Google Adweek 2010 - The collaborative alliance

MARIA LUISA FRANCOLI: That's an overwhelming introduction, so we will do our best to live up to the expectations. It is with great pleasure that I welcome you to the MPG and Media Contacts Collaborative Alliance. This is a very special occasion for us, because it is the first time that we're doing it in combination with somebody else. And who could be better than Advertising Week and Matt, to have offered to us their home, and their situation, for us to establish our collaborative alliance. Today, we are going to talk about technology. And I'm thrilled to be having this presentation here next to the Panasonic [? 3D ?] living room. Couldn't be better, and I thank Panasonic for sharing this with all of us attending Advertising Week events. I also would like to thank [? Bloomberg, ?] because they are with us hosting the cocktails that we're going to be serving afterwards. And as Matt said, it's going to be a little bit of an exception within Advertising Week, because it's a dry event. And because of the time, and because maybe of the tornado watch that we have until 6:00 PM, it's better to have a drink before going home. All of this makes me think, what is the role that media agencies, in particular, have to fulfill going forward? What does the agency of the future look like, or must look like? If you ask me, what I think is that the agency of the future, it should be some kind of an open platform where ideas and technologies can come together, so that together we can offer better solutions for our customers on how to engage with the real consumers, the real purchasers. And there's no better way to do that than to appeal to consumers' passions and to consumers' visions, and technology is definitely the best enabler we could have to do that. Technology, passions, consumers, what we are going to talk about today is how consumers are actually embracing these technologies, actually using these technologies, and what is the reaction of the industry, the publishers on one side, the advertisers on another side? And we're all consumers, so we can judge whether that appeals to our hearts or not. So without any further delay, I'm going to let Mitch, who is the soul of the collaborative alliance, to take us through what is going to be the rest of the day. Thank you. [APPLAUSE] MALE SPEAKER: Thank you. Well, welcome to the collaborative. We made it to Broadway, finally. So let's see what happens. All of you have these sheets? I actually can't see anyone because the lights are in my eyes. You have them. I can read them to you. Here are the presenters. So we have-- I can't read with my glasses like this. Conde Nast, Scott. We have a panel that Maria Louisa will head with Scott, Chris Wilkes, and Carolyn Everson. We also have the collaborative alliance set-top box group, and Joe Abruzzo will talk to you about what we're doing with Kantar. We have the online mobile video coalition. We also have Gilt group founder and chairman, Kevin Ryan. And we have John Carey. And people are arriving and departing at different times, so if you see people run through the entrance way here, you'll see they either have to teach classes or they've just finished teaching classes. So our tradition, cartoons. Let me see. No, I'll try this way? So what would you recommend that I can move-- there we go. So, it's about technology and consumers. So anyway, we are here to talk not about the smoke, but about the fire, to find out what really is going on. And with that, how are the gerbils doing in the back, by the way? Where do you want me to point this? For all of you presenters coming up here, know that-- OK. We want to keep perspective, A little bit of optimism about new technology. Do you want me to point that way? Ah, there it is. OK, now I'm back to that. We actually rehearsed this. OK. Well, why does it keep on jumping back and forth if I'm hitting the same thing? AUDIENCE: Latency. MALE SPEAKER: Is this latency? AUDIENCE: Frequency. MALE SPEAKER: OK, so now we've-- you know this slide now. There'll be a quiz on it. And now we have the tech people coming up. So when you get new technology, always have a tech person. Perspective, that worked, now try one more. We did that one. OK, be proactive. So we have to think about the future. Next one. See you like that one, OK. Sources, it's very important to look at your sources. OK, for the research companies here? No, OK. Now, this was about positioning. And I used this cartoon last time, but it didn't get a lot of laughs. I thought I'd try it again. Tin Man, Iron Man, this became a success. No, OK? Adoption, it's very important to understand how consumers adopt. Privacy is a very big issue. We have to listen to what people say. And so, that's the collaborative alliance, which is really, let's start one step at a time. Let's have presentations. Let's share. Scott, come on up. Watch out, this is dangerous. [APPLAUSE] MALE SPEAKER: I'm not sure. It didn't come with a manual. Try the projector. If not, try the Panasonic or try over there. SCOTT MCDONALD: How do you like that. OK, so we'll give it a shot. There we go. I'm going to talk about iPads and magazines coming on to iPads. How many in the room have iPads? OK, well, you are over-represented relative to the rest of the country, though they are quite popular. At Conde Nast, we have, as of this week with the launch yesterday of the New Yorker on the iPad, we now have five magazine editions that are available on this platform. And we have very, very, very early results. This is of course a new platform, new technology. And it's my overarching caveat of any early conclusions is that these things are likely to change as the market develops and matures. First of all, it's important to think about, who are these iPad users? They don't really look like your classic gearheads, the sort of early technology adopters. It's a little bit more like early consumer product adopters. It's a broader market. It includes some of the people that are in the Kindle market, who are a little older and more book-oriented, and also some of the kids and gamers. Pretty good age range, still a bit of a male skew that affects the demographics of media that they consume on that platform. Surprising to us-- we assumed that almost all of the people buying iPads would already be familiar with the Apple gestures, with swiping, with enlarging and pinching and things like that. Not true. A considerable number of them that we have interviewed-- and this is based on, at this point, surveys of about 5,000 people who've downloaded our magazine apps and more than 100 hours of one-on-one interviews with people and usability testing, things of that sort-- many are relatively unfamiliar with navigational conventions of iPhones. Very important for those of you who are developing interactive advertising for these platforms or media applications to assume that at least a good chunk of people are going to be what we'd call naive users, using very cautious navigational strategies, finding out how to make something work and then tracing the path back and doing it again rather than looking for shortcuts or doing any of those kinds of more adroit maneuvers with this platform. Many people fear that they're going to somehow break the application. I don't mean break the glass by dropping the iPad, which is indeed actually a concern, but fear of breaking the app itself if they push the wrong button. But they do love these iPads. Their enthusiasm is unabashed. They sell themselves. Many people that we talked to were skeptics. They weren't going to buy it in the first place. They saw someone else's, and I've gotta have it. It seems to be driven a lot by the way that the photography looks-- which is good for magazines, of course, since photography is a central part of the magazine proposition-- the cool factor of this device, and about the diversity of applications that are available and continue to be growing leaps and bounds in availability. There were some surprises. Relatively few were using these as really mobile devices at this point. This probably will change as the price comes down, as people end up having more of their own. But for right now, it appears to us that about 2/3 of the people are actually using them as household devices, shared among members of a household. OK, so readers per copy, in magazine parlance, it is to be expected here. Very different from what we've seen with the behavior with apps with iPhones, which are in your pocket, very personal. You don't pass them around to your friends. It's your personal device. So iPads appear to be a little bit different that way. There seems to be very little mode-shifting within an application. So it seems that for-- and I've talked to folks at Time Inc. who've had a very similar sort of result. When they're reading magazines, they're in portrait mode, because that kind of conforms to the way that magazines are laid out. But with video, they're switching to landscape mode, but not very much switching in between applications. Thus far, an extraordinary amount of permissiveness and understanding that the dust hasn't settled yet, that all these different publications are going to use somewhat different navigational conventions. Everything is going to work a little bit differently. They expect it to get better, but they're not too impatient about it. And to my surprise also, not too much sensitivity to download times. Maybe the downloading of half-hour video programs, TV shows and things already condition people to expect to have to wait a little while for a video to fully load. Their expectations seem to be shaped very much by their relationship with the printed magazines and the conventions of printed magazines. They expect to get the whole issue, and this is pretty different from what we saw with iPhones and with mobile apps. They're used to getting partial stuff on a phone, not the full package. But they appreciate the fact that they're getting the full package. They want a lot of flexibility in buying options. This has been one of the real points of contention with Apple, where many publishers are trying to come up with a solution that allows us to give our customers what they want, which is a subscription option, or a digital upgrade, where they have the print magazine and the digital magazine, as what we call a magazine anywhere plan. And thus far, Apple's not willing to allow us those business relationships, and so far we are still selling only single copies. But we're working on coming to a solution for that because that's what people expect. They expect to be able to extend their relationships with these magazines through this new platform. And they expect to have at least as many options for the uses of the digital edition of the magazine as they have for the printed edition. They want a lot of the conveniences of the web and of social media integrated in here, being able to save it, clip it, forward it, post it to Facebook, talk back to the author, all those kinds of things. The conventions of web surfing, in fact, do inform a lot of the navigational strategies on the iPad. We find that they use a lot of web-like language. They don't refer to the cover page, or the cover of a magazine, so much as the homepage. OK, web terminology rather than magazine terminology there. They do seem to use the table of contents. They refer to it as a menu rather than a TOC, but they're using it as a navigational prop a lot more. It's a bit stateless. You don't have the same cues as to where you are in the middle of the magazine. We're working on design tweaks that will make it easier for people to feel confident that they know exactly where they are. They do get frustrated if their assumptions fail to produce the expected result. This speaks to the continuous need to improve navigation, usability testing, and understand that what's in the minds of our designers isn't necessarily what's in the expectation set and navigational assumptions of the public that is using these. Their physical use of the digital editions very much mimics the way that they read magazines. As I mentioned before, with the TOC being much more of a centerpiece of it. They find horizontal swiping much easier than vertical swiping, which has a design implication for the way these magazines are set up. One of things that's been sort of a low-level hum of dissatisfaction for years with printed magazines is now, actually, moving up the agenda a bit in this format. Editors, of course, will get a little bit bored writing one headline on the cover and using it consistently throughout. So they might call a story one thing on the cover, and then give it a somewhat different headline in the table of contents, and then you get to the actual article in the magazine and it's something else again. They're changing their language again. That ends up being a nomenclature problem in the stateless position that people are in, have difficulty making sense of it. Reactions are very, very positive, very high satisfaction, and intend to buy again. Perceived value, all those kinds of numbers are quite great. And even more important-- and I'm just giving one example here from Vanity Fair. Here's some of our behavioral tracking data on the minutes spent per user on the iPhone-- Vanity Fair delivered to the iPhone or delivered to the iPad. Now the MRI estimate for the printed magazine is 45, 50 minutes. So we're seeing here comparable numbers on the iPhone, and significantly higher numbers on the iPad. Now, I mentioned before, you might have multiple users in a household. So we don't know the degree to which that would be deflated if you took account of that. But to our eyes, this looks like a very high engagement proposition, very different from the three- to 12-minute average on the website, where it's really just coming in, seeing one article, and going out again, very different engagement metric. The advertising is extremely well received. Advertising has always been a central part of the value proposition for magazines, and it certainly is part of that in this case as well. We've tested a bunch of the interactive ads that are premier advertisers created for these editions. We'll be presenting in another couple of weeks to them detailed results on what we found out about what kinds of advertising, what strategies work well, but the early read on it is that these are very, very favorably received. Some tips that we'll be providing people in the advertising community about ways to make that succeed even more. So with that, I will leave it and we'll go on to the questions. Thank you. [APPLAUSE] MALE SPEAKER: We're really trying to keep everything moving, but this is my boss up here who's doing the panel discussion. So I don't know how long that's going to take or people will be up here. So now we have a panel discussion. Maria Louisa? MARIA LUISA FRANCOLI: Thank you. Thank you, Mitch. Thank you, Scott. That was fascinating. And it was fascinating because it's pretty unique that it's a publisher making the research on a device that is disconnected to the publisher. We're used to the publisher and the device to be much more connected, so the research was a little bit more engaged and not so objective, maybe, as it was. But very, very interesting findings. Thank you so much. We now have two people that are joined for the panel that are going to discuss with Scott. We have Chris Wilkes. Chris is vice president marketing of audience development at Hearst Magazines. And he's responsible for leading online subscription acquisition efforts for all the Hearst publications. So, definitely very interested and very engaged in what we have discussed. I would like to know your perspective on some of Scott's findings. And we also have Carolyn Everson. Carolyn joined Microsoft advertising as corporate vice president, global ad sales and strategy June of this year. And Carolyn joins Microsoft from MTV. So, without any more dialogue. Let me start with you, Carolyn, it would be interesting for me to know-- coming from MTV, and having seen your audience migrate to new devices and all of that, how do you see all of this? And how do you see it from the Microsoft perspective? CAROLYN EVERSON: I just did an interview before, and I said the industry keeps talking about multi-screen. And we do too, by the way. And we talk about different devices. To the consumer, however-- which we really have to focus on-- to them these are seamless experiences. They depend on their portability of content, regardless of their device. They want similar experiences, depending on whether they're watching in their living room, on their mobile device, or PC. I think we have to start talking more about the consumer experience in all of these different devices, because what's happening as the industry becomes siloed in how we approach each device from a creativity and content development perspective, how we serve the ads, different measurement formats, we're really creating, I think, a lot of difficulty to actually deliver the consumer a seamless experience. At Microsoft, we are trying to put the consumer in the center and think about how all of these different devices and screens will impact the way they deliver content, and the way they want to consume content. But I would say, in general, our focus is really trying to put the consumer in the middle. MARIA LUISA FRANCOLI: That's what we're saying before. The consumer has to be the center of everything and how to engage with them. Let me ask you, Chris, how all these new devices, these new technologies, are going to help you in your job achieve more online subscriptions? How do you see that? CHRIS WILKES: Well, there's a number a fantastic opportunities at play here. I think one is really represented in a lot of the statistics that Scott just showed in that fine presentation around who these readers are. There's a unique opportunity to be able to present our content to what we think are additive audiences. When I look at what we've done on the web over the last five years at Hearst, in selling magazine subscriptions digitally, print subscriptions but via digital channels. We're finding that over 90% of the people we collect from those channels into our databases are new to our databases. They're added. And I think what that reinforces for us is just how big the potential audience is, and how somewhat small our reach really is in the grand scheme of things. We think that these new devices, and portability and accessibility being really key parts of that, represent a really significant opportunity for us. MARIA LUISA FRANCOLI: Scott, do you want to comment on any of this too? SCOTT MCDONALD: Well, certainly. MARIA LUISA FRANCOLI: It is working. SCOTT MCDONALD: Certainly, there's no disagreement about the consumer being at the center of all of these and trying to make it as seamless an experience as possible. We also are fairly encouraged that the audiences that we're able to tap with bringing these experiences to these other platforms will actually be additive. It certainly seemed to be the case with the iPhone. Initially, a lot of the guys that, say, were getting GQ on the iPhone aren't people that want to carry a magazine around. But they've always got their phone with them and they like the content. They're interested in the content. And thus far-- the June Wired was the launch issue of Wired on the iPad. And we sold over 100,000 of the apps on the iTunes store. The average newsstand sale for Wired is about 80,000. It wasn't any different that month. The iPad apps are averaging 50,000, 60,000 now for Wired. And again, we're not seeing any big change in newsstand sales. So we think we're actually in a position here to find new audiences. And as Nielsen's great slogan of follow the video, this is like following your audience as they evolve. MARIA LUISA FRANCOLI: You mentioned something, Chris, about databases and how these new consumers are sometimes new to the databases. In a recent, I think it was The Economist article, I read that some of the biggest challenges for publishers was the lack of information about their consumers and how to do cross-selling and upselling. And I'd like to start with Carolyn, because I think at Microsoft you must have very rich databases about your consumers and how to do that. And then I would like to hear your perspective. CAROLYN EVERSON: Look, I think the most exciting part of what we can do from digital and marketing is actually being really thoughtful about targeting and making the marketers' buy be much more efficient. I just shared a case study we were doing with NBC where we literally able to target folks that had been on competitors' sites, and looking at shows on CBS and ABC that perhaps may have not experienced the NBC content. We were able to see, are they vociferous consumers of that content? Are they not? What is the profile? How do we look at them psycho-graphically? The days of buying women or men, 18 to 49, really, really should be over in my mind. And frankly, they should be over in more formats than just the digital experience. I think you're going to start to see the evolution of TV and using set-top box data, which some people are doing now, to be much more thoughtful about the marketing there. We have a product at Microsoft called the [? Mirror ?], where it is very much about getting to that right audience. So we are very encouraged by what we can do for marketers to actually get to precisely the people that they want to reach. That does not mean, by the way, I'll just say, that general branding experiences and context don't matter. If we swing the pendulum too far, and just try to reach the people that we think we want to reach, we do sometimes miss the opportunity to create an impression and a love for a brand. That will actually have a halo effect over a larger audience. MARIA LUISA FRANCOLI: Absolutely. What is your take on that? The comment that I made, based on The Economist, is not my comment. The difficulties with databases, that's [INAUDIBLE]. CHRIS WILKES: I think we're definitely in the early stages. So the ability to collect the kinds of data that we want is not quite where it needs to be yet. But I would say that so far, with what we've done on the tablets, we're collecting a lot more data than we were collecting from readers in print. But there's an opportunity to have this marriage of best of what we get on the web in terms of analytics, and what we tend to expect and be able to target with, versus what we can potentially collect out of the print magazine. So when you think about how a consumer experiences a print magazine's content on an iPad, there's a number of opportunities to be able to go deeper and collect data as part of the story-ingesting process. So interactive features don't have to just be to change the screens for people. It can actually be to customize the content. And you create opportunities, because it's connected, for users to want to provide information to you to have a customized experience. I think, in as little as three to six months, you'll start to see iPad editions from Hearst that will have unique experiences depending on who you are. And the who you are is based on what you've told us, not what we've gleaned from behind the scenes or what we've sniffed out. We're finding that readers are extremely opportunistic about giving data right now. They're eager to provide information. So far, in some of the experiments we've done, we've seen as high as 30% or 40% of the users interact with a feature where we ask for data. That can be a really powerful way to start to enhance what we have in those databases. MARIA LUISA FRANCOLI: Absolutely, that might be exciting to the magazine world in particular with this task of collecting data from readers. It was more difficult probably, right? CHRIS WILKES: Yeah, and I think a lot of it has to do with the connection. There's a connection the entire time that someone is consuming the magazine behind the scenes. And that presents a lot of different opportunities. MARIA LUISA FRANCOLI: So with all this data, all this information about the consumers, what are your plans to help us and our clients, the marketers, to get better results, to get better products, to get better solutions for their marketing needs? We're under a lot of pressure of getting more for less. And with all this data, we should be in a much better position to achieve just that. So what is your take? I'd like to hear the three of you. CAROLYN EVERSON: I would say the conversations with CMOs, and even agency leaders, has changed from being a primarily completely marketing brand-based building conversation to, help me understand the data, the analytics. I have to show ROI because the CFO or procurement is now very involved in the process. And so, the conversation has changed to be both about the brand and the creative, but also the tools that enable the marketer or the agency to do their jobs better. We have sort of two sides of our business. We actually have three, because we're a marketer as well, trying to figure all of this out. But the technology side of our business is actually investing heavily in what we call digital solutions. And I think the marketplace absolutely needs to have some standard way to look and measure data. It's great to collect all of the data, and all of us do, but then what do you do with it? How do you analyze it? How do you really know what's working? And I still think we have a lot of work to do there. MARIA LUISA FRANCOLI: What do you think, Scott? SCOTT MCDONALD: I would definitely agree with this. I think that it's going to take a while before we're actually able to master all of the various consumer touch points. This opens up a bunch that we didn't already have. We had many already, and have successfully used those, for our advertisers and marketing partners, because we had very important touch points with consumers who are specific. The sort of person in Wired, the sort of person in The New Yorker isn't just anyone. They've got a very specific sort of profile that is of interest to certain kinds of advertisers. So we will be leveraging that. I think, for our websites, for the magazines and for the new digital platforms like the iPad, they give us a different window. It still is a partial view, and the art is in assembling that in a way that helps solve an advertiser's particular curiosity or interest. MARIA LUISA FRANCOLI: Chris? CHRIS WILKES: I'd add to that, that beyond the profiling ability and the targeting that there is a real opportunity to go back to what I was touching on earlier around collection of data from advertising, in an experience that is much more laid back. Those minutes that we just showed on the slides there are really powerful when you think about the type of experience that someone is going through when they're inside of a digital version of a magazine, when compared to something like the smaller nuggets of information they might glean from a website. So when there's an immersive content opportunity like that, and the consumer is that engaged, there's a much richer opportunity, I believe, for our advertising partners to display creative inside of our issues that can capture data in real time and present both a better experience for the consumer, but also a richer and more deep interaction with the advertising content, if they so choose to go that deep. MARIA LUISA FRANCOLI: I want to read something. Just last week, JFK MRI announced that they are transitioning to the platform print brand measurement. And they will change the wording to include whether respondents have read magazines printed on paper, on a cell phone, on a website, using another mobile device, on a computer, using the internet, or using an e-reader. What is your reaction to that? You welcome that? You were waiting for that? You pushed for that? Is that going to be a complication? What is your reaction to that? SCOTT MCDONALD: It's predictable. It's not a surprise. As my friends at MRI know, I'm very skeptical about the ability of the human memory to remember a lot of transient events. Now, downloading a magazine on an iPad and spending an hour and a half with it isn't a transient event. They probably could recall that rather effectively. But you know, some of the others, they may be magazine apps that really aren't full editions. They may be just little bits of things. Certainly on websites, people don't recall accurately at all. We have lots of research on that. So the recall methodology deserves some skepticism as to how far that can be pushed to give an accurate holistic view. I know we all want an accurate holistic view, but whether you can get that by asking people to recall events that in some cases may be very, very transitory is, I think, doubtful. CHRIS WILKES: I think we're all going to be challenged with what the terminology is over time, right? The things that we get comfortable using for metrics, and how we describe them will really start to evolve regardless of what we end up doing and deciding to put a flag in the ground. You have to do that. You have to make change. You have to try to adapt to this, but I think that it's going to be rapidly evolving. When you just think about the magazine experience, there isn't a magazine category on the iPad, for example. We refer to them as magazines, but the more we enhance them, the more they're actually something else. It's a content experience. And I think that starts to challenge too when you ask simple questions, like where did you read your magazine? Well, picking up a copy of Cosmopolitan on the newsstand, but immersing yourself in the Cosmopolitan application on the iPad or on another device or viewing the website. These are all very different things, and I think that our content strategies in all these places will be evolving rapidly. It's going to be challenging to define something that you can get comfortable with for an extended period of time. CAROLYN EVERSON: I just want to echo that. I think that's a really important point when you talk about even just the language we use in this industry, to talk about magazines, or TV shows. At the end of the day-- again, back to the consumer-- to them it's consumption of content that they love. We keep talking about it in formats. We talk about it with screen, or how they're experiencing it, because that's how most of us grew up in this industry and the different jobs we have. I couldn't agree more. For me, it's around, what is the center of the content experience regardless of that device? We are watching people now download movies, or playing their Xbox, downloading movies from Netflix, pausing it, watching it on their PC, and then actually catching up on their mobile device. They are not thinking about that as, oh, I saw a movie on my TV. To them, it's that movie is a piece of content, or that game is a piece of content. We have to change the language. To me, it's like, they're not in the magazine business anymore. They're in the content business. I don't know, I just think that's a big thing that we have to move for the industry. MARIA LUISA FRANCOLI: And Scott seems to agree. SCOTT MCDONALD: I agree, but I think it also speaks to the point that I made before. Give an example, we syndicate on Glamour.com a lot of Glamour content to Yahoo Shine. OK, so people see branded Glamour content there. What are they going to tell MRI? Is that something that would be credited as a Glamour experience at Glamour.com? They asked the question, did you go to Glamour.com. But I don't think you get an accurate answer of it. People don't remember. CHRIS WILKES: I think what also starts to challenge that is not everything will be presented in magazine-like form on these devices. Hearst has about 25 apps in the marketplace today. We'll have about 40 in the next six months, because we have a lot of projects going on. But I'd say half of them are not magazine projects. They use magazine content, but they're not necessarily presented in a paginated left-to-right-- regardless of how interactive it may get-- type experience. Very, very different navigational structures that we could potentially experiment with. MARIA LUISA FRANCOLI: And talking about navigational structure and devices, there are more and more devices. Kindle, iPad, PlayBook that was announced today. What is your feeling about that? Are we going to go to a more homogenized type of platform? Are we going to see more and more different devices with different technology-based solutions? How do you see that? CHRIS WILKES: Beside from giving me a headache, it gives me a lot of options. It means that there's a lot of different options out there for consumers. And I do fully suspect that while we look out over the next two years, the proliferation of these devices in terms of how much time users are spending with them, categorically, is going to rise significantly. And that's as an alternative to even things like the web and using their computers and using their laptops. I think that's all a good thing for us, and it's another reason why we're immersed in investing and creating different product experiences that are in some ways experimental right now. A lot of things that I'm trying to do internally at Hearst are not necessarily things that we'll be doing two years from now. We're putting stuff out there so that we can gauge consumer reaction, so we can measure our success with marketing them, and trying to help that guide us on the roadmap. CAROLYN EVERSON: I would say that I have mixed opinions on this, because I think-- first of all, I totally agree that there's going to be a continued proliferation of devices. There's absolutely no doubt. I think that most of the innovation is going to come in mobile. If you look at the forecast of actually more people will be using mobile for their search and their browsing behavior into 2014, depending on which forecast you look at. So mobile, there's actually going to be a ton of innovation. I think the challenge for content companies, so I look to these guys-- and I just came from a content company-- is every new device you have to think about a different content strategy, perhaps. And so at some point, that is not scalable. Economically, it's very challenging. And so, while there's a proliferation, I do think content companies are going to have to really think about, where's the largest audience that could be relevant for this particular content? It gets to be very expensive to think about all of these different devices. MARIA LUISA FRANCOLI: Do you want to add something to that, Scott? SCOTT MCDONALD: I think they both have said effectively what the state of it is. Obviously, we're interested in having scalable solutions, but they won't scale for us if they aren't successful with the consumer. So consumer continues to be the ultimate source of all value in such things. And so, for better or worse, we have to stay very close to that process as the technologies change. CHRIS WILKES: It's been important for Hearst, as we experiment, not just partner with hardware manufacturers but also with distribution solutions. So through the Zinio network, the Hearst magazines are available on the PC and on the Mac, and they have been for years. But that extends now to the iPhone, the iPad, Android devices, future devices from other manufacturers that we have to come. I think that that's a really important way to look at how you can try to achieve scale. There's certain customizations that you may want to go and experiment with, but when you want to get broad reach across all these platforms into real cloud-based pushing of content to users, distribution is a really important thing that needs to be thought about. CAROLYN EVERSON: I would just say, the evolution of the cloud is going to be what's going to make these things scalable, and portability of content. Every large technology company is investing significant amount of dollars to build that infrastructure. And once that gets into place-- I mean, it is in place to some degree, but there is a lot of development that needs to occur-- that single evolution of our market will make it a much more seamless and easy experience for content providers to publish to all these different devices. MARIA LUISA FRANCOLI: That's a good thought to finish the conversation. And I would like to take one word, as a new thing to say. The homepage of the magazine, I like that a lot. So thank you for sharing it with us, and thank you for being with us and sharing your views. CAROLYN EVERSON: Thank you. [APPLAUSE] MALE SPEAKER: So now we have the OMVC, and we put them in this order because Bruce has to catch a plane and we didn't want him to be late. Anne. ANNE SCHELLE: All right, I've got to get this right. Arrow, right? Hi, my name is Anne Schelle. I'm the executive director of the Open Mobile Video Coalition, not the Online. They're our sister organization. They couldn't make it today. We're going to talk today about mobile DTV services. There we go. For the first time ever, consumers can take live local television with them as, really, TV on the go. This is a brand-new service that's going to be offered by your local television stations. It basically works by taking that same digital signal that you receive in your living room today and offering that to any video-enabled device that has a receiver chip in it the size of a Tic-Tac. To date, local broadcasters have been investing in this technology. What's great about this for TV stations is that they can virtually use all of their existing infrastructure. So we're not talking about a multi-billion dollar effort. We're not talking about a multi-year effort. So who's the OMVC? The OMVC got together in 2007 to develop this new technology. It's a group of over 900 television station groups. You can see all the brand names up there. So it's quite a team of companies that don't traditionally work together, but have to bring this new service to market. To date, over 70 stations have launched nationwide. Broadcasters are looking at both an ad supported and pay model. There we go. So what we're here today to talk about, and share with you, is results from one of the largest mobile DTV showcases that has ever been implemented that's running right now in DC. We launched it May 3rd. It's essentially a TV-on-the-go service. We've got 23 channels running. It's nine stations with 12 local TV stations showing their simulcast content, plus nine premium channels. We're offering both a free and paid tier to consumers. We have electronic service guide. It's an interactive IP-based system, so there is interactivity, interactive advertising. What we're going to talk about today, and what Bruce is here to talk about, is the audience measurement piece. We can see and track viewing data. So the devices that we have in this consumer showcase include 150 Samsung Moment Sprint phones. We actually replaced Sprint customers phones with this TV-enabled phone. 200 Dell Mini Inspiron Netbooks. We gave these out to 200 consumers, and 40 LG DVD players. Our research partners are Harris Interactive and Rentrack. Bruce Goerlich is the chief researcher with Rentrack. You'll be seeing some of the data off the consumer showcase. This is preliminary data. We aren't, again, ending the trial until early November. So we're going to be showing you some snapshots of what we've been seeing. In terms of the qualitative research, the methodology that was used by Harris is an engagement through an online community, a Facebook-like environment. To date, we've received over 8,000 comments from the consumers on the Samsung Moment phone, and 7,000 comments on the Dell Netbook. So some of the information that's coming from the qualitative side, in terms of self-reported usage, about 63% of the respondents are accessing the TV application once a day. 22%, three or more times a day. They're using it largely on the go, not a lot at home, about 27% at home. A lot is happening at work and school. So what are they doing? Where are they taking it? The bathroom. That came up as a big use case, believe it or not. Convenience is key. A lot of stealth viewing, a lot of viewing at work, idle moments, when you're in line, waiting for your lunch, waiting at the bus stop. So viewing, again, occurring throughout the day. And we'll show you the data that reflects that. Another interesting aspect was the local news, how much they valued access to the local news. Our demographic was largely 18- to 44-year-olds, so this is something we didn't expect. The other thing was-- actually, you're in DC, and a lot happens in DC, so a lot of tuning into weather-related issues, emergency issues. There was a situation where there was a bomb threat, and we had a lot of posts about that. So with that, I'd like to introduce Bruce Goerlich with Rentrack. They have a terrific measurement system. This is what's key to broadcasters. And what was talked about on the previous panel is really knowing what these viewers are doing. So I'm going to let Bruce take over. BRUCE GOERLICH: Thank you, Anne. Hopefully, I'll be able to manage the complex technology of the clicker here. So as you can see from this chart, which is for the Moment phone, as Anne said, there were two devices that were tested in this. And we're going to be looking at the results, some of the preliminary results, from the Moment phone, because that part of the showcase has been completed. May 14th is about when most of the phones were dropped, all the way through the end of August. And as you can see, this chart talks about minutes of usage per day per user. Right when it dropped there was a lot of, hey, let me try this new gizmo, let me figure it out. It dropped down, but it stabilized and started to come back up again. So it starts with the novelty, went down a little bit, and then really stabilized around 70 minutes a day. We do see this as something that people are interested in. Once they get used to it, they are using it. And you see the number of usage occasions, again, sort of reflected that same drop from being a novelty to then sort of stabilizing. I believe that you have some-- I think that was some of the emergency events. You see some of those spikes there. So again, it became part of the people's daily use. The number of usage occasions stabilized and just became a normal part of the user's life. No, because I don't know whether what's up and what's down. Let's see. There we go. I think another interesting thing about this is, when we talk about the previous panels, to talk about the additive nature of these devices, as sort of adding in terms of magazine usage, the number of minutes that the iPads or the Kindles or the iPhones bring. The same thing is happening here. This reflects the minutes of usage by day part. And you can see here, what's really popping out is Monday through Friday. If you took a look at normal linear television, you'll see that primetime equals or is greater in terms of minutes of usage than Monday through Friday day, rather than being in third place here. So this is something that people are using during the day. It was reflected in the qualitative discussions, where people were talking about how they brought it throughout the day, using it in the bathroom, et cetera, using it to get information, using it to watch their favorite shows. This really is something that is adding audience. And the other thing that's interesting about this is, as Anne said, this is a pretty high-quality audience, a young audience. And here they are watching a lot of television during the day on their mobile devices. So again, it's extra inventory that perhaps then could be sold as added value to advertisers. This just breaks out Monday through Friday day. Where is it? It's pretty even during the day. So once people are out of the home, they're using this pretty much evenly during the day. There's a slight skew here between the lunch hours from 12:00 to 2:00, a little bit more usage there, but it's pretty even usage. You've got this device. You've got the video on your phone, the TV on your phone, so you're popping in throughout the day. The other thing that's a little bit interesting-- and we still haven't understood this yet-- but as opposed to regular television, where you see usage ends up higher particularly on Sunday, here, again, this is a Monday through Friday phenomenon. But Tuesday seemed to have the most amount of viewing, the most number of episodes being tuned in. This is sort of a day of the week phenomena where viewing is happening during the weekdays and a little bit more in the middle of the week. Also, reflecting in terms of what was in the qualitative, what is coming out number one in terms of the genre that is being watched most often, the most number of episodes that were tuned into are Monday through Friday news. That's that red bar. That's one of the things that people were tuning into the most, to catch snippets of the news, to catch emergencies, to catch the weather, because there was a lot of bad things that were happening in Washington during the weather during these months as it was happening here. So what you have here is the ability to really get local information and get it quickly with your TV on your mobile device. And so, when we think about local news, at least I think about old people sitting and not being able to find the remote. Here's something where people are making the choice to click into the local news. And these are young people. So again, additive value. And finally, we're seeing in terms of unique viewers, the most amount of total unique viewers, again, it was local news. So a real attraction here, not necessarily what you would think that people would be using their mobile television for. But again, that power of being able to get information, being able to understand what's happening about the weather, this is a great new audience that you wouldn't necessarily normally see in linear television, but that the mobile device appears to be bringing to TV. And we're excited to be part of this measurement, and to be part of this future as the OMVC works to make this a real reality. Thank you. [APPLAUSE] ANNE SCHELLE: That's it, right? MALE SPEAKER: So we have the next presentation. So there is a collaborative line set-top box think tank, and we really want to dialogue about issues that relate to set-top box data information, aggregation, as an industry agnostically. Here are all the different companies that are part of what we're doing and offer some insight and people. These are the different companies that have given us data, which without it, we couldn't really exist and try to move things forward. So now Joe Abruzzo has led the charge on this collaborative set-top box alliance project. And Joe, take it over. JOE ABRUZZO: Thanks, Mitch. This was an opportunity to work with Kantar media to get a look at commercial viewing on set-top boxes. We worked with our Carnival Cruise Lines client. And I just want to thank the Carnival Cruise Lines client, and Kantar, again for giving us access to this data. In one case, we're looking at a comparison of what was reported by Kantar versus Nielsen posts. And then in the other case, we're going to look at some other commercial viewing dynamics. So we're looking at 370 occurrences, two weeks in the first case. 4,322 occurrences, six months in the second case. These are all situations where we're talking about live commercial viewing. Because we're dealing with household ratings in the world of Kantar, we have translated all of the Nielsen data over to data that was consistent with what Nielsen was reporting, including DBS households, households that have satellites, because the Kantar data is based on the DIRECTview panel. This is an example. This is a schedule, a two-week schedule. The Nielsen live commercial ratings are along the bottom. These are commercial ratings during primetime DBS households. And then on the vertical axis, we've got what was reported by DIRECTview. What you can see is that there's a really close correlation. Now, I've got to tell you that DIRECTview doesn't claim to be nationally representative. There are 100,000 households that are projectable to 18 million DIRECTV households. And then in the world of Nielsen, we're talking about 22,000 households translating or projecting to 114 million households. But there's a definite correlation. The correlation is 0.85. In this case, the DIRECTV, the DIRECTview data tends to understate slightly what Nielsen would have represented. But I think what's interesting is, when you're looking at actual commercial ratings versus average program commercial ratings, you're seeing a lot more variation. And that's just saying that, depending on where your spots are, there are cases where you're going to do a lot worse than what Nielsen is reporting, and cases where you're going to do a lot better than what Nielsen is reporting. I told you we'd look at some viewing dynamics. This is about what's called tune-away. Think of tune-away as the percentage of commercial that never gets seen. So if you're talking about a 30-second commercial, and someone tunes out after 27 seconds, that means tune-away would be about 10%. So it would be three seconds on 30. We were surprised at the distribution. First of all, the most frequently occurring tune-away was 0%. within this schedule. This is the Carnival Cruise Lines schedule for six months. After that, it's really skewed. We see that the average is about 4%. I don't know if you feel that's high or low. I was surprised. I felt that was a low number. One of the things we wanted to do is say, what is the explanation for differences in tune-away? We've got very low levels. We've got a long tail here, some very, very high levels of tune-away. We wanted to get an understanding of what's going on. What's driving that variation? So we looked by day part. In this case, no surprise, I wasn't surprised. Prime seems to be the place where audiences are most engaged. Tune-away was lower than the other day parts in comparison to something like weekday morning. I think it's clear that this is a measure of engagement. Prime, we're engaged. Weekday morning, people are a little more agitated. They're on the go. They have shorter tuning durations as a result. They're moving on. This was a really interesting finding. We're always interested in differences in commercials. Is commercial A doing a better job of retaining audience than commercial B? Here we had three commercials. The first two commercials had average tune-away of about 2.8 and 3.0. We looked at the third creative, and after seeing the very high tune-away, we realized that that was the result of commercial duration. The first two being 30s, the third being 60s. I spoke to Harvey Morrow at Kantar. He told me that if we had experiences with 15s, we would have seen, actually, lesser tune-away again. So this is a case where it's really-- you sort of have to question the whole idea of, is a 60 twice as good as a 30? And this would suggest not. HD is important. Everything I've taken you through thus far has been on standard definition, all the distributions, all the statistics. We had data for commercials that had been seen on high definition equipment versus commercials that had been seen on standard definition. And what we found is that standard definition tends to have nearly twice the tune-away as high definition. So the engagement of viewing a program in high definition appears to be carrying over to the commercial itself. We think that has interesting implications. You should certainly be shooting your commercials in HD. But then, within this data set, there were networks that were not transmitting in HD. And this is an important finding for those networks. I call this a dilemma. This is average tune-away by position in pod. Everyone is dying to have first position, the A position, in every pod. In this case, we're finding out that we have 8% tune-away in the first position, and then it continues to decrease. It decreases from 8% to about 5% for the second position, all the way down to 2% when you get further out. If you link average these, by the end of this case, the people who were present at the beginning of the pod, only 70% are available for the 12th position. So what this means is that under the current currency, we're paying according to the average commercial rating during the program. In that case, it still pays to be in the first position. But if we were paying according to the actual commercial rating, we would prefer to be in the later positions, because that is when most of our commercials are being seen. If I take my ad off the air, and I bring it back, say, six months later, is it going to be fresh again? And this table sort of suggests that it's partially true. Same ad comes out for about 14 days, goes off for about another 14 days, comes back, has lower tune-away levels, but the tune-away levels consistently build as you add additional rating points. Same thing for the third pod, although we don't see a decrease in tune-away levels. But then again, for the fourth pod, where there was a really long hiatus, we see a decrease in tune-away levels, again followed by an increase with additional exposure. We think this suggests that you really have to be careful. You really want to try to maximize your reach, because your commercials do start to experience tune-away as you build up the exposures. This is about quintiles. I did a quintile analysis where I ranked all the programs based on their rating, and then I looked at the average tune-away for each of the quintile. So that, in the highest quintile you've got the least tune-away. Second quintile next to the least, the center all the way up to the bottom fifth, where you've got 9.9% tune-away, those are the lowest-rated programs in this analysis. This is one of these cases where the numbers tell a different-- you have to look at the data differently to find out what story is this really telling us. What it's telling us is that there's very little variation in the first quintile, and lots of variation in the bottom quintile. This is what a plot of the data looks like. Along the bottom, you've got live household program rating. Along the vertical axis, you've got tune-away percent. Very high programs, very high-rated programs tend to have low tune-away. That's good. People are very engaged. They want to watch these programs. They don't want to miss a second. But the truth is that the majority of low tune-away programs are also low rated. In fact, if you look at the medians, 25% of the occurrences on this chart are in that bottom left-hand corner. So the idea that you have to be high rated to have low tune-away is a fallacy. The majority of low tune-away programs tend to also have low ratings. So we really scratched the surface. Kantar has a very, very deep set of data, a lot of return path data. This is all just about the analysis of their viewing data. What we learned was average commercial minute ratings tell an average story, not a true commercial rating. Set-top box data provides a unique view of audience stability and tune-away. Primary audiences appear to be more engaged. 60s equals twice the length, twice the tune-away? Are they twice the value, is the big question? Is engagement a benefit of HD that carries over to commercial viewing? Tune-away is especially great during the first pod position. Below average tune-away for above average program ratings, but the majority of low tune-away programs have less than a 0.5 rating. So with that, that's our story. One of things that Mitch always does-- [INAUDIBLE]. There's always a thought-provoking idea. So I'm just going to click, and then you can process this. Thank you. [APPLAUSE] MARIA LUISA FRANCOLI: Thank you, Joe. That was interesting findings about the tune-away. Now we're talking about technology. And speaking of technology and technology adoption, I'm thrilled to introduce the next speaker. It's Kevin Ryan. Kevin Ryan is well known because he was the CEO of DoubleClick when DoubleClick became, I would say, the first technology that, in our industry, we were using worldwide. That was a big change for the industry and a big change for all of us in our daily work. Kevin is now CEO-- he was chairman, but he's CEO now-- of Gilt Group, a very intriguing website. When I said that Kevin was joining us, Pat at reception heard that and said, there are plenty of boxes coming from Gilt. I want to know what that is. So Kevin is here and we will discover what Gilt is, and he will tell us about-- Gilt has been made possible because of technology, and the new technologies, and the engagement of consumers with these technologies. And Kevin is also founder of Business Insider. So Kevin, thank you. [APPLAUSE] KEVIN RYAN: Thank you. For many years at DoubleClick, I'm not sure extended members of my family even understood what DoubleClick did. And so now that I have a business where there's lots of sexy male and female models, it's so much easier. And my extended family is very happy with it, because they all get it, which is good. Let me make sure that-- OK, starting with that. OK, so glad to be here. Gilt, I started Gilt three years and four months ago. In fact, three years ago today, we had four employees. Today, we have 500 employees. So it's grown pretty quickly, and it's been very exciting. One of the things I'm going to talk about today is a little bit about technology, but a little bit-- I actually, contrary to what people think, wake up every day and think of Gilt very much as an advertising vehicle, even though we don't sell any advertising. So I'm going to walk through that and tell you why, from a brand point of view, it's a different way of marketing and advertising, and why it is something that is interesting for brands and for agencies. But agencies aren't interested right now and don't want to do it because it doesn't benefit them. We'll talk through that in a second. So we have 425,000 members in New York City. I assume some of them are in this room, but probably not everyone is a member yet. And I'm sorry about that. We can arrange that. I'll just give three minutes on what Gilt is so you can see it, if you haven't seen it, then we'll talk a little bit about what it does and how it's working. So Gilt is a membership-only site. You have to be invited by another member to come in. Every day, we have limited supply, limited time period sales. So any sale that's on here-- Vera *** is the one on here-- would be on the site for about 36 hours. And so, be able to sell, but as most members know, you really should be there in the first hour. And many times, you need to be there in the first five minutes, or it'll be gone. Tens and tens of thousands of items can be sold during that day, and most of them in the first hour. So we started off with women's fashion in the beginning, and then started expanding into many categories. So now we have Gilt for women, we have Gilt Man-- and I'll show you an example of that-- we have Gilt Home, Gilt Children, Gilt City, which is local services, things you could do. We've launched in six cities so far. We have jet setter, which is travel, and we have Gilt Noir, which is not available to the public. It's really just a private area. In fact, don't tell anyone. It's for our top members. It's the equivalent of-- in fact it's a play on, probably, the black American Express card. I'm sure it's a coincidence that we called it Noir. It's for top members. They have special experiences, and it's a group of quite extraordinary people. So we have a couple thousand members that will spend about $80 million with us this year. So it is an audience that many people would like to reach. So if you put on your brand marketing hat for a second, that's an attractive audience. Just to show you what this would look like, so Gilt Women, still the biggest business, but less than half of our business now. It can range from a $20,000 necklace down to a $10 legging. The key in all this is to make sure that it's beautifully presented. We think that the quality of photography-- we have the largest photo studios in all of New York City. In fact, I was looking to hire someone, because we do 12 photo shoots every single day. And so someone came in and said, what profile are you looking for? And I said, just find someone who's managed 12 photo shoots every day. And they came back after conversations and said, well, no one has done that. You can't find that. So we had to readjust it. I had no idea that after a year and a half, it was already the largest photo studio. So you can see here, we show good photography. You can go in and detail. It's generally somewhere between-- depending on the item-- 50% to 70% off retail. About 60% to 70% of the merchandise we have on site we've purchased, and we own, and it's in our warehouse. It's a huge logistical operation, so multiple football fields that we had to set up in a very short period of time over the last two years to make sure we could do this. It's also much more complicated, both technically and operationally, than normal business. Normally, an e-commerce business, you sell the same things for a couple months. Here, our entire site changes every day, which makes it very hard operationally because we do a wide range of things. Second thing is that that peak-- and for those of you in the technology business, you know that you have to design your business for peak. So at peak, we're the number two website in the country in e-commerce. We do more revenue during that time, because it's such a peak during one moment. And so, we hit that moment after about nine months. And we had nine engineers. The number one site, which is Amazon, has I think 10,000 people in the technical areas. We felt we were a little short there, so we're building that up. But it was a stretch. And we're doing some interesting things. Gilt Man, actually, is the business where we have the biggest distance between ourselves and our competitors. Hardly anyone else has a substantial business in our area there. And one thing we launched a week ago, which is really Gilt MANual, is the content site. It's been interesting. Many brands have already called us just in the last week. We've launched, and hired a lot of people who have come from the magazine industry to launch this. And it's giving you tips, because a lot of the men on our site would say, look, I want to buy this shirt but I never quite know, is this spread collar versus another collar? What is that? What should I do? And so enough people asked us that we thought we'd answer those questions. So you get a sense of the type of brands that we have on there. Gilt Home as well. Beds can't be returned. We sold a $10,000 bed the other day. So these are big businesses. Something like a Gilt Man, this is our second year. We'll do probably $100 million on Gilt Man. So that is substantial retail, and that would be, of course, closer to $200 to $300 million at retail. So in terms of items that go out the door, it's pretty substantial. Kids has been a great business for us. The average purchase price is less, but the number of items we sell is quite substantial. We have people coming in every day. A new customer there is going to be a working woman who doesn't want to spend a lot of time, wants a great price, wants great items, doesn't want to spend a lot of time in the store, and probably thinks that-- and I have three kids-- bringing your kids to a store is often not a good experience, for many reasons. I won't even go through all the things that I have suffered. Gilt City, local services, we launched Gilt City in New York about three months ago. And we just launched it in five other cities three weeks ago. These are offers [UNINTELLIGIBLE]. One email, you get five offers like [? Petrune, ?] classes, things you can do in New York City that we don't ship to you. They are experiences. So I'm actually, Saturday night, going to a comedy club, because my 16-year-old likes comedy clubs. I've been meaning to do it. I just never got my act together. I saw it on Gilt City. It was at a discount. And I thought boom, done. And I have tickets and we're going. And I hope it's very funny. So there's a lot of good things happening there. Travel was a big surprise. When I started this business-- you'd like to claim you thought of everything, but I actually hadn't thought about travel at all. And then hotels started calling and saying, look, any chance you would do what you do for clothing for us, because we have the same problem? Inventory goes out of favor. It goes down to zero. We know we can't sell everything, but we want to reach a high-end audience. And if we're on the big booking engines, we're next to the Motel 6. And we spent millions of dollars trying not to be next to Motel 6, with apologies to Motel 6 here. But they want to be in a luxury environment, with quality reviews and things like that. So below this, you'd see 12 offers which would be less expensive than you can get anywhere. So this is our first year. We'll do probably $40 million in travel booking. So it's very, very substantial, and really growing quickly. So I feel good about that. Talking about who we're getting and what we're doing, why this is really an advertising vehicle even though it has no advertising, let's talk about the customer base. And put your advertising hat or your media buying hat on. It's a youngish audience. It's going to be in the big urban environments in general. Obviously, anyone can join, but 65% are under 35, very highly educated. 67% make more than $150,000, even though 2/3 are under the age of 35. That's an audience that's very, very hard to reach, and very, very valuable for all kinds of things. Right now, it's about 75% women, 25% men. And on things like travel, it's about 50-50. Women's business in clothing, you may know, is just substantially bigger than the men's business. So what are some things we've done to get here? And how have we gotten this audience? I'm going to talk about the audience in a second. So I said three years old, about 2,000 items a day. We tend to look at a number of people that are coming in during that hour. So we have maybe 120,000, sometimes 150,000 people that are coming in during that hour. So what you want to think about is, what's the value for a brand if you could get 100,000 people to actually come in and look at your brand? I'll give you some data on this in a second to talk about it. Put your hat on for a second, pretend we're a media vehicle. And you'll see here-- you probably can't see detail, but we're in the red, which is the good one, which is growing there. Compared to most magazines out there, at least online, we now have a bigger audience. What you're comparing-- if you're looking at apples to apples, if you were going to show up there, not as an ad but as an item, is that, one, you're reaching a bigger audience. Two, you're reaching an audience that is a higher income than almost any magazine out there. You're reaching heavily urbanized. And you're reaching a self-selected audience that signed up because they're passionate about this. Because actually, the hurdles that we've created make it so that only the people who really care about these items are going to go there. In a way, we do the opposite of what any website should do. We make it difficult. You have to actually sign up through someone else. They've got to refer you. You've got to go sign up. You've got to get an email every day. You've got to show up at a specific time. So you're going to weed out people that don't really care that much. So I think the people who are there are generally going to be-- out of your 10 friends, whatever the category is, it's going to be the three friends that care the most and are the thought leaders in your group. I think these people are two to three times as valuable as an average random person online who's just clicking around because he's bored late at night. So we think that that's a good audience. And so now we started doing some interesting things. Probably most of you think of us, if you know us, as a platform for discount. Now what we're trying to do-- Brooks Brothers, we launched the fall collection of Brooks Brothers, full price. It was available on Gilt before it was available at Brooks Brothers. It was weeks before on the site. So think of this as a launch, but not advertising, because people, as you know, if they're in a store, they think differently than they just see an ad. So now here you're getting them into a store, which is essentially an ad for things. It was limited. A lot of items sold out. But we actually structured the business in a way where we know we're going to give up revenues. So let's say we think we can sell 1,000 suits. Maybe we'll have 800 suits available. So yes, it'll sellout, which, if you're the brand, if you're Brooks Brothers, you feel good about, because people will come and say, oh my god, this was great. Those must be good, because they're gone. And now what do I need to do if I want to get one? I need to go to the store and buy one. So we measure the value of what we're doing, not just from what we generate in revenue, but what the revenue we generated for the partner in their store, or on their site, or however they sell later on and want to track that over time. Target, as you may know, has a designer series of very high-end designers who design special products for them at a lower price. This last month ago, it was launched on Gilt. It was launched on Gilt beforehand. And now we have custom collections that are also made, private lines as well. So that's starting to expand into a number of things. Sorry. I guess I'll just go with this page because that's where we are. Mobile, we were surprised. I really wanted to be there on the day the iPad launched, because I assumed that all the big department stores, everyone would obviously have their app ready because the iPad was a slam-dunk success. We got there and we were available that day, and no one was there. The only applications where you could buy clothing were really eBay and ourselves. Even months after that, that was the case. It's been hugely, hugely successful. The average person who downloads a mobile application for us spends 50% more than your average person. So we think it's driving a lot of revenue. So we're doing 10s of millions of dollars of sales on our mobile applications, which we feel good about. So I think these are some of the first. I think we've covered that. We're also doing some interesting things on retargeting and personalization. So there are many aspects where we are able to personalize down to a specific category. We have a wait list. We know you were interested in this. The brand, you could come back to us, and yes, we found another 1,000 suits that we can sell to this group. Test for all of you as you're sending out emails, when you get an email from Gilt, it's one of 2,000 versions that went out that day. You're not at all getting the same email someone else did. It's based on, in the past, did you look at children's sales? Did you buy from children? We have a points system. We value every single member out there, and then make sure that we have the right email for you. We know that when the right items are far enough up-- because there's 25 sales today, and obviously we can't show you all 25 in the email. We need to show you the right 25, and we're starting to do that on the site as well. So for example, if you came to us and said, look, I love reaching as many people as possible. That's great. If you said, I want to reach just the people who have purchased $1,000 worth of men's clothing on this site, we could do that. If you said, people in the South don't buy winter coats. Let's not show that to them. We think all the time about making sure-- and this is with a DoubleClick hat on-- you're getting that right offer for the right person so that it really is selective. We want to show you as few things as possible with the most effective idea. We have even different sales. If you sign up as a new member, you'll see different sales in the beginning than an experienced member. We want to make sure that it's easy for you to get in there. It's a new member acquisition program. So the variations on there-- even if you come in to see a sale from last week. If you saw it last week, we won't show it to you this week. If I wasn't there, I may see it again the next week. So the thing I would think about is just, from a marketing point of view, we look at Gilt increasingly as a way to launch brands, sell brands, full priced, discount, where you can use the data that we have. One of the interesting things that we have, that no e-commerce site has outside of our model, is we know everything that everyone has ever done on the site. There is no page view that's not linked to a person, because you have to sign in. It's like us and Facebook. You have to sign in to be on there, which is one of the reasons that we do that. So then we can really, really target based on what you've done in the past, and I think we're about 40% of the way there. I think we're ahead of all our competitors, but 40% of the way there on the things we can do to make it a truly personalized experience that works for you, works for the brand, in a lot of different variations. That's only going to get more and more sophisticated. So thank you for having me. It's been very exciting. [INAUDIBLE]. [APPLAUSE] MALE SPEAKER: And, last presentation before drinks. John? JOHN CAREY: Well, OK. I'm going to try and be brief and quick. I want to talk about 3D television. You may think people talking about 3D TV, it's the latest, I'm going to make predictions and forecast. Not me. My last prediction was that consumers would never buy bottled water. And I then gave up on that, and tried to be a little bit more analytic. So I don't have time to go into the history of it, but I want to give you an update on what's going on and what I think are some of the key issues. OK, first a pop quiz. In the Honeymooners, 1955, Ralph Kramden's excuse for not buying Alice a TV set? AUDIENCE: He was waiting for 3D TV. JOHN CAREY: Waiting for 3D TV. You can actually see this on YouTube. I don't have time to play it. Everything's on YouTube, right? I actually think this would be a great commercial for baby boomers. You know, Ralph, it's been 55 years. It's finally here. OK, now some general principles, because that's what I do. I study adoption of new media, and have for a long time. This is a critique often of new technology. Some engineers created it, they're pushing it out on the marketplace, do people want it? It's a good critique. The problem is, most successful electronic products were pushed into the marketplace. Television, there was no evidence that people wanted that, no evidence that people wanted radio, no evidence that people wanted a range of things. So that's a critique, but that's not a show stopper. Price differential, this is important because I'm going to make a lot of comparisons between the introduction of HDTV and 3D TV. When HD was introduced, a typical 40-inch set was about $4,000. At that time, you could get an analog, say 30-inch set, for about $500. So the price differential was about 9:1 or 10:1. Right now, the price differential for 3D is about 2:1. So compare a 40-inch HD and a 40-inch 3D, 2:1. So it's not as big a barrier. This is kind of important in that it's a replacement cycle. A lot of times people get technology not because they have a great desire for it, but simply they're replacing an old model. And they go in, and they say, well, what's new? And as you see, that's really been helped in the case of, like, laptop computers and the mobile phone, because they're replaced so often. The average mobile phone is replaced every 14 months. Now, what HD had a problem with was, the average analog color TV was replaced every eight years. So if that was your motivation, you had to wait until people went in to replace it. Now, I haven't seen data yet on replacement cycles for HDTVs, but I've got to believe it's not eight years, because if you look in your HDTV, as I have, it's a computer. So I've got to believe it's more closely to, like, five or four years. And that will be somewhat of a benefit compared to HD. Important demographic differences of who likes this. Haven't seen enough data on this yet for 3D. There were some important ones for HD. And the biggest one that I know of was males and females. It's not that women don't like HDTV. They don't like it as much. My whole research career is, I go in homes and I watch people watch TV. And typically, what a woman would say is, if I'm in the kitchen watching the news, and it's on in the living room in HD, I'm not going to go in the living to watch. So that's a question for 3D TV. Changing face of early adopters, this is important. This is a cartoon from 1970s. And it's a guy, it says, all of my gadgets are old. I'd like some new gadgets. And what all the research said in that time was, the early adopter was typically a guy in his 40s or 50s, had a fair amount of disposable income, and liked to try the latest. But it's moving down in terms of age. Think about who's really adopting the mobile phones, the latest, and more women are early adopters. There's a clue in that. Be wary of forecasts about new media. I've studied this for a long time. You can't really forecast a new medium until it's been in the marketplace for a while. So if the forecast is very high, it's very low, I don't believe it until it's out there for a few years. If we had more time, I could give you a history of bad forecasts. Skepticism, that's another thing that comes out when you have anything new. What's an example? Where are we? We're in the Times Center. What happened when black-and-white television was introduced for the first time? What did the New York Times have to say? The problem with television is that people must sit and keep their eyes glued to the screen. The average American family hasn't time for it. In other words, it was a negative that you had to watch a screen compared to radio, where you could look wherever you want and you could walk around. That's also very typical. Will 3D films influence demand for 3D TV? Yes. Now, we've had some great ones like Avatar. We've also had some ones that are not so great. And because 3D films are ahead, really, of 3D TV, that's something to watch. People have to see it before they'll buy it. Perhaps the most important thing I'm going to say here, because it was very mixed with HD, if you went into an electronics store, 1998, 2000, 2001, here's an ad for The Wiz. I'm not surprised they're gone. They had HDTVs, but they weren't hooked up to any HD service. They were hooked up to regular analog cable, and the picture didn't look very good. People said, what's the big deal? By about 2003, they hooked them up to a DVD. By about 2005, when HD started to take off, they're hooked up to the real thing. So you've got to see it in order to buy it. Now, HD did not do such a good job with that. Where did they do a fabulous job? Black-and-white TV. In the 1940s, they put television sets in windows all over Manhattan. But the big place they were in was bars. And what the industry did was, they had special large sets that they subsidized. They put them in bars. Whenever there was a sporting event, the bar was jammed. People would then say, I've got to have this. They'd save up, and by Christmas or whatever, they'd buy it. Why is this? It's a 1950 cartoon. And there's a Salvation Army band, and they've got a television set. And people are going to the bar. Because so many people were going into the bars to watch television, they felt they needed a TV to keep them out of the bar. Now, it's better with 3D TV, still not perfect. Panasonic is doing exactly what needs to happen, which is, show it to people. Show it to people everywhere you can. March Madness had some 3D TV. ESPN, I think, did not do such a great job. They had the World Cup but I didn't see a lot of demos. There were a lot of demos for the US Open. And it's not just the sporting event, which is great, but also you get to see yourself. You get to see games. You get to see a variety of content. That's where it has to happen. OK, so what's the obvious candidate to get people to see it? It's the sports bar, which is exactly what happened with black-and-white TV, and what did not happen very well with HDTV. OK now, TV parties, group viewing, that also helped HD a lot. But there's a problem. What are you going to do if you invite six friends over and you don't have six pairs of glasses? And glasses-- I've interviewed a number of people with 3D TVs, and I've seen the survey-- that's the biggest challenge right now. How are you going to get glasses for everyone who wants to see them? But we'll see if entrepreneurs come up with some ideas on this. OK, does it disrupt the household? Now, this was another problem early on with HD. The early sets, if you wanted to get a cheaper one-- watching my time-- they were these rear-screen projector sets. And they were, like, six-feet deep. So this is a house in Yonkers I was in. And the guy was, oh, this is the best thing since sliced bread. And his wife was, you know, it's taking up half the living room. So this is a cartoon that sort of reflects that. It keeps it out of sight when we're not watching it. But OK, the solution was technology, the flat screen. And this actually is the same house that you just saw three years later. The problem is solved. The big box is gone, and everyone's happy. OK, serendipity. All of my career is studying new media. This is the unplanned thing. You don't know what's going to happen. This may be where there might be a solution to the glasses issue. This has been so key-- I'll give you one example with the VCR and the emergence of mom-and-pop video cassette rental shops. And they wanted to buy the cassette and then rent it out. How did the industry react? They tried to shut them down. It was a big court case, and the industry lost. As a result, the industry made 10s and 10s of billions of dollars. The lesson is, when things you don't plan happen, take a look at them. Maybe they're good. OK, what types of content will work well with the new technology? Well, we're going to end there. We know with HD, sports was great. People love movies. Nature was good. Drama? OK, not that great. News? Yeah, OK. What about with 3D? One thing I'll tell you, the core value of 3D TV, it's not Comin' At Ya. This was a movie-- it was a terrible movie in the '70s. and What they did was they figured out every way you could throw something at the camera, every little plot line. And if you think about the really good 3D movies like Avatar, they only had one scene where they had that. The core value of 3D, in my mind, is the depth of field that's on the other side of the camera. And that's going to take a lot of exploration to figure that out well. OK, this leads to, should the goal with 3D be to have all shows in 3D? And you sort of, with HD say, eventually they'll all be in HD, but maybe not with 3D. Maybe some things will work well and some things won't. And maybe one part of the solution to the glasses issue is that you're not going to watch 20 hours a week with glasses. Maybe you're going to watch three or four, but I'll just raise that as a question. OK, so content for 3D TV. Everyone thinks sports is going to be a big part of it. I think that's right. New 3D movies, and there are a lot of them, but there's only maybe 20 a year. There are not that many old 3D movies. Once again, go on the web, you can see every 3D movie ever made. You could upconvert shows and movies. And the reviews I read are, well, it's pretty good, but it's not as good as the real thing. So what are some other categories? All right, well, we mentioned sports. And there are a number of production issues that have to be fine-tuned, but sports is probably there. 3D games? Now, if you think about it, who would sit in front of a television set for 30 hours a week with glasses? It's the gamer. So maybe what you want to do is find the pieces. People talk about killer apps. Most of the time with new media, there's no killer app. It's a piece of this and a piece of that. So if sports is one piece, and 3D games is a piece, and now it turns out that YouTube is promoting it. You can get a 3D camcorder. Think about how user-generated content helped video on the web to get launched. But there's one other piece to this puzzle, the last one I'll mention-- ***. If you look at the introduction of what was the dime novel in the 19th century, early film, it wasn't *** as as we know it. It was racy content. And the big example of it was the VCR. In the late '70s, 70% of videocassettes sold and rented were ***. It's interesting, the *** industry-- not that I follow it closely-- the *** industry was not interested in HD, because the production quality of their films was so low. They looked terrible. But they think their content lends itself to 3D. OK, so last point. Keep the technology simple. I've been in so many homes where all the new menus, and you can do 27,000 things with them, and a lot of people mess it up. If I were king, we'd go back to the day where the only thing you could change was contrast and brightness. That's what the American public really wants. Avoid then complexity, which is always the great danger. This was a house I was in, and you probably can't count them. There are nine remote controls. This fellow's wife said, I just want to change the channel. That's all I want to do. The final thing, my 10 seconds of blurb, I study adoption of new media. So I have a book coming out in October. If anyone's interested in adoption and why it happens and doesn't happen, there you go. Thank you. [APPLAUSE] MALE SPEAKER: Thank you, everyone. The next collaborative will be in the first week in December. We'll send you notices. Drinks on us, bye-bye.