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Mobile Fix – February 19

Fashion Content & digital

Fashion is one industry that really values digital. Despite being quite late to the party – we pitched websites to luxury brands in the late 90s and they just weren’t interested – it’s now de rigeur to invest heavily. In the last decade ecommerce has taken off – with McKinsey reporting that over the last 5 years online sales of luxury has grown 4 times faster than offline. Aggregators like NetAPorter and Lyst have driven this to some extent.

A long Business of Fashion piece gets into how seriously the best brands take digital – driven by another McKinsey insight – that ultimately 99% of luxury good purchases will be influenced by digital one way or another. It’s already around 75%.

The focus is increasingly on content – with Burberrys Christopher Bailey saying “We are now as much a media-content company as we are a design company.”

For good examples of this look at MrPorter – celebrating its 5th anniversary this week – where the content is every bit as good as GQ or Esquire. The key difference is the business model; GQ make a cpm when they show a Prada ad whilst MrPorter take a 60% margin when a reader buys that suit from them.

You can get a good perspective on how fashion and digital coexist in this Vogue interview – titled Apple and Fashion: A Love Story for the Digital Ages - with Tim Cook and Jony Ive. Apple is now a luxury brand and a fashion one too.

But rather than create content Apple facilitates it. And that has unexpected consequences. When fashion show images are shared instantly – everyone there has a smartphone and is snapping away plus Burberry hired Brooklyn Beckham to take pictures (upsetting more experienced fashion photographers) things change. And Hilfiger now has an InstaPit at his shows where hand selected Instagrammers get a front row seat

So yet another tried and tested business model - Premiere your clothes in London, Paris, Milan or New York and get them into stores a few months later - gets a mobile disruption. This good NYTimes piece looks at how the smartphone is killing off the fashion show.

Burberry will soon make their clothes available instore days after their show – and online instantly, rather than months after.

Perhaps Kanyes Yeezy show at NYFashion week will turn out to be more influential for its’ format than its fashion or music? Imagine Burberry designing a combined mens and womens show that is watched live globally, with all the clothes available with one click. The Kanye show was distributed through cinemas and online through Tidal (although the feed stuttered a little). Could the Burberry show be on Apple TV? I guess Angela can sort that out

Music

In the week Kanye gave a boost to both Tidal –which shot to the top of the app downloads chart - and Torrent, through limiting the availability of his new album, Spotify leaked impressive figures. At the end of 2015 they had 28m paying customers versus around 10m for the Apple music service. The last official data released by Spotify was last June when they had 75m active users and 20m paying ones. Revenue across all the streaming services in the US is estimated at $1bn.

We expect the boost to Tidal to be shortlived – most people will have joined on a free trial ( I did) and so churn is very likely. The boost to Torrent may be longer lived – if the album really doesn’t get a wider distribution, piracy will be seen as the only alternative.

But maybe we will all be amazed when Kanye has a change of heart and the album gets a more traditional release? Could that be with Amazon? Bezos is richer than Zuckerberg and is keen to revamp the Amazon music service.

Might they be the people that buy Tidal? And maybe they can get Kanye to help on designing their own label fashion?

News

The FT article we shared last week on the problems facing the UK newspaper industry was one of the more clicked on. So this riposte by US commentator Michael Wolff is worth reading too. As with lots of his pieces he doesn’t see a viable future for news in digital either.

In the UK we see a new print tabloid coming from Trinity Mirror and the demise of the print edition of the Independent to focus to digital. Both moves, whilst brave, will be watched with some trepidation.

We talked about Quartz before and these ‘native’ news businesses seem better at innovation than their traditional rivals. Their new app with a messaging interface is nice and some see it as the future of news – I think the chatty tone and emojis may get tired quickly. But it’s a new approach and trying new things has to be applauded.

Most of the energy at publishers is currently focused on the new distribution opportunities – Facebook Instant Articles, Apple News, Snapchat Discover and Google Accelerated Mobile Pages.

Facebook opening up their Instant Articles to anyone suggests the format works. One piece of friction is that a fair bit of tech knowledge is needed. But being able to publish your own content on to Facebook and monetise it through ads will have appeal outside of traditional publishers. Could this be a means of attracting YouTube talent to Facebook?

A look at Googles’ AMP covers off the tech issues that publishers are having to deal with – each platform is different and requires a custom set up. And the article also looks at the primary Google ambition here for AMP – to swing the balance back to the mobile web, winning back some of the time spent on apps.

Remember that Indian ecommerce business that dropped the web completely to focus on their app? As we predicted they have had a change of heart and now use the mobile web to acquire new customers. As we always say, smart brands invest in both; mobile web is great for acquiring customers and apps are great for retaining them.

Programmatic going mainstream

Just as the fashion business is rethinking its business to cope with digital and publishers are now having to deal with the tech world, the Marketing industry is embracing change with the adoption of programmatic.

Smart brands recognize that a new approach to advertising is feasible with programmatic and are seeking help to reboot their planning. Some are taking it inhouse but most are exercised trying to get good advice. The A Team at the big agencies get the space but they are spread really really thin. We keep talking with brands that see clear opportunities to profit from data driven marketing but struggle to get their agencies to help them seize the initiative.

Clever Agencies are seeing an opportunity for differentiation though. Publicis are training more of their people and WPP /independent CHI is getting involved in weeding out fraud.

As we have mentioned before adfraud is too big a problem to be ignored – with estimates of $18bn being wasted – or stolen – this way. The dramatic effect of cleaning house is demonstrated in new figures from AppNexus - impression volumes plummeted by 90% as fraudulent ones were eliminated, whilst cpm went up 8 fold in the US. And Clicks grew dramatically too. So to our uneducated brain this sounds like kosher publishers are getting pretty much the same traffic but much more revenue? Which publishers are benefiting from this?

The fear of fraud has given traditional media Taliban good ammunition to decry digital, but the market is developing smarter ways to deal with the problems. More Private Market Place deals mean brands know they have a safe environment and allows them to invest in native ad formats. The desire for these high impact ad experiences is helping drive publisher adoption of our friends at Responsive Ads – especially as the cross screen format means publishers can sell their audience across all devices in one deal. Check out this LG ad by them – a great, immersive experience on all screens – especially impactful on mobile.

As a market matures the best players get rewarded and Criteo – mentioned here the other week as the adtech player Google pays attention to – is doing well. They now have over 10k clients and $1billion in revenue –and their share price jumped 40% in one day. A factor in their success is that they work directly with clients and have a business model focused purely on driving results for those clients. Which leads to a 90% client retention rate. And they are getting better at managing the customer experience so retargeting isn’t as oppressive as it was.

Vertical Stacks

Our work on Vertical Stacks still stimulates our consulting clients; understanding the way GAFA tend to compete with each other through every stage of their business model – software, hardware, payments, content, advertising, commerce etc – is valuable. Especially when often they compete in the same space, but with very different objectives.

One surprising fight is around groceries. Everyone in retail knows that Amazon will launch their own home delivery service in the UK – they already do it in a number of US Cities. But when we started sharing the story that Google were considering entering the space, it caused some surprise. They have now launched the service in LA and San Francisco with perishable goods.

Why? Amazon seeks to sell everything they can – and the more items they have the more money they take and the more they learn about you. And if they have vans traversing the streets of major cities they can deliver other Amazon packages too. For Google we think it’s also about delivery but probably more about payments in the longer term and the data that can help target ads. And driverless cars probably feature in there too.

Another outcome of this thinking is what we call Collateral Damage – the business that happens to suffer because GAFA have rolled onto their lawn. Amazon doesn’t really care that their entry into Groceries will hurt Ocado and Tesco. Just like they don’t really worry that Amazon Prime Video hurts Netflix and their rumoured expansion of music isn’t intended to kill off Spotify. It’s just that Amazon need to be the dominant player in these sectors if they are to maintain their growth. Which isn’t much of a comfort for the VCs and team of a start up competing in that space.

If you are Tesco or Sainsbury you lose money on every home delivery but have to keep doing it to hang on to your overall market share. If you are Ocado, you may well be collateral damage.

Take home delivery – huge growth but the actual costs are not being reflected now – everyone is focused on growing the customer base and hopefully driving out the weaker players. As long as you can persuade your VC to keep finding money for you, you can stay in the game. But what if Google or Amazon decides that they can use their van network to deliver Chinese takeaways too?

This is a great look at how home delivery works - and in our hood HubBub is doing really well – accounting for around half the business of our wonderful Fishmonger. and butcher

Audio

We’re big fans of audio. It’s the natural evolution of the chat interface where all the innovation is right now. Typing intp FB Messenger on your phone will fade out eventually - things like Siri, Google voice search and the Amazon Echo show how well it can work. Whilst we wait for the Apple Watch V2 to be able to read my emails to me, we are seeing some interesting new apps. Anchor is getting lots of press and this week I caught a preview of SoundMite a cool UK app focused on sharing short clips of audio.

Podcasts are getting real traction and we think they help drive the interest in audio even if they are having problems getting advertising right.

Quick Reads

Some interesting thinking about the future of banks. This is going to happen faster than most people think – check out Starling as just one example.

Snapchat is going to have shopping baked in. But then again so is everything else.

Good VC thinking on building an enduring Unicorn You have to change the cost structure of an industry.

Our fascination with China and what we can learn from them continues. Look at some of their UI trends.

With everyone talking about Big Data it’s a little frightening how few people get statistical significance You can’t really measure anything properly, without knowing how it works – test out the people advising you on data and campaigns.

Finally – we have to miss the Mobile World Congress Jamboree in Barcelona next week. As well as all the sales hyperbole and new gadgets there is one topic that is going to make a huge change –eventually; 5G

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