David Schatsky2008-11-11T15:54:49Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25Movable TypeCopyright (c) 2008, David SchatskyThe Physics of Product Innovation2008-11-11T15:54:49Z2008-11-11T15:48:01Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.103122008-11-11T15:48:01ZBy all accounts, my colleague James McQuivey gave a blockbuster of a speech at the Forrester Consumer Forum two weeks ago. (Sadly, I was stuck in NYC.) The title of his talk: "Satisfy Consumers For The Next Decade (And Beyond)." He described a framework to help consumer product strategists understand...David Schatsky
By all accounts, my colleague James McQuivey gave a blockbuster of a speech at the Forrester Consumer Forum two weeks ago. (Sadly, I was stuck in NYC.)
The title of his talk: "Satisfy Consumers For The Next Decade (And Beyond)." He described a framework to help consumer product strategists understand and meet consumers' needs and increase the likelihood of creating successful products. In a nutshell:
- measure your customer's need profile
- know your product or service's convenience quotient
James authored Forrester's first report measuring a Convenience Quotient in July — a ranking of over-the-top TV set-top boxes.
Future research will involve developing need profiles for a wide range of consumer product companies, and analyzing how need profiles vary, especially in an era of economic uncertainty. The framework James has developed will be a valuable tool for consumer product strategists, and I advise you to follow his work in the coming months.
As useful as the framework promises to be, I wouldn't expect it to make engineering the next hit product a slam dunk, though. Nailing the combination of features, functions, form, channel and price and the other factors that distinguishes breakaway hit products from the pack is as much about physics as it is about engineering.
Engineering is for mature, well understood domains, and is the realm of best practices and repeatable processes. Physics is about hypothesis, experimentation, and iteration.
Engineering will only get product strategists so far. To increase the probability of creating break-through products, they need to develop their physics chops: an ability to articulate hypotheses; a comfort with experimentation and iteration; and a culture that exhibits agility in the face of rapidly evolving markets.
By the way, I think Forrester can help with the physics part too.
New European Research on Access and Digital Media at Home2008-09-09T22:29:01Z2008-09-09T22:25:38Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.101892008-09-09T22:25:38ZOur European research team has recently published a suite of great research of interest to strategists looking at high-speed access and digital media consumption in the home. Check out the European Digital Home Forecast, by Tushi Banerjee, for example, which puts home network penetration at over 50% across Western Europe...David Schatsky
Our European research team has recently published a suite of great research of interest to strategists looking at high-speed access and digital media consumption in the home.
Check out the European Digital Home Forecast, by Tushi Banerjee, for example, which puts home network penetration at over 50% across Western Europe by 2013.
See Ian Fogg's piece Home Broadband Bandwidth Requirements, which lays out the what operators need to deploy to support offerings like broadband bundled with IPTV
And See Laurence Meyer's analysis of the competition between premium TV channels and VOD services, which explains why previum TV broadcasters need to improve the breadth and quality of their content.
What I Learned About Work in the Woods of Maine2008-09-03T02:57:35Z2008-09-03T02:55:15Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.101722008-09-03T02:55:15ZI'm just back from a couple of weeks' vacation in rural Maine and New Hampshire with my family. One morning, my kids and I each went off in different directions to spend an hour in solitude in the woods. As I walked along a trail that paralleled a stream bed...David Schatsky
I'm just back from a couple of weeks' vacation in rural Maine and New Hampshire with my family. One morning, my kids and I each went off in different directions to spend an hour in solitude in the woods.
As I walked along a trail that paralleled a stream bed I was struck by the number of frogs crossing the trail in front of me in both directions. They are so busy, I thought to myself. They called to mind the streets of midtown Manhattan at lunch time: no one is on the side of the street they need to be on, and masses of people are streaming past each other to get where others have come from.
Further down the trail I stopped to admire a beaver pond. The water was glassy, the beaver lodge a sturdy dome of sticks and logs constructed at the far end of the pond. The scene was quiet and the air still, but I could hear the sounds of tiny creatures: the high-pitched sound of insects seeking food, and beyond that, the lower-pitched sound of bees pollinating clover.
When you stop and listen, what passes for tranquility is actually a workplace teaming with activity.
A hawk gliding overhead seems to be loafing. But he's working too, surveying a vast terrain, and choosing his moment to strike at vulnerable prey.
Hard at work, but in harmony with the world and well matched with the task at hand, even busyness can feel like tranquility. That's what I learned about work in the woods of Maine.
Forrester Buys Jupiter2008-07-31T14:10:03Z2008-07-31T12:25:58Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.100982008-07-31T12:25:58ZIt was announced today that Forrester Research has bought JupiterResearch from MCG Capital for $23 million in cash. Forrester plans to integrate Jupiter's staff into its Marketing & Strategy division. The goal is to create a dominant marketing & strategy research organization that will become the indisputable leader in our...David Schatsky
It was announced today that Forrester Research has bought JupiterResearch from MCG Capital for $23 million in cash. Forrester plans to integrate Jupiter's staff into its Marketing & Strategy division. The goal is to create a dominant marketing & strategy research organization that will become the indisputable leader in our industry.
A bit of Jupiter history. Jupiter was founded by Josh Harris in 1986 as Jupiter Communications. In the 1990s it adopted the syndicated research and advisory business model. It went public under CEO Gene De Rose in 1999 (I joined that year) and merged with Media Metrix in 2000, forming Jupiter Media Metrix. In 2002 the syndicated research business was sold to Alan Meckler's INT Media Group, which renamed itself Jupitermedia. In 2006 we were acquired by MCG Capital, which merged us with Kagan Research, briefly forming JupiterKagan, until the Kagan business was sold in 2007. And now we find ourselves in the affectionate embrace of our erstwhile competitor, Forrester.
Jupiter folks have looked at Forrester, which was founded in 1983 by George Colony, who still leads the company, with begrudging admiration. We have competed for mindshare, influence and clients in the arena of Internet business research and strategy.We have not always seen things the same way, and we have scoffed at times at some of Forrester's market forecasts and bold pronouncements on the future. But Forrester has a lot of smart people, and has gotten a lot right. And they have executed their business strategy masterfully.
As strange as it may seem, I am excited about this news. I know that the expanded, combined organization will have the resources to provide our clients with even greater insight and advice as well as access to Forrester's broad range of products and services.
Jupiter's employees are also going to benefit from the combination with Forrester. Forrester execs have enthusiastically expressed to me their respect for the quality of our staff and are eager for us to become part of the expanded company. Jupiter folks will reap the benefits of being part of a larger organization, with its rich resources, track record of effective execution, and commitment to employee growth and career development.
In the coming months we'll be working hard to continue providing Jupiter's clients with the high-quality research and service they have come to expect. At the same time, the two company's research, sales and client services teams will come together, and we'll be at work on an improved set of products and services that incorporate the best of what both companies bring to the table.
Stay with us, and watch what we do!
Who Cares If We're Getting Dumber?2008-07-29T16:34:56Z2008-07-29T16:22:09Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.100902008-07-29T16:22:09ZAs consumers spend more time with the Internet they are spending less time with books. {Clients can see some recent Jupiter work on media consumption trends here.) Some observers are worried. Motoko Rich had a great piece in the New York Times over the weekend that looked at the impact...David SchatskyMedia
As consumers spend more time with the Internet they are spending less time with books. {Clients can see some recent Jupiter work on media consumption trends here.) Some observers are worried. Motoko Rich had a great piece in the New York Times over the weekend that looked at the impact of online behavior and Web reading habits on reading, thinking and concentration skills and looked at these worries.
"Some scientists worry that the fractured experience typical of the Internet could rob developing readers of crucial skills," she writes.
Some of the worry is about the impact of Web usage on the brain itself. "Neurological studies show that learning to read changes the brain’s circuitry," she says. "Scientists speculate that reading on the Internet may also affect the brain’s hard wiring in a way that is different from book reading."
In duly balanced New York Times fashion, Rich also cites opposing views--that the Web might actually be enriching users' ability to process information. "Web proponents believe that strong readers on the Web may eventually surpass those who rely on books. Reading five Web sites, an op-ed article and a blog post or two, experts say, can be more enriching than reading one book.
'It takes a long time to read a 400-page book,' said Mr. Spiro of Michigan State. 'In a tenth of the time,' he said, the Internet allows a reader to 'cover a lot more of the topic from different points of view.'”
Apart from the intrinsically interesting question of whether Web use is making us dumber, I wondered why people should care, especially if their own kids (like mine) are avid readers of linear paper media. Along with other surprise benefits of the Internet, such as the destruction of popular culture, perhaps the Web creates an opportunity for those of us and our offspring who have retained cognitive skills to out-maneuver the e-nitwits in our competition for the best jobs and richest resources in a dumbed-down world of the future.
Then I read, in today's Times, David Brook's column, cites new research on stagnant educational attainment in the United States, saying that as a result the country's long-term prospects are in jeopardy. But Brooks extends a compelling benefit to those who escape the dumbing down envisioned by e-nitwit hypothesis: In a dumbed-down world, "The relatively few skilled workers command higher prices, while the many unskilled ones have little bargaining power."
So whether you care about declining educational attainment, or whether surging Internet use is developing or crippling cognitive skills, depends partly on whether you you take a narrow, self-interested perspective, or a broader one, which by necessity must consider the the plight of many of us who depend on rich resources of human capital to run our businesses. What will we do if the wells run dry?
Our Best Research2008-07-17T17:29:20Z2008-07-17T17:24:02Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.100542008-07-17T17:24:02ZWe just did our research awards for the best material we published in the second quarter of this year. Why not share it with the world? Congratulations to Bobby Tulsiani for Competing with YouTube Nate Elliott for Branded Social Networking Pages Ed Kountz and Mark Best for US Mobile Payments...David Schatsky
We just did our research awards for the best material we published in the second quarter of this year. Why not share it with the world?
Congratulations to
Bobby Tulsiani for Competing with YouTube
Nate Elliott for Branded Social Networking Pages
Ed Kountz and Mark Best for US Mobile Payments
If you are a client, make sure you read those reports. If you're not and these topics are important to you, drop us a line and talk to a Jupiter account rep about how you can get access to this research.
Online Performance Affects Retailers' Credit Ratings2008-06-16T14:33:30Z2008-06-16T14:31:35Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.99592008-06-16T14:31:35ZThe Wall Street Journal reported today that Moody's Investor Service has started to factor in online sales of major retailers in its credit ratings. Now, online performance will affect not only revenue and profit but also the cost of credit. It's another indication that the impact of online sales is...David Schatsky
The Wall Street Journal reported today that Moody's Investor Service has started to factor in online sales of major retailers in its credit ratings. Now, online performance will affect not only revenue and profit but also the cost of credit. It's another indication that the impact of online sales is greater than it's 6% share (link to Jupiter's forecast report) of total US retail sales suggests.
Mining Cellphone Data to Derive Global Social Networks2008-06-10T14:16:54Z2008-06-10T14:15:13Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.99382008-06-10T14:15:13ZIn today's WSJ, an interesting review of recent research using cell phone, Web browsing and e-mail traffic to chart the depth of connections among individuals in different locations. For example, according to a recent study, in the Flushing section in the New York City borough of Queens, almost 12% of...David Schatsky
In today's WSJ, an interesting review of recent research using cell phone, Web browsing and e-mail traffic to chart the depth of connections among individuals in different locations. For example, according to a recent study, in the Flushing section in the New York City borough of Queens, almost 12% of all electronic traffic wen to Seoul and 9% went to Porto in Portugal.
The article quoted quoted MIT's Carlo Ratti, who directed one of the studies, as saying, "You can take information from the cellphone network and see how the city lives and how it moves. It's a bit like globalization in real time."
News, Politics & the Internet Panel2008-06-04T18:35:55Z2008-06-04T18:09:03Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.99022008-06-04T18:09:03ZThere was a lively discussion at the panel this morning on News, Politics & the Internet, hosted by Time Warner at their NYC headquarters in support of Internet Week New York. On the stage: - David Bohrman (SVP & Washington Bureau Chief, CNN): Moderator - Steve Grove (Head of News...David Schatsky
There was a lively discussion at the panel this morning on News, Politics & the Internet, hosted by Time Warner at their NYC headquarters in support of Internet Week New York.
On the stage:
- David Bohrman (SVP & Washington Bureau Chief, CNN): Moderator
- Steve Grove (Head of News and Politics, YouTube)
- Nadira Hira (Writer, FORTUNE magazine)
- Michael Scherer (Washington Bureau Correspondent, TIME Magazine)
Steve Grove pointed out that videos posted on YouTube by Obama supporters got far more views than those posted by the candidate's team; that the enormous popularity of Obama's now-famous 37-minute speech on race shattered the myth that only short video clips find an audience online. And he suggested that the Obama campaign may have benefited from analyzing the comments that official video posts attracted to shape subsequent speeches.
Nadira Hira showed good humor in accepting the role as interpreter of young folks, and folks of color, for Fortune's readers, observed that Facebook lit up with conversation during the conclusion of the presidential primary season last night.
Michael Scherer (who also blogs at Time's Swampland) noted that the Internet is "not a community of activities--it's a tool that anyone can use" and credited the Obama campaign of appealing early to a "new online populism." Scherer also echoed Jupiter's view that news products are being deconstructed, and that news organizations are competing story by story. (A series of research reports by Barry Parr paint the picture, here, here and here. And here's a recent one on politics specifically.)
The Internet Comes to New York2008-06-02T19:29:33Z2008-06-02T19:23:08Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.98952008-06-02T19:23:08ZUnder the banner Internet Week New York, dozens of events are taking place this week here in New York City to celebrate the dynamic Internet sector right here in Gotham. Join the fun, network, and learn something....David Schatsky
Under the banner Internet Week New York, dozens of events are taking place this week here in New York City to celebrate the dynamic Internet sector right here in Gotham. Join the fun, network, and learn something.
Congratulations to M:Metrics2008-05-29T14:13:15Z2008-05-29T13:55:55Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.98832008-05-29T13:55:55ZMobile measurement firm M:Metrics has been acquired by comScore. Story here. Congratulations are in order for M:Metrics founders Seamus McAteer, a JupiterResearch alumnus, and Will Hodgman, a colleague of ours from the days when AdRevelance was part of Jupiter Media Metrix. Best wishes, gentlemen! This is the second time in...David SchatskyWireless
Mobile measurement firm M:Metrics has been acquired by comScore. Story here. Congratulations are in order for M:Metrics founders Seamus McAteer, a JupiterResearch alumnus, and Will Hodgman, a colleague of ours from the days when AdRevelance was part of Jupiter Media Metrix. Best wishes, gentlemen!
This is the second time in two years that a firm founded by Jupiter alumni has met with success in the market and been acquired on terms favorable to the founders. Several other Jupiter folks over the years have gone off to build successful start ups.
In our recruiting of analysts, we are sometimes asked about the career path of a Jupiter analyst. I like to talk about how Jupiter analysts have unlimited opportunity at Jupiter to build their profile and extend their industry influence as they are help to drive our continued growth. But for some, Jupiter is a great place to spend 3-5 years before changing the world outside our walls.
If you want to make your mark on our industry, consider a career move to Jupiter. Current job listings here.
To Influence Consumers, Create Digital Experiences2008-05-16T15:42:34Z2008-05-16T13:58:37Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.98402008-05-16T13:58:37ZYour product itself is the best expression of your brand. Consider the familiar idea that physical encounters with a brand are where the brand message is conveyed: by the satisfying click of precision-engineered doors closing; the distinctive feel of the finish on a ThinkPad; the coffee aroma that greets you...David SchatskyMarketingMicrosoft and the Limits of Scale2008-05-08T21:38:04Z2008-05-08T21:26:01Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.98112008-05-08T21:26:01ZWhy has Microsoft found it so difficult to fulfill its online ambitions? After all, according to comScore, Microsoft properties attract a vast number of visitors, not too far behind Google properties (in the US, 121M vs. 137M). With such a gigantic audience, all that would seem to be missing in...David Schatsky
Why has Microsoft found it so difficult to fulfill its online ambitions? After all, according to comScore, Microsoft properties attract a vast number of visitors, not too far behind Google properties (in the US, 121M vs. 137M). With such a gigantic audience, all that would seem to be missing in its competition with Google is a competitive search experience. Doesn’t it seem that Microsoft would have as good a shot as any company to field a competitive experience, considering the vastness of its resources compared to Google:
Over 4 times as many employees
Over 5 times as many employees in R&D
Over 3 times as much R&D spending
Nearly $12 billion in cash on hand as of March 31 (a hair less than Google’s cash on hand).
All of this is surely enough to neutralize scale economies as barrier to entry, as I wrote about yesterday.
But those vast resources are spread across multiple Microsoft businesses. And Microsoft’s Online Services Business is losing a billion dollars a year. Meanwhile, the company cannot afford to neglect its cash cow and other emerging businesses either. So focus is one advantage that Google has. Another would have to be incumbency, Porter’s #5 mentioned in yesterday's post. No matter how many resources you throw at competing with Google, you can hope--for but not count on--matching or exceeding the technological breakthroughs that have given them this lead.
Acquiring to Change the Playing Field
Microsoft seems to have reached this conclusion, leading them to make an aggressive acquisition bid that they hoped would allow them to reap further scale benefits and enhance their competitive position not so much in search but in the portal and display advertising business. That logic still applies. The question is whether Microsoft will turn its attention to acquiring some other online player with a similar rationale.
Hence today's reports that Microsoft has been in talks with Facebook.
Why There Are No Credible Competitors to Google2008-05-07T20:04:31Z2008-05-07T19:38:11Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.98072008-05-07T19:38:11ZContinuing my attempt to apply Michael Porter to the Internet search business, we left off talking about barriers to entry. Porter says that if profit potential is high enough (it sure is) and entry barriers are surmountable (the subject of this post), then a market will attract new entrants, and...David Schatsky
Continuing my attempt to apply Michael Porter to the Internet search business, we left off talking about barriers to entry.
Porter says that if profit potential is high enough (it sure is) and entry barriers are surmountable (the subject of this post), then a market will attract new entrants, and this will depress profits. The barriers to entry in the Internet search market are distinctive, and they have given Microsoft a run for its money.
Porter identifies 7 main barriers to entry:
Supply-side economies of scale. There are obviously economies of scale in Internet search. These are an advantage to incumbents like Google but should be easy enough for global competitors like Microsoft to exploit. After all, Microsoft attracts over 100 million monthly visitors in the US to its Web sites. But as my colleague Emily Riley pointed out to me in an e-mail, "Simply having access to 100mm is not enough to change consumers' search behavior. Yahoo has the largest email product and is still miles behind Google in searches." There is scale and there is SCALE, however; Microsoft cited scale benefits of a merger with Yahoo! that could have produced $1B in infrastructure savings annually.
Demand-side benefits of scale (network effects). The kind of benefits that accrue to incumbent market makers like eBay are somewhat weaker in search. After all, a lack of advertisers shouldn’t necessarily make a search engine less appealing to users, who are more sensitive to organic results and performance. Emily points out, though, that the relevance of Google's organic results may benefit in part by all of the SEO benefits that focus on them--a level of focus they attract because of their market leadership.
Customer switching costs. Negligible here. Search is the quintessential market where competition is “just a click away.”
Capital requirements. There is no question that massive capital is required to build out the massive infrastructure required by any search capability that hoped to compete with Google. Microsoft is one company that with the cash on hand and access to capital that would help it hurdle this barrier.
Incumbency advantages independent of size. This is a catch-all that could include access to proprietary technology; establish brand identity; cumulative experience that allows an incumbent to learn to produce more efficiently; and more. Clearly Google’s proprietary technology is a major asset. And three times as many online users cite Google as a favorite online brand than cite Microsoft. (An impressive 7 times as many 18-24 year-olds do.)
Unequal access to distribution channels. A classic dimension of strategy off-line, this has been largely irrelevant online, though the multi-year deals Google has been striking with high-traffic online partners have the potential of creating a barrier here.
Restrictive government policy. Not relevant, unless you believe that Microsoft’s competitive options are limited because it may attract greater anti-trust scrutiny than other companies.
Most of these barriers are not relevant or could theoretically be easily overcome by Microsoft, who has indeed entered this space and is attempting to compete vigorously. But the company nonetheless sought to acquire Yahoo! believing that its own assets and efforts inadequate to the task of establishing a strategically advantaged position online.
My next post on this topic will look a bit more at the scale issue and why Microsoft hasn't been able to exploit it to field credible competition to Google.
Strategic Hunger at Microsoft2008-05-06T17:19:57Z2008-05-06T17:14:16Ztag:weblogs.jupiterresearch.com,2008:/analysts/schatsky//25.97992008-05-06T17:14:16ZMicrosoft’s aborted acquisition Yahoo! was widely understood as attempt to dramatically improve Microsoft’s strategic position in “online services,” which today means mostly online advertising and search. Online services are vitally important to Microsoft in part because Internet-based applications threaten to offer a substitute to the desktop software that is Microsoft’s...David Schatsky
Microsoft’s aborted acquisition Yahoo! was widely understood as attempt to dramatically improve Microsoft’s strategic position in “online services,” which today means mostly online advertising and search. Online services are vitally important to Microsoft in part because Internet-based applications threaten to offer a substitute to the desktop software that is Microsoft’s bread and butter. But Google has proven that online services can be a highly profitable business as well—in the first quarter of this year Google’s operating margins were 30%, about the same as Microsoft’s in that quarter (and that includes some of Microsoft’s unprofitable and barely profitable lines of business).
Michael Porter Applied to Google, Microsoft and Yahoo!
I dusted off Michael Porters’ five-forces strategy analysis framework to help me understand Google’s strategic position and assess Microsoft’s options for competing. In Porter’s analysis, 5 competitive forces determine the profitability of an industry:
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products or services
Threat of new entrants
Rivalry among existing competitors
If those forces are intense, says Porter, then industry profitability is low; if they are weak, industry profitability is high. It’s easy to see that the first two forces are weak in online search. Commodity suppliers provide interchangeable infrastructure elements like computing power and bandwidth. Buyers are advertisers, and they are free to contract with any search provider they like. It is hard to envision a substitute to search advertising today, though display advertising is a complement. Because of Google’s dominant position, and the limited number of credible potential competitors, Porter would characterize rivalry here as weak.
That leaves the threat of new entrants. More on that in my next post. Till then, check out David Card's post on what Microsoft needs to do now.