The limits of Google.

Last month Millward Brown Optimor published their fourth annual BrandZ Top 100 Most Valuable Global Brands rankings and would have you believe Google's brand is worth exactly $100 billion. While I have debated the worth of these kinds of valuations and surveys in previous blogs, in the wake of the impending release of the Google Wave, it now seems a good time to consider the limits of the brand.

Some people think Google breaks the brand model i.e. no advertising on its home page, no advertising per se but both these measures are merely symbolic. While Google may have inspired what many see as a form of brand disruption, is game changing and is somehow Schumpeterian, it is a behemoth brand utilizing both the common architecture associated with monolithic status as well as exhibiting a traditional set of values not unlike Apple and Virgin.

Similarly, you could argue that Google has unlimited potential as a brand and its brand extensions merely reflect this. However, while Google is a highly successful company but with 97% of its revenues coming from Web advertising and 68% of that from advertising on its own Web sites, it is still very much a single proposition company.

Google’s market dominance means it has virtually reached the limits of organic growth and anything further can only come from transformation via acquisition and perhaps through product and service development, in much the same way Apple has. Sure it’s testing the field with Wave, Chrome and Android, which appear to be the spearheads of a greater platform strategy but if we take YouTube as an example of expansion by acquisition, it seems fairly evident that Google is a one-trick pony.

Since its 2006 acquisition of YouTube revenue estimates have varied wildly with analysts like Bear Stearns and Credit Suisse suggesting Google will see between $90 -240 million in revenues this year. It’s a big range but as the number three brand on the internet YouTube only made around $80 million last year and while that’s no small potatoes, it is struggling. Given Google’s 2006 acquisition of YouTube came with a $1.65billion price tag and Credit Suisse estimates operating costs at around $711 million this year. Therefore it’s reasonabl e to assume that despite Google’s deep pockets, the operating gap is not going to be tolerated for too long.

So what does this mean for the Google brand? Of course, YouTube’s traffic will continue to grow exponentially, with no clear end in sight as will the not inconsiderable cost of this business. Set this against mildly successful efforts at monetizing content via advertising and the overall state of the advertising market and you come back to the central problem for YouTube and ultimately, Google. The non-propietary nature of both its search engine and content that forms the basis of the Google brand and proposition is, at the same time, its achilles heel.

To get further understand these limits, look at the performance and what I see as the eventual fate of Yahoo. Like Google, nearly all of Yahoo’s revenue comes from search and display advertising. Since Google’s 2004 float Yahoo has been losing share in search and though Yahoo is still the second most popular search engine, its searches are inferior. While Yahoo’s content continues to attract users for the moment, its search traffic is secondary to choice of Yahoo as a portal. The problem is that while content from the portal generally helps generate search traffic, yet without either distinctive content (everyone accepts that content is no longer a competitive advantage) and superior search, Yahoo is going to decline. What is best described, as Yahoo’s kitchensink approach to both content and feature development, is not disimmilar to that of Google’s. In this market “innovation” is a very tired word. Yahoo has Flickr. Google Picasa. Yahoo has Finance. Google Finance. Yahoo has Mail. Google Gmail and now Wave. Yahoo has Groups. Google Groups. Now just think of Google’s failures with News, Lively, Orkut and Knol and then apply that to a similar Yahoo’s list of failures or better still AOL, its hard not to draw the conclusion that the direction for both brands is anywhere but down.

On revenue and market performance measures alone, Yahoo is a sombre example of how little stock one can place in single proposition revenue models. In 2004 Yahoo reported net income of about $238 million and had a market value of about $36 billion. At the same time Google's stock market value was around $16 billion based on a net income of around $106 million. Microsoft’s offer for Yahoo last year put its market value $45 billion, against a brand valuation 7.45 billion. It had barely moved and most people thought Microsoft was being generous and Yahoo missed the boat. Now with the rankings reversed and sobriety entering market valuations, Google’s Wave is looking like no tsunami.

This blog was originally published in Marketing Magazine on 11 June 2009.

Before your eyes: how our media use is a history of screens.

A short history of screens.

1. Around 1600 the camera obscura is perfected. Light is inverted through a small hole or lens from outside, and projected onto a surface or screen, creating a moving image
2. Mechanisms for producing two-dimensional drawings in motion were displayed in public halls by devices such as the zoetrope, mutoscope and praxinoscope were displayed in the 1860s
3. The development of the motion picture camera allows individual component images to be captured and stored on a single reel, "motion pictures” are shown onto a screen for an entire audience in the 1880s
4. The first commercially made electronic television with a cathode ray tube is manufactured by Telefunken in Germany in 1934
5. The first call on a hand-held mobile phone is made on April 3 1973
6. Apple Computers introduce the Apple II, the world’s first personal computer in 1977
7. Mattel introduce the first handheld electronic game Auto Race in 1977

According to the results of a landmark consumer media consumption research study released in March, it comes as no surprise that our dedication to screens know no bounds.

The research, commissioned by the US media measurement company Nielsen Media and its US Council for Research Excellence, followed 372 Americans in two full days of live media observation.

It was was designed to simultaneously observe and measure media exposure, life activities, locations for media use and where people spent their day. The mass observation study took place in six geographically disperse cities across the US. The final sample included 952 observed days and over three-quarters-of-a-million minutes of observation. A not insubstantial study.

The study found we spend on average, 67 percent of our total daily media time with live TV screen-based media (including DVRs, DVDs and games), about two minutes a day watching video via the Internet, and only a fraction of a minute watching mobile video. Even among 18-24-year-olds, the average amount of time spent watching live TV (209.9 minutes) surpassed even computer screen time (169.5 minutes).

If, as the study identifies, our total concurrent media consumption across all forms of media runs to eight and half hours per day, it also confirms our lives are now more tuned to screen time than first thought.

The research shows concurrent media use and exposure is almost the same for all age groups, media choice so rapidly changing that computer-based activities have replaced radio as our number two media. US consumers now spend on average two hours and thirty-three minutes on a computer, but only one hour and 49 minutes with a radio.

Contrary to current thinking, young demographics are not the biggest consumers of media. While the average adult spent 309.1 minutes watching live TV and 14.6 minutes playing back programming via DVR, the biggest consumers of media were in the 45-54 demographic or what the study called a “digital boomer.” Digital boomers spend nine and half hours per day using all four screens (TV, computer, mobile and out-of-home such as kiosks) compared to eight and half hours for all other age groups.

One of the most interesting findings was that on average live TV users were only exposed to roughly an hour a day of advertising and promotions. If proven by subsequent studies, this debunks much of what is claimed around the level of brand message exposure per day (at around 3000). As most live television advertising runs at 15 minutes per hour or so, on the basis of figures quoted in the study, these should be two hours on television alone or around 240 messages on live TV at 30 seconds per message). What’s difficult in this measure was “exposure” remains undefined and so do they mean a viewer actually watching advertising or just appearance? My assumption is they are defining it as active participation. For example, during the live TV commercial breaks people were observed shifting their primary attention to media such as print, phone and computing. This data seems to prove a widely-held but strongly debated view that consumers are avoiding most of advertising in programming when they view live TV. The long held view that consumers still “follow” a brand message as they shift from one media to the next also seems to be questionable.

The study now ranks computer-based time as the number two media category after live TV. Including web use, email, software and internet messsaging, computing time exceeded broadcast radio average duration by 40 per cent. The study suggests computing has now replaced radio as the number two media activity. Radio is now number three and print number four. Print covered major US newspaper and magazines with use around 22 to 41 minutes per day. Claims for the death of print are no longer an exaggeration.

The Council for Research Excellence study shows our typical daily media consumption goes beyond TV to a growing prevalence of new digital screen-based channels. One of the by-products is the finding that suggests we may actually be seeing far less advertising than first thought. Indeed, high levels of media exposure and our attentiveness to advertising may be seemingly unrelated and those oft cited high levels of advertising exposure, possibly no more than a frabrication by media planning and advertising agencies.

While the screen and our fascination with the images upon it have been around for centuries; the variety of screen-based communication channels, our use of their content continues to expand and grow at speed.

Portions of this blog were originally published in the Times of Malta's Technology Sunday supplement on Sunday 24 May and in Marketing Magazine Australia on Tuesday May 26.

DIFFUSION for national adoption brands.

DIFFUSION have been appointed to develop the brands of Orphan Angels and Australia's National Adoption Awareness Week.

National Adoption Awareness Week, which will be held this year from November 16-22, aims to encourage, listen and acknowledge all adoption-related journeys and experiences.

Orphan Angels, founded by Deborra-lee Furness and Janine Weir, focuses on assisting global orphan projects and improving Australia 's adoption practices. One of its major projects is the National Adoption Awareness Week.

Orphan Angels President Janine Weir said the group was excited to be working with DIFFUSION as it looked to develop both Orphan Angels and the National Adoption Awareness Week brands.

“This year we’re looking to create even more connections between Australians who are touched by adoption. DIFFUSION’s appointment will enables us to better understand how we can use brand to leverage it and encourage more participation in this year’s event,” she said.

DIFFUSION strategy director Stephen Byrne said the agency was excited with the appointment, given the group’s work was high profile and the agency was continuing to expand its work with organisations that had both national and international reach as well as important social agendas.

DIFFUSION was recently appointed to develop the brand strategy for the Lowy Cancer Research Centre at the University of NSW.

When brands fail, does brand valuation too?

Last month Wally Olins, the man synonymous with the London brand agency that still bears his name, pronounced brand valuation an “utterly meaningless process”.

The bedrock on which many brand consultancies, accounting and valuation firms have built their reputations and practices, Olins pulls no punches on the value of brand valuation, describing it as “about as meaningful as sticking your wet finger in the wind and shouting out a number.”

He says this “ apparently rational process” is conducted through a “series of complex, arcane and to a lay mind more or less incomprehensible statistical measurements” but which ignores a number of well known truths.

“The truth is that brands of all kinds jump around all the time. They are in fashion, then they go out of fashion. They are well managed, then they are badly managed; brand managers become too risk averse or take too many risks.”

And his point is well made. Here in Australia we only need to look at a company like Babcock and Brown (B&B). Founded in 1977, this international finance and investment company had at one time 28 offices and in excess of 1,500 employees worldwide including offices in Europe and the United States. In December 2006 it had a market capitalisation of just over $8.5 billion and in 2007 its share price peaked at AU$33.90 but by December 2008 its share price had nose-dived by 99.6% to AU$0.14, representing a market capitalisation of less than $50 million. Last week the company was placed into voluntary administration.

Here Olins’ point is easy to support. Obviously, if a brand like B&B has no financial value (as the B&B board announced in January) - on what basis can any brand valuation be made?

Similarly, as BusinessWeek ranked Citibank the number 11 brand in the world in 2007 with a valuation of U$23 billion by 2009 some estimates put its brand value at around $9 billion and with that its ranking would fall to around number 40. No one can or would dare predict what Citibank’s brand value will be by the end of 2009. And given the level of US government assistance (US$25 billion to date), it’s brand may yet cease to exist (like I saw Washington Mutual close it’s doors and disappear overnight) and what then is the meaning of any valuation?

It Olins is does oversimplify of the brand valuation process in that it does examine both net present value as well as attempts to construct an idea of future value. However, he is right about how often brand valuation is trumpetted as an absolute measure of value and that, almost without exception in most valuations I have seen, the process takes no account of what either customer or market perception and sentiments is for a brand.

And Olins is only half right when he says brands have “no objective, absolute value” but the truth is that brand valuation can be used to establish an objective value but its ability to measure “absolute” value that is somewhat questionable.

The four standard brand valuation methodologies accepted by both the Financial and Accounting Standards Board and the International Accounting Standards Board for use on balance sheets around the world do provide an objective guide to what people should pay for brands. However, they can, in no way, be used to demonstrate absoluteness

The real fact is that by any measure there has only been a small reduction in the brand value of most of the world’s top brands and as market conditions and sentiments change values continue to change. Last week brands like Apple, Google, UPS and Amgen were being touted as possible replacements in the venerable Dow Jones Industrial Average for stricken companies like Citi Group, General Motors and General Electric.

Brand values do reflect balance sheets, market trends and sentiment but can only do their best to take account of black swan moments. In that way there can be no absolutes, and that is meaningless.

This blog was also cross-posted in Marketing Magazine Australia on March 17.

DIFFUSION's take on taglines out in India.

We're out in the world.

DIFFUSION strategy director Stephen Byrne quoted in a new article published this month by leading Indian business and marketing magazine, 4Ps.

DIFFUSION branding new Lowy Cancer Research Centre.

Shameless plug but here's our latest press release:

Strategic branding agency DIFFUSION have been appointed to develop the brand strategy for the new Lowy Cancer Research Centre.

The $127 million research facility is being built at the University of New South Wales’ Kensington campus to house 400 cancer researchers from both UNSW and the Children’s Cancer Institute Australia for Medical Research (CCIA).

It will be one of the largest dedicated cancer research centres in the southern hemisphere and Australia’s only fully integrated adult and childhood centre.

DIFFUSION strategy director Stephen Byrne said the agency was excited with the appointment, given the Centre’s important work and international reach.

Martin Lindstrom's Buyology: why every idea you ever had about why we buy won't be changed by what you read here.

Sydney-based author Martin Lindstrom’s Buy-ology might have made a brief appearance on the New York Times bestseller list in November buoyed by some good reviews, but by my standards and those professional marketers, strategists and critics of neuroscience around the world, its a mishmash of spectacularly insubstantial claims drawn from a single set of research experiments backed by cribbed online references and enthusiastic, anecdotal and sometimes annoying marketing evangelism. 



The whole premise of Buy-ology is that brand and purchase decisions are not made on any rational basis but by stimulation to certain sections of the brain. Lindstrom’s neuromarketing experiments use two types of brain-scan technology - functional magnetic resonance imaging (fMRI) and SST, an advanced form of electroencephalography (EEG) - to test how various marketing stimuli can affect the subconscious. While the book quotes a number of well known research studies and runs to over two hundred pages, less than a quarter is actually devoted to detailing and recording the results of its four experiments, its the entire basis for his argument.

So here’s the four earth shattering results Lindstrom claims may set off “the biggest branding revolution in 50 years”. It will save you buying this book.

The first experiment, using SST-ECG measured the impact of product placement in television programming and finds that “ we have no memory of the brands that don’t play an integral part of the storyline of a program”. The second, using fMRI on cigarette smokers, tested the effects of “overt, direct and visually stimulating images” and its relationship with subliminal advertising, finding that its iconography and images themselves not logos that actually stimulate purchase behaviour. The third experiment using fMRI tested whether “sports, and sports heroes activate the same areas of the brand as religions did” showed “the emotions we experience when we are exposed to strong brands” is similar if not “almost identical” to the emotions generated by religious symbols. Finally, his fourth experiment, using fMRI on an unknown number of subjects (Lindstrom forgets to tell us how many participated in half these experiements) was designed to “determine whether a signature sound – like the Nokia ring tone – makes a brand more less attractive”. The shocking result: most brands do well when “sound and vision are combined in a congruent way”. Unless you’re Nokia because after a decade or so of use, its ringtone now has a strong aural disassociation. Lindstrom found this result so disturbing he had to give the company a call and tell them!

Lindstrom claims all these “controversial” and “spectacular” findings come from a three-year, $7 million experiment testing 2081 volunteers in the US and Europe (he says they were also from Japan and China but I can’t find these in the results). Buy-ology doesn’t substantiate either the costs or the length of the study period. For example, the commercial cost of fMRI can be around US$525 per hour with standard scans taking around an hour. New fMRI scanners cost anywhere between US$1m and $2.3m and portable scanners around US$2m, so perhaps he had to buy a scanner or two but I seriously doubt this. The point is that he only conducted three fMRI experiments on at least 65 people. Also the standard cost of an ECG scan in the US can range from U$100 to more than $500, depending on the purpose and type of test i.e., asleep or awake, invasive vs non-invasive electrode implantation. Lindstrom’s was non-invasive and his 400 subjects were awake. You do the math.

Untested is Lindstrom's discussion of mirror neurons, behavioural priming and somatic markers, which he tries to draw a line from his own experiments via some scholarly studies he found online. But Lindstrom’s experiments do attract an even bigger question about neuroscience and marketing – whether this kind of research is actually a useful predictor of behaviour. Lindstrom might be fairly certain of this science but most critics of the use of such limited research insist it's too early in the field of neuromarketing to draw these kinds of absolute conclusions. According to Sheffield University School of Psychology Professor Lawrence Parsons, “we don't really know what we are seeing when we watch the brain work. Is it the thing itself - the thought, the flash of insight - or just an aspect of it, the bark rather than the dog?”

It’s clear to me Lindstrom’s claims require substantial research to draw any probable link between the outcomes of these experiments and predictors of future purchase behaviour. Right now his results just show a degree of correlation between stimulation and behaviour, they don’t prove a single basis of causation.

Last year I read a New Yorker article on the roots of psychopathy, describing how researchers have being using a portable fMRI scanner to scan the brains of US prison inmates to uncover the basis of psychopathy. It suggests that if a “biological basis for psychopathy could be established” then pharmacological treatments could be developed. Might not similar treatments be developed for behaviours such as impulse buying and mall rage? These experiments have been conducted for years and have drawn the kinds of accusations which put them in the same category as nineteenth century phrenology. Yet, unlike Lindstrom, none of these researchers dare draw any final conclusions. The field, like neuromarketing is so new, researchers believe they will need more to spend the next ten years and maybe another 10000 scans linked to prisoner DNA, biographical data and case histories before anyone thinks the data makes sense.

In one interview last year Lindstrom said, “If I wrote a serious, heavy book, no consumers would read it” and a trawl through Amazon reader reviews on Buy-ology will confirm that. A Some advertising agency planners might like this book and a few business and industry people might be gobsmacked, but you won’t read anything here you don’t already know already or can’t find online. But if you like this kind of marketing sooth saying the globetrotting Lindstrom will be in New York and San Francisco in March presenting his exclusive Buy-ology symposiums, digging “wider and deeper than it was possible in the book alone, into the research findings and their implications for marketers and advertisers”. I can’t wait.

This review was also published in Marketing Magazine Australia blog on 19 January .

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