It's Rishi

Hulu, the hit free online video service backed by News Corp and NBC, has been a shining example of how big traditional media companies are finally starting to “get it”. Hulu represents big media company’s recognition that fighting the illegal distribution of their video content by blackmailing ISP’s to curb bittorrent traffic and threatening YouTube (and others) with lawsuits is not a forward-thinking strategy. Via Hulu, big media companies embrace the opportunity to control the delivery of their content and (attempt to) effectively monetize it. The result is a win-win for big media companies and consumers. Not surprisingly, the site’s traffic growth has been staggering:

Enter Boxee. The first time I heard about Boxee, I was excited. Over the past five years or so, there has been an increasing demand by consumers to watch digital video content on their TV. A few years ago, Microsoft proclaimed the future to be a PC hooked up to your HDTV powered by Windows Media Center. I think it’s safe to say that vision didn’t quite pan out. However, we can thank Microsoft for creating the XBox because from that XBMC was born. XBMC was the first powerful glimpse of what a media center should be. It allowed streaming of video content over the network and, being open source, many interesting features, such as web browsing and music players, were integrated into it. The problem with XBMC was that you had to find and hack an XBox to get it. Not mainstream. Apple TV could have been a breakthrough product but, in true Apple fashion, the closed nature of the product and DRM restrictions limited its potential it. XBox360 and PS3 make major leaps by allowing users to stream unlicensed video content, but stop short of really embracing the media center concept. Finally in June of 2008, Boxee releases an Alpha of what eventually could be the first mainstream media center software product.

I’ll let you visit Boxee’s web site and discover all the useful features of the product and how you can obtain it. One of the killer features the Boxee team added was Hulu streaming.

Hulu on Boxee (courtesy of Fred Wilson)

Last week alone, Boxee claims to have streamed over 100k Hulu streams. That’s a huge number considering Boxee’s installed base is still pretty small. At a glance, this would all seem like a win-win-win. Big media companies control content delivery via Hulu and Boxee enables Hulu users to enjoy the flexibility of using the service on their TV. Unfortunately, good things don’t last forever. Somebody was going to get hurt. It turns out, it’s Boxee.

Apparently, the big media guys didn’t like that consumers could watch shows like Lost and 24 on their TV via Hulu. After all, big media makes its money by selling TV ads. If Boxee users could enjoy their favorite shows on their TV via Hulu, then big media sells less ads and earns less from cable providers for channels like FX and USA.

The problem in this logic is that it seems to me that Fox/NBC hasn’t really thought this through. What will these Boxee users do instead of watching on Hulu? My guesses are:

1) Tivo/DVR the shows. Result: Ads are skipped altogether. No cable viewing.
2) BitTorrent. Result: Ads are non-existant. No cable viewing.
3) Doesn’t watch the show. Result: This hurts the media companies in several ways. Ads are not seen and no cable love because the show is not seen. The show ultimately becomes less popular, ad space is less valuable, less DVD box sets are sold, less syndication monies, etc., etc.

See a pattern? =) By blocking Hulu on Boxee, Fox/NBC are simply creeping back into their old-school mentality that is slowly bleeding their ad money dry. My hunch, like many others who have blogged about this story, is that this decision will be overturned. Unfortunately, I wouldn’t be surprised though if there are some restrictions placed on Boxee to encourage Hulu users to watch on their PC. Such restrictions could be no HD content or more annoying ads. We’ll see…

One of the items I put on my to-do list is to do some research on what the ad rates are for Hulu (and others like MTV’s Overdrive) and how that compares to TV on a per impression basis. My hunch is Hulu is way higher…I’ve found myself actually intently watching the 30-second ad spots! That rarely happens on TV. Plus the other side benefits of delivering the ads online like opportunities to interact with the ad. I’ll report my findings in a later post!

Citi “providing stability” and “securing the future”? Hmmm… I guess they’re assuming that NY Times readers doesn’t actually read any of the headlines. =)

It should probably read “needing stability” and “destroyed its future”…

Google surprised everyone this week with the unveiling of Google Latitude:

What’s most interesting about Latitude is thinking about why Google prioritized this feature over others for Google Maps. To kill off Loopt? I just don’t see that. After all, how much of a threat is Loopt to Google? Not much. Google Maps is the dominant mapping application on every mobile platform. Ultimately, tracking the location of your friends is a feature not an application. The idea that users were going to launch Loopt on their phone for the sole purpose of checking their friend’s location is just not realistic. It’s natural that this feature was eventually going to come to GMaps. But in the meantime, I doubt Google was losing sleep over Loopt.

So why now then? My guess is amassing more user tracking data. Note that when you enable Latitude on GMaps, Google now ties your Google login to your GMaps installation. This was a link that did not exist before. As a result of all this Google can now record data points such as:

1) Where you go, spend time at, etc.
2) Where your friends go, spend time at, etc.
3) What types of POI’s you search for
4) What routes you take

All very interesting (and very scary) primary data points. It’s not clear if Google can do anything meaningful with this data yet. However, it’s reasonable to expect that that in a year or two, once a lot of this data has been collected, either Google’s search or ad targeting technology will incorporate this info. However, if I am correct that Google is recording this data, they really should make the user aware of this. Of course you can argue that none of the ad networks, including Google, makes online users aware that their every click is being recorded. However, I think there’s likely to be many users who are concerned about their physical location being tracked!

Finally, Latitude is a fantastic way for Google to get users to formally “friend” their contacts. In order to use Latitude, you must have friends on Google’s social network. I, like the vast majority of Google users, have plenty of contacts (via GMail and GTalk) but never formally friended them. Latitude forces users to do this in order to use the service and should help Google build up its social network. This will pay dividends for Google as they continue to expand their social product offerings.

I must say, Google getting serious about mobile is exciting. It’s forcing all the players to step up their game. In fact, my hunch is that Android’s ability to run background tasks had something to do with Apple killing off the push notification system in favor of a more robust background task function for the iPhone. In the end, the consumer wins. I love it!

Have you ever received an ad that was so relevant to your needs and interests, that you were happy to see it? A Google AdWords ad maybe? Or maybe you saw a discount code for your favorite clothing store? My guess is at some point you have. In fact, a recent study in the UK revealed that 71% of young people surveyed would like to receive advertising messages targeted to their particular interests.

Advertising is everywhere we see. Our brains are trained to automatically ignore much of it. While some ads are so extremely unrelated to our interest that it catches our attention. That’s spam. Yet some minority of ads catch our attention because they’re so interesting as to be highly informative. In this case, the ad is a service to the consumer. Think of it like a continuum where the variable is relevancy.

|min—–RELEVANCY—–max|
|spam———————service|

So what if a publisher served only those ads that were very relevant to each consumer. The consumer is happy. The advertiser is happy because their message is reaching exactly those consumers who are likely to act on that message. Publishers are thrilled because they’re making money by very efficiently connecting advertisers with consumers. Win-Win-Win.

Of course, this “perfect” targeting is the holy grail. It doesn’t really exist in any sort of mass scale. But, what if I told you that a company in the UK is so good at doing this that they claim to generate enough ad-based revenue to pay for your cell phone & service? In fact, that company is Blyk. Blyk offers teenagers and young adults in the UK a phone, and service for free. The recipient agrees to receive occasional ads. About a year ago (the service was quite new back then), they claimed 29% average response rate to ads. How do they get such high response rates?

Well, in a sense, Blyk lets its customers control the ads they receive. Customers might receive texts along the lines of:

Are you a UFC fan? [*Y/*N]

XBox360 or PS3? [*X/*P]

Want to hear a sneak peak of the new Radiohead album? [*Y/*N]?

Essentially, Blyk polls the customer to learn about their preferences. They

1) Send a text with content that encourages a simple call to action (“Watch UFC?”)
2) Based on this primary data, they send an ad in the future (“Check out UFC 49 this weekend. $20 on PPV… Call now to order!”).

Blyk’s advertisers and customers are happy. Everybody wins, especially Blyk.

Let’s think about how this might work for a site like Facebook. On Facebook, users are already expressing their interests in a variety of areas. They do this not just statically on their profiles, but constantly via the other social interactions like fan pages, groups, status updates, wall posts, etc, etc.. Fan pages and groups are useful data points but mining user-created content is extremely challenging.

I think a Blyk-inspired system could work on Facebook. I’m curious to know the response rate of the existing Facebook Polls feature. If it’s even somewhat high, and since it’s in the feed I have a hunch it is, Facebook could very easily start to poll users for the purpose of collecting high quality data that makes sense to advertisers. Or, as is suggested in this Telegraph article today (the story is now being denied by Facebook PR), advertisers themselves could poll users via Facebook. Facebook wins two ways. First they earn revenue from the advertiser to run the poll. Secondly, Facebook can charge a very nice premium for enabling advertisers to then deliver ads to specific sets of users (based on their answers to prior polling).

If Facebook executes this well, this may actually improve the user experience. Instead of Facebook being increasingly cluttered with spammy ads, Facebook could serve fewer ads that are, referring back to our earlier continuum, so relevant to the user that the user is happy to see them. Moreover, from a revenue perspective, the rate they could charge for serving a single highly-targeted ad earns orders of magnitude more money than serving hundreds of garbage remnant inventory ads.

Sounds like a plan to me?? Opinions?