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Monday, 28 April 2014

TV and social media advertising

Strong words used by Alan Wurtzel, head of research at NBCUniversal will no doubt put a dent in social media ad budgets, already under pressure. As reported by a recent FT article, based on the results of analysis conducted on Comcast's airing of the Sochi  Winter Olympics, Mr Wurtzel claims that social media had little impact in augmenting the effect of TV ratings. "The emperor wears no cloths" were the words he used to summarize his verdict. Comcast's own data seem to be at odds with this diagnosis, however: 19% of viewers did some social media activity and overall 150 million 'additional' people were exposed to posts via social media overall. This compared to about 21 million TV viewers per day. While there is no doubt that TV's impact is much higher, social media's impact seems far from being insignificant! And this only after about a year of experimentation with the whole concept of connecting the two entertainment platforms. One should also speculate - to be checked - that the 19% posting on social media were younger people. No doubt, this group's size will grow larger and their social media activity become more intense over time. Just this effect appears to be significant. Bottom line: I wouldn't short social media stocks (further) just yet.... at least not based on this analysis!

Wednesday, 16 April 2014

Net neutrality

A number of academic papers have explored the issue of net neutrality in the last few years, many of the most state-of-the-art work being published as we speak. There are two particular papers that are noteworthy in this space. One is by Economides and Hermalin, which has appeared in RAND recently (2012) and the other is by Njoroge in Review of Network Economics. Both of these papers look at a fairly complex world with competing network providers, multiple regimes and heterogeneous consumers and content providers. The results are complicated and it is hard to provide clear cut recommendations. In a nutshell, a non-neutral regime allows network providers to extract more surplus from users and content providers, which also increases their incentives to invest in a higher quality network. Higher quality networks may also provide investment incentives to some content providers but may actually deter some others from participating altogether. So when the content providers are very heterogeneous, net neutrality might provide more overall welfare. It is also important to see that a key driver of the results is the amount of surplus that network providers can keep from the ecosystem. This may not only depend on the pricing regime but also on how much external competition they face. In other words, competition at the network level coupled with a liberal (i.e. not neutral) regulatory regime might actually provide a flexible and robust industry. What is clear from the academic research is that a regulator faces an extremely complex problem if it has to decide on net neutrality or even a restricted framework allowing some discrimination.

Thursday, 10 April 2014

News on News

One can read a lot nowadays about the News industry and, after a long time, the tone is rather optimistic. There is a lot of investment in news from various sources including philanthropists trying to save historical icons - e.g. The Washington Post, earlier entrants who disrupted the industry - e.g. Buzzfeed, well-established online platforms like Yahoo! or Facebook who want to keep their members on the platform and surprisingly also, from venture capitalists. The type of investment is very diverse too. Online outlets discover the value that journalists used to bring to the table and they tend to hire more people. "Curation" is all the talk nowadays, at least on this corner of the business. There is also a fair bit of investment going the other direction, into tools that analyze data (cutting out - if possible - human intervention). Given the easy access to various data sources, the idea is that there is always a niche audience for small bits of analyses / insights. A recent FT article describes in more detail this trend, rightfully wondering about the business viability of the model. Clearly, the disruption is far from over but at least there seems to be some money available for broad experimentation.