Online ad revenue is growing at double-digit annual rates in China and India. Cell phone usage is exploding in india, with subscribers paying as little as two cents per minute. Tv is still the most important medium, but online advertising is gaining traction.
Online ad revenue is growing at double-digit annual rates in China and India. Cell phone usage is exploding in india, with subscribers paying as little as two cents per minute. Tv is still the most important medium, but online advertising is gaining traction.
Online ad revenue is growing at double-digit annual rates in China and India. Cell phone usage is exploding in india, with subscribers paying as little as two cents per minute. Tv is still the most important medium, but online advertising is gaining traction.
hinais home to the largest population of Intemet users, soit
is no suprise that companies are allocating more of thar ad
budgets o this emeraing medium, Although television is stil dhe
‘most important medium, online ad revenues growing at double-
digit annual rtes. Clients comprise A-list global marketers
including Samsung, Mazda, Nike, and Coca-Cola. One recent
prosmotion for Coke Zero on social networking site Xisonei.com
had the theme "Be Bond fora Day.” Coke invited use to uploed
photos that demonstrated why they should be chosen as the
next James Bond. Winners were treated to helicopter fights and
tides in 07 iconic Aston Martin spon ct
Cina aso enjoys the distinction ofthe worl gest popu
lation of mobile phone subsuibers. However, cll phone usage i
epdng in india. As Manoj Dawane, CEO of Mumbai software
‘company People Infocom, explains, “In india, mobile phone pen
‘tration s high compared to ther forms af media tke televsion
‘or the Intemet. You car't havea better place than Ina for mobile
advertising.” Overall advertising revenues in India have been
‘growing at 20 percent annually. Total worldwide spending for
‘mobile ads was only about $1 bilion in 2007, butindustry experts
‘expect that figure could reach $10 bilion to $20 bilion by 2013,
‘One factor diving mobile ads in india is the low rates that
subscribers pay-—2s litle as two cents per minute. Demographics
play an important role, too. About tworthicds of the Indian
Population lives in rural areas where television ownership and
newspaper readership are low. Celivlar operators such as BPL
Mobile have built networks that each tens of thousands of
Indian vilages. Att Ali, head of brand communications at BPL,
has ideas that wil keep subscriber costs low. “We are thinking of
providing 30- to 60-second commercials over the phone where
‘we wil pass on some kind of benefit" he said.
Sourees: Loreta Chao, “Online Advertsing Gets Boost i Chin
Wall Sect Jumal (Decerbec
The
2008), p. RG; Bic Bellman and Taig
Engineer, “India Appeats Ripe for Cell Phone Ads The Wall Steet
Journal (exch 10,2008, p.B.
features such as color displays and cameras give consumers a reason to upgrade their handsets on
a regular basi
new generation of smart phones gives phones some ofthe capabilites of com-
puters, Case in point: Apple's wildly successful iPhone comes equipped with a full-blown Web
browser. The marketing possibilities of cell phone-based e-commerce are suggested by the
followin;
In Australia, a thitsty traveler can pay fora Coke at Central Station in Sydney by calling
Dial-a-Coke
” making a beverage selection, and then collecting his or her selection from @
vending machine. Charges for the purchase appear on the customer's cell phone bills
‘* InNorway, mobile operator Telenor ASA has teamed with a finance group to offer m
purchases of flowers, compact discs, bus tickets and food."
‘#12009, Apple's iTunes store sold its one-bilfionth iPhone application ("app").
wi
these and other new mobile services are in development, individuals are already using
their cell phones for a variety of tasks besides calling. For example, text messaging has exploded
in popularity. Now, advertisers are taking advantage of this capability by using short message
service (SMS), a globally accepted wireless standard for sending alphanumeric messages of up
to 160 characters. SMS is the technology that is the basis for Twitter’s micro-blogs
(Gee Case 15-1). Industry experts expect marketers to integrate SMS with communication
ng service
other digital channels such as interactive digitat TY, the Internet, and e-mail,
“Wireless phone
booths are the
Starbucks of
telephony in South
America,"??
Ralph de la Vega, Bellsouth
Latin america
‘Some smart phones are equipped with a global positioning system (GPS) that allows users
to determine their exact geographic position. This capability is also opening new opportunities
for location-based advertising. For example, Alcatel-Lucent, the French telecommunications
equipment manufacturer, has just Jaunched a service that sends tailored text messages when cell
phone users are near a specific location such as a store, hotel, or restaurant, The service provides
addresscs and telephone numbers of the businesses and can also provide links to coupons or
other types of sales promotions.
Gren Manvel, "Dialing for Dolls" The Well tre! Journal--E-Coraneree (October 20,2003), .R3
Sara Silver and Emily Stel, “Alc
*almse Lou,
(Wovernbe 20,200
hp as
1 Gets Into Mobile Ads" The Wel Stree Journal (May 21,2008), 9. B9.
Lessons: ReliSouth Finds Pocket of Growth in an Od Place," Th Wall Sieet JournalCHAPTER 15 + GLOBAL MARKETING AND THE DIGITAL REVOLUTION 514
‘One might ask whether spam—unsolicited “junk” promotional messages sent to large
numbers of people—will stat cluttering text message inboxes. (The term spam is borrowed from.
‘a famous Monty Python comedy routine in which the brand name of Hormel Foods Cor-
canned meat product is used so often that it crowds everything else out.) The Mobile
ion is the global industry trade group that has the responsibility for address-
ing this and other issues. Because of privacy concerns, mobile advertisers often give users the
opporta ‘oF opt out” by choosing whether ot not they want to receive such promo-
tional communications. This isa classic “pull” marketing stategy that allows marketers to target
high-value consumers with relevant messages.
Mobite Music: Ringtones, Truetones, and Full-Track Music Downloads
Bocause of rampant illegal sharing of music files, record companies are searching for now
sources of revenue, Thanks to technology convergence, a new generation of cell phones is lead-
ing to changes in the mobile music industry. Mobile music is music thet is purchesed and played
‘on a cell phone. One opportunity isto license the rights to popular songs for use as cell phone
ringtones or as ringback tones. (Ringback tones are songs that the caller hears when he or she
places a call to another mobile subscriber.) According to Gartner Rescarch, ringtone sales
peaked in 2006 with worldwide revenues totaling $6 billion.
At first the primary beneficiaries of this growing market were music publishers and song-
swriters. The reason is simple: Many ringtones arc rerecordings and thus represent instrumental
“soundalike” or “cover” versions rather than the original versions by the original recording.
artists; therefore, a song’s publisher and writer receive royalties of approximately 15 percent
‘each time a tone is dowaloaded. The situation has changed, however, as record companies and
autists recognize an important new revenue stream. Truetones, also known as realtones and mas-
teriones, are digitized clips of original songs by the original recording artists. Licensing fees for
tvuctones are typically higher, because they include master recording royalties of 30 to SO percent.
AAs John Rose, former executive vice president of EMI Group, noted, “This is quite an attractive
market (ous. We thing il be a gpificant muli-blion-dolar market over the next couple of
‘years as the new handsets roll out”
‘The market for paid, legal, full-track music downloads is dominated by Apple's iTunes
‘Store. Music purchased from iTunes can be played back on computers and mobile devices such
1 the Apple iPod and iPhone. Downloaded song files can also be burned onto CDs. In 2006,
iTunes reached a milestone of 1 billion song downloads. Apple's competitors have tied, with-
‘ont much success, to develop their own music players and download services to rival the
iPod/iTunes combination. For example, Microsoft has a device called Zune; Dell also has a
player in development. Besides the iTunes store, other online music services are available,
including Amazon.com, Napster 2.0, RealNetworks’ Rhapsody and RealPlayer Music Store,
and Microsoft's ZunePass.
These online music services use a variety of pricing strategies. Rhapsody is primarily &
subscription service, with rates starting at $12.99 per month. Napster charges $9.99 per
‘month, and also has a “Napster to Go" plan for $5. By contrast, ‘Tunes uses “al a carte” pri
ing, charging for each song track or album download. Originally, iTunes sold individual
songs for $0.99 each, Recently, however, Apple introduced a variable pricing policy; new hits
from the Top 100 are $1.29 each, while millions of “back catalog” tiles are $0.69. Other
songs will still sell for $0.99. The new pricing policy coincided with Apple's decision to
abandon digital rights management (DRM) copy protection on the files it sels. This change
‘means that songs purchased on iTunes can be played back on devices other than the iPod and
iPhone.
Kevin Maney, "Baby's Arial Inspires Binh of Cell Phone Camera—and Soceta! Evolution” USA Tadoy
{fsmnry 24, 2007, 3B.
"Bob Teles," Commerce Report” The Roll Seer Jovrnal (Panty 23,2008, p. CS
“gob thisor, “Deal Cold Be Music to Nokia's Eas” nancial Tes (August £4, 2006),
TECHNOLOGY
FORECAST
Sales of cell phones
with cameras reached
460 million units in
2006. By 2010, the
‘number sold per year
will exceed 1 billion.
Gartner, ne
TECHNOLOGY
FORECAST
By 2011, annual
worldwide mobile
music purchases will
total $14 billion. Asia
is expected to account
for 40 percent of the
market.
Juniper Research
TECHNOLOGY
FORECAST
Online music spending
in the United States
is forecast to reach
2011. Ringtones will
account for an
additional 12 percent.
Jupiter Research
or—“—stssC reea
512
PART 4 + THE GLOBAL MARKETING MIX
Mobile Gaming
‘There is @ growing trend toward mobile gaming; eMarketer estimates that nearly 300 million cell
phone subscribers play games that they have downloaded on their handsets. Revenues
from mobile games totaled $1.7 billion in 2007; eMarketer predicts that figure will increase to
$87 billion by 2012. Popular categories include puzzles such as Sudoku; solitaire, blackjack, and
‘other eard and casino games; and board games such as Monopoly. Some games are available for
free; others sell forthe equivalent ofa few dollars. However, the word “free” can be misleading,
as network operators typically charge fees for downloading games.
‘Because cell phones have small screens and limited storage space and computing power,
mobile gaming originally appealed more to occasional users such as commuters rather than hard.
core gamers. Industry growth was also stowed by the varying technical standards incorporated
into different brands of telephones. However, mobile games are quickly becoming more sophis-
ticated as phone makers improve compatibility and add more features and functionality. GPS
capability will lead to location-based games in which players compete by trying to physically
Approach their opponents,
Currently, the economics of mobile gaming do not favor game developers; cell phone
service providers keep 10 to 70 percent ofthe selling price of each game downloaded. Moreover,
for games based on popular motion pictures, game developers are required to pay licensing fees
to the film stodios.* John du Pre Gaunt, an eMarketer analyst, explains why mobile gaming is
‘growing more slowly inthe United States than elsewhere. “The United States will never become
a gigantic mobile game market on a par with India and China (with their hage populations) or
Japan (with is fanatical gaming user base), but the U.S. mobile gaming market does exist in the
‘world’s largest interactive advertising economy. That, combined with advanced handsets and an
increase in unlimited mobite data plans, could .ause marketers (o look at U.S. mobile gaming in
a new light,” he said.
Internet Phone Service
For the telecommunications industry, Internet telephone service is the “next big thing.” Voice
‘over Internet protocol (VoIP) technology allows the human voice to be digitized and broken
into data packets that can be transmitted over the Internet and converted back into normal speech,
fa call is placed to a conventional phone, it must be switched from the Internet to a traditional
phone network; local telephone companies generally own the lines into residences and busi-
nesses. However, if the call is made between two subscribers to the same VoIP provider, it
bypasses the traditional network altogether. The implications are clear: VoIP has the potential to
render the current telecomminications infrastructure—consisting primarily of twisted copper
and fiber optic cable—obsolete.
Currently, VoIP accounts for only a smatt percentage of global calling. However, it has the
potential to be a disruptive innovation that will upset the balance of power in the telecommuni-
‘cations industry. The promise of a global growth market resulted in soaring stock values for
‘start-up companies, In Europe, Niklas Zennstrém, the co-founder of the KaZaA music file shar-
ing service, started Skype Ltd. to offer Internet telephone service. As hundreds of thousands of
new users—-many in China, India, and Sweden—joined each day, Skype became a global
phenomenon. In 2005, eBay acquired Skype for $2.6 billion. However, despite the fact that
‘Skype currently has more than 400 million users, eBay struggled to ereate synergies between
the communication system and the company's core auction basiness. In 2009, eBay announced
plans to spin off Skype as a separate company.
Digital Books and Electronic Reading Devices
‘The digital revolution has had a dramatic impact on traditional print media properties such as
newspapers and magazines. Publishers are experiencing dramatic downturns in readership
as people spend more time online. At the same time, the global recession has forced many
‘2David Pringle, "Moking Games for Cell Phones Is No Easy Play The Wol Stet Journal (Octaber 17,2009), p. Bl
“The eMarketer Daily (Asst 26,2008).CHAPTER 15 * GLOBAL MARKETING AND THE DIGITAL REVOLUTION 513.
‘companies to cut back on print advertising. Caught in a squeeze, magazines are folding and
newspaper companies are declaring bankruptcy, Electronic readers such as the Kindle from
Amazon.com and Sony's Reader Digital Book may help lure subscribers back.
Amazon sold the first Kindle for $359; the new, larger Kindle DX costs $489, holds 3,500
books, and has a 9.7-inch display sereen (see Exhibit 15-6). Industry observers also beliove colleges
i and universities may be instrumental in building awareness and encouraging adoption of electronic
readers. The reason i simple; clectronic versions of textbooks represent huge market opportunity
‘As Amazon.com founder and CKO Jeff Bezos explains:
Physical textbooks get resold as used textbooks five or six times after the initial sale, The
| ublisher has to capture all that value on that first sale. Theze’s a real opportunity here 10
have a very good business for textbook publishers, and at the same time lower the prices of
4 textbooks for students.
For example, the textbook you are reading is available direct from the publisher inthe form
of an electronic “subscription” at wwww.coursesmart.com. The online version requires users (0 be
Connected (0 the Internet; the text can be accessed from an unlimited number of computers.
Buyers can use the e-book for 180 days before the subscription expires. The price is approxi.
‘mately half of what bookstores charge fora new copy of the physical textbook. Usually, stents
can print as many as 10 pages at a time; itis also possible to cut and paste, highlight, and take
notes dectly on the computer. Industry insiders and Steve Jobs watchers predict that Apple will
enter the e-book market with its own reader, Meanwhile, Amazon has taken the Kindle global
with the launch of a small, less expensive version that can be used in more than 100 countries.
As is the case with music and movies, digital piracy is a growing problem with etectronic
editions of books. A number of Web sites and file-sharing services distribute unauthorized
copies of popular copyrighted material. What do the authors themselves think of the problem?
‘Some view digital piracy as a way to gain new readers. Others say that they simply want fait {
compensation for their work. A third camp includes authors who don’t think pursuing the |
pirates is worth the effert, As best-selling author Stephen King said recently, “The quest'on is,
{how much time and energy do T want to spend chasing these guys? And to what end? My sense
is that most of them live in basements floored with carpeting remnants, living on Fustions and
discount beer
spi
Exhibit 15-6: Amazon.com
founder and CEO Jeff Bezes
unwell the Kindle DX, the
latest version of his
company/s wireless reading
device, Bez0sishoping
that the Kindle wilgain
acceptance among college
students.
Search Angello nuh
Newscom,
‘Reward C. ig, “Larger Kindle Lands with Larger rice; USA Today (May 7, 2009), p38,
"*Motoko Rich, "New Target for Digital Pirates: The Pied Word" De New York Tne (ey (2, 2008), p. Al
ee514 PART 4 + THE GLOBAL MARKETING MIX
Summary
‘The digital revolution has crested a global electronic marketplace. ‘The revolution has gained
momentum over the course of 70-plus years, ducing which time technological breakthroughs
included the digital mainframe computer; the transistor; the integrated clreuft; the personal
computer; the spreadsheet, the PC operating system; and the Internet, which originated as an
initiative of the Defense Advanced Research Projects Agency (DARPA). Three key innovations
by Tim Bemers-Lee, the URL, http, and HTML, led to the creation in the early 1990s of the
World Wide Web.
‘The digital revolution has resulted in a process known as convergence, meaning that previ-
ously separate industries and markets are coming together. n this environment, the innovator’s
dilemma means that company management must decide whether to invest in current technolo:
gies or try to develop new technologies. Although leading firms in an industry often develop
sustaining technologies that result in improved product performance, the revolution has
also unleashed a wave of disruptive technologies that are creating new markets and reshaping
indastries and value networks,
E-commerce is growing in importance for both consumer and industrial goods
‘marketers. Generally, commercial Web sites can have a domestic or global focus; in addition,
they can be classified as promotion sites, content sites, and transaction sites. Global ma
kketers must take care when designing Web sites. Country-specific domain names must be
registered and local-langnage sites developed. In addition to addressing issues of technology
and functionality, content must reflect local culture, customs, and aesthetic preferences.
Cybersquatting can hinder a company's effort to rey.ster its corporate name as an internet
destination.
‘The Internet is a powerful (ool for advertisers; click-through rates are one measure of
effectiveness. Another trend is paid search advertising. New products and services spawned by.
the digital revolution include: broadband, which permits transmission of streaming media over
the Taternet; mobile commerce (m-commerce), which is made possible by Wi-Fi, Bluetooth,
WiMax, and other forms of wireless connectivity; telematics and global positioning systems,
(GPS); and short message service (SMS), Smart phones are creating new markets for mobile
music downloads, including ringtones, tructones, and full-track music files; they can also be
used for mobile gaming and Internet phone service using VoIP.