Nikesh Arora at the Marketing Society Annual Conference

Nikesh Arora at the Marketing Society Annual Conference


>>Ladies and gentlemen, Nikesh Arora.
>>ARORA: Okay. So, I have some good news and some bad news for you. Good news is that
my head cold is worse than Guy’s, I was on a flight back from Dubai last night, so I
can’t hear anything. So, if you guys are going to heckle, go crazy. All right. Your phones,
your pagers, it doesn’t matter. The bad news–I’ve never done this before, like this round thing,
standing in the middle because I know there’s a bunch of people at my back. I don’t know
what they’re saying, what they’re doing, so, after a while, they told me to walk a lot
and stand up here, look at these people and make sure they’re behaving themselves. So,
you guys have to help me a little bit. Anyway, so, a part of the challenge is, when you come
here to speak the first time, if you are the first speaker, you have the benefit and the
opportunity that you can say a lot of stuff and then over the rest, or the rest of the
day, many people will stand here and repeat some of the things I’m going to say. The good
news is I get to go first. The bad news that I already saw in the first video that Van
put up there, already, you guys are talking about MySpace, Yahoo, Linkendin, et cetera,
et cetera; Facebook. So, we’re going to do a quick poll. I have only 20 minutes, so,
I would be speaking very fast. How many of you have MySpace or any kind of blogging account?
Raise your hands, please, quickly. It’s early in the morning. You can do it. Okay. How many
of you have an instant messaging account? Okay. That’s not many of you. How many aren’t
willing to admit they have an instant, sort of. How many of you have more than 50 friends
on their instant messaging account? A hundred. One, two, three, four, five–more than 150.
You’re in the wrong age group. Sorry. The average teenager has over 200 friends on their
instant messaging account. They haven’t met 75 percent of them in real life ever. So,
we are going in to a phase which none of us has seen before. I’m going to start the day
with two very provocative statements. One, I think, about 50% of marketeers out there
in the world do not understand what’s going on around them. Okay. And, at least, 50% of
you should be willing to stand up and challenge that, but I can’t hear, as I said, so it doesn’t
matter. The second thing I will tell you is I’m not here to give a doomsday speech. This
is not the end of the world. All the changes we’re talking about are going to take eight,
ten, 15 years to happen. All right. I started my career–by the way, I can, I have about
20 slides. I can do 20 minutes without slides, so, don’t worry about it. I’ll show you the
slides in the end if you guys feel so interested or inclined. But, when I started my career,
I used to work in the mobile phone industry and I saw this piece of research that said,
because there’s a phone around the corner, everybody has a phone, you have one in your
house, you have one in the phonebox, you have one next to you, the probability that people
would want a mobile phone is very low. So the prediction 15 years ago was that there
will be 3% of the people in the world who’d need a mobile phone. How many of you have
a mobile phone–never mind, I know the answer. Who doesn’t have one? You’re definitely in
the wrong place, right. So, clearly it’s very hard to sit back and predict those things
but, you turn around, you look and you say, “That’s pretty obvious. It was very obvious
that people are going to have a mobile phone.” Well, that’s great, how many of you actually
sat there when mobile phones came out and said there is going to be 80 or 100% penetration
of mobile phones in 10 or 15 years. If you did say that and you’re still in this room,
I feel sorry for you because you have picked up a trend which is very hard to pick up.
I moved to the UK seven years ago, and I used to live in the US, in the US we believed in
largesse, and yes, we believe in having lots of things and many of them so I have three
VCRs–you know what a VCR is? Okay, that was seven years ago, okay. But, I’m so ticked
off when I moved here because it would not work in the plugs and they don’t have the
same format is what I have figured out. So, I decided to dump them and I got myself a
DVD player, right, pretty visionary seven years ago, I’d say. So I went to my local
video store and they had one small rack in the corner where they would gave out–they
had DVDs for rent and they had like the whole store where three-quarters of the store is
full of videos. Seven years later, you go there now, I don’t know if they have a video
section. Do you guys remember if your video stores have a video section? That’s pretty
obvious, wasn’t it, seven years ago, how many of you picked that up? The reason I’m telling
you this, is that you sit here, we all sit here and say, “Yes. I get it. I know what’s
going on out there. I understand what’s going out there, I am so smart.” Well, if you are,
try and take this movie and play this forward 10 years from now and look back and say, “What
is the world going to look like 10 years from now with all the trends I’m seeing today?”
In that case, how do I want my business, my company, my product, my brand to be positioned
10 years from now and what do I need to do today, because 10 years from now it will be
too late. Everybody else would have figured it out. So, the question is, what are you
going to learn today–during the day of the conference–what are you going to pick up
and how are you going to turn that around, use it for your brand, use it for your product,
use it for what you do? I think it’s time to see some slides, right? Okay, there’s supposed
to be… There you go. So, if I look at what is going on over there from an Internet perspective,
I think, what’s happening out there is as big as the revolution you saw with, you know,
water steam, combustion, oil, et cetera. Lots of big changes are happening. In the last
10 years the Internet penetration or the number of people in broadband has gone up from–broadband
is about 450 million by the next two years; it’s 250 million now. There’s 1.2 billion
people on the Internet today. How many of you remember the Internet Bubble? Do you guys
know what the Internet Bubble was? Sort of, kind of, yeah? That was 1999, right, 2000
something like that? There were 350 million on the web at that time and the Internet Bubble
at that time, I’d say, there was less than 10% broadband penetration. It was all in your
offices, it wasn’t at home. Today is 1.2 billion people. It’s going to be 40% broadband penetration
in two years. What’s fascinating is the market gap of the 6 Internet companies today is greater
than the market gap of all the Internet companies in 2000. So, I’m not quite sure when the Internet
Bubble was or when the Internet Bubble is but, hey, I think we’re sitting at a point
where there’s a huge revolution going on. You haven’t missed the boat yet because there’s
lots of stuff that is going to happen in the next ten years. There are three fundamental
reasons I believe this is not going to go away. The first reason is, you know, everybody
who has broadband is not going to give it up. How many of you have broadband at home?
Fantastic. If you could keep your hands up for a second please. How many of you are willing
to not have it work for a week? Fascinating, right. Now, this is a phenomenon in marketing,
you should all dream of, it’s called, going from a nice to have to a must have. And the
moment your product goes from a nice to have to a must have, you’ve made it. I can now
have a very glib question, how many of you would be willing to live without Google Search
but, I’m not going to go there. I hope none of you as well. But, again the point is, you’ve
got to figure out a way that your product goes from a nice to have to a must have and
I think broadband access has gone from a nice to have to a must have. And because of that,
I don’t think this trend is going away. If you look at the other phenomenon that’s happening
out there is the cost of storage. And today–are you tapping that because I’m already overrunning
my time yet or–okay–I’m just checking. Right, okay. I don’t think I’m going to get through
my slides so it’s okay. The second thing that’s happening out there is the cost of storage,
and I’ll go through this quickly. An iPod which stores about 40,000 songs today because
the fact that storage gets cheaper. So, literally you can buy twice the storage in 13 months
at today’s price. So, 13 months from now, you’ll be able to pay half the price of the
storage you buy today, that’s how we look at it. If you follow that math, in 10 years,
our storage capacity will go up a thousand times. Right? What does that mean? That means
that you can have an iPod in which we can put all the content ever created whether it’s
music or video in about 15 years. Every piece of content ever created can be on an iPod
in 15 years. What does that mean? What does that do to your product? Does that mean we
need broadband at all? I’ll just go to Africa and start giving them iPod for $250. They
don’t even need broadband access because it costs $7,500 a month in Africa to get broadband.
So, I don’t know, but there is a change going on that is going to impact things. So, from
a more technological perspective, what that mean is we as people will be very comfortable
storing all of our data on the web. Right, because it’s so cheap to store, most companies
offer free storage for your files, for your data, for your e-mail, et cetera. And last
but not the least, most of you that are carrying mobile phones are now carrying a tool of content
production. You have a digital camera in your phone which means people are going to get
more participating, more involved. So, we already talked about the fact that there’s
a billion people out there, there’s three billion people with phones, the new only point
I will make for you people in this room who are “marketers”, this is a billion people
connected by the same need, right, which is very different. It’s never been possible in
the past to find a billion people on a global platform who are connected by the same need.
They’re all online, they have very similar attributes, they all know many, many, similar
things. If the online community was a country, it’d be the fifth largest country in the world.
Imagine launching a product into the fifth largest country in the world purely online
without having to need physical space, physical logistics, there is no wonder that in the
last 10 years the top three brands that have developed had been online, that is Amazon,
eBay or Google. All right. So, there’s a lesson in here for all of us. See, if we look at
what people do on the web, it has primarily been their need for information. Now, how
does that impact your life? Well, there is a billion searches done everyday. That sort
of one per every person and if I go around the room, all of you will admit, sheepishly
that you actually do more than one search a day. So, there’s some people in the world
who are not searching, who are online and we spend our time trying to find them. We’re
searching for the people who are not searching, right, come on guys, give me a break, it’s
9 o’clock in the morning, right? The next thing that people are doing on the web is
chatting, communicating, talking to each other. Again, the same mobile phone guys who told
us that there is going to be 3% usage of mobile phones said that when we have mobile phones
people–if, mobile phones were to take off, people would stop using their fixed line phones
because on average our desire to talk as humans is only about 600 minutes a month. Well, surprise,
surprise now we speak for about 1,800 minutes a month. And we send 60 billion emails a day.
We have 23 billion via instant messages a day which means we are turning into a–what
is that?–“constant partial attention society,” you guys ever heard this phrase? Constant
partial attention, it’s sort of the nice way of saying, attention deficit disorder. It’s
like a very politically correct for saying, constant partial attention that means, “I’m
paying attention to you, darling, don’t worry I’m also doing this at the same time.” Right.
So, that’s what’s happening out there, people are communicating. The next thing which hopefully
impacts you guys more and more specifically is the notion of commerce. Oh, my control,
I will be able to catch up eventually. The European market is 130 billion Euros for e-commerce.
It has tripled in the last three years; it’s going to double again in the next four years.
How many of your company’s products are available on the web? I was talking about that in Germany
awhile ago and, you know, I talked to somebody and he said, “Oh, we have products but the
problem is we’re scared of selling our products directly on the web because our dealers are
going to get really pissed off.” Everybody has dealers, they get really pissed off. I
said, “Okay. So, what happens?” He said, “Well, the problem is in the last six months, one
of our dealers set up a website and now he’s selling more product in the country than we
are collectively in that whole region.” So, again, the opportunity and the challenges
is, is your product available for consumption out there because people are willing to deal
with it. Now, five years ago, I haven’t bought anything on the web. Now, it’s highly unlikely
anybody who buys anything worth more than 500 pounds or 500 Euros is not going to do
so without researching it on the web. The next trend which everybody is still trying
to figure out is what Grant talked about, his epiphany came two years ago with MySpace
and his 12 year-old. There are 250 million people out there who are on MySpace I think,
something like that, or even more. Since I did the slide, there’s more people–between
MySpace, Facebook, Yahoo there are 250 million people, I don’t know what they do, I haven’t
been able to spend too much time in them, but clearly you guys raised your hand and
said, you all participate in it. It’s not quite clear how these communities are going
to evolve and, you know, people like Guy are going to try and figure it out in telegraph
online TV, but there’s still an interesting battle out there. Is content going to be at
the center and communities are going to form around it or is community going to be at the
center and people will find like-minded communities to discuss relevant content? I don’t know
the answer, but I tell you what, every five seconds somebody out there posts a consumer
opinion on the web. And the question is, even if you’re not there personally as a marketeer,
do you know who’s talking about what up there on the web. Is there anybody in the room worked
for Cadburys, before I tell the story? Okay, I’ll tell you a story. Cadbury has a brand
called Wispa–does anybody know a brand called Wispa? Good there’s some people in the room
who are old enough to remember Wispa. Well, Cadbury decided to stop producing that product
earlier this year, until they found out there where 93 Facebook communities about Wispa.
They found out there were 14,000 fans posting opinions on Facebook saying, “Bring back Wispa,”
until the sort of the climax happened in Glastonbury when Iggy Pop was performing, people ran up
the stage where the banner saying, “Bring back Wispa.” Now, as a marketeer, doesn’t
that make your heart go warm and happy? My brand, somebody still loves it. Well, Cadbury
is bringing it back. They are making 23 million this year to test if the product still has
legs in the market. So, I don’t know, do you know what people are saying about your product
on the web? Whose marketeers aren’t ready? Because the way we like to ask people what
they think is we bring them into a room, put very, very bright lights on them and tell
them, “If you can imagine the world where people could fly, how would they look like?”
And the guy said, “I really don’t have an opinion but if you insist and you’re paying
me $50 an hour, I’ll tell you something.” I said, “Look, I did consumer research. Now
I know what consumers want.” So, the point is, you just need to go out there and see
what people are saying in these communities. And last but not the least, the most recent
notion is people are going up to the web and looking for entertainment; they’re looking
to be entertained. There are 5 million playbacks of YouTube videos on the Web, and YouTube
probably has less than 50% market share of all the entertainment on the web. So, between
iTunes and videos, et cetera, there’s lot of stuff happening out there. That’s easy
part. Here’s what we did. We tracked that and looked at it, what people are spending
their time on. What’s fascinating is, people spent about 11 hours–I think that’s a month,
yes. It is, 11 hours a month online in 2003. That number increased since then to 15 or
16, excuse, me, increased to 16 in 2007. It’s going to increase again in the next four years.
But what’s fascinating is where people are going to be spending most of their time. You’ll
see most of the people are going to be spending their time in the community and the entertainment
space, while we like to believe that search and information is going to be important because
only about 10% of the world’s content is on the web and it’s going to take awhile before
all of it comes on the web. But that’s where people are going to spend their time. The
question is, are you ready to interact with those people in those forums in what you do.
Let’s see what happens next. So, what does that mean to me? What do I do as a marketeer?
What do I do as a person who spends my time trying to figure out how to do my day job?
The first interesting observation I had based, have based on all of this stuff is that most
of–so, there is sort of a reversion happening back to fundamentals and the reversion that
is happening which I don’t think ever left is that consumers are sort of blocking advertising
and consumers are beginning to understand that all they give a shit about is the performance
of the product. And if you go back and look at the examples of the companies I said which
have built brands for the last 10 years it is all been on the back of products and I’ll
explain it in second what I mean by that. There is––back again, a greater focus
on performance, management and marketing. People want to know what the ROI of your function
is. I used to be a chief marketing officer for five years. Trust me. I hated the CFO.
He always wanted to come and measure what I was doing. I told him, it’s all good. It’s
all in the head. It’s warm, you wouldn’t understand but, eventually, I had to leave. And he’s
still there. The third lesson from this is that if you can find a way of making your
advertising relevant for consumers when they need it, you’re going to go very, very, very
far. And last but not the least, every element of the four Ps we all learned in marketing
is going to get impacted by the Internet. I was in Dubai yesterday and I was making
a presentation slightly different, and I sort of said this, not on the slide but generally
said it, and the gentleman who was going to speak as spoke before me the previous day
was sitting in the front row, his name is Philip Kotler (ph). Do you guys know Philip
Kotler (ph) is? Some of you, if you’re into marketing. He’s supposedly the grandfather
of marketing and he almost wanted to stand up, stood up on stage and wanted to come hug
me and say you’re right, read my next book which is about how the four Ps are going to
be impacted by the Internet.” So, clearly, it must be true. So, the first one I told
you, product performance is going to be relevant. It is relevant. If you look at the last few
years, the best brands that have been built up to, it have been on the back of performance
of products. What’s fascinating is most of those products had been free to the consumer
which I don’t know what to do. That does mean, you start taking your products and make them
free for everybody? I don’t know the answer. And third, which is fascinating again is there
has been a community element to those products. Whether it’s EBay, whether it’s Amazon or
whether it’s Google. It has been all about engaging with the user, engaging with the
consumer, getting them to contribute. And very seldom in today’s world, the large brands
communicate with their users at the same level, which is a challenge. And as I say, that’s
something which I’ve mentioned to people in Guy’s business is–I was talking to the CEO
of a newspaper, not the Telegraph, and I said, “How many letters of the editors do you get
everyday?” He said, “About 5,000.” I said, “That seems like a big number.” And I imagined
how passionately do you have to feel to write a letter to the editor? How many of you have
written a letter to the editor ever? Wow. Okay, fantastic. Now, I said, “How many do
publish?” He said, “Five.” That’s like, worse than the lottery. All right. You have 5,000
people write letters. You could actually have people who have written 50 letters and never
been published. I said, “Why don’t you put them all in your website so people can actually
feel that their letters are being read, and they have been acknowledged. I don’t even
know. I said, “Do you send an acknowledgement?” He said, “It’s not always possible to send
an acknowledgement every day to 5,000 people.” Right? I just think of that from a marketeer
and a brand person’s perspective. Here’s people desperately wanting to engage with your brand,
and you actually say, let me decide which five of you were intelligent enough to say
something which I deem worthy. All right. Try doing that to a consumer, right? So, anyway,
long story short, they did not want to put them on the web because they felt not every
consumer is articulate enough and yeah, we should talk to the newspaper guys who think
about it. But, the point I’m trying to make is that you need to find a way that you’re
talking to the community, you’re talking to the consumers, you’re talking to users of
your products. Most websites I see, most products I see do not engage the consumer. I bought
an expensive music system and put it on my house, and of course, you know, the fact that
I’m not so technologically savvy, I tried to get it to work and it blew up. And it happened
to blow up just a few hours before I was supposed to have many people over at my house. So,
I tried to figure it out how to fix it. And there’s, now everything is software controlled.
You can’t really go turn the off button, and turn on, et cetera, whatever. But, eventually,
that’s what I have to do. But, anyway, I go to their website, I know all about their management.
I know all about their wonderful production facilities. I couldn’t even find the user
manual on the web. So, I go looking for blogs and there are some people on blogs that have
actually identified that this problem exists. And I go look in the blogs but, I didn’t quite
find the answer. So, I thought it was being really smart, and I called a Help number in
the US, because the US was still open and the UK had closed. So, I sort of got them
talking to me for about five minutes about, you know, what I own, what I own, whatever.
And suddenly, after five minutes, the guy says, “I’m really sorry, sir. I just realized
from your product code that you bought this in the UK. I’m really sorry, I can’t help
you.” He hung up on me. I said, “Okay.” Again, the point is, is your brand talking to your
consumer? Are you talking to them? So, I’ve been given the red lights which means I have
to go really, really fast, right? Okay. I knew 20 minutes was never going to be enough.
So, I’m now going to show the video I was going to show you, you’re going to have…
I am. I guess.>>I love my new iPhone. It does everything.
But will it blend? That is the question. Now, you fans on YouTube have asked me to blend
an iPhone so, I did it. But I have another.>>ARORA: Sorry. This was an example to show
you how–there’s a blender company. This just doesn’t always happen with online brands only.
There’s a blender company called Blendtec which sells blenders to restaurants and will
sell to consumers. They started a small, sort of a viral video in blending things. Now,
they have a channel in YouTube that charge $5,000 if you want to get their product and
put it to blend. They blend toothpaste. They blend iPhones. They blend whatever you want.
All right. But, the users love it. The users are blending shit and sending it to them and
say, “Look how I can blend this stuff.” All right. So, there is some element of entertainment.
Okay. Let me go to the stuff really quickly because I already talked about most of it.
But, there’s a greater focus on performance management. If you don’t know the ROI of your
marketing spend, don’t bother. I sort of disagree with the first slide that showed up when the
video started this morning that 90% of marketeers don’t understand the value of television.
I think 90% of the marketeers don’t understand the value of the Internet. But, I said 50
plus, so, somewhere between there is the answer. All right. The third thing which I talked
about is the notion of advertising as a service. This is a quick example to show advertising
is the advertising when I don’t need it. Advertising is information when I need it. So, if you’re
hiking in the desert when you see a sign saying one mile to the next juice bar, that’s highly
informational. Nobody sees that as an ad. But if I just finished dinner, and you stick
a pizza or McDonald’s ad in front of me, I’m not a very happy person. Do you guys understand
that? And as I said, most every element of the four Ps is going to change for to what’s
going to happen on the Internet. I will tell you one story and I’ll stop right there. There’s
a business on the web called Threadless. And, again, I have lots of lots of examples. I
can talk forever but, I’ve been told I can’t; this is my last story, I promise. All right.
There’s a business on the Internet called Threadless. What Threadless does if you don’t
know it, they sold 6.2 million t-shirts on the web in 2006, and it’s quadrupled every
year. What they do is they’ve asked their consumers to design t-shirts, and you upload
your design onto their website, and then people vote. And whoever votes is implicitly saying,
“I’d like to buy that t-shirt.” So, the people vote, and they print the top six t-shirts
every week, and they make limited copies. If they have 20,000 of t-shirt one which had,
which had 40,000 votes, they have 5,000 of t-shirt too; we have, you know, whatever.
They’ll make the t-shirts, and they sell them to people who voted for the t-shirts. Pretty
straightforward, right? They have 300,000 people registered in their community. They
have 140,000 designs which have been uploaded to their website. They do not design anything.
They take the design off to web, and then print it on a t-shirt, and sell it to the
consumer. And the reason I find that very fascinating, their philosophy, as I said,
we didn’t create a product and trying to sell it to an audience. We created an audience
and then decided what they wanted and sold them what they wanted. With that, I’m going
to shut up. Thank you very much for listening. I hope you have a fantastic day.

Comments

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    videodatabase

    Just amazing…. a future thinker.. very good speech….with the best of voice.. and most importantly an INDIAN!!! jai ho

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    Rabin Gupta

    Considering this video was released on Jan 14 2008, there is an abundant information in this video. Fantastic video….

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    Dillan Philpot

    Wow… this guy seriously knows what's happening.
    I've seen the video twice, it all makes sense.
    I love it, he is amazing, and im in high school.
    The web is a fascinating subject.

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    ahmed enab

    Wonderful video, I've only just made my first $500 this month and it feels stunning! due to to this money making formula known as: Impact Cash Formula, I actually don't recall the site just google this method

  11. Post
    Author

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