Wednesday, December 14, 2011

Get A Job In Mobile

As this year winds down it appears two of the media sectors I work in - digital video distribution and social - are poised for another year of enormous growth as they further define their business models and disrupt traditional media (television) and maturing digital media (search and display) more and more profoundly.

Watching our teen's media habits is illustrative of our near and long term media media future. Half or more of my 13-year-old's time online is spent on Facebook and other than live airings of Glee on the family television, all of her video consumption is online, split evenly between Netflix, Hulu and YouTube on the Family iMac or iPad.

But it's the smart phone (which of course is already a major hub of social media and fast becoming an important video distribution channel) that I think will be seen as the most disruptive force in another year of major media disruption.

Making grand predictions from small samples of personal experience is never a good thing, and a bad habit of mine, but a recent business trip to Washington DC showed me how the deep, omnipresent connection to and dependence on our smart phone is only getting more extreme.

For the first time I paid a taxi fare using Square, a mobile payment platform created by one of the founders of Twitter.  Here is my driver swiping my credit car through the small Square module plugged into the top of his iPhone.

After processing the payment through the Square app, a receipt was sent to my phone via a text message instantaneously streamlining a ridiculously clunky payment process, saving the driver and me valuable time, and allowing the driver to cut his credit card payments in half. (As he told me, the taxi company exercises a 4-5% fee for credit card transactions, while Square charges only 2 1/2%.

In between meetings, I stopped at Starbucks where 3 customers in front of me paid using the Starbucks mobile payment app - a process as simple as driving through a toll using Easy Pass.  Less than 6 months ago a friend seemed to be flexing his early adopter muscles when he paid for our Lattes using this app and now it has moved well into the next stage of consumer adoption.

In a recent column in the Times, Nick Bilton predicts that our Smart phones soon will be attached to our bodies in some form.
The smart phone is going to be the hub for our information sharing and gathering.  Think of it as a force field that will engulf us wherever we are, transmitting power and Internet access to sensors and screens that are tacked to our clothing.
It beckons a new field called "wearable computing" that execs at Google, Apple and perhaps the next great tech company are studying, ensuring that our current devices look as relevant as an 8-Track cassette player in a few years.

Thursday, October 6, 2011

Finding Crocodile Dundee

Once a week or so, it's family movie night in our house.  It's a great time for my wife and I to share with our three kids (ages 8-12) some of our favorite PG-rated movies.  Already spoiled by the on demand availability of almost every piece of content, we don't pick a movie until right before show time,  tossing around titles until we reach a consensus, assuming it will be available.   Last week we decided on the critically panned box office hit, Crocodile Dundee.

Surprisingly, the movie wasn't available on any of TW Cable's VOD movie channels or on Netflix, which we stream through our Wii game console.  But it was available on Amazon's streaming video service for $1.99, which we accessed through a rarely-used Google TV Logitech box we purchased last year. (Not sure what role over-the-top boxes from Google, Roku, Boxee and others will play in the future when every new TV comes with an embedded Internet connection and comprehensive programming platform, and Microsoft aggressively turns their 30 million household strong Xbox platform into a full-on interactive TV offering. )

And why Amazon is not available on the Wii is just another mystery in the highly confusing world of entertainment distribution.

So yes,  you can watch anything you want anytime you want, it just takes some work. We used three different devices and services before we found what we were looking for.

Once the movie started, our smart phones and iPads were were pulled into action as we searched for answers to questions like: who is Linda Koslowski (Paul Hogan's co-star), what is Paul Hogan doing these days, is that bar he stumbles into on Avenue B and 6th still there, how badly did The NY Times movie reviewer shred this movie.  One of us shared this classic scene found on YouTube with our friends on Facebook as we watched it.

All in all, a very different family movie night from the house I grew up in 40 years ago.

While it seems content owners are in a great position to capitalize on the explosion of distribution options, managing the logistics and economics of that distribution, along with identifying effective promotional tools for pre, live and post viewing, will be a significant challenge.

For example, most content (not just the big budget TV shows) should have a customize companion mobile app that engages viewers with relevant information, triggers social networking, promotes additional viewing options and, where appropriate, incorporates sponsors.  Tool kits that enable content owners to create these cost efficiently will come to the market shortly, perhaps offered by single source vendors that offer content and rights management, distribution, and promotional services.

And finally, a big lingering question: Will it ultimately be a zero-sum-gain for content owners as all these choices end up diluting the market, making it difficult for anyone to make any money from anything other than marquee live events.

Tuesday, August 9, 2011

Ads In Books And The Future Of Advertising

For the second time in less than a year I left my Kindle in the seat sleeve of an airplane -  it's slim and weightless mass making is easy to misplace amidst the airsickness bag, shopping catalogs and previous passenger's trash.

Although this was a relatively inexpensive mistakes to make (more expensive than the 10 umbrellas and less expensive than the two phones lost during the same period), I couldn't bear to buy a third one at full price, opting for a new version priced at $119 ($25 less than the base model) that includes ads and special offers on the home page.

Even though I make my living in the advertising and media business, and have always been quite liberal in my views on when and where ad messages should appear (my own family and most of the tenants in my co-op stopped speaking to me when I proposed hanging a 10-story billboard on the back of the building to raise revenue), there have always been a few places even I deemed sacrosanct, and books were one of them.

But Amazon is one of the most successful and innovative companies in the world, rivaling even Apple in its repeated ability to actually mold consumer behavior around emerging new technologies.  The move for me to Amazon's e-reader from paper books last year was swift.  Just a few months before it became my primary reading source I was pretty adamant that I was a "real book in my hand" person.  But the convenience of accessing any book and downloading it in seconds was just too compelling.  All part of the steady march towards being able to consume any piece of media anywhere, at any time - with advertisers breathlessly trying to keep up.

Amazon's move to provide an "ad supported" discount represents just one small innovative move in what is becoming an epic transformation of the advertising business, well masked by the continued vibrancy of the 50-year-old, unchanged TV advertising marketplace.  Along with the power consumers are gaining over what they see and when, they are being given more choices of what ads they see (if any).  In environments where ad choice is not an option (TV in particular), advertisers are insisting on tools and platforms that provide more finely tuned targeting and accountable ROI.

It all leads to a much more mutually beneficial and comfortable relationship between consumers and advertisers. (Provided media companies and advertisers play above boards and squeaky clean with privacy protocol.)  I can listen to Pandora for free with ads or pay a monthly subscription and not see/hear any; and when I am exposed to ads, they will be relevant, based on my location and demo data gleaned from my listening patterns.

I can watch 30 Rock on TV with a full ad load, on Hulu with a smaller, more targeted load, or buy an entire season with no ads for $33.99.

I will see mini-van commercials in "The Bourne Supremacy" on TBS and my swinging neighbor will see ads for sports cars at the same time in the same movie.

And coming shortly, which is sure to cause quite a stir, ads in the actual books on the Kindle and other e-readers.  I'm sure they will be discreetly integrated into the reading experience, with an appealing discount attached. 

Monday, June 20, 2011

Follow The Musicians

Few industries have suffered more at the hands of the digital media revolution than the music business.  Between 2000 and 2010 revenues dropped by 60% from $14 billion to $6 billion as the labels let consumers and other companies control how, where and when music is listened to.  Not long after the Napster "free for all" was reigned in, Apple started dictating the future of the market with a per song pricing  model that forever changed consumer's music buying habits.

As the industry begins to claw back from such an epic collapse, it seems it's the the artists, not the music companies that are leading the way with innovative sales and marketing strategies - properly leveraging the latest media revolution, social.  Examples abound from artists with all sizes of followers.

British rock group Kaiser Chiefs are enlisting their fans as sales agents for their new album, providing them a suite of tools to set up and promote their own online music store and earn sales commissions.  (All parties have to buy the entire album, but can customize it, picking 10 tracks from a selection of 20.)  The Wall Street Journal recently wrote about the program:
After buyers purchase and download the album, they're each assigned a website that doubles as an online store. That comes with digital posters and banner ads that buyers can plaster on their personal blogs or Facebook pages, with the goal of corralling online friends to their sales page. A £1 cut of any ensuing sales drops directly into a personal PayPal account. 
No artist is as firmly in front of the latest media trends than Lady Gaga, who, in collaboration with her technophile manager Tory Carter, is reinventing how music is marketed. A recent story in The New York Times business section referenced her investment, alongside Eric Schmidt, in an online community platform founded by Mr. Carter. Taking meetings with the CEOs of Google, Zynga, Apple and Facebook, they are leaving no chance to new technologies moving too far ahead without the Gaga brand strongly connected.  The article referenced senior Google executives being challenged by the artist's team with  communication strategies they had never seen before. 

For Kaiser Kings, Lady Gaga and thousands of smaller artists, it's about finding new ways to speak and listen to their fans and empower them with tools to interact with each other, building bigger and bigger communities, and ultimately selling more music, merchandise, licensing deals and concert tickets.

If flat-footed and paranoid was the defining characteristic of the music industry's approach to the Web 10 years ago, nimble, adaptive and totally in-sync with social media is their mode today, driven mainly by the artists.

And this approach coincides perfectly with Facebook's growth strategy of getting users to share more and more with each other.  In a fascinating interview with Mark Zuckerberg summarized by Paid Content, he claimed that FB has no intention of getting into the music business, but wants to help music companies and musicians become more social, much like Zynga and Playfish "baked the principles of social design" in to games.
"The corollary of this for music, movies, books and news, he said: “In each of these industries - the media ones are going to be big ones… in the music industry, it’s going to be people who understand music and people; in the movie industry, it’s going to be people who understand movies and people.
The gaming industry has been completely transformed. Social gaming has taken off from scratch.... the biggest companies in the gaming industry are now social games companies.
People listen to music with friends, you read news and discuss it with friends. These industries can be rebuilt from the ground up with social. The opportunities when you make these companies social are a lot bigger than they are (in their current form).”
Strong words, but why not?  Lady Gaga has quickly become one of the biggest artists of all time by following these principles.  For the release of a new single she had fans upload videos of themselves dancing, singing and playing along, while a team of editors baked the new clips into an online film.  Strategies like this have made her #1 on Twitter with 10 million followers, only dwarfed by her 36 million fans on Facebook.

And with tech giants like Google, Amazon and Apple, alongside fast growing start up like Pandora and Spotify, offering new convenient and innovative platforms for consumers to listen to music, there exists a perfect opportunity for the music industry to rebuild from the ground up. 

Wednesday, May 4, 2011

The Atomization of Content

One of my favorite movies is Shane.  Seems I am not alone: it is often included on lists of the best American movies and is referenced by everyone from grand thinkers like Joseph Campbell in the "Hero with a Thousand Faces" to Kevin Spacey and Samuel L Jackson during a silly riff in "The Negotiator" as they argue whether Shane lives or dies at the end - something that is intentionally left unresolved by the film maker.

Shane, for me, was one of those movies I would watch over and over again if I came across it during a mindless TV channel surfing session.

Over the years I have stumbled on Shane at various points in it's run time on TBS, TNT, AMC and a handful of local broadcast stations and sat through every ad until the end.  Although everything about the movie is great - the acting, the script, the extraordinary cinematography with a Wyoming valley and The Grand Tetons as a backdrop, it is really the ending that I wanted to see, one of the great gun fights in movie history - where Alan Ladd and Jack Palance face off in a climactic showdown of good versus evil.

A couple of years ago someone posted the last 8 minutes of the movie, including the gun fight, on YouTube.  Although it was was pulled recently, probably at the insistence of the copyright holder, the damage was done.  Of the 500,000 or so views it generated, 100 were from me, dampening the desire to ever sit through the entire movie again.   I "played it to death" much like my daughter does to her favorite songs on her iPod.

It's all part of what a blogger I recently stumbled upon, calls the atomization of content.  Here he relates what happened to the music industry to every other media form:
"People were able to select the precise song they wanted to hear, download it, and listen to it. An industry of albums became an industry of (less-profitable) tracks. Molecules became atomized.

There’s a chicken / egg question here. Did people gain a taste for picking out their favorite nuggets – or did MP3s allow people to realize a latent desire? (And why was music the first media economy to atomize? Because of the compact size of songs – and, therefore, downloads in the modem era?)

Whichever came first, the expectation of atomized consumption is spreading.
In Sunday’s Times, Joshua Brustein looked at the advent of stations and online tools that show only real-time sports highlights or provide alerts when games become “worth watching”. Hulu does the same for TV shows; YouTube, for movies – a quick search yields your favorite scenes.
In every case – just as Radiohead would argue about its songs –the consumer loses context: the preceding three minutes in the basketball game, or the set-up to a joke on Community. Subtlety, flow, drama, more important moments or information – all are (or, can be) sacrificed to atomized consumption.
It's not just the content itself that is breaking into pieces but the entire creation and distribution models that the media and entertainment was built upon.  Cable operators are beginning to allow customers to pick smaller packages of cable channels, cable and broadcast programs can be viewed independent of their network distributors, digital media companies like Netflix and YouTube are funding the creation of new television series, and the list goes on.

And while we can argue convincingly that certain forms of content atomization, such as breaking a great album or movie into pieces, is having a negative impact on important art forms, the broader "unbundling" that is giving consumers much greater control of what they watch, and ultimately what actually gets produced or renewed, is positive and inevitable.

But what are the economic models that support the creation of content in these new freestanding formats?  Musicians are now more dependent on touring and merchandising than they are on the sale of music.  Advertising will need to be more effectively integrated into free content, generating enough revenue to incentivize the writers and producers.  Hulu, despite it's hazy future, has been quite innovative in creating more relevant and valuable ad messaging formats. 

I agree with this blogger that everything needs to be thought of in a more modular form - As it relates to television newscast, he writes:
Present finished product news in modular form and let the modules contain their own commercial(s). We currently make newscasts, but those are a form of bundled media. We need to be producing individual newscast elements as standalone entities, complete with marketing, so that they can be used in unbundled settings. This means creating content specifically for an unbundled universe, not simply re purposing elements of newscasts. I like the idea of reporters introducing their own stories on camera, for example, so that the entire package is self-contained. These modules could be then assembled together or presented separately.
Regarding that Shane clip, which had no ad messages attached to it: why not post a less compelling scene from the movie with an ad telling me where I can buy the movie or watch it on a commercial television station or network in the future?

As we move through this massive media transformation there will be endless new business opportunities related to the marketing, distribution and monetization of content.

Tuesday, March 15, 2011

Consuming Versus Creating

A few weeks ago a friend told me I read too much. It was after after I sent him a half dozen or so back-to-back emails and IMs with links to media and technology industry stories that I had come across and thought he would find interesting.  


Each morning, buzzed on a couple of cups of coffee, I log onto Google Reader where subscriptions to all my favorite news feeds and blogs are aggregated, sometimes resulting in as many as 1000 stories in a day.   

I try to quickly scan the headlines and dive into only a few stories. But with the media landscape transforming so quickly and profoundly, resulting in entire new industries emerging overnight, my scanning slows to a grind as practically every other headline grabs my attention.  (The rampant practice of "reader-baiting": crafting sensationalistic headlines for superfluous stories to increase page views and ad revenue, adds to the overload.)


Before I know it,  a planned 30 minute exercise has extended far beyond that as my caffeine buzz wears off, the morning disappears and my brain is flooded with a lot more info than it can handle.  


So when my friend told me I read to much, something resonated. (When I went back and looked at some of the stories I shared with him, just a week after sending, I couldn't even remember some of them.)


I decided it was important that I find the right balance of consuming versus creating, or as Seth Godin said in a recent post ... 

In and out

That's one of the most important decisions you'll make today.
How much time and effort should be spent on intake, on inbound messages, on absorbing data...
and how much time and effort should be invested in output, in creating something new.
There used to be a significant limit on available intake. Once you read all the books in the college library on your topic, it was time to start writing.
Now that the availability of opinions, expertise and email is infinite, I think the last part of that sentence is the most important:
Time to start writing.
Or whatever it is you're not doing, merely planning on doing.

For me, it has been too much in and not enough out, this blog post aside.  After returning from a week long ski trip with my family where I intentionally avoided opening my Google Reader, I decided to try another week without logging on.  I wanted to see just how disconnected I would feel.  I wanted to see if the important stuff would find, me so to speak, sent by friends and colleagues in my various social networks.


(Interestingly, Twitter, Facebook and email are not distracting time-sucks for me, like they are for most people. I keep the programs closed most of the time,  avoiding the addiction of real time communication - dealing with them at select times during the day, in batches, just as a recent Newsweek feature story on information overload, titled "I Can't Think," recommends.)


It felt awesome, like my brain was cooling down from an overheated state, and finally allowed to recover from "information fatigue," a condition validated by its recent  addition to the Oxford English Dictionary.  On a plane trip during the second week of my "purge", I came up with an idea for a new business, a thrilling moment I had been waiting for, one that I thought my morning reading sessions would trigger, but I think ultimately delayed.


From that Newsweek story....

Creative decisions are more likely to bubble up from a brain that applies unconscious thought to a problem, rather than going at it in a full-frontal, analytical assault. So while we’re likely to think creative thoughts in the shower, it’s much harder if we’re under a virtual deluge of data. “If you let things come at you all the time, you can’t use additional information to make a creative leap or a wise judgment,” says Cantor. “You need to pull back from the constant influx and take a break.” That allows the brain to subconsciously integrate new information with existing knowledge and thereby make novel connections and see hidden patterns. In contrast, a constant focus on the new makes it harder for information to percolate just below conscious awareness, where it can combine in ways that spark smart decisions.

When I finally did log back on to my Google Reader one morning, I instituted a new set of guidelines:
  • Keeping sessions to 45 minutes or less
  • Stronger filtering - "Do I really need to know about this?"
  • Cancel feeds that are sucking up too much time
  • Saving stories that are relevant but too long to a "Read Later" folder on Evernote, a free cloud-based note taking and filing system that can be accessed from any device, any time. (Everyone should check it out.)
I am also investigating new tools to replace or minimize my dependence on Google Reader, such as Flipboard and Linkedin's brand new social news service. 

Although the Internet has give us so many extraordinary tools that enable us to consume and create more than anyone ever imagined, I believe some of the great new businesses too come will enable us to find a better balance between the two.

Friday, February 4, 2011

Cutting The Cord For A Week

My wife is in the middle of a 15-day "cleanse" - no caffeine, alcohol, meats or starches - all things I couldn't give up for more than half a day.  But in the spirit of cutting things out of our life that we are addicted to, I spent the last week seeing if I could live without cable television, "cutting the cord", so to speak.  Of course I still watched TV, just via the web through a $250 Google TV Logitech box and keyboard.

Cord cutting is the media topic du jour.  Although the term cord cutting couldn't be more inaccurate, as the cord into the home, powering so many web-based TV viewing alternatives, is more important than ever.

As you can see on my latest cable bill, I pay nearly $80 for programming and $30 for broadband service. (Including phone service, the odd VOD movie rental and an utterly bogus sounding list of taxes and fees, my bill adds up to $165 per month.)

It's the $80-per month cable programming subscription that I cut out for the week, relying on the $30 broadband subscription to bring the web, including custom applications from Netflix, Amazon and YouTube, to my TV. (The multi-billion $ question: will/can the cable companies move to a usage model like every other utility, enabling them to raise the price of broadband significantly for heavy users.)

Connecting the Logitech box to the TV and accessing our Wi-Fi network was as easy as setting up our Wii game console. It is designed to be a central home video entertainment hub, enabling users to manage their TV, Web and personal digital media library from one device.  However, I kept it disconnected from my cable box for the week.

My purpose here is not to provide a review of Google TV (many reviews have been written by people more qualified than me) or make a prediction on the future of Google TV and other products like it, but to question why the $160 billion television subscription and advertising business continues to chug along, growing every year,  yet maintaining outdated practices (the Upfront Ad Market) and pricing strategies (Bundling) while the Internet disrupts, upends and in some instances completely dismantles other sectors of the media  industry.

A popular tech blogger I follow recently described the Internet in terms that on one hand seem so obvious, yet also revelatory:
The Internet has gone through fits and starts – in particular the dot com crash of 2000 disillusioned many – but every year we see it transform industries that previously sauntered along blissfully denying its existence.  Already transformed: music, news, advertising, telecom. Being transformed: finance, commerce, TV & movies, real estate, politics & government. Soon to be transformed (among many others): health care, education, energy.

The modern economy runs primarily on information, and the Internet is by orders of magnitude the greatest information mechanism ever invented.  In a few years, we’ll look back in amazement that in 2011 we still used brokers to help us find houses, that doctors kept records scribbled on notepads, that government information was carefully spoon-fed to a compliant press corps, and that scarcity of information and tools was a primary inhibitor to education.
I think within a few years we will also look back in amazement that we paid each month for a bundled package of TV programming, most of which we didn't watch, and that we were not given the flexibility to pay for what we want, when we want it and on the device we want to watch it on.

And that is what my week with Google TV brought to light.

As indicated in an earlier post, I am a relatively light television viewer, so total viewing for the week only added up to 10 hours or so.

Here is a sampling of what I watched:

The Onion News Network
TimesCast (daily video news reports from The New York Times)
Netflix (30 Rock Season 4, various episodes)
Amazon Video On Demand (Mad Men Season 4, first episode)
You Tube (sampling of the greatest soccer goals of all time with my 10 year old son)
Barnes and Noble "Meet The Writers" video podcast

I watched in a similar pattern as I do on cable - sometimes just surfing around, other times having a clear idea of what I wanted.

My experience was completely different from the 5 families featured in a well-publicized cord cutting experiment who, according to this article, all reacted negatively, "feeling immediately the absence of the constant flow of automated TV choice."

I found the less-passive viewing experience, expanded choices and on-demand availability of everything I wanted extremely appealing.  I was also surprised by the abundance of great content that exists outside the cable hegemony.  The Onion News Network is funnier than almost everything on Comedy Central (The Daily Show and Colbert Report aside).  Timescast gave me enlightening, timely, restrained news coverage - something that is quite difficult to find these days on the cable news networks.  And Amazon, Netflix and YouTube's programming offerings are becoming more compelling by the minute. 


Cord cutters like me represent a sliver of television viewers, despite all the press attention.

The television industry has been to date the least flat-footed player in the traditional media landscape, focusing every possible resource on avoiding the fate of the music and newspaper industries. NBC led the development of what is now the second largest online video destination and cable operators have been quite effective at adding broadband, phone and even mobile services to their offering.  (Notice that cable programming represents only half my monthly bill.)

And cable networks are investing heavily in original programming and the highest profile sports franchises, the key stuff that is either not available at all to chord cutters, or available months after the premiere.  (I was able to watch Season 4 of 30 Rock via Netflix, but not the current season. )

Many cable nets are also proving to be particularly nimble at extending their brands to digital platforms - MSNBC had 158 million video views in January, making it one of the most viewed video destinations on the web; and ESPN is consistently one of the strongest brands on mobile devices.

Two recent developments reinforce this sense of adaptability:  Time Warner Cable started offering  lower cost, more customized bundles in certain markets and a new set top box from Cisco that includes web access, among other features, will be soon be available to cable customers from their cable companies.

From an article in the Wall Street Journal announcing Cisco's plans:
IDC analyst Jonathan Gaw said Cisco has an advantage... because consumers would rather lease one device from their cable operator for Web video and cable programming than buy or lease devices from multiple vendors.
"People would rather not buy a Google TV or a Roku or an Apple TV," Mr. Gaw said. "They would rather not have to pick up another remote control."
And just yesterday, Time Warner (the entertainment company, not the cable company) and Comcast announced an agreement that provides Comcast subscribers with expanded online access to TV content from TBS, TNT, Cartoon and a host of other Time Warner networks.

The title of the blog post I referenced earlier is: "Predicting The Future Of The Internet is Easy: Anything It Hasn't Dramatically Transformed, It Will."

It's just taking a bit longer to transform some of the biggest industries.

Television, the biggest and most influential media form, is at the center of an epic battle for control by many of the most powerful and innovative companies in the world.

Over the next couple of years there will be a steady stream of startling developments that transform every aspect of television viewing - from how we discover and decide what to watch, to how programs are produced, distributed and monetized.

Wednesday, January 5, 2011

My Take on the Groupon Frenzy

Just over a year ago I blogged about the breathtaking amount of deal activity in the local media sector and mentioned a new company called Groupon that had just raised $30 million. (A significant amount of money by most fund raising standards, although somewhat inconsequential compared to their latest raise and Facebook's eye popping $500 million Goldman Sachs investment at a $50 billion valuation.)

What was driving all the interest then and even more now, is the sheer size of the local ad market (over $100 billion per year) and how little local businesses spend on digital media (less than 10% of their ad budgets.)

But it is, and always has been, the toughest of markets to crack and achieve any degree of national scale.  Soliciting and servicing millions of highly demanding, not particularly tech-savvy businesses who have limited resources and a laser-like focus on results is a monumental task.  AOL, at the height of it's popularity, couldn't crack it and Google, at the height of it's power, has only had limited success.

From that post ...
    "... local advertising is a tough business. As a well-known local media consultant said, "local is sold not bought." Three things are needed for a company to succeed in local: a great product, significant capital to drive awareness and, most importantly, a big local sales force. The Yellow Pages became a $20 billion category, dominating local advertising for years, based in large part on a famously aggressive local sales force numbering in the thousands. "
Groupon not only has the three ingredients (their sales force is already among the largest in media history), but appears to be turning the "sold not bought" assumption on it's head (businesses are calling them and can't sign up quick enough).

And that is why Groupon may be worth every penny of it's latest estimated $7 billion valuation.  Creating enormous new marketplaces that bring businesses and customers together, exciting both parties along the way, is what made eBay and Google such extraordinary businesses.  And, as Google has also proven, new forms of advertising that cut through the clutter and provide businesses with clearer metrics of accountability will be readily embraced. Finally, with a rumoured $2 billion revenue run rate, Groupon may be outpacing Facebook, which is now seriously encumbered with a ridiculous market valuation and quite frankly, does not have as clear a scalable revenue model as Groupon.

A blog called Measuring Measures summed it up well:

    "Advertising has become quite spammy and irrelevant. We've gotten away from the core issue, which is not inherently spammy at all - merchants interacting with people to retain their existing customers and win new customers. There is nothing evil about that, and the direction that advertising has taken for decades has been largely disrespectful, manipulative, misleading, and lacking in creativity. As a result, it has become quite boring.
Groupon shines a light on a new direction with a different vibe. It is more fun, more down to earth, and a far more compelling proposition for the customer."
There are still many questions about how big Groupon can become.  They just haven't been around long enough to accurately gauge repeat buyer and seller trends. Two key questions that will indicate their future significance: What is the real, long term impact a Groupon deal has on a business's bottom line and, are folks actually redeeming all those deals they purchased in the spur of the moment?

I have been a subscriber via email for 3 months now and still haven't purchased a deal (a fair amount have been relevant and I was close a couple of times), but a week doesn't go by when I am not forwarded one from a friend via email or on Facebook.  (Another "social shopping" company, Living Social, which I just signed on to, seems to be even more popular among my friends but isn't getting the same level of media attention, yet.)

And my friends who own local businesses can't stop talking about both companies.  One friend in particular, who owns one of the largest and most successful dance schools in the country said, "It's advertising that sends you a check." But she is an early adopter and tech-savvy entrepreneur who started building a fan base on Facebook years ago.

Seems the real value in Groupon will be unlocked when they move beyond the curated deal a day model and introduce a self service platform that enables local businesses to communicate more consistently with a more finely targeted audience.

Stay tuned.  Will be fascinating to see how it unfolds.