Five Trends to Watch for Content Owners in 2013 White ... - Internap

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Five Trends to Watch for Content Owners in 2013 White ... - Internap

White Paper

Five Trends to Watch for

Content Owners in 2013

Technology moves and changes at the speed of light. The only way to stay on top is to look

ahead. This white paper investigates the top trends to anticipate in 2013 and explores how

content owners are responding to these shifts.

©2012 Internap Network Services Corporation.

All rights reserved. Internap ® is a registered trademark of Internap.

All other trademarks and brands are the property of their respective owners. 09/12

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Table of Contents

Trend One: Online privacy concerns threaten online content consumption 1

and preference sharing

Trend Two: The rise of the multi-tablet household 3

Trend Three: OTT platforms open the floodgates for new content providers 5

Trend Four: Mobile hastens the demise of the content schedule 7

Trend Five: HTML5 dominates but Flash lives on (at least for now) 9

Sources 11

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Trend One: Online privacy concerns threaten online

content consumption and preference sharing

What do unscented lotions, calcium and zinc supplements, large purses and bright-colored area rugs have in common?

Sometime in the early 2000’s, statisticians at Target figured out that pregnant women tend to buy these items much more

frequently than the shopping population in general. Like most large retailers, Target collects massive amounts of data on

customer visits to its website and brick and mortar stores. “If you use a credit card or a coupon, or fill out a survey, or mail in

a refund, or call the customer help line, or open an e-mail we’ve sent you, or visit our website, we’ll record it and link it to your

Guest ID,” Andrew Pole, Group Manager at Target recently told the New York Times. “We want to know everything we can.” By

deftly placing advertisements for diapers, cribs, car seats and infant formula in front of shoppers that are likely shopping for a

new baby, Target has effectively beat its competitors to the punch and made millions. 1

The problem is, consumers increasingly see these tactics as not only invasive, but also downright creepy. In 2011, TRUSTe

published a survey covering consumer privacy attitudes toward online behavioral advertising. In it, 94% of consumers said they

considered online privacy important. Fifty-three percent said that it was an issue that they “thought about often.” 2

In a March 2012 report by PEW Research, two thirds of Internet users surveyed viewed online targeted advertising negatively.

In the UK, where privacy issues and loss of personal data have been in the headlines, the percentage of consumers willing to

have browsing activity monitored in order to receive targeted advertising has dropped dramatically, from 20% in 2009 to just

5% in 2010. 3

To add to consumers’ concerns about sharing personal data, security breach incidents are on the rise. In January, Amazon

disclosed that hackers had cracked its customer database to steal some 24 million customer records. 4 More than six

million LinkedIn passwords were hacked and posted to a bulletin board in June. 5 Justifiably, credit card and identify theft are

consistently ranked among the top privacy concerns for online users. For 12 straight years, identity theft has ranked at the top

of the US Federal Trade Commission’s annual list of top consumer complaints. 6

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How are content owners responding?

Digital publishers that collect behavioral data from customers’ Internet usage, location data and other demographic information

are addressing privacy concerns by providing clear opt-out control to consumers. Providing easy access to an informationcollection

preference on your site as well as links to external opt-out channels like the Digital Advertising Alliance’s (DAA) Self-

Regulatory Program for Online Behavioral Advertising and the privacychoice.org opt-out network, builds consumer trust which

drives content use and ultimately increases revenue. In fact, the TRUSTe survey revealed that more than half of consumers

surveyed said they would be more likely to click through and buy from an advertiser or publisher that provides the option to opt

out of online tracking and/or behavioral advertising. 7

Content owners are also working harder to protect sensitive customer data from theft, starting with their hosting infrastructure.

Enterprises are putting controls in place to keep credit card information and personal information fully-separated from less

sensitive data. They are also auditing their infrastructure vendors to determine whether they have proper data security

certifications like PCI, SOC2 and European Safe Harbor. At a more granular level, enterprises are looking closely at whether

credit card numbers, email addresses, usernames and passwords are being properly encrypted while at rest and in flight.

The LinkedIn hack clearly demonstrated the need for comprehensive encryption (e.g., hashing and salting) of customer data.

Content owners, publishers and distributors are increasingly realizing that attention to online privacy details will keep them on

good terms with their customers and help their online presence thrive.

Industry Spotlight: Secure Online Back-up Solutions

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Trend Two: The rise of the multi-tablet household

Total tablet unit shipments rose an astounding 246% to 64 million in

2011 according to Bank of America Merrill Lynch equity research. 8

With an average selling price of around $500, this market generated

$32 billion in revenue for retailers, device manufacturers and

component suppliers. Analysts predict tablet shipments will reach 94

million by the end of 2012. According to Deloitte Consulting, growth

in this still nascent market will be supported by households buying

their second or third tablet. By the end of 2012, almost 5% of tablets

will be owned by individuals or households that already own a tablet. 9

Beyond the fact that consumers are rapidly adopting tablet versions

of their favorite magazines, games and other online content, tablet

versions of online and print content are also giving publishers

greater flexibility in their pricing models. In May 2011, The New Yorker launched its tablet version for $59 a year, simultaneously

raising its print subscription by 77% to $69 per year. Condé Nast is also leveraging the advent of its tablet version to increase

subscription pricing. Condé Nast CEO, Charles H. Townsend, said in 2010 that the company had been too “overtly dependent

on advertising as the turbine that runs [its business].” Given that digital advertising has traditionally been sold at lower price

points than print, the ability to raise subscription fees has become critical for some publishers. 10

Many publishers have duly noted that consumers are using tablets primarily for content consumption (e.g., browsing websites,

reading news, playing online games) rather than content creation (e.g., writing blogs, posting videos, creating spreadsheet

models). A recent Morgan Stanley AlphaWise survey of 8,200 consumers across the US, UK, France, Germany, China and

Japan supports this assertion, revealing that content creation usage is much lower on tablets than on traditional PCs. 13 In fact,

tablet usage appears to be driving reductions in time spent on PCs for key content consumption tasks, but not for content

creation actions.

To add another wrinkle, consumers use different types of tablets differently. Smaller devices are likely to be used differently than

their 10 inch counterparts due to reduced processing power and mobility. Smaller devices may be used more frequently for eBook

reading, mobile-as-Web browsing, email and photo sharing on-the-go. However, smaller tablets may be less useful for browsing full

versions of websites, reviewing emails or presentations, analyzing data in spreadsheets or watching full-length video. 12

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How are content owners responding?

From a customer perspective, it’s all about experience and convenience. They’re looking for content that is quick to load,

always available and optimized for all of their devices. Digital publishers are turning to content delivery networks with multidevice

transmuxing to help optimize single files for consumption through a wide variety of venues including Apple iPhone

and iPad, Flash, Android and Silverlight devices. Content owners are also “tiering” titles across infrastructure platforms.

New content with highly uncertain demand patterns is increasingly being launched in a public cloud environment. Should

demand take off quickly, compute and storage resources are turned up in minutes to address increased traffic, and virtual

servers that carry unsuccessful titles are quickly decommissioned to avoid unnecessary costs. Assets that have predictable

demand patterns can reside in a physical server environment, either via colocation or managed hosting to avoid the bursting

premiums inherent in almost every pure public cloud model. The payoff for successful tablet content strategy implementation

can be huge. After years of low-margin, advertiser-supported revenue models, consumers are beginning to embrace online

subscription pricing models. This increased acceptance is due in large part to the fact that tablets allow a portable, easy-toview,

highly-customizable medium for content consumption. 14 With stickier customers and more subscription pricing power,

multi-device content initiatives can pay for themselves in a few weeks.

Industry Spotlight: Mobile Entertainment

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Trend Three: OTT platforms open the floodgates for

new content providers

Content consumption continues to move away from a few “hits” (mainstream products and markets) toward an enormous

number of niches in a “long tail.” As evidence of this shift, in the 2010-2011 television season, the number of 18 to 49 yearolds

watching commercials on the four biggest television networks was 17% below the number that the same group watched

during the 2007-2008 TV season. 15

Even cable channels aren’t immune to the turn toward alternate distribution channels and an ever-broadening of content

interests. In the first quarter of 2012, the average audience for 11 of the 15 most popular cable channels fell from a year

earlier. 16 Meanwhile, over-the-top (OTT) pure plays such as Netflix, Hulu, Amazon Prime Instant and CinemaNow blossomed.

The economics of this shift threaten traditional distribution models as well as the content providers that support them. As

Canaccord Genuity pointed out in a recent research report, Dish Management made recent comments during its Q3/2011

earnings conference call that suggested that OTT was cannibalizing its premium programming:

I think that we do lose revenue because of over-the-top, Netflix is probably the best example where we lose premium

programming revenue because 20% of our customers are, in fact, Netflix subscribers as well, and when they’re Netflix

subscribers, they don’t continue to subscribe to Showtime and HBO and Starz. In fact, they don’t subscribe to Starz at all

because they can get all those movies, at least today, from Netflix. So, that has some impact. 17

In response, large content owners are pulling their most valuable assets from OTT providers’ lineups unless subscribers can

“prove they’ve paid” for traditional cable or satellite packages. 18

OTT providers are responding in kind by licensing and deploying their own content. Netflix recently said it will spend as much

as 15% of its content acquisition budget on original streaming content like David Fincher’s House of Cards and Lilyhammer, a

Norwegian-produced program. 19

As OTT pure-plays look to fill the void left by the Viacoms and Liberty Medias of the world, smaller, more nimble content providers

that don’t rely on existing cable or network distribution for the bulk of their revenue could be positioned to benefit greatly.

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How are content owners responding?

Content owners are conducting systematic content audits, segmenting titles by age, shelf life, viewer demographics and

personas. Many are also beginning to make their entire library of content available online (across multiple devices) to drive

consumption and further understand their customers’ viewing tendencies. Marginal costs for adding a title to a website library

is near zero due to ever-decreasing storage and bandwidth costs. Additionally, content that may seem outmoded or stale

can unexpectedly drive significant traffic or index towards uniquely valuable audiences. Once armed with an understanding of

viewing frequencies and other consumption data, content owners can better market broader distribution through an OTT or

other online venue.

As viewers increasingly turn to OTT for their favorite programming, the need for additional storage and methods to optimize

online delivery becomes critical. Utility cloud compute and storage services working in tandem with optimized connectivity and

content delivery network capability can provide cost effective ways to store and deliver the assets of traditional publishers,

online gaming outlets and other entertainment and media companies. Established OTT vendors who are experimenting with a

number of business models are also benefiting from outsourced data center services that can hybridize infrastructure across

hosting and colocation platforms to increase performance, add functionality and improve reliability relative to on-premise options.

Industry Spotlight: Media and Entertainment

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Trend Four: Mobile hastens the demise of the content schedule

Humans are creatures of habit. We are hard wired to build routines and establish schedules, even subconsciously. It’s nice

to know that on Thursday night at 9:30 PM ET you can sit down, turn on your television and see the first run of Parks and

Recreation. Deloitte echoed these tendencies by recently predicting that in 2012, 95% of television programs would be viewed

within 24 hours of broadcast. 20

But anyone who has used a DVR can attest to the satisfaction of not only replaying that episode you missed, but also avoiding

irritating commercials. In several major TV markets, DVR penetration rates are already above 50% in the US and UK. 21 Although

not officially classified as such, tablets and smartphones are in many ways, just portable DVRs. These devices enhance content

replay by adding a view-anywhere element (dubbed “place shifting”) to the mix.

Music streaming services like Rhapsody and Spotify recognized this value to consumers early on by rolling out mobile versions

of their streaming applications. Consumers quickly signaled they were willing to pay for this convenience. Spotify’s introduction

of its mobile product drove 2x conversion ratio from free to paying subscribers. 22

Online publishers face a similar trend. According to Pocket, the developer of the Read It Later I/OS app that allows users to tag

content they wish to read later, mobile users defer reading content at much higher rates than PC users. Regardless of when

the news was published within a particular day, iPhone and iPad users shifted reading times back to the most convenient times

for them – during breakfast, the morning and afternoon commutes and right before bed. 23

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How are content owners responding?

Mobile is hastening the move away from traditional viewing schedules. This changing landscape is driving publishers and

advertisers to carefully consider when and where the user interacts with content. To get a fuller picture of the media consumer,

content owners are analyzing device and location-based information as well as more traditional demographic and time-based

metrics. It follows that the emergence of mobile payment services like Square and Google Wallet present huge monetization

possibilities for content owners that understand where their media are consumed.

From an IT Infrastructure perspective, digital publishers that want to enhance their audience targeting are looking for service

providers that have a full range of capabilities. In addition to having public cloud, managed hosting and enterprise-class

colocation to effectively manage and store large location-based and customer-specific media libraries, content owners are also

looking for IT vendors to provide native content delivery network capabilities that include geo-fencing and deep analytics to

round out their content targeting requirements.

Industry Spotlight: Online Advertising Technology Solution

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Trend Five: HTML5 Dominates but Flash lives on

(at least for now)

In November of last year, Adobe confirmed what the news analysts had been predicting for months: Adobe was discontinuing

its development of mobile browser Flash in favor of HTML5. For those of you who missed it, Danny Winokur, Adobe’s VP and

general manager of interactive development, wrote:

HTML5 is now universally supported on

major mobile devices, in some cases

exclusively. This makes HTML5 the

best solution for creating and deploying

content in the browser across mobile

platforms. We are excited about this

and will continue our work with key

players in the HTML community,

including Google, Apple, Microsoft and

RIM to drive HTML5 innovation they can

use to advance their mobile browsers. 24

Combined with Cascading Style Sheets

(CSS) and JavaScript, HTML5 provides

http://www.indeed.com/jobtrends?q=HTML5%2C+Flash&l=&relative=1

excellent design control (particularly gradient

and masking flexibility) and can re-flow at multiple screen sizes. These features provide huge advantages for publishers given

the explosive growth of the tablet and smart phone markets. HTML5 will also natively support audio, video and other elements

currently supported by plug-ins like Flash, although not all video issues are yet resolved. 25

The lack of maturity of HTML5 means Flash will live on as a staple in many website and online application developers’ toolkits

for some time. Creative tools for HTML5 like Adobe’s Edge aren’t fully mature and seamless cross-browser HTML5 support

still requires lots of testing and debugging. As for Microsoft’s Silverlight, it should shortly disappear altogether except for very

limited internal enterprise applications intended solely for Internet Explorer. 26

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How are content owners responding?

In addition to enabling multi-device compatibility, the emergence of HTML5 as the go-to programming language for

all devices will bring with it several advantages. First, without plug-in license fees, interactive and rich media content is

becoming cheaper to produce. It is also improving the searchability of content because it resides natively in the browser.

Media companies are responding by upgrading their HTML5 knowledge base — organic or otherwise. In January

2012, the Financial Times acquired London-based application development firm, Assanka, which built an HTML5

web application for the publisher. 27 Game Closure, a small start-up developer of an HTML5 game authoring platform,

reportedly turned down hefty acquisition offers from Zynga earlier this year. 28

While digital publishers are working to accelerate their development of HTML5 programming expertise and associated

content deployment to take advantage of cost and revenue opportunities, they are keeping their toe in the Flash

plug-in pool. At least in the near term, Flash continues to be a valuable programming tool to address complex design

objectives. 28 Infrastructure platforms such as private or custom cloud computing services are cost-effective options

to test out new content deployments, HTML5 or otherwise. Global content delivery networks and route-optimized IP

services continue to be critical technologies that ensure mobile content is delivered reliably to the end users no matter

where they are in the world.

Industry Focus: Online Gaming

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Sources

1. http://www.nytimes.com/2012/02/19/magazine/shopping-habits.html?pagewanted=all

2. http://www.usatoday.com/tech/news/story/2012-01-16/zappos-security-breach/52605292/1urce, http://www.truste.com/adprivacy/

3. http://www.pewinternet.org/~/media/Files/Reports/2012/PIP_Search_Engine_Use_2012.pdf

4. http://www.techspot.com/news/47060-amazon-owned-zappos-hacked-24-million-accounts-compromised.html

5. http://blog.linkedin.com/2012/06/07/taking-steps-to-protect-our-members/

6. http://ftc.gov/opa/2012/02/2011complaints.shtm

7. http://www.truste.com/ad-privacy/TRUSTe-2011-Consumer-Behavioral-Advertising-Survey-Results.pdf

8. 2012 – The year ahead: Year of the tablet shakeout; December 2011

9. It takes two to tablet: the rise of the multi-tablet owner: Technology, Media & Telecommunications Predictions 2012. https://www.

deloitte.com/assets/Dcom-Global/Local%20Content/Articles/TMT/TMT%20Predictions%202012/16264A_TMT_Predict_sg6.pdf

10. http://thepricingjournal.com/2011/05/17/the-new-yorker-offers-tablet-subscriptions%E2%80%A6-and-raises-prices/

11. It takes two to tablet: the rise of the multi-tablet owner: Media & Telecommunications Predictions 2012. http://www.deloitte.com/

assets/Dcom-UnitedKingdom/Local%20Assets/Documents/Industries/TMT/uk-tmt-predictions-2012-v2.pdf

12. It takes two to tablet: the rise of the multi-tablet owner: Technology, Media & Telecommunications Predictions 2012. http://www.

deloitte.com/assets/Dcom-UnitedKingdom/Local%20Assets/Documents/Industries/TMT/uk-tmt-predictions2012-v2.pdf

13. Table Demand & Disruption: Mobile Users Come of Age. Morgan Stanley. http://www.morganstanley.com/views/perspectives/

tablets_demand.pdf

14. http://www.pcworld.com/article/219883/the_top_5_reasons_to_buy_a_tablet.html

15. TV Lures Ads as Audiences Scatter” 9/21/2011 WSJ. http://online.wsj.com/article/SB100014240531119041067045765827821

04631352.html

16. http://online.wsj.com/article/SB10001424052702304177104577303421740764332.html

17. http://seekingalpha.com/article/305999-dish-network-s-ceo-discusses-q3-2011-results-earnings-call-transcript

18. http://finance.yahoo.com/blogs/the-exchange/online-streaming-prove-paid-model-time-olympics-150952642.html

19. http://www.fastcompany.com/1814701/how-netflixs-lillyhammer-thwacks-traditional-tv

20. The schedule dominates, still: Technology, Media & Telecommunications Predictions 2012. http://www.deloitte.com/assets/Dcom-

UnitedKingdom/Local%20Assets/Documents/Industries/TMT/uk-tmt-predictions-2012-v2.pdf

21. http://www.investortoday.co.uk/News/Story/?title=Top%20UK%20media%20trends%20for%202011&storyid=4957&type=news_

features

22. http://www.slideshare.net/kleinerperkins/kpcb-top-10-mobile-trends-feb-2011

23. http://readitlaterlist.com/blog/2011/01/is-mobile-affecting-when-we-read/

24. http://blogs.adobe.com/conversations/2011/11/flash-focus.html

25. http://findarticles.com/p/articles/mi_m3065/is_4_40/ai_n57399075/*

26. http://www.slideshare.net/soapcreative/2012-digital-predictions*

27. http://www.aegismobile.com/mobile-enterprise-solutions/blog/entryid/60/html5-and-typography*

28. http://blogs.adobe.com/conversations/2011/11/flash-focus.html

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