2010-07-19 Apple iPhone 4 woes lead to free bumpers—but no recall

Intelligence Report - 07/19/2010
By Mark Glaser & Corbin Hiar




Apple iPhone 4 woes lead to free bumpers -- but no recall

There is a certain Apple way of life: Hype builds around a secret product or upgrade. A black-shirt-wearing CEO Steve Jobs unveils the new product with hyperbole. Lines form outside of stores as the excitement builds and the product is released. But that way of life is endangered as the new iPhone 4 had massive sales -- and massive problems. Worst of all the problems are around calls being dropped, a longtime issue with Apple's exclusive carrier AT&T, but this time possibly from a design flaw with the hardware and antenna. Making matters even worse, Apple was caught deleting forums on its site related to the iPhone 4 problems. And then came Consumer Reports’ tests, which resulted in the magazine's decision not to recommend the iPhone 4. They determined that it was a hardware problem that could be remedied with a bumper case or, their unglamorous solution, a piece of duct tape to cover the antenna gap. Apple's share price has suffered as a result of the uncertainty, losing 4.2 percent the day Consumer Reports released its findings.

As BusinessWeek's Arik Hesseldahl notes "as yet there’s no evidence to support that iPhone 4 sales are being hurt," but the negative press is a serious danger to the well-respected technology company. Consumer Reports, Sen. Charles Schumer (D-N.Y.), and many others are calling on Apple to provide a free fix for device owners. PR experts recommended a full recall. “Apple must protect its brand image, its crown jewels, at all cost,” crisis communications expert Chris Lehane told Cult of Mac's Leander Kahney. That cost would be substantial: $1.5 billion, according to Bernstein Research analyst Toni Sacconaghi. At a press conference last Friday, Jobs acknowledged what he called "antennagate" and offered free bumpers to help solve the antenna problem -- or a full refund for people who weren't satisfied. But no recall. As the San Francisco Chronicle’s Ryan Kim observed, PR problems could seriously tarnish the brand and potentially sink the iPhone 4, right as tough competitors such as the Droid X gain prominence.

Mobile Roundup: iAds blast off; Meredith buys Hyperfactory

Much attention was paid to the potential of Apple’s iPad tablet computer to revitalize the fortunes of ailing print publishers who could charge for apps. Less consideration was given to the boon the device could be for publishers who might split ad revenues with Apple. That's starting to change as the first iAds have been served with stunning results. As Kunur Patel of AdAge describes them, iAds “work like fully functional mini-apps operating within other apps” and allow consumers to view them without navigating away from the apps. This innovative design, coupled with the novelty factor of the new ad units, has led to astronomically high click through rates with effective CPMs that are unmatched in other ad platforms. One app developer said they brought in $1,372 on the first day of iAds, with a click through rate of 11.8%. But that rate is certain to fall as consumers become accustomed to iAds, but that hasn’t dampened advertisers' interest in them. Joe Mandese of MediaPost reports that a study from one large, nationwide ad services firm found that a third of agency clients are most interested in mobile advertising, "and an overwhelming majority of those respondents cited Apple's new iAds.”

Meanwhile, Meredith has deepened its moves in mobile marketing, which Jack Marshall of ClickZ says "follows a trend of publishers branching out into marketing services, partly in an attempt to further offset declining print advertising revenues." Meredith bought out mobile marketer Hyperfactory, a startup it already had a 20% ownership stake in. Hyperfactory has helped build mobile sites and apps for Meredith magazines, including Better Homes and Gardens, Parents, and Fitness. "We made the initial investment to help figure out how well we worked together, and ultimately formed a very strong partnership," Meredith exec Martin Reidy told ClickZ. "Mobile is becoming more important, and it's hard not to have it in your portfolio of offerings." Plus, one newcomer in the mobile ad space, InMobi, based in Bangalore, India, announced it had raised another $8 million in venture capital funding. The company serves ads into both Apple iPhone and Google Android networks, and says it has served 2 billion ad impressions since its launch earlier this year.

Twitter does deal-a-day with @Earlybird feed

Rather than make advertising on Twitter an experience that interrupts the flow of tweets, Twitter has opted for a different approach: sponsored tweets that run in search results, sponsored trending topics, and now a separate Twitter feed called @Earlybird with special deals from sponsors. AdAge's Michael Learmonth described it as a "promotion for marketers with a product or service with a limited shelf life where word has to be disseminated quickly." The company is hoping the sponsored handle, along with its sponsored tweets and promoted trends, will deliver advertisers valuable word-of-mouth advertising as well as new sources for revenue for Twitter itself. "Assuming [@Earlybird] goes well, the company could spread into other areas, including accounts for books, music, movies, and TV shows,” CNET's Josh Lowensohn predicted. Twitter’s project manager Shiva Rajaraman confirmed in an interview with AdAge: "What we're excited about in the future is how it will work on a geographic or interest basis, fashion versus tech or San Francisco versus the rest of the U.S."

The first deal offered on @Earlybird was a two-for-one ticket deal for Disney’s poorly reviewed "Sorcerer’s Apprentice" movie. “Twitter might not want to be launching @Earlybird with this turkey, an over-the-top Jerry Bruckheimer action-fest that stars Nicolas Cage," CNET's Caroline McCarthy warned. Other commentators thought teaming up again with Disney, which had previously advertised Toy Story 3 with a promoted trend, was a good decision. "A movie ticket deal for a summer Disney film is certainly a way to start @Earlybird off with a bang,” wrote Leena Rao of TechCrunch. AllThingsD’s Peter Kafka simply applauded Twitter for trying something new and notes that if @Earlybird is even a moderate success, it "will translate into big numbers." The question is whether Twitter can effectively compete with existing deals feeds run by other companies on Twitter, as well as the booming business for deals through email newsletters that have been thriving for years.

Time.com limits magazine stories online

For the second time in its history, Time magazine is limiting access to its print content on the web. Stories from the current issue of the magazine on the newsstand are all available online, but only in an abridged form. Although there are plans to offer online readers the opportunity to buy individual articles, at the moment those stories can only be viewed in their entirety in the print magazine or by paying $4.99 for an iPad version of it. Two weeks after the stories hit newsstands, they come out from behind the wall and join Time magazine’s massive free archive. Although Time is committed to retraining readers to pay for print articles, managing editor Richard Stengel told the New York Times, “we’ll see what works and doesn’t work.”

Reaction to the new restricted content was largely negative. Nieman Lab’s Joshua Benton had many questions about the decision to rebuild the wall among them, "why now?" Staci Kramer of paidContent, who was once involved in Time magazine’s editorial process, called it “unsatisfying on every level” and described the restriction as “the magazine equivalent of a condom, a barrier between online readers and the full content of the magazine.” Mark Coatney, a journalist who worked behind the earlier Time magazine pay wall and is now at Newsweek, criticized the poor labeling of print stories and the way the decision degrades Time’s online articles. “Why should I bother to read the online ones, since Time itself doesn't value them?” he asks.


Search ads grow, tempered by economy, social nets

The slow recovery of the American economy has proven to be a boon to online publishers as advertisers warily begin increasing their marketing budgets. The low-cost paid-search market in particular has experienced tremendous growth, gaining 14% in the second quarter over the same period last year, according to Efficient Frontier. Those growth figures were supported by findings from SearchIgnite, which produced broadly similar numbers. Efficient Frontier and a report from eMarketer predict continued growth in 2010, but caution that economic troubles in Europe could put a break on the rate of ad spending increases. Their concerns are well founded: An IPA/BDO Bellwether survey of U.K. marketing budgets found widespread downward projections with Internet ad spending growth at its lowest rate in three years, and search grew more slowly than in Q1. Efficient Frontier has also found falling cost-per-click rates in the U.K.

In online display advertising, publishers have more than just the economy to worry about. Namely, they should be concerned about Facebook and MySpace. As Edmund Lee of AdAge reports, a comScore analysis found that "social sites dragged down the average online CPM by as much as 18% over the last year." Between them, Facebook and MySpace are responsible for over a fifth of online display advertising volume, yet account for less than 5% of total online display ad revenues. “Social networks are going to be a challenge for everybody, as the sheer dominance of the impressions they're making flood the marketplace with inventory," Microsoft’s head of U.S. sales Keith Lorizio told AdAge.

Gigya: Facebook dominates log-ins, except on news sites

When you want to leave comments or share articles from a content site, how do you log in using a third party service? Some use Twitter, others Facebook, and still others might use Google or MySpace. According to research by Gigya, a social services provider, the majority of Internet users choosing to log in to sites via third party providers are choosing to go the social route, with Facebook accounting for 46% overall. But as Gigya CEO David Yovanno told Josh Constine of Inside Facebook, “in different content environments people choose different platforms to connect through.” This trend is most apparent on news sites, the only category in which Facebook does not lead the field. Twitter garners 45% of third-party logins on news sites compared with Facebook’s 25% share. While Gigya has hired an outside research firm to analyze its findings, Constine reported that one thing is already clear to Yovanno: “As social becomes a larger source of referral traffic, sites will need to optimize for it in the same way that they have for search in the past.”

Of Note

Yahoo Strikes Ad, Content Deal With Gannett (MediaPost)
Gannett's 81 newspapers and seven of its broadcast sites nationwide will be able to package Yahoo ad space with their own online inventory using Yahoo's APT platform

Goldman really likes its new iPad (FT Alphaville)
Lost in the flurry of coverage of Apple’s iPhone 4 antenna problems was an ecstatic stock note from Goldman Sachs that was long on the device maker and short on netbooks and Microsoft

Washington Post Gets Personal With iCurrent Acquisition (MediaPost)
iCurrent lets users automatically aggregate news based on specified topics areas. Users can update pages by adding or removing topics and news sources

Boom! Foursquare Crosses 2 Million Users (TechCrunch)
Social location service Foursquare has added some 100,000 users a week and doubled the 1 million users it had only three months ago

Kachingle Hopes 'Social Payments' Can Help Fund Content (PBS MediaShift)
Founder explains that service has been popular in Germany, and makes micropayments easy for people who love certain journalism sites and blogs

It’s open season on company search terms (The Inquirer)
The European Court of Justice has ruled that it is legal to bid on company keywords to drive traffic to independent websites


openquoteFacebook regularly touts how few developers run each segment of their business, but even if the company was generating tens of millions on a couple of developers, apparently more can be generated with the small gifts team working on other projects.closequote

Nick O’Neill of All Facebook explaining why Facebook shut its profitable virtual gift shop

Why Facebook Killed A $100 Million Baby (All Facebook)


The OPA Intelligence Report is a bi-weekly email summarizing and commenting on important news and research for the online publishing industry. As always, feedback is welcome at feedback@online-publishers.org.