pay for services that included these capabilities. and advertisers attempting 267 SMAll BuSINeSS: lATIN AMerICA’S growTH eNgINe | . Like consumers. Brazilian consumers preferred simple services over those composed of multiple APIs where bundling was proven to negatively impact willingness to pay. small businesses in both countries are equally transparent in their penchant towards a monthly subscription plan. results in greater revenue potential to the provider.

In other words. they are less inclined to do so when it comes to advertising. In other words. We have already covered an aversion to targeted ads. with the right formula. the incremental demand from businesses that are willing to accept this trade (attention in exchange for a lower price point) more than offsets the price discount. the revenue outlook is more favorable than in a case where no advertising is present. the media format also has influence over 268 | CHAPTer 17 . Despite the fact that consumers are inundated with literally thousands of advertisements per day and often willingly trade their time and attention in exchange for discounted. Specifically. by entrepreneurs expecting different strategies. which only offers additional upside for providers and developers. This is a case where a provider stands to make up the pricing discount in volume and earn even more revenue as a result. we asked these business respondents to consider a scenario whereby their attention (and that of their employees) is exchanged for a lower retail price—a scenario similar to the way in which we behave as consumers. myTh: small businesses won’T ToleraTe adverTisinG While many are quick to paint small businesses with a consumer’s broad brush. conventional wisdom dismisses the notion that small businesses would be receptive to the same. Beyond the targeting of the message. In fact. conventional wisdom is wrong.THe SHIFT to capture the market with a generic one-size-fits-all approach optimized for consumers will find themselves marginalized. we measured the willingness to pay for services where no advertising was present. In this case. providers actually stand to earn more revenue from these enterprises through an advertising-subsidized approach than with no advertising at all. if not “free” services. In cases where at least a 10% discount is offered over a finite (6 months) or indefinite period of time. if not completely dislocated. Our research revealed that small businesses in Latin America are not only receptive to advertising but potentially attracted to it. We also found that small businesses have clear preferences or aversions toward certain ad formats. We then measured willingness to pay for the same services subsidized by advertising through a pricing discount to the respondent. Note that we have not even calculated the incremental revenue provided by advertisers with this approach.

While the need is clear. If you assume small businesses aren’t influenced by ad format. They simply lack the ICT know-how to implement the technology in their business (which. ironically. and frequency. And this is where the disconnect between the services a small business decision 269 SMAll BuSINeSS: lATIN AMerICA’S growTH eNgINe | . these entrepreneurs are more than capable of assessing their needs and examining value propositions that resonate. They have the means to afford it. this myth is much more complex in its meaning. the willingness to pay among small businesses in Brazil was significantly higher than what was found in the United States. is also the opportunity that makes these entrepreneurs so attractive to providers and developers). In fact. making employees aware that their real-time context is fair game may require company policies stating the same. No. It’s not that small businesses are confused as to what they want. that these services were among the top out of 13 tested in terms of willingness to pay. Small businesses know what they want. It’s also not that these small businesses do not have the means to pay for services. Consider this case in point.THe SHIFT the decision maker where a clear preference is revealed for more traditional ad vehicles. Small businesses in both Brazil and Mexico favored services that optimized meetings or fostered more seamless communications between employees—so much so. myTh: small businesses are PrePared To buy whaT They wanT Please do not misunderstand this myth. In fact. the exposure of mobile SMS or MMS ads actually decreases revenue potential when compared with the baseline of a service with no advertising at all. While the presence of video-based banners or advertisements yields a positive revenue impact of up to 20% for high-frequency impressions. the ability for these entrepreneurs to use these services is less certain. targeting. you will unintentionally leave money on the table. This finding is not surprising when one considers that these Latin American businesses agreed that reducing operational expenses earned its place among the three most cited determinants in influencing resource allocation from a list of ten possible factors. in fact. Since these services rely on knowing employees’ presence and location information to seamlessly connect them to others. and the want for value propositions that make employees more efficient follows.

nearly 90% of Latin American small businesses indicated they would be somewhat or much more likely to stay loyal for 12 months. one where demand clearly exists but practical implementation requirements are lacking.THe SHIFT maker wants and those that are readily implementable becomes problematic. Despite loyalty to an incumbent provider that delivers relevant services. Only three in five Brazilian small businesses have policies that provide for some type of employee monitoring in place. In Latin America. In contrast. Brazilians are roughly split in their preference regarding which type of company—a service provider or an application developer—they would be most inclined to buy the service from. incumbent service providers were perceived as having a favorable pricing position compared with popular 270 | CHAPTer 17 . further debunking this myth. with fewer than half agreeing that such policies are sufficient in protecting employee privacy concerns. In a global market plagued by one of the worst recessions in our lifetime. In contrast. the loyalty to one’s incumbent provider is even stronger among small businesses than what exists in the United States. the situation is even worse. Service providers or developers attempting to introduce contextually based services that rely on real-time knowledge of employees’ presence and location may discover a bit of a schizophrenic market. small businesses in Brazil do see things a bit differently than either their Mexican or US counterparts. In Mexico. That is. myTh: small businesses will defecT for lower Prices Small businesses certainly appreciate the value of currency. price appears to have little influence over the preference for a particular type of provider among Brazilian small businesses. service providers drew nearly two-thirds of the preference votes among US and Mexican small business decision makers. only half of the US small business decision makers felt the same. Specifically. However. it is erroneous to believe that small businesses automatically equate price with value. In fact. And. with about a third indicating that such policies exist but only a quarter agreeing they are adequate in addressing employee privacy rights. when asked how much more likely they would be to remain with a provider that offered their favorite application of the thirteen tested. yet alone that they are likely to defect from a provider merely to save a buck. this point is amplified.

small businesses deserve more credit for their business sense. In Brazil. For instance. Where these developers narrowed the perceptual gap was in the delivery of high-quality products and services backed by superior support. Of course price has a bearing on take rates for services (as we discussed earlier with the elastic demand curve discovered for advertising-subsidized services). SMAll BuSINeSS: lATIN AMerICA’S growTH eNgINe | 271 . In fact. over 40% are also likely to prefer a partner who offers QoS guarantees. This definitely aligns with a culture that embraces new business ventures as identified by the World Bank. productivity enhancements and operational efficiencies are most important to these entrepreneurs. In Mexico. In either Mexico or Brazil. not price. Here. the situation is a bit different. In Mexico.THe SHIFT enterprise developer brands that were also tested. Linking one’s value proposition to benefits in productivity. However. despite a more price-sensitive market compared with that of Brazil. This isn’t to suggest that entrepreneurs are somehow immune to the basic laws of supply and demand. the absolute top requirement out of ten tested was in opening up new market opportunities. customer service. with Mexican small businesses demonstrating a significant willingness to pay for comprehensive support options and enhanced network security (a phenomenon also recognized among Mexican consumers and reflective of the current safetyconscious mindset of the market). To this point. not only do businesses value support in selecting a brand with which to do business. although nearly half of Latin American small businesses favor a provider because of a favorable pricing model. or revenue attainment will find a market primed to respond. they are also willing to pay more for it. the influence of support on willingness to pay was even stronger. the latent motivations driving demand reflect business imperatives. Nearly 50% of Mexican entrepreneurs agreed that this was the most important determinant in influencing resource allocation. with approximately 40% agreeing that these needs are most essential in determining resource allocation. Brazilian entrepreneurs were most influenced by comprehensive support packages with IT help desk capabilities. when we tested the impact of various support options on a respondent’s willingness to pay.

the majority are not equipped to address employee privacy concerns with current company policies. particularly when considering the cost benefits they derive with subsidized services. these decision makers are not solely influenced by price.THe SHIFT PuTTinG iT all ToGeTher Small business is big business in Latin America. Mexican businesses respond with a lower willingness to pay. and buoys the economy. increasing efficiency. and support. > Do give credit to these entrepreneurs for their business sense. In fact. While the law of supply and demand is still in play. services. 272 | CHAPTer 17 . creates jobs. > Don’t get the advertising equation wrong. which are met with lower appetite and revenue potential. Among the do’s and don’ts are the following: > Do recognize the clear preference for a monthly billing option that clearly distinguishes these entrepreneurs from their Latin American consumer counterparts. > Don’t underestimate the challenges these entrepreneurs will face in introducing services that rely on employees’ real-time context. Providers and developers attempting to introduce these capabilities may find friction in the market until such policies are more widely adopted. While Brazilian businesses are more receptive to services that bundle multiple APIs. However. brand loyalty is closely associated with superior products. Service providers and developers looking to capitalize on this growth must first avoid the missteps that are unfortunately all too commonplace when serving this complex market. these businesses are willing to pay for services that address their imperatives of improving productivity. such as presence or location. this is a case where targeted advertising suppresses revenue potential. While these decision makers prefer and are willing to pay for services that incorporate this intelligence. Beyond remaining loyal to providers who offer the same. As Mexico has realized. Small businesses are receptive to advertising. And. > Don’t suboptimize revenue potential with overcomplicated services. there are clear preferences for video-based advertisements in lieu of mobile advertising options. and unlocking revenue opportunities. creating an environment that favors business entry increases competition.

the opportunity for prosperity rests. on their ability to sustain private sector growth.THe SHIFT A thriving private sector lifts more than a local or national economy. For Brazil and Mexico. your time has come. And. entrepreneurs are rewarded. while Mexico and Brazil represent the largest economies within Latin America. And. It creates an environment where jobs are created. your market is waiting. and citizens benefit from increased competition. for those providers and developers serving small businesses in these emerging economies.0 landscape. perhaps the true mettle of a country will rest in its ability to propel itself forward with a framework that attracts and inspires an entrepreneurial spirit. SMAll BuSINeSS: lATIN AMerICA’S growTH eNgINe | 273 . Perhaps Hanson is correct in expecting more from a country that has endured its fair share of reform. This transformation further requires a communications infrastructure wrapped in services and support that adapt to the business challenges of a 2. Or. at least in part.

THe SHIFT 274 | CHAPTer 17 .

THe SHIFT developerS brazil’S emerging marKeT chaPTer 18 deVeloPerS: BrAzIl’S eMergINg MArKeT | 275 .

these developers prize their community and do not expect. behind only the Asia Pacific.THe SHIFT key chaPTer hiGhliGhTs A developer is born in latin America every 5 minutes. like their uS counterparts. giving the region the second highest growth rate for developers in the world. as was the case in North America. Brazilian developers agreed that APIs reduce the time associated with creating applications and were willing to pay a premium for bundles composed of multiple APIs as a result. However. discoverability. who are willing to pay more for customer service and billing capabilities. is what matters. 276 | CHAPTer 18 . premium support options to supplant their peer forums. not reach. Brazilian developers were strongly attracted to marketing options that increased their chances of breaking through the cluttered application marketplace. or want. Brazilian developers in an Alcatel-lucent primary research study demonstrated a greater interest in network-based APIs than their American counterparts. Support options are also valued by developers. Time remains the intangible currency that unites all developers across the globe. with the vast majority willing to trade exclusivity with a provider for greater discoverability benefits.

trouncing the United States. which came in fourth place by comparison. as measured by purchasing power. analysts. iT recenTly earned its place as the most attractive market (tied with China) in a survey among Bloomberg investors. making it the top country worldwide in this pursuit. with 86% of the Brazilian online population regularly using social networking sites. Brazil has more mobile phones per inhabitant than the United States. and China) keeps it in company with emerging markets that collectively represent the fourth largest economy worldwide.273 But we’re not simply speaking of a market primed for economic development. its inclusion in the BRIC block (composed of Brazil. India.274 Brazilians who have access to computers spend 30 hours per week on the Internet—more than the 17 hours per week they spend watching television by comparison.THe SHIFT > brazil is a markeT riPe for develoPmenT .275 They are rabid social networkers.272 And.271 It boasts the world’s eighth largest economy and. is second only to the United States in the Americas. Russia. our primary interest is in the pent up demand for “development” of a different kind—applications development. and traders. If you’re quick to assume Brazil is a country without the means to afford the high-tech gadgets and services popular in the United States and other developed nations.276 A survey by Deloitte in early 2010 across 277 deVeloPerS: BrAzIl’S eMergINg MArKeT | . consider the following facts. As authors of this book.

placing it above the 6.500 due to the tariffs imposed on imported electronic devices.277 Perhaps this craving helps explain Apple’s recent success with its iPad launch in the country. Germany. We were curious if commercial developers in Brazil would be equally attracted to these network APIs. We put these developers through the same paces as we did their North American counterparts. this places Brazil as the second largest IT market among emerging economies after China. second only to Asia Pacific’s growth rate of 8. ignore this developer market at your own risk. Though this currently ranks it last against its global peers. and India found Brazilian consumers to be the most committed to acquiring new technology products the moment they are introduced.3 billion in 2010. Therefore.3% and over four times the growth rate of the North American developer market. That translates to an IT spend that is currently more than double that of Russia and 33% more than India’s. The results prove these developers are more similar to their North American brethren than they are different. up from $101.281 We’ve covered the appetite for network capabilities across 1. Japan.280 Perhaps this growth helps explain an equally burgeoning market of application developers in Latin America. The region represents roughly 9% of the global developer population worldwide. despite the scarcity of other Apple products in the country.THe SHIFT seven countries including the United States.278 And.279 The market potential for information technology across all segments of customers— consumers and enterprises—places Brazil near the top of the emerging market heap.6% of the country’s real GDP.300 commercial developers in North America. we expanded the scope of our study to include 300 commercial developers in Brazil. The current threshold of spending represents 9. We tested the willingness to pay for several network-based APIs and various go-to-market support options that could be offered by a provider.1% ratio for the BRIC block. Gartner recently predicted that IT spending among end users in Brazil will reach $134. that hasn’t deterred Brazilians from paying two to three times the manufacturer’s suggested price on the black market to satiate their appetite for the latest technology.2 billion in 2014. with the device selling at up to $1. Further. Evans predicts the developer population will grow by 8% in Latin America annually. 278 | CHAPTer 18 .

among all network-based APIs tested in both the United States and Brazil. Tied for first place among both developer communities were: > A security API that establishes and maintains an authenticated connection for a single session across multiple devices and/or networks > The ever-popular messaging API that allows for seamless SMS. they exceed it. as we have discussed. and several operating system choices. Further. and email messaging optimally formatted and distributed to a recipient based on the most accessible device. the types of APIs that were more popular. hundreds of network alternatives. That’s quite an appetite for a developer community with hardly a shortage of APIs readily available to them. operating system. MMS. 279 deVeloPerS: BrAzIl’S eMergINg MArKeT | . are surprisingly similar in both the United States and Brazil. Further. This is the same API that attained top honors among commercial and enterprise developers in the United States and now is shown to be even more popular among Brazilian commercial developers.THe SHIFT Time is The inTanGible currency Brazilian developers do not exactly share the appetite for network-based APIs as expressed by their US peers. and network. This fragmentation in the market creates an appetite and willingness to pay for functionality that is agnostic to device. It accentuates the points made in the earlier developer chapters: Developers value functionality and are willing to pay for it. For the least popular network API. the commercial developer’s intangible currency is time. Developers are faced with thousands of device environments. the figure jumps to 59% of Brazilian developers expressing the same inclination. In fact. IM. all commanded a positive willingness to pay among developers. While 39% of US developers were very likely to use the top-performing network-based API if it were made available to them. Skeptics reading this may still question why developers would see value in APIs in a market characterized by thousands of APIs across web and device environments. In short. still over one in three Brazilian developers indicated they would be very likely to use it if it were available. We would submit it is precisely this abundance of APIs that makes network-based APIs attractive. as expressed by a likelihood to use them if available.

the bundle configuration alone had the most significant impact on a Brazilian developer’s willingness to pay. Still not convinced? You may recall the Commercial Developer’s Hierarchy of Needs that we introduced in Chapter 5. rather than having to scour the thousands of APIs available in the market today for those with complementary functionality (such as presence and location. then every second attempting to troubleshoot an application that isn’t performing up to par results in lost productivity for a developer. Those attributes that were most important to influencing a developer’s willingness to pay were reflected as the most primal needs (such as the functionality of the network API. when we asked Brazilian developers for the top three benefits third-party APIs afford. In fact. Perhaps that helps explain why Brazilian developers evaluated an API that identifies and troubleshoots problems associated with installation issues. Corroborating the importance of time to a developer. suPPorT is The unaddressed need If time is the intangible currency. create a more powerful product that can be developed in less time. which alone had the most significant impact on demand among North American developers). Further. Why? A bundle of capabilities allows the developer to use the same tools to create an application. when combined. and network traffic conditions for an application as one of the 280 | CHAPTer 18 . latency problems. reducing the length of time needed to create new applications was the top choice cited among eight possibilities—selected by 52% of Brazilian developers. for example) and then stitching together those APIs with disjointed software development kits and testing and certification requirements. While we demonstrated that bundling APIs had a greater impact on willingness to pay among North American developers than price itself. Quite simply. this represented the statistical analysis of thousands of trade-offs made by North American developers across a variety of attributes. the effect was even stronger in Brazil.THe SHIFT Find a way to crash the development cycle and help a developer accelerate the revenue path and you will find a market willing and able to pay. including API functionality and goto-market support options. The revenue potential of bundling two APIs together earns a provider up to 80% more revenue than offering two APIs discretely. developers can instead gain value with a bundle of capabilities that.

Take the all-important billing engine as one example. As such. the potential for billing as a revenue platform could mean big business to a provider. Beyond “traditional” support. developers are keen to accept services that help them monetize their applications. such as email and moderated forums. T-Mobile. which has cited mobile as one of its key growth opportunities. the potential micropayment market has captured the interest of more than just PayPal. particularly in an Open Source environment. developers must rely solely on the support of their peer community to troubleshoot and resolve the problem. the incremental willingness to pay associated with these more costly support options does not likely offset the associated cost in providing them. Take PayPal as the most obvious success case. they understandably demonstrate a relatively healthy willingness to pay for lowercost support options.282 Indeed. they are interested in—and willing to pay for—support that can pick up where these forums may leave off. Today. While this may seem obvious. which consists largely of PayPal. the findings in Brazil are as encouraging as those found in North America. billing is and will continue to be a critical requirement for a developer. And. Developers are not seeking an alternative to supplant the support provided by their peers. an increase of just 3%. Of these developers interested in and using micropayments. took in $838 million in revenue in the third quarter. As we mentioned in the earlier developer chapters.THe SHIFT most attractive in terms of willingness to pay. It accounted for 37% of eBay’s overall revenue in the third quarter of 2010 compared with 23% just 5 years ago. which will use near-field communications to recognize payment through a consumer’s mobile device. if an application still isn’t working up to snuff.283 AT&T.41 billion in revenue during the same period. The primary core of eBay’s auction operations collected $1. up 22% in a year. For these developers who have acted as architects of the 2. Google has also demonstrated how phones with a new version of 281 deVeloPerS: BrAzIl’S eMergINg MArKeT | . for providers who are accustomed to a world where “support” translates to onerous service level commitments and 24x7 live service. eBay’s payments division. That is.0 world in which they live. the role of community cannot be understated. However. Nearly half of Brazilian developers use micropayments and 40% who do not are interested in doing so. they expect revenue derived from that source to grow. and Verizon announced a joint venture called Isis.

businesspeople by necessity. simply by changing the type of business model offered—from revenue-sharing to per-dip—a provider stands to earn several orders of magnitude more in revenue potential without deterring developer participation as a result. there is even higher interest and willingness to pay for network-based intelligence that helps the developer determine the optimal price point for an application. As we saw in North America. In other words. for service providers of all sizes.284 Accordingly. And. The sentiment is shared by their Brazilian counterparts. And. this is further evidence that these developers not only want but need intelligence-based tools to address this blind spot.2 billion mobile applications market. commercial developers are often creators first. Not only is reach the least likely to affect willingness to pay. Perhaps that helps explain why again we see a market receptive to appropriately priced per-dip models when compared with revenuesharing alternatives. a significant minority of Brazilian developers—35%—would actually prefer to work with a regionally focused provider versus a large national alternative. in an attempt to capture its share of Gartner’s estimated $6. discoverabiliTy is The desire We covered the point of reach being the least important variable in influencing developer willingness to pay in North America. Does this mean that developer demand for APIs is really that inelastic. the news is even better. Brazilian developers are equally likely to prefer a network provider to a software company or device 282 | CHAPTer 18 . But. Apple has recently hired an expert in near-field communication technology as its new product manager for mobile commerce. that they will incur what would amount to a six-fold pricing increase for the same API without decreasing demand? We think not.THe SHIFT its Android system could do the same. And. what the picture does reflect is a situation where developers gravitate first to the bundle and functionality of APIs before considering the business case basics of profit and loss. there is commensurate appetite for the capability to charge fees to an end user through the service provider’s billing platform as measured by willingness to pay among Brazilian developers. with providers having the opportunity to gain six times the revenue potential for the former. As we mentioned in the previous developer chapters. But the interest doesn’t stop there.

we would submit the underlying motivation rests in the time currency we have cited. such as creative bundling options. This may seem counterintuitive. That is. Developers desire discoverability. if I can develop an application once and simultaneously reach more potential customers. they would. then I have made more productive use of my scarce time. This is yet one more example of trading off greater “reach” by limiting one’s application to a particular storefront for enhanced “discoverability” on the same. And. why wouldn’t a developer want a larger audience? All else being equal. PuTTinG iT all ToGeTher Brazil is an emerging market in many ways. we asked these developers how likely they would be to offer a minimum of 6 months exclusivity for their application with a provider in exchange for greater discoverability in the provider’s storefront.THe SHIFT manufacturer when considering with whom they would most like to work. Its economy is poised for growth. And. Over 80% of developers would be somewhat or much more likely to agree to a term of exclusivity if a provider were to offer optimal search or storefront placement. 283 deVeloPerS: BrAzIl’S eMergINg MArKeT | . To the extent developers express an overt desire for reach. It’s the same reason developers in our study that preferred Google as a partner were likely to cite its large number of customers as a reason. its developer community is growing faster than most with an appetite that exceeds that of the United States. The fact that these latter companies often have a large “reach” of customers that consume applications demonstrates how insignificant this criterion is relative to other factors in a developer’s decision. this need can be satisfied with more attractive approaches. However. Further to this point. It speaks to why nearly half of Brazilian developers were willing to accept up to a 30% premium over traditional API prices to work with a carrier-agnostic aggregator that exposes APIs across multiple service provider networks. when asked to make difficult trade-offs that are more emulative of real market scenarios. Its citizens are avid consumers of technology. After all. reach is not as important. A developer’s expressed interest in reach reveals a latent need for time. which alone can neutralize a perceived reach advantage by a larger provider. not reach.

> Support options are a fundamental need. The United States and Brazil are definitely distinct markets. they were more likely to gravitate to QoS and storage capabilities than US developers. since developers are more alike than they are different. One struggles with recession while the other stands at the precipice of economic hope. One is developed while the other is emerging. such as enhanced storefront position or search placement. 284 | CHAPTer 18 . Further. despite these differences. Whether this translates into leveraging a service provider’s billing platform for micropayments. They crave support. these developers responded very favorably to diagnostic QoS capabilities that identify and troubleshoot application performance problems across an end-to-end network.THe SHIFT For providers seeking to tap into this market. a service provider’s potential to attract these creators reaches far beyond its local or national jurisdiction. the similarities across these developer communities could not be more apparent. while the other is burgeoning. One has a significant developer community. That said. They are willing and able to pay for network-based APIs. And. remember the following: > Time is the intangible currency. > These developers are far more like their US counterparts than they are different. is the latent desire. providers have an opportunity to earn incremental revenue with each of these approaches. Do not conflate the two. They share the same intangible currency. They want discoverability. using network-based intelligence to identify the optimal price point for an application. the market potential is now as global as a provider desires. Yet. In particular. or seeking intervention when peer-based forums fail. Offering developers greater discoverability capabilities. These developers were most influenced by bundle configurations of APIs in the impact on willngness to pay. they have a bigger appetite and greater willingness to pay for network-based APIs. > Discoverability. A virtual world knows no geographic boundaries. These similarities represent a good-news market for service providers. not reach. Indeed. is sufficient to earn exclusivity for an attractive application.

0 World ePIlogue | 285 .THe SHIFT The evolved value chain in a ePiloGue 2.

THe SHIFT 286 | ePIlogue .

networks.THe SHIFT > now ThaT we have eXPlored mulTiPle asPecTs of The evolving 2.0 business models are unstable and in need of transformation.0 value chain. Instead. and app stores. Whether looking at network providers attempting to keep pace with a seemingly insatiable consumer broadband appetite. let’s take a moment to recap the key findings based on thousands of surveys administered across this complex ecosystem: > The current 2. > This is not about a zero-sum game. It’s time to augment traditional business models with new value chains that can be supported in a thriving ecosystem. To do so. content providers hoping to stem the tide of future video cord-cutters or advertisers seeking to evolve archaic “spray-and-pray” delivery models. the shifting sands in our landscape are evident. > Leveraging the network as a development platform—what we have called Application Enablement—allows developers to tap into new capabilities while addressing the fragmentation associated with thousands of devices. incremental value must be created and sustained across the ecosystem. Developers have an interest in and willingness to pay for these network capabilities. this is about exploring options that enable multiple parties in the market to thrive. Bundling these APIs 287 ePIlogue | .

THe SHIFT 288 | ePIlogue .

social networkers. They are in need of marketing support. online video enthusiasts. and connected parents across North and Latin America—see a value in network-based capabilities. and are willing to pay for such. social networkers having a penchant for pay-per-use charges and gamers possessing an aversion to one-time fees. and operators insert themselves into a new value chain. They are willing to pay more for services when such network ingredients are incorporated. However. Providers offering up profiling data 289 ePIlogue | . there is not a one-size-fits-all billing approach for these users in North America—with video enthusiasts preferring monthly subscription fees. > Enterprise users are more complex in their assessment of capabilities. users leverage the secure billing relationship already in place with their providers. their inclusion in a bundle can actually serve to decrease willingness to pay. > All consumer groups—including gamers. consumers in each country expressed a different appetite for bundled APIs operating within a service definition.THe SHIFT results in even greater revenue potential for a provider. Finally. Service providers that aggregate consumer profile data and provide such intelligence to developers address the natural fragmentation in markets across North and Latin America and maximize revenues. Further. While bundling is a clear winner among developers and most consumers. > Advertisers face an increasingly fragmented market as well. these developers do not conflate reach with discoverability. Some segments view a few APIs so negatively. the willingness to pay for specific network functionality is as different as the current sociopolitical landscapes in these countries. it is less of a sure thing among enterprise users. Combine this aggregated profiling data with the ability to allow a developer to charge micropayments directly to the end user’s communications bill and you have another win-win-win in the market: Developers receive seamless billing. bundling can serve to either increase or decrease revenue potential. including diagnostic tools and marketability of their applications. While per-use models clearly won favor among Mexico and Brazil consumers. with Mexicans favoring such an approach (like their North American counterparts) and Brazilians eschewing it. Depending on the configuration and segment. They crave simplicity and performance metrics.

Consumers are more likely to trust their service provider over their application developer with this sensitive data. Further. device. developers are a critical part of the ecosystem that will require their own resources for marketing and support. > Developers will not abandon popular devices like the iPhone and Android family. network capabilities will simply provide developers with additional options should they want to address multiple devices and operating systems concurrently. Service providers must consider developers an extension of their market and must be primed to support them. In either case. both enterprises and consumers in the US are highly tolerant to high-frequency ad models as part of their service definitions. Providers cannot expect to merely expose APIs and walk away. 290 | ePIlogue .THe SHIFT for end users can find themselves in an interesting position to monetize this information. True. Otherwise. Users must remain in control of their profiling data—including over who has access to such information and when it is made available to them. Undoubtedly. though this landscape is changing. and Web APIs could be combined to offer the development community greater simplicity in the development cycle while maximizing the performance capabilities of their applications. We would never suggest this is an either/or option (either develop for devices or for the network providers). the point is valid. bundles of network. they should turn to aggregators that are capable of attracting this market and sell through their capabilities accordingly. True. In fact. It seems US service providers are in the catbird seat with regards to monetizing the profiles of a trusting and advertising-tolerant user base—among both enterprises and consumers. Among the possible objections: > Service providers are not relevant to developers. Instead. providers must first earn and then keep the trust of users in an attempt to do so. Cultivating the market is even more important and will require dedicated effort on the part of providers or through the aggregators that serve developers. However. there are still critics who are not convinced service providers have a right to play in this space.

to be clear. ePIlogue | 291 . Now. Assuming network providers were to open up these capabilities. the regulatory impacts are uncertain. when they choose not to).THe SHIFT > Regulators will intervene. We will keep our eyes open for supporting or contradicting evidence that corroborates our arguments or points to new shifts in the environment. This is precisely why we submit that consumers must remain in control of their privacy settings at all times. The race has started. depending on how capabilities are exposed and to what extent broadband innovation is supported. given our research and analysis. This is not a case for an opt-out approach. nor should the dialogue. True. While it might be dangerous to estimate the market potential of such a vibrant value chain. network providers will be competing against Web and device alternatives that will continue to innovate in emulating comparable capabilities. Regulators will always have a significant role to play in this market. > Consumer watchdog groups will question privacy concerns. Opportunistic players will either find ways to innovate and remain relevant in their value chain or find themselves commoditized or extinguished as a result. there are heated debates underway pertaining to Net Neutrality and the reclassification of broadband services. Certainly. more importantly.0 world requires 2. While many service providers watch from the sidelines. Consumers must directly and transparently opt in whenever they choose to share information about themselves (and. Whether you agree with our arguments or not. this game continues to evolve. This story does not end with this book.0 business models. we’re not sheepish to do so. For those seeking to play in this dynamic ecosystem. However. the choice is now yours. we estimate a $100 billion market opportunity in the United States alone. We will continue to analyze and report ongoing shifts in this value chain on our blog at www. one matter is not up for debate: A 2.theshiftonline.com. This one remains to be seen.

THe SHIFT 292 | ePIlogue .

THe SHIFT references reFereNCeS | 293 .

THe SHIFT 294 | reFereNCeS .

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August 11. Klein. “Average Social Gamer Is a 43-Year-Old Woman. 2008. April 12. 166. December 9. 2010.” Yahoo! Canada Finance.com/zyngacom/2010/04/farmville-nabsinaugural-social-games-award-at-gdc. June 11..” Bloomberg Businessweek.com/2010/02/17/average-social-gamer-is-a43-year-old-woman/ . Mathew Ingram. “America’s Love Affair with Small Business. http://zyngablog. Olivia Oran.” Courant. 169. 2010. June 8.com blog. http://www. 2010. 159. 2010. 165. February 17. 171.” www. “Quicker Employment Recovery Expected Outside Europe and the U.com/news/articles/2008/08/IT-spending. 2010..” Zynga Blog.html .businessweek. 167 Emily Maltby.” 170. 2010 Social Gaming Research.com/ 2010/04/06/zynga-5-billion-valuation-buy-%E2%80%93-early-leader-in-socialgaming-is-printing-money/#ixzz0ropJX8XB . “Small Can Be Beautiful in Job Creation.com. “Intuit: Small Biz Employment Ticking Up. 2010.htm . November 30. May 28. 2010. 2010. Learn from Europe. Karen E. 168.” Bloomberg Businessweek.typepad. ”To Encourage Small Business. http://www.” GigaOM. “Three Best Ways to Expand Overseas.” The Wall Street Journal. Bob Willis. “Zynga $5 Billion Valuation: BUY — Early Leader in Social Gaming Is Printing Money. 2010. “Small-Business Confidence in US Increased in May (Update 1). 160. 164.html . Lou Kerner.S. Angus Loten. 2010. 172.com/smallbiz/content/ dec2010/sb20101210_839038. Information Solutions Group.THe SHIFT 157.” Bloomberg Businessweek. http://www. April 6. Ibid. December 10. 161.” Inc. “Study: Business IT Spending to Grow. “FarmVille nabs inaugural social games award at GDC. “Travelers Study Reveals Small-Business Owners’ Priorities. June 10. http://gigaom.thestreet. “To Encourage Small Business. NYSE Euronext Back to Business CEO Survey Reveals. Scott Shane. reFereNCeS | 305 . June 8.” Second Shares.inc. Ibid. 2010.” The Wall Street Journal.secondshares. 158. 162. 163. Matthew Sturdevant. Shane.

June 14. November 3. 2010. 186. Bernie Monegain. Patty Enrado. Besta Shaniker. 2010. 180. 2010. Symantec. May 25.com. 2010.wikispace. Leaders Say. “The Doctor is (Plugged) In. Enrado. June 14. 2010. 2010. February 24. May 28.” Healthcare IT News.” Healthcare IT News. April 2010.” Healthcare IT News. “Healthcare Data at Risk. 174.THe SHIFT 173.” Healthcare IT News. “Survey Points.” Bloomberg. Russell Nichols. John Morrissey. “Younger Docs EMR Ready. “Digital Monitoring Helps Patients Manage Blood Pressure. June 2. “Telehealth Boosts ICU for Rural Hospitals. 187. 2010. “CIOs Expect Boost in IT Budgets. 306 | reFereNCeS .” 183. May 6. June 26. 181. June 14. 182. 179. Study Says. 2010. Shifthappens.” Healthcare IT News. Staff. “Before They Were Famous. January 26. Molly Merrill. 185. “iPad can accelerate new era of care. 2010. 2010.” International Business Times.” Health Data Management. Mike Miliard. “Facebook Users Help Predict Republican Election-Night Victories. 193. Molly Merrill. Symantec Global Internet Security Threat Report.” Government Technology. Volume XV. “Healthcare Top Target for Hackers. “Five Ways to Reduce $3. Brian Womack. “Survey: Consumer Support for EHRs Low. Kyle Hardy. “Survey Points to Growing Appeal of PHRs. 192. 2010. 177. March 29. 2009. Mike Miliard. “CIOs Expect Boost. 176. 184. 2010.” Healthcare IT News. Monegain. 188. 2006.” 190. 191.” iHealthBeat. Diana Manos. Bernie Monegain.6 Trillion Healthcare Waste in the US. March 29. “E-Government Score Remains at All-Time High.” Healthcare IT News.” Healthcare IT News. December 31. 189.com. May 6. 2010. May 6.” Healthcare IT News. 178. “Nurses Bogged Down in Paperwork. 175.” Government Technology.” ModernHealthcare. “IT to Play Key Role in Healthcare Change.” Bloomberg Businessweek. 2010. June 2. 2010. “Law Enforcement Needs a Standards-Based Communications Infrastructure.

biz. May 20. Dan Moren. reFereNCeS | 307 . May 3. “U. 2010. Emmeline Zhao. Russell Nichols. “Town Hall Meetings Find New Home. Ibid. Distrust in Cloud Computing. Nichols. 207. “Demand for Educated Workers May Outstrip Supply by 2018.” Government Technology. 2010. 2010.” 213.” Government Technology. June 10. 197. May 13. May 26. Ibid.S.” Government Technology.” Network World.” Government Technology. 2010. May 27. June 8. John Tozzi. 2010. “DOJ Looking into iTunes Antitrust Allegations. 202. “Study: Despite Economic Challenges. 198. “Graduation Rate. OECD Program for International Student Assessment (PISA) 2006 Results. 2010. 2010. May 26. 199. Karen Wilkinson. 210.” Government Technology. 196.” Bloomberg Businessweek. Laura Devaney.’” Billboard.” Government Technology. June 15. Russell Nichols. Broader Audience Online. “Cyber-Security Survey Shows Distrust Between Public and Private Sectors. Study Says. 2010. “National Crowdsourcing Effort Proves the Value of Sending a Clear Message. 214. 208.” 212 Teicher Khadaroo. “Report Highlights Ed-Tech Lessons from Abroad. 2010. April 21. April 20.” The Wall Street Journal.” Christian Science Monitor.” Government Technology. 201. Meris Stansbury. “Town Hall Meetings.THe SHIFT 194. “Paper Remains King in the Electronic Age.” 200. Stansbury. 203.” 195. “Graduation Rate for US High-Schoolers Falls for Second Straight Year. Digital Sales ‘to Overtake Physical in 2011. Nichols. 2010. 2010. 204. “Gov 2. 205. 206. “Survey: Voters See Technology as Cost-Saving Solution for Governments. “Every Child. 209. February 12. Andrea Paine. Russell Nichols.0: The Next Internet Boom. “Survey Highlights Federal Government’s Confusion. 211. June 15.” eSchool News. April 27. 2010. “E-Government Score. 2010. 2010. “Every Child Needs to Boost Economy. Stacy Teicher Khadaroo.” eSchool News. IT Spending Still a Key Priority for Governments.

“Hooked on Gadgets. June 7. 2010. 235. 2010. “Can Apps Make Kids Smarter?” CNET News. “Can Apps Make Kids Smarter?” 229. “Survey: ‘Digital Natives’ Need More IT Support. 233. “Community Colleges Turn to Online Classes as Enrollments Spike. “Are Social Networks Making Students More Narcissistic?” USA Today. 2009-2010. Bell. “Online Safety Report Discourages Scare Tactics. 234.” New York Times.” eSchool News. “Survey Reveals Gaps in School Technology Perceptions.” New York Times. EDUCAUSE Current Issues Survey. 231. “‘Vanity’ Press Goes Digital. 2009.” eSchool News. May 5. “Not Everyone Ready for the Digital Textbook Revolution.” CIO magazine. June 2. August 24. “Study: Multitaskers Do It Badly. Ibid. April 16. Dennis Carter.” 232. Sharon Jayson. 220. June 6. April 22. Dennis Pierce. June 3. Dennis Carter. “Teenagers Text More Than They Call.” eSchool News. May 5.” USNews. 2010.” eSchool News. 2009. 218. Teddy Wayne.” eCampus News.. “State of the CIO Survey. “Virtual Schools Soon Reality in Mass.com.” The Wall Street Journal. February 26. Lauren Padia and Alex Baumgardner. Fowler and Jeffrey A. “Don’t Steal This Video: Internet Piracy Grows. 2009. Pierce. 230.” eCampus News. 2010. Laura Devaney. 2010.” The Boston Globe. 2010. 219. James Vaznis. “Researchers: Even Violent Video Games Can Be Learning Tools. June 3. May 28. 227. “Study: Too Few Schools Are Teaching Cyber Safety. 2010. 226. Ibid. 308 | reFereNCeS . August 25. 225.” eSchool News. “Survey Reveals Gaps. 217. and Paying a Mental Price. 216. 2010. Randolph E. 2010. Dennis Carter. Schmid. May 23. June 3.” Medill Reports: Chicago.THe SHIFT 215. Donald Bell. 222. 224. 223. Trachtenberg. 2010. 2010. 2010. Matt Richtel. 2010. 228. 221. Geoffrey A.

” 254. Economic Reforms. 240.com/ news/2010-11-23/america-movil-cfo-sees-50-million-potential-mexico-bankusers. “Mexico Violence Costs $350K Daily in Natgas Losses. November 23. November 21. “Mexico’s $80M Boom Industry: Bulletproof Cars. 2010. ETFdb. 2010. Mark Stevenson.” November 6. 251. Research and Markets: Mexico Telecommunications Report Q4 2010. Forero. 242.” The Age. 2010. 2010. Bob Evans. April 1.” 238.html . 237. 2009.” 246.theage. Bill Wilson. November 23.” Bloomberg. Bob Evans.” USA Today.com. 2009. Crayton Harrison. Cox. 243. 2010. “Brazil’s Middle Class Takes Flight. 250. Jeff Swicord. “America Movil CFO Sees 50 Million Potential Mexico Mobile Banking Users.” The Washington Post.THe SHIFT 236.au/breaking-news-world/mexico-marksrevolution-centennial-amid-new-struggles-20101121-182at. 248. “Mexico Marks Revolution Centennial Amid New Struggles. “ConocoPhillips And Harrah’s Put CIO Positions on Ice. 2010. November 23. reFereNCeS | 309 . “Brazil’s Middle Class Takes Flight. David Agren. “Global CIO: IBM’s New CIO Sheds Light on Priorities and Plans. 2010. 2010. “Mexican Gangs Reportedly Use YouTube. Stoyan Bojinov. “In Brazil.com.” The Next Silicon Valley. 253. http://www. 247.bloomberg. 2010. November 16. November 4.” VOANews. “Mexico Marks Revolution Centennial Amid New Struggles. 2010.” Business Wire. “State of the CIO Survey. Ibid. 252.html . 2010. BBC News. http://news. Juan Forero. http://www. 2010. “Ten High Tech Hot Spots.businesswire. J. PricewaterhouseCoopers. November 4. November 11. 241. Social Programs Expand Middle Class. Business Wire. 245. November 23. November 1.” Information Week. 249.” Associate Press. 239.” Information Week. “Running the 2016 Rio Olympics”.” 2009. “ETFs for the ‘Next 11’ Economies”. “Trial by Fire.com/news/ home/20101123006653/en/Research-Markets-Mexico-TelecommunicationsReport-Q4-2010 . 244. August 11. November 23. “ATG Powers Successful Web Re-Launch for Netshoes.

” warc. 263. 2010. 271.” The Economist. 2010. 270. November 18.” Portada. 257. “LinkedIn Growing at a Member per Second. Erik German. Ibid. 2010. “The Internet’s New Billion. 2010.” November 16. September 20. “Mobile Web Set to Make Global Impact. but Orkut Still Far Ahead.” Digital Trends.2 Billion in 2014. 259. 258.” American Way. “The Orkut Effect. “Research: eMarketer predicts ad spending growth in LatAm of 6-9% annually through 2014. 2010. “Facebook Growing Fast in Brazil.” Business News Americas.” Bloomberg. November 18. November 15.” Vator News. “Why Isn’t Mexico Rich?” UC San Diego and NBER.” ReadWriteWeb. 266. “Mobile Penetration Rate Topped 100% in October.” The International Bank for Reconstruction and Development/The World Bank.asp?ID=27517 . Mike Dorning. 260. November 22.telegeography. “Media in Relation to Brazil’s Election.com/cu/article. “Mobile work: A way to earn money by texting.THe SHIFT 255. November 18.warc. 2010. 2010. Molly McHugh. November 18. November 1. http://www. October 7. Gabriel Elizondo. 2010. Frederic Lardinois.” 267. “US Loses No. Gordon Hanson. 264.com/News/TopNews. “Doing Business 2011. Ronny Kerr. 2010. 2010. 2010. 262. 2010. 265. October 28. “Mexico’s Type 2 Diabetes Market will Exceed $1. http://www.php?article_ id=35284 . November 15.” GlobalPost. “Brazil Could See First Sub-US$100 Smartphone in 2011. “Facebook Links Accounts with Mixi in Japan. Jack Boulware.” TeleGeography’s CommsUpdate. 256. 2010. 310 | reFereNCeS . October 29. Patrick Nixon. 2010. “Mobile Penetration Rate Topped 100% in October. 268. 261.1 to Brazil-China-India Market in Investor Poll.” Decision Resources. September 2010. 269.

“Apple’s iPhone Void. “Global Developer Population and Demographics Report.” 278. 2010.com/articlesreports/technology-development/brazil-next-emerging-technology-market-has16-trillion-econo . 274. “$1. Apple Joust for Mobile Payments via Android.500 iPads Flying Off Shelves in Brazil. “Ten High Tech Hot Spots. 2010. Matt Rhodes. http://thenextsiliconvalley. 2010.2bn in 2014. 281. Alexandre Marinas. Verne G.THe SHIFT 272.com.“IT Spending in Brazil to Reach $134. “Apple’s iPhone Void. Ibid. 282. 275. Ibid. 273. 2010. Kopytoff. May 12. 2010. 2010.” 280. August 21. November 28. “Brazil Tops League of Social Media Users. 276. 279.” eWeek. 277. . the Future is Mobile.” Evans. Beecher Tuttle.” June 17. Clint Boulton.6 Trillion Economy. “For PayPal. August 11. September 16.” The New York Times.” The Next Silicon Valley.” The Next Silicon Valley. November 29. December 3. 2010. “Brazil the Next Emerging Technology Market – Has a $1. 2010.” Bloomberg Opinion. reFereNCeS | 311 .” The Next Silicon Valley. iPhone. 2010. 283. Marinas.” TMCnet. Marinas. “Apple’s iPhone Void Leaves Brazil Begging. “Google. 284.

THe SHIFT 312 | reFereNCeS .

She has helped define. launch and support strategic solutions for carriers and for enterprises. She holds two Bachelors degrees from the University of South Florida and Masters of Business Administration and Telecommunications degrees from Southern Methodist University. Allison oversees marketing strategy and communications and engages with North and South American service providers on go-to-market approaches to drive revenue and/or reduce churn. particularly in the education and healthcare markets. Christina has Bachelor of Arts degrees in journalism and English from Southern Methodist University and a Master of Arts degree in American literature from the University of Texas at Austin.Allison CerrA is Vice President of Marketing. In this capacity. ChristinA JAmes is a Director of Solutions Marketing at Alcatel-Lucent with 15 years experience in marketing and communications in the technology sector. sales and product management functions across service provider and equipment vendor industries. Allison has more than 15 years of telecommunications experience in marketing. She has also worked as a marketing consultant and freelance writer. . Communications and Public Affairs for Alcatel-Lucent in the Americas Region.

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