For most people, Chris Anderson’s 2006 book The Long Tail marked a new way of thinking about selling goods on the Internet. Being free of the physical limits of shelf space, he predicted, would alter what people bought. For music, this would mean the most popular music titles would become less popular as consumers were able to tap into vast online catalogs. In most corners of the business world, and especially in the music industry, The Long Tail was controversial. Would consumers actually start to ignore the hits?

A Billboard analysis of Nielsen SoundScan data going back to 2004 shows Anderson wasn’t correct on all points. Hit digital albums have lost market share to far less popular titles. But hit digital tracks have gained market share over the years. The top 200 tracks accounted for 14.5% of sales in 2004 and rose to 15.8% in 2005, 17.1% in 2006 and 2007 and 17.2% in 2008. Through October 25, 2009, the top 200 tracks’ share stood at 18.7%.

The top 200 digital albums have shown an opposite trend in market share, steadily dropping to 21.9% in 2008 from 28.7% in 2004. At 22.1%, digital albums’ market share through October, 2009 is slightly better than 2008’s figure.

These two trends imply album and track purchase decisions may be driven by different factors. The most popular tracks may be benefitting from a herd effect due to the viral nature of the Internet. The awareness generated by that small number of songs could drown out less popular songs. Album buyers show they have more diverse tastes and take advantage of the vast catalogs at online retailers. So consumers may prefer to sample the depths of long tail through albums, not by individual songs.

Any discussion of Anderson’s book and theories should include how the record label’s role has changed. A popular sentiment of The Long Tail is that artists have all the tools they need to self-release digital music. That is true. Barriers to entry have been lowered to the point where the costs of recording and commercially releasing music are negligible. As Anderson explained in The Long Tail, cheaper tools of production and distribution have greatly increased the supply of music found online.

But acquiring distribution and getting a sale are two different things. People tend to underestimate the amount of competition faced in digital music. Over 100,000 albums were released in 2008 alone – and about half of those were digital-only releases. Not only does a title have to compete against other new releases, it has to compete against the tens of thousands of well known catalog titles that are available online. It takes resources – both money and expertise – to rise above the competition and achieve sales commensurate to what career-oriented artists need. Such resources are the domain of record labels, who can still find success in the digital world.

While The Long Tail was less explicit about record labels’ role in a changing digital marketplace, in July Anderson told The Times that record labels “are now the least important part” of the music industry. That is true for those with very low sales goals. These days a more established artist, or a mere hobbyist, can circumvent a contract with a record label by using inexpensive digital tools and outsourcing some record label functions. For the more ambitious and the less established, a record label is still by far the best way out of obscurity.

Summary of Billboard’s analysis:

• As more digital albums are released, the more popular titles lose market share to the less popular titles. In other words, demand has shifted from the hits to the niches. The head (what Anderson would call the top 5,000 titles) has lost market share to the tail (all other albums). The head accounted for 77% of digital album sales in 2005. By 2008, the head’s market share had steadily dropped to 65%.
• Sales of digital albums have become less hit-oriented while digital tracks have become slightly more hit-oriented. The top 200 digital albums have accounted for a smaller share of total digital album sales since 2004. In contrast, the top 200 digital tracks’ share of total sales has nudged upward during that time period.
• Sales of individual tracks (those purchased independently, not as part of an album) account for the majority of digital music purchased in the U.S. Individual tracks accounted for 57% of all digital music sold in 2008 (assuming 12 tracks per album).
• In any given week, the top 200 digital tracks account for nearly one in four track purchases. To put that in context, Amazon.com’s MP3 store currently lists 9.99 million tracks. So, the top 200 tracks represent only 0.002% of what a large download store stocks.
• Even titles in the tail (below #5,000) have lost some market share recently. In 2008, the top 8,000 digital albums lost market share to lower-ranked albums. But it wasn’t the best-selling albums that suffered the most. Albums ranked from #200 to #800 suffered the biggest drop in digital album market share from 2004 to 2008 – between 25% and 34%
• While lower ranks have gained market share over the years, any one title has not gained much. For example, an album ranked at #9,000 in 2008 sold about 1,050 digital albums. Less than 100 of those units can be attributed to gains in market share over the previous four years.

An expanded version of this story first appeared at billboard.biz.

Is the Super Bowl the ultimate marketing ecosystem of paid and earned media? 2010 will be huge test, as the new reality of consumer expression and cross-platform integration create a powerful new dynamic hovering over the largest single-spot ad spend on record.

What marketers urgently need to understand is not only total ROI on that mega-media buy, but the full return on all the other activities triggered or reinforced by this paid media stimulus. How does paid media drive earned media? And to what degree does earned media halo future paid media efforts? These are critical questions that Marketers need answers to – along with a metric or common yardstick that quantifies the blending of the two.

Getting Real about Real-Time
In an more agile and flexible marketing environment, where there’s actually a chance of making real-time changes based on available data, marketers need to understand the real-time role they can play in making tactical interventions to grow earned media impressions and ultimately, increase odds of success.

Twitter brings a fresh dynamic and promise to Super Bowl media efficiency. The platform reached a reach tipping point in 2009 – so much so that marketers increasingly use it to fan the flames for events, interact with brand mavens or enthusiasts, and, in a growing number of cases, manage or sandbag tension points like customer disappointment or service shortfalls.

Tweets are also increasingly embedding themselves in Facebook feeds, blog entries, and Google search results, magnifying their long-term value. Translated to the Super Bowl, positive playback about Super Bowl ads can have a “latency” effect and provide brands with an almost endless annuity of “earned media.” The same dynamic will be at work with Facebook brand fan pages, which can see massive growth – hundreds of thousands – following a major ad campaign, offline or online.

Quantifying the Big Picture
In the end, Super Bowl spots today need to meet two distinct “torture” tests – one measurable based on traditional TV scoring, and another based on unique dynamics of cross-platform engagement, most notably word-of-mouth and conversation. On a pure TV-impression alone, one can argue that the Super Bowl has become such an unusual magnet for consumer attention and recall – the one day of the year that we “celebrate” advertising – that it is worth every penny. Indeed, curiosity, anticipation, guessing, nostalgia come into play big time before this festival of brand persuasion. Consumers, after all, want to see the ads, almost akin to seeing a movie.

The entertainment halo certainly matters. Over the last three years, Nielsen IAG research found Super Bowl spots achieved a 31% higher break-through and 93% higher likability than the typical ad on television. But it’s not that simple. Timing is also a factor. First and second quarter spots yield more yardage than second half spots, and 4th quarter spots are about comparable to a “normal” TV buy in terms of generating ad recall. The viewer’s ability to associate the correct brand with the ad, and reported likability levels similarly wane over the course of the game. Surprisingly, branded integration effectiveness shows an opposite trend. Recall and brand opinion are lowest pre-game, moderate during the game, and big gainers post game. For Marketers, the mix is clear: focus on ads early and branded integration efforts late. Lastly, the SuperBowl is a touchdown for brands generally: purchase consideration for the average ad the week after increases +13% versus the week prior.

So that’s the foundation of pure “paid” measurements. What about the “earned” side of the equation, which factors in free media, consumer conversation, participation, and the like? Clearly, the Super Bowl in particular shines light across a far more complicated mix of marketing activity and user-engagement. Great copy finds life in other places.

An engaging, even participatory Pepsi game spot, for instance, might trigger a site visit, a Google search, a tweet, retweet, fan-page sign-up, or DVR rewind. It might trigger a desire to share, forward, discuss, critique, rate, or review. It might bleed over into the social media stream of a New York Times or any media reporter (a growing number of whom leverage social media across all platforms.)

The good news is that this digital trail can be quantified with high levels of precision – by volume, reach, tone, source, or even depth of brand advocacy. And much of this can be delivered in real-time, empowering today’s brand manager to make real-time changes or adjustments to the site. Last year, for instance, a large percentage of brands buying spots on the Super Bowl made real-time adjustments to their websites or social media efforts based on pre-game variables.

This year, Frito-Lay’s Doritos brand sits on the extreme of early-adjustments, as the four spots they are running are sourced from user-participation events and contests. In this case, the “earned media” is stimulating the paid side of the equation. Then again, this can work in reverse. When P&G’s Tide brand ran a highly engaging “Talking Stain” spot two years ago, it triggered a user-generated contest that created an impressive annuity of online video that quickly reshaped the brand’s search results for the better. Three years ago, Nationwide insurance estimated that the “earned media” dividend from their Kevin Federline spot totaled over $20 million dollars.

So in the end, it’s just not as simple as “buying” high-reach media. The broader ecosystems truly matter. This year, Nielsen is putting its biggest effort into measuring and quantifying the full return of Super Bowl advertising, combining a comprehensive suite of paid media and earned media metrics into a total “engagement” score. And we don’t intend to stop at the Super Bowl. Over the course of 2010, we’ll be applying our new cross-platform engagement metrics across our work on the Winter Olympics, Academy Awards, and the World Cup.

Webinar: Learn more about Nielsen’s comprehensive approach to the Super Bowl. Join Pete Blackshaw and Randall Beard for a webinar Maximizing Advertising ROI in a Paid vs. Earned Media Environment on December 8 at 2:00PM EST.

Note: Effective with June 2009 data reporting, Nielsen has made several enhancements to the VideoCensus service, including a panel that is 8 times larger, more granular reporting and improved accuracy and representativeness. These enhancements provide the highest quality data to our clients and the marketplace. For some sites, trending of previously-reported data with current results may show percentage differences attributable to these product enhancements and should only be compared directionally.

VideoCensus Methodology and Metrics:
Nielsen Online’s VideoCensus combines patented panel and census research methodologies to provide an accurate count of viewing activity and engagement along with in-depth demographic reporting. Online video viewing is tracked according to video player, which can be used on site or embedded elsewhere on the Web. For example, if a “Saturday Night Live” clip from NBC.com is embedded on a personal blog, that video would be attributed to NBC because of the NBC video player.

A unique viewer is anyone who viewed a full episode, part of an episode or a program clip during the month. A stream is a program segment. VideoCensus measurement does not include video advertising.

Source: The Nielsen Company

Video Viewing on Facebook Continues to Grow
During the last year, Facebook’s online video viewing audience has experienced tremendous growth. Year-over-year, total time spent viewing video on Facebook increased 1,840 percent, from 34.9 million minutes in October 2008 to 677.0 million in October 2009. The number of unique viewers of video increased 548 percent and total streams grew 987 percent during the same time period.

“Facebook’s rapid growth in online video during the last year illustrates the site’s evolution from simply a communications focused tool to a media portal,” remarked Gibs. “Social networking sites are evolving from a venue for catching up with friends to a platform for personal expression, allowing consumers to share their experiences in the full variety of content formats available online.”
 

Source: The Nielsen Company

“While our data does show that print newspaper readership is slowly declining, it also illustrates
that reports about the pending death of the newspaper industry are greatly exaggerated,” said
Gary Meo, Scarborough’s Senior Vice President of Print and Digital Media Services. “Given the
fragmentation of media choices, printed newspapers are holding onto their audiences relatively
well.”

According to the demographic data in the study, newspapers continue attract educated, affluent readers.
In an average week:

• 79% of white collar employed adults read a printed newspaper
• 82% of adults with household incomes of $100,000 or more read a printed newspaper
• 84% of adults who are college graduates or more read a printed newspaper

Video from: NewTeeVee

A Brief History of Flight

In the mid-1980s, the highly regulated airline industry was relatively unsophisticated about how to price its main product, seats, until Peoples Express burst onto the scene. Peoples’ low fares quickly gained customers and market share. The big airlines took notice and responded in two ways–one obvious and one less so.

American Airlines responded with deep discount “Supersaver” fares, essentially matching Peoples on key routes. This was the obvious response. The less obvious response was the introduction of “yield management,” which gradually brought a level of sophistication and a data-driven pricing model that yielded a 3-8% revenue improvement, according to industry analysts. Yield management quickly spread to the hotel, car rental and other industries.

Yield management is an approach to maximizing revenue when a business has a fixed, perishable resource and can segment customers into groups willing to pay different prices for the same resource. In airlines, a seat is “perishable” as the revenue potential disappears once the flight has flown.

Simply stated, the airlines want to sell the right seat to the right passenger at the right time at the right price. Doing so requires sophisticated algorithms which account for capacity utilization, route scheduling, fuel prices, competitive pricing and the like. All those yield management algorithms are what’s behind the minute-to-minute price changes happening every time you book a flight.

Yield Management… For Marketing?

From an advertiser perspective, yield management is the ideal model:  place the right ad in the right program against the right target at the right price. In concept, it’s the same as selling airline seats, but on the buy side.

Making it Work

What’s required for yield management to work for advertisers?

• Digital – Digital is more easily measurable and therefore more usable in a yield management model.
• Cross-Media Measurement – Marketers must be able to measure viewership across TV, web and mobile to optimize media allocations.
• New Measurement Tools – Marketers must be able to target viewers based on any segmentation dimension, buy media based on ad effectiveness by program, and measure ROI.
• Real Time Data – All three of the above are needed in real time – 24/7/365.
• Accountability – Advertisers must demand greater accountability for every media dollar spent.

For some, the surprising news is that all of the above are either in place or rapidly becoming so. The future is closer than you think.

New Measurement Tools

Two new measurement tools are critical to moving to a real-time Yield Management Marketing Model:

1. TV Program Engagement – TV Program Engagement is a measure of how involved consumers are in a TV program. Is it really a surprise that viewers are more involved in “Desperate Housewives” than “America’s Greatest TV Stars?” Who cares? Marketers should, because TV program engagement is highly positively correlated with ad recall. Higher engagement = higher recall. So, buying ads in high engagement shows instead of low ones is more effective.
2. Advertising Effectiveness – Ads are more relevant to consumers if the equity of the ad fits the TV program they sit within. Is it any doubt that an ad for SlimFast is more effective on the “The Biggest Loser” than a program with different content but similar audience size and demographics? Now advertisers can buy media based on their brands Purchase Intent by program or genre.

Barriers

The advertising and media industry has had decades to build systems and processes to support the traditional media model. The systems for planning, buying and allocating media for brands won’t change overnight. But the trends are there to see, and the Marketing organizations with the most foresight and vision will see that reengineering these will yield great benefits.

So… When Do We Take Off?

There’s no doubt — all of the Yield Management puzzle pieces are now in place. In the future, advertisers will be able to:

• Target the Right Audience – Targeting will move from simple demographics to more sophisticated psychographic and behavioral targeting. And Marketers will be able to drive these segmentation schemes thru most of their marketing contact points.
• Identify the Right Program – Viewership will be supplemented with TV Program Engagement data. Marketers will become more sophisticated in identifying high engagement / high ad recall programs to improve their ad recall effectiveness.
• Match the Right Ad – Marketers will care about and measure the impact of program fit with their brands. This will enable them to match ads to programs based on purchase intent data, for optimal impact.
• At the Right Time – Media planning will move from an annual, exception-driven exercise to a real-time, algorithm driven process, fueled by continuously updated effectiveness metrics.

All of this will be connected to purchase panel data. So all of the buying, planning and allocation decisions will be held to simple question: did I get an acceptable ROI?

This is the coming “seismic” shift in Marketing—real-time ROI Marketing. Those who don’t get on board will be grounded in the new economy.

The launch of the Droid by Motorola–which runs Google’s Android 2.0 operating system–is the latest smartphone to be tagged “game changing iPhone killer.”  We prefer to view it as simply a quality choice in a growing line of smartphones rather than something that will stifle the competition. With only 10,000 applications available in the Android market and more than 100,000 available for the iPhone, the Droid–or any Android phone–won’t be killing the iPhone anytime soon. What the Droid will do is advance the use and adoption of web content to a connected device. Android’s integration with popular and widespread Google applications such as Gmail, Google Calendar and Google Voice is a big help as is its ability to run multiple applications (up to six on the Droid). Most users do this on their computers so being able to listen to music while browsing the web and sending email makes a multi-tasking smartphone an appealing option.

The Competition to The Competition

The mobile marketplace is not just a faceoff between the iPhone and Droid; over the next few months, there are at least six new devices on deck that will have large screens like the Droid, keyboards (the Droid has both a virtual and physical keyboard), and an ever-increasing number of applications.

Nielsen’s data from Q3 2009 suggests that if you buy an Android phone, you’ll likely use more of the data features more often than if using any other smartphone.

Also, for the first time in Q3, Nielsen saw more users accessing the Internet on smartphone than that of feature phone users. If this trend continues, we’ll see more than 80% of the devices accessing the Internet being these advanced phones.

The Mobile Universe is Expanding

In Q3 2009, historically the slowest phone sales quarter, more than 25% of all phones sold were smartphones. Expect Q4 to have more than 40% of the new phones sold be smart devices. This is important to watch as smartphones are on track to be the majority of phones in the U.S. by 2011. Projecting Nielsen data out through 2010, we see smartphones crossing 50% of the market by the middle of 2011, roughly equal to 150 million users. This shift could happen much faster with the right conditions such as continued competitive price points on devices, lower “all you can eat” data packages and the increasing consumer need to be connected anytime, anywhere.

By mid-2011, the U.S. should be just over 300 million mobile subscribers. If we assume that we will have over 150 millions uses of smartphones (based on our projections) and that 80% of these users will access the Internet and 60% will access video (given the current data trend these assumptions may actually be low), this means that over 120 million mobile users will be on the Internet and 90 million will be watching video. What we have typically called the “third screen” is quickly becoming an extension of the first and second screens (TV and desktop viewing) especially in some key demographics. Note how Hispanics and African-Americans over-index on Mobile Video and Internet Usage.

Overall, we see mobile media growth accelerating over the next year with more users paying for video and premium content. Remember,  the mobile phone is the one media device that is always within reach. The trend in the U.S. is more interaction, more consumption, and more connected devices. While not a competition killer, the Droid is the next logical step in a market with a wide array of rich media devices. As that trend continues, the battle for better smartphones with better access to content will wind up seeing the consumer as the clear winner.

Online Buzz

With huge anticipation for the Modern Warfare sequel, online buzz levels from Nielsen have been consistently strong in the 4 weeks leading up to launch. At three weeks pre-launch, buzz levels spiked after Microsoft confirmed that the special edition Call of Duty: Modern Warfare 2 bundle would be available for the Xbox 360. Five days prior to release, the game’s launch trailer was posted on YouTube, which caused yet another surge in buzz, further fueled by ongoing discussion of high pre-order rates.

High Game Awareness and Anticipation

Data from Nielsen’s weekly Video Game Tracking service corroborates what the online buzz suggests: Active gamers are aware of and highly eager to experience Call of Duty: Modern Warfare 2. In addition, there is an expectation that the game will be high-quality. Key metrics for the game have been growing steadily since the title first appeared in tracking in May of this year, with Call of Duty: Modern Warfare 2 outperforming benchmarks across measures including awareness, purchase interest, rating and purchase urgency.

Active gamers know that Call of Duty: Modern Warfare 2 will be available, with current unaided awareness six times higher than historical benchmarks (12% vs. 2%, respectively) and aided awareness nearly triple that of the average video game release (71% vs. 26% on average). Last week, nearly half of the gamers aware of Call of Duty: Modern Warfare 2 report seeing the title advertised on television (46%) and approximately one-in-three (30%) note that word-of-mouth through friends, relatives or co-workers contributed to their awareness of the game while almost the same proportion (28%) saw an online preview/review.

While awareness is important, Nielsen data shows Call of Duty: Modern Warfare 2 is also a highly anticipated game, with 3 to 4 times the proportion of gamers in recent weeks indicating they would pre-order or buy the game in its first week of release compared to the average title (9-12% vs. 3% on average). Current definite purchase interest for Call of Duty: Modern Warfare 2 is nearly three times higher than for the average title (21% vs. 8%, respectively) and overall purchase interest is almost double (37% vs. 19%, respectively), suggesting strong demand for the title at retail. These potential buyers expect the game to be a good one, with those aware of the game rating it substantially better than average (7.7 vs. 6.8 on a ten-point scale).

Likely to Buy

In addition to buying high-profile titles like Modern Warfare, Nielsen Homescan for Video Game indicates that households that bought the original title spend nearly 3 times the amount of money on video game purchases annually vs. typical video game buying household, and even outspend the average household that purchases shooter titles more broadly. These higher purchase rates make Modern Warfare franchise fans valuable, highly desirable customers at retail – which is perhaps why we see a concerted effort to entice them to not only purchase the game itself, but also special editions and limited-edition consoles.

Nielsen data also shows that households purchasing Modern Warfare (across all platforms) were more likely to have children aged 13 to 17 (index 121), earn a household income of $100,000+ (index 148), and be of Asian descent (index 141) vs. the average game-buying household.

…and Eager to Play

If prior play rates are any indication, PC gamers in particular will be glued to their computers the minute they acquire Modern Warfare 2. Over the last twelve measured months from Nielsen’s GamePlay Metrics metered PC data, we see consistent and vibrant activity for the original Modern Warfare title. The average weekly gameplay on the single game mode was nearly two hours, while multiplayer consumed almost four hours per week. On average, nearly five sessions were logged per week, per player. Of note, multiplayer gameplay peaked in June 2009, when Nvidia sponsored a free multiplayer map pack download: during this month, the average weekly hours jumped to six.

Of course, other titles will have to move over to make room for some PC gamers’ marathon Modern Warfare 2 sessions in the coming weeks. Judging from Nielsen’s GamePlay Metrics, cross-title play data among the most recent (September 2009) players of the original Modern Warfare game, World of Warcraft, Call of Duty: World at War, and Half-Life 2 (in addition to COD: MW) are the most frequently alternately played titles that could experience a blip in PC play with the title’s launch. This list suggests that PC gamers who play the franchise skew toward the more traditional, hardcore gaming audience, corroborated by their 70% male, 54% ages 25-54 profile.