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November 10, 2005

KlipBlog Posting re: "Marketers Explore Beyond the Browser"

On October 10, 2005 I posted an article entitled "Marketers Explore Beyond the Browser".  My primary point was that marketers are again beginning to explore Innovative tactics such as delivering Branded Desktop Applications (BDAs) that are downloaded onto the user's desktop thus opening a new direct communication channel to the consumer beyond eMail and the the browser.   

Allan Willie posted a response to my article on KlipBlog on October 25, 2005 entitled "Marketing Outside the Browser - ie: The Desktop".  I have provided below a copy of his post along with the ensuing dialog between Allan and myself.

"Marketing Outside the Browser - ie: The Desktop", Allan Willie, October 25, 2005:

I’ve just read a blog posting by Ian Karnell at karnellKNOWLEDGE talking about how a decade after Pointcast broke the mold and opened a marketing channel to the desktop, marketers are now starting to take note.

The post goes on to describe a few current initiatives where companies have launched branded “desktop alert” apps (he calls them rich internet apps - RIA), where the user gets a pretty rich single purpose app, that reside in the user’s system tray.

Ian believes the trend will continue, and certainly based on the leads and projects we are currently working on, we echo this trend. So … the problem follows, as he aptly notes,

… that brands need to begin to prepare to wage war for real estate in the user’s icon tray and on the user’s desktop.

You bet. And it will be a major hurdle once users already have a few of these RIAs installed. Picture it, each app with their own look and feel, each with their own pop-up alerts, each launching on startup vying for attention … what a mess. And what’s worse is that most of these RIAs are over the top in and of themselves - such as having animated little desktop characters that bounce across your screen when new data arrives. Not really a smart move if you’re trying to build customer loyalty.

Although this targeted approach to putting little desktop apps does bring with it a certain focus and simplicity that can only benefit users, the larger context is missing. It’s like giving a user a browser that can only surf pages from a certain company. It might simplify the user experience, but at the same time, the value is incredibly limited and before long if a browser comes along that allows surfing to other sites of interest, without increasing the usability complexity, then the battle is quickly lost.

So, this is, in a nutshell one of our beliefs also. The single brand, single purpose (SBSP) RIA or desktop alert app will not last too long before the user realizes it:
a) has limited value on its own
b) takes up too much screen real estate and conflicts with other installed alerting applications

You see, although ahead of its time, Pointcast did actually get some things right. It did allow users to personalize their experience. And it did so without cluttering up the system tray, or adding new UI paradigms. But there were also many, many things they did wrong (that’s another topic).

Whenever we work with a client who is interested in publishing a Branded Desktop Alert app, one of the first things we do is to talk with them about “extended user value”. In addition to the value of their services on the desktop, what else is there demographic interested in? If they want to foster true customer loyalty, then need to give users freedom, not lock them in (I think there is a CSNY song about that …).

Winning users on the desktop will require simplicity and value. And yes, that can be packaged within a brand - just not locked within it.

That’s the difference.

My response to "Marketing Outside the Browser - ie: The Desktop" posted November 2, 2005:

Allan,

Thank you for visiting KarnellKNOWLEDGE and reading my article entitled “Marketers Explore Beyond the Browser”. I appreciate the perspective that you provided in your Blog posting, however I would like to address your primary thesis and respectfully offer a counterpoint.

You state that although branded desktop applications (BDAs) may benefit from their focus and simplicity, they have “limited value” as stand-alone applications because they limit the user experience and may over complicate usability. Your primary supposition is seemingly based on the premise that the BDA’s value is “quickly lost” because it misses the “larger context” (which I assume you mean the ability for users to personalize their experience with the specific content, features and functions that they value). You state that “you need to give users freedom, not lock them in.”

The challenge that I have with your theory is that it presupposes that user value is directly related to the user’s ability to personalize their experience. This simply is not true. User value must be defined more broadly, especially when discussing BDAs, to account for usefulness, usability and desirability.

  1. Usefulness addresses the function or utility the BDA provides to its user. What user problem is the BDA solving; what benefit does it provide?
  2. Usability addresses the ease with which the user is able to benefit from the BDA. How easy is it to operate the application and how low is its overall “pain of ownership”? A BDA with high usefulness can easily fail to be widely adopted because it may be too difficult to use. This is often a very common problem—especially with high-technology products that are loaded with too many features and personalization options.
  3. Desirability refers to the emotional connection that users often make with a BDA. Desirability explains why two BDAs can be nearly identical as measured by usefulness and usability, but because they are styled, branded, positioned and marketed differently they may get completely different acceptance in the marketplace.

These facets typically blend in the mind of the user. For example, if a BDA is hard to use the user will simply uninstall it. If, on the other hand, a BDA is deemed highly desirable, a user may gladly ignore deficiencies in its usefulness and usability.

Company’s that seek to deploy BDAs would be well served in investing in primary user research prior to deploying their applications to the marketplace. I would recommend engaging specialists that include ethnographers, user researchers, interaction designers and human-factors experts who are trained in understanding and defining the human-to-application relationship at all levels.

Regarding your comments that BDAs will take up too much screen real estate and conflict with other “installed alerting applications” I would offer my opinion that it is simply too soon to see how this will play out. Most BDAs that I have reviewed offer configuration options that allow users to manage how they interface with the application and how frequently they desire alerts. Yahoo! (http://www.konfabulator.com) has solved the desktop real estate problem for individuals who have downloaded their “widgets” by allowing users to configure a function key, that when struck, either displays or hides the “widgets” on a user’s desktop.

Allan's response posted November 3rd, 2005:

Hi Ian

Thanks for your thoughts. I actually subscribe to all of what you’ve said … At the core of our design philosophy is a user-centered approach; we evaluate efficiency, effectiveness and satisfaction of use. These are the fundamentals.

I don’t see these as being mutually exclusive to our vision. To give you an example, when we work with customers to deploy a branded desktop alert app, first and foremost, the application needs to address the needs of the target user (both utility and usability), but as you mentioned needs also to foster the appropriate emotive connection. Now, the user can stop right there, but if they want (and depending on the scenario), we can help them add additional data points to their BDA - like their local weather, stocks, email tracking etc … RSS feeds if the user is inclined.

It’s clear to me that you understand the human factors approach, and it’s value across every context is paramount. Our vision of granting the user access to additional valuable information needs to be applied appropriately, and within the context of their experience and original need.

Cheers!

July 02, 2005

AdRant Discussion Thread re: "People Do Stupid Things" post.

Harry Webber 2 Jul 05
Jeremi,You're mixing apples and oranges. Skype gained it's critical mass as a B2B VOiP SOFTWARE play using WOM in the IT infrastructure community.They stayed in stealth mode purposefully until the VOiP regulation issues were settled and the "Big Boys" decided that VOiP was not the AntiChrist.Vonnage is a Consumer Brand. Skype is a Geek Brand. Look for Skype to be aquired within the year by one of the big infrastructure providers. My bet would be on Sun.

Harry WebberMadisonAveNew.com

Jeremi Karnell 2 Jul 05
Actually, I am intimately familiar with the differences between the two services. I am not here to debate those details. My point was regarding whether or not the money Vonage was investing in marketing and advertising was in fact driving respectable business results. My sense is no. Just my opinion based on available data.

Jeremi Karnell 2 Jul 05
I imagine another good topic to discuss is how the Vonage "mad ave" brand approach holds up against the Skype grass roots/WOM approach. If we were to compare the two balance sheets---I bet I know which one wins!

Jim Turner 2 Jul 05
Call me up sometime Jeremi! I heard of Skype before Vonage.

Harry Webber 2 Jul 05
Here's the Vonage rational, "In the past year we have been focused on educating consumers about IP-based communications. We've demonstrated that there is a demand for alternative telephony services in the consumer marketplace, having put nearly twenty thousand lines on our network," according to Louis Holder, executive vice president of product development at Vonage.The real question is who is backing the venture fund at 3i, Meritech Capital Partners, New Enterprise Associates (NEA) and Institutional Venture Partners . I bet if you scratch deep enough you will find several Sprints in sheeps clothing. Which makes vonage a stalking hourse for the Telcos. Already their complaints about "blocked lines" is stirring up issues at the FCC to provide more fuel for the telecom regulation reform debate.Telcos are the scum of the earth. They will outspend their compeditors 50 to 1just to get their installed base. IMHO none of these spending issues have to do with branding. All of them have to do with "buying" media support in the coming shoot-out.

Harry WebberMadisonAveNew.com

Jeremi Karnell 2 Jul 05
Harry,Let's assume your view is correct. Do you think that Vonage is succeeding in winning "media support" for the coming shoot with this approach to advertising?Regardless, I have a hard time believing that Vonage and their capital backers have some deeper & more strategic play that's being executed within their advertising efforts. If you ask me this smells a lot like pets.com. It has all the ingredients. A startup player capitalizing on an emerging network, capital investors caught up in the hype, and traditional ad agencies wetting themselves to get a piece of the pie. At the end of the day Vonages' EBITDA needs to look healthy. Dropping an estimated $120-$240 Million in advertising when you have a 4% churn rate and a subscription service that (at most) yields $300/year per subscriber is lunacy.

Jeremi Karnellhttp://www.karnellknowledge.com/ (I stole your footer idea Harry---hope that you dont mind.) :)

Jim Turner 2 Jul 05
Jeremi I didnt mean to sound flippant before, but I think your point hit home. I ask alot of people if they want to "Skype" me, turning it into a verb. I have never heard anyone talk about "Vonaging". I live here in Colorado in the Dot Com grave yard. I watched as they spent money like crazy. They could'nt get the buildings up fast enough to house all of the dot com companies that were moving in to town. We referred to it as Dot Com Alley. It was along the turnpike from Denver to Boulder.Vonage is spending money like those Dot Coms did, and had nothing really planned for it other than they have an innovative product, but I'm not sure what plans they have to return their investment. I can't understand their strategy.I agree with Harry. I have seen what Telcos do with their competition. They give them a little hip check and the Vonages of the world are shoved aside like a small child. I completely expect that Vonage will soon be in merger talks with a larger player out there. So let's spend huge amounts of money on our brand, and when Google comes knocking, we all walk away with a little cash in our pockets. Sopend the $240 million and sell at about $500 Million.


Jeremi Karnell 2 Jul 05
Jim,Thanks for chiming in. Do I think Vonage will be gobbled up? Yes! (I will put my money on Verizon doing the acquisition.) In fact I think its going to be very tough for many of the Startup VOIP players to stay in business when the traditional RBOC & Cable companies begin to flex their muscle. So if that's the end game, the Vonage approach still seems "stupid" to use their term. Its one thing to brand smartly to raise awareness of your service and seek a strategic merger, its another thing to keep infusing yourself with hundreds of millions of dollars of outside capital (thus diluting your equity position) to piss that money away on a questionable advertising approach (that wrecks your balance sheet.). Do they want to be bought for a premium valuation or in a 363 asset sale under Ch. 11? The peeps at Skype are the ones that will walk away from this whole thing laughing (and toasting each other off the coast of Monaco in their big ass private yachts).

Jeremi Karnellhttp://www.karnellknowledge.com/

Harry Webber 2 Jul 05
Jeremi,This forum is all about self-promotion. At least for me. Be my guest.Consider this scenario. Sprint is the weak sister telco. Sprint lacky Earthlinkis about to jump into the wireles market with the Koreans. Wireless is all about value-add and branding and nothing about infrastructure. Vonage uses Earthlink as a distribution partner. Now we're talking a huge installed base.Earthlink leverages Vonage's name recognition in the VOiP space to give it street cred in the Telco business ( since EL has all but buried its ties to the Sprint mothership) Now we have a wireless/VOiP/Broadband brandwith a competitive share of voice with Vorizon/Cingular and SBC. It's exactly the same play that SBC did with Yahoo. the only people who care about Vonages' EBITDA are the analysts and the retail investors. What if Vonage could care less about the equity markets? What if this was a roll-up in stealth mode? what if the LAST thing they wanted were those pesky institutional investers with the "hard" questions. What if they are smarter than we think they are? Vonage is one of the few high profile brands among GenY and GenXthat has low offering comprehension scores. "I know the name. it has something to do with phones or something." I can't be smarter than they are.But they can damn sure be smarter then I am.3i is the key. The other VCs are just a smoke screen. 3i is the largest privite equity VCs in the world. they could give a shit about EBITDA. They are all about value-creation. And THAT'S why they spent $233 million on building awareness for the Vonage brand among the toughest demo in America to crack. Skype? They're not even in the picture. Nothing is what it seems in this play. Not even me.

Harry Webber

The Institute for Advanced Practices In Advertisinghttp://www.iapia.org/

Jeremi Karnell 2 Jul 05
Harry,I have to take some more issue with your response (but don't take this personally, I love the conversation. Furthermore, your credentials are more impressive then mine...so I don't want to piss you off ;) )I am not sure I follow what your point is in your first para (would you mind taking another shot at the explanation?) Feel free to shoot me an e-mail instead of a post.I also don't know where you are going with the statement that "3i is key. The other VCs are just a smoke screen." I imagine that Bain would take issue with that since they have provided the latest round of funding to Vonage on the magnitude of $200 Million. This represents 50% of the capital raised to date by Vonage and stands as the largest capital infusion in the U.S. thus far in 2005. Just in case you forgot, Bain Capital was one of the late stage funders of WebVan, and we know what happened there. But I digress. 3i's round C funding for Vonage was only $40 Million. I may lack a lot of perspective here but I am sure when it comes to capital investments-size does matter.With 5+ VC investors contributing a total of $408 million in funding, my inclination is to guess an IPO is the only way out for Vonage. EBITDA may not matter so much now in the earlier days while everyone still feels warm and fuzzy about the neat little jingle they stole from Kill Bill, but it will sure as hell make a difference when Wall Street enters the picture. They love bitch slapping companies that pull these kinds of stunts.Two more points. 1. In the mobile space, infrastructure does matter (a subject for another post). 2. x10 Webcams were once top of mind to the GenX and GenY crowd as well at one point-that did not get them very far either.

Jeremi Karnellhttp://www.karnellknowledge.com/

Sherril McCahon 2 Jul 05
Hi JeremiI have only heard of Skype and use it here in the UK (N.Ireland to be precise) and also have all my clients using it too. Never heard of Vonage b4.Best...Sherril

Harry Webber 2 Jul 05
first point:Believe half of what you see and none of what you hear. The only equity that counts is the equity held by the Investment Fund, not the various VCs. It's called "Iceberging" and it's quite popular among corporate venture funds to obscure roll-up and diversification strategies. Remeber, Bain is frequently EMPLOYED by 3i, so I doubt whether they would ever take issue with anything concerning 3i.Second point:"WIRELESS is all about value-add and branding and nothing about infrastructure." God is in the details. No second post required.Third point: Hardware and Peripheral platforms are not Brand Equity Platforms.

Harry Webber Fantazzzmia.com

Jeremi Karnell 2 Jul 05
Harry,I see where you are headed. BTW, you sound like Morpheus and I feel like Neo. Just took the blue pill (skipping off into the sunset)

Woohoo wo who hooo, Woohoo wo who hooo, Woohoo who, Woo who, Woohoo wo who hooo (Think Vonage Theme Song)

source: AdRant Discussion Thread re: "People Do Stupid Things" post.