Morning Read – Page 4

Scan Me, Baby.

What’s this article about?

2D Barcode Integration & Execution Tips for Print Advertising

Normally, this expertise and my experience in the space is reserved for paying clients. But today, I’m publishing a no-frills, five-minute guide to integration and execution of 2D barcodes (also called QR Codes*) into static print advertising. Why? Because this technology keeps print relevant in the digital age, and it physically pains me to see it botched so frequently. So, PLEASE, please, please… I implore you to share this post with everyone who you think will find it useful.

Step I: Planning

What are the goals for this advertisement? Support sales? Build brand equity? Promote a special event (like a weekend sale)?
What are the metrics through which you will measure success? Increased sales? Increased traffic to your website? Better results on market research surveys? Higher Klout/social influence score?
What will your 2D barcode do? Download a contact card into the phone? Link to a video? Link to a website? Action through a social network’s API? Bake you a pie? (just kidding, they can’t do this… yet).
Perhaps most importantly… why do you want to use a 2D barcode in your advertisement anyway? Because everyone else is (a very bad reason)? To (finally!) be able to attach a firm ROI to your print ad campaigns? To drive customer engagement? To innovate and keep your brand fresh?

Write the answer to each question down. Right now. Seriously, get a pen and paper (or open up notepad, if that’s your bag).

Step II: Design

2D barcodes are ugly. Well, not so much ugly as aesthetically uninspiring. But that’s just the nature of the beast… and including one in your advert provides benefits that far outweigh any loss in aesthetics. Plus, consumers don’t care… really, they don’t. Adding a 2D barcode to an advert is adding an element of mystery to the consumer experience- a mystery which can be easily solved… by scanning the barcode. Research by Neilsen conducted in 2010 found that 5-7% of all smartphone owners scanned 2D barcodes in advertisements, and also followed the action through the goal funnel. That was in 2010, and the technology is much more ‘in the mix’ today. Most phones come with barcode scanners pre-installed, and the user rate continues to increase steadily (smartphone ownership in Canada increases about 10% year-over-year, and 2D barcode usage proportionally with it).

Considerations for advert design:

Never make your 2D barcode smaller than 1.5 inches on either side (and it must be a square, unless you’re using HEM’s ShotCode)! Phone cameras with lower resolutions or cheap image sensors won’t reliably read them. Yes, smaller barcodes can be read by higher-end phones nearly all of the time… but are you marketing your products exclusively to the owners of the iPhone 4, BlackBerry Torch, or Samsung Galaxy SII at the expense of all other smartphone owners? Yes, technology will improve over time… but you’re living and selling in the right now. If your customers can’t access the additional content, they may discard the advert’s message (costing you a chance at conversion). Tech-savvy prospective customers may write you off completely, considering an improperly executed barcode advert a statement against your credibility (“Man, this company is worth how much and they can’t get a barcode ad right? I wonder if there’s lead in the paint too…”)
Never embed a 2D barcode in an advert which will run on newsprint. Newsprint rarely presents a sharp enough image for all of the edges of a 2D barcode to be clear enough for a phone’s sensor to read properly. Newsprint also smudges, and is prone to errors such as ink blotting and minute tearing during production. If you absolutely must embed a 2D barcode in a newsprint advert, then overcompensate. Make your barcode larger than normal- 2.5 inches or more per side.
What’s the size of your ad slot? Smaller ad slots will be eaten up by a 1.5″ square barcode, and you do still want to retain the aesthetic balance of your ad layout. If you want a 2D barcode and some semblance of a coherent CTA and marketing message, then don’t buy smaller than a quarter page for a barcode-enhanced advert.
Placement, placement, placement. This one drives me nuts. Think about where your ad slot is in relation to the physical barriers of the medium it’s going in. For instance, is your ad on a front-facing page in a magazine? Then you don’t want your barcode on the far left of the page (the binding may obscure part of the code, or, cast a shadow over it- thus forcing the camera flash to fire, which will obscure part of the code due to the light reflection from the glossy paper). Is it on a back-facing page? Then you don’t want it on the far right for the same reasons. Not sure which page your slot will run on? Play it safe- embed your barcode in the bottom-middle of your design.

Step III: Metrics and Content

Always have a system of metrics in place to track your advert’s performance! At the very least, you want to be able to track the traffic count to the page where your enhanced content is located (if your strategy for the advert includes additional content). Ideally, you want to also be able to track time-on-page, bounce rate, conversion rate (if you have a specific sales or other goal funnel as part of your strategy), geolocation (can be iffy to collect because mobile devices aren’t assigned IP addresses, but still worth trying since they’ll register an IP and location if connected via WiFi), and social share rate (the percentage of users who ‘share’ your content to social networks via embedded action buttons).

Always have a game plan for page content (unless your goal is to simply download a contact card/vCard/iCard into the user’s phone). Please, don’t just use your homepage. Prospective customers who scan a 2D barcode are taking a step to stop what they’re doing and give you their full attention. And trust me, during this process you have their full attention. They want to be wowed. Give them some content that meets this expectation. Video is great (if well-developed and of decent production quality- and yes, ‘social’ videos can and should still have these qualities). A flash presentation isn’t so great (it looks pretty on your PC at home, but many mobile devices don’t yet support flash natively- and few users will bother to download a flash player to compensate).

Involve your IT people (outside consultant, web designer, hosting service, whomever is the architect and mechanic of your online presence); set clear expectations for the metrics you want to track, and design/implement the proper systems to do so if you haven’t already (before you even finalize your media buy for this initiative).
Integrate social sharing actionables (‘Like’ button, ‘Tweet This’, ‘Digg It’, eMail, whatever). You paid for the initial contact with this customer, and you should definitely give them the opportunity to advertise for you by turning them into brand ambassadors- this will lower your overall cost of acquisition. How do you do this? Read the next step.
Create some great content. This was mentioned above, and because it’s so important it will be mentioned again: after the prospective customers scan your barcode, you have their full attention. Hold it, and use it!

Step IV: Go Do It

Don’t be afraid to experiment. Don’t be afraid to push the envelope. Don’t be afraid to engage with your customers and prospective customers on an intimate, social level. Social media has and will continue to have a disruptive effect on traditional marketing and on the way that we carry out CRM and CMR in business (Customer Relationship Management and Customer-Managed Relationships). But; don’t fall for buzzwords, fads, and clichés like “catch the wave.” Learn how to best use these tools for your business. You know your business better than anyone else, and you know what your customers want and what they’ll respond to- both positively and negatively. So, go do it.

For the sake of my sanity, please share this post with everyone who you think can benefit from it. Especially the people at Dior, Tag Heuer, Armani Exchange, Alexander Keith’s, and General Motors. They’ve all missed the boat on integration and/or execution of something in the above article at least once in the past six months.

* “QR Code”, “QRCode”, and “Quick Response Code” are trademarks of Denso-Wave, Inc.

Apple’s Evil Empire

Apple isn’t evil, of course. They do what every for-profit corporation strives to do: maximize shareholder value, drive revenues, and defend their intellectual property. But the way in which Apple does this screams schoolyard bully.

Apple has a long history in the consumer electronics and software industries, having launched the year after Microsoft (the latter was founded in 1975). Throughout much of its history, Apple was seen as the rebellious alternative to Microsoft’s three-piece suit evil corporate dominance. In the mid-90s, Apple started building its brand around that intangible feeling of warmth and happiness that accompanies sunshine and rainbows. And butterflies and kittens and all other things soft, warm, and fuzzy in the world.

I suspect though, that we may have been dealing with a wolf in sheep’s clothing all this time. This isn’t a Mac vs PC debate- rather, what I want to meditate on here is Apple’s business practices and how it chooses to manage its relationships. As a disclaimer, let’s be clear on the intent of this article: I’m not suggesting or stating that Apple has done anything illegal- ultimately, that’s for the justice system to decide. My commentary relates solely to business ethics and draws on that which has already been reported by reputable journalists.

Shall we begin?

1. Apple sues Samsung over the ‘look’ of its Android-powered smartphones

This is just pure foolishness. Here, Apple is trying to claim that the physical look and feel of the iPhone is subject to copyright protection. In other words, Apple is arguing that the way its popular mobile device looks is so novel that it’s actually an artistic creation- and thus, copyrightable under current intellectual property laws. To add a little dynamism to this battle, Samsung is one of Apple’s biggest suppliers (Samsung manufactures the screen used in the iPhone). So, we have not only a dubious intellectual property lawsuit… but a very public dispute between two large tech firms that have previously enjoyed a profitable strategic relationship. Apple supporters may argue that if Samsung valued the business relationship, it shouldn’t have so closely copied the aesthetic design of the iPhone. This suggestion has some merit, but Apple doesn’t own the rights to the design process. Whether by accident or design, Apple came up with a physical device layout that lends itself very well to the user experience requirements of touchscreen consumer mobile devices and their application environments. That doesn’t mean that no one else can benefit from their design advances, merely that they were early pioneers in the space.

In fact, Apple tried something similar in 1988 when it sued Microsoft over the visual design of its Windows operating system. In essence, Apple claimed that Microsoft had infringed upon its copyrights by utilizing a graphical user interface (GUI). In hindsight, we now look back and scoff at how ridiculous the idea of copyrighting the concept of a GUI is, but the case was a watershed event. Had Apple won, I suspect that the development landscape would be very different today. Since US copyright protection lasts for seventy years, GUI designers wouldn’t have been able to get into the game until around 2060 without paying licensing fees… and the entire field of User Experience (UX) in tech might not even exist today, as the UX field grew out of and is closely related to the User Interface (UI) field.

To draw a parallel- do you remember when North American auto manufacturers began to incorporate curved body styling, and more recently, the swept-back headlamp housings that give cars a sportier — almost fierce — look? Those design elements originated in Europe (which the domestic guys initially used as a marketing plug), but did we see BMW or Mercedes-Benz launch nine figure lawsuits against GM, Ford, or Chrysler? No. Has Rawlings sued Wilson because the latter’s baseballs look too much like their own offering? No. One has to wonder whether Apple is actually going after Samsung, or is using this as an opportunity to strike at Google over its Android operating system (currently the subject of a similarly wishy-washy patent-infringement suit by Oracle, who owns Sun Microsystems).

Enough with the litigation, Apple. Get back to the innovation.

The Ethical High Ground Not Taken:

Own the copycats. Take the fact that they’re now playing catch-up on your UX breakthroughs and transform it into brand equity. Do this by poking some fun at the competition in an ad campaign and stick the iPhone beside a similar-looking competitor’s handset. Place some text below it (or use a voiceover) saying something along the lines of ‘so groundbreaking that the other guys decided to do it too.’ Then ask the consumer if they’d rather have the gold-standard, or settle for the knock off.

Run this campaign for awhile, and continue on with the business relationship that you have with Samsung. After all, switching to a new supplier of high-quality screens is going to hurt your bottom-line in the short term while the wrinkles get ironed out, and you’ll incur unnecessary expense here (in addition to the unnecessary expense of a ridiculous lawsuit which you have no hope of actually winning).

2. Hey GetJar: @#$$ off!

Recently, Apple sent third-party application market GetJar.com a rather nasty cease and desist letter (according to the company’s founder, during a recent interview on the Lang & O’Leary Exchange). What was Apple’s beef? Well, GetJar referred to its website as an ‘App Store’ in some of its marketing materials. GetJar may be in a bit of trouble here, as Apple does have an active US Trade-Mark for ‘App Store’ (77525433). However, the word ‘App’ has since entered the common lexicon as short for ‘Application’, and Apple certainly doesn’t have any exclusive rights to the word ‘Store’. If this Trademark is opposed (it was published for opposition by the USPTO in late 2010), it may be wiped off the record (had Apple chosen to file as a design mark, using a logo, any opposition would likely be rebuffed unless Apple clearly copied another design).

Apple would have a much stronger moral argument if GetJar blatantly branded itself around the words ‘App Store’ and mimicked the UX design used in the “iTunes Store” or the “App Store”. But if you look at the GetJar website, this is simply not the case. In fact, I’d go so far as to say that both the UX and graphic design of GetJar intentionally try to avoid looking like the App Store (GetJar’s business model is based around offering free apps from independent developers, while Apple’s is not).

The Ethical High Ground Not Taken:

Drop the Trade-Mark application for ‘App Store’ as a wordmark, and resubmit it as a design mark. ‘App’ has become a generic word, and any company that tries to enforce intellectual property rights over the common language with which we communicate is in for a world of hurt- if not in the litigation arena, then in the brand perception one.

3. Ripping off the Wireless Sync app

Anyone who’s previewed Apple’s upcoming iOS5 and covered the various advancements in it has thus far raved about the built-in ability to sync Apple devices over WiFi, instead of relying on the traditional USB sync via PC or Mac. It’s a great improvement in functionality and user experience that leverages the trend of consumer electronics devices increasingly going wireless. Some would call it a quantum leap forward, some would call it a common sense step forward. The problem is that Apple didn’t actually come up with the idea, nor the application that it integrated into iOS5. A college student in the United Kingdom submitted the application to the App Store in May of 2010, and was personally contacted by an Apple representative to inform him of the rejection- and to solicit his resume (normally a standard-form rejection letter is sent). The student declined, and began to sell his app via an independent application market shortly thereafter. A year later, this was promoted as a core function of the upcoming operating system during an Apple PR event. Did Apple infringe upon a patent or other intellectual property with this move? It appears not, as the developer didn’t seek patent protection. Not that I blame him, the patent process is a long and expensive one- and even more convoluted than normal in the case of software patents. In all likelihood, the software technology he created would be obsolete by the time the patent was even opened for public inspection (usually, a patent is opened for public inspection 18-24 months after submission). Still, it seems a bit hypocritical of Apple to appropriate the kid’s idea, given the company’s outlandishly protective stance on copyrights (how can you claim that competitors unfairly copied the way your product looks, and then turn around and gobble up an actual, working technology without paying for it?).

The Ethical High Ground Not Taken:

License the application from its rightful creator. Or alternatively, purchase it outright for future use in iOS. Aside from the whole doing-the-right-thing bit, this would also make good business sense: expenses related to technology acquisitions generally qualify as tax write-offs. Apple would also increase goodwill amongst the developer community (without the support of developers, the app store part of Apple’s business model falls apart).

The bottom line:

Apple generates a whole lot of value for its shareholders. The stock closed on the NASDAQ today at $390.48. It also generates a whopping $25.26 in earnings per share (by comparison, Microsoft generates only $2.69). The company is profitable, produces massively-popular product lines, and dominates in a variety of technology markets which it created (did we buy digital music and movies online before the iTunes store? Not really). The question mark really is how they carry on business, and it boils down to this: do you, as a business person (or consumer), want to be involved with an organization that shamelessly screws not only the little guy, but its own strategic partners? I sure don’t. Good relationships are built first and foremost on trust, and second on opportunity.

Disclosure: at time of writing, I did not own an equity position in any of the companies mentioned in this article.

Startup Culture

Dan Taylor at the GPAEDC recently challenged me (in a friendly way, of course) to qualify a statement I made via my Twitter account:

“@AmberMcPhee1 @Cre8tiveDanT @dani_roche there’s a reason why startups tend to form around the communities created by universities!”

All of this just wouldn’t fit in 140 characters, so we now have a blog post. Here goes:

Personally, I believe that great startups spring from great relationships. Sure- the 5Ps of marketing are essential (product, place, price, promotion, people)… but without the great relationships which forge great founder teams, those never get off the drawing board. In tech (especially internet and mobile technologies), the barriers to entry for entrepreneurship are much lower than say, mining or manufacturing. Low overheads and low capital requirements to create tech products are among the reasons why so many young entrepreneurs are focused in this area (not to mention a natural affinity for the space). In mining and manufacturing, you need several million dollars and VC backing to get into the game; whereas in tech you need a PC, internet access, a smartphone, and someone who knows how to write code. A natural attraction to coffee shops with free WiFi and a burning love of all-nighters doesn’t hurt either.

Back to why startups tend to form around post-secondary communities. Relationships. If we think about the socio-demographics of ‘life stages’ and how people tend to progress through life in western societies, this becomes clearer. Typical life stages, of course, are:

The stages are far more nuanced than this and their progression is unique to each individual… some people may skip a stage or experience them in a different order… but ceteris paribus, this is how the general progression goes. By the very nature of these stages, we can eliminate some of them as ideal entry points for entrepreneurs (yet, there are always exceptions that prove the rule- I’m sure most of us can even name a few). The first two stages; birth and physical growth, can be eliminated simply because people have neither the intellectual or legal capacity to create a business organization (for sake of argument, let’s define youth/physical growth as spanning ages >0 to 18). Stages five through eight, we can also eliminate as ideal: when starting a family, that tends to be your focus. And love it or loathe it, bootstrapping a startup eats into your time like nothing else (more than once, I’ve often looked up from the workstation in my kitchen and realized that the wee hours of the morning snuck up on me). Child-rearing creates similar constraints- raising children takes an enormous amount of energy and dedication, as any parent will attest to. As a parent, would you rather be with your family during off-time, or embarking on a hare-brained journey to start a business (let’s face it, starting a business requires just enough insanity to be able to push past the self-doubts and heightened risk of personal financial calamity that are inherent to the process). By retirement, the focus tends to shift to enjoyment of the good life in reward of all your many years of sacrifice and hard work (as it should). There’s also the ’empty nest’ stage between child-rearing and retirement, and many entrepreneurs take the plunge here, if they didn’t do so earlier in life… but entrepreneurs who take root in stages three and four far outnumber the empty-nesters (in tech, anyway).

So, stages three and four… education and workforce entrance. In many cases, entrepreneurs will build the necessary skills and relationships in the first of these stages, and then implement them in the second. The average student and recent graduate is in their early to mid-20s, and people of that age tend to form most of their personal relationships through classes and the social networks created and maintained by post-secondary institutions and its culture. By ‘social network’, I refer to that of the physical world… the term was around long before Facebook sprung into existence, and in fact, Facebook is modelled after this university culture of relative interpersonal social networks.

The highly intelligent, ambitious, game-changing minds come together with others of similar and complementary characteristics at college and university. Natural attraction brings these people together inside of their own (and relative) social networks. The truly entrepreneurial ones recognize strengths and weaknesses in others which are complementary to their own, and a high-value entrepreneurial relationship is born. The formation of these ideal relationships isn’t a common occurrence, of course- probability is stacked against it. Ergo, this is purely a numbers game. If you throw enough spaghetti against the wall, something will stick. Where else will someone in their early to mid-20s be exposed and immersed in a homogeneous (on the macro level) culture with thousands of people who share socio-demographic characteristics with them? There are, of course, numerous cultural pools within this environment that run along the lines of religion, preference, and a variety of other factors. The critical constant here is that cross-interaction between these pools is forced by the physical proximity on campus and the dynamics of the learning environment within each classroom.

All of these factors make university and college campuses a highly-effective breeding ground for entrepreneurship. I believe that universities and colleges within Ontario would do well to recognize and foster entrepreneurship on campus (many are; but as a whole, the post-secondary education system could be doing so much more to integrate it into the administrative culture and consider it directly in planning initiatives).

For those of you who have the entrepreneurial bug, but are no longer a student- you can still form those relationships. Here’s how:

Go looking for them.
You have one advantage that many third year business students don’t. You know what you want, and what you need. Many young entrepreneurs stumble into complementary relationships and THEN decide to pursue entrepreneurship (that’s how it happened for me). Think long and hard about who you need to balance your traits in order to improve the whole unit. Then, go do some networking. Wade through LinkedIn, Twitter, and any other social network aggregation platforms that you happen to be using. Also make sure to do it the old-fashioned way: attend networking events through your local Chamber of Commerce, or other business-friendly organizations. Meet and talk to people. Ask every single person you interact with if they’re interested in entrepreneurship. Many won’t be, but odds are that they can point you in the direction of someone who is… and perhaps even introduce you. As elitist at it sounds, sometimes it really is all about who you know.

Hit the lecture circuit.
Call, email, or write every organization you can think of which sponsors events and offer (perhaps even for free) to give a talk on what you know and what you do best. Not only will you build your own personal brand and reputation as an authority, but you’ll inevitably meet movers and shakers (complacent people don’t attend lectures), as well as decision-makers and their gatekeepers. People will engage you, ask questions, and take your business card.

Go back to school.
Not for another four year degree or diploma, who has the time for that? Unless you’d planned on doing an MBA or other graduate-level degree anyway… in which case, no time like the present (I would argue that the probability of meeting other entrepreneurial-minded people is even higher in graduate programs than in baccalaureate ones). But if that’s not in the cards for your immediate future, then audit a class. Preferably in something related to what you do or want to do, but in which you’re not an expert- you’ll meet people who are experts, or are well on their way to becoming so. Worried about being turned down? Don’t be. Since your tax dollars partly fund these institutions, you’re entitled to audit a class whenever you like- provided that there’s space for you, and that you receive permission from the course instructor and/or admissions department (few will turn you down if you demonstrate a genuine interest in the subject matter, and promise to be respectful and participative- sometimes there’s also a nominal fee involved). Keep in mind that you often won’t be permitted to turn in coursework for evaluation, and that you won’t receive credit (if you want these things, inquire about formally enrolling).

Volunteer.
The dirty little secret of volunteering is that it’s often used as a great way to network with like-minded individuals and go-getters. I’d love to be able to say that volunteerism is purely a selfless act, but the reality is quite different. Some companies place mandatory volunteering components into their employment contracts (as a part of a social responsibility plan) or encourage employees to volunteer with incentives. But, there are also business people who volunteer out of a genuine desire to give back to the community. If you’re involved in volunteerism long enough, you’ll be able to spot them in the crowd. These individuals often make great angel investors if you can demonstrate to them that their money will help generate jobs in the community, and even return a buck or two in the process. And trust me- if you want to make a serious go as an entrepreneur and create a great company, you’ll need an angel or two on your side (unless you hit the lottery jackpot, have a trust-fund, or a knack for robbing banks and not getting caught).

Want to talk about your experiences in entrepreneurship and what it’s like for you? Leave a comment. Or post to Twitter with the hashtag #startuplifestyle.

Disclaimer: don’t rob a bank. That’s just plain not cool.

3D What-Now?

Seems to be the week that I notice poor brand messaging in advertisements. Crest has a line of products on the market called 3D White – which contains everything from toothpaste to mouthwash to disposable whitening strips. I’m sure that they all work just fine…. but the brand messaging is simply godawful.

First- the name. 3D? So, if I use this product… my teeth will magically become three dimensional? I hate to break out to you P&G, but they already are. Thanks to my parents. I came out with three dimensional teeth. Perhaps the ‘3D’ stands for something else. If so, it’s not clear exactly what that is in any of the magazine, television, or online ads that I’ve seen for the product line.

Second- the TV advert that I saw last night featured a ‘photographer’ telling the audience (in this case, me and anyone else watching I Love You, Man on Showcase) that the most important thing to ensure a good picture is a white smile. Except that it wasn’t a photographer, there was a nice big disclaimer at the bottom of the screen that read ‘Actress, not a real photographer.’

So, not only are you feeding us misinformation (a white smile is certainly not the most important thing in taking a good portrait- composition and lighting are)… but you’re doing it with a fake ‘expert’ and TELLING us that the ‘expert’ is a fake? Sure, there’s such a thing as creative license in advertising… when you’re telling a story or narrative, and want to do it in a clever way (while ensuring that the audience knows you’re telling a story).

Reminds me of a rather colourful phrase I once overheard.

Sure, I’m screwing you. But at least I have the common decency to do it from the front.

Disclosure: at time of writing, I did not own an equity position in any of the companies mentioned in this article.

Throw Some Spaghetti Against the Wall, Would Ya?

I actually did this once, during my tenure working part-time at a restaurant in the 90s. I wanted to see if the customer who’d just complained was right (I was in high school, and sometimes lacked maturity).

As it turns out, some of the spaghetti stuck… and some of it slid down the wall, canoodling up together in a bundle on the floor. Pun intended. Having been extremely irritated only seconds before, the complaining customer began to howl with laughter. I coyly told him that I’d have the cook whip up the best off-menu philly-style cheesesteak that he’d ever had (on the house). And with a wink, I was off.

Wait staff- this was a pretty risky move on my part (fuelled by the naivete and immaturity of a male sixteen year old, no less). Though it ended with a successful customer recovery (and a healthy tip for me), don’t start throwing food items at the wall. It’ll most likely end in you getting reamed by a very, very angry boss. Or cook. Or customer. Or all three, simultaneously (as unpleasant a hospitality furpile as I can imagine).

Having a laugh over this distant memory the other day prompted some thinking on hyper-segmentation in marketing (read on, it’ll make sense shortly- I promise).

Over the past century, both financial markets and successful organizations have grown markedly more complex. In today’s commercial landscape, we have banks offering insurance (all of the big 5)… grocery stores offering banking services (Loblaw’s/PC Financial)… insurance companies selling mutual funds (State Farm)… you get the idea. The bigger that business-to-consumer retailing organizations get, the more pies that they tend to stick their thumbs in (which perhaps makes Walmart an octopus- you can’t have that many thumbs on two hands). This is perfectly normal for the most part, just another evolution of capitalism in the ongoing hunt for the almighty dollar. Unless you’re of the mindset that these peripheral services distract from the core competencies of the organization, as I am. One of the reasons why I don’t buy mutual funds from my car insurance company.

Enter brand segmentation.

With the segmentation of brands, companies can offer a hodgepodge of services without the consumer becoming confused or questioning the organization’s ability to competently execute the non-core services. The wireless telcos tend to segment their brands extremely well- and good on ’em for it. Bell sells discount wireless services through its Solo brand, while Telus does the same through Koodo, and Rogers with Fido and Chatr Wireless (though Rogers acquired the once-independent Fido, and I’m not convinced that they’ve completely figured out what to do with it yet).

Enter hyper-segmentation, or the segmentation of brands to a high degree. This isn’t for the faint of heart; as hyper-segmentation is typically much more intensive on your marketing resources than normal brand segmentation. The return on investment thus may be lower for large companies with big marketing budgets. But the return to your organization’s brand equity is well worth it in the long run, in the form of increased customer recognition for your products, and the perception of value (admittedly, coming up with metrics to measure brand equity is more art form than science- we’ll chat about that another day).

Let’s use IBM as an example:

What does IBM actually do these days? (they’re not as active in the consumer device market as they once were). IBM sells… productivity software (Lotus, System z)… business analytics packages (Cognos, SPSS)… content management systems for enterprise… integration packages… software management packages… service management packages… and that’s just on the software side of their business. They also sell enterprise-level server hardware, networking hardware, personal computers, retail point of sale systems (cash registers), security systems (for computer networks, not home alarms). AND… they’re in the services business- offering IT outsourcing, leasing of server space in data centres, application development, business consulting, and training. And it’s all branded IBM.

As far as the numbers are concerned, it’s a positive that IBM is involved in as many areas as it is- their revenue stream is diversified, and highly stable. Now close your eyes and recite the fraction of IBM’s products and services that I listed above. Unless you have a photographic memory, it’s pretty much impossible.

Now think about Hertz (you can open your eyes again). What does Hertz do?

They rent cars.

People identify with brands that are simple, pure, and have strong messaging. Those are the brands that drift to the top of the memory-recall pile when a consumer has a need to be filled. Am I suggesting that IBM shouldn’t be in the business of doing… well… everything under the sun? Of course not. But, their brand strategy would be far more effective if they grouped distinct operations together under co-related brands (IBMsoftware, IBMhardware, IBMservice, et cetera- with more creative ‘oomph’, of course).

How does this connect with spaghetti and the westerly wall of that dive diner all those years ago?

Imagine that the entirety of the consumer marketplace is a well-worn Spanish-style mosaic tile wall. Each tile has slightly differing textures and characteristics, not to mention a veritable cornucopia of colours. All of the different brands in the marketplace are represented by cooked, buttery spaghetti strands; and if you toss a pot of that against your imaginary wall, some strands will stick to some tiles because of the tile’s characteristics- while others will slide off the other tiles and come to rest on the floor. Brands are much the same, in the sense that some brands ‘stick’ with a person because of the characteristics of that person, while the same brand may not stick to another person who has different characteristics.

Disclosure: at time of writing, I did not own an equity position in any of the companies mentioned in this article.

Thoughts on the Knowledge-Based Economy

There’s been a lot of buzz about how this country and its communities need to transition to a knowledge-based economy in order to remain competitive, thrive, and even to survive in some cases.

I tend to agree (in the interest of full disclosure, I do have a bias- I’m a partner in an internet technologies firm that is heavily reliant on IP to generate revenue).

Let’s talk about this knowledge-based economy thing and highlight some of the challenges ahead, both nationally and locally.

First off- what is a knowledge-based economy? That can be tough to pin down in a well-defined sense. But, as the term implies, a knowledge-based economy is at heart an economy that relies on the creation of intangibles and intellectual property in order to create wealth. An easy example on the micro level is the creation of Facebook, which makes revenue by selling advertising on its site, targetable to the 600-some odd million users who use it; Facebook has generated an ecosystem, where other companies can use its platform to generate revenue- such as social game maker Zynga (creator of the much-loathed and much-loved FarmVille).

Note that even if knowledge-based companies don’t retail physical goods and services directly, they’re almost always involved in the process indirectly. For example, my firm owns and operates a B2B real estate marketing brand specializing in high quality eMarketing products which are used by real estate agents and brokerages. This is a knowledge-based entity, and though it doesn’t sell tangible products directly (aside from some signage and business cards), it closely supports professionals who do sell tangible products (namely, property and housing).

Confusion about the knowledge-based economy comes from an often-missing part of the equation: the knowledge-based economy is indelibly tied to the value chain of manufacturing and the retailing of tangible goods and services. If you were to remove the manufacturing and retailing of physical goods from the economy with your magic wand, a knowledge-based economy would be largely unsustainable. This is not to say that our nation MUST have strong tangible and intangible facets (though this would be preferable), as the interconnectedness of the 21st century world means that manufacturing can (and usually does) happen in other areas which have more lax labour regimes and lower cost of production in an economy of scale. Capital, like energy, flows along the path of least resistance. The state of our manufacturing sector shouldn’t be blamed on corporations or the greed of business owners, as it’s actually our societal lust for low-priced products that is the root of what ultimately drives manufacturing overseas. But, I digress.

If we can’t competitively manufacture (a generalization, yes, but an accurate one), then the growth of knowledge industries is certainly essential to our long-term economic health (traditional natural resources aren’t everywhere, after all… and certainly aren’t infinite; thus, relying on the resource sector as a long-term economic driver is certainly a folly). Canada has a reputation for high-quality innovation in a number of fields- among them, aerospace and high-tech (before the demise of Nortel, anyway- and RIM may not always be the shining beacon that it has been). Sadly, other countries have shown more rapid growth in high-tech than we have in the past decade (in my opinion, high-tech is a cornerstone of knowledge-based economies).

Before we talk about what challenges there are for transitioning to a knowledge-based economy, let’s define the term ‘high-tech’. It has a few different meanings, based on the perception of the individual. ‘High-tech’ has been used to describe:

technology developers/manufacturers (Nortel, RIM, Cisco)
technology integrators (the ill-fated Vonage, Skype, Telus Healthcare)
software developers (OpenText, Corel, Sage)
internet technologies (Google, Facebook, Yahoo)
hybrid-tech companies [those who do a bit of everything] (Microsoft, Apple, Hewlett-Packard)

Thus, the common idiom of ‘high-tech’ can be used to refer to a company like Cisco, which develops and manufactures computing hardware (and to a lesser degree consumer electronics), as well as Facebook- which brought online social networking to the mainstream and sells advertising. Though they’re both ‘high-tech’, these two companies carry on vastly different businesses and rely on revenue models that are apples and oranges to each other. But the one big thing they have in common is this: reliance on leveraging intellectual property (IP) to generate revenues.

Challenges for a Smooth Transition to the Knowledge-Based Economy in Canada

Plentiful. Among them:

Geography and Geopolitics
Business and investment climate
National politics (though perhaps lessened with the CPC in power as a majority)
High cost of advanced communications services (broadband, mobile, et cetera)

There is no Silicon Valley in Canada (though at different times Toronto, Vancouver, and Montreal have all been referred to in the popular media as ‘Silicon North’). The low population density in this country tends to work against the critical mass of ideas necessary for brilliant innovation at the concept stage within the tech sector (with the exception of the seven major urban centres, of course, which have higher population densities). The low-population density factor is especially detrimental when considering that Silicon Valley and its support systems are a mere eight hour plane ride from Pearson (shorter from Calgary and Vancouver). Many Canadians have relocated to California and been incredibly successful in the tech sector. In fact, non-profit group theC100 is solely dedicated to promoting and supporting Canadian tech entrepreneurship in Silicon Valley. The mere existence of such a group speaks to the dismal conditions for high-tech firms in Canada at the same time that it speaks to the quality of tech innovation borne in this country at the concept stage.

The business and investment climate (particularly venture capital) is also currently a detractor to economic transition. Currently, the national economy is in the middle of a fragile recovery (we may be in the ‘middle’ of this recovery for several years to come). Uncertainty in global markets, combined with a red-hot commodities market typically works against knowledge-based companies at the seed and startup stages in particular. Economic resources are limited (though to the individual, the economy seems limitless due to its overall size). If you had ten million dollars to invest in a company, what would you do- take a flier on an internet startup that either could quadruple your money in five years or leave you shirtless in six months? Or, would you invest that money in a commodities company that provides a high-demand resource into global markets (such as gold, potash, or crude oil) and will give you a steady return of 6-10% per year on your money annually (when you can also sell that position at any time to make back your initial ten million, and then some)? Capital flows along the path of least resistance. Thus, the resource sector in this country is far more attractive to venture level investors than the tech sector. It also doesn’t help that there’s far less private venture capital in Canada than there is in our neighbour to the south, even when compensating for factors like population and market size. As Sir Terry Matthews put it ‘… it’s like a desert out there.’

National politics certainly plays a role in any economic transition. This one in particular could be extremely sensitive, given that the manufacturing sector currently makes up about 10% of the employed labour pool nationally (source: Statistics Canada, May 2011). This of course is predicated on the assumption that if government attention and support shifts to knowledge-based companies, that manufacturing-based companies will feel the pinch even more than they have. The sensitivity comes from the fact that manufacturing has a disproportionately loud voice in the public sphere, primarily due to unionism and its well-established, well-funded lobbying assets and mechanisms. This risk to transition is perhaps somewhat lower now that the CPC rules Ottawa with a majority government- its stance on unionism and labour disputes has been made quite clear by its actions in the Air Canada strike, and more recently, the Canada Post conflict (the national service disruption was a lockout by management- not a strike, as many have called it).

The high cost of advanced communications services such as broadband and mobile are also a hindrance to consumer adoption, and thus, a hindrance to economic transition. The digital communications technologies that make our world smaller are the infrastructure upon which a sustainable knowledge-based economy must be built, after all. We can consider them the four-lane freeways, seaports, and rail lines of the new economy. If the cost of adoption among the mass market is prohibitively high, the consumer base for the knowledge economy is smaller than it should be- and a bigger market almost always means higher profits, which attract more investment capital. Canada currently ranks 26th in price offering for broadband technologies, according to research done by the OECD (meaning that a consumer can purchase monthly-subscription broadband services cheaper than here in twenty-five other countries, benchmarked to the USD). In price per megabit per second (of advertised speed), we rank 25th with an average of $1.46 and an average monthly line cost of $56.99 (benchmarked to the USD). By comparison, second-place Japan averages $0.12/mbps with an average monthly line cost of $24.68 (again, in $US). There are a variety of factors for this price disparity- the big telcos will say it’s infrastructure (valid) and supply/demand (also valid), while the free-market proponents will scream oligopoly, price-fixing, and lack of competition (all valid as well). Canada has slipped considerably in broadband penetration, now ranking 22nd globally- no doubt in part due to pricing disparity with other nations. Capital flows along the path of least resistance- especially in the consumer spending arena. Wireless technologies such as cellular phones are in a similar state, as data-delivery has become the battleground of that industry in the past five or six years (even more so now that wireless telco has evolved to become primarily an application delivery ecosystem instead of a make-phone-calls-from-anywhere industry).

Challenges for a Smooth Transition to the Knowledge-Based Economy in Peterborough, Ontario

On a macro level, the Greater Peterborough Area faces these challenges in its transition to a knowledge-based economy. Currently, the services/hospitality sector, coupled with manufacturing, are major drivers of employment within the community. Thankfully, the bigger manufacturing players (Siemens and General Electric) are highly-specialized and require highly-skilled labour. Additionally, the margins on the end-products which are manufactured or re-manufactured at these facilities tend to be quite healthy (for instance, nuclear power technologies). These two factors reduce the likelihood that these manufacturing operations will be relocated to lower-cost areas in South East Asia. Though, risk does still exist to the manufacturing base from smaller players (for instance, the near-fatal over-reliance by Ventra plastics on automotive sector clients circa 2008 and the closure of Unilever/RAGU in 2010). Growth in manufacturing in North America is unlikely to be a major economic driver in the coming decade, and any new manufacturing operations will likely be based on advanced technologies which reduce the required input of human labour anyway (ergo, fewer jobs created than in the past). Thus, focussing on manufacturing is unlikely to bring a good return on investment to the local economy.

Hospitality and services will be a high-growth employer in the coming years, based partly on the demand for labour outstripping the future supply. Indeed, projections suggest that without intervention the hospitality sector will experience a labour shortfall of 300,000+ workers nationally by 2025 (source: Ontario Culinary Tourism Alliance, 2007). This will create a very pointed demand for culinary and hospitality professionals, which will drive up wages and ultimately the price to the end consumer (almost certainly creating a mini-bubble which will self-correct as demand falls in response to the rising prices).

I mention these two industries because they are currently the forerunners to compete with the high-tech industry for government grants and support resources (federal, provincial, and municipal) in the coming years. Personally (again, I do have an inherent bias), I believe that tech is the most sustainable of the three industries, and presents the best opportunity to create wealth for this community and its residents. Knowledge-based companies (like tech) create high-paying jobs because at the root of it, intellectual capital simply cannot be created by machines (whereas products and food can)- with the exception of derivative intellectual capital (such as the creation of databases; which are ultimately of little value without ideas for their application). The creation of knowledge cannot simply be picked up and moved overseas, like manufacturing can (show me someone who wants to pack up and move to a country in southeast Asia with a lower standard of living, and work for half the pay, and I’ll show you a crazy chicken).

How do we create a knowledge-based economy in this community?

The foundations are already here. Geographic proximity to the nation’s nexus of capital (Toronto’s Bay Street and the TSX), sparse as it is for venture funding. Outputs of new, highly-skilled labour in the form of Trent University and Fleming College. Closeness to major transportation networks such as the 401/407 and St. Lawrence Seaway (remember, the knowledge-based economy is stronger and more sustainable when intertwined with the traditional economy- in fact, the most viable first phase of transition to a knowledge based economy is perhaps in using intellectual capital to enhance the efficiency and productivity of the traditional economy, something which the tech sector excels at). Also, this community has room to grow- both outwards and upwards (the footprint efficiency of existing real estate in the city core can still be nudged upwards, as there are no skyscrapers here currently and an abundance of low-value properties which have become dilapidated). Lastly, support mechanisms do exist in this community for business creation. The GPAEDC, CFDC, and Innovation Cluster being at the forefront (in addition to the BDC, EDC and the usual host of federal and provincial agencies which support business creation).

A principal barrier to the transition is, in my opinion, a near-absolute vacuum of capital support at the seed and startup stages. This is typically an area which is serviced by the private-sector; but, due to the overall nature of venture capital in Canada, this area is quite barren. The seed and startup stages (in the venture cycle) represent the highest risk for investors, due to the high rate of failure (though I would argue that the high rate of failure has a lot to do with the lack of available capital funding mechanisms and support for early-stage companies). Thus, the limited venture capital in Canada naturally flows to companies in the growth and mature funding stages (capital flows along the path of least resistance).

So, what’s the solution?

The big one would be an increase in available venture capital to fund companies at the seed, startup, and growth stages. Attracting additional capital to Canada (and Peterborough) in the form of venture capital funds and firms is an unlikely scenario, due mainly to our proximity to the red-hot venture capital markets in the United States. Thus, we need to be creative and tap unconventional sources of capital more efficiently, creating large pools of capital by aggregating small individual sources of capital. The angel investor model excels in this area; angel networks are on the rise in Canada (and North America) as the opportunities which funding seed and startup stage companies become more widely realized. At the policy level, it is absolutely essential to support the growth of this funding model. One such way of supporting this funding model is through creation of a tax credit which would allow angel investors to write off x% of their investment as a direct credit at the federal or provincial level (thus making this type of investment more attractive to those with a net worth of $5-50 million; individuals with higher net worths are typically involved at the venture capital level if involved at all). A program based on this model currently exists in British Columbia, and is highly successful (a recent study of the $30 million program revealed that for every dollar spent, the return to the provincial treasury was $2 and the return to the federal treasury was $1). Government policy funnels unimaginable sums into revenue-losing programs at every level; it would seem that allocating money into a revenue-neutral or revenue-generating program should be a no-brainer. Crowd-sourced funding is also another answer- where multiple investors contribute small sums to a pool of wealth (think Kiva, but as a for-profit), thus spreading the investment risk across a wide base (you might not be okay with losing a ten million dollar investment, but odds are high that you’d be able to swallow fifty or a hundred dollars if the investment went south). One of the current barriers to crowd-sourced funding is outdated securities regulation which was designed to police the investment community at the million and billion dollar level. Write the OSC an angry letter on the subject (I have).

Unfortunately, we have little control over programs like this at the municipal level. However, what we can influence at the municipal level is the development and support of business-creation mechanisms, such as incubators and mentorship programs… as well as support mechanisms for high-wealth individuals interested in investing in early stage companies (for example- research services, networking events, and limited fund-matching programs). Additionally, the creation of a community fund specifically for investment in early-stage companies would go a long way towards fuelling transition to a knowledge-based economy (realistically, this would have to be a private/public partnership utilizing funds from the public sector and funds+managerial experience from the private sector in order to be viable in the long term).

One area of opportunity is in the creation of a dedicated business incubator. In the tech industry, ‘incubator’ typically refers to cutting-edge operations which support entrepreneurs through the concept and seed stages (with financial support and mentorship) and sometimes into the actual startup stage (as in the Silicon Valley Y-Combinator program, which guarantees $15,000 in seed funding and $150,000 in venture funding to every accepted application). This type of investing is typically high-risk, but when approached with a portfolio strategy (ie- one big success will pay for fifteen failures) is sustainable and can be quite lucrative. However, incubators aren’t restricted to the tech industry- there are examples of several successful Canadian incubator programs which service a broad array of early-stage companies (Vancouver’s Network Hub, Toronto’s MaRS Project, Calgary’s Al Ross Technology Centre– even Port Hope’s IDEAHub is in the roster of the Canadian Association of Business Incubation).

Whatever path we as policy makers, business people, and citizens ultimately choose in order to facilitate economic transition will be a difficult one. But, I believe the people of this community (and nation) are ultimately up to the challenge. Prove me right.

Your First Time

Do you remember your first time?

The way that everything looked? Smelled? Sounded?

…of course, I’m referring to the first time that you incorporated a legal business for your startup.

For the entrepreneurial addict, incorporating your first startup is a visceral experience- one filled with a surge of endorphins and adrenaline, much like your first time doing… other things (such as riding a bike). For the truly passionate, it’s a flashbulb memory experience- one which is forever burned into the long term memory. Ask anyone you know who’s a serial entrepreneur where they were when they wrote the Articles of Incorporation for their first company, or if they didn’t write them, when they got them back from ‘The Man’. I bet they’ll be able to tell you.

I just had mine… in the form of 7902255 CANADA INC. (O/A KleverAnalytics), and I’m surrounded by the beige walls of my home office and the aroma of slightly damp canine (it was raining when I took them out for their evening stroll). Not quite as romanticized as one might expect, but I still bear the same ear-to-ear grin as everyone else.

I may even take the weekend off.

Thor Brings Potential New Life to the Nuclear Energy Industry

No, not the Marvel Comics superhero- although, Thorium is named after the Norse god often associated with the protection of humankind.

As discussed in a recent Globe and Mail opinion piece, in the dawn of the nuclear age there were two fissionable fuel sources suitable for use in the production of nuclear energy: uranium and thorium. Uranium was chosen, not because of its superior qualities as a nuclear fuel, but because it could be used to synthesize plutonium- the key ingredient of forty-five years’ worth of Mutually Assured Destruction insanity we now call the Cold War. Thorium cannot be converted to a weapons-grade fissile material with any sort of practicality, thus it was not chosen, as the military and scientific goals of early 20th century nuclear research marched in a paranoid lockstep.

Today, the world is a much different place. Energy security and safety is a much more pressing concern than the rapid proliferation of nuclear armaments (at least, in most places outside of Africa, South-East Asia, and the Middle East). And anyone versed in the field of nuclear physics can quite easily tick off the advantages that thorium has over uranium as an energy source- shorter half-life, fewer radioactive by-products, and greater energy density in its natural form. The geologists would also note a greater abundance on earth- perhaps 3 to 4 times so.

If thorium is the six million dollar man of nuclear energy, why do we still use uranium as a nuclear fuel source- even after the military agenda supporting uranium has faded? The easy answer is market momentum. And the not so easy answer is also, market momentum. For nearly fifty years, demand for uranium has created deep capital and commodities markets centred around the innovation of nuclear technologies. Starting the process over with thorium would be counter-productive to the interests of the free market and its investors. However- the nuclear industry has reached a stage of technological advancement where the substitution of thorium as a nuclear fuel would not necessarily eradicate the capital gains built on the back of uranium. Mining techniques are quite similar, the refinement of thorium is not overly complex or cost-prohibitive, and there are existing reactor designs that could utilize thorium as a fuel source with only minor modification (the most pre-eminent of such is our own CANDU reactor design).

Let’s examine the economics of thorium over uranium for a moment-

Thorium tends to exist in nature in relative high purity, whereas uranium-235 has to be enriched from it’s natural state (~0.7%) to between 4 and 5% purity in order to be used effectively for the generation of electricity in a nuclear reactor. Clearly, thorium ore has a much higher energy density than uranium ore. CERN’s Carlo Rubbia stated in an interview for the BBC earlier this year that one tonne of thorium ore could produce as much energy as 200 tonnes of uranium ore.

That’s a pretty substantial efficiency improvement. The June 2011 settled price for uranium futures contracts on the Chicago Mercantile Exchange is $57.50 ($US/pound). In other words, purchasing a short ton of uranium for June 2011 cost US$115,000. Purchasing 200 tonnes of it for the same contract period cost US$23 million.

Currently, thorium isn’t commercially traded in the volumes required for power generation- nor is it listed on any of the world’s mercantile exchanges. Around five million tonnes of natural uranium is known to be recoverable- compare that to one and a half million tonnes or so for thorium; according to data from the United States Geographical Survey. However this figure is hypothesized without any exploration activity and represents a best guess only; it is quite likely that additional deposits of thorium would be discovered with commercial exploration, as naturally-occurring thorium is more abundant in the earth’s crust than is naturally-occurring uranium.

If we assume a direct correlation in supply and demand pricing between the two metals, then a reasonable ceteris paribus free market price for thorium would be about US$77 per pound- assuming a total of 1.5 million tonnes of recoverable thorium (in a mature market, assuming equal supply capacity and market demand as that of uranium). A simplistic estimate, perhaps, but one not without merit for the purposes of this demonstration.

At US$77/pound, one ton would cost US$154,000- more than the cost of one ton of uranium. However, since the energy density of thorium ore is so much greater than that of uranium ore, the cost to produce the equivalent amount of energy with uranium would be on the order of US$23 million- as calculated above. It doesn’t take a calculator to see that the cost savings potential for using thorium as a nuclear fuel is absolutely gargantuan.

But, if you want the number… generating the equivalent energy of 200 tonnes of uranium ore with thorium ore would cost 99.33% less. Currently, the world consumes about 67,000 tonnes of uranium annually for electricity generation. Only 335 tonnes of thorium would need to be consumed to generate the same amount of electricity- meaning that this level of electricity generation could be sustainable for 4,477 years even if no additional thorium was discovered beyond what is known to be recoverable today.

There’s another important tidbit of information about thorium that makes it highly desirable for the generation of energy in a nuclear fuel cycle: the potential for catastrophic meltdown is greatly reduced, since the melting point of thorium is nearly a thousand degrees (celsius) higher than that of uranium (and since the element is unable to ‘go critical’ in the event of a power outage or natural disaster damaging a reactor). Considering recent events, I’d say that in itself is reason enough to pursue thorium-fueled nuclear power.

Sources:

British Broadcasting Corporation
World Nuclear Association
New Scientist Magazine
Chicago Mercantile Exchange
Discovery.com Blogs [Patrick J. Kiger]

Disclosure: at time of writing, I did not own an equity position in any of the companies mentioned in this article.

DVR Avoidance

The bane of TV networks, large and small, is the Digital Video Recorder (DVR – sometimes also called a Personal Video Recorder, or PVR). DVRs allow people to digitally record TV shows and then play them back in the same fashion as was once done with Beta and VHS (does anyone still even own a VCR?). This is actually a big problem for TV networks- if consumers are fast forwarding through commercials, the value of advertising space diminishes (at least in theory), as do revenues.

Let’s be clear- I’m not a big fan of TV advertising for this, and many other reasons; and I usually advise my clients to avoid this type of ad buy like the plague. Unless they have the budget to buy the ‘Midas’ slot- or the ad slot at the very end of the commercial break; everyone sees this ad, or at least the endplate/call to action part of it- which is why buying this spot on practically any show with decent ratings costs a small fortune. This is why you typically only see large companies with national brands in this spot (think the Fords, Coca-Colas, and Nikes of the world). Often, if a network can’t unload the Midas slot on an advertiser, they’ll use it to plug their own shows.

Research done by Socialnomics/HULT indicates that only around 18% of traditional TV ad campaigns generate a positive ROI. I’d love to know how the folks at the HULT International Business School came up with that number- one of the problems I have with TV advertising is that you can’t track the ROI of a TV ad via any sort of reliable metric, whereas with social media or other forms of internet-based advertising, it’s very easy to track detailed ROI in a variety of forms.

But, I digress.

Problem: DVR avoidance.

Solution: …

… Twitter?

There’s a trend emerging in the TV entertainment world: live tweeting by cast, crew, and contestants. It’s much more successful with reality TV shows than scripted ones thus far, but the interest is there. Shows like The Apprentice, Dragon’s Den, and Shark Tank on the reality side of it are quite sophisticated- adding in content and personal viewpoints which enhance the show for viewers that are plugged into the Twitterverse. And here’s the good news for the networks: if you love to watch and Tweet, you’ve gotta catch the show live (at least until Marty McFly commercializes his time machine- and perhaps makes it smaller than a DeLorean).

Will Twitter save the networks’ butts?

No. But, there’s a big opportunity for networks to capitalize on the trend by incorporating a Tweet strategy into show scripts. With a good writer and production team on board, Tweeting could become a part of the storylines- thus enticing viewers to catch the show live. It’s also another channel for high-value product placement opportunities (imagine a frazzled Meredith Gray picking up her BlackBerry and tweeting out “Damnit, I need a Starbucks” after a lengthy surgery on the show).

For the uninitiated, I’m sure you’re thinking ‘I don’t like the ads! I want less of them, not more!’

As a TV enthusiast, I feel your pain. The commercialization of the medium can really take away from the enjoyment of the art form. But here’s the dirty little secret that no one outside of the business world talks about: the advertising pays for the production of the TV shows we love so dearly. No three minute commercial breaks, no Big Bang Theory or The Bachelor or Fringe, or whatever your flavour happens to be. If the big advertisers drop TV ad buys, the networks lose their primary revenue source… and stop ordering production. And then our only recourse would be to pay for HBO (kudos to them for coming up with a subscription-based business model that works; others have tried and failed).

My big gripe about network TV right now? Fox cancelled The Chicago Code. That was some good police drama, let me tell you. But I suspect that this decision is mostly attributable to the North American ‘ratings’ system that the industry has the audacity to call a marketing metric, and not the quality of the show itself. But, that’s a rant for another day.

Disclosure: at time of writing, I did not own an equity position in any of the companies mentioned in this article.