Sunday, February 24, 2008 

Vol. 4 No. 3

The Coming Ad Revolution, or Why I’m So Enthusiastic About Online Communities…

Esther Dyson’s Observations Have it Right Again

Esther Dyson’s predictive foresight on Internet has harkened back way over decade when she wrote the testament to the Internet age, Release 2.0: A design for living in the digital age back in 1997. She is one of the foremost authorities on the Web today, and so when I read her recent editorial published in all editions of the Wall Street Journal a week or so back (ironically, when I was just wrapping up another NADA Convention), I took note, or more so, reassurance that I am on the right track.

I preprinted it, in its entirety below and want to say that I believe that the power of two way permission customer based, two way interaction and social networks will forever change the landscape of marketing communications in general, in every industry, but the changes will be most profound in the automotive industry – the industry that historically in the US, has spent the most on marketing and communications but has been the most reluctant to change in strategy in tactics (maybe a byproduct of historically having so much money to spend) on how to reach the customer.

…And Next Entry, I’ll Let All Know How I’m Changing Myself, How I’m Redirecting Everything to Focus on, Learn, Create and Lead in this New “Ad Revolution"



The Coming Ad Revolution
By ESTHER DYSON
Wall Street Journal
February 11, 2008; Page A18

While the big news in the online world focuses on Google, Yahoo and Microsoft, a more profound revolution is taking place on the online social networks: The discussion about privacy is changing as users take control over their own online data. While they spread their Web presence, these users are not looking for privacy, but for recognition as individuals -- whether by friends or vendors. This will eventually change the whole world of advertising.

The current online-advertising model will become less effective, even as it gets increasingly sophisticated. New players are emerging to devalue the spaces that the ad giants are currently fighting over. Companies you've never heard of called NebuAd, Project Rialto, Phorm, Frontporch and Adzilla are pitching tools to Internet service providers that will enable them to track users and show them relevant ads. This approach (called behavioral targeting and already in service by ad networks that track users through so-called tracking cookies) undercuts traditional online publishers, who employ content to lure users and to sell adjacent ads. Now, the ISPs can sell advertisers direct access to the same users.

Take user number 12345, who was searching for cars yesterday, and show him a Porsche ad. It doesn't matter if he's on Yahoo or MySpace today -- he's the same number as yesterday. As an advertiser, would you prefer to reach someone reading a car review featured on Yahoo or someone who visited two car-dealer sites yesterday? His identity is still private: The ISP and behavioral-targeting networks don't know 12345's name and don't care. They just know what they think he wants.

This market will get more competitive, and users will be barraged by ads to which they will pay less and less attention. Call that public space, a world of billboards and cacophony. Even though the ads will be more "relevant" than ever, users will increasingly tune them out.

Now consider the new world of social networks. Facebook, unwittingly or on purpose, has been teaching people to manage their own data about themselves. Facebook's launch of the Beacon service -- which informs Facebook of members' activities (i.e., purchases) on other sites -- was a PR fiasco. But it still familiarized millions of users with the notion that they can control information about themselves online -- and determine to whom it is visible.

What might seem like a horribly complex and tedious task to their elders -- categorizing "friends," managing news feeds, handling intersecting communities of contacts -- feels natural to the Facebook users of today. They want more granularity of control, not less.

Each user determines who will get into his own garden, whether friends or vendors. Look at Dopplr (where I plan to become an investor), a site for travelers. I list my trips, and see how they intersect with my friends' itineraries. "Oh, we'll both be in London April 4? Let's get together!" Or, "Juan and Alice will be in town next Tuesday. Let's hold a dinner!" You can imagine or visit equivalent approaches for books (a hypothetical Amazon 2.0, new and more personalized), clothes (Glam.com and Stardoll.com), and even money management.

So what's the business model? I'll "friend" British Airways, which will say, "We see you're going to Moscow next month. Why not fly through London and we'll give you 10,000 extra miles?" I'm no longer in a bucket of frequent travelers, my privacy protected. I'm an individual with specific travel plans, which I intentionally make visible to preferred vendors. British Airways, of course, will pay Dopplr a handsome sponsorship fee to be eligible to be my "friend" (just as a Nike rep might pay to sponsor a basketball game and be part of the community). Someday NetJets may show up, offering to ferry me and my friends to a conference we'll be attending together.

I'm far more likely to respond to BA or NetJets within a trusted site, and for a specific offer, than I am to heed their ad while reading a newspaper article on the troubles in Russia. (As for Orbitz, my old standby: After five years, it still doesn't acknowledge my preferred airlines.)

The new model creates a more trusted environment for reaching high-value, frequent purchasers, whether of airline tickets, electronics, clothes or other items. Where does that leave the less-frequent purchasers? Probably looking to their friends rather than to advertising for advice. I'm an expert on travel; my friends may look to me for hotel choices. When I'm in the mood to buy a book or a new computer, I'll check out what my friends on Facebook are doing.

This does not mean that traditional online advertising will go away, just that it will become less effective. Value is being created in users' own walled gardens, which they will cultivate for themselves in real estate owned by the social networks. The new value creators are companies -- like Facebook and Dopplr -- that know how to build and support online communities.

Ms. Dyson is an investor in companies including 23andMe, Eventful.com, Meetup Inc., WPP Group and Zedo.

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10:42 AM | |

Wednesday, February 13, 2008 

Vol. 4 No. 2

The More Things Change…The More They Become Different…
Women, Cars, NADA 2008 Annual Convention, and CarsDiva.com

I’ve been in the car business a very long time by most standards, over 22 years now. As always though, at the National Automobile Dealers Association 2008 Convention, there are dealers and other attendees who make me look like an absolute rookie. , The 91st annual NADA Convention, as in previous years, still overwhelms me with the sheer size and scale of the event.. Anybody who is anybody in the retail end of the car business attends, and no matter how high up on the ladder, seems accessible for at least these few days a year – this is the only convention I recall where all the top guys of the industry make a point of being available at their booths on the convention floor (and at meetings, and parties, etc.), to meet and greet all of the attendees that they can for the time available.

The Times, They Are A Changing…

So in my almost quarter decade of the business, sometimes the NADA conventions reflect a certain theme, something in the industry that represents change, that overtakes many other topics. I remember the “Asian invasion” (two of them), the issue of dealerships being public entities (that’s only a little over 15 years old, by the way, for an industry that’s been around 100 years, that would be a little surprising to most folks), the “factory dealer” controversy and the “Blue Oval” experience. I’ve lived through the “.com,” “direct-to-consumer” and march of the “silicon yuppie” late the last decade, and the “program car” era of the domestic manufacturers first buying, then selling all of the daily rental car companies.

Through all this, the resiliency of the automotive dealer system, and the admirable and effective tenacity of dealers, always seems to prevail, and indeed, no matter what situation unfolds, dealers always adapt to create benefit out of chaos, advancement out of change. This year the “economy,” “green” and “emission standards” are of the highest priority, and Chinese vehicles are a hot topic. One additional event, of the highest impact was the official inauguration of the new incoming NADA Chairman, Annette Sykora. While this would seem unremarkable in most industries, this is the first time in its history that NADA has been chaired by a woman, and it’s pushing a hundred years old.

The fact is women directly buy the majority of new and used vehicles, they directly spend the majority of vehicle service dollars, yet as I walk the halls of NADA, the ratio of men to women in the retailing end of the business is still probably close to 90% men to 10% women. But this represents a positive change, as when I started in the business is it was, indeed, more like 99% to 1%.


Where I Think the Web Plays a Role

There are many reasons for the recognition and growth of the empowerment of women in the business, but one overwhelming catalyst in particular has been a level of transparency and openness that was initiated by the Internet over the last ten years or so. When I started in the business, it was common practice for a dealer to not let his salespeople know the true invoice of a vehicle, dealer customer satisfaction numbers were a closely guarded secret, and poor treatment of women and consumers in general, was notoriously commonplace in some of the more financially successful stores. With no light shining on these facts, there was very little there to motivate a change of these old practices.

About ten years ago now, the World Wide Web came along, and added a level of transparency that changed everything. Now vehicle invoices (and current consumer and factory rebates) are available to anyone who can connect up (even though for many years after this freely available information was posted, many dealers still refused to reveal individual vehicle invoice prices to salespeople…go figure). Bad “word of mouth,” and now dealer rating systems, are easily “vetted” on the Web for all to see instantaneously. And voila, the focus and treatment of women consumers that make up the vast majority of the retail automotive buying market, have improved dramatically and NADA has a woman Chairman. I don’t think any of this is coincidence or happening in a vacuum, but instead is finally ushering in a new age, where both the best and worst retailers are exposed very quickly with the visibility of virtual communities on the Web. This is taken now one step further with the advent of “social networks” that is, the formation of information exchanging virtual communities, specifically created to make available personal referral type information informally among online local and national friends.

So get the convergence here… Online communities are the most rapidly expanding Web communication medium for both individuals and marketers, and are the focus of conventional media. Cars and automotive topics have always been one of the staple topics of offline communities, when people socialize and congregate. Word of mouth referral is important to every consumer, and is the most trusted and credible method by which to pick any retailer or item (as opposed to advertising or marketing, in any form). Women buy and service the majority of motor vehicles in the US, and are, as a group, the most dissatisfied and disenfranchised with the car buying and servicing process, and are grossly underrepresented on a professional basis within the retailing end of this industry. (These two facts have something to do with each other, no doubt).

So put together all of the facts of the above, and the conclusion that a social/professional automotive online community focused on women and automotive topics would satisfy an unmet need and help to bridge the information gap for women (and all) consumers on how the business works, allowing for the type of industry retailing transparency that leads to greater purchase and servicing satisfaction. To be most effective, it would need a personal spokesperson, a woman in the business to act as a catalyst and bridge between consumers and the industry, to reach out to male and female industry personalities to explain their various functions and specialties, in a personal communication dialogue. It’s a sort of virtual town hall where the many knowledgeable customer focused individuals in the business (many at NADA right now,) are visible and can be a consumer resource for the advancement of all….


That’s the CarsDiva & CarsDiva.com

I’m proud to have announced at this year’s NADA Convention our first automotive related online community (and the only one focused on retail consumers, the rest will be industry trade networks), CarsDiva.com, the online network “By, For & About Women and the Car Business.” I’m even prouder, by the way, to introduce the CarsDiva herself, Demetra Markopoulos, who is the best new industry insider catalyst I know to be the “Martha Stewart” meets “MotorTrend” meets “MySpace” social and professional network host. It’s no exaggeration to say that among issues of the economy, green and Chinese vehicles that 2008 marks the year of the true emergence of the recognition of women as the major consumer sector that fuels the car business at NADA. I congratulate Annette Sykora for her accomplishments and in playing a large part in moving the needle forward in this regard, and hope that CarsDiva.com can push things forward as well, to the benefit of all consumers and retailers in this industry (the one I’ve always liked the most).

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7:31 PM | |

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