Media industry network analysis – tools for better strategic decisions

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Among the most powerful applications of network analysis is understanding industry structure and the implications for strategy. While this is still a relatively new field, we are beginning to uncover some very specific approaches and applications to industry network analysis. If you go to a large strategy consulting firm to provide strategy recommendations, you will get a thorough analysis of your industry. However this is almost always highly linear, looking at market shares, value chains, and industry trends. This hides the richness of highly interconnected industry structures. The next 5-10 years of strategy analysis will see a far greater use of network analysis to understand leverage points for

In the Future of Media Report 2007, we included some new analysis by Laurie Lock Lee. In the Future of Media Report 2006 we used Laurie’s analysis of shifts in media industry networks from 2001 to 2006, and earlier this year I featured some high-level analysis on the network structure of the Australian media industry. This new network analysis goes considerably deeper, analyzing the change in industry structure before and after a significant acquistion, by Macquarie Media Group of Southern Cross Broadcasting. An overview of the analysis is below. See the Future of Media Report 2007 for the full details.

There are a wide range of highly practical applications of industry network analysis. One, as illustrated in the example below, is analysis of industry structure before and after potential acquisitions or divestments by your company or your competitors. This can show the industry impact of major transactions, and provide further insights into their value. Another example in the media sector which we are currently exploring is examining the rich networks between advertisers, ad agencies, media buyers, and publishers. Viewing this from a network (rather than a simple market share) perspective enables very specific insights into how advertising spending can be shifted from one publisher to another. I’ll continue to post high-level views of some of this work and the kinds of benefits our clients are deriving from this.

MEDIA INDUSTRY NETWORK ANALYSIS: CASE STUDY

Laurie Lock Lee, Optimice

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Facebook begins to open up – recognizing and riding the inevitable trend

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Last week, in the heat of the grand discussion on openness in social networks, I wrote in a blog post titled Is the trend to openness accelerating? Social networks as an inflection point:

I see the trend towards openness accelerating, which makes playing the lock-in game ever more difficult. I think that the current debate reflects that today there is far greater visibility for lack of openness in offerings, and less tolerance for that. What is currently playing out in the social network space is a fantastic case study that is relevant across all business segments. After MySpace dominating the social networking space, Facebook has shifted to the front very quickly, through openness in its APIs. It is at risk of having its leadership short-lived, if others quickly leap on to people’s preference for open systems, especially when it concerns their personal relationships.

However the more likely path is that Facebook sees the trends, and swiftly opens out its systems. Any incumbent is loath to shift to greater openness, but given the players and the landscape today, I don’t think that Facebook is not going to hold on too tightly for too long.

Looking back in a year or two from now, we may see that now was an inflection point in openness in social networks. We may also find that this shift has impacted many other facets of the information and businesses worlds. The jury is still out, but I think the evidence points to the current landscape being a manifestation of the acceleration of openness.

Today, just one week after I predicted that Facebook would open out, Dave Winer writes Facebook *is* opening up, noting that he’s discovered some new RSS feeds from Facebook, including a Friends Update Status, and Friends Posted Item. Paul Thompson says that the Friends Update Status has been available since last month, while Techcrunch says that this will win Facebook a lot of friends.

Providing RSS feeds for key information in Facebook basically means that you don’t need to go to Facebook to see your updates and information. You still have to maintain a profile in Facebook, and it will still be the platform for your social networks, but you are far freer in how you use it. One implication is it’s harder to monetize, as you can’t be sure of presenting advertisement to your users. However if being freer means you can maintain the role of predominant social network, you definitely will find other ways of making money, not least because the majority of an increased network will choose to interface to their network through Facebook.

Media industry transactions are now transcending the boom years

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In our Future of Media Report 2007, we did an analysis of all media industry transactions of more than US$1 billion from 1993 to mid-year 2007. The transactions are not legible in the image below, so to get full details and analysis on the media industry transactions, click on the image for the complete Report.

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Even at a high level of the general trends in activity, two things stand out. The first is the sharp rise in activity in 1999-2000, highlighted by the massive US$166 billion AOL/ Time Warner merger (remember that?), which still dwarfs any other transactions in the media sector, followed by a spectacular slump in activity in the following three years.

The second is how fast activity has risen in the last 18 months. Remember that the 2007 figures in the table are for the first half-year only. In fact if you take out the AOL transaction as an extraordinary one-off, there is a far faster pace of activity today than even in the boom years at the turn of the century. The question is, of course, whether this pace will be maintained or even accelerate, or whether it will again decline. While the answer is significantly related to stockmarket levels, since so much of the activity has been private equity-based, there is the potential for transactions to continue even after a fall in equity prices, as private equity firms snap up opportunities.

Richard Watson at Innofuture 2007

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Richard Watson, our esteemed Chief Futurist at Future Exploration Network, is speaking at what looks like an extremely interesting innovation conference in Melbourne on August 28-29, called Innofuture 2007. It has a great cast of speakers, including Tom Kelley of IDEO and Frans Johanssen, author of The Medici Effect.

The rise of e-democracy and the wonderful experiment of participatory democracy

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I was recently interviewed for an excellent article in IDM magazine titled Democratic participation ignited by the power of many, which explores the potential of e-democracy.

Here are some selected quotes from the article:

“Mass media will always exist. People will always want a common perspective on the world. But we are definitely seeing a fragmentation of media,” says Dawson.

Rather than social leaving mass media for dead, Dawson believes we are seeing the emergence of two forms of media that primarily feed off each other. “Often journalists look to online blogs and sources and commentary and will even quote them in their articles. They don’t need to pick up the phone anymore,” says Dawson. “There’s no better way to pick up on trends then to explore the world of social media.”

“Of course there is always the issue of the credibility of the source. But often for credibility, people will simply turn to mainstream media,” says Dawson.

Although citizen journalism is opening the doors for anyone with Internet access to have their say, it may not progress ‘democracy’ but it does improve on the dissemination of information and debate. “In the past we had to rely on press releases and reports for our information, now we have access to everything,” says Dawson.

“As you get input on creating outcomes, emergent results occur, emergent outlines where you can’t predict the outcome,” says Dawson. “Things get better with the more people that use them. You see what’s popular, what’s relevant, different approaches and bringing together of different data-sets.

There are many layers to the potential of e-democracy. The domain of transparency and dialogue, on which I was quoted here, is the first. In the US presidential elections, already in full swing with 15 months to go, there is already substantially improved engagement by voters over previous elections. People have access to – and often choose – far more diverse sources than the mainstream media in forming their opinions. The power of bloggers was amply demonstrated by the line-up of all major Democratic candidates at the recent YearlyKos convention of political bloggers. There is real participation in political dialogue, whereas before the messages were almost all filtered through mainstream media. This is not to say that all is rosy in American democracy, or the way in which issues are discussed. However we are far closer to participatory democracy when discussion of the key political issues is participatory.

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Ross Dawson answers six pressing questions on online social networking

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I recently created a 4 minute video in which I briefly answer six questions on online social networking:

What are the benefits of online social networks?

How do I know if my obsession with Facebook has gone too far?

What is the etiquette for ignoring invitations on social network?

How do Australians compare with others in using online social networks?

Will email die now that all my friends keep in touch on Facebook?

What should companies think about their staff using social networks?

The video was created for an Australian audience, so for others, please draw your own implications on how your country compares on uptake of social networks. See here for recent figures on comparisons of the usage of online social networks US, UK, and Australia.

Eight key developments in the global media industry: July 2006 – June 2007

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In the Future of Media Report 2007 we included a quick overview of eight major developments in the global media industry in the year to July 2007, with prominent examples of each. Full details in the report. Developments continue apace – we’ll be keeping track…

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Self-publishing in a networked world: The case study of David Maister

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Professional services guru David Maister has announced that his next book is going to be self-published. He says:

Ask any business author who has published a book what the experience was like: for the vast majority, the horror stories are endless.

Basically, publishers don’t actually add any value. Yes, they can edit a manuscript and get a book typeset, but both of those things are freely available as stand-alone services to anyone.

Publishers, like record companies, would be incredibly valuable if they marketed your book for you – most authors can use all the marketing help they can get. But just like the record business, the truth is that publishers don’t do any marketing for you unless you’re already a star. Since so few books succeed, it’s not worth them spending anything on an individual book: they put a portfolio of product out there and wait to see what succeeds.

In my book Living Networks I proposed a basic “Creative Career” trajectory, illustrated below.

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Global comparisons: Fastest Growing Online Properties

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Continuing our series of excerpts from the Future of Media Report 2007, in this post we will cover the Fastest Growing Online Properties, which features some of the research done by Nielsen//NetRatings for the Report. The relevant data and commentary from the report is below – click on any of the images below to get the complete Report with full details.

One of the great things about having Nielsen//NetRatings as a research partner for the Report is that we were able to bring together global data in new ways to provide original research and insights. There are some very interesting perspectives that emerge from the differences in how new media properties are taken up across countries.

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The US leads in usage of all leading social networks. The pace of growth in UK and Australia is extremely high, however they still signifi cantly lag the US in terms of breadth of usage. MySpace is the incumbent globally in terms of market presence. Facebook began as a US college-only social network, however since opening to other users has had strong international as well as domestic uptake. Opening up the Facebook platform to thirdparty developers in May 2007 has contributed to phenomenal global growth as consumers integrate increasingly more interactive tools.

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All business is media: Institutional media usage surges

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There is much excitement at the release of private equity firm’s Veronis Suhler Stevenson’s new measures and prognostications on the media landscape, with most commentators focusing on their prediction that Internet advertising revenues will exceed those for any other media form by 2011.

The single thing I find the most interesting in the report is the different paces of growth across different media users. “Consumer” usage of media is actually DOWN 0.5%, driven by shifting from long-format media such as TV to short-format media such as online news and video. In contrast, “Institutional” usage of media (comprising business, education and government) is UP 6.9%, outpacing the increases for “marketing” and “advertising”.

I have long said that we are moving to a world in which ALL BUSINESS IS MEDIA, and that is supported by these trends. Almost all of what businesses do today is gather, process and disseminate information or knowledge-based products, making what they do essentially a media business. This is reflected by a massive 7.4% difference in the growth trend in consumer versus institutional use of media.

The second key aspect to pick out of the report is the 6.8% total growth in spending in media over the last year. While global GDP growth for 2007 is forecast to be 4.9%, suggesting just a 2% outpacing of the rest of the economy, this masks the fact that media is heavily overrrepresented in the US, which accounts for 42% of media globally, where the GDP growth is expected to be just 3.3%. In other words, a very rough view suggests that media will double it’s share of the global economy in around 25 years or less. This just happens to be the figure I’ve been quoting for some time, so we seem to continue to be on trend for this.

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