Archive for the ‘Internet’ Tag

Traditional media companies reboot

When I was growing up, watching TV was a family affair. We gathered around one cathode set at the same place at the same time to watch the same shows as everybody else. How times have changed. Nowadays adults spend more time online and on mobile devices than they spend watching TV, listening to the radio or reading the printed word.

Yet some things have stayed the same: We’re still watching TV shows. Only now we’re not necessarily watching the same shows, or watching them at the same time, or even watching them on TV. This trend, which shows no signs of abating, has significant implications for traditional TV cable and content providers, says David Purdy, Rogers Communications Inc.’s senior vice-president, content.

“We’re playing in a market now that has a solid mix of traditional cable subscribers, a growing group of ‘cord shavers’ — those who are tuning in less to traditional cable and more to online sources for TV and movies — and ‘cord nevers,’ many of which are Millennials.”

The move toward the digital consumption of television content is spurring a series of watershed developments in the industry, such as:

  • The rise of high-quality original programming exclusively available on streaming services (e.g. Netflix)
  • Increasing competition from vendors that historically haven’t offered professionally produced content (e.g. YouTube)
  • Increased crowd sourcing to determine which shows get produced, cancelled or resurrected (e.g. Amazon)

Traditional media companies and cable providers should be concerned. All of these developments reflect the fact that more consumers have relinquished cable and forgo live programming, opting instead for cheaper online services.

Rogers is transforming its business to address these shifts, says Mr. Purdy. “We recently partnered with Vice Media to bring more compelling content to the Canadian market. We also invested in and launched Shomi, a video-streaming service.”

How will these trends change advertising?

Online video is changing the way people interact with each other and relate to sponsoring brands. As a result, media companies are facing flat — and in many cases reduced — advertising spending, as ad buyers shift their dollars from well understood TV to new (and unproven) digital formats.

In some ways, however, advertising will become more valuable as TV watching becomes more, not less, social. For example, a growing number of people are having real-time conversations on Twitter about the shows they’re watching. Some viewers have even begun purchasing products they find appealing right from a show, with eBay and other sellers offering apps that enable viewers to browse and buy items related to what they’re watching.

But in other ways viewers are becoming less engaged with programming, and thus with ads, as fewer people watch the same shows (with the notable exception of live sports and a few big television productions such as Canadian Idol). This could translate into more complicated ad buys, more fragmented marketing strategies and harder times ahead for traditional broadcast media companies.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.  Follow me on Twitter @MitchellOsak

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Using IT to drive Insurer growth

Despite an improving economic climate, Canadian insurers continue to face considerable challenges including growing price competition, rising distribution & delivery costs and increasing competition from banks.  At the same time, consumers – particularly younger, more educated and more affluent ones – are rapidly turning to online tools to purchase and service products.

Emerging technologies offer Insurers the potential to increase market penetration, grow share of wallet and reduce sales, marketing and support costs.  However, Canadian firms are appreciably behind when it comes to using IT to drive revenues and bolster customer service.  There are understandable reasons for this conservatism.  As an industry built on trust developed through personal connections, Insurers are hesitant to adopt arm’s-length ways of developing relationships.  Moreover, with up to 20% of its operating budget spent on technology and its supporting services, Insurers tend to frame IT as an expensive cost center prone to high-priced cost overruns not as a strategic business driver.

Yet, many global insurances companies are using new web and mobile technologies to drive revenues and outflank competition.  In particular, four areas offer rich rewards for those company’s that can truly understand their customer’s needs, make IT a strategic imperative and execute with excellence.

1.  Establish new sales channels

New wireless platforms like the iPhone, iPad and BlackBerry enable Insurers to reach customers more effectively and efficiently.  In one case, South African Metropolitan Life is piloting a new short-term life insurance product, Cover2Go, which allows new customers to purchase a contract by simply by sending an SMS.

2.  Leverage Social Networking

Popular sites such as Facebook and LinkedIn offer tremendous potential to build brand communities, enhance the customer experience and engage a national workforce. In one example, State Farm is using Facebook as a national training platform.  Approximately 17,000 agents have mobilized into groups of “friends” to discuss new products and exchange best practices around customer service and claims processing.

Some Insurers have invited customers into their product development process. Allstate has set up social-network forums to facilitate interactions among motorcycle customers and enthusiasts. The forums solicit customer feedback and use it to inspire new products and services.

3.  Develop custom products

Forward-thinking insurance firms are using powerful data analytics capabilities to identify unexploited customer segments and then target them with tailored, “mass customized” products.  One large Insurer I know is combining sophisticated “rules-based” algorithms with high performance computing to enable product designers to adapt policies both to customers’ preferences and to specific market regulations.

In another case, some auto insurers are using IT to develop dynamic coverage models based on driving patterns and behavior. One leading carrier in the United States, for example, uses GPS technology to monitor drivers and then apply discounts to policies as a reward for safe driving.

4.  Streamline customer service

Even with extensive IT, insurance remains a labour intensive and complex business.  However, a growing number of firms are using off-the-shelf technology to streamline customer service. For example, AXA and Zurich Insurance have location-based iPhone applications that enable customers to use their phones to record damaged areas and then to send the accident photos to reporting centers to expedite claims handling.

In the future…

Social networking has the potential to reorder the traditional Insurance business model. With its ability to mobilize people quickly, sites like Facebook could quickly spawn large affinity groups which can negotiate preferential insurance rates much like Groupon has been offering since 2008.

To use IT as a growth driver, executives need to look beyond their industry in order to identify promising business opportunities that are enabled by new technologies and business models.

For more information on our services and work please visit the Quanta Consulting Inc. web site.

Private Market Networks Disrupt US Capital Markets

Until recently, companies scouting M&A transactions or looking to raise money sought out familiar intermediaries like Banks, Investment Banks and Alternative Lenders. Today, thanks to the power of the Internet and the emergence of some innovative platforms, CEOs now have another option to address their US financial needs: Private Market Networks (PMNs). 

PMNs like SecondMarket, Angelsoft and AxialMarket are new, web-based financial matchmakers that quickly and seamlessly bring together corporate buyers and sellers as well as financial lenders and borrowers. Though in their infancy, PMNs are beginning to do for Capital Markets what firms like eBay did for classified ads:  leverage the unparalleled reach and power of the Internet to revolutionize an established business.

Like online auctions, PMNs have a compelling value proposition in today’s economy.  Just as eBay allows buyers and sellers to find each other, negotiate the terms, and agree to transact business, so do PMNs enable firms and investors to locate each other and then efficiently narrow down the field of potential business partners through due diligence.

Using the internet to connect buyers and sellers is not a novel idea.  Over the past decade, a number of start-ups attempted to serve as financial intermediaries, albeit with limited success. Thanks to new Web 2.0 technologies, security protocols and integration standards, PMN clients can benefit now from a powerful suite of services, including: opportunity identification and recommendation engines; analytics and evaluation tools; secure virtual diligence rooms; industry comparables and; standardized documentation and fee terms – not to mention deal flow. Significantly, PMNs’ inherent network effects – more sellers attract more buyers and vice versa – have the potential to generate substantial market liquidity in a short time. 

These new business models are beginning to play an important role in a variety of areas.  For example, PMNs are emerging as an important exchange for early stage firms looking for their first couple rounds of venture capital. According to Booz & Co., a consultancy, Angelsoft is attracting over 4,000 global start-ups each month seeking financing. In other cases, PMNs can provide liquidity for employees and early investors in pre-public companies (as was true with Facebook before its Goldman Sachs deal, and remains true for other sexy pre-public companies like Twitter and Zynga). 

Moreover, PMNs could be play a significant role in the arcane and illiquid world of alternative assets.  Not only could PMNs help match investors with hedge funds and private equity funds, but they also could help create secondary markets for each of them.   Moreover, PMNs could provide liquidity for out-of-fashion financial instruments like failed auction rate securities and collateralized mortgage obligations.  Finally, PMNs could provide an active market for traditionally illiquid assets such as art, memorabilia and wine.

Although still small by Wall Street standards, PMNs are growing quickly. According to Booze, SecondMarket closed some $3B of transactions in illiquid securities in 2010, including several hundred million dollars in equities of late-stage venture-backed companies. Moreover, AxialMarket had companies with combined revenues of approximately US$30B listed for sale in 2010 . 

Perhaps the biggest industry impact will be on client fees. Through its model, PMNs can deliver transparency around which fees are paid for what services.  In many cases, this can trigger fee compression. For example, as a rich source of information PMNs can provide for at a low or zero cost basic knowledge of how the sales and financing processes work as well as access to a critical mass of buyers and sellers. As these platforms proliferate, many traditional investment bankers will be forced to reduce fees on commodity services and then compete more aggressively on the higher margin deal structuring and terms.

The history of the Internet tells us that PMNs could flourish and capture significant transactional market share.  Of course, much will depend on regulatory considerations (which are presently unclear), the staying-power of traditional financial intermediaries, and client adoption rates.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.