Louis Halpern's View

As everyone grapples with Web 2.0, mobile marketing/J2ME, blogging and user-generated content along with a host of other new digital applications, sneaking up almost unnoticed is the next new phenomenon, virtual worlds.

Virtual worlds are websites where people, in the form of avatars, live much like they do in the real world. They socialise, build homes, buy clothes and possessions but without the restrictions of a physical body or gravity. Many digital consumers are now spending hours upon hours in what is a ring fenced synthetic world.

Figures for the phenomenon are breathtaking. Second Life, which along with There.com and Warcraft is one of the leading virtual worlds, boasts one million signed up members with thousands online at any one time. This is up from 350,000 in July, making Second Life the biggest upcoming threat to Myspace as the web’s largest online community.

The most surprising aspect about virtual worlds, however, is the level of revenue they are generating. $300 million dollars a month in the US is now spent on virtual worlds as community members spend money on virtual houses, virtual leisure, virtual clothes and a host of other virtual products. Second Life itself has over 7,000 in-world businesses. The phenomenon has become an even bigger craze in the Far East with virtual world spending in South Korea reaching a staggering $230 million a month whilst in August, Levi Jeans sold $36,000 of virtual clothing in Japan.

For marketers, virtual worlds offer both a threat and an opportunity. The threat is that as more digital consumers log onto virtual worlds, they end up in a closed world which prevents other online communication tools from reaching what is a very lucrative, predominantly young target audience. Banners, podcasts, blogs and other forms of online advertising fall by the wayside when consumers are spending hours in what is a tightly ring-fenced environment.

If brands are willing to participate in virtual worlds, however, the opportunities are huge. Adidas has bought centrally located land on Second Life to support the launch of its new A3 Microride sports shoe giving consumers who buy the virtual trainers extra bounce throughout the virtual world. The company has even created a bouncy floor where consumers can try out the extra bounce before purchase. The cost of the virtual shoes is 100 Linden dollars (Second Life’s monetary unit) which is equivalent to the actual real-life cost of the trainers.

What Adidas and Levis have achieved is a holy grail for marketers – virtual products that create the same brand connection that real products do, but at no real cost of production. In what could be the prelude to a second major digital ‘land grab’, other brands forging ahead on Second Life are American Apparel, Toyota, Major League Baseball, LEGO with many other brands considering entering the space. Sun Microsystems even held a virtual press conference earlier this autumn.

Virtual worlds also offer brands an outstanding three dimensional test bed for new marketing designs. Companies such as Adidas are able to offer virtual product lines and test how each product fares. The most appealing designs subsequently make it into the high street, effectively cutting out the need for costly focus groups and allowing brands the opportunity to maximise revenue in the real world too.

Whether Second Life and other virtual worlds will be a long lasting marketing channel remains to be seen. Some commentators view it as broadband’s ‘killer application’ whilst others view it as no more than a computer game that will reach critical mass in record time but will disappear just as quickly. Parallels certainly exist with the best-selling game SimCity, yet in terms of ongoing income generation, virtual worlds are in a league of their own. That’s the major difference.

Whatever the views, the numbers don’t lie. Secondlife’s home page has a running total of dollars spent online and the site currently generates $500k every single day. In fact, if virtual worlds such as Second Life continue to grow at the same rate as they have over the past eighteen months, their growth will dwarf the rise of Google and eBay. It’s for this reason that the US Congress has already launched an investigation into the tax implication of communities like Second Life and how virtual economies should be taxed. If the US Congress is getting involved at such an early stage, it’s a clear message that governmental authorities view the medium as a future threat to their own streams of tax income generation.

Such is the projected growth of virtual worlds, Reuters has created a virtual world news agency and allocated a full time virtual bureau chief to cover Second Life. Reuters rationale for entering the virtual world arena was simple, “it’s a good chance to engage with a new audience of people that ……may not be consuming our products in any other way.” For brands, it’s the second half of that sentence that’s important. Virtual worlds are ring fenced and it’s only by participation within them that brands can benefit – previous online marketing methods won’t work. It’s for this reason that brands must prepare now. In a year’s time it will be too late.

During the summer of 2006 every person in Malmaison’s database received an email. It was a simple, uncluttered message dominated by an eye-catching image. At first glance, the sight of beautiful dandelion seeds drifting sedately into a deep blue sky no doubt soothed a few minds and brightened the day for many. Then something happened. The ‘delete’ button didn’t get pressed. Instead, heads leaned closer to monitors, eyes widened and eyebrows were raised

Those weren’t ordinary dandelion seeds. They were transforming. They were subtly turning into something else: the Malmaison logo.

Bold design, an unusual visual element and Malmaison’s strong brand identity were combined to deliver exactly the kind of twist their target audience has come to expect from this innovative company. Consistency in values is always vital but, alone, they aren’t enough to ensure customer loyalty. You’ve got to give them something to shout about too… and Malmaison had a great offer.

A sexy, well-crafted vehicle for a highly desirable product can’t fail to achieve the desired results. This is what the advertiser looks for; maximum impact: something that conveys a brilliant opportunity to the right people in a stimulating manner.

Respecting the target market; communicating with them but not bombarding them, so that they actually look forward to receiving something from you; ensuring that what they get is always worth looking at, these are the measure of a superb brand and a successful promotion. As are, of course, results.

The Malmaison email worked. People clicked on the image and arrived at a microsite. It continued the theme, expanded the message, tempted them with the irresistible… and they responded to the offer in droves. Sales in August were fantastic. Job done. With style. We like that.

A little bit about my posts to date:

Mobile firms miss a trick – UK mobile phone operators take anywhere between 40-60% of revenue on mobile marketing campaigns – a significant barrier to any progressive marketers wanting to embrace the format. more…

Evaluating integrated communications – Marketers’ mindsets will need to change before integrated campaign evaluation takes an equal seat alongside planning, strategy, creative, etc. Data quality available to marketers today is such that those brands and agencies who embrace this information will gain a notable competitive advantage. Likewise, those that don’t pay attention to the data now available will suffer accordingly. more…

Media owners of the future – The fragmentation of traditional media was already an unstoppable process a decade ago. Now there’s no doubt that the digital revolution has added its own mix of rocket fuel which is becoming more potent with every technological advance. It will demand a radical re-assessment of the world we live in and the way that as humans we interact with each other. more…

Digital consumer data is the new battleground – With one billion people worldwide currently having access to computers and with more than 800 million new mobile handsets being issued this year alone, only those media owners holding the most valuable and precise individual data will survive. more…

Camden Town HC happenings:

There’s certainly been a lot of activity at Halpern Cowan over the past few weeks to share with you. Our client services team continues to grow in line with the flux of new business wins. We’ve three new additions – Alex Pierre-Traves – Account Director; Grace Wilson – Account Executive; and Janita Patel has been promoted from working with me (poor girl!) to Account Executive.

We continue to be known for our awesome viral marketing but this is only a fraction of the picture of the diverse digital output from Halpern Cowan. My favourite examples from the last few months include:

• Tamares – a corporate website with a twist. Hand drawn attention to detail in New York and the trading floor of the London Stock Exchange. www.tamares.com
  
• Ebookers calendar – Its exciting to put a brand in a place where traditionally only Microsoft has reached. We’ve opened a unique channel with ebookers that is already spreading through word of mouth alone, giving users something relevant and useful to their lives! www.ebookerscalendar.com
  

The HC E-Shop – Every time we’ve tried to buy off the shelf shop software we’ve been frustrated. Frustrated that it wasn’t as functional as our favourite internet shop – Amazon. To solve the problem we decided to build our own. Testing is now complete and it’s being rolled out to our clients and their customers. Watch this space for more noise about this. And well done to the development boys.

The evaluation of integrated campaigns is a topic rarely looked at by the mainstream marketing press. Flick through the pages of Campaign, Marketing, Marketing Week or niche publications like New Media Age and barely a nod is cast in the direction of campaign evaluation. Why? It’s simply assumed and taken for granted that campaign evaluation ‘works’. After all, each marketing channel has its own tried and tested method of measuring effectiveness and verifying ROI.

To most commentators schooled in their various areas of marketing expertise, it would seem that all is rosy in the land of campaign evaluation. Of course, to some extent it is but wait, what happens when the optimum marketing solution is an integrated campaign that involves nine different marketing channels? How do you compare TV awareness recall with Online Price Per Click? How do you compare rail station poster reach with a Sunday Times leaflet drop? In effect, how does one evaluate not only the campaign itself but the efficacy of each marketing discipline against another?

This is altogether a different problem and one which the marketing industry hasn’t fully come to grips with, especially in an era of massive media fragmentation. As a result, it is currently impossible to compare disciplines in a way that is commercially relevant from a wider strategic perspective. How does one advise a company’s board that it would be more effective to spend £3 million on a television campaign than spend the equivalent figure on a combination of direct mail, sales promotion and an online banner campaign?

It has been advocated that a ‘gold standard’ of integrated campaign measurement could be possible – a single benchmark that works as well for television as for newspapers, as accurately for direct mail as sales promotion. That this hasn’t been achieved already is a combination of two factors: firstly the difference between the various advertising channels has been too wide, and secondly the vested interests controlling each media channel have acted solidly as a barrier to real integration.

So, what is the way to breach this impasse? Data. The modern era of digital technological solutions lends itself to the collation and analysis of data with unprecedented accuracy. For example, ‘reach’ is a measurement that all the various advertising channels have in common. It is now possible to calculate reach with an accuracy never before seen – in Times Square, New York, billboards actually contain digital cameras which physically calculate how many people are looking at the poster images at any given time. The ideal solution is therefore quite straightforward: collect all the data you can gather and then analyse and report on the results using an internet-based business model.

Take an integrated campaign for a leading consumer brand. With TV media it is possible to obtain figures for reach, awareness and even ITV figures. This data is inputted into a central campaign database in conjunction with results for other advertising channels such as direct marketing, sales promotion, online advertising, email marketing etc.

Within the central database, it is then crucial that all the different metrics are paralleled. Each advertising channel metric will also contain both a ‘known’ and an ‘unknown’. The known refers to a statistic that is provable such as visitors to a website whereas the unknown consists of an educated guess, such as how many people will scan a newspaper print ad. Both sets of statistics are added to the central campaign database and skewed using mathematical modelling to give a hugely accurate effectiveness profile for each media.

Of course, there will be limitations with the data and certain media will give far more accurate statistics than others but the challenge is simply to attain the very best data available for every media used. Obviously, the central campaign database must be exceedingly well designed to allow such complex mathematical modelling, but the expertise is certainly available – it is just a question of resource allocation and dedication. The benefits are clear: not only can integrated campaigns be evaluated accurately but also campaigns can be analysed in real time allowing creative and media to be tested ‘live’. The integrated campaign can then be tweaked throughout its course to give a vastly improved ROI.

With every passing year, data accuracy is becoming increasingly sharper and more refined. As digital and technological applications infiltrate every media channel (not just online solutions), marketers are going to have fewer excuses for not dedicating time and energy to real time campaign analysis. To date this has not been the case, and back-end analysis and campaign collation have rarely been considered as important as front end planning and campaign management. £millions will be allocated to television, £100,000’s to print media yet very little is usually invested in data collation.

Marketers’ mindsets will need to change before integrated campaign evaluation takes an equal seat alongside planning, strategy, creative, etc. However, in the new digital age, such is the quality of data now on offer to marketers that those brands and agencies who embrace this information will gain a notable competitive advantage. Likewise, those brands that don’t pay attention to the data now available will suffer accordingly. In a nod to the increasing importance of data and research, Campaign magazine ran an article late last year entitled ‘The Golden Age of Planning’. They should have also added, ‘and Campaign Analysis’. In conclusion, there is no doubt we are entering the new era of data.

Whilst the fragmentation of traditional media was already an unstoppable process a decade ago, there is no doubt that the digital revolution has added its own mix of rocket fuel which is becoming more potent with every technological advance. We’ve become a fractile society of individuals in a way that, as Lord Rees Mogg asserts in “The Sovereign Individual”, could eventually even undermine the power of nation states themselves. It will demand a radical re-assessment of the world we live in and the way that as humans we interact with each other.

As part of these seismic trends, marketers are ill-prepared for the changes in media that now loom on the horizon, all driven by the very industry we work in. As mass media disintegrates, those media owners holding the most valuable and precise information will be the new media kings, the new Randolph Hearsts. Make no mistake, these new media kings will be digitally-based and recent manoeuvrings by eBay, Yahoo, Google and Microsoft are a strategic recognition by these digital giants that information is the new currency.

By its simplest definition, media owners are intermediaries. They provide the content that allows advertisers to target their chosen markets. In the new digital paradigm, the role of media owner is still the same but is now exponentially more sophisticated. Google’s strategy is an undeclared recognition of this very fact. As the number one search engine they already know what you’re reading, what you are interested in, where you are going (Google maps) and their forays into the VoIP and mobile markets are significant because Google will eventually know everything about you.

Google’s strategy is replicated elsewhere across the net. Is it any coincidence that eBay has bought Skype? Or Yahoo Dialpad? It’s not a haphazard plan but a clear land-grab to not only own ‘growth services’ but to also own personal information and data. By aggregating that data and publishing it in the right way all these services will combine to provide advertisers with unparalleled personal information on each and every individual. It will be worth a fortune. It is the media industry of the future, and it is approaching more rapidly than people think.

The information collated on individuals will allow far more than preference advertising. It will allow precise delivery of relevant communications to millions of individuals in ‘real time’. It will also be delivered in a far more personal way, eventually via mobile which itself will supersede the computer and becoming the on and offline medium of choice over the next five years. Civil Liberty campaigners may bleat about privacy issues but I don’t think there is a privacy issue. On the contrary you are only seeing marketing messages that are relevant to you. And I stress the word ‘relevant’. Why, if I was looking for a new car and currently drove a BMW would I mind receiving an ad for a Mercedes E-Class?

The great advertising edifice, made up of TV, outdoor, radio and press is visibly crumbling. Omnicom OPera’s recent announcement that ITV1’s share of TV advertising revenues will fall from 46.8 per cent in 2005 to a forecast 43.3 per cent in 2006 (a drop of £82 million) is a staggering example of this. The old paradigm of mass media is now very quickly being replaced by precision-guided digital media targeting millions of individuals (with advertising budgets following suit). When people look back twenty years from now, 2006 will be viewed as the time that marketers and advertisers finally awoke to the recognition that the media owners of the future will be companies like Google and not the current media monoliths which are slowly becoming extinct.