GAFA & The Next 11
It’s been 5 years since we pioneered the term GAFA to denote the 4 firms that shape the world we live in. We later stole the Goldman Sachs idea of the Next 11 to capture the second tier – Twitter, Snapchat, Yahoo. Verizon/AOL, Microsoft, IBM, eBay, Alibaba, Tencent, Baidu and probably Salesforce.
This rank is obviously debatable but feels about right to us. And none of this second tier are likely to shake up GAFA significantly. But Microsoft are increasingly back in the game, with their recent strategy - and the consequent M&A – making them a more significant player.
But it must have hurt a little at Apple when the surprising MS acquisition of LinkedIn tended to overshadow their WWDC event. Whether or not it turns out to be a good deal, it shows that whilst all these big companies have the cash to make a big splash, the desire to avoid tax leads to some strange behavior. With $100bn in the bank, Microsoft are borrowing the money to buy LinkedIn. Because most of that cash is held outside the US and bringing it home would attract a 35% tax bill. But that is good news for startups in Europe and Apac as they are consequently ‘cheaper’ than their US rivals
To be fair to Apple this is a developer conference and their reaction has been pretty positive – especially to the news that they can play with Siri. But we will only know how profound this new news was when we see what developers do with it. Some good ideas don’t get that much developer traction – for example we are surprised Peek and Pop hasn’t been used more, especially in ad formats.
As we keep stressing, the need to motivate developers and keep them focused on your platform is a priority for GAFA – and especially for Apple where the business depends on people wanting to (needing to) upgrade their devices. As we have argued before, smartphones are reaching a similar stage to the TV market – they all look much the same and have pretty much the same capabilities. So the differentiator is what one can do with the phone and that depends on what magic the developers enable through apps.
The lead that Apple once had – where everyone did their iOS app first and some didn’t bother with an Android version at all – has shrunk dramatically. Working with the Google Play team at a recent event we saw that smart brands are very focused on Android. And some are taking advantage of the flexibility and rich features of the Play Store to test and learn what features get traction with users and having that inform their overall strategy.
When you fold in last weeks news on better margins and ads in the App Store we think developers will go home happy from WWDC so we should expect some good innovation in the coming months. And as Apple are demonstrating they are listening to their community, lots of the Apple estate will be better by the key Christmas period. Being able to more easily move content between Apple devices may swing more laptop buyers – and so might having Siri available everywhere. And perhaps they have done enough with the Watch to get us to try wearing ours again?
One of the key ways GAFA try and keep you invested in their platform is through Anchors – building services where leaving is a real effort. The key ones are Photos, Music and (a work in progress) your wallet.
Whilst Photos is effective and a good way to drive cloud storage, it doesn’t have the monetary value that music does. Apple led the way with iTunes and we still have a huge amount of music locked in iTunes (and old iPods – which can now be quite valuable)
With Beats they have tried to build on this asset, but the general view of Apple Music wasn’t that favourable. So a key element of WWDC was explaining how they are going to improve it. This demo makes it sound pretty good – and anyone using the Sugar Hill Gang has to be applauded. As does a presenter who isn’t a middle aged white guy with his shirt hanging out.
But the key elements in Music are the exclusives and the curated list of recomendations. We still think that buying Tidal is the best way to get access to exclusives – and as it’s a Norwegian company is it even more of a bargain? For the list they will find it hard to beat the Spotify Discover Weekly playlist and both Amazon and YouTube do a reasonable job of surfacing other music you may enjoy. The best tech for doing this was Scrobbling - from the original Old Street start up LastFM – bought by CBS for $140m and subsequently allowed to wither away.
Competition is increasing with Twitter investing in Soundcloud and it’s rumoured that Amazon are to launching a stand alone music service too. The most common use for our Alexa is requesting tracks from Spotify - partly because Amazon still won’t link a UK Music account to the US bought device
Given Amazon suffered most from the rise of MP3s and streaming music, you can see why they want to build their presence here. Google have YouTube to leverage, but Facebook is a conduit for so many music conversations whilst having no music assets. In the many posts I see on Facebook about music from friends, the content is usually a YouTube video (often with just a picture of the obscure soul or jazz record). Could Facebook build a hack that lets me create a playlist of the tracks my friends have shared? Would they be able to extract value from that?
I keynoted an internal Google event this week looking at Video and advertising. Fascinating space and one of the things I was reminded of doing the prep is just how flawed the measurement is - YouTube count a view as 30 seconds whilst Snapchat deem 1 second enough. GroupM want “Verified human exposure to 100% of the video window with audio on & 50% of the ad viewed”
It’s interesting to see more GroupM thinking on video in this taxonomy – which makes lots of sense. The gap between traditional marketing and digital is shrinking - partly because the common use of video.
Another speaker was Sky explaining their progress with Adsmart, which is really impressive – and seemingly interesting to ITV. But whilst it’s all about video, there are some real differences and the brands who get this right will have a huge advantage. We are putting together a workshop around this topic for clients; what’s happening, emerging best practice and some good examples. If you would like to take part in one of these with your team, let me know.
Making Ads Better
I also spoke at an AOP event this week and shared our thinking on the issues around making ads better – building on our breakfast the other week. Ad blocking inevitably came up but publishers talked of their frustration of being given heavy ads to run – often with lots of tracking scripts etc. But there are some promising green shoots – one of our friends is about to trial their tech in a very interesting experiment.
In a neat coincidence, the day of the event was the day that Orange chose to block ads – or chose to deny their customers the right to see any ads and deny the publishers their customers choose to visit, the right to earn any ad revenue. No-one seemed to have noticed much effect and this explanation of the problem with network level ad blocking is timely.
The new study from Reuters on digital news tells us that “Only around 8% of smartphone users currently use an ad-blocker but around a third of respondents say they plan to install one on their mobile in the next year.” So it’s still not too late.
Out take on the whole space is that ad tech and programmatic is a little like the new electronic technology in cycling. You can use it to make you go faster and farther. Or you can use it to avoid doing any work.
With some notable exceptions a lot of adtech has being used lazily. Now is the time to use it to go further, faster and make ads better – and consequently profit from mobile and social and the shifting attention of your customers
Facebook is industrialising Dark Posts – posts that don’t appear on your timeline have been used for a while by smart brands, but now the hack is no longer needed and they are being promoted to all advertisers
The internet of Things can seem a little dry but we think that distributed sensors can be really powerful. This example from Hollywood talent Agency WME shows them using tech on a fashion show to great effect
Finally Video and social are so strong right now its good to remember where we came from. There was a time when a million YouTube views was a lot and one early example of smart use of the tech was Lonely Girl 15. Around 10 years ago we covered it on our old blog and now the whole story is out; the guys behind the project tell the whole story and it is still a good guide to making things happen now.
The only thing lacking in marketing and tech right now is good ideas. Lets get that sorted.
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