The U.S. online video ad market is growing at 30% a year. Still, it is just a small fraction of total U.S. T.V. advertising spending. The leader in the online market is Hulu. GE’s NBC Universal, News Corporation, and Walt Disney are Hulu’s owners. Hulu and some other video sites provide free professionally-produced videos from its investors. Hulu exists on an advertising business model. Hulu will place one or two thirty-second ad spots during a few commercial breaks for hour-long shows.
Since this market is showing so much growth, the leading cable firms, Comcast and Time Warner Cable, have decided to respond. Comcast has introduced OnDemand online and Time Warner has created TVAnywhere. These are cable trials offered only to existing pay TV subscribers. The paid subscribers get the professional video from cable networks for free. The cable programmers, though, may be putting the same number of ads online as they show on traditional TV, considerably more than Hulu.
What would be the effect of this development on Hulu?
Suppose we divide the world into two types of people: Comcast and Time Warner cable subscribers and everyone else. Clearly the Comcast and Time Warner cable subscribers are going to be better off. They have an online channel to view content for which they have already paid. They just have to watch commercials in the process. (See Audio Tip #64: The Objectives of a Performance Improvement Program on StrategyStreet.com.)
On the other hand, the part of the world that views Hulu will not be affected at all by these online offerings from Comcast and Time Warner. They will continue watching just as they have over the last few years. Hulu will still have its own exclusive content. Hulu’s growth will not slow.
In the long run, there was probably room for both models. Both the cable companies and Hulu offer exclusive content. They will continue to attract viewers who prefer their proprietary products, just as major network and cable networks do today. In this longer run, the market share prize will go to the company offering the most attractive proprietary content.
The addition of OnDemand online and TVAnywhere are good product and service improvements from the cable companies but they won’t slow Hulu’s growth in the least.
Showing posts with label new product. Show all posts
Showing posts with label new product. Show all posts
Monday, September 14, 2009
Thursday, June 18, 2009
New Product in a Fast Growing Industry: Bing
After failing more than once to create an innovative and attractive search product, the persistent Microsoft is back with a new entry called Bing. Let’s use the Customer Buying Hierarchy to evaluate the prospect for the Bing’s success.
The Customer Buying Hierarchy (see “Video 27: Full Description of How the Customer Buying Hierarchy Works” on StrategyStreet.com) holds that customers buy a product using four categories of evaluation: Function, Reliability, Convenience and Price. Function (see “Video 13: Definition of Function” on StrategyStreet.com) refers to the features of the product that affect how it is used. Reliability (see “Video 14: Definition of Reliability” on StrategyStreet.com) refers to the benefits of the product that assure the customer that it works and will continue to work. Convenience (see “Video 15: Definition of Convenience” on StrategyStreet.com) refers to the ease with which the customer may find and purchase the product. Price is the cash cost the customer pays for the product.
We will begin with a look at Function differences. The search industry has two customers: The consumer searcher and the advertiser. This new Microsoft entry is drawing some good reviews for consumers and some wait-and-see opinions from advertisers. Bing offers some new Function innovations that reviewers prefer to Google’s search results. It appears that the consumer will find Bing an improvement on Google. The advertisers, however, are adopting a wait-and-see attitude. Google’s market share, at over 60% of the current search market, is massively larger than is Bing or its Microsoft predecessor. Even Yahoo Search is much larger than is Microsoft in the market. Many of these advertisers plan to wait to see whether Bing will become the new Google.
The Reliability and the Convenience advantages in this market belong solely to Google. The company name has become a verb describing a search. Most people know about the Google product and believe it to be the market leader. A large percentage of desk top and lap top computers have the Google toolbar with its search box resident on their computers. Google is an easy default choice for most searchers.
So, what is the outlook for Bing? The success of Bing largely depends on what Google does to respond to the Function advantages Bing is bringing to the market. This is still a fast-growing market. This works in Bing’s favor. Consumers are likely to be willing to try something new if they think it might help. Switching to Bing from Google or Yahoo offers little difficultly. Microsoft has the cash to put on quite a marketing blitz. All of these Convenience factors work in Bing’s favor. However, Microsoft has to rely on the forbearance of competitors in order to win in this marketplace. It has to maintain its unique Functions in order to best Google in a world Google dominates. (See the Perspective, “When to Compete on Features” on StrategyStreet.com.) If Google copies Bing’s new Functions, Bing will lose its advantage and will not succeed. The Reliability and Convenience advantages that Google enjoys today give it time to copy Bing’s Function advantages without losing much of its current market share.
If Google neutralizes Microsoft’s Function advantages soon, Bing will bring only modest market share changes.
The Customer Buying Hierarchy (see “Video 27: Full Description of How the Customer Buying Hierarchy Works” on StrategyStreet.com) holds that customers buy a product using four categories of evaluation: Function, Reliability, Convenience and Price. Function (see “Video 13: Definition of Function” on StrategyStreet.com) refers to the features of the product that affect how it is used. Reliability (see “Video 14: Definition of Reliability” on StrategyStreet.com) refers to the benefits of the product that assure the customer that it works and will continue to work. Convenience (see “Video 15: Definition of Convenience” on StrategyStreet.com) refers to the ease with which the customer may find and purchase the product. Price is the cash cost the customer pays for the product.
We will begin with a look at Function differences. The search industry has two customers: The consumer searcher and the advertiser. This new Microsoft entry is drawing some good reviews for consumers and some wait-and-see opinions from advertisers. Bing offers some new Function innovations that reviewers prefer to Google’s search results. It appears that the consumer will find Bing an improvement on Google. The advertisers, however, are adopting a wait-and-see attitude. Google’s market share, at over 60% of the current search market, is massively larger than is Bing or its Microsoft predecessor. Even Yahoo Search is much larger than is Microsoft in the market. Many of these advertisers plan to wait to see whether Bing will become the new Google.
The Reliability and the Convenience advantages in this market belong solely to Google. The company name has become a verb describing a search. Most people know about the Google product and believe it to be the market leader. A large percentage of desk top and lap top computers have the Google toolbar with its search box resident on their computers. Google is an easy default choice for most searchers.
So, what is the outlook for Bing? The success of Bing largely depends on what Google does to respond to the Function advantages Bing is bringing to the market. This is still a fast-growing market. This works in Bing’s favor. Consumers are likely to be willing to try something new if they think it might help. Switching to Bing from Google or Yahoo offers little difficultly. Microsoft has the cash to put on quite a marketing blitz. All of these Convenience factors work in Bing’s favor. However, Microsoft has to rely on the forbearance of competitors in order to win in this marketplace. It has to maintain its unique Functions in order to best Google in a world Google dominates. (See the Perspective, “When to Compete on Features” on StrategyStreet.com.) If Google copies Bing’s new Functions, Bing will lose its advantage and will not succeed. The Reliability and Convenience advantages that Google enjoys today give it time to copy Bing’s Function advantages without losing much of its current market share.
If Google neutralizes Microsoft’s Function advantages soon, Bing will bring only modest market share changes.
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