Creating Value: Media Economies of Scale

dirty-shattered-cd-525701-mThe fragmentation of media consumption is driven by the introduction of new technologies in the market place. Consumer electronics are tools that serve to connect people to information. Reports that circle around advertising agencies and on the client side show a decline in TV viewership, which makes Nielsen, the large TV networks and TV manufacturers all nervous. People are consuming more content on multiple digital outlets. No one can pinpoint the exact sites a certain demographic, such as W18-34, spends its time on because there is not one channel. Perhaps it’s easy to point Facebook and Twitter as channels that they use consistently.

Unlike before where people’s consumption of information resided primarily on TV, print and radio– which all had a handful of key “stations” that the majority tuned into– the marketplace nowadays is complex. It’s made up of the long tail: everyone is on different sites and different times doing different things. There are many destinations and activities that is available on the Internet. Many products too, that were not seen before because they didn’t quite meet shelf space requirements of major retailers. (Chris Anderson explains this phenomena in his blog and book).

The ability of the Internet to surface new markets is incredible. You can now buy individual parts for whatever appliance or electronics you have in question (coffeemaker, iron, earphones, laptop, etc). When I lost the rubber buds for my Shure earphones that were phased out, I was able to buy them online. I don’t think there is a retailer that carries those buds, since it will take up space in the inventory/shelf… precious space that can be used for another product that has higher demand (and hence greater profit for the retailer/manufacturer).

The enabling power of the Internet to transform economics and create a viable, more profitable distribution channel for products and services reminds me of my conversation I had with a friend when I was in Manila in September. We were talking about politics, and why the Philippines always ends up with a government filled with corrupt or incompetent officials (this was during the pork barrel scam so emotions and opinions ran high). We think it’s because most of the population is comprised of those who live in scarcity and don’t have access to good information to help them make decisions (or that they are easily swayed to vote for the more popular candidate regardless of competency level). Since a true democracy takes into account the voice of the majority, whoever the “masses” vote for will win. At the end of the day, Philippine politics is a popularity contest (much more so than politics already is in other parts of the world).

This conversation shifted towards technology and provision of services. We had a few brainstorms about products and services that we can potentially bring to the market. Our interest in mobile technology led us to talk about the possibility of launching a mobile app in emerging markets, but we quickly realized that the smartphone market in developing countries is not up to par with the level that exists in the States. Then, what mobile technology is used by the majority in emerging markets? Basic or feature phones. So we weighed the pros and cons of launching an app into the market for the smartphone market– even if the market is small, the profits may be greater. Yet we can’t deny the scale of basic and feature phones in reaching millions more…. to satisfy millions of individual demands in aggregate which creates a profitable market that makes up the long tail.

This is the opportunity in the rising economies of the world: tapping into new markets, particularly latent ones. It takes cultural insight specific to each region to surface these alternative markets. In addition to “big data,” we will start to see the importance of using “small data” (insights gained from qualitative research) to explain cultural phenomena.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s