Featuring key takeaways for CMOs, creatives and technologists, this comprehensive guide to emerging digital platforms outlines best-in-class strategies for innovative campaigns that connect brands and people.

1. 1
THE 2011 DIGITAL
Innovation Playbook

2. 2
contents
mobile marketing | 05
location-based marketing | 11
loyalty and action | 17
gaming | 25
Excerpted from The Engauge 2011 Digital Outlook. interactive tv | 35
Download the full report @
www.engauge.com/2011-digital-outlook.
augmented reality | 45

3. 3
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.

4. 4
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.

5. Consumers Hands
5| 5
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
that’s become a joke: Mobile is the future of suggest that mobile ads will become a
marketing—and always will be. $10 billion market in the U.S. in 2011, but
most industry analysts put the numbers
Mobile
Not anymore. Mobile is now. Brands spent much lower. Middle-ground estimates from
80% more on mobile ads in 2010 than in 2009. eMarketer indicate that mobile marketing
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
Can Innovative making them a legitimate choice for mainstream hardly qualifies as a major breakthrough
marketers. when compared to the $120 billion spent
Brands Deliver the on advertising in the U.S. across all media,
Right Message at In the year ahead, brands will spend over $1
billion on mobile marketing in the U.S. for the
much less the $450 billion in global ad
spend. That’s not a drop in the bucket, it’s a
the Right Time? 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
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.

6. 6
$1B
In the year ahead,
brands will spend over
$1 billion on mobile
marketing in the U.S. for
the first time.

7. 7
02
Within two years,
global sales of
smartphones will
outpace PCs.

8. 8
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

9. 9
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.

10. Going Mobile and a Fast Start
10
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

11. 11
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

12. 12
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

13. 13
Who’s Got the Grail?
location-based platforms

14. 14
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.

15. 15
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 branded virtual goods to players checking
is 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.”

16. 16
16
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.

17. 17 17
17|17|
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

18. 18
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.

19. 19
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.

20. 20
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.

21. 21
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.

22. 22
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.

23. 23
The Coupon User
Wealthy, Well-Educated and Influential
twice as likely to use online coupons than
Coupon usage demographics are probably • 61% of adults with household incomes adults with household incomes under
not what you’d expect. Contrary to stereotype, over $100,000 redeemed a coupon within $35,000 (39% vs. 21%), according to
wealthy and well-educated Americans account the last six months, according to a recent the poll.
for a significant portion of coupon clippers. Harris Interactive survey.
• Groupon provides a very clear picture of
These trends are even more pronounced when • Adults with college degrees are reportedly its customers: they tend to be women
it comes to online coupons. Moreover, online twice as likely to have recently used (77%), young (68% aged 18-34), college-
coupon users tend to be more discriminating coupons. educated (80%), employed full-time (75%),
and more open to new experiences and single (49%) and with money to spend
products. They see themselves as influential. • People in upper-income brackets with (29% with $100,000+ household income).
And they’re really into shopping. $100,000+ household incomes were nearly
The Online Deal Bug Living Social
Coupon Offers: Donates a percentage of every deal to a
charity of the customer’s choice.
Provides free daily deals for users who con-
vince three friends to participate.
Facebook Deals Groupon RedPlum
Linked to location-based Facebook Places, Requires a minimum number of paying Redplum.com provides consumers with local
it offers four types of deals for consumers: customers before deals reach the “tipping and national offerings across a multi-media
individual, friend, loyalty and charity. point” and become active. platform on brands they want most.

24. 24
The Stats on Coupons
Confluence of Economic and Tech Trends
The uptick in coupon clipping began, in consumer spending have increasingly • 81% of U.S. consumers find it “fun” to see
not surprisingly, amid the market crash in converged with new technologies and more how much they can save, according to the
2008. That year marked the first increase tactical marketing. 2010 American Pantry Study from Deloitte.
in total coupon usage in nearly 20 years.
During our present state of slow economic • Consumers saved an estimated $2 billion • The Internet accounts for less than 5%
recovery, marked by high unemployment with coupons during the first half of 2010, of total coupon redemption and 1% of
and middle-class wage stagnation, financial according to the coupon company Inmar. distribution, but the online segment
considerations continue to motivate many The annual total for 2009 was $3.5 billion, has gained significant ground against
consumers to search longer and harder up from $2.7 billion in 2008. traditional clip-and-save.
for the best values. Changing patterns
Tippr Zozi Coupons.com
Sends out three local deals a day, which pro- Caters to an active crowd with deals on travel Pushes online coupons through affiliate market-
gressively increase in value as more people and outdoor adventures. ers that publish the offers on their own sites and
participate. Tippr acquired several patents re- receive a small payout for every coupon printed.
lated to online group-buying from Paul Allen, Homerun
co-founder of Mercata, a similar service that Oriented toward social gamers, provides Scoutmob
went bankrupt in 2001 after blowing through credits and points that users can put toward Offers free deals when people check in with their
$90 million. deals or cash-back offers. mobile phones at participating businesses.

25. 25
Full Tilt: Foward-Leaning Brands
Marketing for
Gaming
In the massively multiplayer environment of ignored, but we see a growing segment that
digital marketing, first-time players enter an merits serious and sustained attention.
exciting new world that’s constantly evolving.
They often spend the opening rounds just Video games are now bigger and more
figuring out what buttons to push. lucrative than the recorded music industry.
At least 65% of American households play
Take a cue from video games. The winners computer or video games, according to
93%
are the ones who rapidly adapt and refine the Entertainment Software Association.
their tactics, they’re the ones who refuse to be Contrary to common stereotypes, the game-
intimidated. playing population includes significantly
of tween girls in more women over the age of 18 (33%) than
America play Among the many emerging brand platforms, boys under the age of 18 (20%). Gaming has
online games. gaming and games marketing have perhaps the become a legitimate mass media that brands
greatest capacity to daunt the uninitiated. Why can’t afford to overlook.
is this? If 93% of tween girls aged eight to ten
in America are playing online games, according Capitalizing on these trends, major brands
to M2 Research, what prevents marketers from have sponsored ads and product placement
plugging in? in big-name games. Gatorade, for example,
sponsored a series of ads in sports games
Today, only a small fraction of most brand like NHL 10 and NBA Street Homecourt from
and agency budgets is allocated to games Electronic Arts. The campaign essentially
marketing. That may seem like a tiny sliver easily mimicked what Gatorade does for ordinary

26. 26
65%
At least 65%
of American
households play
computer or
video games.

27. 27 Online
game revenues are expected to rise at an 27
18% compound annual growth rate to 2013.
televised sporting events—plastering its logo Online and mobile games are particularly mass downloads of popular games, minting
across signs, water bottles, score updates and attractive to casual gamers, people who overnight successes. An impressive 20% of
on-screen callouts. A recent study by Nielsen might not otherwise invest in sophisticated the U.S. population aged 6+ have recently
found that spending on Gatorade products at-home console systems like Sony played a social network game, according to
increased by 24% in households that owned PlayStation 3 or Nintendo Wii. By capturing an August 2010 report from The NPD Group.
at least one of those games. a broadening spectrum of consumers, online Today, over 60% of social network users
games have become increasingly viable and also play social games, according to the
The global game software market grew more valuable as a marketing medium. most recent National Gamers Survey from
than 50% from 2006 to 2009, according to Newzoo.
Strategy Analytics, reaching record-setting
revenues of $46.5 billion. In November,
Social Gaming: Smart marketers have found creative ways
Microsoft managed to sell 1 million Kinect Betting Big in 2011 to tap into this trend. Southern Comfort
motion-sensing peripheral systems for its has launched a “Beat the Bartender” game
Xbox 360 console within the first ten days of The social game Farmville, supported by on Facebook that challenges adult fans to
its launch, proving, once again, that gamer Zynga’s five-year strategic partnership make a SoCo lime cocktail faster than their
enthusiasm runs extraordinarily high. with Facebook, proliferated across social virtual bartender. CBS Consumer Products
profiles in 2010 like bioengineered weeds, partnered with Ubisoft to develop “CSI:
In the years ahead, gamers will increasingly consuming free time, productivity and Crime City,” where characters from the hit
migrate into online, social and mobile. These attention spans. The game that encourages TV series enter a world strikingly similar to
platforms will capture millions of new players you to “farm with your friends” now claims Zynga’s Mafia Wars, minus the annoying
who are non-gamers today. Online game 80 million players. menus. Purina teamed up with Playdom to
revenues are expected to rise at an 18% create Pet Resort, playable on Facebook.
compound annual growth rate to 2013, at In the year ahead, we’ll see a big push of
which point they’ll account for nearly 40% new social titles from game developers
of total video game revenues, according to and publishers who recognize that positive
industry forecasts. word of mouth on social sites can drive

28. 28
>70%
Currently, 70% to 80% of
all app store downloads are
games and roughly 60% to
70% of those games are free.

29. 29
20%
of the U.S. population
aged 6+ have recently
played a social
network game.

30. 64 million Americans play mobile 30
games at least monthly.
But haven’t we been here before with soon as a strategic counterpunch to the Though ad-supported mobile games have
Second Life? Indeed, around five years ago, social dominance of Facebook. Social game a marginal presence in North America,
many marketers enthusiastically set up shop developer Playdom was acquired by Disney, countries like Japan and Korea have proven
in the virtual metaverse of Second Life from and Intel’s venture arm, Intel Capital, took more receptive to advergaming, and those
Linden Lab, only to quickly lose interest an ownership stake in OpenFeint, a tech business models may eventually signal the
as consumers (and their freaky-looking platform that allows game developers to add way forward for the U.S. market. Indeed,
avatars) failed to show up. Yet marketers mobile and social features to their apps, like the overwhelming public embrace of, and
who are reluctant to take a similar gamble live chat. These deals signal a shared belief heightened expectation for, free mobile apps
on social gaming should keep in mind that social gaming is a cultural phenomenon will force game developers to reconsider
several important distinctions. Second Life with long-term prospects. their options and eventually widen their
is more of an experiential environment than revenue sources.
a game. And it never really transcended its
niche status. After five years and 20 million
Mobile Gaming: Forecasts from eMarketer indicate that ad
registered users, fewer than 1 million are The Go-Slow Zone funding will account for only 12% of mobile
regularly active. Moreover, Second Life gaming revenues in the U.S. by 2014. That’s
is a relatively complex and sophisticated Mobile gaming has surged amid concurrent $180 million of marketing dollars. Not much,
endeavor. Newer social games that have waves of smartphone uptake and the rising really. And not surprising, given how reluctant
become huge hits are, by comparison, much popularity of apps. Currently, 70 to 80% of all marketers have been to embrace mobile
less of a strain on the cerebral cortex. app store downloads are games, according advertising in general. But for the right brand
to Gartner, and roughly 60 to 70% of those with the right strategy, getting a jump on
It’s also telling that the social gaming sector games are free. mobile games may be a smart move in 2011.
has recently seen major investments from
technology, media and entertainment Overall, 64 million Americans play mobile
giants. Last year, Google quietly invested games at least monthly, according to
upwards of $100 million in Zynga amid eMarketer, and that number is anticipated to
rumors that “Google Games” is coming exceed 90 million by 2014.

31. 31
Geolocation Gaming: Finally Moving Past Foursquare
A hybrid of mobile and social gaming, concept of check-ins, will enter 2011 with Coca-Cola, for example, recently got the ball
geolocation games have transcended the over 5 million users and is adding 25,000 rolling in the right direction with a nationwide
boundaries and emerged as an important new users daily and logging 2 million game campaign aimed at teens called Coke
category of their own. check-ins a day. The company has focused Secret Formula, which mixes consumer
almost exclusively on growing their user rewards with location-based service from
Though Foursquare and its badge-wearing base in hopes of crushing Gowalla and SCVNGR. Debuting on Black Friday, the
mayors have hogged most of the hype in gaining enough scale to thwart (or at least busiest shopping day of the year, Coke
geogaming, the spotlight will shift in the year withstand) incursions into its home turf by created challenges at Simon Malls across the
ahead to other location-based social games Facebook Places and Twitter Places. The country consisting of check-ins and photos,
like MyTown, a virtual version of Monopoly folks at Foursquare have belatedly begun to rewarding participants with $10,000 in total
that attracted over 3 million users within 12 pursue ways to make money from merchants gift card rewards. Coke gave the campaign
months of its launch. and will move more aggressively to recruit an extra boost with online and print ads, as
more brand partners in 2011. What’s missing, well as playful in-store signage that read:
MyTown appeals to consumers because it’s a though, are incentives to keep people “This Mall has Secrets. Unlock Them. Play
real game, not a gimmick. And by expanding playing—the thrill of real entertainment. SCVNGR. Get Rewarded.” Part of the brand’s
their “check-in” functionality to include Badges get boring. Mayorships are pointless. initiative involved familiarizing uninitiated
products and bar code scans rather than Really good games require much more than consumers to SCVNGR. Though the location-
just locations, the game developer Booyah just showing up. based service lags Foursquare and Facebook
proved it was thinking strategically on behalf Places with around 1 million members, it’s
of marketers too. In recent months, Booyah The next generation of geogames will given a welcome spin to the location craze by
has reportedly inked deals with H&M, HP, employ better game mechanics and provide using a game-based approach to give added
Microsoft, Pantene, Oil of Olay, Disney compelling content that use check-ins to meaning—and a lot more fun—to the act of
and MTV. enhance playability, dimensionality and checking in.
participation. In the process, they’ll become
Foursquare, which helped popularize the increasingly attractive to marketers.

32. More than 90 million Americans will 32
play mobile games by 2014.
Retooling Brands with Game Mechanics
U.S. Mobile Ad Spending The most important long-term takeaway noted that the rewards of playing games
2009–2014
millions and % change from the gaming industry may, ultimately, appeal to two distinct drives within ourselves:
$2,549 25%
be a greater understanding of game the wanting and the liking. Participating in
$2,036 36% mechanics—what motivates people to play, games activates our ambition and sense of
to spend money and commit tremendous craving. But on the other side of the brain,
$1,501 36%
amounts of time for very arbitrary rewards. games also satisfy our need for delight.
$1,102 48%
The Coke Secret Formula campaign, for Brand experiments with online, social and
$743 79%
example, features a number of critical factors location-based games—or partnerships
beyond the cash-back gift cards—astute with game developers—may help marketers
$416 30%
understanding of social dynamics, points and gauge what kind of incentives keep people
progress tracking, deadline-induced urgency engaged, as well as their optimal rate and
and intimations of exclusivity. intensity. Chatfield refers to the “reward
schedule” and the concept has clear
Tom Chatfield, author of Fun Inc., contends implications for brands seeking ways to keep
‘09 ‘10 ‘11 ‘12 ‘13 ‘14 that gaming can provide a set of very useful their customers coming back.
Source: eMarketer
optics for examining consumers and our
contemporary culture at large. Addressing
the TEDGlobal 2010 conference, Chatfield

33. 33
Getting a on Virtual Goods
Grip
When American gamer Jon Jacobs bought Soon after acquiring the virtual resort, Jacobs Dogg—are expected to generate revenues
the Asteroid Space Resort for $100,000 in rechristened it “Club Neverdie” and turned of $41 million in 2011, which is three times
2005, he paid real money for an imaginary it into a premier in-game destination that the size of the market in 2010. Overall, the
building in an online role-playing game, included a nightclub, stadium and shopping entire virtual goods market could easily
Planet Calypso, the oldest planet of mall where players spent real cash. His exceed $2 billion in 2011, according to
the Entropia Universe. He’d reportedly personal income from the game exceeded published estimates.
remortgaged his house to buy the make- $200,000 per year, according to Forbes.
believe asteroid. Clearly this was an act of These kinds of anecdotes and figures tend
insanity. Right? In November 2010, Jacobs resold his Planet to flummox those who’ve assumed that
Calypso virtual properties for $635,000. virtual goods are, and would remain, a niche
Planet Calypso is available as a free That’s a return of over 500% in five years. market. A few years ago, frankly, you couldn’t
download, but its 900,000 registered users are Baffling, but true. even call it a market. It was a blip. A curiosity.
encouraged to deposit real-world dollars to
fund their adventures. A share of the resulting Nearly 30% of Internet users in North But consider this: When General Mills
revenue stream goes to the developer—First America have purchased virtual goods in a promoted its Cascadian Farm Organic
Planet Company, a subsidiary of Swedish social networking game, according to a May Blueberries on Farmville, players planted
group MindArk—but players also buy in-game 2010 study in eMarketer. Branded virtual over 300 million of the virtual berries at a
services and virtual goods from third-party goods—offering innovative tie-ins for a cost of 20 coins each, creating a bumper
entrepreneurs like Jacobs. range of brands from Green Giant to Snoop crop of innovative marketing. Green Giant

34. 34
34
The virtual goods market could
easily exceed $2 billion in 2011.
turned this strategy on its head, putting Branded Virtual Goods Revenue Worldwide
Farmville coupon stickers on select produce
in 4,000 stores nationwide, redeemable for
in-game Farm Cash.
2010–2015 millions and % change
$318 41%
Improved mechanisms for converting real
$226 51%
cash into virtual currency are building more
momentum. Facebook Credits is now the
$150 71%
exclusive payment method for a number
of popular social games, and PayPal is a
preferred provider for Facebook Credits.
$88 115%
As these systems mature, micropayments
Source: eMarketer
$41 156%
will become increasingly feasible alternatives
for marketers to offer in lieu of traditional
coupons or discounts. Already, developers
$16
like Ifeelgoods of Menlo Park, California,
have started helping brands build
app-based bridges from virtual currency to
real commerce. 2010 2011 2012 2013 2014 2015

35. 35 35
35|
One-third of all U.S.
households will have
Internet-connected
TVs by 2015.
Interactive TV

36. 36
The Two-Way Tube
Battle Royale
Reportedly dissing Google TV because its were neither compelling nor memorable, but
“footprint was too small,” News Corp.-owned a lot has changed in the last ten years. Don’t
Fox closed ranks with the other broadcast expect Google TV to fade into obscurity.
networks—ABC, NBC and CBS—in blocking
access to its programs from the new web- Despite the past failures and the fierce
enabled platform. The implication was that the resistance from broadcast networks, Forrester
newcomer wasn’t popular enough to earn their Research recently predicted a third of all
respect and cooperation. But instead of simply U.S. households would have Internet-
ignoring Google TV, the broadcast bullies tried connected TVs by 2015. The anticipated
to kick the new kid out of their schoolyard. uptake can be attributed, in part, to a retailer
cabal: Best Buy announced it would only
But connected TV isn’t a sandbox. It’s sell connected TVs in 2011, and Walmart
Madison Square Garden. It’s the big ring indicated it will follow suit in 2012. In a
where the heavyweights are contending for related move, Walmart also expanded
$180 billion in ad revenue. It’s the title match into digital content distribution, acquiring
between digital and traditional media. And streaming high-def video company Vudu,
smart marketers have booked ringside seats and inking an interactive deal with Disney
for 2011. for Toy Story 3. Meanwhile, manufacturers
like Toshiba, Samsung and Sony are ramping
True, earlier versions of interactive TV lost the up production and rolling out new models
fight before it really began. This is a category of interactive TVs. Across the technology
haunted by the wreckage of has-beens and and retail spectrums, leading companies
wannabes with a decade-long history of hype are pursuing parallel agendas that will drive
and misplaced hopes. Remember WebTV and adoption of connected TVs and reconfigure
AOL TV? Nope, neither do we. Those products that ungainly box in your living room.

37. 37
Open Eyes and Active Hands
Brand Experimentation Required
Interactive TV builds on the promise of digital as the technology evolves. The integration of and consumers are growing more accustomed
marketing—engagement, measurement and television and digital ads onto a single platform to viewing video ads online, further blurring
targeting—and brings it to a bigger screen. will very likely be a catalyst that integrates, and the experiential boundaries between digital
Addressable ads could be a serious boon to rationalizes, the respective marketing budgets. and TV. By late 2010, online video content
brands with clear segmentation strategies was being viewed by 178 million Americans
and a willingness to experiment. The Meanwhile, Walt Disney Co., Mattel Inc. and monthly, according to comScore. On average,
interactive content, of course, needs to be the U.S. Navy have been experimenting with those viewers consumed 14.3 hours of online
sufficiently compelling to lure viewers away interactive channels on cable, according to video per month.
from their show. The Wall Street Journal. Cablevision created
interactive channels for the brands that can be Most households with interactive televisions,
On the other hand, mass brands accustomed navigated by a standard TV remote, providing however, have not been taking advantage of
to connecting in a predictable manner with videos, coupons and callback requests for the heightened connectivity. Back in August,
the largest possible audience may initially customer service. Casual games, pre-roll spots Forrester Research reported some daunting
experience confusion as the traditional TV and pop-up banners are now in the mix as well. numbers:
format fragments into a dizzying menu of • 61% of consumers hadn’t even heard of
programming choices and heterogeneous Though the pricing for TV ads has been connected TVs.
micro-communities. traditionally pegged to an estimated audience • 27% said they couldn’t imagine why they’d
size, the new wave of interactive ads often want a TV that connects to the Internet.
Brands currently shell out three times utilizes a performance-based model similar to • 26% of people who owned connected TV
as much for TV ads than they spend on online pay-per-click. This pricing model should said they don’t often take advantage of
online marketing, even though the media effectively lower barriers to entry by marketers the Internet connectivity.
consumption of today’s consumers is evenly looking to take the new technology for a • 20% of owners were very happy with
split between the two mediums. Interactive TV test run. their connected TVs, but only 12% would
ad spending is barely a blip in today’s market. recommend them to friends.
Google TV, in fact, had no ads at launch time, In a related trend, online video ad-serving
but more marketing dollars will be allocated platforms like adap.tv continue to gain traction, We can sympathize with the disappointed

38. 38
first-generation users. Surfing specialty promo
channels on cable with your old-school TV
remote really does not sound like a ton of
fun. But major developments have occurred
since the Forrester survey—the September
second-generation release of Apple TV,
the October debut of Google TV and the
November launch of Microsoft Kinect. Kinect,
the flagship peripheral suite for Xbox 360, is
technically an add-on for a gaming console.
But the hands-free, motion-sensing, face-
recognition technology has serious potential to
fundamentally change how we view television.
Microsoft sold over 2.5 million Kinect units in
the first month. Around the same time, word
leaked that Microsoft had been talking to TV
programming providers about launching a
paid-subscription TV channel via the Xbox
360 console, which could create a new super-
competitor in connected TV.
As these technologies grow along with
consumer expectations, we’re going to see
some compelling new developments in
interactive television. The tube is about to
178M
By late 2010, online
video content was being
viewed by 178 million
be reborn. Americans monthly.

39. 39
60% Nearly 60% of TV
viewers use the
Internet while
watching TV at least
once a month.
The Promise of Apps:
“The coolest thing about Google TV is we don’t the coolest thing about Google TV and its
even know what the coolest thing about it will competitors will be? Apps. Apps have the
be,” came the pitch for the new service, now potential to truly revolutionize television,
Third-Party Apps available on Google TV Logitech set-top boxes, the same way they changed everything
Sony Internet TVs and Blu-ray players from brick- in mobile—setting higher consumer
Anticipated for and-mortar stores like Best Buy. expectations, changing behaviors and media
Google TV, but Apple All due respect to the geniuses in Mountain
consumption patterns, accelerating uptake of
new technology and creating unprecedented
TV Slow on Uptake View, but doesn’t everybody already know what sales growth.

40. 40
Nearly 60% of TV viewers use the Internet while Apple, surprisingly, has proven slow to TV shows individually for 99 cents an episode
watching TV at least once a month, according embrace the full possibilities of its Apple and thereby jeopardize the sale of the same
to Nielsen. This implies that our culture, in TV set-top box, which seemingly remains a shows to branded networks that pay hundreds
many ways, has already moved ahead of the side project for the company, described as of millions of dollars?” Bewkes said.
technology. We’re using the Internet and a “hobby” by Steve Jobs, after four years
TV together. Why not do so on the same on the market. Apple TV2, unveiled in Television industry incumbents should be
device? And, while we’re at it, why not use the 2010, allows users to watch iTunes content expected to be wary about these disruptive
touchpads on our smartphones to change the on their televisions, rent shows for 99¢ from innovations. For audiences, though, it’s all
channel and search for content? ABC and Fox and access Netflix, YouTube upside. Consumers will be able to custom-
and Flickr, but it does not yet function as tailor their viewing choices and activities,
Google TV ships pre-loaded with apps for a wide-open platform for third-party app updating their Facebook profile, for example,
Netflix, CNBC, Twitter, Pandora, Napster and developers. We’re encouraged by the then changing “channels” to watch Grey’s
NBA Game Time. Other Google TV media rumors, however, that the next-gen release Anatomy while tweets from their friends’
partners, such as HBO, NBA and Turner of Apple TV may offer app support—the stream in a news crawl at the bottom of
Broadcasting, have developed dedicated online sooner, the better. In the meantime, hackers the screen.
platforms for interactive TV programming. The are already touting their own custom apps
opening of a Google TV app marketplace is for jailbroken Apple TVs. Given how much we now use web-based apps
anticipated for 2011. on the 3.5-inch screens on our smartphones,
Clearly, not everybody’s on board. Though why should we accept that the 36-inch screen
Admittedly, first-generation Google TV lacks a he gushed that television was entering a on the wall would remain technologically inert
certain artistry and ease of use with its interface. second golden age, Jeff Bewkes, CEO of and app-free?
The search function does not always quickly Time Warner, nevertheless warned media
or accurately return the right TV program execs at a London conference in September The connected TV is a portal into new
when searching for a show, and the keyboard that lower-cost digital competitors like possibilities, placed at the most important
controllers are clunky. People expecting an Apple and Amazon could erode the long- social locations in the home. The most
elegant TV equivalent of an iPhone, or even an standing value of television programming. thrilling aspects of interactive TV extend far
Android, have been disappointed. The design According to Hollywood Reporter, Bewkes beyond finding new ways to watch television
and functionality should progressively improve railed against the Apple pricing model in programs. TV apps have the potential to
in future releases, but there seems to be a big particular. integrate TV, web, search, video, social and
opening here for competitors, say, a well-timed shopping. They’re going to rip the lid off the
follow-up act from Apple TV. “How can you justify renting your first-run old paradigm.

41. 41
56%
Of the one-third of
Americans who own a
DVR, 56% fast-forward
through commercials.

42. 42
Socializing the TV Set
Turning On and Tuning In
Social TV companies are promoting mobile Aiming squarely at the mainstream, TVGuide Television is indisputably a social medium.
applications that add social functionality to launched new check-in features in October It’s the focal point of the “family room” in
TV watching. They’re targeting the 200 mil- with simple buttons on its website that read modern households. And for decades, work-
lion people who already use mobile for social “I’ll watch” for particular shows. The feature ers have gathered around the water cooler to
communication like tweeting and Facebook is integrated with Facebook, allowing users discuss their favorite shows.
status updates. The future of social TV will be to divulge their guilty pleasures or try to
apps that bring social alongside the set-top impress each other by pretending to watch To help quantify the buzzing sociality of TV,
box and display controls of interactive TV, but only high-brow PBS documentaries. Within consider these Twitter stats compiled by Fast
for now, these sites primarily cater to audi- the first month, the site was receiving 10,000 Company:
ences of traditional TV. check-ins per day.
• There were 2.3 million tweets during the
Social TV sites like Miso, Tunerfish, Philo and Still, some people insist TV audiences prefer East and West Coast broadcasts of the
Starling give a hint of the possibilities. These to be passive. They don’t want to lean for- 2010 MTV Video Music Awards.
sites appeal to “superfans” and are generally ward or, for that matter, strain their forebrain. • Glee, the most popular primetime series
at their best when facilitating communication Instead, they simply want to sit back, relax on Twitter, was mentioned in 285,800
between friends viewing the same program and be entertained. But until quite recently, tweets on the day its Britney Spears epi-
at the same time. By placing a premium on audiences have never been given an authen- sode aired.
“live” experiences, connected viewing may tic opportunity to truly interact through their • In the immediate lead-up to the series
offer clues on how advertisers can finally televisions. It’s always been a one-way me- finale of Lost, and the letdown that fol-
overcome the audience attrition from DVR. dium. The theories of audience passivity are lowed afterward, there were over 400,000
Of the one-third of Americans who own a accepted only because they remain untested. Lost-related tweets over a 24-hour period.
DVR, according to Nielsen, 56% fast-forward That doesn’t mean they’re true.
through commercials.

43. 43
Why the TV Networks Are Nervous
Disruptive Innovation
Clay Christensen, the Harvard Business disrupter. The company succeeded by taking incumbents. The new offering isn’t competing
School professor who wrote the classic book an innovative approach in the declining against better-known alternatives in the same
on disruptive innovation, has observed segment of tight-margin video rentals. Netflix category because the category itself is brand
that up-and-coming attackers can prevail launched its subscription service in 1999, new. The only competition is non-consumption.
against industry incumbents with two posted its first profit in 2003 and mailed In other words, the new technology is either
central strategies—low-end disruption its two-billionth DVD in 2009. By 2010, adopted or it dies.
and new-market disruption. Interactive TV the number one incumbent, Blockbuster,
has elements of both, which is why the TV had declared bankruptcy and number two, Interactive TV is a new-market disruption,
networks are nervous. Hollywood Video, was being liquidated. particularly when one considers the full search
Recently, Netflix introduced a cheaper, functionality and web-browsing capability
In the low-end scenario, large incumbents pure-streaming video service for consumers of Google TV. For all the talk about “cord-
basically fall asleep at the switch, blithely who don’t want to receive any DVDs in cutting,” this technology isn’t a viable
ignoring new entrants in the bottom segment the mail. In the process, they’re moving replacement for cable or network. It’s a
of their core markets where returns, quality upstream into the profitable headwaters of new category.
and demand are relatively minimal. What’s video on-demand, traditionally controlled
the problem with mocking a competitor by cable networks. But instead of charging The zillion-dollar question facing Google TV
for having a teeny-weeny footprint? If the inflated cable-industry prices, they’re offering isn’t whether people will ditch their current TV
low-end offering improves and innovates unlimited streaming videos to consumers for service, it’s whether they really want to web
at a fast-enough rate, it will gradually claim only $7.99 per month. access via their TV. If not, chalk one up for non-
customers in the middle tiers of performance consumption. But if people want full interactivity
and profitability, carving out the incumbents’ New-market disruption involves the from the biggest screen in their house, and we
market from the bottom up. introduction of an innovative product or certainly believe they will, then interactive TV
service into a new segment or emerging will gradually gain ground against the broadcast
Netflix is a prime example of a low-end market that is not traditionally served by networks, particularly if they balk now.

44. 44
44
Google TV could be the kind of parasitic
technology that benignly feeds off
traditional TV for a few years, then gradually
grows big enough to swallow its host.
Related hardware and services from Apple,
Netflix and Roku are poised to join that
feeding frenzy.
The major networks seem to think they can
inoculate themselves by blocking access, but
as soon as Fox and colleagues quarantined
their sites from Google TV, online tips for
workarounds and “unblocks” were instantly
circulated online by white-hat hackers.
Limiting access isn’t the solution. If anything,
networks will only hurt their cause by
$120B
disenfranchising consumers with annoying
barricades to online content that’s freely
viewable from any laptop. And if they really
Brands are spending $120
think it’s a good idea to get into a shoving
billion more annually on TV
match with game-changers like Google, they ads than Internet ads, even
should consult their media colleagues in the though consumers evenly
magazine, newspaper, publishing and music split their time between tube
industries. Immediately. and web.

45. 45
Looking ahead to 2011,
we’ll see some exciting
developments in AR
marketing as the technology
moves from the desktop to
smartphones.
Augmented Reality

46. 46
The Digital Enhancement Spaces
of Public
Augmented reality, enhancing our natural intersections as you virtually cruise the consumers find their nearest sandwich shop
view of the world with overlays of digital photo-documented downtowns of online while adding whimsical touches to the local
information, sounds like a scenario from a cities. More recently, Microsoft unveiled eye- landscape, including 3D animations inside
sci-fi film where the ultracool anti-hero wears popping new AR features for Bing that turn Yankee Stadium.
neural chip implants and hi-def eyeglasses online maps into truly interactive 3D worlds
while speeding through the cybersprawl. featuring live video feeds, indoor views taken These developments lead us to consider
But you don’t need to wait for the straight- with a backpack camera and overlays of some provocative questions about the
to-DVD release. Although it might sound georegistered images from Flickr. Users can monetization of public space. What if Quiznos
like a fantasy from the far-off future, the era dramatically swoop from street view to aerial, superimposed its AR ads over nearby Subway
of augmented reality has already, in fact, flying like a disembodied avatar over a Sim shops? What if the Yankees plastered virtual
begun. And it’s finding resonance, as well as City-like landscape. billboards across the left-field wall at Fenway
some interesting applications, with marketers Park in Boston? Building virtual perimeters,
hunting the next new trend. Looking ahead to 2011, we’ll see some known as geofences, has been suggested
exciting developments in AR marketing as as one possible solution, which, incidentally,
You’ve seen first-generation augmented the technology moves from the desktop could also be used to automate check-ins
reality (AR) in televised football games— to smartphones with applications such for location-based apps. Although, who will
that yellow first-down line isn’t actually as Tagwhat and Layar. Tagwhat allows decide the size and orientation of your digital
on the field, glowing in the grass, it’s a users to create and share location-based fence’s footprint? What kind of surveyor
digital overlay to enhance the live viewing messages by “tagging” physical buildings do you hire? And what’s the penalty for
experience. Similar applications have been like a GPS-enabled graffiti artist. Layar is trespassing across virtual borders? Anticipating
popping up on the web. Two years ago, an augmented reality browser that allows that these kinds of questions will eventually
for example, Google introduced interactive iPhone and Android users to stream multiple land litigious competitors into real-world
links with ad-functionality for retail stores, layers of localized digital information onto courts, Pillsbury Law Firm recently established
restaurants, museums and other venues their touchscreens while their phones are a specialized “virtual worlds” practice to
within its panoramic street-view maps, in camera mode. Quiznos teamed up with provide legal counsel on AR issues. So far, few
highlighting local businesses and labeling Layar last year to develop an app that helps precedents have been established.