Economist 9/16/14

  1. Global spending on mobile advertising has advanced rapidly, nearly doubling to $19.3 billion between 2012 and 2013, according to the IAB, an industry group.From a commercial point of view, a mobile’s best feature is its location-tracking capability, which shows exactly where the phone is. Advertisers are experimenting with “geofencing”, which allows them to reach people within a particular area. For example, 1-800-Flowers, a flower retailer, has tried sending ads to mobiles within driving distance of a shop.Beacons—small wireless devices that use radio signals to communicate with nearby mobile phones and tablets—will become an integral part of in-store marketing within a couple of years, says Ann Lewnes, chief marketing officer at Adobe, a software firm. Beacons can communicate with apps to offer consumers coupons and deals. In India, where not many people have smartphones, companies such as Facebook are experimenting with “missed call” ads, which allow a user to make a brief call to an advertiser and get him to ring back with an ad along with some entertainment, such as a sport score or music. Smartphones’ small screen size, too, remains a problem, which helps to explain why mobile-advertising rates are lower than those for desktop display. Mobile consumers do not pay much attention to “baby banners” at the bottom of a screen, and spend less time on long-form content, which reduces their tolerance for long video ads. Commission has already brought a handful of cases, including against Path, a social-networking app that was taking information from address books on people’s phones, including names and numbers, without their consent or knowledge.
  2. Around 195m Americans, or 77% of American internet users, already watch videos online. In China, where people are suspicious of government-censored television, the figure is nearly 500m, or 70% of those who use the web. This year digital-video advertising in America is forecast to grow by 43%, against a mere 3% for TV advertising. Yet they start from such different bases that television will still rise by $2.2 billion, against $1.8 billion for online video.Online-video ads are good for internet advertising: they are richer and more engaging than banner ads, and advertisers like them. But online video is not about to unseat TV. Advertisers want to reach young consumers, who watch lots of content on the internet, but they do not want to miss older ones, who still watch plenty of television.And it is a myth that younger consumers have more discretionary spending than older ones.In Britain, people over the age of 45 control 70% of the nation’s disposable income.
  3. Netflix has been signing up viewers in Britain, Ireland, the Netherlands and the Nordic countries; and next week it starts invading the continental heartland, beginning with France. Canal+, a French pay-TV firm that launched its own SVOD ( Streaming Video on Demand )service three years ago, called CanalPlay, is rustling up new programmes and adding other features to get viewers to stay. Sky Deutschland, a German pay-TV firm, has slashed the monthly charge for its SVOD service, Snap, to €3.99 ($5.16)—it had previously cost up to €9.90. Maxdome, a video on demand (VOD) subsidiary of ProSiebenSat.1, another German media firm, has just bought a job lot of popular American series.At first sight, Europe seems a tougher market than America for Netflix to crack.European viewers can often choose from a wealth of high-quality programmes, free or fairly cheap, from public and private broadcasters, many of which provide streaming “catch-up” viewing at no extra cost.Yet in Britain, where competition from the BBC and others is especially stiff, Netflix has signed up more than 10% of households since opening there in 2012. Although Netflix has sold the French rights to “House of Cards” to Canal+, it will produce a Gallic remake of the political thriller, called “Marseille”.Since it will be pumping programmes out of a European headquarters in Amsterdam, Netflix will avoid both the levy that French broadcasters and distributors pay to subsidise local productions, and limitations on the share of foreign-made shows.
  4. Car rentals is a big business—worldwide turnover last year was about $37 billion. But a wave of consolidation in recent years has left just three firms—Hertz, Avis Budget and Enterprise—with 95% of the market in America and a sizeable share elsewhere.Hertz and Avis Budget still do over two-thirds of their business at airport counters. Enterprise, the largest firm, with about 40% of the world market, mainly rents out cars in city centres, and in America it has the lion’s share of the market for the cars that insurers lend to policyholders after crashes. Enterprise bought National and Alamo in 2007, a year after Avis and Budget joined forces. In 2012 Hertz bought Dollar Thrifty. But instead of being satisfied with its lot, Hertz has since expanded vigorously in the city-centre and insurance-replacement businesses, and refused to follow rounds of price increases by its two rivals.There are two reasons why it may make sense for Hertz to sacrifice short-term profits for market share. Smartphone apps for car rentals are killing the hire counter, even at airports, so Hertz (and Avis Budget) will need to replace the easy profits those counters generate. This week Renault said it would join a new electric-car-sharing venture, for which it will make the vehicles.Avis Budget, recognising the emerging threat, spent $500m last year buying Zipcar, the world’s largest example of a “car club”
  5. If Apple were simply a hardware-maker, there would be reason to worry. It is losing market share to rivals such as Samsung of South Korea and Xiaomi of China, which make cheaper devices, and to Google’s Android operating system, which runs on 71% of the world’s smartphones. Apple’s average selling price is $609, compared with $249 for smartphones worldwide, according to IDC, a market-research firm. That is good for profits, but it makes Apple increasingly a niche player.Apple is considered a laggard in online offerings, especially since it bungled the launch of its map service. Its services and apps can be maddening. But iTunes, Apple’s media store, now boasts more than 800m active users, three times as many as Amazon’s. Apple’s software and services category, which includes iTunes, its Apps Store, revenue from warranties and other businesses, brought in sales of more than $16 billion in 2013 and is growing steadily.

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