W1 Insight

The Mashed-up business

“It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.” Steve Jobs, Co-Founder and Chief Executive, Apple

The Mashed-up business is created by joining together products and services from different firms to create a new offering that is only possible by the unique combination of resources and capabilities that you have assembled. We’ve been outsourcing many of our functions to achieve lower costs and better services levels for many years, we’ve even started outsourcing our innovation, even crowdsourcing, to speed up development of new products and services. Now it’s time to take the next step – to assemble components of other people’s offerings and business models to build something brand new to offer your clients – fast.

Transformation
Right now, the digital media industry is being transformed through convergence, more to the point, the news, information, entertainment and advertising industries are being transformed through digital convergence. Online- newspapers look more like TV channels (eg: The Times) and TV news programmes are looking more like newspapers (eg: BBC News). In just five years YouTube has become the most watched media channel in the world and newspapers could have largely disappeared, as physical copies, in the UK by 2019′. In the future we will increasingly want to pay for content, not paper and ink and transportation.

Facebook founder, Mark Zuckerberg, announced at the November 2010 Web 2.0 conference in San Francisco, that within the next five years he expects his company to make “billions and billions of dollars turning the TV, news, film and music industry upside down”.  If all that wasn’t enough reason to think that media world is in downward spiral of deconstruction, the Google backed O3B satellite network aims to provide mobile phone and internet access later this year to the other 3 billion people, the ones in the world who have no access today.

LinkedIn, with 100 million users executes its IPO this year with Groupon, Facebook and Twitter all positioning themselves to go public in the not too distant future. Facebook, with 600 million members is likely to see its 1 billionth member by the end of 2011. This sort of growth and change, alongside O3B means that by the end of 2011 we will be looking at a completely reconfigured digital media infrastructure. The players will have rearranged their ownership and 3 billion more customers will be online, mostly through mobile devices.

Curation
What was about control of content in the past, is today all about access. By the time all this is in place broadcast and broadband will completely overlap, and mobile broadband at that – access for all – but who will help navigate all this content?

The editorial role in TV and Newspapers isn’t going away any time soon, it’s just changing hands, from the traditional channel providers, such as The Times and the BBC, to social networks such as Facebook and Twitter. Even that’s not accurate, because it’s in the hands of the people on Facebook, YouTube, Google and Twitter. It’s their members who have become the new curators of content, and we’re following them. In the meantime, advertising is moving onto these online platforms but not fast enough.

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ACCOUNTING SOFTWARE SURVEY

MYOB, Sage and Paprika have come out on top in our recent survey of accounting software packages used by creative companies.  None of these software packages is at the high end in terms of cost and complexity, which suggests that users consider ease of use, reliability and quality of support to be as important as the range of functions and number of reports a package can generate.

Popular options

The two most commonly used packages are Paprika and Sage, used by 28% and 21% of businesses, respectively. It’s not surprising that Paprika is popular given that it markets itself as an integrated job costing and accounting system, specifically designed for creative agencies. In fact, two thirds of the accounting software systems used by survey respondents included some form of job costing function and over half had an integrated timesheet. Only 5% of businesses reported using two packages within their organisation due to a need to have both an effective job costing system and accounting system. Creative agencies bill clients according to time spent on individual jobs, so a job costing system is important to monitor and control costs.

Access and Quickbooks also proved popular but less so than Paprika and Sage, with fewer than 10% of users each. Size of business appears to be an important factor in the choice of accounting software, with larger businesses preferring more heavy duty, complex software, such as Adserve, Navision and Tempora, and smaller businesses opting for a cheaper ‘off-the-shelf’ alternative, such as MYOB, Sage or Quickbooks.

Medium-sized businesses appear to prefer Paprika, with 81% of companies that use it recording a turnover of between £2m and £10m. Yet Sage is used by companies with turnovers ranging from £100,000 to £25m. One possible reason for this is that  there are numerous versions of Sage available, so as businesses change in size, they can trade up or down  to a different version as required.  

Purchasing reasons

Interestingly, almost half the finance teams surveyed use their current accounting software package because it was already in place when they joined the business. This would suggest either a reluctance to change the system knowing the upheaval and difficulties it will present or an ‘if it ain’t broke, don’t fix it’ mentality.

One third of businesses, however, chose their current software because it was recommended to them. Paprika was the most recommended software with half of Paprika users surveyed implementing the system for this reason. Sage came second, with 40% of businesses running the software following recommendations. Only 12% of finance staff implemented their current accounting software system because they had used it previously. But, reassuringly, over 30% of businesses felt their current software provided value for money.

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Digital Economy Act under fire from all directions

Don’t get me wrong, I do think people should be properly paid for what is theirs, but this Act has been flawed from the start with too much given to holders of IP and copyrights. It is currently the subject of a judicial review and earlier this week the LSE’s Bart Cammaerts and Bingchun Meng claimed the Act “gets the balance between copyright enforcement and innovation wrong” and that it will “stifle innovation” in the content industry.

Cammaerts and Meng say in their blog the Act is weighted too heavily in favour of copyright holders against ISPs, users and new entrants to the industry, and advise the music industry to “innovate and actively reconnect” – not treat people like criminals. They also question whether filesharing is the key reason for declining profitability, suggesting that the music industry should focus on finding other ways to make money instead of “actively monitoring the online behaviour of UK citizens”.

To boot, The Open Rights Group (ORG) have also weighed in, submitting a ‘friend of the court’ brief to the High Court ahead of the judicial review hearing, arguing that “the act will undermine vital public Wi-Fi provision, makes it likely that people’s sensitive personal information will be exposed, presumes people are guilty of infringement without good proof, and is reliant on insufficient evidence of wrongdoing”.

The judicial review hearing itself began yesterday, at the request of BT and TalkTalk, who claim the Act is not EU law compliant and that the enforcement process is fundamentally flawed.

In my view this Act need to be redrafted. The balance needs to be re-addressed between the IP/copyright holder, the ISP and the end user, and reflect how IP addresses actually work. The mediaCAT case highlights precisely why.

Innovation

A rising economy floats all boats, on the other hand our economy is set to grow at around only 2%, unemployment is increasing and our national debt is over £4.8 trillion, once public sector pension liabilities are included, according to the Institute of Economic Affairs. That’s four times the total annual economic output of the UK and represents £78,000 of debt for every person in the country. To thrive in this market we have to do something different, we have to innovate to stand out from the crowd. We have to recognise that we are not returning to the good-old-days of growth but to a whole new environment where we’ll use new tools and channels. New opportunities will arise and clients needs are changing to meet new consumer attitudes, values and preferences.

During and after every recession, depression or ‘panic’, as they used to be called, in the past one hundred years, new business models, products and service have emerged. It will be the same this time around as well. Procter and Gamble was formed in the 1837 panic and Edison merged his businesses to form General Electric (GE) in the 1873 recession. Motorola launched the very first car radio in 1930 right at the lowest point of the great depression. Fortune launched at the same time, a new format – the magazine -priced at the equivalent of $13 today, recognising that people’s interest in business had been piqued because of the crash.

Google only emerged as a global player as a result of the 2000 recession (mostly US centric) as ad-dollars went online for the first time. After every major recession leading players fall away and new entrants emerge. Now is the time to innovate and launch new products and services utilising new channels and approaches to consumers and partnering to speed access to markets for your clients.

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