The China Vortex

Alibaba has announced plans to consolidate two of its subsidiaries into one company. Alimama is the company’s ad network for Chinese SMBs, and Taobao is the company’s auction platform, which is best known for dramatically driving eBay China out of the China market after eBay bought Eachnet.

This is likely a measure to counter Baidu’s plans to enter the e-commerce market. According to this report from Keso, Taobao has blocked Baidu’s spiders from crawling Alibaba. Spiders from other search engines are not blocked. It is very unusual to hear of one search engine’s spiders being singled out for blocking; I have never heard of this until now.

Can you say hardball?

Spiders are software programs used by search engines to crawl other websites; they detect changes in websites and report changes back to the mothership search engine which are used to update the search engine’s search index.

According to Keso’s report, Jack Ma of Alibaba believes that Alibaba’s SMB e-commerce platform represent the family jewels, and he already has enough users to allow him to make such a dramatic parting of way’s with Baidu. Baidu is currently China’s largest search engine player, with more than 60% market share.

For Baidu, losing the capability to crawl Alibaba’s sites represents a huge loss, and puts more pressure on their nascent e-commerce platform to succeed. Otherwise Baidu’s e-commerce search results will look very weak, just as e-commerce is showing signs of takeoff.

Now, Google China is the wild card which might benefit from the Alibaba/Baidu faceoff. Significantly, Google China’s spiders are not blocked from crawling Alibaba’s sites. Jack Ma has three options:

• Build his own search engine team which would build its own search engine to crawl Alibaba sites;
• Make Google.cn the default search engine for Alibaba and its subsidiary companys;
• Go to Google China and propose a joint venture company which would have a separate search engine to crawl Alibaba sites. Search advertising revenue would be split between the two companies.

From a technology perspective, search engines are more challenging to build. Specifically, they need to continuously update their search index, although if the search engine is only pointed at the Alibaba community, it would not be as difficult. Search engines need to be continuously updated and modified to get accurate search results, although optimization on organic and paid search are very different in how they are updated and modified.

From the SMB users’ perspective, the key to success is providing a smooth and transparent transition between search advertising and online business transactions. Bad user experience has led to the downfall of many a business, most recently eBay in the US, which has continuously raised fees on its auction platform, driving away its originally fanatical loyal user base, and forcing it into a retail model which competes on unfavorable terms with Amazon, the online retail ecommerce leader in the US.

Things are getting interesting…

Technorati Tags: alibaba, alimama, amazon, auction, baidu, China, Chinese, ebay, ecommerce, programming, search, taobao, user_experience

Search engine marketing is the main engine behind Google’s rise as a major online media player, and the product it is offered in is Google Adwords, which allows advertisers to directly target their online ads by selecting keywords, and then targeting them to relevant search results pages and to published pages (using Google’s publisher’s network, Adsense).

In China, the leading search engine company is Baidu, which started in the US, but came to China, and is now the most popular search engine among Chinese Internet users. It has been financially successful, and is listed on the US’s Nasdaq under the symbol BIDU

There are several reasons for Google Adword’s success, and the most important are two: PageRank, which measures the popularity of a web page by measuring inbound links which for the most part, are selected by humans and not computer algorithms, and introducing relevance into the keywords auction model. Under the Google model, paying the highest price for a keyword is not enough to insure clickthrus (for the most part, Google charges advertisers per click, or pay-per-click PPC), but it must be relevant. The more relevant it is, the more clickthrus it will get, and the less an advertiser will have to pay for a higher ranking.

As this excellent article makes clear, Google did not invent the keyword auction model, but it did perfect it. By perfecting the Google Adwords model, Google has become the hugely profitable online media machine it is.

As China becomes more important as a market, more advertisers are looking to sell directly into the Chinese market using Google and Baidu, the two leading search engine firms in the Chinese market. Baidu operates under a very different business model from Google, one which it has adapted to suit the Chinese market.

My understanding is that Baidu does not figure relevancy into its advertising fee structure, Chinese advertisers only pay for higher ranking. As far as I know, Baidu does not have anything like PageRank inbound linking algorithm to count inbound links either. Without these two elements, Baidu’s ad search looks a lot like the GoTo.com ad model. This makes it fundamentally different from the Google Adwords model.

I’m digging deeper into the search engine marketing business in China, and want to hear what you would like to know about. If you have questions, please post them in English or Chinese in the comments below.

Technorati Tags: adsense, adwords, auction, baidu, China, Chinese, engine, google, keywords, marketing, optimization, pagerank, ppc, relevance, relevancy, search, sem, seo

Several days ago, a different kind of earthquake happened in China in the telecoms field. Unlike the Sichuan earthquake which took so many lives and caused so much damage, this shakeup was not unexpected. It’s ramifications will be large, if not huge, and it’s worth going into some depth to get a deeper understanding of how this change will affect the development of mobile usage of the Internet in China.

Before leaving the Sichuan earthquake as a subject, I would like to point you to this excellent slideshow by CIC Data (h/t to Tangos Chan) which shows how China’s grassroots social media has helped in the disaster rescue and recovery process.

China’s New Telecom Landscape

The main points of the new joint interagency government announcement by the MII (Ministry of Information Industry), NDRC (National Development and Reform Commission) and Ministry of Finance (MOF) are phrased as an opinion and encouragement. (Note: When you get two government ministries and one super-ministry “encouraging” you this way, you do what you are encouraged to do, even if you are China Mobile and have the largest single-country number of subscribers in the world. After all, this is China, not the US, where big corporations tell Congress and the executive through lobbyists and lawyers what they want and are willing to do, and then sell it to the American people through the media as “being in the best interests of the people”.)

The main points are:

• China Telecom is “encouraged” to acquire the CDMA business of China Unicom
• China Unicom and China Netcom are encouraged to merge
• The basic telecom service of China Satellite should be merged into China Telecom
• China Tietong (part of the railways infrastructure and the third fixed line operator after China Unicom and China Netcom) is to become a wholly-owned subsidiary of China Mobile

All six operators (China Mobile, China Telecom, China Unicom, China Netcom, China Satellite and China Tietong) have been asked to separately submit their implementation plans to the relevant ministries where they will be encouraged (again) to reconcile their different plans and agree on a schedule. Once this is completed, the Chinese government will then announce the granting of the three 3G licenses and which operators they will go to.

Following the reorganization, there will be three companies left, which meshes perfectly with the number of 3G licenses to be granted by the government. There will be one license granted for each of the new 3G technologies: TD-SCDMA (China’s natively-developed standard), CDMA2000 and WCDMA. Current opinion is that China Mobile will get the TD-SCDMA license, with China Unicom and China Telecom getting the other two foreign technology licenses.

Reaction

The immediate reaction on the HKSE, where China Mobile, China Unicom, China Netcom and China Telecom are listed was unfavorable to China Mobile, the giant in the mobile sector in China. Goldman Sachs issued a sell rating on China Mobile.

You can bet that the six companies will be burning the midnight oil to complete and submit their implementation plans so that they can get the 3G licenses as soon as possible, which should be sometime within the next 3-6 months. Most likely it will not happen before the Beijing Olympics, even though the network infrastructure is there, simply because there is a lot of training and testing to be done.

My Take

This change marks the end of the first stage of the rollout of mobile phone services in China. While China has the largest single-country number of mobile subscribers, most people use mobile overwhelmingly only for voice and SMS services. From a business standpoint, China’s telecom industry has been in a wait-and-see mode for the past two years.

This second generation, or next stage of mobile services will be about a renewed rollout and introduction of more data services, and the more important metric for the operators will be ARPU (average revenue per user) instead of number of subscribers. So please, let’s stop talking about number of subscribers, and let’s talk about ARPU instead from now on.

ARPU will be the real metric to measure the performance of the three operators. I say “It’s about time!”

This change opens crack and opportunities for investment and new players, and gives more choices to Chinese consumers. China Mobile, the industry leader in mobile services, has continued to expand the number of subscribers, having the world’s largest number of subscribers in one country, with more than 500M. China Unicom has been playing catchup because it started as a CDMA service provider (as opposed to China Mobile’s GSM) and although it also later entered the GSM field. The small independent mobile operators such as Tom.com, Linktone and KongZhong have all languished because China Mobile was seen as the dominant player which wanted to completely dominate the platform and application-level services. While it would be a real challenge for those companies to claw their way back to health, venture capital and private equity firms can now look more favorably at the next generation of mobile services, which will no longer be as dependent on a single mobile provider, since there are now three choices available, and they will differentiate on the basis of how they cooperate with service providers and services they offer to Chinese consumers.

In order for Chinese startups to survive and prosper, they will increasingly differentiate themselves on their business and execution skills instead of just technology. Good management will be key.

It goes without saying that Apple’s iPhone will be the most high-profile beneficiary of the change, since it will have two other mobile operators to talk to besides just China Mobile. Instead of just having a loyal base of hacked iPhone users in China, Apple will have a chance to test its vision of the mobile Internet with Chinese users.

The major handset makers such as Nokia, Sony-Ericsson and Samsung will also want to test their application services among Chinese users, and will have greater chance of reaching them.

There are many opportunities in search and display advertising, and subscription-based services. Most of these opportunities are not infrastructure-related, but service- and tool-related. I will talk about some of these opportunities in the future.

While this is a short-term setback for China Mobile, it will ultimately help the company because instead of becoming a lazy monopolist offering bad services, it will have to compete on service. This will make the company more competitive when China starts planning seriously for 4G.

I give the plan an enthusiastic “thumbs-up”!

This is a good example of central planning working to help competitiveness, and in favor of consumers.

It would be nice if, ahem, other countries with large consumer markets, took a closer look at this move and how it helps competitiveness.

Technorati Tags: 3G, advertising, arpu, BBS, cdma, cdma2000, China, chinamobile, chinanetcom, chinatelecom, display, earthquake, gsm, internet, policy, search, sichuan, td_scdma, telcos, telecom, US, wcdma

Google China’s blog (in Chinese) mentions a Google search query log which dramatically shows the moment of silence and mourning on 2:28PM on May 19 for the victims of the May 12 earthquake in Sichuan.

Apparently, even Google search queries fell off dramatically during that three-minute moment of silence where Chinese stopped everything they were doing to observe a moment of silence.

The graph says it all.

Technorati Tags: China, earthquake, google, log, mourning, query, search, sichuan

Google China announced their launch of Google China People Search in the Google China blog to help victims and their relatives get in touch with each other. I have chosen to translate the announcement in full, and have included the original hyperlinks in the story.

Aside from the human tragedy, this is an excellent study in how Chinese Internet users turn to the BBS (all of the links except for the disaster area search platform below are to BBSes) during times of emergency.

As of this morning (May 16), there are 19,579 casualties, and total fatalities are estimated to total more than 50,000. Many families are continuously looking for their loved ones, in the hope that they will be able to find them safe.

Google China’s engineers, after working more than 24 hours, have created the disaster area search platform. We have attempted to gather information from across the Internet to make it easier for users to get information. Our objective is to create a platform where bravery and hope can meet.

We hope that your loved ones are not among the long list of fatalities. Maybe they are searching for victims in ruined buildings, maybe they are caring for the injured in a hospital, maybe they are feeding a child somewhere. Maybe they will hear our call and know that they are not alone in this disaster.

If you have any information about people you know who are involved in this disaster, please post their information to Tianya Laiba, Baidu Tieba, Soso Search, Sina, and Netease. You can also send email to us. Our engineers are at work 24 hours and we will regularly update our information.

Google’s influence in China is small, so we have made this code available to everyone. Any blog and website can include this code in their website so that more people and websites can join in this search.

This is a long recovery process and there is much more work to be done. May heaven protect China, and we hope that your loved ones will be safe.

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寻找灾区的亲人

Technorati Tags: baidu, BBS, China, disaster, earthquake, google, netease, people, search, sina, sohu, soso, tianya, victims

This article is a follow-up posting to my previous article about why China Mobile should buy Baidu.

One of the rules for mergers and acquisitions is that if one company wants to be acquired by another company, they have to be moving in generally the same directions. This way, less management attention needs to be spent on changing direction and redirecting resources.

If we take a look at China Mobile, they are a Chinese company which has been looking aggressively outside of China. With 500M+ mobile phone subscribers in China, it has the user base and cash flow to be truly a world-class company. China Mobile is proposing to set up a development lab with Vodafone and Softbank to work on widgets and others services to offer China Mobile and Vodafone subscribers. From the surface, it appears that these two leading carriers are trying to wrestle some of their technology dominance back from Apple’s iPhone, which will offer its own Apple App Store, selling mobile apps directly to Apple iPhone users beginning in June.

Interestingly, Vodafone is helping to bring Apple’s iPhone into the Indian market. According to a recent article, Apple may be discussing launching the iPhone officially in China with China Unicom. (Note: I disagree the author’s tone about Apple not getting it right in selling in China, I think that Steve Jobs knows very well what he is doing, and is biding his time until the 3G iPhone comes out in June. China is another piece on his chessboard, albeit a very important one.)

On the business side, China Mobile has been most agressive in Pakistan, following on its purchase of Paktel in 2007, and has just launched its Mobile Zone in the country. This looks like a test learning market for China Mobile. There are not many companies which can afford to “test” in a country with a population of 180M, China Mobile is one of them.

Based on this, it would be fair to say that China Mobile is leaning forward into overseas markets. It has enough money in its coffers to expand more quickly, but the most serious barrier is lack of international management talent who can execute in non-Chinese markets.

In contrast, Baidu is much more focused on the Chinese domestic market, where it continues to grow and pull ahead of Google. Everything suggests that the Baidu management believes that there is much more room for revenue growth domestically in China. The only tentative step Baidu has taken outside of the China market is with Baidu Japan (baidu.jp), which has only 0.3% of the Japanese search market.

Compared to Google, Baidu still continues to go after the easy money in China. Google continuously introduces and refines it search algorithms which are the secret sauce of its success. In comparison, Baidu relies less on search algorithms, instead using human search to assist in search results.

Baidu’s search results are also fundamentally different from Google’s. While Google’s search results strictly differentiate between unpaid organic search and PPC advertising, Baidu makes no such differentiation. The end result is that unpaid search results are pushed further back in position on the search results pages.

If there is one challenge in Baidu’s reliance on human-assisted search (as opposed to automated search algorithms as Google uses) and giving preference to paid advertising over unpaid in search results, it is that while it boosts revenue in the short-term, it is not extensible outside China, except for some of the other East Asian markets (Naver.com in South Korea is one such example. It would be nearly impossible for Baidu to oust Naver.com from its leading position as the home-grown leader in that very nationalistic market.)

Here lies the challenge: China Mobile is looking outside of China now, and Baidu is still looking to grow revenue on the domestic market, while nearly ignoring the overseas market.

Is there room to narrow the gap and create a new company for mobile search advertising and location services, first in China and then which can be extended overseas?

That is the challenge.

Technorati Tags: advertising, Apple, baidu, China, chinamobile, iPhone, pakisitan, paktel, search, softbank, vodafone

A few days ago I read an interview with Steve Jobs published in Fortune in March. One of the ideas which Steve Jobs put forth is that you really need to understand the technology issues, then follow how they will roll out in order to be successful. Apple has a certain advantage because it owns the operating system and the hardware. This means that the hardware and technology can be integrated much more tightly together.

This makes me think that one of the issues with the current media and advertising space in China is that there is not enough understanding of the integration of the hardware and software. Basically, DoubleClick came up with the idea of the banner ad, then Google came up with the idea which came from came up with the idea of PPC advertising on the search results page, and the algorithms which would optimize the system to become a money machine for Google. For too long, players in this space have come from the media space, offering a “me too” solution full of buzzwords but with little real content to differentiate.

What did Google do which was so different from Yahoo!, the leading Web 1.0 portal? They got very close to the technology, to the point where they built the servers and disks, and created MapReduce, Google’s search technology which could run on huge clusters.

Now, I hear a lot of talk about all the startups in China, but most of the time, I don’t see how any new technology is used to take a whole new look at how advertising should be delivered over a complex network. Most are consumer plays which do not deliver anything spectacular. That would not be an issue if they had a good feel for the marketing process, but more often than not, they do not. As a result, most advertising buys gravitate to the big online media companies, which include Sina, Sohu, Netease and QQ, as Kaiser Kuo frequently talks about in his blog at Ogilvy China Digital Watch.

In fact, we are just at the beginning of a whole new wave for technology and advertising: this is the mobile wave. Handset makers now only pay US$15 per handset for software, and with the upcoming development and launch of Google’s Android, per handset payouts are going to go down even more. This means only one thing: there will have to be a steady advertising revenue stream to finance all the content. The mobile network though is not one network, it will have to be two:

• The search and search results network including GPS location-based detection
• The network delivery system

In software development, there is the MVC or model/view/controller system for software design. The rules are defined at the model level, there is the presentation end for how the viewer sees the content (Apple is now taking a grab at this with the Apple iPhone) for view and the controller, which connects the rules at the model level with the view, and handles delivery.

Basically, Apple is trying to leverage its control of the iPhone audience at the view level to get leverage with the carriers, who act at the model level. In some markets it has been successful, but not with China Mobile so far. The handset makers such as Nokia, Samsung, and LG have solutions, but since their product lines are spread across so many products, they have little leverage unless they came up with their own operating system and hardware as Apple has. What are the chances of that happening? Microsoft has a solution with Microsoft Windows Mobile, but it is just one among many players and does not have a dominating position on any of the model, view and controller levels of the mobile network.

China Mobile has made no secret of its plans to control the platform as much as possible by virtue of its near-monopoly role in this space. Ultimately, it will have to make marketing choices about what audience it wants to serve: the casual youth market or the productivity worker, and how to maximize revenue from the market they choose. The only way for them to avoid having to make this choice is to offer contextual advertising on the mobile network. It would make a lot of sense for China Mobile to buy Baidu to protect its mobile advertising revenue stream from Google, and then make a serious technology effort to combine improved search algorithms with location services. Search technology involves a great deal of non-trivial technology which cannot be easily replicated, even by a company as huge as China Mobile.

As for smaller players, they will have to come up with ways to get revenue from a market which has been bombarded with a huge amount of free content.

Google has a tremendous advantage with the Google Android operating system, which will have hooks built into it for search and location services. If you think that they are giving a mobile phone OS away for free just because they are nice people, you are delusional. They are offering a new mobile ad platform with other services to attract developers.

I expect that the mobile network will very soon become the “smart network” compared to the PC-based network, which will become the “dumb network” because it does not have location sensitivity. (Of course, newer computers will have location sensitivity. This will then combine with Google’s current services to deliver ads which will make the current ad networks look like something from the Stone Age.) The PC network will continue to be good for banner and brand advertising, but if you really want smart contextual advertising which operates on a PPC basis, mobile will be the leader.

The smaller mobile players will have to pay “toll fees” to the model (China Mobile, China Unicom, etc,.) and view (Apple) players. It will be much harder to get onto the technology ramp for mobile than it is for the PC, at least in the beginning.

Technorati Tags: android, Apple, baidu, China, chinamobile, doubleclick, google, gps, iPhone, lg, microsoft, Nokia, samsung, search, stevejobs, yahoo

The quality and amount of discourse on the proposed takeover of Yahoo! by Microsoft has had my bullshit meter jumping off the charts, and I felt I just had to chime in.

Paul Kedrosky summed it up best when he said that it would benefit Google the most. Anyone with half a brain and who has worked in corporate management more than one week knows that the most painful thing to do in business is to grow by acquisition. Acquisitions are especially hard to do in a market which has matured relatively quickly in the US, such as search advertising. But analysts and senior management sometimes like to do acquisitions because it creates a lot of buzz. And in the lousy US market nowadays, any buzz which does not include the keyword “subprime” is welcome buzz.

Organic growth is the much better way, and in the long run, yields better results. A lot of early Google talent has been cashing in their chips and leaving the company; shouldn’t Microsoft focus on hiring some of those very smart people to beef up their search offerings? Wouldn’t that be a better way to catch up to Google’s search technology? Yes, and I’m sure that Microsoft is doing that right now, but it doesn’t capture the imagination of the old media folks the way Microsoft! would.

“Let’s toss a big fat red herring to the dumb masses!”

In spite of its management problems, Microsoft still has a formidable technology pool of talent. The fact that it cannot create an operating system as reliable as Apple’s Leopard even though it has more than three times the number of employees is more a testament to bad management of talent and resources than to anything else. It could even be argued that Ubuntu Linux has a friendlier and more stable operating system, and it has almost no revenue, and almost everyone working on it is a volunteer!

So why does Microsoft’s Steve Ballmer want to do this deal? I see it as hail-Mary desperation pass to show that he is “doing something”. If you are saying that it is useless and dumb, then you have a problem. You see, you have committed the unforgiveable sin of looking too closely and thinking too much.

Shame on you!

To add to the entertainment value of this show, Google has jumped in with claims that it is seeking to protect the “openness of the Internet from a closed company like Microsoft”. Now, I have had many images of the Internet, but I have never quite had the image of the Internet as this beautiful bride about to be horribly ravished by some mean thug in the northwest. As a matter of fact, I think that the Internet has been ravished many times before, continues to be ravished, and somehow manages to live with it and get along with life.

Now, if Google has suddenly discovered that Microsoft is closed, why should it limit itself to complaining about Microsoft? Why not go after nation-states which are not famous for openness, and frequently tinker with the “openness” of the Internet. If they have any trouble thinking of any, they are welcome to call me.

I could easily come up with more than 190 names.

So Google can now also score points with your senile old grandfather, the one who criticized Microsoft for being a monopoly way back in the 90s, but still makes sure to keep his copies of Microsoft Office current.

YEAH, GOOGLE STANDS FOR OPENNESS!

Now, to add to Uncle Steve’s general cluelessness, he comes out with this gem stating that Google has no products, it only has search. He may not have heard it, but there is a whole bunch of businesses which don’t have products; they’re called services.

Yes, Google doesn’t have any products; it only has services. But the services produce something called search advertising revenue by matching advertisers with content providers using keywords and taking a chunk of revenue in the process.

Do you think that Steve knows why he’s buying Yahoo?

Frightening thought, isn’t it?

Technorati Tags: acquisitions, advertising, google, keywords, microsoft, paulkedrosky, products, revenue, search, services, steveballmer, yahoo

Everything else being equal, it is safe to assume that human language-specific search should closely map to populations. For example, the US population is 300M, Canada’s is about 30M, the UK is about 60M, and Australia is about 15M and New Zealand is about 4M. These are the main English-speaking populations, and they total about 4.1B, and make up most English-language search. Of course, there are many other English speakers living in other countries, and there are many non-native speakers who also choose to search in English for their own reasons.

Most of them use Google as their leading search engine.

There are about 1.3B Chinese who use Chinese as their language of choice for search; for the most part, they use Baidu.

If the Chinese searched as much and as frequently as Americans, Canadians, Britons, Australians and New Zealanders combined, it is safe to assume that Baidu’s Chinese-language search would have about three times the volume of Google’s English language search.

This has not happened yet, but this report shows that the growth trend for Baidu’s Chinese language search is beginning, since it has already overtaken Microsoft, according to this report from Techcrunch. In China, Baidu commands more than 60% of the search market share, while Google’s Chinese-language search in China has only 20+%, and the gap appears to be growing…

In the US, Google is putting its efforts into the mobile Internet, and sees the mobile phone as soon replacing the PC-based Internet as the access device of choice for most people, even in the US. In China, South Korea, Japan and Europe, the mobile phone already is the access device used by most people, which accounts for the huge volume of SMS traffic.

Google Android is the major part of Google’s effort to define a mobile platform for communications. Since the Chinese carriers, especially China Mobile, and Baidu, have not yet defined an SDK for the mobile platform, many assume that Google will soon have a mobile strategy in China which will turn the tables on its Chinese competitors.

My answer to this: “Dream on…”

China Mobile has a well-deserved reputation as a very tough company to deal with in China, but they are not stupid…

The Economist has an excellent article on Rupert Murdoch which is in fact a review of a book titled: “Rupert’s Adverntures in China: How Murdoch Lost A Fortune and Found A Wife”.

All’s well that ends well…

It makes me wonder if the presence and performance of many western companies in China can be explained as company-financed executive wife searches?

Maybe Google should take heed.

Technorati Tags: australia, baidu, canada, China, chinamobile, economist, google, microsoft, mobile, murdoch, newzealand, rupertmurdoch, search, US

Readers know that I have spent quite some time thinking about how the Internet and online advertising will affect the whole overall advertising industry. A recent post on Ogilvy China Digital Watch made me think more about how some of the changes the rapid rise in online advertising spending will affect the advertising industry as a whole.

The advertising industry grew at a time when the divisions and demarcations between different media and media audiences were very clear (TV, radio, print and below the line advertising). It was a good business, and permitted the ad agencies to buy large amounts of media, then resell it to their advertisers, while offering other services (creative, PR, direct mail, etc.) on top as value-added services. Advertising could be divided into brand advertising for global brands and more targeted ads for small local clients. All in all, it was a good service business with healthy margins.

That whole business model has been blown apart with the Internet, and ad agencies are adjusting to the changes. These changes are just starting, and will ripple out to affect other services as well.

The single greatest change brought by the Internet is the shortening of the business cycle. People have more things to do, which means that they need to make decisions, even important decisions, in much shorter time cycles. This means that if they want to find out something about a product/service, they want to know it in as short a time as possible.

This has been enabled by search, a business which Google has built to near-perfection. Add advertising to search results, and you have the Google money machine. Advertising appears in a welcome context instead of being disruptive.

Search advertising has had some negative effect on brand advertising because it is possible, in a very short time, to find out what others are saying about a given product or service. This is not the line from the corporation, but what other buyers are saying. More disruption of the communications process.

The immediate effect for ad agencies is that their whole time-cycle has been disrupted. Instead of the normal annual budgets and precious planning time which goes into big-budget ad campaigns, more corporate attention is going to fighting fires, which usually fall into the PR realm. The agencies are trying to protect their creative and media teams from this hyper speed development cycle in-house, but it is impossible to control what is happening on the advertising client’s side, who is getting continuously distracted by what sounds like noise and chatter.

What is the ad agency to do in order to adapt and survive?

First of all, it is necessary to tell the clients that it is no longer possible to control the message to the customers. The customers are talking back, and there is no way to tell them to shut up. A lot of the customer feedback is noise, but there are also very valuable pieces of information in there.

There is a need for a new kind of ad agency warrior who can go out there and slay the dragons , and collect the valuable information and give it back to the creative teams and client so that they can act on that information in its product and marketing cycle.

Here are my draft job requirements for an ideal candidate:

• Information researcher, able to use Internet and mobile tools to monitor client-relevant information in real-time;
• Able to engage with client at all levels (executive and manager) to understand evolving client needs, and to report in real-time on rapid changes in market situation;
• Able to understand client’s corporate position and voice, and act as a responsible spokesperson and advocate in the digital realm while upholding client’s integrity;
• Understands how to communicate to different clients on different levels and is able to quickly adjust accordingly
• Can quickly analyze and learn and communicate this information back to creative and media teams and back to client on a frequent basis;
• Proactively pushes out information to other team members and clients for their use;
• Comfortable working with amorphous teams which are changing on a constant basis;
• Is comfortable communicating in at least two human languages;

Requirements:

• More than two years’ blogging experience, including acting as an advocate for a product/service;
• Knowledge of SEO tools and terminology;
• Understanding of corporate structures and organizations and how they work, and how to get things done in them;
• Must love doing things fast and independently

Notice that I didn’t include academic credentials? I told you that we needed a new kind of ad agency warrior, didn’t I?

Technorati Tags: advertising, agencies, brand, digital, directmail, google, internet, ogilvy, PR, print, radio, search, TV