If you’re looking for an early bet for the top story of 2010, bet on the story being the Internet Revolution, because after years and years of anticipation and progress, the next two to three years are when we are going to see the Internet become what we all thought it would be.
Actually, the term Internet might not even be correct. What I see is much more like the virtual world finally truly coming of age in ways that can no longer be dismissed and with a strength that continues to slay those business models that are linked to the past. (And the cheap debt that supported the legacy model.)
Why do I believe this?
It’s a fairly roundabout theory involving cheap debt fueled by the asset bubble (which faltering businesses like The Tribune Company used to buy a few more years of life) declining prices of technology, companies maximizing their advertising dollars, a bit of Moore’s Law and a conversation I had fifteen years ago with Craig McCaw.
Let’s start with the conversation I had with Craig McCaw.
In the early 1990s, I was a junior copywriter at The Richards Group in Dallas, Texas and one of the accounts that I worked on was Cellular One, or at least the portion of Cellular One that was owned by Craig McCaw.
Over 15 years ago, Mr. McCaw was the first person who told me, as Cellular One launched the first national cellular network, that a phone number would no longer be a place anymore but a person.
It’s hard to remember but until that moment, phones stayed stuck to office walls, desks, and living room tables. Numbers were always places, not people.
Mr. McCaw went onto say that people born in the 1990s would have the same number their whole lives, the number would be the person. I even came up with a tv spot showing discarded phones and a small boy’s voice asking, "Grandpa, tell me about when a phone used to be a place not a person."
Flash forward to 2009, and this concept is not completely uncommon. However, and it’s pretty amazing to me, or maybe this study is flawed, 91% of all American households still have landlines. The basic question is why? Just pure habit I suppose. But if you surveyed people under 35, I’ll bet the number is higher. And under 25, it’s higher still.
My conclusion is that habits take a long time to day, but right now, our economy is helping them die just a little bit faster.
I’ll bet that anyone facing a little person budget crisis isn’t going to give up his or her cellphone to keep a landline. In fact, if every American really took a hard look at the need for both a landline and a cellphone, that 91% number would plummet.
Or how about if more people know that in many areas you can trade your home phone number to a cell number? The number would fall even farther and faster again.
The lesson here is that it takes a long long time for technical revolutions to really take hold and it’s not really till there is strong financial incentive for them to really tip. The recession and other economic budget factors are part of the tipping process that is going to occur now.
So let’s follow the money, specifically, advertising money.
Advertising money, even advertising money controlled by people whose habits die slow and hard, ultimately goes to the media where the people are. People are not reading newspapers, watching broadcast television or spending their time in traditional media space.
When advertising budgets are flush, and business is good, there is less concern about maximizing the return on investment from advertising funds. But when budgets are tight, and business is soft, or down, there is tremendous concern about ROI.
Right now, the ROI favors online advertising, specifically, Cost Per Click models in a way that simply can’t be overstated.
Via Google, or Facebook, clicks can be delivered to a company’s web site for anywhere from 20 cents to a dollar. If you advertise on say an outdoor board for $20,000, can you get 40,000 – 100,000 clicks to a site, of course not.
Yes but advertising agencies cry! Yes but what? Is not the purpose of advertising to drive sales? How can you argue against the most efficient way to drive those sales?
Am I suggesting that brand advertising and brand building is essentially dead in this new world? Not at all. In fact, brand building is more important than ever, it’s just that sorry, brands are built outside in, not inside out.
You can’t stand up and claim "this is the greatest restaurant" and we have "the best steaks" and impact your business in the long term because from Twitter, Facebook, emails and even the culmative effect of instant messaging, your brand is going to be built for you, your strengths and weaknesses are going to be examined, every minute of every day, from the outside in.
You can claim whatever you want, but it’s a waste of money.
No, no, no the makers of expensive tv commercials cry, it’s not true.
Well, yes it is. Again, now and moving forwardbrands are no longer built top down, what you tell me about your brand is strictly immaterial these days. Brands are created from crowd-sourcing. If I want to find out about a resort in the Bahamas, do I read the ad for the resort in Travel And Leisure? Or do I go to Trip Advisor and find out what people who have been say about it?
So habits die slowly and CPC is the best return, well what about these newspapers? Just what is happening?
To me, it’s no surprise the San Francisco Chronicle lost over 20% of its subscribers in just six months, a shocking figure especially when you look at the decline of the last five years leading into the last six months. What is surprising is that the San Francisco Chronicle, and so many other newspapers are still in business.
Total US Daily Newspaper Circulation is just over 30 million copies (with total US Population now over 330 million) What is keeping the newspapers afloat? Cheap debt from the bubble and habitual investors. Smart people (remember David Geffen thinking about buying The Los Angeles Times?) still are putting money into newspapers not for what they are today, but what they were once.
But that will stop. And all of that massive amount of debt will come due, and literally, the rash of newspaper failures will go from a small river to a mighty flood.
Finally, Moore’s Law or the theory that computer power doubles roughly every two years.
In terms of this conversation, what you are seeing is a massive shift in technology that literally is putting the power in people’s hands for pennies.
The computer power and spread of broadband makes video instant. Gives you everything on your phone, let’s you communicate, find anything, do anything from your phone. (I don’t have an iphone but I go to Apple just to look at the new apps sometimes, amazing)