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Digital Outlook
THE ENGAUGE 2011

Digital Outlook
THE ENGAUGE 2011
© 2011 Engauge. All rights reserved.

01
Create
creativity in the era of co-creation | 06
shaping the conversation | 09
02
Innovate
mobile | 26
location-based marketing | 32
storytelling | 11 loyalty and action | 40
start-up: figment | 14 start-up: placepunch | 48
courting the crowd: best practices | 16 gaming | 52
the power of play | 18 interactive tv | 62
the content play | 20 start-up: getglue | 70
augmented reality | 76
03
Relate
a nation of narcissists | 82
04conclusion | 118
foundations of digital success | 120
social coding | 86 photography credits | 123
metrics and analytics | 92
best practices | 100
start-up: crimson hexagon | 102
consumer trust | 104
start-up: blue cava | 114

Foreword
The merger of creativity and technology is no longer an inspiring this cultural shift in social norms comes improved metrics and social
idea, but the new imperative. As social media becomes the dominant intelligence analytics, providing compelling evidence of what many of
channel of consumer engagement, brands now connect personally us have known intuitively: digital marketing can be a powerful driver
with people. And consumers reach out to companies. Daily. of brand perception, consumer motivation and, ultimately, the bottom
line for companies.
There’s a new relationship to navigate.
Fortunately, effective strategies and creative digital tools for driving
As marketing strategies rapidly mature along with technology, so growth are now available to every marketer. You—right now—can
will the two-way conversations between brands and people. Today’s help lead your company’s marketing efforts as a source of
consumers determine when and where they connect with brands, and encouragement and empowerment. That’s the essential message of
they expect brands to be available at all times, present in all places our 2011 Digital Outlook. Transformation isn’t a passive proposition.
and accessible through every channel. At the same time, they’re also It requires a focus on doing. The actions of strategic digital marketing
sharing incredible details about their lives, tastes and desires. With are clear: Create. Innovate. Relate.

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READ RICK’S BLOG:
RICKMILENTHAL.COM
CREATE:
Develop transformational ideas that connect brands and people.
INNOVATE:
Move beyond the ordinary and do what’s never been done before.
RELATE:
Create real meaning in the lives of consumers and growth for your brand.
Will you join us?
Rick Milenthal, CEO

Develop transformational
ideas that connect brands
and people.
01
SECTION
Create

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01
SECTION
Create
CreativityCo-Creation
in the Era of
The mandate is a seemingly impossible one: The question today is: how do you
Reconcile the many disparate voices—shouts keep your brand from becoming an
How to Build a from fans and friends, cranks and creatives—
into something unified and intelligible,
exquisite corpse?
Coherent Brand something of real value to brand perception
and equity. It’s a directive born of the singular
Brand narratives are increasingly complex
and composed of many voices. Smart
Narrative brand lesson of social media: Marketing is
made by all, not by one. Brand messages, now
brands accept this new reality. Creatives
can’t just sit down at their desks and dictate.
co-scripted by the masses, can’t be controlled More than ever before, brands must plug
like before. So what are the odds that they’re directly into the collective conversation
competitively positioned and strategically and imagination to discover what grabs
relevant? Or even coherent? and goes viral, what sways and makes us
swoon, what will sit on shelves and what will
Indulge the comparison. The collaborative sell. This is not a time to despair, though.
writing game “exquisite corpse” was played This is not some doomsday denouement
70%
by Surrealist Parisian poets of the 1920s. It brand marketers should fear. Rather, this
required each player to successively contribute populist movement toward co-creation, co-
a random word and create a sentence. The conversation and even co-invention reflects
Fully 70% of executives
game earned its memorable name from one an incredible resource of creativity and
surveyed said their companies
reaped value from online of the first mystifying lines: “The exquisite energy for brands. Embraced strategically,
communities, but only a corpse will drink the new wine.” If that sounds the bottom-up contributions of the masses
select few are achieving the like some of the comments on your brand’s are ushering in a new era of creativity.
maximum benefit. Facebook page...

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Embraced strategically, the
bottom-up contributions of the
masses are ushering in a new
era of creativity.
The Fan-based Business Model
Local Motors is a global network of over
5,000 designers intent on building their own
cars. Threadless is a crowdsourcing apparel
merchandiser whose online community
chooses which user-generated T-shirt designs
are included in its fast-evolving fashion line.
The business model of this new world is open
source, fan-based and bolstered by grassroots
support that can spread across the web like
wildfire. Yet the potential for meaningful co-
10K
creation is hardly limited to DIY disrupters
and up-and-coming start-ups. Leading
customer-centric companies from Starbucks
On a typical day, the
to Chick-fil-A have proven that business
biggest brands each
value—better service, better products, better spark 10,000 or more
marketing—can be collaboratively created comments on social
with direct cooperation from and conversation networks like Twitter,
with consumers. They have succeeded in Facebook and YouTube.
creating, fostering and continually improving
online communities that deepen engagement
and then pipe external insights to executives,
designers and decision-makers.

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Shaping
the Conversation
Focusing Broad Insights to Create Brand Equity
Marketing messages don’t write themselves, that solicits the top solution. A highly
not even with a broad array of social inputs. qualified field of contributors competed for
Innovative products don’t simply materialize the million-dollar Netflix prize, awarded to
out of the online either. And new services the team that most improved the algorithm
don’t automatically launch just because used to recommend movies to customers
somebody posted a terrific suggestion on based on their viewing preferences. Though
your website. Heed the black holes: Among costly, the online challenge significantly
6%
the numerous online suggestion systems strengthened Netflix’s competitive edge.
rolled out in recent years, many imploded the
moment the marketing department realized It’s an elegant model, a simple and
Companies committed less it lacked the resources to review—much less powerful prism. Take a wide spectrum of
than 6% of marketing spend the desire to respond to—a daily deluge of public inputs (consumers and active users),
to social media in 2010, even comments from consumers. refine the focus (solicit ideas on a specific
though American consumers issue) and then sort suggestions with an
now spend about as much One solution was pioneered by Netflix: Ask efficient (algorithmic or vote-ranked) filter to
time on the Internet as they a narrow question about a specific problem, ultimately identify the ideas with the highest
do watching TV. then create a contest with cash incentives concentrated value.

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Learning from Missteps Finding the Right Connection Within Online Communities
at Starbucks
Virtual labs, beta testing, custom modding, Indeed, fewer than half (42%) of financial
Over 60,000 suggestions for new products brand ambassadors—choosing the right co- services firms that maintain a presence on
have been submitted to the My Starbucks creation approach and platform depends on Twitter and Facebook reply to users’ posts
Idea site since 2008, but many are based on the problem you need to solve. New product and comments, according to Forrester
individual tastes and preferences. (A recent development? Charles Schwab learned early Research. Yet nearly two-thirds of all financial
example: “Offer a skinny pumpkin spice on to listen to online communities and, in services firms maintain a presence on such
latte!”) Accordingly, the site is awash with the process, discovered that underserved sites. So why do the rest of them bother?
ideas that are strategically irrelevant for the Gen-X investors needed a new series of Why do companies invite consumers if
company. high-yield checking accounts. What about they’re not going to show up themselves?
customer experience? Comcast and AT&T To succeed, marketers must choose the
So in its 2010 betacup challenge, Starbucks trawl for insights far beyond the corporate right channels, ask the right questions, learn
changed its tactics. Borrowing from the firewall, deploying social media teams for to listen perceptively and provide frequent
Netflix model, they focused their fans customer care that monitor chatter on social feedback. This keeps brand constituents
on a problem that had proven internally networks like Twitter, Facebook and YouTube active, satisfied and engaged. None of
vexing—how to reduce environmental and proactively contact (and try to help) the this is necessarily easy—not the first time
waste from paper cups, a high-priority goal haters and complainers. or the second or the third—and, given the
for Starbucks’ corporate responsibility. The rapid rate of technological change, even
$20,000 contest drew 430 submissions, 5,000 The takeaway: Communities don’t run the top-performing social campaigns must
ratings and 13,000 comments. The award- on autopilot. Even though fully 70% of continually evolve.
winner, Karma Cup, recommended giving a executives surveyed by McKinsey said
42%
free cup of coffee to every tenth customer their companies reaped value from online
who carries their own reusable mug. In this communities, only a select few are achieving
case, the positive PR from an estimated 10 the maximum benefit. Social media
million media impressions may actually be marketing isn’t some automatic, hands-free, Only 42% of financial services
worth more than the award-winning idea, but self-propelled phenomenon. It’s a discipline. firms that maintain a presence
both are valid components of added value. It requires resources and commitment. on Twitter and Facebook reply
to users’ posts and comments.

Storytelling
Radically Revising the Brand Narrative
Brands can’t keep pitching the same kinds stage, they’ve got lines of their own and
of top-down narratives. Stories, and the way they demand to be heard. They have, in
we tell them, have changed dramatically. fact, the final word. It’s a shift in power
No, thankfully, it’s not Surrealist poetry. that instead of diminishing the impact
It’s more like a classic Greek play with a of creative advertising makes it all the
chorus of followers on Facebook and Twitter more relevant and critical to brand and
providing commentary and feedback on the marketing success.
main protagonist—the brand. The challenge
facing marketing departments and agencies Online communities and co-creation
is deciding whether it’ll be a tragedy or a can produce a broad array of benefits—
comedy. Though American consumers now deeper understanding of customer
spend about as much time on the Internet needs, desires and demographics; better
as they do watching TV—and, when online, messaging and brand engagement; new
they spend twice as much time on social ideas for services and innovative products;
networking sites than any other activity— novel fixes to persistent problems; and
companies committed less than 6% of fresh content that is culturally relevant
marketing spend to social media in 2010. and continually evolving. Done right,
co-creation can benefit both consumers
Bottom line, in today’s ad campaigns, and and producers.
in today’s culture, the brand is no longer
the only hero. The audience has become
the cast and chorus—they’ve climbed on

Q
POINT OF VIEW
What is the role of creativity for brands today?
Welcome to the democratization of creativity. What do I mean?
Well, let’s go back—starting a few centuries to a few years ago.
Creativity was, by its nature, elitist, owned by few and awed by many.
In order to create, you needed tools, a location and resources, not
merely talent. The prohibitive costs and time commitments relegated
creativity to those with the capacity to pursue it—the funded painters
vibrancy of reality. It chose dialogue over monologue. The opinion
of a teenager from Antioch, Wisconsin became as valuable as the
postulates of a tenured Harvard professor. Anything was possible, and
the unexpected became the expectation.
Emotion hijacked logic. It was no longer necessary for logic paths
and poets, the industry-backed musicians and filmmakers. to move rigidly from awareness to persuasion. No, it was marketing
anarchy where the targeted audience usurped brand positioning right
It was no different in business. Ad agencies possessed all the time, from the hands of unsuspecting marketers.
tools and talent to create. Consumers sat back passively and watched
or listened. Because agencies, bankrolled by marketers, could afford Now, what consumers say—in blogs and microblogs, on social
to create the message, we had control. We owned the influence; we networks, in email chains, on socialized sites and video sharing
commanded the mediums. We held all the creative cards. platforms—is the voice of your brand. And it can change in a
nanosecond without rhyme or reason. Like it or not, this is the new
Then technology came along and reshuffled the deck completely. world of creative influence.
In the hands of the many, the voice of creativity changed. Its
tone became collaborative. It eschewed production polish for the Some brands will resist, some will reluctantly accede. But those brands

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Mike Bednar chief creative officer
READ MIKE’S BLOG:
ENGAUGECREATIVITY.COM
that not only embrace but also join their new creators will triumph. Here’s
the secret to why: Brand positioning, by its very nature, is emotional. Its
foundations are, and have always been, built on constantly shifting sands.
Perception is reality. And consumers have always held the ultimate control—
they’ve either believed or they haven’t. They’ve created images of brands
in their own minds. Now they simply have the ability to create the outward-
facing image. Consumers accept the creative messages of other consumers
more readily than from marketers.
So give them the tools to create, unleash experiences and invite them in. Let
them influence your brand’s direction, not the other way around. Trust them
to know as much about themselves as your precious research does. Allow
them to disagree, to argue—at least they’re talking. Create two-way content;
share everything you have—without hesitation.
Their creativity is limitless and infinitely effective. When it’s built around your
brand, it becomes the most powerful marketing tool any brand could possess.

Start-up to Watch
The Social Network Teens
for Literary
Can Figment redefine the book market?
Within five days of going live in December, media-sharing sites. More than a million
Figment.com drew 10,000 registered users. titles have been published, some even
The social network for the literary teen catapulted to the top ranks of Japanese
allows for sharing, reading and reviewing of literary bestsellers. “The first literary genre
original works across all genres, from fiction to emerge from the cellular age,” is how
to memoir. Figment co-founder Dana Goodyear dubbed
the movement.
Founded by two veterans of The New
Yorker, Figment is an attempt to translate Before launching the site, Ms. Goodyear
A conversation with CEO and for American audiences the Japanese and Jacob Lewis, the site’s co-founder, spent
Co-founder Jacob Lewis. pop-culture phenomenon of the cell phone several months visiting schools, libraries and
novel—a breakout category of romance literary organizations across the country to
www.figment.com and fantasy fiction written by young women speak with teenagers, recruiting them to
on their mobiles and initially appearing on participate in a beta version.

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Q: You attracted 10,000 members in the first five days. and shared. It’s not being done with the full participation of
What’s the appeal? readers and authors together. We think publishers will be able
to discover heuristic information about how people are reading,
A: It’s an inviting space as a reader, not just as a writer. There are which could help them make decisions about what to publish
books on the shelf that you might want to read—a story by in the future. These really are the future readers and they’re a
your friend or a novel that just came out from a major publisher. group that publishers have never had access to. Publishing has
Putting those in the same place is important, because kids today a very bad hit rate. They lose out on 70% of their books. I think
don’t draw a line between their own creativity and the stuff they we could have an impact on their performance.
find in a bookstore.
Q: What about advertising?
Q: Do teens have fundamentally different expectations about
reading and writing? A: Right now, we offer an integrated marketing platform for
publishers to market individual titles to users of the site. There
A: When I was 17, I wrote a letter to Philip Roth. He didn’t write are no banner ads, but we can facilitate ads within the pages
back. Not surprising, really. Back then there was no expectation of the book excerpts—interstitial disruptive ads that appear on
that a well-known author would respond to readers. That’s not the pages. So far, we have deals with eight to ten publishers.
true now. There’s been a fundamental shift. When kids today We’re also very interested in looking into brand marketing. We
interact with the authors they love, they expect a response. believe that brands that truly want to understand the millennial
They demand a response. Reading isn’t a passive experience generation will come because of the activity level on the site.
for them; it’s a social one. People want to participate. They’re
writing things, reading things, sharing things. We think that Q: What did you learn from talking to teenagers during the six-
experience could redefine the marketplace for books. month closed beta stage?
Q: What’s the response from publishers? A: We were holding our breath for six months—spending time and
money to watch and learn from these kids. But we would have
A: As bookstores die and content goes digital, publishers are trying failed without it. A lot of the things we built, initially, were not very
to find new ways to market themselves. Publishers are very wary useful. We’d built a lot of clichéd social networking tools—letting
about eBooks. But there’s a deeper and more fundamental visitors “friend” somebody, creating a “wall” for comments. You
problem with publishing, about the way content is created learn very quickly you’re never going to replace Facebook.

01
SECTION
Create
Courting the Crowd Best Practices for Brand Communities and Co-Creation
68M bloggers regularly
review and recommend
products and services.
Who are your lead
users, innovators and
market mavens?

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Brands are constantly discovering new ways to tap into the creative power of the crowd, but consider these best practices:
STACK THE INVITE LIST. Leading SOLICIT FOR A SPECIFIC STRATEGIC DON’T CONFUSE MARKETING
companies conduct up-front research INTEREST. Shape the conversation. GIMMICKS with consumer
to identify key influencers in their category, Let consumers know where their ideas are engagement. Brand communities are not the
to preselect a group of core participants who needed most. place for a one-way conversation. Nobody
are likely to get engaged early and remain wants a social site that sanitizes all negative
active over the long term. Among the 68 SEEK BUSINESS VALUE BEYOND comments. You’ve got to go way beyond
million bloggers who regularly review and THE BUZZ. Letting consumers slogans and marketing collateral. Even some
recommend products and services, who vote on the best ideas can help automate of the most marketing-astute brands have
are your lead users, innovators and market the review process and reduce costs. But made these mistakes in the past only to
mavens? And how many of them happen to consumers are not always privy to your experience a consumer backlash.
already be loyal customers? business objectives—other analytics are
needed to evaluate business potential. One EXIT YOUR COMFORT ZONE.
PREPARE A TECHNOGRAPHIC approach is to identify users who’ve made Online, social and mobile platforms
PROFILE. To build the broadest valuable contributions in the past and track often lend themselves well to experimenta-
possible community, brands should strive to their future input, even when it fails to win tion. These technologies can, and should, be
understand the online behaviors, motivations over the crowd. trialed in an iterative process, constantly field
and usage patterns of their customer base. testing and refining brand strategies, instilling
What are their common characteristics? What READ AND REACT. People want to confidence and creating value. Tactics can be
sets them apart from other consumers? It’s be reassured that their opinions are custom-tailored to accommodate almost any
not just about knowing how they spend being heard and valued. Regular feedback is level of technical sophistication, but you’ve
their time, it’s also critical to understand essential for maintaining consumer attention got to step up and get started.
what catches their interest and stimulates and activity in a corporate-sponsored online
participation—coupons, discounts and environment. Find ways to encourage them STAY COMMITTED. Successful social
cash rewards; games and contests; social to share their stories, and then loop those initiatives aren’t one-offs. The real
recognition; or insider opportunities to beta messages back to the brand. benefits come from long-term engagement
test new products? and continuous improvement.

The Power of Play
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SECTION
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Create The life of the average American is increasingly value of play—both online and off—exploring,
spent online. We’ve come to depend on the imagining, creating and renewing our world.
constant stream of information as if it were
umbilical, an oxygenated and brain-sustaining When it comes to the power of play, some
lifeline. Our workdays (and more nights brands are already plugged in. Converse, for
and weekends than we’d care to admit) are example, is no longer just an athletic shoe
punctuated by constant eyeballed bursts of company; the brand has been reinvented as
information, posts, updates and tweets, a never- a curator of cool. In July, members of rock ’n’
ending digital pulse that, like a pacemaker, keeps roll bands Vampire Weekend and Best Coast
us rolling and our hearts and minds in rhythm. produced a Converse-sponsored, web-released
hit single, “All Summer,” which quadrupled
Yet there’s no digital substitute for the real world. Converse’s web traffic and resulted in an
We haven’t lost any passion for restaurants and estimated $6.5 million in brand mentions and
bars, hair salons, football games, cinema and unpaid media. Now the company is developing
shopping malls. We’re not in retreat from reality. a recording studio named Rubber Tracks in
But more and more, we’re augmenting these Brooklyn, NY, where emerging artists will get free
real-life experiences with mobile and online studio sessions and a chance to have their music
Connecting in a connectivity. And the nexus of our online and
offline worlds—the proliferating points of overlap
distributed on Converse social media channels.
Clearly, the company has re-embraced its legacy
Converged World and integration—that’s where the interesting stuff
is happening.
as the über-cool cobbler to generations of
rockers from Keith Richards to the Ramones to
Kurt Cobain, leveraging a playful and powerful
In 2011, we predict an accelerated integration cultural connection with consumers.
of online marketing with real-world activities
like promotional events, demographic research Other brands seek to offer consumers a taste of
and in-store shopping. Interactive marketers adventure—on the web and all across the world.
will increasingly look beyond the web to find Engauge client Chick-fil-A has built a robust
new ways for brands to resonate with consumer owned-media channel using social media—and
culture. In the process, we’ll rediscover the a fan base of more than 3.5 million. With this

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Engauge helped Van Gogh
Vodka develop its “Unbottled”
campaign, sponsoring ladies’
nights at clubs and encouraging
fans to pose for pictures. Photos
channel, Chick-fil-A drives trial for new products and
of women cheerfully embracing
gives “raving fans” a way to engage with the brand the brand went viral after being
in a fun way. The brand is strategically merging the uploaded to Facebook.
online and offline worlds in this campaign, with
fans dressing up like cows to earn free food in their
restaurant locations and thousands posting photos
of the fun within social media channels. Canadian
Club Whisky, Starwood Hotels and Red Bull have
all organized scavenger hunts that provide clues
on platforms like Twitter and Facebook Places,
mixing online sleuthing with real-world prizes,
destinations and celebrities. With its Code Spotter
Sweepstakes, Engauge client Nationwide Insurance
drove fans to engage with NASCAR in a playful
way instead of simply as passive observers. And
play they did, entering 1.8 million codes that were
plastered everywhere fans might look, even on the
dashboards of racecars that show up on the in-car
live camera feeds on race day.
Ethnographic insights are critical for any culture-
propelled social marketing campaign. Engauge
client Van Gogh Vodka reached beyond the
web to engage adult consumers in their natural
habitat—their homes and favorite bars. Researchers
interviewed Van Gogh fans over cocktails in their
own kitchens and learned that women, in particular,
were being under-served in a premium vodka
category that traditionally catered to men.

01
SECTION
Create
TheAction Plan for Challenger Brands
Content Play>
Brands can realize bigger gains by producing 100 patrons, but the audience for the event
and owning their own video content, rather grew exponentially online, thanks to a
than bogging down somebody else’s show livestream video broadcast.
with pre-roll or interstitial ads. Online video
can be a force-multiplier for promotional Livestreaming—online coverage of live
events, particularly those that create an events in real time or rebroadcast on-
authentic, immersive experience with a niche, demand—remains a small portion of total
but influential, target audience. online video content. But this segment
has escalated at a particularly rapid clip.
40%
For brands with a small budget competing Consider: Americans viewed 650% more
against category leaders with outsized media online live video in 2010 than the previous
Videos now account for buying power, it’s a chance to finally compete. year, according to comScore. Mind you,
almost 40% of all this figure only includes videos from five
consumer Internet traffic. The Livestreaming Revolution publishers: Justin.tv, USTREAM, Livestream,
LiveVideo and Stickam.
Fans and filmmakers at the Los Angeles Film
Festival in June—with two more nail-biting YouTube recently trialed a new livestreaming
days to wait for the premiere of Twilight video service, broadcasting talk shows and
Saga: Eclipse—were treated to a free concert how-to videos in real time from programmers
by up-and-coming L.A. band Honey Honey Howcast, Rocketboom, Next New Networks
650%
and singer-songwriter Chris Pierce. Cameras and Young Hollywood. Ad buys and
were rolling as the crowd filled the club, a sponsorship opportunities are expected to
venue dubbed the “live.create lounge,” follow. Facebook, taking a different strategy,
Americans viewed 650%
more live online video
where premiere sponsor ZonePerfect now provides a fly-on-the-wall feed into the
in 2010 than the Nutrition Bars showcased nearly 30 other company’s Palo Alto headquarters via its
previous year. musicians over the course of the festival. The new Facebook Live channel. In addition to
intimate club only accommodated around corporate presentations and press events,

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Much More Than Repurposed TV Spots:
the Facebook service is peppered with celebrity Best Video Ads Slyly Play Off Cultural Connections of Brand and Base
appearances, like a cameo by actress America
Ferrera, who stopped by the launch party to pitch There are many other creative ways to commit to video. Many of the best online
her latest indie flick, The Dry Land. videos play off a unique cultural component of the brand and its customer base
without overtly sermonizing about the company or its goods and services.
Seismic Shift in Spending
With its web-based sitcom Back on Topps, for example, the baseball card
Brands have been pumping up budgets for online company Topps found ways to consistently be funny while inherently emphasizing
video advertising. Total spending for online video the social connections of the brand. Rather than an advertisement, it’s an
ads will jump by over 40% in 2011, according to immersion, inviting the viewer to live within the brand. The fictional faux-
eMarketer, after skyrocketing nearly 50% in 2010. documentary series—similar in style and feel to The Office—has been viewed over
These numbers are a direct response to changes in 1.5 million times on YouTube.
consumer media consumption. Web video continues
to gain greater importance for brands as consumers Similarly, a five-minute YouTube spot for Orbit Gum scored over a quarter million
crave more and more content: views since its debut in June 2010. The piece was developed by DumbDumb,
a sponsor-driven advertising and production company founded by actors Jason
• American viewers are spending significantly more Bateman and Will Arnett, both of Arrested Development, who infuse the long-
time watching videos on YouTube (up 68% in format video with their own brand of humor.
2010) and Hulu (up 75% in 2010), according to
comScore. Rather than thinking of the Internet as a smaller, cheaper, lower-profile platform for
• Nearly 180 million Americans regularly watch repurposed TV ads, which often fail to reflect the style, feel and immediacy of the
online videos, an activity in which they spend, on digital format, breakout brands have learned it’s often more effective to provide
average, 14.3 hours per month. original content for consumers. Consumers clearly want high-quality online video
• Videos now account for almost 40% of all content, but brands don’t always need to produce a viral sensation or develop an
consumer Internet traffic, according to Cisco, and online version of Friends to use video effectively. Creative interactive campaigns
will reach nearly 60% by 2014. can satisfy the demand and keep engaged consumers coming back for more.

22
Move beyond the ordinary to do
what’s never been done before.
02
SECTION
Innovate

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Innovation in Action
Dizzied by the breathtaking pace of digital innovation, marketers fast-following competitors. Even category leaders rarely have time to
risk being swept up in the crush of the trend-chasing crowd, running rest. Gap, for example, lent major credibility to online coupon company
scattershot without a clear strategy, entering a flash-mob marathon Groupon with its first national promo deal in August. But within three
without a finish line. months, the apparel company had changed course and rolled out a
new offer with Groupon’s newest and biggest rival, Facebook Deals.
Though brands increasingly recognize the value of establishing digital
relationships with audiences, the fundamental choice of finding the From livecast video to virtual goods, interactive TV to location-based
right interactive platform is more difficult and complicated than ever. services, social gaming to next-generation mobile ads, marketers
The channels are multiplying. Online, social and mobile ad alternatives face an incredibly diverse mix of new opportunities. Much of the
continue to proliferate. Every day we face a fresh deluge of tech overall acceleration in online and mobile marketing can be attributed
updates and trend alerts. Marketers need to be more than merely to emerging companies such as Facebook, Zynga and Twitter. Yet
familiar with these new technologies; they need to be strategic. They large incumbents, such as Apple, Google and Microsoft, have also
must see beyond the hype to accurately evaluate their options, then proven capable of pushing the pace with innovations, moving faster
deploy the best new digital tools for their brand. than their smaller competitors. The competitive field of technology
firms is guaranteed to reconfigure again within the next five years and
The pressure—and potential payoff—is immense. Groundbreaking marketers will need to remain nimble, attentive and ready to reallocate
marketing campaigns are generally only a few months ahead of their resources accordingly.

25
Jeff Hilimire
chief digital officer
FOLLOW JEFF ON HIS BLOG AT
JEFFHILIMIRE.COM
OR ON TWITTER @JEFFHILIMIRE
Marketing mastery of digital technology goes far beyond knowing
what’s hot today, what’s launching tomorrow and how it all works. The
best interactive campaigns are more than just a buzz-driven choice of
a new media channel. They reflect a deep understanding of the target
audience and its technographic profile combined with potent creative
concepts that affirm and amplify the cultural connections between brand
and consumer. Those campaigns represent innovation in action.
Engauge’s Digital Innovation Group
The Digital Innovation Group, also known as DIG, researches,
tests and experiments with emerging technology with the goal of
connecting brands and people. Launched in late 2009, clients now
include Coca-Cola, Chick-fil-A, Reese’s, Cisco, IHG, NGK Spark
Plugs, Nationwide Insurance and Food Lion.

Consumers Hands
26
26|
26
02
SECTION
Innovate
Hold the World in Their
Is this finally the year of mobile? As a profession, But given the history of hype in this subject,
we’ve been asking—and dodging—this question it’s important to keep these numbers in
for an absurdly long time. It’s a shopworn refrain context. The most wildly optimistic forecasts
Can Innovative that’s become a joke: Mobile is the future of
marketing—and always will be.
suggest that mobile ads will become a
$10 billion market in the U.S. in 2011, but
Brands Deliver the most industry analysts put the numbers
Not anymore. Mobile is now. Brands spent much lower. Middle-ground estimates from
Right Message at 80% more on mobile ads in 2010 than in 2009. eMarketer indicate that mobile marketing
the Right Time? The launch of Apple’s iAd mobile advertising (display, search and message-based ads) in
network and Google’s acquisition of AdMob the U.S. will grow from $1.1 billion in 2011
have given mainstream credibility to mobile ads, to $2.4 billion in 2014. One or two billion
making them a legitimate choice for mainstream hardly qualifies as a major breakthrough
marketers. when compared to the $120 billion spent
on advertising in the U.S. across all media,
In the year ahead, brands will spend over $1 much less the $450 billion in global ad
billion on mobile marketing in the U.S. for the spend. That’s not a drop in the bucket, it’s a
first time. Globally, too, the growth curve shows nanoparticle in the Pacific.
a significant arc. Google, in fact, has reported
a $1 billion run-rate for its worldwide mobile Marketers, of course, recognize that budgets
ad revenues since late 2010. Marketers are are rarely the best barometer for valuable
responding, in part, to the rapid adoption of innovations and future-shaping trends.
smartphones by consumers. Forecasts from Indeed, in mobile marketing, there are very
Mobile
Morgan Stanley suggest that global smartphone good reasons why the level of excitement
sales will outpace personal computers in 2012, exceeds current expenditures.
just five years after the introduction of the
first iPhone.

27
$1B
In the year ahead,
brands will spend over
$1 billion on mobile
marketing in the U.S. for
the first time.

02
Within two years,
global sales of
smartphones will
outpace PCs.

29
What Makes the iAd Special? Apple opened the door to “freemium” discovered that the demographic profiles
content when it began allowing in-app and usage patterns of mobile-empowered
Since the iPhone and iPad don’t support purchases in late 2009, enabling developers shoppers can be extremely attractive.
Flash, Apple has been hard-pressed to find to distribute a free trial version of apps with
a workaround that can deliver the interactive additional features that could be “unlocked” Retail is a top-ten activity for American
content that marketers crave. Enter the iAd. when users requested and paid for them. mobile users, but in terms of popularity, it
The model proved successful: one-third of lags behind social networking, news, sports
Apple’s new HTML5 advertising platform the top-grossing apps (34 out of 100) were information, banking, weather, movies and
enables brands to build better mobile available as free downloads as of November maps. Last year, 7 million Americans per
ads—with interactive content, video and 2010. The iAd platform is freemium with a month visited retail sites via mobile browsers,
games—and serve them seamlessly to twist—consumers now “pay” to unlock the and 2.7 million used mobile shopping apps,
consumers within apps. Nike, Toy Story 3 and content by watching ads within the app. according to comScore. The U.S. is behind
Target have produced entertaining iAds that the global curve in this category: 57% of
function, essentially, as apps within apps. In a related development, Apple also claimed shoppers in Asian-Pacific countries, like
a leadership position with the iPhone 4, Japan and Korea, compared to 14% in the
But the greatest significance of iAd is its with its high-resolution retina display that U.S. regularly make purchases after receiving
new monetization model for the App Store. can convey a premium visual experience. a promotional text message, according to
The iAd platform effectively encourages Competing device manufacturers quickly e-Dialog. But don’t be too quick to dismiss
developers to make their apps freely pumped up their pixel counts, too. This those meek American numbers—we’re
available for download, rather than charging is particularly important for luxury brands, catching up fast. Shopping app adoption in
up-front fees from consumers. That means which have been reluctant to design or the U.S. rose over 90% in 2010, and there
developers will increasingly (and, perhaps, deliver mobile brand messages that were was a 50% jump in browser-based mobile
more profitably) derive revenues from ad anything less than beautiful. Finally, they retail. Many shoppers now use mobile as
sales. To boost ad sales, they’ll need to grow have a mobile showcase suitable for the a price-comparison tool, but their usage
their audience as big as possible, beginning crown jewels. will become increasingly transactional with
with free distribution of content. Brands and gradual uptake of location-based marketing
consumers both stand to benefit from the The Mobile Retail Revolution and direct-to-mobile offers.
new arrangement, but the biggest winner
will be Apple. For hosting and selling the As the technology of handheld devices grows People tend to be highly targeted in their
ads, Apple takes a 40% cut of developers’ ad more sophisticated along with their potential mobile activities. Marketers should respect
revenue. That’s a big bite. as marketing platforms, many brands have the constraints on their time, attention and

30
2.7M Americans used mobile
shopping apps last year.
screen size and make every effort to serve and The Gristle Missile, who snort and stalling at the starting line while they
user-relevant content. stomp and promote a steady diet of chicken debate about what “mobile” actually
sandwiches. At-home entertainment for iPad- means. Though SMS still dominates mobile
The best mobile campaigns begin with a equipped preteens, the comics have proven messaging—6 trillion text messages were
firm grasp of the cultural and technological to be smart, funny and engaging. sent in 2010, according to the International
demographics of the customer base. Telecommunications Union—mobile
Engauge client Ruth’s Chris Steak House, for Yet many companies still seem frozen in place marketing is no longer limited to text, search
example, understood that a big portion of when it comes to mobile marketing. They and display.
its clientele were executives who wanted a can’t figure out how to approach the space.
way to book lunch meetings and after-hours What’s preventing them from overcoming What passes for “mobile” today may
dinners with ease and absolute assurance. their inertia? Why aren’t they already moving actually be an amalgam of multiple
The restaurant chain responded with a ahead with mobile? platforms—online, social, video, music,
custom-tailored app that facilitates mobile- gaming, payments, retail transactions,
made reservations. Businesspeople booking Partially, it’s because marketers are stuck in a location-based services and augmented
tables with their iPhones and BlackBerrys traditional mindset that prevents quick-and- reality. Social networking, in fact, is now the
receive automatic confirmation and the dirty field testing of new technology. The fastest-growing mobile activity, according
assurance that they won’t be left waiting for a barriers have a number of different names to comScore. Accordingly, a big part of the
table when taking an important client (or the like “demographics,” “reach,” “projections,” problem for marketers is figuring out which
CEO) out to lunch. “plans,” etc. Major mindshifts in marketing foot to put forward first.
rarely happen overnight, of course,
Catering to a much different demographic particularly when the profession is faced Those decisions depend on a careful
in the restaurant business, Chick-fil-A with a new, transformative medium. But with calibration of brand, base and message, but,
developed a series of comic books that mobile, in particular, the excuses have been generally, the best strategies emerge from
proved popular with kids. The quick-serve egregious. continual testing and fine-tuning, because
chain is expanding the concept by publishing when it comes to mobile, what’s needed
the series as an iPad app featuring cow After waiting years for mobile to become now is a little less conversation and a little
superheroes named Cold Cuts, The Swatter legitimatized, some companies are now more action.

Going Mobile and a Fast Start
31
Getting a Firm Grasp
Marketers should be actively experimenting with new apps and technologies to determine their potential value and how best to use them.
Here’s our perspective on how companies can start embracing mobile:
IT’S OK TO FAIL, JUST FAIL FAST. FIGHT ANALYSIS PARALYSIS. GET IT IN YOUR CUSTOMERS’
In the start-up world, the only way you We are all for making sure you have a HANDS. Today, successful start-ups
get better is to try, fail, learn and retry. The plan in place, and having research to support work hard to get their product in front of cus-
key with being good at failure is failing fast. that plan is great. But if that plan is being tomers as soon as possible. This allows them
Don’t stall at every setback. Instead, be ready used as a crutch to avoid getting started in to get immediate feedback and fine-tune un-
to adjust as you go. mobile, then you need to find a way to move til they’ve developed a product that people
through it. Which brings us to the third point. will use. With mobile, testing campaigns or
apps in specific markets—and rolling out
REMEMBER HENRY FORD. functionality as you go—is a great way to get
Mr. Ford is often quoted as saying, “If invaluable and timely input from customers.
U.S. Mobile Ad Spending 2009-2014 I had asked my customers what they wanted,
millions and % change they would have asked for a faster horse.” And, lastly, ask yourself:
‘09 $416 30% Visionaries like Steve Jobs often use this DO YOU REALLY WANT TO BE
quote to emphasize why they do things that AN IMMOBILE BRAND?
‘10 $743 79% are contrary to what research might indicate Do you want to be a brand that is severely
is the right path. Sometimes your customers limited in where and how you interact with
‘11 $1,102 48% don’t know what they want until you give it customers? If you’re continuing to find rea-
‘12 $1,501 36% to them. sons why your company isn’t ready to start
testing mobile, you’ll just keep standing still.
‘13 $2,036 36% Nobody wants to be an immobile brand.
‘14 $2,549 25%
Source: eMarketer

32
Getting a Fix
On Location-Based Mobile Marketing
80%
Last year was the ignition phase for location- dramatically, adding new users at an expo-
based mobile marketing with the launch of nential pace. Meanwhile, Facebook, which
Facebook Places and the upward trajectory of recently debuted Places after being rebuffed
Currently, location-based
social networks are primarily other check-in services like Foursquare, Gowalla, in its bid to buy Foursquare, clearly intends
a hit with young, geeky guys: SCVNGR, Loopt and Twitter Places. to win the geolocation space race.
nearly 80% of users are male,
and the vast majority are Will we see a liftoff in 2011? Foursquare and Facebook Places attracted several million
between the ages of 19-35. Google-funded SCVNGR have been rising users within its first few months and gained

33
the support of major brands like Gap Who’s Got the Holy Grail of Location-Based Engagement?
and The North Face for its test run of
Facebook Deals. Check-in promotions have appealed to a achievements, like run time and total vertical
wide range of consumer-oriented companies, descent. Like those Disney guests waiting
However, fewer than 5% of Americans were including Whole Foods, Starbucks and outside Epcot Center, Vail visitors spend much
using these location-based mobile services McDonald’s, but certain brands are of their days in line, while queuing and riding
as of August 2010, and only 1% do so on a particularly suited to location-based ski lifts. With EpicMix, the resort discovered a
daily basis. Geolocation services will require marketing. way to turn the downtime of a lift-ascent into
brand support before moving beyond early an opportunity for deeper brand engagement.
adopters to reach the mainstream. Forward- Disney Parks, for example, teamed up with There’s also an EpicMix kid site for skiers under
thinking innovators are already in action. Gowalla to create virtual stamps and special age 13, with special privacy controls, which
The trend-aware followers are getting in line. trips for participants at over 100 top theme should appeal to parents intent on keeping
And the laggards are, as always, in danger of park locations, including Epcot Center, Space their children under supervision. By monitoring
being left behind. Mountain and Pirates of the Caribbean. real-time updates, parents can keep constant
Presumably, they’re not trying to drive more track of their children’s whereabouts, even if
Backed by creative campaigns, appropriate visitors to these rides and destinations—they’re their 12-year-old speed demon leaves them
privacy policies and added functionality, already popular. Rather, Gowalla provides stranded at the top of a black diamond.
location-based mobile marketing could easily visitors something to do while waiting in long
gain enough momentum to go stratospheric lines, which creates additional experiential In 2011, expect more brands to pursue
within the next two years. layers for guests. It’s a brilliant application of partnerships with location-based service
the technology. providers. The sheer volume of start-ups in
At the moment, location-based social this category, however, inevitably adds a great
networks are primarily a hit with young, Vail Resorts just launched EpicMix, a deal of time and complexity for marketers
geeky guys: nearly 80% of users are male, location-based app that’s linked to the bar trying to choose applications. Among the
and the vast majority between the ages of codes on lift passes that are scanned by many competing services, each with a slightly
19-35 (70%) with college degrees (70%), resort personnel every time a skier heads different story and spin, who will ultimately
according to Forrester Research. This is the up the mountain. The application provides win this market?
same crowd that was using Twitter three maps, messaging, weather forecasts and
years ago. Draw your own conclusions. snow reports. It also calculates stats and

34
Who’s Got the Grail?
location-based platforms

35
Marketers seeking greatest reach and recognition will probably favor the largest contender, Facebook Places, but start-ups like SCVNGR and
Checkpoints have introduced valuable innovations that can offset their smaller profiles.
Facebook Places Foursquare Yelp Check-In Offers
Scoop: Launched in August 2010 with Scoop: Generally given the most credit for Scoop: The popular Yelp website added
functionality that’s instantly familiar popularizing the concept of mobile check-ins, check-in service in January 2010 where
to users—finding nearby friends and, Foursquare was founded in 2009 and recently consumers review and rate local busi-
if you’re traveling together, tagging passed up a $100 million buyout offer from nesses. But it wasn’t until November
companions. Yahoo!. that Yelp finally introduced Check-In
Size: Facebook claims Places is more Size: 5 million members. This represents a nearly Offers to allow brands to reward their
popular than any other location-based 1,000% increase since March 2010. loyal checked-in customers.
service. Significance: People are getting tired of Size: Not reported. Founded by members
Significance: In combination with Facebook gimmicky badges and mayors and will need of the so-called “PayPal mafia” in 2004,
Deals, the check-in service attracts more functional offerings before the site Yelp is supported by ad revenue and
mobile shoppers with local incentives and loses relevance. But don’t call it a comeback. has a strong following with 38 million
delivers strong tie-ins to brand pages. Foursquare remains quite healthy in terms of users monthly, making it a natural fit for
new members. The site added 1 million new location-based services.
users within two months after the launch of Significance: Given Yelp’s status as a
SCVNGR arch-rival Facebook Places, then registered the trusted source of consumer reviews,
next million in under six weeks. this emerging check-in channel will be
Scoop: A game-based approach with worth watching in 2011. Unfortunately,
check-in challenges and shared photo Yelp may have copied the wrong pages
snaps, SCVNGR puts a welcome spin on Gowalla from the Foursquare playbook when it
the location craze. It’s tightly integrated Scoop: The latest version of Gowalla’s location- added “Yelp Badges” and “Yelp Roy-
with Facebook Places. sharing app allows users to check in to other alty” like Dukes, Duchesses, Kings and
Size: 800,000. location networks. Barons into its check-in app.
Significance: The game-based approach Size: 1 million members.
creates a deeper level of consumer Significance: The cross-platform play was a
engagement within location-based smart move, removing the pressure of an
services—way better than badges. all-or-nothing decision for marketers who’ve
been struggling (or stalling) to pick the perfect
location-based platform.

36
Loopt WeReward MyTown
Scoop: Since 2006, Loopt has let users see Scoop: WeReward allows consumers to Scoop: A mash-up of Monopoly and Second
where their friends are and what they’re accrue, exchange and cash out points via Life, this addictive GPS-enabled app is
doing, incorporating local content from PayPal, earning $10 for every 1,000 points. built around the idea of buying and owning
Citysearch, Metromix, Bing and Zagat. It’s also the first location-based service your favorite real-world hangouts. Consum-
Size: 4 million users on Sprint, AT&T, Verizon, to integrate check-ins, product sales and ers check in to unlock rewards, accruing
iPhone, Android and BlackBerry devices. reward-app downloads with CRM function- points that can be used to buy virtual real
Significance: Loopt offers ad services for ality from Salesforce. estate based on actual locations, and then
brands across a suite of products including Size: Not reported. charge other players “rent” for future
Loopt, Loopt Star, Loopt Mix and Loopt Significance: While attempting to fine-tune visits to that venue. Released by Booyah
Pulse for the iPad. Despite the impressive its closed-loop CRM functionality, WeRe- in 2009, it’s become the most popular
membership numbers, they lack the buzz ward has been offering the service for free location-based social game.
of Foursquare and Facebook Places and to large clients like Domino’s Pizza. They’ve Size: 3.3 million players.
face stiff competition from similar services also rolled out a double opt-in feature that Significance: Several pioneering brands have
like whrrl, buzzd and brightkite. allows advertisers to continue communica- set up shop in MyTown. Volvo presented
tion with consumers after the initial deal is branded virtual goods to players checking
done. into locations like garages or auto dealer-
Twitter Places ships. H&M showcased its Blues collection
Scoop: Highlighting tweets at any given of denim garments on MyTown, report-
location, Twitter finally launched the edly drawing interest from around 700,000
service in June 2010 after several months players.
of rumors.
Size: Not reported.
Significance: Stay tuned. Currently, brands
aren’t allowed to “claim” their own Twitter
Places, but a company spokesman told
Mashable: “We’re experimenting with a
variety of features. Allowing businesses to
claim a Place is a natural thing to consider
for the future.”

37
37
Checkpoints
Scoop: This iPhone app launched in Septem-
ber 2010 and gives rewards for scanning
bar codes of participating products. Check-
points advertisers, in turn, can deliver
coupons, recipes, games or other digital
content to the consumer’s iPhone once the
item is scanned.
Size: 100,000 downloads of the iPhone app
occurred within the first month.
Significance: Checkpoints deserves credit for
recognizing how packaged-goods brands
can benefit from location-based services.
For brand partners such as Tyson, Belkin
and Seventh Generation, the real value
of product check-ins will be measured by
what happens in the checkout lane.
4%
of online adults in the
U.S. use geolocation
services like Gowalla
and Foursquare.

Q
POINT OF VIEW What’s the most important tech
platform today in digital marketing?
Social is no longer an optional add-on; it’s the new default. Facebook
reached an epic milestone in November, accounting for a quarter of
all webpage views in the U.S., according to Hitwise. For some brands,
social presences are now the primary platform for brand expression and
interaction. In 2011, their owned-media channels will be augmented by
and community managers—but success in social is rarely attributable
to how much money you throw around. Rather, social campaigns live
or die as a result of creativity, commitment and mindset. Creativity,
in particular, matters more than ever. Unlike traditional media like TV,
brands can’t “rent” an audience for thirty seconds by buying an spot
traditional homepages, rather than the other way around. in a popular program. In social media, brands have to build and retain
their own audience.
However, those tech-savvy brands are the exceptions; the bulk
of marketing has not kept pace with the advance of innovation. Marketers bemoan the proliferation of platforms because of the
Brands should also recognize that successful owned-media channels increase in required resources. They continue to view these platforms
on Facebook, Twitter or YouTube can be launched with minimal as “tactics,” rather than an invaluable extension and expression of
technological sophistication and very little up-front investment. It’s not consumers themselves. Brands should take solace in the fact that
completely free—somebody has to pay the salaries of dedicated staff these technological changes have reinvigorated engagement.

39
Raghu Kakarala svp, creative technologist
FOLLOW RAGHU ON
TWITTER @INTERPOLATE
Social and mobile have increasingly become essential “life tools” for
mainstream users. Over 20% of U.S. consumers visit social networking
sites and blogs on their mobile phones, according to comScore, and it’s
expected that half of all U.S. consumers will have a smartphone by the end
of 2011. If consumers are allocating their time and money, what’s holding
back brands?
Today’s early adopter is often an average consumer, rather than the
neighborhood techno whiz. That’s why it’s not too early to begin testing
emerging technologies like connected TV, where brands can come alive
through addressable commercials, or social TV, with mobile apps that
enable audience participation. These technologies may be logical next
moves for brands that have already mastered their owned-media channel.

40
02
SECTION
40|40|
Innovate This year, Groupon, a digital
coupon company that taps the
buying power of the crowd, may
become the fastest-growing,
billion-dollar business in history.
>60% of consumers now search
for deals digitally before
shopping.
Loyalty and Action

41
Digital Deals Retail Experience
Change the
The new technology of thrift comes with a very More and more, online and mobile offerings oriented spending would increase at least
retro twist—we’ve devolved into a society of are being used to supplement traditional 5% annually.
hunters and gatherers. Shoppers are scouring shopper channels like in-store displays and
online reviews, checking price-comparison sites circulars. Today’s brands are using new The primary push has been economic. Nielsen
on their smartphones and signing up for digital technology and data-driven insights to create reports that one in four North Americans
deals before hitting the stores. Long gone are increasingly customized reward programs. The have no discretionary income. But this shift
the gilded days of carefree consumption. digital menu includes search, social media, is also being driven by a broad range of new
online coupons, daily deals, thematic content, online and mobile options. For marketers, the
This year, a digital coupon company may relationship marketing and apps. challenge is in selecting the most effective mix
become the fastest-growing, billion-dollar of platforms, messaging and incentives. There’s
business in history. The success of Groupon A recent report from Booz Allen for the Grocery no one-shot solution. Brands need to review
offers a lesson for brands: The convergence Manufacturers of America found that over 60% all their options, honing reward programs and
of shopping and digital marketing offers of consumers now search for deals digitally shopper-oriented strategies to drive consumer
opportunities for innovative brands to surge before shopping. Not coincidentally, over action.
forward, leaping over the economic slump if 80% of packaged goods executives in the
they can deliver campaigns that add some zing survey said their companies would be boosting The goal is frictionless engagement, a state
to the zeitgeist while coordinating tactics across shopper marketing budgets over the next three of brand nirvana we define as the removal of
emerging technology platforms. years. The majority indicated that shopper- barriers that inhibit consumer decision making.

Futurecast: from
A Fictional Scene
the Year Ahead
After traveling to Zurich on business over Reading her email over coffee the next morning,
Valentine’s Day, Cissy Halstead wanted to Cissy found a new Groupon offering a half-price
do something special for her fiancé, Trevor, pedicure at a nail salon that recently opened
when she returned home that weekend. downtown. The promotion required a minimum
of 25 paying participants by a one o’clock
While waiting for her return flight, she deadline, otherwise, the deal would disappear.
found a seat in the airport lounge and
checked her iPhone. She’d received a tweet She quickly posted a note—part appeal, part
from a friend and fellow foodie. “Can’t wait lark—on Facebook: “Spa day? Who’s up for a
to use my @MediciRestaurant Groupon pedi?” By noon, she’d received 11 responses:
tonight! The tiramisu is amazing!” Cissy two yesses, one maybe and eight wish-we-
clicked the link, filled out the form with coulds. She went ahead and registered and so
her credit card information and ended up did three of her friends, pushing the number of
saving 50% off a romantic dinner for two. participants past the necessary 25 people. By
That night, Trevor was surprised—and two p.m., all four friends were seated side-by-
impressed. He relented, with a smile, when side at the busy salon, enjoying their impromptu
she reached for the check. mini-makeovers.

43
1%
Only 1% of coupons for
consumer packaged goods are
distributed online, but those
coupons account for nearly 5%
of all CPG coupons redeemed
by consumers and 20% of their
total value.

The New Cool: Direct Action
Digital Coupons Drive
By matching deal-seeking shoppers with and subsequently spurned a $6 billion Game Over for Groupon?
local promotions, Groupon, Facebook takeover deal by Google.
Deals, LivingSocial, Tippr and other sites Not so fast. In many ways, the mobility
have collectively pulled off a major coup in Facebook introduced Facebook Deals and instant gratification of Facebook Deals
marketing—making coupons cool. with a breakout debut in November and represents a significant improvement over
quickly attracted many major brands, the Groupon model of daily deal emails.
Daily coupon sites tap the purchasing power including Gap (three months after Yet consumers make an estimated 80% of
of the consumer collective by encouraging its much-touted deal with Groupon), purchases, on average, within ten miles of
shoppers to share offers with their friends McDonald’s, Starbucks and Chipotle. It their homes. Groupon may survive (and thrive)
on Twitter, Facebook and Yelp, leveraging links to location-based Facebook Places if it can capture the local markets.
social networks—and a sense of deadline- and offers mobile functionality that allows
induced urgency—to make sure that deals smartphone users to browse deals on- The benefits are quite clear for marketers—not
pass the “tipping point.” the-fly from nearby restaurants, stores only attracting new customers, but convincing
and other venues. Consult the map-based those customers to participate and spend
Daily deals have proven ideal for businesses app, pick a deal and check in. money within a specific timeframe. Groupon
offering services that today’s penny-pinchers claims its consumer customers spend 60%
might have trouble justifying without a Facebook, in total, has over 20 times more above the value of the coupon, on average,
deep discount—an hour-long massage at members than Groupon and can provide and 95% of its business customers say they’d
the day spa, a holiday travel package or an more detailed consumer demographics use the service again. Even so, the promotions
afternoon at the driving range. for brand clients. So it’s not surprising that may not be immediate moneymakers for
some industry analysts immediately hailed participating vendors. In fact, companies like
The initial frontrunner, Groupon, Facebook Deals as the “Groupon Killer.” Groupon generally split the resulting revenue
went mainstream with an $11 million with their clients—revenue that already
nationwide promotion for Gap in August reflects a steep discount of around 50%—so
incremental sales can be negligible.

45
Retailers Look Past Competitors
To Create Their Own Offerings
For brands, online coupons have emerged by allowing customers to receive their offer their own Facebook-based deals. But
as a compelling tool for engaging early for free if they convince three friends to some brands may be better off pursuing
adopters and spreading the word in participate. partnerships with better-known providers like
extended social networks. Walmart Groupon and LivingSocial, which can help
introduced its own group-shopping app, ConAgra took a similar approach to spread the word. Boulder-based business
Crowdsaver, on its Facebook page in incentivizing participation by offering Giant Nerd, for example, used the Wildfire
October. The first deal—an 18% discount a coupon on its Facebook page that tool but couldn’t find five people willing to
on a $500 plasma TV—passed the minimum progressively increased in value as more buy a $1,000 bike for $450, according to
threshold of 5,000 “likes” within 24 hours. people “liked” it. Ad Age.
Similar location-based services are offered Newcomers include Tippr, DealBug, The W Hotel in Scottsdale recently launched
by companies like ScoutMob and Placecast, GroupSwoop, Homerun and Zozi. They’ve its own group deal in an app on its Facebook
which target shoppers when they’re inside all tweaked the Groupon model in hopes of page, offering rooms at nearly 50% off its
or near a participating store. In some differentiating themselves in a crowded field. $295 rack rate if at least ten people signed
categories, these new technologies claim DealBug, for example, donates a percentage up. But how many people looking for hotel
redemption rates of over 60%, compared to of proceeds to charity. Other sites tailor their reservations are going to already be “fans”
2% for traditional clip-and-save coupons. pitches for foodies, fashionistas, social gamers of the hotel in the city where they’re headed?
or outdoor adventurers. Evidently, there were several locals in
Prior to the launch of Facebook Deals, Scottsdale who didn’t want to sleep at home
the second-biggest daily deal site was For brands with sufficient scale and scope, that weekend, because 28 people signed
LivingSocial, which now serves nearly 100 like Walmart, launching their own Facebook up, according to Ad Age. But, in general,
local markets and has raised $50 million app makes perfect sense. Several developers, certain types of brands may be better served
in venture capital. LivingSocial has upped including Palo Alto-based Wildfire, have through deal-linking services with search
the ante (and the social networking payoff) designed apps that allow marketers to design capabilities and similar functions.

Q
POINT OF VIEW
What can brands learn from
retailers’ embrace of convergence?
Every day, shopper expectations get higher and higher, and the brand
that is present in every channel on every device is the one that is
going to have the best chance to make a real connection with them.
Not long ago I stumbled across an Altimeter report, “The Rise
of Social Commerce,” that talked about the enlightened state of
Consumers shop in stores while using their phones to check
competitive pricing, read product reviews and ask their network of
friends for their thoughts and experiences. The more considered the
purchase, the more highly social it becomes as anxiety to make a good
decision drives consumers to reach out for real-world input. Accepting
and enabling these behaviors is the first step. Best Buy gets a nod for
“frictionless commerce” in which social and retail are integrated for early adoption by putting Internet-connected terminals inside stores to
a completely redesigned shopping experience that’s truly consumer- allow consumers to do that very thing.
centric. Even for non-retail brands, there are benefits to adopting an
e-commerce mindset when it comes to convergence. But why We now see the integration of Facebook Connect with brands’ own
stop there? site-registration processes. In addition to making the log-in process
simpler, Facebook Connect provides a detailed picture of customers.
The future of marketing is frictionless engagement. I call it brand The data goes far beyond demographics. We know what books they
nirvana and define it as the removal of barriers that inhibit consumer read, events they attend, brands they care about and who their friends
decision making. are. Amazon is leading the way by making the site your experience,

47
Shannon Delaney director of behavioral brand planning
reminding you to buy gifts for friends’ birthdays and suggesting books and
music you should buy based on your “likes.”
Sometimes people are so excited about a great score or the pure joy of
something they recently purchased, they want to share it with the world in
real time. And yet, recently, a client asked, “Shouldn’t we wait to launch our
social presence and spend six weeks doing focus groups to ask people what
they really want from our social offering?” My answer: “Why wait? Every day is
another day that you aren’t present in a place that they expect you to be and
even more important is you have a social focus group right there.”
To truly influence consumer behavior, you need to recognize that digital
retail and social are not isolated channels. Seamlessly integrated and highly
personalized experiences will lead to frictionless engagement. That’s not only
nirvana for brands; it’s also heavenly for consumers.

Start-up to Watch
Breaking Down
Location-Based Service Silos
Can’t decide between
Foursquare and Facebook Places?
PlacePunch enables brands to think bigger— multiple platforms and venues. The suite
with a broader perspective and better brings together Foursquare, Facebook Places
analytics—when building their own location- and similar services under a unified dash-
based loyalty programs. board, freeing marketers from the constraints
of exclusively focusing on one channel at a
Launched in September, PlacePunch provides time. PlacePunch also coordinates personal-
online tools for managing and integrating ized brand messaging via Twitter, email and
A conversation with CEO and location-based marketing programs across online couponing.
Co-founder Adam Steinberg.
www.placepunch.com
(Disclosure note: Jeff Hilimire, chief digital
officer at Engauge, invested in PlacePunch
Q: What inspired the idea for PlacePunch? What was missing in the marketplace?
through a start-up incubator.)
A: Check-ins are driving bottom-line revenue for businesses. But marketers don’t want to
be constantly keeping track of how many people are on Foursquare versus Facebook
versus Gowalla. PlacePunch makes it easier for marketers to think strategically and
integrate across all those services.