Marketing Japan: Why Google Worries About its Own Future....

By Mike in Tokyo Rogers

Google is dominating the Internet scene today and seems like they have destroyed the competition. But did you know that there are rumblings below the surface? Did you know that Google themselves fear for their position in the long run? It's true.

If you stop to think about it for a few moments, you can see where Google may be headed for some bad times in the very near future. Some reasons have to do with Google being so good at what they do that they have created a hole in their armor that can be exploited.

Today, I will lay out just a few of the reasons that Google and outside Internet experts alike seem to think that Google won't be king of the hill for too much longer. Here's why....

Have you ever asked the question, "Where will Google be in 10 years?"

I think a look at what has happened to major terrestrial TV broadcasting stations, or what has happened to Rock "hit" radio in recent years is a good indicator of what might probably happen to Google. If you consider the shape these two entities - TV and radio - are in today, as compared with their dominant position just 15 years ago, then it's not too far of a stretch of the imagination to see Google as, perhaps not a bit player, but not the dominant player.

Why?

I think it has to do with a few things; first the fracturing of the audience and the variety of choice given to us by the Internet due to the Long Tail. Because the Internet allows us so much choice, that choice allows people to exercise their quite unique individual tastes. This is damaging the "hit" market and exponentially growing the "niche" market. When people have many choices, they will exercise that choice.

When there were only 4 types of jam for toast, for example; strawberry, grape, blueberry or orange marmalade, people bought one of those. Now that there are hundreds - and the online stores can carry thousands - people are buying the peach, plum, or Canadian Boysenberry.

When a customer, buys one product, like Canadian Boysenberry, that's money displaced that takes away from a purchase of generic strawberry. That is what is called, "the Long Tail."

(See brief information on the Long Tail see "A Primer on the Long tail" here and "Is the Long Tail all Junk" here. For an in-depth analysis, please read Chris Anderson's definitive work in The Long Tail.)

The Long Tail

What does all this have to do with Google? Ah, there is the crux.

Think of Google search engine like a TV station. The TV station must have very broad appeal in order to survive... Today, this broad appeal actually has started working against them in the long run.

Take the example I often use of TV Tokyo. Let's compare TV Tokyo and, the Food Channel on TV:

TV Tokyo has over 1,000 employees.
Food Channel TV has about 20 employees.

TV Tokyo has a extremely wide target audience of anywhere between 6-years-old kids to 84-year-old seniors.
Food Channel TV has a focused target audience of women between 34-years-old to 50-years-old.

It costs about $150,000 (USD) to buy 25 commercials on TV Tokyo.
It costs about $8,000 (USD) to buy 25 commercials on Food Channel.

Now, the question is; "You are a manufacturer of kitchen appliances and cook ware. Where will you advertise?"

It is obvious that you will take the focused marketing that the Food Channel offers.... Now, extrapolate this into every segment of manufacturing, goods, services and possible sponsorships. What do you get?

You get a market that demands specialization. Isn't it obvious? Isn't that the way everything has been going? What restaurants do well? The family restaurant that has everything, but nothing is especially tasty, or the specialization restaurant that only serves, say, Italian food, or the sushi shop, or the Chinese restaurant?

The catch-all shops are, in many ways, still useful and profitable (see WalMart), but they are getting fierce competition from specialization and will be in the future. People, when given a choice, will choice specialization.

I touched on that in more detail here in "Marketing Japan: Why Digital Conversion Will Destroy TV Tokyo and TBS":

When there are 300 TV channels competing for your attention and sponsor's money - both of these critical factors to the survival of TV (audience and money) will be more widely dispersed.

Think of it this way: You are the maker of, say, outdoor goods like tents, bicycles and barbeques. Say, the price for 25 TV ads on a TV station like TV Tokyo is about $150,000 (USD). The price of 35 TV ads on the sports channel is $14,000. Sure there are more viewers on TV Tokyo, but Sports TV offers a targeted audience of men who like sports (and, by the way, many are probably are married, have families, and like the outdoors).... TV Tokyo's audience ranges from 10-year-olds to 80-year-olds; Sports TV target audience is mainly 30 ~ 50-year-old men.

Now, where would you spend the money if you were the sponsor? 

It is obvious that you would go for the Sports TV. It will be the same for all manufacturers whether they make diapers or women's fashion brand shoes. The diaspora of audience will make targeting even more important as time goes by.

Now, keep this in mind... Sit back and consider... Like I said, if Google were a TV station... Google is a catch all search engine... Whatever you want to search for, Google search engine has...

But wait a minute! What about specialization?

What if some smart Internet site, say a Food Channel, decides that they wanted to corner the market for Internet searches for "Food" and anything at all related to just food and food only.

Some might say, well, "Google will make one too..."

No, they won't... They can't... They might try though...

Think back to the Long Tail and all the millions and billions (more!) niches there are! There are niches inside of niches! Google cannot compete with that...

But a small company focusing on their niche and that niche only can... And they can do very well at it.

Then imagine that every niche in the world had their own search engine. Think of it; anything to do with cars might have their own specific search engine, travel only (then inside of "travel only" sub-niches like "Travel in Western Europe" or "Travel in Lower New Jersey"); the same with sports, medicine, shopping for women's clothes, you name it.

Can you see? Google could never keep up with that.

Google would become like today's catch all TV station and the niche search engines would eat them up.

From what I am seeing, I am beginning to think that this is inevitable... I suspect that Google does too!

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Keywords:
Google search engine, mike rogers, Marketing Japan, Google, Long Tail, travel, food, TV, TV Tokyo, sports, medicine, cars,  The long Tail, Chris Anderson,  Mike in Tokyo Rogers, niche, niches

Marketing Japan: Is the Long Tail all Junk?

By Mike in Tokyo Rogers

After reading my "Primer on the Long Tail" where I explained what the Long Tail really is, one kind reader wrote to me claiming that most of the stuff (products, services and merchandise) on the Long Tail is "crap" and claimed that the proof in this lay in the fact that the average product in the Long Tail doesn't sell well. This, he claimed, is logical because he reasoned that it doesn't sell well because the average person doesn't want to buy it. So, in his reasoning, if the average person doesn't like it, then it hasn't mass appeal; If it hasn't mass appeal then it doesn't sell well so it must not be "good."

He claimed that sales are the ultimate determining factor in deciding whether or not something is "Good" or "Bad."

Is this pile of junk the Top 40 Charts or the Long Tail? You decide!

Well, I won't go into the subjectiveness of "Good" or "Bad" as what I think is good you might not like or vice-versa (or what is an "average person" - I like to think that I am not average and I hope most people realize that they are special too!) But the idea that one person's "Good" translates into "Everyone's Good" is, I believe, a little bit too simplistic so, I think you will have to find someone more intelligent than I to debate that point with you. But! I will show you how, without a doubt, for many smart companies who are doing intelligent business in Japan, the Long Tail provides them with better sales, profits and opportunities than the "hit" products. And I will prove to you, once again without a doubt that, when it comes to quality, what the the "average person" buys can often be a poor indicator of quality.

Popular and best selling? Yes. Quality? No comment (not from me at least).

The evidence of the booming business that the Long Tail offers on the Internet is all around, but even with that, some people refuse to see it, so I'll make some simple examples today.

Like I said, sure there is a lot of junk on the Long Tail, but there's a lot of junk at the top of the best seller list too. Would anyone argue that there's not a lot of crap on the, say, hit charts of popular music too?

Whether something sells well or not, is not completely a measure of it being "Good" or "Bad"; it is also a a factor in whether or not something was promoted or marketed well. It has to do with distribution problems and whether or not there was enough shelf space for it in a brick and mortar store.

I disagree that sales, in and of themselves, is a measure of "Good" or "Bad" and, once again, would like to point out what Chris Anderson wrote in The Long Tail to support my arguments. On page 118 it says,

"...for many people, the best stuff is in the Tail. If you're interested in Audiophile stereo equipment, the finest equipment is not going to be among the best sellers at Best Buy."

Think about that, that's exactly right. The best stereo equipment in the world would never be a top ten seller at a discount electronics shop or at K-Mart. Those places sell cheap boom-boxes imported from Asia. The best equipment would have to come from a specialist shop. I doubt that the average person is spending over ten or twenty thousand dollars for the world's best component stereo equipment. I won't argue that the average person is scooping up the compact, battery powered, CD, cassette, radio made in China that K-Mart has marked down to $8.99 for after Christmas clearance.

No arguments there. K-Mart also sells a guitar for $24.99 too... But I think you'd have a very hard time finding a professional quality Gibson or Fender for that low, low price - holiday clearance or not (OK, well, perhaps during the coming of the Four Horsemen of the Apocalyse!)

OK. I think anyone would agree with me on the examples above. Yes?

Now, I'd like to point out that, when done correctly, a company in the year 2010 and beyond can sell and profit more through exploitation of the Long Tail and products residing in the Long Tail market more than they can by just selling hit products.

Because the Long Tail offers a virtually unending source of goods, then niche marketing can find the perfect product to fit exactly what the customer wants... Not so with a brick and mortar store! Think about this: How many times have you gone to the store to buy something but couldn't find exactly what you wanted, so you settled on the next best thing? I know I have many times.

This should never happen with Long Tail retailers.... You search for what you want; find other customer reviews and recommendations, and order the best product to fit your needs. Not a product that is the least of two evils.

Read The Rhino Records Story here

A good case in point how this niche marketing can be hugely profitable is Rhino Records. When I was a student in California in the late 1970's, I used to go to Rhino Records store in West Los Angeles. It seems to me that they had two shops at that time. I thought Rhino Records was dirty and dingy but I also thought it was cool as they sold 60's music as well as the local underground Punk bands too.

Rhino built a strong and loyal niche in that market for the Punk Music, underground, and 1960's psychedelia.... The story would have ended there, but they later made a deal with Capitol Records where they would remaster old Capitol back catalogue and re release it under the Rhino name. From that one deal, Rhino Records became a force to be reckoned with in the music industry.

Rhino Records didn't release big selling artists nor Top 40, yet they became one of the most respected and profitable record labels in the United States. They got that way by being cool and having street credibility. Credibility is hard to get, it is even harder to buy. Rhino got it by sticking to their guns and only marketing to a niche audience... A niche audience who, by the way, were sick of the big stars and the top sellers.

And all from releasing old material and back catalogue.

There is a huge opportunity for all of us in the Long Tail. The Long Tail, like Punk Rock in the 1970's, is taking the market out of the hands of the big corporations and bringing it back to the people.

And that is a key factor here: The Internet is bringing back business into the hands of the people; whether it be a small businessman promoting his company through blogs and blogging, video blogs (vlogs), Social Media and networking sites like Facebook, Linkedin or Mixi; to the housewife who has started a business out of her home utilizing Pick, Twitter, YouTube or U-Stream to freely promote herself and her business, the Internet has opened up an entirely new world to all of us.  

The Long Tail has lots of junk to be sure; but one man's trash is another man's treasure and, on top of that - say in the case of a record store  - the Long Tail has millions and millions of titles whereas the local record store has how many? A few thousand?

So, where do you want to shop? The Long Tail businesses that have these millions of items  - and the list keeps growing longer day by day - that are easy to find at the tips of your fingers from the comfort of your own home, or do you want to have to get up and travel to the brick and mortar shop that only sells a limited number of items in the hopes that they might have what is merely acceptable to you?

Your choice.

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Marketing Japan: A Primer on the Long Tail

By Mike in Tokyo Rogers


What is the Long Tail?


The Long Tail is transforming our lives and our businesses. If you are considering ways to improve your business and your life, then you do need to understand what the Long Tail is and its ramifications.


Anyone who wishes to do any business utilizing the Internet or any Social Media needs to fully understand the Long Tail in order to improve on whatever it is they are doing. That includes Facebook, U-Stream, blogs, Mixi, blogging, video-blogging, Myspace, vlogs, Pick, Linkedin or Twitter.

In fact, if you are involved in any of the above, then you are a part of the Long Tail.


Recently, my partner and I went to a satellite TV station here in Tokyo, Japan that is not doing too well... In fact, they are all worried about their future and the future of their station. (Incredibly, there are old media people who seem not to be worried about their station's - and their future - but this blog is for people who are not brain-dead.) Over these last 5 - 10 years, advertisers have been abandoning satellite TV (as they have been abandoning all other Mass Media formats) and spending their marketing and advertising yen in different areas.


Not only have advertisers been abandoning them, but, even more alarming for them is that the viewers have been getting off the sofa and doing other things too. Subscription Music TV is no longer cool like it used to be. And why should it be? Why do I have to sit through ten crappy videos to maybe see one I like when I can go on YouTube or Myspace and see what I like immediately? (Both YouTube and Myspace are excellent examples of the Long Tail in practice).


Don't be confused, just because this particular station is a digital satellite station, don't think they are not in trouble; they are... Admittedly, though, they are in much better shape than a dinosaur such as TV Tokyo or TBS is, but that is only because they do not have over a thousand employees like those terrestrial stations do. Most of these satellite stations in Japan have anywhere between 40 - 80 employees so their books - and their chances of survival - are much better than the major terrestrial TV stations.


Nevertheless, even though they are a satellite TV station, their business philosophy is still strongly rooted in analogue type of thought; and this will be their downfall if they don't act soon.


The station in question has been struggling through a few years of trying to figure out how to utilize the Internet to help survive as a broadcasting station but they have come up short consistently every time... I think the problem lies in that they can't get their heads around the fact that they will have to stop thinking like a TV station and start thinking like an Internet business in order to survive.


After having several meetings with them, I think I've figured out what their basic fundamental problems are: they do not understand the Internet (they think it is a crutch to support their TV broadcasting and they haven't a clue as to what the Long Tail is and what it means to them.


Up until now, and for the foreseeable future, broadcasters in Japan are, and will be, stuck in old-fashioned thinking. They still use their web pages as a place for one-way communication to their viewers. Simply put, their web pages are boring and, frankly speaking, only serve as an online TV Guide listing for the program schedules.


Not exactly the kind of content that is going to start a buzz or an overnight Internet sensation.


They also do not understand how the web can be an avenue for creating new business and money streams... It is my guess that this particular station probably loses about ¥200,000 ~ ¥500,000 yen (about $2,000 ~ $5,000 (USD) per month on their web page when they could be - should be - making money from their web site, like so many others do.


Of course, we had been trying to explain to them about the concept of Web 2.0 and creating "community" by giving away free, interesting content online, but for some reason, they never seemed to quite "get it." Oh, they seemed to understand that something has to be done, but couldn't put their finger on what exactly that it is that has to be done.


I gather that after our meetings they would go back to their company meetings and say things to their compatriots like "Yeah! Mike says we have to do Social Media and Social Marketing! He says we have to be more intelligent about our online business and in creating community! He says we have to put content online and giveaway content free..."


Then the boss would retort, "Why?" and then that's where the confusion came in... I'm sure the room would grow quiet.


But finally, at this last meeting, I think I have gotten through to them as to why they need to act. Finally, I believe that I explained it in a way that makes sense to them. And that explanation was the Long Tail. (Please understand that I am a professional speaker so if I had trouble explaining this to these good folks, I can imagine how hard it must be for most!)


So, now let me give you an EXTREMELY short explanation of what the Long Tail is. I also have a link below to Chris Anderson's bible on the subject, "The Long Tail" that I strongly recommend!

Highly recommended: Chris Anderson, The Long Tail 

The Long Tail explains is how things have changed in these last 10 years or so.


At the head of the tail (the top), there are your standard Brick and Mortar shops and businesses; shops that have limited retail space. In my example, I'd like to use Tower Records.


Tower Records is probably the most famous of the old style record stores. Everyone knows them... I used to go there  lot. Unfortunately, I figure they have a very bad future and won't be around in 10 years. In spite of having a huge amount of floor space, Tower cannot possibly carry everything.


Tower takes a risk on ordering product and having to distribute that product to their various stores. They have to guess how many of each product each store can profitably sell. It is inevitable that they will guess wrong.


For example, the new NOFX record comes out and a kid wants to buy it in the Tower Records Shinjuku store, but the Shinjuku store is just sold out - while the Tower Records Shibuya store still has 5 copies. What happens to the kid at the Shinjuku Tower Records store? He goes to another record shop nearby, in Shinjuku, and buys what he wants... Tower Records loses a sale.


For companies like iTunes, or Amazon, who work on the Long Tail, this is a huge advantage for them over the traditional retailers; they have no shelf space (well Amazon does too - to a degree - but they started MP3 and download business too).


A key component to understanding the Long Tail is shelf space. Businesses and organizations that cannot capitalize on the Long Tail have space restrictions. For each centimeter of shelf space, Tower Records must make a certain amount of money in return. In this case, Tower Records cannot possibly have enough shelf space to have everything, floor space costs money. So, Tower Records can only sell the hits or any CD that they might reasonably expect to sell more than ten or twenty (or, preferably, several hundred).


Philosophically, it is obvious that when one tries to be friends with everyone, they are friends with no one. This is why I predict that, say, InterFM will go bankrupt by end of 2012, maybe sooner. I also predict TV Tokyo insolvency by end of 2014.


But back to the Long Tail.


Tower Records, TV and radio stations have only so much "shelf space" they are confined to a physical world. But, take iTunes for example; iTunes has no space restrictions. iTunes carries millions of titles and their catalogue grows daily. How many titles does the biggest record store in the world carry? 30,000? 100,000? And each of those titles cost money to carry; they must pay the rent. Shelf space costs money!


How much does it cost iTunes to carry some bits on a server that has 3 million titles on it? Almost nothing and it's getting cheaper by the day.


Look at the chart below. At the left are my examples above: Tower Records and the TV and radio stations. They only have so much space, space costs money; they have to cut off somewhere what product they are going to carry or broadcast. THAT is the point where the Long Tail begins.

I have marked the cutoff line in Red. To the right of that red line (and, by the way, including everything to the left of that cutoff line) are the products that a company like iTunes carries.


You'd think that, to the right, this line eventually goes to zero. It doesn't. It never goes to zero. The market is growing exponentially (in spite of what the major labels are saying) and because people are being offered more and more choice, they are taking it. Today we are witnessing a cultural explosion of DIY people and new artist's, authors, publishers, musicians, comedians, producers, writers and more. The end is not anywhere in sight.


The Long Tail is providing us with much more freedom of choice.


And here is the kicker, because storage of data on bits costs nothing, then places like iTunes, Amazon (MP3, E-Books), etc. can store hundred's of thousands, no millions of titles... More, if they wish... And it costs them almost nothing. It will be Game Over once the rights issues are resolved.


Now, look at the chart above again.


To the left are the old stores and old media. At the bottom is the Long Tail of the new media. It is a fact now, since people are being offered so much more choice, that "Apple said that every one of the then one million tracks in iTunes had sold at least once (now the inventory is twice that)." This means that, cumulatively, that the products in the Long Tail add up to a significant portion of iTunes business... As the tail gets longer, it is merely a question of time (probably a relatively short period of time) when the Long Tail's total sales will surpass those at the head of a traditional retailer.


What will that mean for our culture, entertainment and economy?


Even with this explanation, I knew, from experience, that I still had to educate my friend's at the satellite TV station to be able to go to their boss and explain to him why we had to reform their Internet business....


I did that. Now, if you need any more convincing, take my chart and turn it vertical. Now the end of the Long Tail is at top and it is still extending.

Where does your business want to be in the next few years? 

At the right or on the bottom?

And the bottom, well, the popularity segment is shrinking as can be witnessed by dropping sales of major artists and Rock radio...


Now, where do you and your business want to be in the next few years? At the top right or at the bottom?


Utilize the benefits of the Internet to, not only benefit your current business, but to reform and revitalize it. Understanding the Long Tail is key. Now that's not just smart, it's good business and intelligent marketing.


Note: For a more detailed explanation of the Long Tail, I highly recommend reading Chris Anderson's "Why The Future of Business is Selling Less of More - The Long Tail"


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