Monday, December 5, 2016

black suede booties

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>> ladies and gentlemen, nikesh arora.>> arora: okay. so, i have some good news and some bad news for you. good news is thatmy head cold is worse than guy's, i was on a flight back from dubai last night, so ican't hear anything. so, if you guys are going to heckle, go crazy. all right. your phones,your pagers, it doesn't matter. the bad news--i've never done this before, like this round thing,standing in the middle because i know there's a bunch of people at my back. i don't knowwhat they're saying, what they're doing, so, after a while, they told me to walk a lotand stand up here, look at these people and make sure they're behaving themselves. so,you guys have to help me a little bit. anyway, so, a part of the challenge is, when you comehere to speak the first time, if you are the

first speaker, you have the benefit and theopportunity that you can say a lot of stuff and then over the rest, or the rest of theday, many people will stand here and repeat some of the things i'm going to say. the goodnews is i get to go first. the bad news that i already saw in the first video that vanput up there, already, you guys are talking about myspace, yahoo, linkendin, et cetera,et cetera; facebook. so, we're going to do a quick poll. i have only 20 minutes, so,i would be speaking very fast. how many of you have myspace or any kind of blogging account?raise your hands, please, quickly. it's early in the morning. you can do it. okay. how manyof you have an instant messaging account? okay. that's not many of you. how many aren'twilling to admit they have an instant, sort

of. how many of you have more than 50 friendson their instant messaging account? a hundred. one, two, three, four, five--more than 150.you're in the wrong age group. sorry. the average teenager has over 200 friends on theirinstant messaging account. they haven't met 75 percent of them in real life ever. so,we are going in to a phase which none of us has seen before. i'm going to start the daywith two very provocative statements. one, i think, about 50% of marketeers out therein the world do not understand what's going on around them. okay. and, at least, 50% ofyou should be willing to stand up and challenge that, but i can't hear, as i said, so it doesn'tmatter. the second thing i will tell you is i'm not here to give a doomsday speech. thisis not the end of the world. all the changes

we're talking about are going to take eight,ten, 15 years to happen. all right. i started my career--by the way, i can, i have about20 slides. i can do 20 minutes without slides, so, don't worry about it. i'll show you theslides in the end if you guys feel so interested or inclined. but, when i started my career,i used to work in the mobile phone industry and i saw this piece of research that said,because there's a phone around the corner, everybody has a phone, you have one in yourhouse, you have one in the phonebox, you have one next to you, the probability that peoplewould want a mobile phone is very low. so the prediction 15 years ago was that therewill be 3% of the people in the world who'd need a mobile phone. how many of you havea mobile phone--never mind, i know the answer.

who doesn't have one? you're definitely inthe wrong place, right. so, clearly it's very hard to sit back and predict those thingsbut, you turn around, you look and you say, "that's pretty obvious. it was very obviousthat people are going to have a mobile phone." well, that's great, how many of you actuallysat there when mobile phones came out and said there is going to be 80 or 100% penetrationof mobile phones in 10 or 15 years. if you did say that and you're still in this room,i feel sorry for you because you have picked up a trend which is very hard to pick up.i moved to the uk seven years ago, and i used to live in the us, in the us we believed inlargesse, and yes, we believe in having lots of things and many of them so i have threevcrs--you know what a vcr is? okay, that was

seven years ago, okay. but, i'm so tickedoff when i moved here because it would not work in the plugs and they don't have thesame format is what i have figured out. so, i decided to dump them and i got myself advd player, right, pretty visionary seven years ago, i'd say. so i went to my localvideo store and they had one small rack in the corner where they would gave out--theyhad dvds for rent and they had like the whole store where three-quarters of the store isfull of videos. seven years later, you go there now, i don't know if they have a videosection. do you guys remember if your video stores have a video section? that's prettyobvious, wasn't it, seven years ago, how many of you picked that up? the reason i'm tellingyou this, is that you sit here, we all sit

here and say, "yes. i get it. i know what'sgoing on out there. i understand what's going out there, i am so smart." well, if you are,try and take this movie and play this forward 10 years from now and look back and say, "whatis the world going to look like 10 years from now with all the trends i'm seeing today?"in that case, how do i want my business, my company, my product, my brand to be positioned10 years from now and what do i need to do today, because 10 years from now it will betoo late. everybody else would have figured it out. so, the question is, what are yougoing to learn today--during the day of the conference--what are you going to pick upand how are you going to turn that around, use it for your brand, use it for your product,use it for what you do? i think it's time

to see some slides, right? okay, there's supposedto be... there you go. so, if i look at what is going on over there from an internet perspective,i think, what's happening out there is as big as the revolution you saw with, you know,water steam, combustion, oil, et cetera. lots of big changes are happening. in the last10 years the internet penetration or the number of people in broadband has gone up from--broadbandis about 450 million by the next two years; it's 250 million now. there's 1.2 billionpeople on the internet today. how many of you remember the internet bubble? do you guysknow what the internet bubble was? sort of, kind of, yeah? that was 1999, right, 2000something like that? there were 350 million on the web at that time and the internet bubbleat that time, i'd say, there was less than

10% broadband penetration. it was all in youroffices, it wasn't at home. today is 1.2 billion people. it's going to be 40% broadband penetrationin two years. what's fascinating is the market gap of the 6 internet companies today is greaterthan the market gap of all the internet companies in 2000. so, i'm not quite sure when the internetbubble was or when the internet bubble is but, hey, i think we're sitting at a pointwhere there's a huge revolution going on. you haven't missed the boat yet because there'slots of stuff that is going to happen in the next ten years. there are three fundamentalreasons i believe this is not going to go away. the first reason is, you know, everybodywho has broadband is not going to give it up. how many of you have broadband at home?fantastic. if you could keep your hands up

for a second please. how many of you are willingto not have it work for a week? fascinating, right. now, this is a phenomenon in marketing,you should all dream of, it's called, going from a nice to have to a must have. and themoment your product goes from a nice to have to a must have, you've made it. i can nowhave a very glib question, how many of you would be willing to live without google searchbut, i'm not going to go there. i hope none of you as well. but, again the point is, you'vegot to figure out a way that your product goes from a nice to have to a must have andi think broadband access has gone from a nice to have to a must have. and because of that,i don't think this trend is going away. if you look at the other phenomenon that's happeningout there is the cost of storage. and today--are

you tapping that because i'm already overrunningmy time yet or--okay--i'm just checking. right, okay. i don't think i'm going to get throughmy slides so it's okay. the second thing that's happening out there is the cost of storage,and i'll go through this quickly. an ipod which stores about 40,000 songs today becausethe fact that storage gets cheaper. so, literally you can buy twice the storage in 13 monthsat today's price. so, 13 months from now, you'll be able to pay half the price of thestorage you buy today, that's how we look at it. if you follow that math, in 10 years,our storage capacity will go up a thousand times. right? what does that mean? that meansthat you can have an ipod in which we can put all the content ever created whether it'smusic or video in about 15 years. every piece

of content ever created can be on an ipodin 15 years. what does that mean? what does that do to your product? does that mean weneed broadband at all? i'll just go to africa and start giving them ipod for $250. theydon't even need broadband access because it costs $7,500 a month in africa to get broadband.so, i don't know, but there is a change going on that is going to impact things. so, froma more technological perspective, what that mean is we as people will be very comfortablestoring all of our data on the web. right, because it's so cheap to store, most companiesoffer free storage for your files, for your data, for your e-mail, et cetera. and lastbut not the least, most of you that are carrying mobile phones are now carrying a tool of contentproduction. you have a digital camera in your

phone which means people are going to getmore participating, more involved. so, we already talked about the fact that there'sa billion people out there, there's three billion people with phones, the new only pointi will make for you people in this room who are "marketers", this is a billion peopleconnected by the same need, right, which is very different. it's never been possible inthe past to find a billion people on a global platform who are connected by the same need.they're all online, they have very similar attributes, they all know many, many, similarthings. if the online community was a country, it'd be the fifth largest country in the world.imagine launching a product into the fifth largest country in the world purely onlinewithout having to need physical space, physical

logistics, there is no wonder that in thelast 10 years the top three brands that have developed had been online, that is amazon,ebay or google. all right. so, there's a lesson in here for all of us. see, if we look atwhat people do on the web, it has primarily been their need for information. now, howdoes that impact your life? well, there is a billion searches done everyday. that sortof one per every person and if i go around the room, all of you will admit, sheepishlythat you actually do more than one search a day. so, there's some people in the worldwho are not searching, who are online and we spend our time trying to find them. we'researching for the people who are not searching, right, come on guys, give me a break, it's9 o'clock in the morning, right? the next

thing that people are doing on the web ischatting, communicating, talking to each other. again, the same mobile phone guys who toldus that there is going to be 3% usage of mobile phones said that when we have mobile phonespeople--if, mobile phones were to take off, people would stop using their fixed line phonesbecause on average our desire to talk as humans is only about 600 minutes a month. well, surprise,surprise now we speak for about 1,800 minutes a month. and we send 60 billion emails a day.we have 23 billion via instant messages a day which means we are turning into a--whatis that?--"constant partial attention society," you guys ever heard this phrase? constantpartial attention, it's sort of the nice way of saying, attention deficit disorder. it'slike a very politically correct for saying,

constant partial attention that means, "i'mpaying attention to you, darling, don't worry i'm also doing this at the same time." right.so, that's what's happening out there, people are communicating. the next thing which hopefullyimpacts you guys more and more specifically is the notion of commerce. oh, my control,i will be able to catch up eventually. the european market is 130 billion euros for e-commerce.it has tripled in the last three years; it's going to double again in the next four years.how many of your company's products are available on the web? i was talking about that in germanyawhile ago and, you know, i talked to somebody and he said, "oh, we have products but theproblem is we're scared of selling our products directly on the web because our dealers aregoing to get really pissed off." everybody

has dealers, they get really pissed off. isaid, "okay. so, what happens?" he said, "well, the problem is in the last six months, oneof our dealers set up a website and now he's selling more product in the country than weare collectively in that whole region." so, again, the opportunity and the challengesis, is your product available for consumption out there because people are willing to dealwith it. now, five years ago, i haven't bought anything on the web. now, it's highly unlikelyanybody who buys anything worth more than 500 pounds or 500 euros is not going to doso without researching it on the web. the next trend which everybody is still tryingto figure out is what grant talked about, his epiphany came two years ago with myspaceand his 12 year-old. there are 250 million

people out there who are on myspace i think,something like that, or even more. since i did the slide, there's more people--betweenmyspace, facebook, yahoo there are 250 million people, i don't know what they do, i haven'tbeen able to spend too much time in them, but clearly you guys raised your hand andsaid, you all participate in it. it's not quite clear how these communities are goingto evolve and, you know, people like guy are going to try and figure it out in telegraphonline tv, but there's still an interesting battle out there. is content going to be atthe center and communities are going to form around it or is community going to be at thecenter and people will find like-minded communities to discuss relevant content? i don't knowthe answer, but i tell you what, every five

seconds somebody out there posts a consumeropinion on the web. and the question is, even if you're not there personally as a marketeer,do you know who's talking about what up there on the web. is there anybody in the room workedfor cadburys, before i tell the story? okay, i'll tell you a story. cadbury has a brandcalled wispa--does anybody know a brand called wispa? good there's some people in the roomwho are old enough to remember wispa. well, cadbury decided to stop producing that productearlier this year, until they found out there where 93 facebook communities about wispa.they found out there were 14,000 fans posting opinions on facebook saying, "bring back wispa,"until the sort of the climax happened in glastonbury when iggy pop was performing, people ran upthe stage where the banner saying, "bring

back wispa." now, as a marketeer, doesn'tthat make your heart go warm and happy? my brand, somebody still loves it. well, cadburyis bringing it back. they are making 23 million this year to test if the product still haslegs in the market. so, i don't know, do you know what people are saying about your producton the web? whose marketeers aren't ready? because the way we like to ask people whatthey think is we bring them into a room, put very, very bright lights on them and tellthem, "if you can imagine the world where people could fly, how would they look like?"and the guy said, "i really don't have an opinion but if you insist and you're payingme $50 an hour, i'll tell you something." i said, "look, i did consumer research. nowi know what consumers want." so, the point

is, you just need to go out there and seewhat people are saying in these communities. and last but not the least, the most recentnotion is people are going up to the web and looking for entertainment; they're lookingto be entertained. there are 5 million playbacks of youtube videos on the web, and youtubeprobably has less than 50% market share of all the entertainment on the web. so, betweenitunes and videos, et cetera, there's lot of stuff happening out there. that's easypart. here's what we did. we tracked that and looked at it, what people are spendingtheir time on. what's fascinating is, people spent about 11 hours--i think that's a month,yes. it is, 11 hours a month online in 2003. that number increased since then to 15 or16, excuse, me, increased to 16 in 2007. it's

going to increase again in the next four years.but what's fascinating is where people are going to be spending most of their time. you'llsee most of the people are going to be spending their time in the community and the entertainmentspace, while we like to believe that search and information is going to be important becauseonly about 10% of the world's content is on the web and it's going to take awhile beforeall of it comes on the web. but that's where people are going to spend their time. thequestion is, are you ready to interact with those people in those forums in what you do.let's see what happens next. so, what does that mean to me? what do i do as a marketeer?what do i do as a person who spends my time trying to figure out how to do my day job?the first interesting observation i had based,

have based on all of this stuff is that mostof--so, there is sort of a reversion happening back to fundamentals and the reversion thatis happening which i don't think ever left is that consumers are sort of blocking advertisingand consumers are beginning to understand that all they give a shit about is the performanceof the product. and if you go back and look at the examples of the companies i said whichhave built brands for the last 10 years it is all been on the back of products and i'llexplain it in second what i mean by that. there is––back again, a greater focuson performance, management and marketing. people want to know what the roi of your functionis. i used to be a chief marketing officer for five years. trust me. i hated the cfo.he always wanted to come and measure what

i was doing. i told him, it's all good. it'sall in the head. it's warm, you wouldn't understand but, eventually, i had to leave. and he'sstill there. the third lesson from this is that if you can find a way of making youradvertising relevant for consumers when they need it, you're going to go very, very, veryfar. and last but not the least, every element of the four ps we all learned in marketingis going to get impacted by the internet. i was in dubai yesterday and i was makinga presentation slightly different, and i sort of said this, not on the slide but generallysaid it, and the gentleman who was going to speak as spoke before me the previous daywas sitting in the front row, his name is philip kotler (ph). do you guys know philipkotler (ph) is? some of you, if you're into

marketing. he's supposedly the grandfatherof marketing and he almost wanted to stand up, stood up on stage and wanted to come hugme and say you're right, read my next book which is about how the four ps are going tobe impacted by the internet." so, clearly, it must be true. so, the first one i toldyou, product performance is going to be relevant. it is relevant. if you look at the last fewyears, the best brands that have been built up to, it have been on the back of performanceof products. what's fascinating is most of those products had been free to the consumerwhich i don't know what to do. that does mean, you start taking your products and make themfree for everybody? i don't know the answer. and third, which is fascinating again is therehas been a community element to those products.

whether it's ebay, whether it's amazon orwhether it's google. it has been all about engaging with the user, engaging with theconsumer, getting them to contribute. and very seldom in today's world, the large brandscommunicate with their users at the same level, which is a challenge. and as i say, that'ssomething which i've mentioned to people in guy's business is--i was talking to the ceoof a newspaper, not the telegraph, and i said, "how many letters of the editors do you geteveryday?" he said, "about 5,000." i said, "that seems like a big number." and i imaginedhow passionately do you have to feel to write a letter to the editor? how many of you havewritten a letter to the editor ever? wow. okay, fantastic. now, i said, "how many dopublish?" he said, "five." that's like, worse

than the lottery. all right. you have 5,000people write letters. you could actually have people who have written 50 letters and neverbeen published. i said, "why don't you put them all in your website so people can actuallyfeel that their letters are being read, and they have been acknowledged. i don't evenknow. i said, "do you send an acknowledgement?" he said, "it's not always possible to sendan acknowledgement every day to 5,000 people." right? i just think of that from a marketeerand a brand person's perspective. here's people desperately wanting to engage with your brand,and you actually say, let me decide which five of you were intelligent enough to saysomething which i deem worthy. all right. try doing that to a consumer, right? so, anyway,long story short, they did not want to put

them on the web because they felt not everyconsumer is articulate enough and yeah, we should talk to the newspaper guys who thinkabout it. but, the point i'm trying to make is that you need to find a way that you'retalking to the community, you're talking to the consumers, you're talking to users ofyour products. most websites i see, most products i see do not engage the consumer. i boughtan expensive music system and put it on my house, and of course, you know, the fact thati'm not so technologically savvy, i tried to get it to work and it blew up. and it happenedto blow up just a few hours before i was supposed to have many people over at my house. so,i tried to figure it out how to fix it. and there's, now everything is software controlled.you can't really go turn the off button, and

turn on, et cetera, whatever. but, eventually,that's what i have to do. but, anyway, i go to their website, i know all about their management.i know all about their wonderful production facilities. i couldn't even find the usermanual on the web. so, i go looking for blogs and there are some people on blogs that haveactually identified that this problem exists. and i go look in the blogs but, i didn't quitefind the answer. so, i thought it was being really smart, and i called a help number inthe us, because the us was still open and the uk had closed. so, i sort of got themtalking to me for about five minutes about, you know, what i own, what i own, whatever.and suddenly, after five minutes, the guy says, "i'm really sorry, sir. i just realizedfrom your product code that you bought this

in the uk. i'm really sorry, i can't helpyou." he hung up on me. i said, "okay." again, the point is, is your brand talking to yourconsumer? are you talking to them? so, i've been given the red lights which means i haveto go really, really fast, right? okay. i knew 20 minutes was never going to be enough.so, i'm now going to show the video i was going to show you, you're going to have...i am. i guess. >> i love my new iphone. it does everything.but will it blend? that is the question. now, you fans on youtube have asked me to blendan iphone so, i did it. but i have another. >> arora: sorry. this was an example to showyou how--there's a blender company. this just doesn't always happen with online brands only.there's a blender company called blendtec

which sells blenders to restaurants and willsell to consumers. they started a small, sort of a viral video in blending things. now,they have a channel in youtube that charge $5,000 if you want to get their product andput it to blend. they blend toothpaste. they blend iphones. they blend whatever you want.all right. but, the users love it. the users are blending shit and sending it to them andsay, "look how i can blend this stuff." all right. so, there is some element of entertainment.okay. let me go to the stuff really quickly because i already talked about most of it.but, there's a greater focus on performance management. if you don't know the roi of yourmarketing spend, don't bother. i sort of disagree with the first slide that showed up when thevideo started this morning that 90% of marketeers

don't understand the value of television.i think 90% of the marketeers don't understand the value of the internet. but, i said 50plus, so, somewhere between there is the answer. all right. the third thing which i talkedabout is the notion of advertising as a service. this is a quick example to show advertisingis the advertising when i don't need it. advertising is information when i need it. so, if you'rehiking in the desert when you see a sign saying one mile to the next juice bar, that's highlyinformational. nobody sees that as an ad. but if i just finished dinner, and you sticka pizza or mcdonald's ad in front of me, i'm not a very happy person. do you guys understandthat? and as i said, most every element of the four ps is going to change for to what'sgoing to happen on the internet. i will tell

you one story and i'll stop right there. there'sa business on the web called threadless. and, again, i have lots of lots of examples. ican talk forever but, i've been told i can't; this is my last story, i promise. all right.there's a business on the internet called threadless. what threadless does if you don'tknow it, they sold 6.2 million t-shirts on the web in 2006, and it's quadrupled everyyear. what they do is they've asked their consumers to design t-shirts, and you uploadyour design onto their website, and then people vote. and whoever votes is implicitly saying,"i'd like to buy that t-shirt." so, the people vote, and they print the top six t-shirtsevery week, and they make limited copies. if they have 20,000 of t-shirt one which had,which had 40,000 votes, they have 5,000 of

t-shirt too; we have, you know, whatever.they'll make the t-shirts, and they sell them to people who voted for the t-shirts. prettystraightforward, right? they have 300,000 people registered in their community. theyhave 140,000 designs which have been uploaded to their website. they do not design anything.they take the design off to web, and then print it on a t-shirt, and sell it to theconsumer. and the reason i find that very fascinating, their philosophy, as i said,we didn't create a product and trying to sell it to an audience. we created an audienceand then decided what they wanted and sold them what they wanted. with that, i'm goingto shut up. thank you very much for listening. i hope you have a fantastic day.

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