Feature: The New Trojans

  • by February 28, 2005
By Jonathan Blum

Michael Flamm isn't exactly an "early adopter" when it comes to new technology.

The 40-year-old associate professor of history at Ohio Wesleyan University owns a 10-year-old TV, an even older VCR, and a basic DVD player that he watches rental movies on from Blockbuster.

When Time Warner Cable began offering a cable set-top box with a built-in digital video recorder (DVR) in suburban Columbus, Ohio where Flamm lives, his wife Jennifer had some interesting input.

"She's from L.A. and everyone she knows has a TiVo," says Flamm. So it wasn't a big step for the couple to get the DVR. "I remember clearly when it was all finally set up, that there was this threshold moment where you realized that you control all your media."

For Flamm, what started out as a simple desire to manage his TV-watching, led to a profound shift in all his media habits: His time was managed more efficiently; he no longer channel-surfed; and he watched fewer shows in real time.

Flamm also found his new media lifestyle changed his attitude toward his wife's iPod and the family's digital camera; they were no longer merely a portable audio player and a device for taking pictures, but tools that gave him a new way of engaging with technology and media. They had multiple potential uses.

Content too, has become more liquid, and the devices Flamm uses to make it more personal have quickly become necessities. Interestingly, he's considering purchasing more cutting-edge technologies like a home media server for networking his devices and a high-definition TV set.

Flamm is not alone.

The Media Kitchen, a New York-based media agency, conducted several surveys in 2004 and found that digital devices are capable of things that consumers never anticipated.

There's a whole new crop of digital chameleons on the market, nifty multifunction gadgets and services that were designed to evolve into sophisticated and networked applications. The new Trojans also have the potential to become powerful media portals. Most consumers don't realize this, of course.

That's where the story of the Trojan War comes in: The Greeks gave a giant wooden horse to their Trojan enemies, essentially as a peace offering. After the Trojans accepted the gift, the Greeks, hiding inside the horse's cavernous belly, snuck out and threw open the gates of Troy after which the city was attacked. Fast forward to 2005 and a digital camera isn't merely a digital camera; it doubles as a digital camcorder and connects to a pc. It's a multimedia gateway. Who knew?

Consumers can download photos to an iPod, play video clips, and even add speakers and a docking station to create a home stereo. There's a new Web-based service that transforms digital photos into customized iPod silhouette-style ads. Ironically, ad-zapping devices like TiVo and other DVRs carry long-form content, infomercials, advertising, and other promotional content. Wireless phones have built-in Blackberry functions, video capabilities, and even TV service, while video game consoles have become broadband gateways for branded entertainment content.

Marketers from General Motors to Procter & Gamble are on top of the trend.

"gm knows that digitization is a big deal," says Curt Hecht, senior vice president at gm Planworks, the automaker's media planning division that resides within Starcom MediaVest Group.

"We are seeing a definite interest from clients like Coke and Nestle for some sort of advanced tech spin," says Robert Tuchman, founder and president of tse Sports and Entertainment, an independent marketing and event firm.

iPod, uPod, we-all-Pod Yet marketers eager to leverage new technologies to their media advantage recognize the limits. "The key here is to be in the business of selling evolution, not revolution," says John Barrett, research director at Parks Associates, whose firm has conducted thousands of consumer product studies. "You just have to make sure that what you're doing is a no-brainer," Barrett adds.

One of the biggest examples of the potential power of the new Trojans is Apple. The iPod marketer has successfully leveraged a Trojan strategy unbeknownst to most consumers. At the beginning of the year, the company had sold more than 10 million iPods. That number is expected to reach more than 13 million in 2005, and hit 23.5 million globally in 2006, according to a Needham & Co. analyst.

Apple's iPod mini, iPod with photo capability, and cut-rate iPod shuffle and mini Mac, are signs of its marketing prowess. In selling more hardware, Apple hopes to lure more people to download tracks from iTunes and to use its QuickTime 6 software.

The consensus was, "Apple is definitely interested in building a platform here," says Ross Rubin, director of industry analysis at NPD Group. Industry analysts speculate that the platform may make Apple-branded gadgets the Nike "swoosh" of digital devices, if it hasn't already  an iconic brand that consumers are willing to pay a premium for.

That could make the company a gatekeeper for digitized versions of all entertainment in the home. Though there are plenty of hurdles for Apple, namely its rivalry with Microsoft over standards and an aloofness that often borders on absurdity, the digital power shift is not lost on industry observers.

"I would give my right arm to be an advertiser with the right product for the iPod," says Paul Woolmington, CEO at The Media Kitchen.

Yippee! It's 3G A wireless phone is no longer just a wireless phone. Heralded and maligned for more than a decade, legitimate broadband cellular service is at last going to see some scale in 2005. Hidden inside Cingular's takeover of AT&T Wireless was its nationally deployed broadband Edge wireless network. Not to be outdone, Verizon Wireless deployed its blisteringly fast ev-do network in at least 42 of the top U.S. markets. Both companies have rolled out powerful wireless phones and cards as well as services that support their networks. Verizon also offers original content for V Cast, its 3G multimedia wireless service, distributing 52 one-minute "mobisodes" of two original soap operas. Usually sober market players are seeing the upside: "3G telephones are going to be a mass market," says Mark Stewart, executive vice president and chief strategy officer at Universal McCann. "It's not whether, it's how."

But considering the spectacular level of failure in wireless applications, industry observers say it's important not to dismiss their limits. There's the potential to squander limited network resources like battery life, access charges, and capacity which can spur costly subscriber churn rates. The bottom line is that consumers will have zero tolerance of applications that are irrelevant.

"The technology is definitely there," says Rich Blasi, spokesperson for Cingular Wireless. "But it is important that we do not inconvenience people."

BMW is using 3G wireless technology to offer consumers a preview of its new 3 Series vehicles. Though not available until spring, BMW invites consumers with 3G wireless phones to call in to 703-286-BMW3 to get a multimedia preview of the new car. A microsite enables consumers to view photos, graphics, and product information associated with the new cars.

TiVo Rising TiVo could well be the ultimate Trojan, though the company has suffered almost from the day it was born. Marketing missteps, tepid relations with cable operators, consumer electronics makers, and content providers all hurt the business. But despite all that, many industry observers believe DVRs and TiVo will finally reach scale in 2005.

Brian Wieser, vice president and director of industry analysis at Magna Global, pegs the installed base for all personal video recorders at 6.4 million in the fourth quarter of 2004. He conservatively estimates that there will be 11.5 million units by the end of 2005.

TiVo's hedging its bets on a Trojan strategy by turning its service into a home networking and media storage device. In a bid to generate more revenue, TiVo is developing a new operating system called Tahiti that will open its software standards to the general market, allowing developers to create applications and content for the system. This, it hopes, will spur more advertising and marketing opportunities.

TiVo appears to be playing the "open standards" card held by Linux and others. The move positions TiVo as a potential leader in the development of new marketing concepts, which could lead to the creation of more long-form content and advertising.

"The future lies in learning to play with the new kids on the block and experimenting with promotions," says W. Russell Neuman, Evans Professor of Media Technology at the University of Michigan, who has studied set-top boxes for more than 20 years. "Understanding what can work inside the converged television is the key."

Strange, New Connected World A few of the most exciting trends for 2005 and beyond can be found in Wi-Fi-enabled cameras, broadband video game consoles, and even changes in landline telephone services.

Digital cameras have morphed into multimedia platforms, offering the ability to make mini movies and videos. Take Kodak's Easyshare-One camera. Launching later this year, it can hold 1,500 images and allows users to upload their photographs wirelessly from any T-Mobile hotspot.

"Halo ii," the Xbox video game, offers players the ultimate real-time multiplayer gaming experience. Broadband-enabled multiplayer titles are an ideal forum for marketers to get their brand messages in front of young men. In-game promotion of new products, and other messages can be added in real-time as updates and plot twists.

Massive Inc.'s online video game advertising network enables developers and games publishers to integrate their games into its network. The network delivers advertiser messages seamlessly into first-run video games, which are played primarily by 18- to 34-year-old males. Ad messages and promotions appear in games on billboards, posters, and other advertising elements that mesh with game play.

Verizon Communications is overhauling its core landline business around a new integrated messaging, data, and content product called Iobi. Verizon says Iobi offers messaging and other services for a flat monthly fee and that it will eventually manage contacts, call routing, and even cable TV connections, making them available wherever there is an Internet connection.

Marketing is likely to be part of the Iobi equation. "We see this as a fantastic targeting machine," says Luis Blando, executive director at Verizon eServices.

Ready or Not Perhaps the most telling trend of all in handicapping the chances of the new Trojans in 2005, is that dollar spending for traditional media is likely to remain constant, but as a share of total spending, new media ad buys will almost certainly rise.

"Consumers are clearly ready to pay for any type of service through advertising," says researcher Parks' Barrett. "They see if they watch the ad, they don't have to pay for it." That's not exactly true when it comes to movies at the cineplex where for $10.50, moviegoers are subjected to at least 10 minutes worth of TV commercials or made-for-cinema ads.

Meanwhile, the unending debate about the shape of media continues to intensify. The new Trojans are likely to lead the way through a media vortex that is anything but boring.

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