Research firm Nielsen has released its top advertising trends for 2010. Not surprisingly the leading trend is the ability to measure activity that merges online and offline purchasing behavior, addressing the fact that users have expanded options for how they consume content and how they interact with brands.
Nielsen data shows that "time spent on each of the three screens--TV, PC and mobile--is increasing. In particular, the consumption of video content is on the rise across all platforms."
Top advertising trends for 2010
- Optimizing media convergence is a top priority
- New models emerge to take advantage of smartphones
- More cross-media ad campaigns surface
- Commercialization of social networking hubs increase
- More interesting and interactive online ads appear
The challenge with advertising mediums such as video (TV more so than online) is that they require users to not only be interested in the product but remember it when they are making a purchasing decision. This, of course, is why online advertising has proven to be such a lucrative model. Consumers, in theory, can be served an ad and then perform some kind of action, such as buying a product online.
Nielsen asserts that for consumer packaged goods, "purchasing decisions in 2010 will be affected by factors such as brand innovation, retailer assortment, proliferation of store brands, and healthy eating preferences." With the exception of healthy eating (maybe eco-friendly tech is the comparison?), the technology industry won't be dramatically different.
Large brands like Oracle, Hewlett-Packard, and Microsoft must continue to innovate (brand innovation), more start-ups will join the fray (retailer assortment), companies like Dell will offer more services to support their hardware business (proliferation of store brands) and maybe electric cars become the healthy eating of the tech world.
What remains to be seen is which advertising trends are the most efficient and cost-effective. Social networking has been largely aggregated onto a few major sites such as Facebook and MySpace, while other niche sites garner far less traffic (though potentially more per-user dollars.)
The biggest opportunity is to make people actually like seeing advertising. Despite all of the hype and success around ads, I've yet to meet someone who claims to just love Internet ads. We all accept ads as a part of our lives online, so there is certainly an opportunity for more interesting online ad formats.
Despite some recent troubles, Nintendo President Satoru Iwata has predicted that Wii Sports Resort, Wii Fit Plus, and New Super Mario Bros. Wii could each sell 10 million copies this fiscal year. Considering estimates that more than 2 million copies of Wii Sports Resort have already sold, the company should be able to achieve those targets without too much difficulty.
What's less clear is if Nintendo can maintain margins to meet sales goals, or if it will resort to dropping prices to hit the big numbers.
Nintendo has consistently introduced good games and interesting accessories and kept both at price points that feel acceptable to pay even in the down economy.
But Nintendo's pricing strategy won't necessarily continue to work as consoles like the Xbox 360 move heavily into digital distribution, allowing for on-demand, variable pricing that can easily shift sales in real time.
The new Xbox 360 Games On Demand service is set to launch on Tuesday and will offer a library of downloadable older-title games. The big issue is not about consumer acceptance, but of disk space--as most players don't have the available hard drive room to accommodate a huge number of new games.
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EnterpriseDB on Monday announced an Oracle Migration Assessment Program after Oracle recently raised prices on database modules by as much as 40 percent. This comes on the heels of license increases of up to 20 percent in 2008.
The program enables enterprises to migrate their applications running on Oracle to Postgres Plus Advanced Server, an open-source PostgreSQL-based database containing an Oracle compatibility layer, "with no disruption to operations, and delivers ongoing cost savings of 50 percent or more."
"Oracle's price hikes might be good news for those on Wall Street, but they're terrible news for IT departments trying to function in the worst economy since the Great Depression," said Ed Boyajian, president and CEO of EnterpriseDB.
It's no secret that Oracle is good at pricing--at least from its perspective. I can certainly understand why Oracle customers would be interested in a program that allows them to make a switch to a less expensive option that provides the same functionality.
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Oracle: Kings of pricing.
One year after raising many prices by 20 percent or more, Oracle is once again raising prices--by 40 percent for certain products.
Interestingly, the products receiving the big price bumps are not the core database or application servers, but instead the administrative tools used for monitoring and compliance.
I'd certainly like to say this is price gouging, but really it is just smart business. Oracle knows database sales can't grow forever and that customers will sooner or later need to have additional tooling. Strategically, it's much smarter to price non-core components higher to ensure consistent adoption and cash flow of the primary product line.
This does introduce a few strategy questions related to the impending Sun acquisition--namely, how does Oracle price MySQL and its related packages, and will the existing tools work with MySQL or will customers running both be forced to buy two sets of tools? And will MySQL users be comfortable with Oracle changing pricing policies?
Pricing changes are common across all software companies, but open-source companies like MySQL have generally stuck to simple models to keep the costs of sales low and volumes high.
The big question is if Oracle owning MySQL helps customers. There are no doubt scenarios in which it will be convenient to buy and be supported from one source (the mythical "one throat to choke"), but it's hard to see how the hands-on approach of Oracle sales jives with MySQL's adoption to sales conversion process.
As a side note, if you think the GPL and open-source licensing is confusing, take a gander at Oracle's Application Licensing Table (PDF), which seems straightforward until you need to use a non-vanilla installation.
Follow me on Twitter @daveofdoom.
I was somewhat shocked by the stellar results Oracle recently reported, considering the sorry state of the economy. I even called an analyst friend to find out if maybe there was some house of cards ala Computer Associated that explained the consistent rise in revenue and margin. But I was reminded of two simple facts explaining why Oracle remains dominant:
- Applications drive database sales
- Oracle owns pretty much everything
Oracle's acquisition streak has given the company an enormous breadth of offerings (say what you will about quality of the software) and the attempt at offering it's own Linux variant gives it an OS that's passable if not meaningful. But, I don't know that owning the operating system is important to the growth of sales in applications or databases. (Note: Matt Asay wrote a very good post about why Ubuntu should be Oracle's Linux of choice.)
Oracle applications and databases have to run on an operating system, but the operating system doesn't necessarily drive software sales, or sell databases. The OS may be a point of influence, but doesn't drive the dollar values that you get from software.
Meanwhile, Oracle has amassed such a wealth of software that it can not only drive it's own database sales through upgrades and replacements (JD Edwards or Siebel running on DB2 seems unlikely) but it can up-sell databases to customers of BEA or any of the other myriad applications it now owns.
Add MySQL into the equation and Oracle can sell you a database pretty much anytime for any purpose, to support any application (which you can probably buy from them too.)
This leads into some questions regarding Cisco's strategy, based on the idea that hardware should sell applications, as well as IBM's strategy, where services have often sold software and hardware. The future is of course a mix of all of these strategies, but it's not clear that another company is as well positioned as Oracle.
While certainly not unstoppable, Oracle's execution has been very impressive, especially in a down economy.
Follow me on Twitter @daveofdoom.
Oracle has decided to kill the Virtual Iron business and keep only the technology, according to a report in The Register.
Apparently, one month plus one week was enough for the database giant to float its latest acquisition into the dead pool.
While not surprising, this is an unfortunate situation for Virtual Iron customers and also feeds into BigCo sales tactics that tell customers to avoid buying from small companies. Oracle has long used the "bigger is better" sales tactic and this will falsely emphasize the perception that buying from start-ups and small companies is risky.
According to The Register:
In a letter to Virtual Iron's sales partners, Oracle says it "will suspend development of existing Virtual Iron products and will suspend delivery of orders to new customers." And in a second letter to a partner speaking with The Reg, the company says it will not allow partners to sell new licenses to anyone - including existing customers - after the end of this month (i.e. in 11 days). Before then, partners can only sell licenses to existing customers under certain conditions.
"Until June 30, 2009, Oracle may approve granting add-on licenses to existing Virtual Iron end customers, or licensing end customers who had demo'd or otherwise evaluated the former Virtual Iron products and do not require further delivery," the second letter reads.
Virtual Iron was certainly not a big dog like VMware or XenSource, but the company did hold a great deal of promise. In the acquisition announcement, Oracle described Virtual Iron as a "leading provider of server virtualization management software." Fellow CNET blogger Gordon Haff wrote that, in this instance, "leading" should be read as "on the roster but something like fourth-string backup quarterback."
As enterprise sales get harder to come by, there will be more of these types of deals. It remains to be seen if Oracle will do right by the customer and partner base, but I wouldn't bet on it.
Follow me on Twitter @daveofdoom
I just finished reading Dennis Howlett's excellent analysis "Surviving and thriving: or why MISO has it (mostly) wrong" in which he discusses the basic strategic mistakes being made by Microsoft, IBM, SAP, and Oracle. The net takeaway is that the companies have an unfriendly attitude toward customers and a focus on technologies that the market has not demanded.
Some key points that outline why MISO are going in the wrong direction:
- The egregious treatment of customers at the shrine of maintenance revenues
- The foundational technologies for what they deliver are all showing distinct signs of age, wear and tear
- The five year lifecycle of product delivery is all wrong in today's rapid development
One of the reasons we hear (and write) so much about open source and cloud computing these days is because customers want to be in control of their destinies as well as their infrastructure. MISO offer a great deal of lip service to new technologies but don't deliver an overwhelming wealth of new products or features that users actually want.
What's the point of selling me shiny new technology which I'm struggling to understand anyway when I need to pay the bills more efficiently but more importantly find new business.
Howlett wrote a lot of words, but it's definitely worth a read. The issues at hand with MISO provide enormous opportunities for start-ups to jump in and take market share while the big guys offer empty promises.
Follow me on Twitter @daveofdoom
IDC recently published its annual report on software industry market share, which ranks software companies by revenue. According to IDC, despite Oracle's string of large acquisitions, including its pending acquisition of Sun, it will remain in third place behind Microsoft in first and IBM in second.
I received some interesting data points from the IBM PR team:
- IBM's software revenue in 2008 totaled $22 billion.
- Software represents a whopping 40 percent of IBM's overall profit, and 20 percent of its revenue.
- In 2008, more than 90 percent of IBM's segment profit was from software, services, and financing.
- IBM has acquired 81 software companies since 2003 and more than 100 software companies in the past decade (including Cognos, Filenet, Telelogic, Micromuse, and MRO Software).
- The R&D focus at IBM has shifted more toward software and services. More than 70 percent of the U.S. patents IBM received in 2008 (IBM's 16th straight year of patent leadership), were for software and services.
- IBM has been driving a shift to higher-profit segments (versus the low-margin commodity parts, which is why it got out of the PC, hard drive and DRAM businesses.)
- IBM is also getting greater margins from creating offerings that exploit the blurring of software and services, such as cloud computing and SOA.
A more difficult but possibly more interesting metric would be to understand the levels of adoption--that is, servers, users, etc., versus revenue--to get a better picture of the market. Of course, revenue and profit are all that really matters, but I'd like to know if IBM makes more money than Oracle on a potentially smaller installed base.
The big mystery is who else can Oracle buy in order to overtake IBM? It seems like industry consolidation has taken out most of the obvious candidates. Maybe this is where we'll start seeing Oracle acquire SaaS providers in order to gain fast-growing market share?
Follow me on Twitter @daveofdoom
Sun Microsystems shareholders have filed three separate class action lawsuits to block a $7.4 billion acquisition by Oracle, the company revealed in a 10-Q filing with the Securities and Exchange Commission.
The lawsuits allege Sun's board didn't live up to its fiduciary responsibilities to shareholders when it accepted Oracle's acquisition offer, saying "the consideration offered in the proposed transaction is unfair and inadequate."
Personally, I don't think these issues will block the deal. If it really has to, Oracle has the cash to up its offer or settle with the shareholders before it gets nasty (if the suits actually have any merit). And in another wrinkle, Oracle probably already knows that Sun may have violated the Foreign Corrupt Practices Act.
That's right: Sun also disclosed Friday that it may have violated the act, which bars American companies from bribing or engaging in other unethical activity with foreign officials. This can often be difficult since some foreign governments, to put it charitably, don't have the same hard rules against government bribery. Potential contractors can be put in the no-win situation of either paying off local officials or losing out on a lucrative contract. That's not to say that's the situation Sun is facing. It's not clear what Sun executives believe may have happened, but they have hired outside lawyers to look into it.
But as I already said, I don't think these new revelations are deal-breakers, even if FCP violations can carry potential penalties that include fines, criminal sanctions, and a ban from doing business with the U.S. federal government.
What does this tell us about the Sun/Oracle deal itself?
Oracle execs must believe that they can work out a deal with the dissenting shareholders (or, again, maybe they think their suits have little merit). And Oracle execs probably aren't that worried about any lingering government-related issues. This isn't the first time Oracle's acquisitions have come with legal question marks. The database king successfully fought a government antitrust suit against the eventual takeover of software rival PeopleSoft several years ago. Many pundits thought fighting the suit was folly, but Oracle did it anyway.
... Read moreTechWeb Global CIO writer Bob Evans recently published an open letter to Oracle CEO Larry Ellison. The heart of the note illustrates the point that Oracle's current strategy remains a burden to customers and that they are (finally) starting to get fed up.
The issue that needs your fresh thinking and attention in today's brutal economic climate is the one-size-fits-all, nonnegotiable 22 percent annual maintenance fee Oracle charges your customers.
As you well know, those customers are desperately trying to cut costs and conserve cash, and are exploring every possible option for doing so. You can help those customers very directly while also advancing Oracle's cause in a variety of ways by being willing to modify your stance on that single-tier, unmodifiable policy.
The author primarily takes issue with maintenance fees, but the underlying theme is that users have already paid for the software and that they aren't seeing much value in what is described as "maintenance." And Oracle doesn't seem to care a whole lot about it.
Mr. Ellison, it's easy to see why you like the current system, where someone pays, for example, $4,000,000 for a software license and then pays you $880,000 every year for "maintenance." And maybe CIOs will continue to find that's a fair exchange of value. But maybe they won't--as you know better than just about anyone, the IT industry is an archetype of creative destruction, where faster/better/cheaper alternatives relentlessly stalk, attack, and kill older/slower/more-expensive models.
Perhaps the model you and Charles Phillips and the entire Oracle global team have built is so extraordinarily singular that it will endure forever and remain unassailable from the forces that have ground down every previous eternal model in the technology business. But maybe not.
Definitely worth a read--this thread of "long-gone customer value" is what open source and software-as-a-service companies thrive on. The big vendor backlash is just starting.
