AI vs Chat
The news that Tencent has invested $50m in Canadian chat app Kik is significant for a number of reasons. It’s further proof that BAT have ambitions outside China and it’s more evidence that Chat apps are about so much more than chat. As one of the Kik founders said
As he goes on to say, WeChat can scan a machine and get the menu, letting you select the drink you want, pay through then app and get the drink. As the piece we shared last week showed, WeChat is probably the one app someone in China needs. Bankers at HSBC think WeChat accounts for around half of Tencents value – some $84bn – because of this ‘flexibility’.
A chart in this same piece reminds us that WeChat has 600m users – less that either of the Facebook dogs in this fight. With Facebook Messenger at 700m users and WhatsApp at 800m, Facebook now has more chat users than social media users; 1.5bn vs 1.49bn. And as Ben Evans said a while ago
this Techcrunch article suggests the Chat apps are challenging the Operating systems for the future of mobile. And within iOS and Android its AI that seeks to understand what you want, almost before you know yourself – with Google Now on Tap and the upcoming revamp of Siri promising most. ( Bings Snapshot is pretty cool too)
One certain outcome of these changes is that apps and mobile services need to get more closely connected and within iOS and Android the idea of deep linking is going to become more and more important. When I make a restaurant booking I shouldn’t then have to go open the taxi app. And when I book a flight the hotel app should open automatically.
The chat apps – especially in China - can open up mini apps at the right moment and that is the focus of some smart start ups in the West too. Branch Metric look interesting and Button – who come more from the payments and commerce side – are too.
Now all this is work in progress but it reminds us that the tech world is still very fluid and we have a long way to go. The various battles around ad spend between Google and Facebook will continue as will the battle for phone buyers between Apple and Android. And these chat players are going to move more centre stage.
So the challenge for brands is what do you do to better understand how these things work and what the opportunity might be? Those that get their heads around it before it becomes a pay for ads game, will probably do best – just as we saw in search and social. Organic learning helps you (eventually) spend your money more wisely. So go download Kik, Line, Wechat etc and start learning.
This study doesn’t break out share by company but it’s clear that Facebook is key to this growth and an in depth look at their progress with Atlas suggests they are probably getting even stronger. Their 1st party data on 1.4 billion people helps and being able to reach those people on the open web through Atlas terrifies those media owners struggling with mobile. With measurement a challenge - through the lack of cookies - and many of the formats (shrunken desktop banners) failing to inspire brands (whilst actively annoying users) lots of publishers are still unsure what to do.
Given the natural benefactor of this has been Google we shouldn’t be surprised that new research from Facebook suggests that display ads often don’t get the credit they deserve for influencing sales – often being seen before a search ad is clicked.
And one more piece of data on the power of Facebook – it now drives around 40% of traffic to a set of major news sites – against Google driving 38% - and Facebook have doubled their traffic since then start of 2014.
In the US cord cutters – those people who cancel their cable subscriptions – continues to grow. Although the % is quite small – less than 1 % - it is around half a million people and Wall Street is concerned – over $50bn came off traditional media firms value recently
But the traditional TV is still bullish – a recent CBS roadshow argued that TV viewing is not in decline, millennials will start watching more TV as they get older and TV ads are still really valuable.
All of which may be true to some extent but we still think the genie is out of the bottle. As they admit, digital can add 5% reach to a traditional TV campaign and we have to believe the alternative options for millennials will be even more diverse as they mature. But they did shoot themselves in the foot when they talked about DVRs where penetration seems to have plateaued at 49%;
There are a couple of books that are worth reading – Fix friend Faris has a good book called Paid Attention: Innovative Advertising for a Digital World and long time media commentator Michael Wolff has a book called Television Is the New Television: The Unexpected Triumph of Old Media in the Digital Age. I am not sure I agree with the main argument but great content remains hugely valuable, whatever the medium of distribution.
Our understanding of how digital is used for storytelling is still nascent – and following our piece on shorter video ads last week, one of our readers that works at YouTube shared this study showing length isn’t that straight forward.
Reassuringly it seems good content can work at longer lengths and people are willing to engage for longer on mobile. So it’s about quality rather than quantity.
Just as you could argue many traditional media brands have struggled to adapt to digital, so too have many traditional agencies. We can’t think of many industries where their business in 1965 looks eerily familiar in 2015 – but despite the Math Med cliché, MadMen still represents the day to day in many Agencies.
Some brands are looking for new models and as well as the burgeoning Agency scene that has grown around performance models – and hence with a focus on Google and Facebook - the Professional Service industry has shown an appetite too.
We know a major global brand that is pitching for help to develop their digital content and ad platform and they are seeing people like Accenture and Boston Consulting Group as well as some more usual suspects. Probably the most developed offering is Deloitte who have 6000 people and revenue of $1.5bn – this is a good profile of their business. And EY have just bought London based service design firm Seren.
One thing all these players have in common is a focus on the value they create – so their performance can always be measured. Along with the new approaches linking sales with ads on Facebook and Google, this points to the demise of a board signing off an ad campaign without clear expectation on the results
Amazon has had lots of press this week over how it treats it’s people. We tend to to agree with those pointing out that the typically really smart people they hire could work anywhere. And they choose jobs where they can make impact and will tend to be happy to work really hard. My sympathy is with the people in the warehouses where they probably don’t have that much career choice. The Everything Store from 2013 gives you good insight into how Amazon works and is still worth reading.
<plug> We are busy working on our first event – Do we need to fix Programmatic? Held at Google (who are our partners for the event) in October, we have signed up great speakers from the BBC, Nestle and Infectious, with more to be confirmed shortly. We’ll share more details over the next couple of weeks but Early Bird tickets are now available – find out more and book here. </plug>
Lots of press on how Kodak invented the digital camera then buried it. We often use Kodak as an example in our Digital Transformation workshops – especially as they made so many mistakes. They eventually sold their patents for digital photography for $500m. Which probably seemed a good price, except just about every smartphone camera depends on those patents. Imagine if they were paid just $1 for each device? And in the Everything Store about Amazon, it turns out Kodak hired one of the Kindle designers who then invented an Instagram type product. But Kodak killed that too.
Kodak filed for bankruptcy the same day Facebook bought Instagram.
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