Social Media - Where Broadcast and Broadband come together

1. Rob van den Dam
Global Telecommunications Sector Leader
IBM Institute for Business Value
Social Media
Where Broadcast and
Broadband come together
© 2010 IBM Corporation

2. Majority of CEOs, including those of media and communications companies,
experience the New Economic Environment as distinctly different
Face-to-face interviews with over 1,500 CEOs
The New Economic Environment
%
13% 18% 69%
More volatile
Deeper/faster cycles, 79%
30
Complexity
more risk gap*
More uncertain 60%
14% 21% 65%
Less predictable 49%
More complex
18% 22% 60% Multi-faceted,
interconnected
26% 21% 53% Structurally different
Sustained change
Currently Expect high/very Feel prepared
experiencing high level of for expected
Not at all/ To a large/ high/very high complexity over 5 complexity
To some extent
to a limited extent very large extent level of complexity years
© 2010 IBM Corporation

3. Two trends - shift to the Open Internet and collaborative
communication - are shaping the future of the media landscape
Collaborative Gated Communities Shared Social Space
Communication Pattern
n
ctio
dire
t
Traditional ke Open and Free
Broadcasting ar
M
Terrestrial Satellite Telco TV
One-to-One Broad Broad providers
casters casters
One-to-Many
TV Cable
News companies
Channels
Provider-Controlled
Communication Environment
Open
Internet
© 2010 IBM Corporation

4. The traditional media landscape where large media players were
controlling the channels and messages is increasingly slipping away
Share Change
2004 – 2009
Devices 28%
39% + 11%
Distribution 22%
25% + 3%
Advertising 31%
23% - 8%
Paid Content 19% 13% - 6%
2004 2009
(US$915 billion (US$1,126
revenue) billion revenue)
© 2010 IBM Corporation

5. Telcos have entered the scene and are investing heavily in IPTV
Which of the following consumer/residential services do you believe are most critical
for you to invest in over the next 5-10 years?
Social media 43%
IPTV/ Video on Demand 34%
Intelligent lifestyle services 30%
Fixed Mobile Convergence (FMC) 29%
End-user, security, authentication 27%
Mobile Payments 21%
Content storage 20%
Internet-basedCommunications 14%
Location-based /availability Services 13%
Mobile TV/Video 9%
3D Television /Video 9%
Unified messaging 7%
Mobile B2C transactions 7% Face-to-Face
interviews with
Mobile e-Mail 5%
Telecom Executives
Mobile / multi-player games/Virtual Worlds 5%
(IBV 2009
Video telephony 4% Global Telecom
Voice conferencing 2% Industry Survey)
Video conferencing 2%
© 2010 IBM Corporation
2009 IBM Institute for Business Value Telecom Industry Survey N=61

6. However, only a tiny proportion of Telcos expect IPTV to make
significant contributions to their revenues over the next 5-10 years
What do you believe will be the relative contributions of the following models/services to your
revenues over the next 5 – 10 yrs? IPTV
4%
14% 10% Revenue
30% 27% 26% Contribution
33%
96% Above 10%
86% 90%
70% 73% 74% Below 10%
67%
Source: 2009 IBM
Institute for Business
Value Telecom
Industry Survey
N=61
Traditional per Mixed tariff Tiered broadband Triple/Quad play Analytics to Internet IPTV
minute voice bundles incl. 'all- based on speed / reduce churn, communications (subscriptions
you-can-eat' quality improve cross/up- (e.g. VOIP, IM and advertising)
sell Social Networks)
Many Telcos see offering TV/video services mainly as a necessity to combat the trend
of losing subscribers to cablecos which are increasingly offering triple-play bundles
© 2010 IBM Corporation

7. The Open and Free model provides alternatives to traditional video and
entertainment services on open internet platforms at no – or very little - costs
Razor Blade Model Inverse Razor Blade Model
Cheap Razor Pricey Blades Pricey Device Cheap music/videos
Apple is using iTunes and the AppStore
to drive demand for hardware and foster
audience monetization
© 2010 IBM Corporation
Source: 2009 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US

8. The substitution threat to traditional media is real. For television, it is most
apparent with the converted younger audiences
Impact of Online Video Viewing on “Traditional” TV Viewing
50% US Respondents Segmented by Age
40% Watch slightly
less TV
30% Watch
significantly less
TV
20%
10%
0%
18 - 21 21 - 24 25 - 34 35 - 44 45 - 54 55 - 64 65+
New channel consumption is happening at the expense of traditional linear
television, particularly for the younger demographics
© 2010 IBM Corporation
Source: 2009 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US

9. The Open and Free model alters the equation for the Traditional and IPTV
providers. Clashes will be unavoidable for distribution and ......advertising!
Google TV: Google partners
with Sony, Intel for Google TV
Targeted Advertising
Matching content - whether it is a regular tv
program or video from the Internet - , web
browsing patterns and email behaviour will
result in more effective advertising
Google CEO Eric Schmidt: “Google TV will bring both search and context to traditional
television, with behavioral data to both. That would shift the $70 billion annual TV advertising
market in favor of Google’s strengths. W’re getting into the game by tilting the playing field.”
© 2010 IBM Corporation

10. Relying on subscriptions and PPV models is unsustainable in a world
where consumers do not expect to pay for all content
Global Users interested in Online Video Ad-supported versus paid content online
Add-Supported Consumer-Paid
90%
83%
80% 73%
69% 70%
70% 64%
62%
60%
50%
38%
40% 36%
31% 30%
30% 27%
20% 17%
10%
0%
Australia Germany India Japan UK US
Ultimately it all revolves around advertising relationships and the
possibilities the Internet offers for more efficient targeting
Source: 2009 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US © 2010 IBM Corporation

11. Many consumers will accept advertising and provide information
about themselves in exchange for relevancy and value
Under What Circumstances Would you Provide Information About Yourself?
If message and content are
ONLINE MOBILE 71%
relevant and personalised
If offered a discount for voice
64%
1
/text services in return
Free digital music/video Relevant content &
download messaging If offered free shopping
2 61%
Shopping vouchers Free airtime minutes vouchers
3
Travel discounts Shopping vouchers
If offered free music or video
46%
downloads
4
Relevant content & Free digital music/video
download If it is entertaining, innovative
messaging 39%
or amusing
Listed in order of importance If it is embedded in content I
19%
am already watching
Source: IBM Institute for Business Value Global Telecom Consumer Survey, 0% 20% 40% 60% 80%
© 2010 IBM Corporation

12. However, online ad-supported models have yielded a substantial
lower unit return
Broadcast television value per thousand viewers per episode
$560
“We (the industry) trained the
online audience to de-value
Advertising
3x content. Not only have we given
the online content away for free,
value but we inserted fewer ads as we
tried to grow the audience base.“
$170
Executive Vice President
Strategy, Major Broadcast
Television Company
Broadcast TV Online
Broadcast TV viewer estimated at 3 times the value of online viewer due to scarce
inventory placement per show
12 Sources: UBS Global Can Pay TV, Benefit from Online Video; IBM Analysis © 2010 IBM Corporation
NOTES: Broadcast TV online value estimated as the average between high and low scenarios for pricing.

13. The Gated Communities is still a “walled garden” approach – but one
that facilitates collaboration services
Telecom providers are
Communications Content
uniquely placed to
• SMS • Apps
• Mobile web
integrate all forms of
• Social media
• Mobile video communications providing
• Search/maps
• Location-based • Sponsorships seamless social media
services • In-game advertising experience across the
‘three screens’
Commerce
• Shopper apps
• Mobile couponing “Mobile has the opportunity to be
• Loyalty programs a game changer because of its
• RFI ability to transcend time and
• Barcoding space to deliver true utilitarian
value to the consumer.”
Source: IBM analysis CEO Digital, Global Agency
Holding Company
© 2010 IBM Corporation

14. The power of Television to view and share Personal Media.
« View and share my personal content like any TV channel »
Personal media « The basics »
management on TV
Family calendaring
Share
Social TV Upload, restore, Photo/Video
Preview, organize Repository
News headlines, watch/share
Share
My YouTube Playlist on TV
YouTube top20 on TV New photo notification / preview
Add to my screenshow, view my Upload
FlickR on TV screenshow Share my screenshow photos
My Personal channel
TV chat
My photos on TV
Thematic Web2.0 on TV
Music streaming on TV
TV integration Mobile integration
© 2010 IBM Corporation

15. There are different options for traditional providers to move to the
Gated Communities space
Open
Community
Community of developers, AppStore / Revenue
Pro-consumers Sharing model
Commercial parties
Apps developed by applications, e.g. major
partners but hosted brand TV presence
by the Service Provider
Applications developed
& hosted by the Scope of technical/
Service Provider Partnering capabilities
Service Provider applications as Media
Management and Sharing, Social TV,
TV Chat, Family calendaring, etc
© 2010 IBM Corporation

16. Many IPTV providers are experimenting with these concepts
However, the question remains whether ..............
Verizon Communications has
developed TV-based widgets
for Facebook, Twitter and
other features in an attempt to
make FiOS TV a more fully-
integrated TV an online
content experience. In
addition, plans to add the
ability to stream online videos
from YouTube.
It has also opened its widget
platform application
programming interface
to outside developers, and its
"Widget Bazaar " .
© 2010 IBM Corporation

17. ....Telcos are seen as the logical providers for consumers to turn to
for online video and other entertainment content
US NL Spain UK Sweden Germany Australia China India
Internet Internet Internet Internet Internet Internet Internet Internet Internet
Information Information Information Information Information Information Information Information Information
Provider Provider Provider Provider Provider Provider Provider Provider Provider
Pay TV Pay TV Telecom Pay TV Telecom Telecom Telecom Telecom Pay TV
Provider Provider Provider Provider Provider Provider Provider Provider Provider
Social
Telecom Pay TV Telecom Device Content Pay TV Pay TV Telecom
Network
Provider Provider Provider Provider aggregator Provider Provider Provider
Sites
Social Social Social
Content Content Pay TV Pay TV Content Device
Network Network Network
aggregator aggregator Provider Provider aggregator Provider
Sites Sites Sites
Social Social Social
Telecom Content Device Device Device Device
Network Network Network
Provider aggregator Provider Provider Provider Provider
Sites Sites Sites
Social Social
Device Device Content Device Content Content Content
Network Network
Provider Provider aggregator Provider aggregator aggregator aggregator
Sites Sites
© 2010 IBM Corporation
Source: IBM Institute for Business Value: Global Telecom Consumer Survey, 2009

18. Moreover, the younger generation seems to prefer Social Networks
above Telcos as provider for online video and other entertainment
Question: Over the next 5 - 7 years, whom will you expect to go to for online
video, music, games and other entertainment content? Select all that apply
80%
70% 68%
65% All ages
60% Under 25s
50%
42% 42%
40% 35%
30% 29% 29% 29%
30% 25% 23% 26%
20%
10%
0%
Internet Pay TV (e.g. Telecom Social Device Content
Information Cable) Provider Provider Networking Manufacturer aggregator
Provider (e.g. Sites (e.g. Nokia) (e.g. Apple
Google) iTunes)
Source: IBM Institute for Business Value: Global Telecom Consumer Survey, 2009
© 2010 IBM Corporation

19. Social Media have become a primary destination for people to
manage and enrich their digital lifestyle, also for communicating
Nov 2010: Facebook launches a 'next generation' messaging service
© 2010 IBM Corporation

20. Shared Social Space is the domain of players as Facebook & YouTube
- throughout the world, people are turning en masse to these sites
Aug-04 Aug-06 May-10
1 Yahoo! Yahoo! Google
2 MSN MSN Facebook
3 Google Google Youtube
4 Microsoft MySpace Yahoo!
5 Passport Live Live
Twitter was the
6 eBay eBay Blogger
fastest-growing
7 Amazon Youtube MSN
Web brand growing
8 Offeroptimizer Microsoft Twitter
1,928 % from June
9 Fastclick Amazon Wordpress
2008 to June 2009
10 Doubleclick Orkut MySpace
11 go Blogger Google UK
12 Alibaba Google UK Microsoft
13 CNN Passport Amazon
14 BBC BBC Bing
15 165.254.12.202 Craigslist eBay
The largest Social
16 AOL Go LinkedIN Network with over
17 Google UK CNN Flickr 500M unique
18 Gator Alibaba Craiglist visitors worldwide
19 eBay UK Megaupload Rapidshare per month
20 Searchscout Imdb Livejasmin
Social Media Sites
Note 1. Ranking reflects top 20 English Language Web sites; the multilingual Wikipedia is not shown in this list
Note 2: The traffic rank is based on three months of aggregated historical traffic data, and is a combined measure of page views and users (reach). © 2010 IBM Corporation

21. With the “Digital Natives” at the forefront of this shift, older audiences
have followed the younger audiences to social networking sites
Adoption of Social Networking Sites by Age
US 2007 - 2009
100% 2007
85% 85% 2008
2009
80% 77%
74% 73%
68%
60% 56%
52%
50%
40%
31% 31%
24%
20%
0%
18 - 24 25 - 34 35 - 44 45 +
Source: 2008 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US. IBM 2007 digital © 2010 IBM Corporation
consumer survey: Total responses = 2800 across five countries: Australia, Germany, Japan, UK, US

22. Because of the speed in which social media enables communication,
‘word of mouth’ now becomes ‘world of mouth’
If Facebook were a country it would be the world’s fourth largest between the US and Indonesia
> 1.5 million pieces of content (Web links, news stories, blog posts, etc.) are shared on Facebook daily
Currently YouTube has more than 2 billion views per day
There are over 200.000.000 blogs. 54% of bloggers post content of tweet daily
Twitter has nearly 100 million users who send on average of 600 tweets per second
People continue to spend more time on SN and blog sites than ever before
, with total minutes increasing 82% year-over-year
the average time per person increasing 67 % year-over-year
© 2010 IBM Corporation

23. Social Media is redefining what broadcasting really means
Citizen
Journalism
Egypt 2011
Haiti 2010
Iran 2009
China Earthquake 2008
Fast and viral
distribution on
large scale
© 2010 IBM Corporation

24. Subject to this disruptive force of changing human communication
behaviour, the option of doing nothing is a luxury few can afford
OLD MEDIA MINDSET
+
NEW MEDIA CONSUMER
=
DISINTERMEDIATION
© 2010 IBM Corporation

25. IBM Institute for Business Value for Telco and Media industries
www.ibm.com/iibv
Rob van den Dam
Global Telecom Industry Lead,
Thank you! IBM Institute for Business Value
rob_vandendam@nl.ibm.com
© 2010 IBM Corporation