In Search of A Sustainable Business Model

April 12, 2012 3 comments

(This is a copy of an article written for BroadcastPro)

On the surface, the free-to-air television sector in the Middle East is thriving. Viewing time is one of the highest in the world. Even in the turbulent political environment of 2011, research indicates that the advertising market has continued to grow. Hundreds of channels exist yet satellite operators can’t keep up with demand and continue to launch new satellites. International players such as Newscorp and Turner have made investments in Middle East media. The region’s population is growing rapidly and is very young by global standards, thus making it attractive for advertisers. The large number of broadcasters supports an eco-system of profitable entities ranging from international and regional production houses to infrastructure providers and media professionals.

In reality, a minuscule number of broadcasters are profitable. Ad figures are inflated by rate card monitoring that does not take into account regular heavy discounting. On a net basis, ad spend per capita is lower than global benchmarks. In the absence of a single regulatory body with authority over the many countries in the region, the advertising and broadcasting sectors are practically unregulated. In advertising, this has led to aggressive but not always transparent sales practices. In broadcasting, the lack of regulation has led to large discrepancies in the quality of content. Audience measurement is either non-existent or relies on antiquated methodologies.

The rapid development of satellite Direct-to-Home distribution, while a necessity in the past to avoid strict government control of the television sector, has come at a cost. Broadcasters and advertisers cannot target individual markets and therefore larger countries tend to get the lion’s share of television spend while local TV advertising budgets are diverted to newspapers.
Despite the lack of profits, new channels continue to launch, at times as misguided commercial ventures but mostly in pursuit of non-commercial goals. This is fine in a normal free market scenario, but with the lack of audience measurement and no regulation of the claims channels can make or how their advertising inventory is sold, the market becomes distorted. Its overall value is diminished as too many players are left chasing an undervalued advertising spend.

There is no short term solution or quick fix for the various issues afflicting the TV sector in the Middle East. Many are regulatory and related to the multi-country footprint of the sector and therefore cannot be easily resolved. Ultimately, the current key players in the Middle East’s television industry including broadcasters, advertisers, media buyers and sales representatives, are best positioned to improve its prospects by taking pragmatic steps to increase revenues, reduce costs, and support transparency.

Key actions include:

All parties should support the introduction of audience measurement tools. The UAE is the only major Middle East market that is close to launching people meters.

Broadcasters can increase their revenues if they work closely with advertisers. The evolved advertisers need to expand their arsenal beyond the 30-second spot to cut through the clutter. Yet currently the content development process at broadcasters barely involves their ultimate clients. If more budgets are to be allocated to TV, broadcasters must reach out to advertisers and seek to develop content that entertains audiences while integrating brands in a seamless non-intrusive manner.

Broadcasters should begin to shift their mindset to that of content owners and capitalise on new platforms to increase revenues: IPTV platforms are emerging in Saudi and other countries. OTT is a nascent but promising sector. Satellite operators are considering spot beams. YouTube viewing on mobile is one of the highest in the world. Broadband penetration is growing rapidly in key markets. All these platforms provide opportunities for content owners to create more relevant localised content, extend television brands onto the web and mobile, generate syndication and licensing revenues, or explore new advertising mechanisms.

Broadcasters can reduce content costs by sharing productions across markets or acquiring rights for smaller geographic territories. The pan-Arab channel is a convenient myth and very few channels can be both popular with audiences across all countries and be able to generate revenues from those countries.

Advertisers too must play a role in rewarding broadcasters that create premium content with verified audiences. In too many instances, the short term focus on reducing spot rates has led to a negative ripple effect across the advertising value chain.
The TV sector in the Middle East must repair its business model if it wants to sustain itself in the long term and attract investment on a commercially viable basis. Eventually, internal voluntary reform, if not exercised, will be replaced by externally imposed regulatory reform.

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My lawyer told me to lie, and so I did

March 29, 2012 Leave a comment

It is very common, when looking at twitter profiles, to find wording similar to “[job title] at [company]. Views are my own and do not represent those of [company]”

Really? In the age of the Internet you still think you can simply get away with such legal dross?

Your [company] hired you. It gives you the authority and resources to influence its future direction. Your statements on Twitter are a reflection of your world view, your ethics, and your personality. If the actions of your [company] are determined by your decisions, then who you are and what you say/do IS part of your company’s view. Just because your legal department is worried about the negative implications of employees tweeting their heart out to all who would listen doesn’t mean you can disassociate your beliefs and behavior from your company with a quick statement of deniability. This is particularly true for journalists and media professionals who have platforms that allow them to influence public discourse.

The transparency of social media is a double edged sword. If you can’t take the challenge of tweeting in a manner that reflects the ethics and responsibilities of your job, then it is best you don’t tweet at all.

FREE is becoming more expensive

October 29, 2011 Leave a comment

Internet users expect free services and content. News, email, games and social networks are among the most popular “free” services. Initially, web sites simply wanted your page views to fuel their advertising income. Then they asked you for your email to send you newsletters with ads in them. As advertising became targeted, sites demanded more information such as gender, date of birth, address and credit card number. Then social networks exploded and we willingly handed over our entire lives and relationships. With the current advertising formats being rolled out on Facebook and Twitter, our thoughts and opinions have become the latest data sets for marketeers. Mobile surfing means our locations are now on offer as well.

If we measure the cost of “free” services to a user in terms of the volume of personal data that he or she needs to reveal, it is clear that the cost of Free has a very high inflation rate. “Data is the new oil” is now a conference PowerPoint cliché and consumers are the oil reserves.

Will this change? Is there a time where people will demand compensation for revealing their personal information or for receiving customised marketing messages?

The obvious answer is No. Anyone who thinks the opposite will likely be old enough to remember life before the Internet. Privacy is on a one way trip to extinction.

Don’t waste your time mourning the loss of privacy. Instead, think about how your business can benefit from it to better understand customers, tailor services and exceed expectations.

When will the web video sales horse catch up with the technology cart?

October 19, 2011 Leave a comment

At the medialive UAE conference yesterday, I listened with interest to a panel discussing how to generate revenues from the “new media ecosystem.” It quickly became apparent that several markets in the MENA region had reached the stage where the technology to generate revenues from web video was ready for prime time but was yet to make a significant impact because the business understanding and processes required were not yet mature. In other words, the “new media ecosystem” exists at a technology level but lacks a clear sales ecosystem to create value. There are now online video on-demand sites like istikana.com and online television channels like elgomhoreya.tv. YouTube reports rapidly growing MENA usage while regional variants like Ikbis have sprung up. Digital creative agencies like flip and nervora can help develop innovative advertising and engagement solutions.

Yet most advertisers who look at shifting marketing dollars to the web are presented with a now familiar list of top five sites with banner and CPM rates. If not that, then the now obligatory Facebook fan page for branding and interaction purposes is the default suggestion. Little effort is made to make use of the superior data that web campaigns can provide, which is surprising given the region’s lack of accurate advertising currencies and performance measurement.

Similarly content owners who make their content available online will find meager sums awaiting them. As a result, most seem to default to using the web as a branding and reach mechanism rather than a revenue generator.

The reasons for the business ecosystem lagging behind the technology are varied. Google’s representative on the new media ecosystem panel admitted they couldn’t generate revenues from YouTube in MENA because they did not yet have the right resources on the ground to do the selling. Clearly a global company will prioritise larger markets at the MENA region’s expense. For media buyers, even those with specialized digital units, the majority of their revenues is still tied to traditional media spend and traditional media economics. This in turn affects the number of staff and effort put into digital sales. For all its touted measurement capability, the MENA web does not have a standard audit body. Advertisers are sometimes more comfortable with the display-based advertising formats that more closely resemble what they are familiar with in print media. Broadband speeds are increasing by the day, but still vary wildly from one market to the other thereby limiting the reach of web video. Finally, even in mature markets, web video sites are struggling to equate the value of a web view of a video commercial with its more expensive television variant. When you consider that a consumer who does not click “skip” and chooses to watch a video advertisement is more engaged than a passive consumer watching television, it would seem the higher value attributed to TV viewing is partly influenced by the legacy of the industry’s development rather than statistics and data.

It is clear that web video advertising will continue to grow rapidly in the MENA region. To reach its full potential though,the sector needs changes in advertiser mindsets, media buyer economics and broadband infrastructure. That may sound like a tall order, but it is only a matter of time before the pieces click into place.

Why waste a perfectly good monopoly?

August 31, 2011 1 comment

In general, telecom operators in the MENA region have a very sweet deal. They are either operating as monopolies, comfortable duopolies, or are in markets where the incumbent was heavily entrenched before deregulation kicked in. They regularly rake in massive profits and many have stockpiles of cash. Yet, what are they doing with this cash? Where is the feedback loop that is taking this cash and injecting back into the economy to drive innovation and support the development of new ecosystems? In competitive markets, telcos have tried to innovate with mobile operating systems, mobile payment mechanisms and mobile content distribution. Unfortunately in MENA, most seem to be content to just upgrade their networks to faster speeds using technology developed elsewhere. Don’t get me wrong, telcos in the region have done much to increase access to information and allow people to connect, but they have in general failed miserably in making an impact that is proportional to the billions they have collectively made in profits over the years. Where are the Arabic operating systems? Where are the unified payment mechanisms to enable e-commerce? Where are the funds for launching mobile and online startups? So far, the combined score for telcos in MENA is, at best, a C-. Only they can change this for the better, if they ever decide to move beyond increasing short-term dividends to shareholders.

Google+ and the existential question of our virtual self

July 10, 2011 Leave a comment

Joining Google+ has again forced the question that now faces everyone who lives in the dual physical world and virtual social media world: what part of you does your online identity represent? It used to be simple: Facebook for most started as the extension of your personal relationships (friends, family etc.). LinkedIn was the extension of your professional self. Gradually, the lines blurred, with twitter and Facebook interactions accelerating the mixed work-personal presence online.

When I first logged into google+, I was surprised to see that google had an image of my 1 month old baby daughter as my profile picture. After resisting the desire to check if someone was hiding in my closet or if a program was snooping on my laptop, I realised it is because that is the picture I had chosen in Google Talk on my phone. Google Talk is a tool I use for personal conversations with friends and family so no issues there, but I didn’t want my public google profile to have the same picture as I consider it “private” (in the modern sense of online privacy, ie not very private but not totally public either!).

But Google+ seems to be all social tools in one. Its stream is like Facebook’s. The profile page combined with the Work circle is like LinkedIn. Its “following” circle is like twitter. Hangout is like Skype (with Google Wave DNA). So what part of you do you put on it? How do you keep your professional and personal identities separate? Google’s circles try to help in this by differentiating your social groups so you don’t have to share everything with everyone.

Perhaps the question of trying to separate your personal and professional identities is no longer valid. In a digital world where information can be compiled and compared so easily, is it even worth the effort to present different versions of yourself? On the face of it, being your genuine self and transparency sound like great ideals to strive for. But in reality, I am sure all of us can think of examples where we prefer not to know the true nature of everyone in our social circles!

Categories: Social Media Tags: , ,

The Older Generation is Doing it Too

May 2, 2011 4 comments

Blinking 00:00s on VCRs used to be the embodiment of the gap in the technological prowess between parents and children. Children today might ask about the meaning of “VCR” and, in some countries, question the need to record anything. Whether it is YouTube videos of a two-year old mastering an iPad or the surveys citing a typical child’s 500 friends on Facebook, the digital world is now firmly part of a child’s view of life. In a stark example of this trend, a friend recounted how his three-year old stood next to a picture frame and tried to swipe sideways across its glass front to see other pictures. When nothing happened, he gave his mother a quizzical look as if to ask whether anything was wrong with the “device”. The child’s view of how an object like a picture frame should function is now influenced by what he learnt from using technology. Research always highlights the “digital natives” generation but seeing them in action makes the case for a vastly different technological future very clear.

However, the nature of the generational technology divide today is not as black and white as it once was. Recently, my father received a fax of a printout of an internet article. When he mentioned that the text was grainy and not very legible, I googled the article on his iPad, at which point the long-winded route of receiving the article became clear to him. But let’s look at this example from a different perspective: the article was faxed by a friend of his from the same generation, yet it was from an internet website, and one that did not belong to a newspaper. My father owns a fax machine because technology moves at varying speeds in different markets. A fax machine is still important for his business as several of his clients and suppliers in the region still use them to communicate. However, most of his business’ communication is now by email. Whereas the normal generational technology divide would have previously had my father stuck in the world of fax machines and unable to comprehend the tools of digital communication, he owns several emails, laptops, smart phones, iPods, and an iPad. He bought my mother an iPad because he wanted her to stop borrowing his. He had previously bought her a laptop because she played Farmville so often that he couldn’t use his laptop anymore.

Is is interesting to note what he now perceives as complicated. You won’t see him syncing on iTunes or using his laptop much anymore. With the advent of the iPad, even a Macbook now seems cumbersome and complicated to him. Similarly, data bundle pricing from telcos may as well be in Mandarin. He doesn’t want to know the difference between GPRS, EDGE and 3G. He doesn’t want to have to decide whether 1 Gb is enough for him in a month. He just wants his emails on his mobile phone. Although devices are becoming simpler (thanks Apple), the services around them are not moving towards simplicity at the same rate and this needs to change. The good news is that the shift of software and services to a cloud-based model should enforce a simpler and easier interface.

There is broad consensus that the younger generations will use technology in a much more intense and persistent way than their parents. However, the ubiquity and accessibility of technology today is also affecting how all generations embrace technology in their lives. In MENA where broadband penetration is generally low but rising rapidly, the mass appeal of technology can only help create a larger audience for digital services and products.