The Phygital
The Phygital is a conversation. It is a series of observations, arguments, predictions, even artistic imaginings regarding the fusion of the digital domain and the physical realm. I have been exploring the state of affairs between the Virtual and the Actual for quite a while now and we are fascinated with the great reversal of roles that seems to have taken place: instead of the former digital adaptation and appropriation of material things (think of the folders and the trash can on your laptop screen as a very basic example), we see a new, physical manifestation of digital concepts and functions has beginning to emerge. Cross your middle and index fingers on both hands for instance, and you have just signaled a Twitter hashtag, specifying the general topic you speak about. What is that, if not a human gesture generated by lines of computer code?
Phygital can describe a million other things as well and all four of us will be more than happy to discuss and discover all these new definitions together, building an online community.
Another discussion around the phygital is where this trend is or can be potentially applied. Again, I have more than 4 industries (broadly speaking) on the top of my mind like engineering, product development, marketing and entertainment that could potentially be redefined using phygital elements in the future.
I will stick to marketing for now though.
FROM ANALOGUE TO DIGITAL ADVERTISING
In the past years, we all witnessed the boom of digital advertising – and we still do actually. There was a very quick and a bit “vulgar” transition to the Holy Land of digital advertising where everything could be measured and built on a 2-way communication process. Brands could not only communicate with their customers in innovative and brand-new channels but they could also “hear” what they were saying and “store” their reactions for future optimization of their campaigns.
This was huge news for the marketing/advertising industry. Before the era of digital advertising brands had to rely on channels like OOH banners, in-store promotions, radio and of course TV. Apart from TV campaigns whose efficiency can be measured (with certain limits), everything else was relying pretty much on the creative genius of the ad agency and some generic KPIs like sales volume, brand awareness etc. So it is true that “digital” advertising brought and is still bringing a revolution on how brands communicate with their customers. The whole value chain was redefined. New players got in, the KPIs changed and customers became brands. We all pretty much know that and there are hundreds of academic papers getting deeper on that and I am sure that digital advertising still has a lot of room to innovate, redefine itself and improve.
SOMETHING IS NOT GOING WELL…
But as I was witnessing this major and sudden shift towards the panacea of digital advertising as a consumer, as a Master’s student and as a marketing professional I was sure that something is not working properly. Of course I was not the only one and I was not the first. There is a huge and ongoing debate on how effective digital advertising is, why CTRs are so low, why the “banner” is probably the most #fail advertising format, why TV is the most #win format in 2014, why there are tens of softwares blocking ads and generally what happened and customers HATE advertising nowadays. I was following this debate, I was blogging about it but I was also sure that the reason/cause for all these effects was not our attention span, the information overflow or the UX of websites.
For me, the main reason was that this transition from physical to digital happened so fast and “violently” that people were not “ready” to digest the new formats. There is a huge discussion about the millenials and the fact that they haven’t experienced a life outside the Internets. This is true and their behavior is totally different even from mine that I am 27 years old. They think digitally first BUT they are still human beings and there are some common rules that all humans follow. And these rules are one of the main reasons that digital advertising is in such a bad shape.
ON TOUCHING THINGS
People are genetically inclined to touch things. We like to do that. A lot. And once we touch something we create a physical relationship with it. A bad one or a good one. Depends on what we touch and how this thing is designed to be touched. Another fact that is that people DO NOT touch things anymore. Not as many as they used to. Nowadays, we mostly give commands for most of our actions to 3-4 basic devices like our laptop, smartphone and tablet. What I am trying to say here is not that digital devices are bad and we should stop using them. This would be nonsense. What I am trying to say is that people have lost their connection with traditional physical objects. They have even stopped doing basic actions like for example drying their hands with a towel or finding the right program at the washing machine. We have been used to the enhanced capabilities and the variety of options that digital devices bring along so traditional, physical objects mean nothing to us. At the same time, we miss touching stuff. I am sure we would die to know how it feels like to touch Google, or how Instagram smells. And I am even more sure that the connection we would have with these 100% digital brands would be much stronger. And they would kill to get that.
THE ERA OF PHYGITAL
This is where The Phygital comes in. The potentials that it carries along are amazing both for brands and consumers. It can unlock a totally new level of creativity. It can redefine UX, consumer behavior, sales, engagement rates and many many other metrics.
I would love to go further and develop more of my arguments in favor of the phygital but I will keep the discussion alive for my future blogposts. The only thing I will embed is the presentation from the 2014 Cannes Lions where some early phygital marketing experiments were awarded for first time.
Fernando Pessoa Was A Digital Anthropologist
I spent the last week reading Fernando Pessoa's "Herostratus", a book about the search of immortality and fame. As you may know, Herostratus was an arsonist from Ephesus who burnt down the temple of Artemis because he wanted everyone to remember his name even because of a despicable act.
This post is not about literary criticism, I would never attempt to write a critique of Pessoa's poems and essays. However, there were some parts in "Herostratus" that felt like being written for people in our era, social media, how we use them and mainly for which reasons.
I will just copy/paste these parts without commenting or justifying why I think that they are 100% valid for me and you. I am sure that those who will read the post will understand.
A. On Being Always Busy
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The slowness of our life makes us not consider ourselves old at 40. the speed of machines decreased the speed of our souls. We live a lazy life and this is why we get bored so easily. Life is like a resort for us. We are not working enough and we present that we work like maniacs. We move super fast from a point where nothing happens to a point where nothing can happen, and we call that the "crazy speed of everyday life".
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B. On The Importance Of Likes & Followers
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People in ancient Greece craved for fame and recognition at sports because they generally craved for fame. They loved it. We crave for fame in sports and hobbies because we are not able to get recognition from anywhere else.
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C. On Instagram & Photoshop
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The unprecedented number of people producing and creating art, photos, paintings etc creates a confusion. At the same time, this is our main mechanism towards the fear of being invisible. Nowadays, people producing art have created fans but they will never meet them. Their fans have accepted them but nothing more than that.
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D. On Attention Span
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The next generations will only like only authors and writers who write extremely densely. People will always be happy to read big books of 500 pages for "now" because they are IN it and they will only read the dense books of the past. Our era does not favor the long poems, because the sense of proportionality and structure does not exist nowadays.
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P.S. Apologies for probably the bad translation of Pessoa. The book I read was in Greek, so I tried to translate the parts myself.
A Design & Semantic Analysis Of The New Airbnb Brand
Rebranding is always a difficult process. Both for the companies and their customers. Especially if the company is a success case study, a profitable business and an industry disruptor pioneering a new movement called “sharing economy”.
Rebranding is difficult because companies need to wrap-up their new (?) strategy, corporate values, mission/vision into a few colored pixels and make customers love this new entity from the beginning. A few years ago, when companies launched a new and fresh brand, nobody pretty much cared unless this new brand was insulting to a small tribe in North Africa. Life was going on.
Since Silicon Valley turned into the modern Meccah, start-ups were placed in the centre of our attention, social media led us to “dualism”, smartphones became the extension of our arms and each one of turned into a modern hunter for social approval and “likes”. And, among million other things, we witnessed 2 phenomena.
1) There is a whole media industry consisting of hundreds of websites, blogs and social media accounts that make their living out of “tech news” so they need to create a continuous stream of content to lure advertisers and make money. Part of their content creation process is to write, critique and review EVERYTHING around start-ups and tech companies and usually from a negative scope.
2) At the same time, customers are also now brands themselves, marketing whiz kids, social media sensations and disruptors. Adding the fact that design and creative tools have been totally democratized and everyone can use Photoshop, create GIFs and produce YouTube viral videos, we end up to a situation where EVERYONE has a “fair” point about a new logo, brand values and corporate communications. And this usually doesn't end up well for brands that are not Apple, Google or Facebook.
THE Airbnb CASE STUDY
Airbnb launched its new brand last week with the announcement of Belo. It moved on from this
To that
You don’t have to be a designer or a marketing professional to decide which one is more beautiful. Airbnb moved from a totally uninspired blue, italics and bold visualisation of its name to a flat and serious font along with a proper logo in a “watermelon” background.
The logo is called “Belo”, coming out from the word “belong”, and epitomizes the new Airbnb values and corporate mission/vision that we will discuss at the next chapter.
The final shape of “Belo” came from that:
From a visual point of view, Belo gives an amazing balance to the whole logo bringing the playfulness of oval shapes next to the "serious" font of Airbnb. The choice of non-capital letters is wise because choosing otherwise would mean that Airbnb takes itself very seriously losing the “flexibility” of a cool company that wants to build on how “fluid” our world is and that we belong in communities and not in “traditional” countries marked down by borders. Moreover, although “Belo” is 100% circular and flexible, it is also “close” from all sides. This subconsciously communicates that “once you become an Airbnb member, you belong to a team that you will never want to leave”.
IMHO, the choice of the color is based on an unwritten “coolness meter” which says that right now the variations of orange, purple are the wisest choice for technology companies. It is worth mentioning that the blue color of the previous Airbnb logo fits more the "trust" angle that the company announced but the "watermelon" color is hot right now, so who cares?
Last but not least, Airbnb announced that their logo is open to editing for everyone giving out “Photoshop” tools for everyone to experiment and build their own Belo version. This is also another clear proof of how “open” Airbnb wants to look to its customers taking down all the walls between the Company and the User. “Trust” is a word that was used a lot by the Airbnb founder and the “openness” of the logo comes to prove it.
THE BRILLIANCE OF PHYGITAL
Before moving on the communication strategy of the “new” Airbnb, it is critical to note down that the creation of “Belo” serves another purpose apart from the notion of “belonging”. It follows the logic of “Phygital”. Phygital is the transformation of innately digital entities to a more analogue, tanglible environment with enhanced capabilities that gives the chance to technology companies to have a “physical presence”. This is proven to raise the brand loyalty because we are all “wired” to appreciate more the things that we can touch and physically interact with them. The transition of a bluish depiction of a company name to the “Belo” logo which can easily transform to housing merchandising like key holders, mugs and forks has amazing potential for Airbnb.
ENOUGH WITH THE LOGO. WHAT DOES Airbnb SAY?
Now let’s move on to the part where Airbnb explains what Belo really signifies for the company, which are the values of the fresh brand, how they want their customers feel when they are using Airbnb and which is the mission of the company.
I will use two main sources. One is the official press release that was published after the new brand announcement and the second source is the interview of the Airbnb CEO, Brian Chesky, to the New York Times.
The most interesting parts are:
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The short answer is that Airbnb understood that the world was becoming hyperconnected — meaning the technology was there to connect any renter to any tourist or businessperson anywhere on the planet. And if someone created the trust platform to bring them together, huge value could be created for both parties. That was Airbnb’s real innovation — a platform of “trust” — where everyone could not only see everyone else’s identity but also rate them as good, bad or indifferent hosts or guests. This meant everyone using the system would pretty quickly develop a relevant “reputation” visible to everyone else in the system.
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I can spot some problems and issues with the selection of some specific words. The most worrying fact is the rising grading system that runs in most social sharing companies. We have moved to a phase where our supposedly leisure time is spent on platforms which gain power and popularity through users grading and characterizing each other with metrics set up by the companies themselves. We are actually talking for a transition from the background check that usually banks do to loan applicants to a situation where Users rate each other and this could soon end up to being the “reputation” that we carry both to the offline and online world.
And here is the second issue. The domination of our digital presence vs our offline one has become so rich on “data” that implies who we are as individuals, if we are the right “material” to be hired, to start a relationship with someone we like, to be approved by a landlord to rent his house etc.
It gets better:
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On Airbnb, everyone has an identity. You can’t rent a room from someone or to someone unless you create a profile. And the more information you put into your profile — license, passport, Facebook page and reviews of people who have stayed with you — the more customers are likely to come. And the better reputation you earn from reviews, “the more other people want to work with you”
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We are all having a dual identity. The digital one is issued by the Facebook Police Department and carries data like our check-ins, our consumer habits, the girls we have sent a message to, the friends we have and the photos we have uploaded.
We are also moving to a phase where there is 24/7 labor status. We need to have a “clean” digital identity so that more people will want to “work” with us. The sharing economy was supposed to be fun and far from any capitalistic process that we are exercising at least for 10 hours/day. But no. Now, we are “working” 24/7 as money generators to sharing economy companies.
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At a time when new technologies have made it easier to keep each other at a distance, you’re using them to bring people together. And you’re tapping into the universal human yearning to belong—the desire to feel welcomed, respected, and appreciated for who you are, no matter where you might be. Belonging is the idea that defines Airbnb, but the way we’ve represented Airbnb to the world until now hasn’t fully captured this.
It’s a symbol for people who want to welcome into their home new experiences, new cultures, and new conversations. We’re proud to introduce the Bélo: the universal symbol of belonging.
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There is a small contradiction here. Social media like Facebook were praised at the NY Times interview as the main identity of Airbnb users which could give them high positions in the rating system. But now they are “technologies that keep us at distance” and Airbnb will bring us closer.
AND WHAT ABOUT THE SHARING ECONOMY?
From the very first day that Airbnb went public with its new brand, there is an ongoing debate in the “intellectual” digital media about the sharing econony, how it has branded itself and what is its true effect in our society.
There is a great number of articles arguing that the sharing economy, with AirBnb and Uber being its champions, has a dark side and is not only about “collaborative consumption” but for people who are struggling to make a living through these services.
A recent article from the NY Magazine points out the effect that the sharing economy has in traditional industries and full-time jobs resulting to a situation where consumers DO NOT trust each other but their only choice is being part of the sharing culture.
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A huge precondition for the sharing economy has been a depressed labor market, in which lots of people are trying to fill holes in their income by monetizing their stuff and their labor in creative ways. In many cases, people join the sharing economy because they've recently lost a full-time job and are piecing together income from several part-time gigs to replace it. In a few cases, it's because the pricing structure of the sharing economy made their old jobs less profitable. (Like full-time taxi drivers who have switched to Lyft or Uber.) In almost every case, what compels people to open up their homes and cars to complete strangers is money, not trust.
But as Tanz himself notes, the data clearly show that Americans don't trust each other: One survey, he says, "found that just 41 percent of respondents express 'a great deal' or 'quite a bit' of trust in the people they hire to work in their home, only 30 percent trust the cashiers who swipe their credit or debit card, and a mere 19 percent trust 'people you meet when you are traveling away from home.'" So something else must be compelling people to exhibit what he calls "behaviors that would have seemed unthinkably foolhardy as recently as five years ago." One plausible explanation is that people don't have a choice: They have to get comfortable with the sharing economy because that's where the money is.
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LA Times recently wrote:
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“The sharing economy’s success is inextricably tied to the economic recession, making new American poverty palatable,” Cagle writes. Sure, she says, it’s “largely heralded as a ‘return to the village,’ an ahistoric utopia where we were friends with all of our trusted neighbors, lived in harmony with nature, and wanted not to consume, but to share.” But, she reminds us, “sharing and homesteading are things poor people have been doing forever out of necessity.”
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The amazing Rob Horning wrote:
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What sharing companies and apps chiefly do is invite us to turn more of our lives into capital and more of our time into casual labor, thereby extending capitalism’s reach and further entrenching the market as the most appropriate, efficient, and beneficial way to mediate interaction between individuals. For the sharing economy, market relations are the only social relations.
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The most “viral” piece against the new Airbnb brand is this from Kate Losse who argues that it is wrong to seduce customers to a new “community” where the only value is this of AirBnb based on mutual trust. She claims that the new brand should focus on the competitive advantage of Airbnb making money for its users and not for the emotional bonds created between them.
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What differs from Facebook in Airbnb’s focus on “trust” over financial exchange, however, is that Airbnb users are being compensated for their exchange of personal property, unlike on Facebook where the exchange of personal data is done without monetary compensation to users.
Given that for most this is the real value proposition of Airbnb, in another marketing universe Airbnb could imagine itself as the Best Western of freelance house rentals; and simply focus on being the most efficient and trusted place to transact rooms. But it could do all of this without relying on the users themselves adopting the nation of Airbnb, flying its national flag and posting its logo in their homes, committing to “sharing” and “connecting” (two words that are also foundational to Facebook’s mission) with renters rather than simply providing a comfortable space to sleep.
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SO WHAT?
The debate around how evil the sharing economy is, attracts more and more coverage and this is something that makes total sense. The sharing economy has disrupted many traditional industries and is about to disrupt more in the near future. The supporters claim that simple customers can finally make money without any intermediary and the contrarians argue that we are slowly turning into part-time professionals selling our services to make a living in a world where there is a continuous rating system and our digital presence is more than than our offline.
I find small truths in both sides but I have to admit that I agree with the alarming macro-analysis that the contrarians present. However, I cannot see even a small correlation between this argument and the new brand of Airbnb. Don’t forget that the purpose of this post is to analyse this new brand and the discussion about the sharing economy is something totally irrelevant. I am sure that the Airbnb management team is well aware of the arguments about the alarming effects of the sharing economy to our society and THIS IS THE EXACT reason that they want to build their new brand to a different direction. Kate Losse says that people want to just make money out of Airbnb and not create communities of mutual trust. However, she misses the fact that the only way to trust your money or your house to a total stranger (no matter how many rating stars he has) is when you belong to a community of trust. Another argument is that AirBnb is promoting a status quo where there are not traditional countries and governments but only the universal truth of Airbnb. And who said that this will not work for Airbnb? I am sure that the Marketing team of Airbnb would kill to create even the illusion of an AirBnb world with a "Belo" flag and rating stars on top of everyone's head.
In a nutshell, I can totally understand the “belonging” angle of the new Airbnb identity. It is probably something I would use myself if I were the Head of Marketing of AirBnb. It is a marketing truth that creating communities based on trust can unlock great potential for B2C companies.
On the other hand, I find the selection of some words in the press release pretty poor or not well examined. They open discussions that maybe Airbnb should avoid.
However, what we think of the sharing economy as a social phenomenon is a different story from what the marketing department of Airbnb wants to achieve and this is something we need to understand before we "judge" any branding initiative.
P.S. I am well aware of the "genital discussion" that sparked after the announcement of the Belo. The reason I didnt include any of the memes in my analysis is exactly because I think that there will always be someone who associates something with something else. When this is the logo of a successful company and how it can be associated with an ass, a penis or whatever else, it is 100% proven that it will become viral.
Rory Sutherland Explains How Behavioral Economics Can Redefine Advertising
My Presentation for the Reload Greece "Start-Up Conference"
Brain Candies
Michio Kaku is a renowned physicist, futurist, professor and host of many TV shows popularizing the hard sciences to the people. The last years he has been studying the human brain, a field that attracts more and more scientists. Nautilus, the best science website and print magazine out there, published 10 short videos with Michio Kaku answering simple questions, that each one of us has thought but nobody has convincingly answered. I found his answers 100% to the point, avoiding academic references that usually scare casual readers and enhanced with simple examples from our every day life. Considering also the fact that I watched these videos the day that a computer passed the Turing test made Michio Kaku seem even more "important". Enjoy!!
Guardian recently launched an interactive infographic about the online sinful behaviors under the prism of the traditional 7 sins. It is really interesting to see how the "sins" of wrath, greed and sloth are translated in the digital context taking the shape of likes, viral videos and selfies. Apart from the conversation that such an approach can trigger, Guardian has done an amazing job on implementing this research with an interactive infographic, a seamless UX and insighful articles. Well done Guardian.
I have written about the Behavioral Insights Team (BIT) before. The Nudge Unit, as it is called, is working with the British Government applying insights from academic research in behavioral economics to public policy and services. There are many case studies presenting the effects that their consulting services had in public policy like tax collection. A few days ago, BIT released a new paper under the name "Easy, Attractive, Social, Timely (EAST)", that gathers 4 basic methods of applying behavioral insights to pretty much everything. It is a great and easily-read paper for everyone who wants a simple introduction to the fascinating world of behavioral economics.
I have written at the past about the advertising industry, its next phase and the illusion of the "Social Media El Dorado" but I always find exciting reading academic papers about social media. When these papers come from Warwick University, where I have spent one of the most beautiful years of my life, and are written by Greeks, I get more than excited. Antonis Kodjamanis and Spyros Angelopoulos recently published a short paper on the consumer perception towards advertising on Facebook. It is a concise and insighful research which leads to a conclusion that most of professional marketers have already come across. You cannot build a successful brand using only Facebook.
How a medal proved that we are living in a news world
The Wikipedia definition of the John Bates Clark medal is an award given by the American Economic Assocation to that American economist under the age of forty who is adjudged to have made a significant contribution to economic thought and knowledge. I could sum up by writing that it is the hip version of the Nobel in Economics prize.
The previous year the medal was awarded to economists who had focused their work and research on "traditional" economic issues like public policy, employment, microeconomics and corporate finance. This year the American Economic Assocation honoured Matthew Gentzkow from the University of Chicago.
Do you know his field of study? The volatile economics of the news business. A field that didnt exist a few years back and it would be silly even to suggest for an award at the beginning of this decade.
Gentzkow's papers dive into many different aspects of online news business like the advertising dollars, the attention economy and media bias. You can find most of his awarded papers below:
Facebook buying Whatsapp: A story about mobile, text and China.
WHY AM I READING THIS?
So there is this whole discussion about Facebook acquiring Whatsapp for $19bn with some people arguing about the brilliance of Mark Zuckerberg and others making fun of the huge amounts of money that Facebook is paying for its acquisitions.
There are tens of articles and reports trying to explain Zuckerberg’s rationale behind this decision and to be honest I find most of them to be totally out of subject and focusing on wrong points like whether Whatsapp will be “contaminated” by ads etc
I am writing this post neither to praise Facebook nor to mock their business strategy. I would be a fool thinking that they havent made very careful business analysis before deciding to invest $19bn but at the same time this doesn't mean that their decision will prove successful. History has proven that the tech industry changes in the flash of a light and we have witnessed both flops and golden wins, so I am not the one to judge Facebook mobile strategy. I am just trying to understand their rationale from the knowledge I have for the mobile marketing industry, in which I have been working for the last 4 years.
I will break down my thoughts on 3 main pillars. Mobile, Mobile Messaging and Emerging Markets.
A. MOBILE
What is happening with mobile?
Mobile is eating the world. So simple, so easy. Mobile is the most powerful tech growth driver in the last years, it will develop even more in the next decade and it expands in many different platforms. There is a huge battle in the field of hardware with players like Apple, Samsung, Nokia, HTC and Huawei. At the same time, the mobile operating system industry is more crowded than ever and last but not least the advertising dollars are moving to mobile as well.
Ben Evans, probably the most influential mobile analyst, made this presentation. A good example to understand mobile’s strength.
Why is Facebook interested?
Facebook is interested in all these. Do you know why? Facebook is a mobile company. It is not me saying. It is Mark Zuckerberg. If you check the Q4 2013 earnings report of Facebook, you will see that mobile advertising dollars are the most crucial part of their business model. Their survival depends on how well they will adapt to mobile and their latest decisions prove that. They acquired Instagram to dominate the mobile photography industry, they launched Facebook Search to be able to sell mobile search ads, they announced Facebook Home, they have openly talked about their plan to launch facebook branded apps like “Facebook Messenger” in order to offer a full mobile experience to their users without them having to login to their account.
B. MOBILE MESSAGING & OTT
Whatsapp with mobile messaging?
So mobile is one thing. Mobile messaging is the next one. Messaging is the most important feature that mobile offers, after of course voice communication. Messaging used to come only via the SMS technology which is still the dominant channel but starts getting challenged by the OTT players.
What are the OTT players? OTT refers to delivery of video, audio and other media over the Internet without a multiple system operator being involved in the control or distribution of the content.
Great examples of OTT players are Viber and Whatsapp. What these companies did was to offer simple and secure services, which were perceived till then as paid, for free. Consumers immediately embraced them, loved them, shared them, engaged with them and became loyal customers. At the same time, telcos could not do anything. They were watching start-ups like Whatsapp eating their revenues and their only profit was the data usage from their customers.
Here are some great numbers proving the dominance of OTT players over traditional channels over SMS:
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From 2013 to 2017, SMS revenues will grow by 4%, but they will begin to decline in 2017 after peaking at $166.5bn in 2016. Year-on-year (YoY) growth is relatively flat, with revenues growing at rates of 2% in 2012 and 1% in 2013. This stands in contrast to the rapid growth of social messaging services;
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SMS is still generating money for mobile operators, but social messaging players are taking away more each year. The lost SMS revenues are considerable ($32.6bn in 2013), but the growth in mobile broadband revenues is bringing in a lot more than the money lost to social messaging. The prevalence of free services, the early stages of monetization of social messaging services, and the decline in SMS revenues will all put pressure on revenues from the messaging industry as a whole.
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So, it makes perfect sense for Facebook to acquire the hottest OTT player which has already started disrupting the messaging industry.
C. EMERGING MARKETS & THE SMARTPHONE REVOLUTION
The last thing is the importance of emerging markets and their next billion consumers for the tech industry in general and the mobile especially. I think this is the main driver behind Facebook acquiring Whatsapp in its mission to be the king of these countries in the next years.
My personal experience
I happened to work a little bit with the team of Ran Makavy, Facebook Head of Growth, last summer trying to come up with effective solutions regarding the penetration of Facebook messaging in emerging markets. What I found out was how important the next billion consumers are for Facebook. Someone might argue that their purchasing power is much lower than this of their counterparts in the West but the other side of the moon is that the middle class in sub Saharan Africa, China, India and LATAM is gaining so much strength that you cannot ignore them.
All these people used to communicate via feature phones for so many years but we are currently witnessing a smartphone revolution in these markets. Why is this happening? Because this is how technology works. Smartphone manufacturing becomes cheaper and cheaper and we have reached a point where Nokia can announce an $80 smartphone. This means that in the next years almost everyone in Nigeria, China and India will have a smartphone and will want to text message for free. Why? Because this is what Whatsapp brought to the market. The easy and free messaging.
This is the smartphone penetration by region in the next years. A graph by Asymco. Even if you cannot clearly read the details, you can see that the graphs are going UP:
WHAT WE KNOW AND WHAT I THINK
Whatsapp has 450 million users and 72% of them are daily active. At the same time, Whatsapp users exhange approximately 500 million photos per day which are probably more than the ones exchanged in Facebook and Instagram combined.
Facebook paid $19 billion to buy Whatsapp which in other words means that Whatsapp costs at the 10% of Facebook current market value and last but not least the $19bn means that each Whatsapp user costs $35 for Facebook.
A first impression is that $19bn is A LOT OF MONEY. Actually, it is not an impression. IT IS A LOT OF MONEY. Moreover, paying $35 for a mobile user is way more than you will ever make from an ARPU strategy. ARPU stands for Average Revenue Per User and it is the most important metric of the mobile marketing industry.
A second impression is that $19bn is definitely not the price that Zuckerberg estimated for Whatsapp. We could say that the $19bn are also working as a clear sign of strength and dominance of Facebook towards other challengers like Google.
In a nutshell? IMHO, Facebook acquiring Whatsapp is a brilliant move. It places itself in an amazing spot for the next years stepping one foot in the West and the other foot in the emerging markets. At the same time, the OTT consolidation is proven by Viber being sold to Rakuten. A clear sign of Chinese players trying to penetrate the West.
What about monetization?
How is it going to monetize all these users? This is a good question. One way is advertising? Not in the boring, traditional way of banners and suggestions. It will probably offer contextual texting advertising based on your needs and habits. (do not forget that Facebook will know everything about what you are texting, to whom and when).
Another idea would be to include messaging in a premium package of services along with other features like music streaming, news subscriptions and exclusive gaming. But this scenario is at least far-fetched.
Christmas Gifts: Books & Magazines
I thought it would be a good idea to give some of the books and magazines I am reading to the people who spend a few minutes reading my blog. I imagine, I am not sure, that they will share the same interests with me and that they will be the kind of people I would enjoy going out for a drink and have a discussion about pretty much everything. So why not giving them a present.
The gifts are 2 magazines and 2 books:
1) ADBUSTERS is a quarterly magazine written by marketers, artists and creative people who care a lot about the art of communication, information flow, psychology and ideas. You cannot find it in Greece unless you are a subscriber. I bought it in London, I loved it and I am now a subscriber.
2) Radical Philosophy is a journal of philosophy. The journal appears 6 times a year and features major academic articles, commentaries, news and a large & diverse reviews section. The issue that I am giving out is focused on the Greek crisis and there are some really interesting articles in there.
3) "Seventh Sense" is a book written by Mimis Androulakis, a renowned philosopher/thinker and greek leftist MP. If you forget his identity of MP, his books are really interesting and especially this one touches some fields like synesthesia, neuroscience, predictions etc. It was the basic inspiration for 2 of my posts. One about synesthesia and one about Google paralyzing half of our brain.
4) "David & Golliath" is Malcolm Gladwell's latest book. I am pretty sure you already know the basic info for Gladwell but in case you dont, he is a pop philosopher writing about social phenomena out there that you have already observed but you didnt know how they actually work. His books have received fierce criticism because of their lack of scientific proof of what Gladwell is saying and I agree with most of them. But at the same time, I think he is a great story-teller who can unfold a difficult story and make it easy for everyone to read. "David & Golliath" deals with how underdogs always prove stronger than the favorites. Here is a TED talk about the book.
HOW YOU CAN GET THESE GIFTS
I am not sure which is the most effective way to do that since Tumblr has a problem with comments and there is not a dedicated Facebook page of the blog (need to work on that). I think the only way to have a "fair" and not lame contest would be to write something (hopefully good) for my blog on Twitter with the link of the blog so I can find it with a Twitter search or RT my latest tweet (@mpilloukos). All these need to take place by end of the year. On January 1st, my friend Pan Pan (who has illustrated one of my recent posts and you can see his work here), will pick one of all the people who participated.
P.S. I am aware of the fact that Androulakis' book is written in Greek and there is a chance that some of you do not speak Greek. If this is the case, I will get to know when we draw the winner and I will swap this book with another written in English. Promise.
Let me read your mind
WHY YOU SHOULD READ THIS POST
This post will try to explain some facts around marketing, neuroscience, cognitive psychology and behavioral insights and you may think that this is something extremely narrowly targeted for marketing/advertising professionals and you shouldn’t read it but I tend to disagree with you. And there are 2 reasons I disagree with you.
I firmly believe that everyone of us is a marketer. We are all marketers because each one of us is striving on a daily basis to promote himself, to gain more followers, to be “liked”, to be reposted in Instagram, to build a better LinkedIn profile and land the job of his dreams, to upload cool pictures, to check-in at a cool place, to start a hip blog. Is this democratization of marketing happening now because of the rise of social media and online services? No. It was always there hidden in different occasions of our daily life and maybe in a lower lower level but it was there. It was there when you visited a grocery and you were trying to guess the character of the store owner and negotiate a better price, it was there when you were flirting with a girl in a bar and it was definitely there when you were trying to land a job and you had to reinvent yourself according to the questions you were being asked. So yes, I think that everyone is a marketer, everyone of us has his own brand that is trying to promote, everyone of us is an advertising account manager monitoring what is being written about him online and we definitely are creative directors coming up with nice selfies, witty tweets and repositions of our "self" brands.
At the same time, we are consumers. And I am not talking about the strict definition of consumption. We daily consume data, pictures, gifs, social media status updates etc. I find it extremely interesting to get to know what is happening in our mind when we face this monster of packaged online info, how we get to choose what we like and what we click.
In the next paragraphs, I will try to explain how marketing is changing, how important our brain is and how interesting it is to read about how our unconscious is working. So stay with me.
MARKETING + NEUROSCIENCE = NEUROMARKETING?
A funny thing about the marketing industry is that it follows the same rules like any market out there. There are trends, flops, rising stars and gurus. We have witnessed many different trends like engagement techniques, viral textbooks, big data, storytelling etc. Some of them are really important elements of marketing, others are big flops. The latest “trend” is the convergence of marketing and neuroscience.
If you make a quick google search of “behavioral insights marketing” or “neuromarketing” or “reading consumers’ minds” you will find millions of results. There are authors, academics and public figures who have emerged as “neuromarketing experts” like Adam Alter, Wired created a new blog called “Brain Watch”, NY Times had an exclusive interview with the masterminds of the “Behavioral Insights Team” a group of scientists testing the power of behavioral change to devise effective policies, seeing it not just as a way to help people make better decisions, but also to help government do more for less. Last but not least, The Economist recently wrote about the turn of advertisers towards psychology and behavioral analysis models created by Kahneman.
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The unit has been nudging people to pay taxes on time, insulate their attics, sign up for organ donation, stop smoking during pregnancy and give to charity — and has saved taxpayers tens of millions of pounds in the process, said David Halpern, its director. Every civil servant in Britain is now being trained in behavioral science. The nudge unit has a waiting list of government departments eager to work with it, and other countries, from Denmark to Australia, have expressed interest.
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I have also myself written about the "marketing of unconscious", the irrationalities of our mind and the phenomenon of synesthesia.
WHAT IS NEUROSCIENCE AND HOW IT CAN HELP MARKETING
Neuroscience is the study of the nervous system that seeks to understand the biological basis of behavior. Broadly speaking, the most compelling application of neuroscience in marketing is its ability to understand individual differences at multiple biological levels. Neuroscience brings the ability to integrate many different explanations of behavior, and multiple levels might be necessary for various consumer phenomena. Indeed, neuroscience works to understand when different individuals employ different choice strategies. These efforts can build upon existing efforts in marketing to identify different strategies behind, providing a clear path for neuroscience to impart novel insights into how individuals utilize different decision-making strategies.
The current set of neuroscience tools could improve the efficiency of marketing strategies. Neuroscience cannot replace, either now or in the future, traditional approaches to understanding consumer needs. Instead, neuroscience data can indicate implicit processes, improve out-of-sample predictions, improve the generalization of models of behavior, and provide a reliable and process-based approach for segmenting customers.
Neuro- science data cannot facilitate prediction of all purchasing decisions by individuals, but it can facilitate an understanding of when and how preferences can change
NEUROMARKETING: NOTHING MORE THAN A BUZZWORD
A critical distinction is between consumer neuroscience, which refers to academic research at the intersection of neuroscience and consumer psychology, and neuromarketing, which refers to practitioner and commercial interest in neurophysiological tools, such as eye tracking, skin conductance, electroencephalography (EEG), and functional magnetic resonance imaging (fMRI), to conduct company-specific market research.
Neuromarketing is an emerging field that bridges the study of consumer behavior with neuroscience. Controversial when it first emerged in 2002, the field is gaining rapid credibility and adoption among advertising and marketing professionals. Each year, over 400 billion dollars is invested in advertising campaigns. Yet, conventional methods for testing and predicting the effectiveness of those investments have generally failed because they depend on consumers’ willingness and competency to describe how they feel when they are exposed to an advertisement. Neuromarketing offers cutting edge methods for directly probing minds without requiring demanding cognitive or conscious participation.
If neuroscience is considered to be in its infancy, neuro- marketing is clearly at an embryonic stage. Marketers are just awakening to the possibilities offered by unveiling the brain circuits involved in seeking, choosing, and buying a product. While many of the studies done by neuromarketers are commercial and as such don’t go through the standards and review process imposed by academics, enough evidence has been already published to highlight a few core neurocognitive principles at play when consumers perceive advertising messages.
HOW WE START LOVING A BRAND: WE USUALLY LOVE THE BRANDS THAT ARE LOCATED ON TOP SHELVES
It is very common for people to say “I love the X,Y,Z brand”. This statement can derive from many reasons like personal experience, cheap pricing, nice branding etc. But how it starts?
The framework divides the stages that are required for brand preference formation over time into four basic components: (1) representation and attention, (2) predicted value, (3) experienced value, and (4) remembered value and learning.
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Each second we are exposed to an estimated 11 million bits of information that reach us through all our senses, yet humans are capable of processing only around 50 bits of that information, letting most of the input go by unnoticed.
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The first process in brand decisions involves forming the representation of the choice alternatives—that is, brand identification. This entails processing the incoming information, so that different options for choice are identified, like for example different beer brands. At the same time, the consumer needs to integrate information on internal states (thirst level) and external states (location, social context) that drive attention. For example, when faced with a choice between drinking Heineken or Amstel beer (an incoming information) a consumer's choice is likely to depend on her own level of thirst (an internal state) and what her friend chooses to drink (an external state).
Attention is the mechanism responsible for selecting the information that gains preferential status above other avail- able information. Recent review of attention in neuroscience indicates that four conceptual components are fundamental to attention: bottom-up or saliency filters, top-down control, com- petitive visual selection, and working memory.
Bottom-up or saliency filters automatically select the most important information from all available information. This selection is based on the low-level features of the visual input: colors, luminance, orientation, size, shape, movement, etc. Such bottom-up factors have a strong effect on the initial eye movements when consumers are exposed to marketing information: the first four eye-movements are made within the initial 2.5 s of exposure. Some higher- level factors are also capable of gaining automatic, preferential access to attention. These include faces, text, novelty, and one's own name.
Visual selection occurs when the most important information from all the areas that are identified as potentially important in preattentive scans (based on the bottom-up input) is chosen. This means that attention is given to a particular location in space.
The predicted value of each brand that is available for choice (e.g., Heineken vs. Amstel) represents the consumer's belief about the experienced value of that brand at some time in the future. In other words, the predicted value involves the consumer's evaluation of how much enjoyment he will derive from consuming a Heineken or an Amstel beer.
Experienced value is based on the pleasure derived from consuming a brand. According to early notions of utility or value, experienced value is the “true value” that should matter the most for value-based decision making. Experienced value consists of the (a) valence and (b) intensity of the consumption experience.
These and related studies suggest that relatively greater activity in the left frontal region is associated with either positive emotion- al experience or the motivational drive to approach an object.
Consider again our example of choosing between Heineken and Amstel. An important predictor of your choice is your memory of previous exposures to the two brands. If you remember that Heineken had a bitter taste and Amstel had a distinct whiff of something sweet, these experiences may influence your decision. You may remember a recent entertaining Heineken commercial, but you have no such memory of an Amstel commercial. Brands “work their magic” by associating themselves with experiences, which in turn influence subsequent retrieval and recognition. It is important to note that these can be personal experiences or those of other people
The link between memory and preference was further strengthened by studying how “expert power” influences this link. In the study, products that were presented simulta- neously with an expert person were associated with improved recall at a subsequent memory test on a different day
Different models of memory retrieval have seen memories as being “replayed,” contributing to the popular notion that (episodic) memories are stored as hard copies in the brain. In this view, remembering is the process of retrieving factual and true information about the experiences we have had. While memories have been thought of as labile during encoding, information that is consolidated in memory has been thought to be retrieved as more stable “information packages.”
WHAT WE LIKE, WHAT IS THE CONTEXT AND HOW WE DIFFER FROM EVERYONE ELSE
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The brain is responsible for all our consumer behaviors. To function properly, it needs to use a lot of energy. Even though the brain is only 2% of our body mass, it burns nearly 20% of our energy. Most of the functions we need to go through a day are managed by the brain below our level of consciousness. This explains why nearly 80% of our brain energy is necessary to sustain our rest state or default mode, a critical aspect of brain functioning which continues to puzzle neuroscientists. Clearly, we only use about 20% of our brain consciously. Worse, we do not control the bulk of our attention since we are too busy scanning the environment for potential threats.
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There are 3 basic pillars that characterize how we think before we choose or buy something.
First, to evaluate a brand (or to buy a product), consumers must determine whether or not the product and the price are to their liking (preference measures). Second, consumer preferences are susceptible to context and hence it is important to understand how perturbations to cognitive and neural pro- cesses will affect choice. Third, like all things, preferences will vary across consumers (individual differences).
If neuroscience is able to identify brain activity that corresponds to preference measures, this demonstrates an ability to identify precise computations taking place in the brain. In other words, the existence of value signals in the human brain argues for a cognitive process of subjective valuation, and that mechanism can be studied in the context of pricing or another costs associated with consumption
The ability of emotions, memory, social comparisons, and previous actions to affect consumer choices is well known. Similarly, the manner in which a decision problem is posed may affect choice behavior, including whether or not an individual is in the physical presence of potential options. All of these scenarios involve changes in decision context and modulations of choice behavior.
Neuroscience studies now attempt to understand how choice processes are modulated by various contextual changes, whether external (e.g., framing of a problem) or internal (e.g., mood, memory). For example, changes in the price of wine modulate both subjective reports of flavor pleasantness and the corresponding neural activity. Similarly, the presentation of an equivalent risky choice problem has been shown to affect the neural processes recruited to resolve it. Internal manipulations, such as sleep deprivation, have also been shown to affect the neural processing of risk. Another manipulation, self- regulation, has been shown to affect both physiological and neural responses to reward; neuroscience can quantify the ability of an individual to self- regulate. Finally, neural markers of decision processes can be shaped by choice-induced changes in the evaluation of out-, as well as by preference changes borne out of cognitive dissonance.
Once the marketing team has collected sufficient information about a new potential product, they can then make revisions to their original prototype and revise the design of the product. Feedback obtained from market research in stage 1 can also aid in modifying brand name and packaging strategies. The scale and scope of such processes is heavily product-dependent. Thus, the contributions of neuroscience to this stage may be limited, although procedures similar to those outlined in stage 1 can be iterated to improve the evaluation of modified prototypes.
Once a product is developed, a communication strategy is typically put in place to educate consumers on the both the existence and the benefits of the product. I have extensively explained in a previous post how brands should plan their communication strategies based on how consumers’ unconscious works. This communication strategy will be integrated across all the various ways in which the firm interacts with the consumer (e.g., from product packaging to in-store displays to social media, and traditional advertising campaigns). Many marketing researchers still follow historically popular approaches to measuring the effective- ness of these efforts. For example, a brand manager may employ a memory test to measure recall, assuming this measure is a good determinant of advertisement effectiveness. If memory recall does indeed always accurately correspond to increased preference and purchasing behavior, this would be a sufficient metric.
CASE STUDY: PLAYERS WERE DRIVING MUCH FASTER A RED BULL CAR IN A RACING VIDEO GAME
Brand exposure can have double-sided effects on behavior, with brand identity associations creating both positive and negative effects on objective consumer performance. Experimental results from a racing game involving functionally identical cars with differently branded paint jobs show that Red Bull branding creates a U-shaped effect on race performance, as Red Bull's brand identity of speed, power, and recklessness work both for and against the players. Even though brands were exposed supraliminally, effects traveled through nonconscious channels. Double-edged effects of branding on consumer performance could be increasingly important as ambient advertising and product cobranding become more commonplace.
Recent work has extended brand priming effects to non-consumption environments, where even incidental or nonconscious exposure to a brand can trigger goal- relevant behavior and cognitions
Unlike traditional advertising or mere exposure, however, placing brand information on real-world and virtual objects that consumers can interact with offers a second potential route of influence within consumer behavior.
The Red Bull brand, for example, has cultivated a brand identity that resonates with concepts of speed, energy, and aggressive risk-taking. In addition to their “Gives You Wings” slogan, Red Bull has built their brand identity through promotions such as sponsoring downhill street luge contests, airplane races, and creating full-contact ice-skating obstacle courses known as “Crashed Ice.”
The Red Bull brand identity may influence consumers to attempt to finish the race as fast as possible, pushing the car and their abilities to the limit in order to achieve the fastest lap scores. At the same time, these brand characteristics could encourage people to race too hard, pushing the car and themselves beyond their limits of performance and skill. This could lead to consumers taking too aggressive of a racing line, going off track, or even crashing, leading to the opposite effect on race performance than the brand identity might suggest
This suggests that Red Bull encourages participants to pursue a fast, aggressive racing strategy, which results in fast times for some participants, but an increase in off-track time led to decreased performance for participants pursuing overaggres- sive driving strategies.
Red Bull's personality associations of speed, power, aggressiveness, and recklessness either pushed consumers to the edge of their ability, leading to very fast races overall, or pushed them beyond their ability, leading to higher off-track times and slower races overall. Indeed, Red Bull was the only brand with a significantly uneven race speed distribution, showing a strong U-shaped effect on race time; Red Bull was most commonly a participant's fastest or slowest car.
Overall, these results highlight the importance of exploring the effects of brand exposure on consumer behavior. Brand exposure can create double-edged outcomes on consumer performance, with both positive and negative effects arising from a single set of brand identity associations. These effects may travel through largely nonconscious pathways outside of conscious awareness suggesting that objective performance metrics may better capture brand priming effects over subjective or cognitive measures. As ambient out-of-home advertising continues to flourish, brand collaborations and cobranding attach multiple brands to single objects, and promotional techniques such as product placement challenge traditional advertising for marketing dominance, these effects are of growing importance as the amount of brand exposure increases in consumers' lives.
BIBLIOGRAPHY
The most contagious ideas of 2013
5 videos you should watch
There has been a dramatic rise of clever individuals who combine pieces of knowledge around technology, design, philosophy and marketing and then they wrap them up in interesting talks, videos or interviews. Jason Silva is one of them. He calls himself performance philosopher and viral artist. He is behind the amazing "Shots of Awe" YouTube channel, he gives TED talks and I am pretty sure he is a really interesting guy to have a conversation with.
Russian Standard Vodka decided to make him an ambassador in its latest ad campaign and build the promo around his personality and communicaion skills combining technology, entertainment, storytelling and nice graphics.
My opinion? Much much better than having paid a second tier celebrity.
----------------------------------------------------------------------------------------------In many ways, when you experience positive emotions in a context that doesn't match that function, here's where we're finding that difficulties arise, and that we shouldn't be trying to promote positive emotions at all times and in all situations, and for all people for that matter.
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These are the 2 most recent examples of branded content coming from Dolce & Gabbana and Prada and directed by Martin Scorsese and Wes Anderson respectively. Totally uninspiring and repeating the "love for old" concept that Italian brands have been promoting since for ever.
11 minutes about Malala Yousafzai, the 16-year old girl from Pakistan who was shot by the Taliban because she wanted to be a doctor and she is now nominated for the Nobel Peace Prize
248 slides explaining why native advertising is right now the only digital advertising format that works