Emerging tech biz CMO markets big for nanotechnology

January 6, 2003

BY MICHAEL KRAUSS

Marketers seem to be growing apocalyptic about the advertising business, at least in thinking up the titles to peddle their latest books. Former Coca-Cola chief marketing officer Sergio Zyman named his current book, The End of Advertising As We Know It. His thesis: Thirty-second television spots that build awareness are not enough. Advertising needs to sell harder. It's about the bottom line. Madison Avenue must rethink its model.

Marketing pundit Al Ries christened his newest book, The Fall of Advertising & The Rise of PR. He opened his recent talk in Chicago saying, "I've seen the future and it's Botox," a glib reference to the creation of a brand worth millions, without a nickel of investment in advertising. Botox succeeded by using PR.

Reading Zyman and listening to Ries, I thought there wasn't much new in their arguments that wasn't in Don Schultz's 1993 book Integrated Marketing Communications: Pulling It Together & Making It Work. Maybe Schultz would have sold a few more books if he'd predicted something apocalyptic. Still, Zyman's and Ries' angst feels vaguely reminiscent of the dot-com boom when the youngsters from Silicon Valley and Route 128 outside Boston told us technology would change everything. Of course, back then the advertising industry was booming as millions were spent (and wasted) on Super Bowl ads for companies that would soon be out of business.

To try to make some sense out of all of these arguments, I decided to call Brody Keast. Keast, the former head of worldwide product marketing at Cupertino, Calif.-based Apple Computer Inc., is really changing the world through technology, just as promised in the technology boom. Only the revolution isn't coming through a personal computer; it's coming through your living room television.

Keast is senior vice president and general manager of San Jose, Calif.-based TiVo Inc. TiVo, for those not yet introduced, is a personal video recorder (PVR). It connects to your television like a VCR but uses a hard drive to record programs. The device is intuitive and easy to program and operate. It can learn your personal viewing preferences and record programs it thinks you might like. It can help you be more selective in your viewing choices. Best of all, it allows the viewer to fast-forward and skip the ads. It's the ultimate can of Raid for those pesky commercials.

Call me a couch potato, but TiVo is some awesome technology. I never miss watching ER, Law & Order (in any of its forms) or NBC Nightly News though I'm rarely home when these shows record. I don't have to fiddle with videotapes. And, I never watch any ads. It seems that TiVo holds all the industry disruption potential we used to talk about before March 2000.

Recently, Cambridge, Mass.-based Forrester Research Inc. conducted a survey with members of the Association of National Advertisers. As reported in The Wall Street Journal, PVRs currently reside in only 1.7 million homes, but penetration is forecast to increase to 30 million homes before 2007. Forrester predicts, "The shift to on-demand TV will cut traditional ad viewing by 19%, shaving $ 7 billion from traditional ad revenues." That may not be the end of advertising, but it certainly stings.

Yet Forrester sees a silver lining. According to the research company, advertising and fees from on-demand TV programming will more than compensate for this loss. The impact on traditional Madison Avenue agencies and their 30-second commercials is harder to predict. As Zyman and Ries like to remind us, ad agencies aren't always the most flexible and adaptive organizations. They're going to have to work harder and be more nimble to maintain their role in the marketing mix. I'm sure they'll survive, and even prosper, once they step out of the headlights of the enormous truck that's headed right for them.

Knowing that Keast is the fellow at the helm creating all this change, I thought it only fair to learn what marketing tools he is applying to achieve the 30 million-household penetration level that will reshape the market environment. Partnerships, celebrity product placements, public relations and word-of-mouth communication are the key elements in TiVo's marketing plan.

"As a small company, we can't do this alone," Keast says. "While we sell TiVo off our Web site and through retail channels, we have some important partnerships with DirectTV and Sony. We provide the TiVo service to DirectTV on an OEM (original equipment manufacturer) basis; they assume responsibility for all new customer acquisition, support and billing. They set the price and pay us a fee on a per-account basis."

Early on, TiVo recognized the power of word-of-mouth communication. They gave their product away to entertainment industry and sports celebrities to generate interest and stimulate awareness and trial.

"For us, public relations has become the new advertising," Keast says. "We've done everything from product reviews to lifestyle stories to a massive amount of product placement with people who are influential in pop culture.

"We've seen the product written into scripts on everything from Friends, Will & Grace, and (HBO's) The Mind of the Married Man. We've been on the 'Top 10 List' of Letterman and in Jay Leno's opening monologue," he says.

Does he advertise TiVo on network television, or is he afraid his own ads will be zapped? Keast admits to running an advertising program to help launch TiVo.

"We're not doing Super Bowl advertising, though we did invest in a national advertising campaign to build awareness of our brand and interest in our service. We think it served its purpose. While building a brand is the sum of many influences both large and small, advertising did a lot to get the initial awareness, to define a personality and tone for our brand and to pique interest," Keast says.

"It was really expensive," adds Keast, who has to educate customers about his new service. "Advertising has some constraints.

"At TiVo, we're talking about a mass change in consumer behavior, in how people watch TV. With a 30-second spot, by the time you break through the clutter, grab somebody's attention, entertain them, deliver some sort of simple message, tag it with your brand and a call to action around your Web site, you're pretty much in and out of there."

Does Keast feel advertising's days are numbered as Zyman's and Ries' book titles might suggest? Not really.

"TV advertising just builds awareness and is brute force. But building a brand gives you pricing power. Early on it was a good tool for us to use. I don't know that there's ever a cookbook thing where it's always good or always bad. It depends on who you are, what you're trying to get done and the environment," he says.

But, agencies and marketers are going to have to adapt.

"I don't think the advertising business is going to go away. I think the future of the 30-second spot is definitely a question mark. As TiVo and our competitors grow, the advertising industry will have to accept (that) they are operating in an environment where the viewer is completely in charge and has total control. It's an 'opt-in' environment.

"That just requires a different approach. I don't think it's the end of advertising. It means that advertising has to get better and the judge of that will be the consumer," he says.

Listening to Keast, I realize TiVo may not be the death knell for advertising, but one thing's certain: You won't see a new book entitled The End of Technology any time soon.

I guess the technology revolution isn't over after all.

Michael Krauss is a partner with DiamondCluster International in Chicago. He can be reached at michael.krauss@diamondcluster.com or news@ama.org.