What Consumers Don't Like About Advertising

Going through some old material I came across the findings of a Forrester study published last year on consumer feelings about advertising.

The take-aways from the study are profound and should be burned into the brains of everyone working in advertising supported music:

Consumer backlash against advertising is driven by three factors:

• An excess of ads
• The disruptive nature of ads
• The irrelevance of ads

I will be publishing periodically during the next couple of weeks.

In the meantime I wish everyone Happy Holidays.

So, Ad-Supported Mobile Music Won't Happen?

One gets a sly pleasure when a person who doubted you later has to eat their words.

I got this pleasure yesterday. The situation is relevant to this blog so I thought I would share it.

Steve Smith writes weekly on mobile trends for the Online Media Daily Commentary column.

Yesterday, Steve wrote a column entitled 10 Things You Need to Know About Mobile Marketing. Here is the 7th thing Steve thinks you need to know:

7. Pricey, over-air mobile music did not pan out for carriers in 2007, but no one wants to let go of the dream of using handsets to sell and promote music beyond a flattening ringtone market. In 2008, this is the platform that will pull the record industry into the inevitable: ad-supported music downloads. A recent study found two-thirds of consumers prefer that model for phones, and carriers and labels will have no choice but to follow.

Last year Steve wrote a column about my company (our name at that time was SixtySeven Kilohertz). In that column Steve said ad-supported mobile downloads would never happen.

Actually, this is what Steve said: "My guess is that, like free concerts and getting closer to God through sheep farming and peyote popping, ad-sponsored mobile music will be a path not taken."

Steve is a good guy, entitled to change his mind. And its nice when someone admits they are wrong and you are right.

imeem Confused About TSL

According to neurologist Oliver Sacks, music can evoke profound visual images. I don't think, however, that it can evoke the iPod ad shown on the imeem home page.

This is the crux of imeem's advertising problem.

Read this selection from a recent article on imeem:

Activity Is Key

Users of Imeem can upload their favorite music, video and photos, search for and stream full-length audio and videos on demand, and find new content through social discovery features. Unsurprisingly, Imeem's typical demographic is media lovers aged 24 and younger. What may become a boon for Imeem is the amount of time it's able to keep its members on its site.

"The comScore data we've seen indicates that people are spending more time on Imeem than other social networks. We also expect that time will increase now that we are the only social networking service that offers free streaming of the entire digital catalog from all four major labels," Steve Jang, Imeem CMO and head of business development, told the E-Commerce Times.

"Imeem combines premium music and video content from all four major music companies and thousands of indies [independent labels] within a social networking experience, which provides a very entertaining and expressive user experience that keeps people on the site," he added.

If Imeem users make a habit out of staying logged on and listening to playlists, time spent online with advertising may also rise, implying that Imeem's entire premise and business model may have a solid set of legs.

The last sentence of this passage sums up the confusion: because imeem provides audio content, time spent on the site does not increase time spent with visual advertising.

Most people do something else while listening to music. Here is multitasking data for teenagers:

So, when people listen to streaming music they are most likely not staying on the streaming site. Since the site only provides visual ads, imeem and its advertisers are fooling themselves if they equate time spent on the site with time spent exposed to advertising.

The only solution to this problem is for imeem to integrate audio ads into the music stream.

Tuesday Tantalizing Tidbits

1 million tracks on Spiralfrog - Last week the company announced that there are now 1 million tracks available on the Spiralfrog service. Coupled with the recent news that imeem has licensed all of the majors, this is evidence that record companies are getting comfortable with advertising supported music.

Best ad songs - Check out this great piece from Advertising Age (also see this previous post). This is their year-end list of the best songs used in television commercials. Watching the clips drives home how music can amplify the emotional power of advertising. Implemented properly (dynamic insertion), advertising supported downloaded music harnesses this power better than any other ad medium.

This Old Navy commercial is my favorite:

Intel as hip-hop impresario - Intel commissioned Sean Kingston to produce a track entitled Gotta Move Faster, which is: "...all about moving faster and staying connected. And its all about using amazing technology to stay at the top of the game."

The track doesn't mention Intel but it does have a number of seemingly non-sequitur references to computers. Product placement is a form of advertising supported music, but apparently this track will not be free. Bad move.

Audio Whiplash

This is a great post by David Jennings. In a generally favorable review of We7, David notes the piercing incongruity between an ad and the track that it is grafted to. David's brilliant term for this is audio whiplash.

Here is the example of audio whiplash that David gives:

As you can hear, the We7 ad is like a screaming commercial you would hear on the radio. Radio spots need to scream because the listener is usually not paying attention.

Commercial spots on downloaded digital music don't need to scream because the ad goes right into the listener's brain through his earphones.

Ad formats on ad-supported downloaded digital music are really important. I am cutting We7 a break because they are just starting. I think they will learn this important lesson.

The Era of Free Music is Coming

Last year Jupiter Analyst Mark Mulligan predicted that 2007 would be the year of free music. Mark just put up a post with a tepid prediction that 2008 will now be the year of free music.

Mark cites the following as the developments pointing to free music in 2008:

But there is a lot of positive activity:
• Spiral Frog’s September launch.
• Pandora and Ruckuss both continue to build
• Last.FM was bought by CBS in may for a whopping $280 million, has deals in place with Warner and SonyBMG and has gone from strength to strength.
• The ever entrepreneurial Peter Gabriel invested in UK start up WE7
• As of Wednesday MOG signed a deal with Rhapsody making music available throughout the network, with 25 songs a week for free and a subscription fee for fully integrated unlimited access
• But perhaps the least heralded yet most significant development is Imeem. The social network music service has just signed a deal with Universal for streaming its catalogue across the service, which means that Imeem now has deals with all of the majors. The service enables people to upload tracks, create and share playlists and stream music audio and video. In short it enables users to immerse themselves in music as part of their social networking behaviour. But most importantly, as with Last.FM and MOG, it is trying to do something different with the web and music rather than try to re-invent the offline world online.

Yes these are positive developments but the most powerful developments pushing advertising supported downloaded music forward are:

1. The growing demand by consumers for free content. For example, Limewire is now installed on 36% of computers worldwide.
2. The continued rapid decline in CD sales, which is forcing the recording industry to open their collective mind to what consumers want.
   

The only sustainable business model for free music is advertising support. I don't think advertising supported music will break out in 2008 because the technology for dynamic insertion is not yet in place.

I'll end this post with the same thought I ended a previous post on this topic:

We can predict with certainty that ad-supported music will happen, we just can't predict when. But when it does start, it will usher in, not the year of the free, but the decades of the free.

Advertising Will Find a Way

I concluded my post on Tuesday with an item about McDonald's advertising on report cards, which I saw as evidence that advertising is too powerful a business need to be restrained, thus- advertising will find a way.

I want to explore another example of this power and make some analogies to advertising supported downloaded music. The example for today is TiVo.

This quote from an LA Times article sets the scene when TiVo was introduced:

When it debuted in 1999, TiVo revolutionized the TV experience by wresting control of screen time from advertisers, allowing viewers to record shows and skip commercials. TiVo's slogan said it all: "TV your way.

Fast-forward eight years to the end of 2007 and we have the situation described in this New York Times article:

That move — and the support from high-profile friends like NBC — is particularly unusual given that TiVo started a full-fledged panic among networks and their advertisers when it introduced the technology that allows viewers to fast-forward past commercials.

Now, TiVo is helping networks and advertisers overcome that technology by offering interactive banner ads that make sponsors’ names visible as their ads are being fast-forwarded. And its ability to keep second-by-second ratings on the commercials that, after all, some viewers do still watch, also helps.

The TiVo lesson is this: platforms featuring good conditions for advertising cannot be kept free of advertising. The business need for advertising is too great.

Music is a fertile advertising platform. FM radio has proven this. Downloaded digital music is an even better advertising platform.

When people say advertising supported downloaded music won't happen, point to the TiVo case and ask them why downloaded music is different.

Tuesday Tantalizing Tidbits

Pepsi-Amazonmp3 Giveaway - According to a number of sources, starting on Super Bowl Sunday Pepsi will give away up to 1 billion tracks through Amazonmp3. Pepsi sponsored a similar promotion with iTunes in 2004, which touted giving away up to 100 million tracks but, ultimately, only about 5 million tracks were redeemed.

Still, as I have said before, this type of sales promotion is an important sub-set of advertising supported downloaded music. I am surprised that Pepsi isn't going with a We7 type promo on the redeemed tracks. I think they are missing a lot of branding value. I believe that as this type of promotion matures, however, advertisers will demand more association between their brand and the music - and the technology exists to give it to them.

Xbox Advertising on We7 - Speaking of We7, the company has announced that Xbox will be advertising with them during the holiday season. I think We7 is the best of the launched advertising supported downloaded music services and this is great news for the industry.

imeem signs Universal- imeem has licensed the catalog of Universal and now has agreements with all four of the major record companies. This is a big step but I think it comes at too high a price. According to the Financial Times, imeem paid $20 million upfront to Universal. I think any substantial payment is a huge mistake. imeem should have used this money to fund its growth and will regret paying it. Some of my enthusiasm for imeem has been dashed.

Advertising Will Find a Way - Nothing to do with advertising supported music, but a testament to the power of advertising.

It was the Jeff Goldblum character, Dr. Ian Malcolm, in Jurassic Park who said: "Nature always finds a way."

Well, I think advertising also always finds a way. While food advertising on children's television draws criticism, McDonald's advertising budget will not be contained:

Nokia's Comes With Music Service

Will Nokia preside at the marriage of the cellphone and digital music?

The week before last I wrote about the impending marriage between mobile and music. I then fell into a pneumonia induced feverish state and imagined that Nokia had announced an all-you-can-eat free music download service.

Well, as you know, this announcement was real. arsTechnica describes the service this way:

Here's how Comes With Music will work. Starting sometime in the second half of 2008, customers who purchase a qualifying phone will have unlimited access for a year to Universal's entire artist catalog, and Nokia is currently in talks to bring the other major labels on board as well. Tracks can be downloaded via Nokia's phones or PCs, and the DRMed tracks will remain playable even after the one-year subscription period finishes. Here's the kicker though: In order to renew the subscription and regain access to new music for another year, Nokia says consumers can purchase a new device. Burning a CD of any track(s) will require an upgrade purchase for each track. Don't worry, the bounce just fell out of our step too.

Regarding the way subscription charges will be accounted for, though, Nokia says the cost of a Comes With Music subscription will be included in the price of the device. It remains to be seen whether eligible phones will receive a marginal bump in price or if Nokia will eat the cost itself.

So the service will be free to the consumer for the first year, after which he will have to subscribe, or perhaps, buy a new phone to continue the service. The speculation in the blogoshpere is that the wholesale cost of this service is $5/month and is essentially the adoption of Universal's Total Music proposal.

How does Nokia expect to make money from Comes With Music? I can come up with only two possibilities:

• Sell more phones: A cellphone that comes with all the music you want for a year has a strong competitive advantage. I think many people would buy such a phone over other phones just for this feature. My question is; can Nokia afford to subsidize the phone at $60 or so/year and still make its desired profit? I doubt it. What if the carriers helped? Don't know. There are many unanswered questions in this area but my gut tells me that the economics don't work.

• Sell music subscriptions: In many ways the Comes With Music plan is similar to installing XM or Sirius satellite radio in new cars. The new car with XM or Sirius usually comes with a trial subscription to the service. Apparently, the rate for initial satellite radio conversions from a trial to paid subscription is around 50%. If Comes With Music had a conversion rate like that I would declare it a smashing success. Unfortunately, I think the history of digital music subscription services points to a far lower conversion rate.

My bottom line view is that Comes With Music will not succeed as it is currently configured but I really like it.

Why do I like it? Because with a simple tweak the service can become ad-supported.

Comes With Music may be an important intermediate step to the happy union of ad-supported downloaded music on cellphones.

From My Sickbed

Sorry I haven't posted in a couple of days.

I write from snowy Chicago and the winters seem to have finally caught up with me. After all these years my hearty Midwestern stock has succumbed to pneumonia.

I hope to be writing again on Monday.