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Field Reports - July 2014

1 Jul, 2014 By: Doug McPherson Response

Supreme Court Decision Suspends Aereo Operations

By Doug McPherson

WASHINGTON — Just three days after the Supreme Court handed down its 6-3 decision on June 25 that online video service Aereo infringed copyright of TV shows, the company suspended operations.

Chet Kanojia, CEO and founder of Aereo, said in an E-mail sent to subscribers the weekend following the ruling, “We have decided to pause our operations temporarily as we consult with the court and map out our next steps.”

Analysts say the decision will likely force the Barry Diller-backed cord-cutting service to either shut down permanently or significantly revamp its business model.

After initially launching in New York, Aereo’s $8 per month service rolled out to 11 cities in the U.S. Subscribers streamed over-the-air TV shows to their smartphones and tablets.

A coalition of broadcasters sued to shut down Aereo, arguing the service shouldn’t be allowed to publicly air TV shows without paying retransmission fees. The Supreme Court sided with the broadcasters and rejected Aereo’s contention that its architecture protected it from copyright infringement liability. Aereo uses dime-size antennas to capture programs and stream them on an antenna-to-user basis. The start-up said the one-to-one nature of the streams meant they are “private,” and therefore didn’t require licenses.

But the court ruled Aereo’s underlying technology wasn’t relevant to whether it infringed copyright. “Why would a subscriber who wishes to watch a television show care much whether images and sounds are delivered to his screen via a large multi-subscriber antenna or one small dedicated antenna?” wrote Justice Stephen Breyer for the majority. “When an entity communicates the same contemporaneously perceptible images and sounds to multiple people, it transmits a performance to them regardless of the number of discrete communications it makes.”

Kanojia continues to defend the company’s business. “The spectrum that the broadcasters use to transmit over-the-air programming belongs to the American public, and we believe you should have a right to access that live programming whether your antenna sits on the roof of your home, on top of your television or in the cloud,” he wrote.

Kanojia thanked subscribers for their support in his E-mail and urged them to sign up for updates at “Our journey is far from done,” he added.

Others agree. Pivotal Research Group’s Brian Wieser wrote in a report that the ruling “should not be conveyed as suggesting that broadcasters are out of the woods yet with respect to technology. We expect that new technologies will continue to come to market, and from the vantage point of today’s broadcasters, they will still need to develop the capacity to iterate and adapt without relying on courts to solve disputes.”

Wieser also identified an additional, counterintuitive risk now faced by broadcasters — the “industry-wide risk that can follow from the stifling of technology-driven innovation.”

He wrote, “Depending on how this case is interpreted in the future, today’s action could impact how consumer electronics companies and related upstarts approach the video market in the future. This is unfortunate in the long run, as a vibrant video service business should help the industry expand overall, with most incumbents retaining dominance.”

For example, Wieser says, broadcasters weren’t happy to see VCRs emerge, but they ended up helping the industry to grow.

Other reactions to the court’s decision include:

Rep. Fred Upton (R-MI), chairman of the House Energy and Commerce Committee: “While the court ruled that Aereo had overstepped, invention and innovation are at the heart of America’s global leadership in communications and technology development. This case underscores the mounting need to modernize the 80-year-old Communications Act.”

Gene Kimmelman, president and CEO at Public Knowledge, a digital rights group: “It is very unfortunate for consumers that the Supreme Court has ruled against Aereo, which has provided an innovative service that brings consumers more choices, more control over their programming, and lower prices. This decision, endangering a competitive choice for consumers, makes it all the more important for the Department of Justice and Federal Communications Commission to guard against anti-competitive consolidation, such as the Comcast/Time Warner Cable merger.”

Gordon Smith, president and CEO, National Association of Broadcasters: “NAB is pleased the Supreme Court has upheld the concept of copyright protection that is enshrined in the Constitution by standing with free and local television. Aereo characterized our lawsuit as an attack on innovation; that claim is demonstrably false. Broadcasters embrace innovation every day, as evidenced by our leadership in HDTV, social media, mobile apps, user-generated content, along with network TV backed ventures like Hulu. Television broadcasters will always welcome partnerships with companies who respect copyright law. Today’s decision sends an unmistakable message that businesses built on the theft of copyrighted material will not be tolerated.”

FTC Seeking Law to Regulate List and Data Brokers

By Doug McPherson

WASHINGTON — A Federal Trade Commission (FTC) report asks Congress to enact new legislation to regulate marketers’ use of customer data through:

Creating a centralized mechanism for data brokers to identify themselves and describe how they collect and use data.

Giving consumers access to their data and providing them with the ability to suppress it.

Disclosing to consumers that inferences might be drawn about them based on their raw data.

Providing “prominent notice” to consumers that they share their data and whom they share it with, giving consumers the ability to opt out.

The report, “Data Brokers: A Call for Transparency and Accountability,” is scathing and says data brokers regularly and secretly collect sensitive data from consumers, share that information without restrictions and discriminate by assigning Latinos and African Americans to “sensitive categories.”

The report is based on the operations of nine companies that were required to share with the FTC details of how they operate: Acxiom, Corelogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf and Recorded Future.

“In the nearly two decades since the Commission first began to examine data brokers, little progress has been made to improve transparency and choice,” the report reads.

The report also puts data brokers and list brokers in the same classification. Tiffany George, a senior attorney in the FTC’s division of privacy and identity protection, said, “If your primary business is collecting data from various sources, you’re a data broker. We consider list brokers to be data brokers.”

FTC Commissioner Julie Brill criticized marketers that treat people differently based on race, income and sexual orientation. “The profiles have the ability to not only rob us of our good name, but also to lead to lost economic opportunities, higher costs and other significant harm,” Brill wrote.

The Direct Marketing Association (DMA) responded to the report by stating that it supports “transparency and choice,” but added the proof of harm is lacking.

“This is the fourth study on data brokers they’ve done and, again, no harm has been shown,” says Peggy Hudson, senior vice president of government affairs for the DMA. “Now nine companies and hundreds of thousands of pages of information have been reviewed, and the misuses that are alleged to be out there are not occurring.”

In addition to legislation, the FTC recommends that data brokers voluntarily adopt practices such as collecting only the data they need, disposing of unused data, and refraining from collecting information from children and teens — all of which are already being done, Hudson says.

“Abuses are dealt with immediately and, if they’re not resolved, they are turned over to the FTC,” Hudson says.

Earlier this year, Senators Jay Rockefeller (D-WV) and Ed Markey (D-MA) introduced a bill that would allow people to opt out of having data brokers collect and sell information about them. Rockefeller has criticized the data broker industry for offering to sell lists of potentially vulnerable groups like “payday loan responders” and “genetic disease sufferers.”

Procter’s Programmatic Buy Might Help DR

By Doug McPherson

NEW YORK — Advertising Age reports that Procter & Gamble wants to buy up to 75 percent of its U.S. digital media programmatically by the end of 2014. Analysts say such a significant investment from P&G could reduce the negative perceptions of direct response advertising (programmatic has been commonly associated with direct response).

The move might also mean bad news for agencies. Insiders say P&G’s announcement could have a significant impact on how P&G uses its media agency — Publicis’ Starcom MediaVest Group — because P&G does its programmatic buying in-house. Bloomberg has reported that Apple is taking more of its advertising in-house.

But Brian Wieser, senior analyst at Pivotal Research Group, told MediaPost News he doesn’t think the new items are omens for the industry at large.

“Growing numbers of brand-based marketers either operate or are establishing in-house trading desks for the digital media they buy programmatically. [And] while there is some logic to this approach for many marketers … over time, we only expect a minority of brand-based marketers to eventually bring programmatic trading in-house.”

Wieser mentions the difficulty of getting specialists to relocate, securing the ongoing investments needed to operate a trading desk and keeping pace with larger agency trading desks as a few reasons to be worried about the long-term sustainability of brands bringing ad tech in-house.

Programmatic has been on an upward trend. Casale Media reports marketers doing their own programmatic buying accounted for 11 percent of all spend on U.S. marketplaces in first-quarter 2014, up 267 percent over fourth-quarter 2013.

P.J. Bednarski, a writer with MediaPost News, says no other programmatic buying method — such as through an agency, via a trading desk, or using a manage service/network — grew as fast quarter-over-quarter as marketers using in-house tech. But Casale’s report included both brand-based marketers and direct response marketers, and the importance of the P&G news is that it’s on the branding side.

Bednarski adds the other side of the equation is learning how P&G will spend up to 75 percent of its U.S. budget on programmatic. “I’m assuming the majority of this spend will come through programmatic direct channels rather than real-time bidding, though perhaps the more important question is where the supply will come from,” Bednarski writes.

Wieser has said P&G is basically saying, “If you want to work with us, you’re going to supply to us.”

So P&G appears to be forcing the hand of publishers, but Wieser reckons those publishers are prepared for it. “I’m going to guess there’s probably not very many suppliers who [P&G] really care about that they couldn’t get,” Wieser said.

He added that while they might not like it, he would be surprised to learn of a major publisher that hasn’t seen the inevitability of programmatic. He believes P&G could help “move a lot of people along” in terms of how programmatic is utilized by brands.

CMOs: Digital to Inflict Major Change

By Doug McPherson

NEW YORK — An Accenture Interactive survey says 78 percent of senior marketing executives believe corporate marketing will see a fundamental transformation during the next five years as digital methods and mobile technologies unfold.

More than a third of executives say at least 75 percent of their budgets will go toward digital methods. They say their E-mail, display ad and search campaigns increased by 14, 10 and 9 percentage points during the past two years while telemarketing’s value dropped 10 percent.

But 79 percent also believe their companies will not be fully functioning digital businesses within five years. Marketers under age 35 attach higher significance to the use of mobile marketing methods (38 percent) than do their older counterparts (18 percent).

“Digital is the marketing game changer,” says Brian Whipple, senior managing director of Accenture Interactive. “In an information-overloaded world, the traditional brand-centric marketing approach has lost the appeal it once had assuring a healthy rate of return from marketing investments. As consumers go digital and interact across multiple devices and channels, they expect brands to fit their needs of the moment with relevant experiences. If the brand doesn’t measure up, consumers move on.”

TV Ad Dollars to Outpace Digital Video 6-to-1

By Doug McPherson

NEW YORK — Despite the huge growth of digital video advertising in the U.S., TV will add more new dollars this year — $2.19 billion more than 2013, compared with a $1.76 billion increase in digital video ad spending last year over 2012, says eMarketer.

What’s more, the company estimates TV will continue to outpace digital video in dollar growth through 2018. In 2016, for example, eMarketer projects TV almost doubling the amount of new dollars going to digital video channels, due chiefly to advertising surrounding the upcoming U.S. presidential election that year.

Still, digital video ad spending will increase 41.9 percent this year, reaching $5.96 billion, while TV advertising in the U.S. will grow 3.3 percent to hit $68.5 billion.

eMarketer says the uptick in usage on digital devices is an important contributor to growth in ad spending for these sectors, but by no means will carry enough momentum to overtake the TV market in the near future.

David Hallerman, principal analyst at eMarketer, says the digital video audience is “spread more thinly” than a mass television audience, and that segmentation makes digital video ad buys more complex and less reliable than TV advertising.

“Time spent with digital video is growing significantly, and it’s taking away some TV time, but given the diversity of placements and platforms, digital video viewers are more difficult for advertisers to target,” Hallerman says.

He also added that much of the time audiences spend with digital video is not useful for advertisers. Some of that is when they view clips that are either too short or not brand friendly. But it’s also because more and more digital video content is streamed through subscription services such as Netflix or Amazon Prime Video — neither of which supports advertising.

Overall, eMarketer estimates that online video ad spending (spending primarily on desktop-based ads) will total $4.52 billion in 2014, or 75.8 percent of digital video ad spending, versus $1.44 billion for video ad spending on tablets and smartphones. By 2018, those figures will converge, when online will still slightly outspend mobile video — $6.64 billion to $6.07 billion.

Video ad spending on connected TVs — devices such as set-top boxes, smart TVs and gaming consoles — is accounted for in the online portion of video ad spending in eMarketer’s definition, which partially accounts for the growth there in contrast to our mobile category. As desktop advertising declines in favor of tablet and smartphone advertising, connected TVs will help pick up slack in the online category.

“As audiences find it easier and easier to watch Internet-sourced content on their TVs, and as more and more content compels them to watch, the connected TV universe will offer marketers a unique blend of digital interactivity and TV’s big-screen power,” Hallerman added.

Mobile Commerce Sales Mount at Desktop’s Expense

By Doug McPherson

BALTIMORE — A new study says traffic from both smartphones and tablets continues to grow at the expense of desktops.
Sales via smartphones and tablets through the U.S. and U.K. affiliate networks of Affiliate Window accounted for 19 percent of total Web sales in May 2013 and 30.6 percent in May 2014.
Affiliate Window, a marketing company, says mobile commerce is taking over more and more of online retailing and that desktops are losing favor among online shoppers.
In May 2013, 71.4 percent of total traffic on the affiliate networks stemmed from desktops, 11.4 percent from smartphones, 11.4 percent from tablets and 5.8 percent from other devices (mainly feature phones and game consoles), Affiliate Window says. But in May 2014, desktop traffic was down to 63.7 percent while smartphone traffic was up to 17.4 percent, tablet traffic was up to 14.8 percent and other device traffic was down to 4.1 percent.
Similarly, 62 percent of time spent with online retail in the U.S. in April 2014 occurred on mobile devices, up from 55 percent in July 2013, Web and mobile measurement firm comScore Inc. reports.
The Affiliate Window study of May 2014 also found:
  • Twenty-five percent of total revenue came from mobile shoppers
  • Apple iPhones accounted for 75 percent of smartphone traffic and 75.1 percent of smartphone sales, while Android smartphones accounted for 25 percent of traffic and 24.9 percent of sales
  • Apple iPads accounted for 72.6 percent of tablet traffic and 84.1 percent of tablet sales, while Android tablets accounted for 27.4 percent of tablet traffic but only 15.9 percent of tablet sales
  • Tablet shoppers converted at a rate of 6 percent while smartphone shoppers converted at a rate of 2.9 percent
  • Twenty-three-thousand sales each day originated from a mobile device: 14,750 on tablets and 8,250 on smartphones; 387 clicks originated from a mobile device every minute, while 343 sales were generated through a smartphone each hour
Matt Swan, client strategist at Affiliate Window, says mobile shoppers on affiliate networks convert at higher rates than mobile shoppers.
“High conversions rates are typical for the types of promotions we see perform well through mobile,” Swan says. “For example, incentivized traffic — cash back, voucher codes — has always converted extremely well and it typically over-indexes in mobile commerce. Additionally, the products we see convert well through mobile are typically lower value items.”


About the Author: Doug McPherson

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