Since Facebook informed us it was going public, and it's estimated IPO valuation was reported, debate has raged over whether the company could possibly be worth $75-$100B. Almost nobody writes that Facebook is undervalued, but many question whether it is overvalued.
If you are a trader, moving in and out of positions monthly and using options to leverage short-term price swings then this article is not for you. But, if you are an investor, someone who holds most stock purchases for a year or longer, then Facebook's IPO may be undervalued. The longer you can hold it, the more you'll likely make. Buy it in your IRA if possible, then let it build you a nice nest egg.
Facebook has 28% of the on-line display ad market, but only 5% of all on-line advertising. On-line advertising itself is generally predicted to grow at 16%/year. But there is a tremendous case to be made that the market will grow a whole lot faster, and Facebook's share will become a whole lot larger.
At the end of January Proctor & Gamble's stock took a hit as earnings missed expectations, and the CEO projected a tough year going forward. He announced 1,600 layoffs, many in marketing, as he admitted the ad budget was going to be "moderated" – code for cut. While advertising had grown at 24%/year sales were only growing at 6%. He then admitted that the "efficiency" of on-line advertising was demonstrating the ability to be much higher than traditional advertising. In other words, he is planning to cut traditional marketing and advertising, such as coupon printing and ads in newspapers and television, and spend more on-line.
P&G spends about $10B/year on advertising. 2.5x the Facebook revenue. Now, imagine if P&G moves 10% – or 25% – of its advertising from television (which is now a $250B market) on-line. That is $1-$2.5B per year, from just one company! Such a "marginal" move, by just one company, adds 1-3% to the total on-line market. Now, magnify that across Unilever, Danon, Kimberly-Clark, Colgate, Avon, Coke, Pepsi …… the 200 or 300 largest advertisers and it becomes a REALLY BIG number.
The trend is clear. People spend less time watching TV and reading newspapers. We all interact with information and entertainment more and more on computers and mobile devices. Ad declines have already killed newspapers, and television is on the precipice of following its print brethren. The market shift toward advertising on-line will continue, and the trend is bound to accelerate.
Last year P&G launched an on-line marketing program for Old Spice. The CEO singled out the 1.8 billion free impressions that received on-line. When the CEO of one of the world's largest advertisers takes note, and says he's going to move that way, you can bet everyone is going to head that direction. Especially as they recognize the poor "efficiency" of traditional media spending.
And don't forget the thousands of small businesses that have much smaller budgets. Most of them rarely, or never, could afford traditional media. On-line is not only more effective, but far cheaper. Especially as mobile devices makes local marketing even more targeted and effective. So as big companies shift to on-line we can expect small to medium sized businesses to shift as well, and new advertisers are being created which will expand the market even further. This trend could lead to a much faster organic market growth rate beyond 16% – perhaps 25% or even more!
Which brings us back to Facebook, which will be the primary beneficiary of this market shift.
Facebook is rapidly catching up with Google in the referral business. 850 million users is important, because it shows the ability Facebook has to bring people on-line, keep them on-line and then refer them somewhere. The kind of thing that made Google famous, big and valuable with search a decade ago. In fact, people spend much more time on Facebook than they do Google. When advertisers want to reach their audience they go where the people are (and are being referred) and that is Facebook. Nobody else is even close.
The good thing about having a big user base, and one that shares information, is the ability to gather data. Just like Google kept all those billions of searches to analyze and share data, increasingly Facebook is able to do the same. Facebook will be able to tell advertisers how people interact, how they move between pages, what keeps them on a page and what leads to buying behavior. Facebook uses this data to help users be more effective, just like Google does to help us do great searches. But in the future Facebook can package and sell this data to advertisers, helping them be more effective, and they can use it for selling, and placing, ads.
Facebook usage is dominant in social media, but becoming more dominant in all internet use. Like how Windows became the dominant platform for PC users, Facebook is well on its way to being the platform for how we use the web. Email will be less necessary as we communicate across Facebook with those we really want to know. Information on topics of interest will stream to us through Facebook because we select them, or our friends refer them. Solving problems will use referrals more, and searching less. The platform will help us be much more efficient at using the internet, and that reinforces more usage and more users. All the while attracting more advertisers.
The big losers will be traditional media. We may watch sports live, but increasingly we'll be unwilling to watch streaming TV as the networks trained boomers. Companies like NBC will suffer just as newspaper giants such as Tribune Corp., New York Times and Dow Jones. Ad agencies will have a very tough time, as ad budgets drop their placement fees will decline concomittantly. Lavish spending on big budget ads will also decline.
Anyone in on-line advertising is likely to be a winner initially. Linked-in, Twitter, Pinterest and Google will all benefit from the market shift. But the biggest winner of all will be Facebook.
What if the on-line ad market grows 25%/year (think not possible? look at how fast the smartphone and tablet markets have grown while PC sales have stagnated last 2 years as that market shifted. And don't forget that incremental amount could easily happen just by the top 50 CPG companies moving 10% of their budget!)? That adds $20-$25B incrementally. If Facebook's share shifts from 5% to 10% that would add $2-2.5B to Facebook first year; more than 50%!
Blow those numbers up just a bit more. Say double on-line advertising and give Facebook 20% share as people drop email and traditional search for Facebook – plus mobile device use continues escalating. Facebook revenues could double up, or more, for several years as trends obsolete newspapers, magazines, televisions, radios, PCs and traditional thoughts about advertising.
If you missed out on AT&T in the 1950s, IBM in the 1960s, Microsoft in 1980, or Apple in 2000, don't miss this one. Forget about all those spreadsheets and short-term analyst forecasts and buy the trend. Buy Facebook.
There is dramatic change in the television/media industry
NBC Universal/Comcast is changing ownership, and leaders
The company’s future success will have more to do with which battles the new President invests in than the history, or style of the past and future company President’s
Trying to “fix” the old business will waste resources and harm future prospects
Success will require developing a management approach that gives permission and resources to find a path to the future – a future that will be nothing like the past
NBC Universal is changing owners, from General Electric to Comcast. The former NBC President, Jeff Zucker, is being replaced by Steve Burke. Stylistically, it’s hard to imagine two fellas less alike. Mr. Burke, portraited in the New York Times “A Little Less Drama at NBC,” is a mild-mannered, quiet, self-effacing executive who almost attended divinity school. He avoids the limelight as much as he avoids being abrasive with colleagues. The outgoing Mr. Zucker is by all accounts brash,abrasive and quick to make decisions, as he was portraited in PaidContent.org “Was Jeff Zucker Really So Bad For NBC Universal?“
But it isn’t executive style that will determine whether Mr. Burke succeeds. Although NBCU just returned its highest profits since 2004, the television and media industries are in dramatic transition. Things aren’t like they used to be, and they will never be that way again. Growing revenues, and profits, at the combined NBCU/Comcast will require Mr. Burke quickly move both companies into a different kind of competitor focused on the changed market of 2015 – when media customers and suppliers will both be very different, with quite different demands.
Although Mr. Zucker is blasted for allowing NBC’s ratings to fall to last among the Big 3 networks (including CBS and ABC), it’s not at all clear why that wasn’t a smart move. What has grown NBC’s profits has been far removed from network programming. It was the acquisition of cable channels USA and Sci Fi (now Syfy) via Universal, and later Bravo, Oxygen and The Weather Channel that contributed greatly to NBC’s revenue and profit growth. These were also enhanced by building, from scratch, the #1 business-content television channel at CNBC, and the profitable, somewhat populist counter-channel to powerhouse conservative Fox News with MSNBC. Despite what the critics (who are largely interested in programs rather than profits) have said, it may have been an act of brilliance to avoid investing in the declining business that is prime time network programming.
What anyone thinks about the brouhaha over Jay Leno’s attempt at prime time, and Conan O’Brien’s stint leading The Today Show, is immaterial to revenue growth and profits. I’m a late boomer, so I remember when there were only 3 stations, and Johny Carson dominated the post-news late evening. But now I have college age sons that don’t even own televisions, have almost no idea who Jay Leno is (other than know of him as a car and motorcycle collector) and find all interview programs boring. “Network” TV is something they don’t quite understand – since their tolerance for watching entertainment on someone else’s pre-determined schedule is non-existent, and their patience for sitting through commercials of real-time programming is even lower. In other words, what happens in the “prime time” race, or with network celebrities, really doesn’t matter any more. And if NBCU can’t grow viewers it can’t grow ad revenues – so why should it invest in the prime time business? Just because it used to? Or started that way?
While lots of media “experts” are screaming for Mr. Burke to “fix” NBC, that business is already well into the hospice. Network share of entertainment interest is falling rapidly as boomers die, dozens of new offerings are micro-targeting across the channel spectrum, and we all turn to the internet for downloads, ignoring the TV for news or entertainment several additional hours each year. Meanwhile, people under the age of 30 aren’t even watching much television any more. They just pretend to watch while sitting with their parents as they text, check Facebook or watch a downloaded program on their iPhone.
“Network” programming is a business which is not going to grow again. Given how costs are increasing for traditional shows, and the over-explosion of inexpensive “reality” or “news” shows, and fragmentation and decline of advertising why would anyone ever expect this to be a profitable business? Being last in that 3 horse race is about as interesting as tracking share of market for printed phone directories. Probably the first to quit ist he big winner. So why should Mr. Burke spend much time, or money, fighting the last war? “Fixing” that outdated business model is fraught with high risk, and low return. Now that tthe artificial limits on news and entertainment programming have been removed (thanks to the internet) isn’t it time to let go of that historial artifact and focus on the future?
We know the future will be a mix of traditional TV (at least for a while, but don’t make any bets on it being too long), as well as targeted channels we now refer to as “cable” (even though that moniker is clearly losing meaning in a WiFi world.) Some of these will be free access, and some will be paid content. But all of that now must compete with downloads from Netfilx, Hulu (in which NBCU is a part owner) and YouTube (partially owned by Google.) People can create and post their own programs, and even do their own marketing. Instant availability, reviews and promotion will be couresy of Twitter and Facebook. This is a lot more complex than just ordering a new crime drama series, or situation comedy, and foisting it on a market with only a handful of channel options.
Viewership will range from 50″ panels, to 2″ hand-held screens – with a plethora of optional sizes in between. Program length will be infinitely variable from hours of non-stop viewing to constantly interrupted sound bites, no longer proscribed by 30 minute increments. Traditional programming, like local or national “news” will have little meaning, or value, in 2020 (or maybe 2015) when we will be receiving instant updates several times each day on our mobile device.
Mr. Zucker did a yeoman’s job of steering NBCU toward the future. He was smart enough to understand that only historians, locked-in media critics and old farts in Lay-Z-Boys care about what’s happening on The Tonight Show or the NBC News. His primary investments were oriented toward understanding the future, and getting NBCU’s toes into that rapidly churning water where future growth lies. But he’s leaving just as the stream is turning into a torrent. Even what he did could well be out of date within a few years – or months!
Now it is Mr. Burke’s turn. The very pleasant fellow has a daunting challenge. If he isn’t supposed to “double down” his bets in network TV, and traditional “cable,” what is he supposed to do? In a dramatically changing advertising world, where Google, Facebook and mobile device ads are now becoming the hot markets, what is the role for NBCU/Comcast? If we no longer need the physucal cable (say in 2020), won’t Comcast lose subscribers for cable access just like we’re seeing declines in subscribers for newspapers, DVD subscriptions, land-line telephones and land-line long distance? What is the role of a “programmer” like NBCU if viewers all have unlimited access to everything, anytime, anywhere, in any format? And what is the value of a content provider if self-published content streams onto the web by the terabyte daily? And is sorted by engines like Google and YouTube?
What Mr. Burke must do, regardless of style, is develop some scenarios about the future, and understand the much more complex playing field that is today’s media business. He has to find the holes in competition, and learn how to leverage what the “fringe” competitors are doing that drives all that usage, and viewership. And, most importantly, he has to keep experimenting – just as Mr. Zucker did. He has to create opportunities to test the newly developing markets, figure out who will buy, and what they will buy. He has to set up white space teams who have permission to be experimental, even if they attack the old businesses like “network” TV – even cannibalizing the historical viewr base as they transition toward future media markets. If he can create these teams, give them the right permission and resources, NBCU/Comcast could be the next great media company.
We’ll have to wait and see. Will the sirens of the past, looking backward, pull the company into gladiator battles with old foes trying to hold share in narrowing, declining markets? That path looks like a sure disaster. Despite being an early leader with satellite TV and MySpace that approach has not helped NewsCorp. But betting on the future is more a bet on the journey, and finding the right path, than betting on any particular destination. The future-based approach takes a lot of faith in company leadership, and the company management team. It will be interesting to see which way Mr. Burke goes.
This does not prepare the business for market shifts
Motorola was a leader with Razr, but was killed when competitors matched their features and the market shifted to smart phones
Netflix's leader is moving Netflix to capture the next big market (video downloads)
Reed Hastings is doing a great job, and should be emulated
Netflix is a great growth story, and a stock worth adding to your portfolio
"Reed Hastings: Leader of the Pack" is how Fortune magazine headlined its article making the Netflix CEO its BusinessPerson of the Year for 2010. At least part of Fortune's exuberance is tied to Netflix's dramatic valuation increase, up 200% in just the last year. Not bad for a stock called a "worthless piece of crap" in 2005 by a Wedbush Securities stock analyst. At the time, popular wisdom was that Blockbuster, WalMart and Amazon would drive Netflix into obscurity. One of these is now gone (Blockbuster) the other stalled (WalMart revenues unmoved in 2010) and the other well into digital delivery of books for its proprietary Kindle eReader.
But is this an honor, or a curse? It was 2004 when Ed Zander was given the same notice as the head of Motorola. After launching the Razr he was lauded as Motorola's stock jumped in price. But it didn't take long for the bloom to fall off that rose. Razr profits went negative as prices were cut to drive share increases, and a lack of new products drove Motorola into competitive obscurity. A joint venture with Apple to create Rokr gave Motorola no new sales, but opened Apple's eyes to the future of smartphone technology and paved the way for iPhone. Mr. Zander soon ran out of Chicago and back to Silicon Valley, unemployed, with his tale between his legs.
Netflix is a far different story from Motorola, and although its valuation is high looks like a company you should have in your portfolio.
Ed Zander simply took Motorola further out the cell phone curve that Motorola had once pioneered. He brought out the next version of something that had long been "core" to Motorola. It was easy for competitors to match the "features and functions" of Razr, and led to a price war. Mr. Zander failed because he did not recognize that launching smartphones would change the game, and while it would cannibalize existing cell phone sales it would pave the way for a much more profitable, and longer term greater growth, marketplace.
Looking at classic "S Curve" theory, Mr. Zander and Motorola kept pushing the wave of cell phones, but growth was plateauing as the technology was doing less to bring in new users (in the developed world):
Meanwhile, Research in Motion (RIM) was pioneering a new market for smartphones, which was growing at a faster clip. Apple, and later Google (with Android) added fuel to that market, causing it to explode. The "old" market for cell phones fell into a price war as the growth, and profits, moved to the newer technology and product sets:
The Motorola story is remarkably common. Companies develop leaders who understand one market, and have the skills to continue optimizing and exploiting that market. But these leaders rarely understand, prepare for and implement change created by a market shift. Inability to see these changes brought down Silicon Graphics and Sun Microsystems in 2010, and are pressuring Microsoft today as users are rapidly moving from laptops to mobile devices and cloud computing. It explains how Sony lost the top spot in music, which it dominated as a CD recording company and consumer electronics giant with Walkman, to Apple when the market moved people from physical CDs to MP3 files and Apple's iPod.
Which brings us back to what makes Netflix a great company, and Mr. Hastings a remarkable leader. Netflix pioneered the "ship to your home" DVD rental business. This helped eliminate the need for brick-and-mortar stores (along with other market trends such as the very inexpensive "Red Box" video kiosk and low-cost purchase options from the web.) Market shifts doomed Blockbuster, which remained locked-in to its traditional retail model, made obsolete by competitors that were cheaper and easier with which to do business.
But Netflix did not remain fixated on competing for DVD rentals and sales – on "protecting its core" business. Looking into the future, the organization could see that digital movie rentals are destined to be dramatically greater than physical DVDs. Although Hulu was a small competitor, and YouTube could be scoffed at as a Gen Y plaything, Netflix studied these "fringe" competitors and developed a superb solution that was the best of all worlds. Without abandoning its traditional business, Netflix calmly moved forward with its digital download business — which is cheaper than the traditional business and will not only cannibalize historical sales but make the traditional business completely obsolete!
Although text books talk about "jumping the curve" from one product line to another, it rarely happens. Devotion to the core business, and managing the processes which once led to success, keeps few companies from making the move. When it happens, like when IBM moved from mainframes to services, or Apple's more recent shift from Mac-centric to iPod/iPhone/iPad, we are fascinated. Or Google's move from search/ad placement company to software supplier. While any company can do it, few do. So it's no wonder that MediaPost.com headlines the Netflix transition story "Netflix Streams Its Way to Success."
Is Netflix worth its premium? Was Apple worth its premium earlier this decade? Was Google worth its premium during the first 3 years after its Initial Public Offering? Most investors fear the high valuations, and shy away. Reality is that when a company pioneers a growth business, the value is far higher than analysts estimate. Today, many traditionalists would say to stay with Comcast and set-top TV box makers like TiVo. But Comcast is trying to buy NBC in order to move beyond its shrinking subscriber base, and "TiVo Widens Loss, Misses Street" is the Reuters' headline. Both are clearly fighting the problems of "technology A" (above.)
What we've long accepted as the traditional modes of delivering entertainment are well into the plateau, while Netflix is taking the lead with "technology B." Buying into the traditionalists story is, well, like buying General Motors. Hard to see any growth there, only an ongoing, slow demise.
On the other hand, we know that increasingly young people are abandoning traditional programing for 100% entertainment selection by download. Modern televisions are computer monitors, capable of immediately viewing downloaded movies from a tablet or USB drive – and soon a built-in wifi connection. The growth of movie (and other video) watching is going to keep exploding – just as the volume of videos on YouTube has exploded. But it will be via new distribution. And nobody today appears close to having the future scenarios, delivery capability and solutions of Netflix. 24×7 Wall Street says Netflix will be one of "The Next 7 American Monopolies." The last time somebody used that kind of language was talking about Microsoft in the 1980s! So, what do you think that makes Netflix worth in 2012, or 2015?
Netflix is a great story. And likely a great investment as it takes on the market leadership for entertainment distribution. But the bigger story is how this could be applied to your company. Don't fear revenue cannibalization, or market shift. Instead, learn from, and behave like, Mr. Hastings. Develop scenarios of the future to which you can lead your company. Study fringe competitors for ways to offer new solutions. Be proactive about delivering what the market wants, and as the shift leader you can be remarkably well positioned to capture extremely high value.
Demand doesn’t decline, it just changes form – and usually grows!
We want more entertainment and communcation – but not the old fashioned way
Losers keep trying to sell what they have, and know
Winners supply solutions aligned with market needs regardless of old competencies
How would you react if your customers said your product really wasn’t something they needed? Would you work hard to convince them they are wrong? Maybe try to add some features hoping it would regain their attention? Or would you start looking for what they really do need/want?
Pew Research Center, at PewSocialTrends.org headlines “The Fading Glory of the Television and Telephone” describing how quickly people are walking away from what were very recently considered absolute necessities. As a “boomer” and member of the “TV generation” I was surprised to read that only 42% of Americans now think a television is a necessity! This has been a rapid, dramatic decline from 52% last year and 64% in 2006! 1 in 5 Americans have changed their point of view about television as a necessity in just 4 years! And TV as a necessity is in an accelerating decline! I can remember when my generation went from 1 TV in the house to 1 in every room! This trend does not bode well for broadcast television networks, affiliates, advertisers, traditional production companies, television newscasters, manufacturers of TV sets and TV equipment – or many other businesses linked to TV as we know it.
Simultaneously, demand for a land line telephone has declined. Again, my generation remembers the days with one phone in the house – in some areas on a shared “party” line where multiple families shared a single phone line. The phone was in a central area so it could be shared. In the 1970s we saw things change as telephones were added to every room! Now, according to Pew, folks who consider a land-line phone a necessity has declined to only 62%, a 10% decline from just last year (68 to 62) and barely 3 in 5 Americans! Wow!
Of course, for every decline there’s a winner. 47% see the cell phone as a necessity – that’s 5 percentage points greater than the TV score, indicating mobile phones are seen as more of a necessity than television by the general population. And 34% see high speed internet as a necessity – only 9 percentage points fewer than the TV number – and more than half who see the need for a land-line phone.
Demand for entertainment and communication have not declined! If you are in television or land lines you might think so. Rather, that demand is accelerating. But it is just shifting to a different solution. Instead of the old technology, and supplier industry, people are changing to something new. First with video cassetttes, then digital video recorders (DVRs), then the plethora of available cable channels and on-demand TV, and now with on-line entertainment from YouTube to Hulu people have been changing the way they consume entertainment. Demand has gone up, but not from traditional consumption of TV, especially as viewing has switched from the TV to the computer monitor – or the hand held device.
Clearly, access to the internet (facebook, twitter, et.al.), texting and anytime/anywhere calling has increased both our access and use of one-way (such as reading web pages) and two way communication. Communication is continuing to grow, but it will be in a different way. No longer do we need a “dial tone” to communicate – and in most instances people are finding a preference to asynchronous rather than real-time communication.
These are the kind of industry transitions that threaten so many businesses. What Clayton Christensen calls “The Innovator’s Dilemma” as new solutions increase demand while making old solutions obsolete. The tendency is for the supplier of traditional solutions to say “my market is in decline.” But really, the market is growing! Just like Kodak said the demand for film was declining, when demand for photography – now in digital format – was (and is) escalating! When market shifts happen, incumbents have to resist the temptation to try “keeping” the “old customers” by undertaking Defend & Extend efforts – like adding features and functionality, while cutting price. This inevitably leads to disaster! Instead, they have to understand the shift is only going to accelerate, and develop an approach to entering the new market.
As this research comes out, Apple launched a series of new products to augment its set-top box and iPod/iTouch product lines. (San Francisco Chronicle, SFGate.com “Steve JobsUnveils Upgraded Apple TV, New iPods“) by doing so Apple recognizes that people still want entertainment – but they are a whole lot less likely to accept sitting in front of a communal television, serially deploying programming at them. They want their entertainment to be on-demand, and personalized. Why should we all watch the same thing? And why watch what some programmer at CBS, HBO or TMC wants to deliver?
Apple is bringing out products that align with the direction the market is now heading. Ping is designed to help people share program information and identify the entertainment you would like to receive. iTunes is upgrading to bring you in bite-size chunks exactly the entertainment you want, as you want it, aurally or visually. These are products which will grow because they are aligned with what the market says it wants — even more entertainment. Those who are hidebound to the old supply mechanism will simply find themselves fighting for declining revenue as demand shifts – and grows – in the new solutions
Most people misunderstand evolution. They think that changes happen slowly. Imagine an animal with a 12 inch tail. Every generation or so it's imagined that the tail gets a little shorter, then a little shorter, then a little shorter until after some very long time it simply disappears. But that's not at all how evolution works.
Instead, most of the animals have a long tail. Some small number of animals are born each year with very short or no tails. For the most part, this matters little. If the tail is valuable – say for warding off parasites – those without tails may suffer and die off quickly. And that's the way things are, largely unchanged, for decades. But then, something happens in the environment. Perhaps the emergence of a predator able to catch these animals by the tail and hold them in place to let the pack kill it. Within one generation almost all of the tailed animals are killed by the predator, and only the no-tail animals survive. Some of these have developed an immunity to the parasite. So then this "evolved" animal becomes dominant. No-tail animals replace the tailed animals. That's how evolution really works. It happens fast, with drastic change (and this time of change is referred to as a punctuated equilibrium.)
Once we know how evolution really works, we can start to better understand business competition. A Success Formula works for a really long time, until something changes in the marketplace. Suddenly, the old Success Formula has far poorer results. And a replacement takes over.
Consider newspapers. They played a very important role in society for at least 100 years (maybe 200 or 300 hundred years.) But with the advent of the internet, their role is no longer viable. Printing and delivering a daily paper is too expensive for the value it can provide. So think of newspapers as the long-tail animal. And digital news delivery is a short-tail animal. The internet is the attack pack that kills the newspapers. And within short order, the world is a different place – in a new equilibrium. And everything about the surrounding environment is shifted. Regardless of how much you enjoyed newspapers, they simply cannot compete and new competitors are a better fit in the new marketplace.
Now consider Netflix. Netflix played a major influence in obsoleting traditional movie rental shops – like Blockbuster. Netflix was a winner. But markets – new attack packs – keep emerging. And the latest shift are products like the Kindle and Apple Tablet (as well as other tablet PCs.) These products make Hulu and YouTube a lot more viable. Suddenly, Netflix is the long-tail animal, and the short-tail animals are doing relatively better.
According to The Wall Street Journal, in "Apple Sees New Money in Old Media" Apple is close to a deal with several newspapers to deliver their content to readers via their internet device. They also are negotiating rights to deliver movies and television (small format) entertainment. Simultaneously, Amazon keeps marching forward as MediaPost.com reports in "Take That Apple: Kindle Introduces Apps." We see that there are a LOT of potential different versions of the short-tail animal. Tablets, phones, netbooks, etc. Which will be the biggest winners? Not clear. But what is clear is that the old long-tail competitors (newspapers, print magazines, network television, traditional PCs) are not going to flourish as they once did. The market has permanently shifted. Those competitors are in the back end of their lifecycle.
Simultaneously, this market shift causes ripple effects through the environment. The market shift affects ALL players – not just the one most visibly being attacked. So, as SiliconBeat.com reports in "Looks Like Netflix is Dead, Again" this change suddenly imperils Netflix which has mostly counted on postal delivery rather than digital. And it provides a boost to short-tail players like Hulu and YouTube which could see much larger revenue given their digital-based delivery models.
And this affects you. What do you print, or say, that could be better handled on a mobile device? Could you deliver user instructions via an iPhone or Kindle app? If so, why aren't you doing it? Are you still working on traditional web pages, with embedded text in graphics that can't be seen by a mobile phone, when most people are likely to find you first on their mobile device? Are you busy working on your web site, while ignoring having a Linked-in or Facebook account? Are you advertising on television, or in newspapers, and ignoring Facebook ads – or YouTube links? Do you have a YouTube channel with short clips to instruct users on your product, or how to install an upgrade, or even why to buy? Are you still competing with a long tail, while the pack is rapidly killing off the long-tail species?
Market shifts are happening fast today. If you don't react, you just may find yourself deep into the pack with declining results. Or you can shift with the market to keep your business competitive.
