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TrendMarkerJuly 2008

A brief for executives that highlights, explains, and discusses an idea, media innovation, market trend or invention that offersmarketing and communications opportunities.

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Copyright 2008 Universal McCann

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Over the last decade weve becomeincreasingly used to getting something

or nothing. Massive advances in thetechnologies that underpin the internet,in particular processing power, digitalstorage and broadband have providedthe means to develop and distribute richcontent and complex services to anyoneor virtually zero cost.

These actors have created a new business model based

on ree access, which has been tagged Free World by

the author o the longtail Chris Anderson. Today you can

make a phone call to the other side o the worldwith Skype, you can watch the worlds best TV clips on

YouTube and you can upload and share your photos on

Flickr; all or the price o an internet connection. It has also

inspired consumers to create and share content in their

hundreds o millions as the barriers to entry all to zero.

The worlds collective thinking, knowledge and

inormation is now available at the click o a mouse.

The consequence is that we are now exposed to an

unprecedented volume o content and services that

provide unlimited choice and distraction.

This has resulted in a culture o ree access, that is

becoming even more entrenched as younger web

users grow up and the desire or ree access to content,

services and experiences increases. These actors willincreasingly permeate oine and into product categories

where the impact o alling technology costs are not

as immediate.

Why is this important? It means the uture o content, web

services and increasingly wider business will be advertising

supported to allow the ree access that has become

essential to compete.

Additionally the desire or ree means that the environment

or branded content, entertainment and services isextremely positive and the opportunities are huge.

Lastly there are signifcant impacts o the Freeworld or

brands and advertisers due to the avalanche o content

and services it has created, both in terms o business

opportunities and continuing to deliver the most eective

and efcient marketing communications.

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freeWelcome

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New!

New Economics:

Free WorldMassive advances in technology mean the cost o

producing web content and services has been pushed

so low that the provision o access and usage or ree

is now a viable business model. It has undamentally

changed the basic economic rules o production and

supply and the impact is huge or any category impacted

by the web.

The ollowing actors are most importantin driving down costs:

Processing power is infnitely cheaper than it used to be.Moores law states that processing power doubles every

two years and it has been proved correct since the

dawn o computing. This means the super computer you

would have paid millions o dollars or back in the early

80s will now be out perormed hundreds o times over by

the average desktop computer. Complex processing,

web development and powerul applications are now in

the hands o every PC user and the costs o production

and development o content and web services have

plummeted. The tools to create have been democratised.

The cost o broadband has slumped. This means thatthe costs to distribute and access rich content or operate

a complex web-based service have allen to virtually

nothing. You can move inormation globally in seconds

or no charge. Compare this to the old inormation

networks, such as cable TV and radio, which were either

owned by one company, very expensive to develop

and access or very heavily regulated.

Digital storage is now so cheap it is possible to store aninfnite amount o content. This means data-rich servicesare becoming cheaper and cheaper to deliver, while new

data-heavy oerings that would have been impossiblesuch as photo-sharing sites that holding billions o high

resolution photos have become viable.

Geographical location and proximity are no longerrestrictions or costs. This means the scale o audienceneeded to provide ree access is much easier to fnd or

both mass and niche products. It also means labour and

skills rom anywhere in the world can be employed.

As technology advances and digitisation impacts more

categories the power o Free World will multiply. The new

business model will also spread oine as technology andglobalisation drive down the cost o real world goods like

clothing, televisions, MP3 players and airline tickets.

The new business model:

Find the many and charge the ewFree access is simple. It basically involvescreating the largest user base possible andthen seeking to monetise it in dierent ways:

Advertising support: The cornerstone o any web start-up. All websites and services now pursue advertising as

revenue, trying to convert their eyeballs into dollars. The

result is a plethora o innovative advertising solutions and

new platorms to support advertising

Additional services: Websites are increasingly trying to selladditional services. I you can convert just 2% o your user

base it can be signifcant revenue stream. For example,

photo-sharing site Flickr, is ree to use but i you want to

increase the number o photos you can upload you need

to pay an annual ee, while Basecamp an online project

management tool allows ree access, but charges or a

premium account.

Retail: Some sites have taken to selling other peoplesproduct or their own branded product to drive revenue.

Afliate schemes:Many sites recommend products andservices. They are likely to belong to afliate schemes that

mean they get a cut o any sales they generate through

links or advertisements.

Syndication: I you have good content you can sellit to other sites or media companies. The same goes

or services such as music retail sites, which can be

rebranded as white label products.

Micro-payments: Very small payments are impractical tobe paid by conventional payment systems such as credit

or debit card. Although these amounts are tiny, millions o

transactions add up. Micro-payments are oten used byree to use virtual games, massively multiplayer games

and social networks, with users buying with credits that can

be paid or by SMS, credit card or systems like Pay Pal.

Expect it to become increasing used or paying or

additional content particularly as universal micro-payment

schemes that work across the web emerge. Contd>

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YouTube: Rapidly evolving into the reeto access global TV platorm. Makes its

money rom advertising, sponsorship orpartnerships.

Gmail:One o many ree to use emailplatorms.It was unique when it launched

because it oered near unlimited storage

or ree and makes money through

sponsored links.

Facebook:Global social utility completelyree o charge to use. Makes money rom

advertising.

Skype: Make phone calls over broadband.Makes its money made rom Skype Out

calls when consumers call landlines.

Photobucket: Photosharing site, with5.5bn photos uploaded by mid 2008 -

makes money rom charging users an

annual ee or a pro account to upload

larger numbers o photos. Also supports

sponsorship and advertising.

Habbo Hotel:Free to use Teen virtual worldwith 100m avatars by June 2008 - makes

its money rom charging micropayments

or credits which can be exchanged or

virtual clothing, urniture and accessories.

There are too many examples to list literallymillions. The ollowing have made a globalimpact and become household names:
http://www.youtube.com/http://www.gmail.com/http://www.facebook.com/http://www.skype.com/http://www.photobucket.com/http://www.habbo.co.uk/http://www.habbo.co.uk/http://www.photobucket.com/http://www.skype.com/http://www.facebook.com/http://www.gmail.com/http://www.youtube.com/



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player game thats ree to download and makes its

money rom micro-payments or character upgrades and

in-game advertising.

Applying Free World to the oine world

Its easy to see that these new business principles can alsobe applicable to other business sectors, particularly as

the costs o producing goods alls. Weve identifed a ew

possible models that you might see in the uture.

Hotel rooms: Free hotel rooms paid or by sampling,gambling on the TV set, product placement and retailing

the interiors. Hotel rooms are a captive market.

Flights:In many cases, budget airlines have almost madeights ree but they could become completely ree o

charge, covering their costs via in-air shopping, gambling,

duty ree and ood sales.

Hollywood Blockbuster:Download or ree and then paidor by merchandising, limited edition boxsets and product

placement.

Free Clothing: Get ree basic clothing t-shirts, tops andwhen you wear them you actively promote them and you

speak about them to riends. Revenue is made by selling

premium versions.

The consumer:Were not paying anymore

The direct result o the Free World and the expansion

o the internet into all aspects o our lives is exposure

to an unprecedented volume o web-based content,

inormation and services. The ollowing actors are driving

a continual march towards the land o the ree.

Unlimited choiceFaced with an infnite number o options we are extremely

unlikely to choose the one that charges or access do

you think YouTube would have been the success it has iyou had to pay to use it? Due to the complete open and

democratic nature o the web there is simply too much

competition to justiy charges.

Distraction planetWith hundreds o millions o websites, countless riend

profles, RSS eeds by the minute, three-way Instant

Messenger conversations and never-ending email, we live

in a world o constant and increasing distraction. It s not

just online, TV, radio or newspapers, technology like games

consoles and iPods are all competing or attention.

Moving oine

The success o the ree to access model online andthe alling costs o production in the real world mean

the concept is moving oine. O course, giving stu

away as a loss leader has long been a sales practice

and marketing tool; mobile operators give their phones

away, satellite companies give you a ree PVR and now

broadband operators will even give you a ree laptop. But

these things come saddled with a contract you pay or it

in the end.

The dierence with applying Free World is that you can

create a genuinely ree to access service or product or

consumers as the culture o ree pervades all aspects o

lie. The ollowing are all examples o real-lie Free World:

Free newspapers: In every major city worldwide andhas worked wonders or encouraging youngsters to read

newspapers again. They are entirely unded by advertising.

For example, London now has two morning reesheets,

two evening reesheets and two weekly magazines that

are distributed across the city.

Prince: Despite his rather negative views on his videosappearing on YouTube, the pop star gave away his latest

album on the ront o the UK Daily Mail. He made his

money by selling concert tickets and merchandise.

Radiohead: In October 2007 the album Rainbows wasreleased or digital download with consumers allowed to

dictate the price paid. Amazingly a large majority still paid

or it. PR stunt or pure Free World? You decide.

Blyk Mobile: Launched in Europe in 2007, Blyk is acompletely ree mobile service or 16-24s as long as

they watch and receive a certain number video and text

advertisements on their handset.

Battlefeld Heroes: Electronic Arts produced online multi-

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This directly erodes the time and ocus we can give to

a particular piece o content or service and indirectly

the value and price we are willing to pay or it.

Browsing Culture

Faced with a constant distraction, we seek contentthat is increasingly byte sized, hence the growing

popularity o video clips and blogging. The shorter

content gets, the less likely we want to pay or it.

Were All Content Generators NowThe rise o social media and in particular blogs,

photo sharing and video sharing sites have given

all o us the means to create and share content.

The result is hundreds o millions o amateur publishers,

producers and composers and a massive ecosystem

o ree content, which users have no intention o

charging or. This wealth o content populates ree toaccess web services and provides viable alternatives

to paid or and proessional media.

Universal McCanns global social media tracker

estimates that by 2008 248m internet users worldwide

have uploaded photos, 184m have started a blog

and 183m have uploaded video clips. YouTube now

receives 10 hours o content every minute and Flickr

receives more than fve million photos a day.

This impacts the ability to charge or content and

services due to the huge choice.

PlatormisationWith such a wealth o content to organise and sort

through, we increasingly gravitate to the services that

provide us with the tools to organise, sit and manage

it. These are the platorms the social networks,

personalised home pages, photo-sharing sites and

video-sharing sites o the web. They help us organise,

sort and prioritise the complex world o the content

reeconony.

The Pirates Rule OkDigitisation o entertainment and the drivers o Free

World have meant that its increasingly easy toreproduce content or nothing and on any scale

you like.

Back in the analogue era, you had to manually copy

a programme VHS tape by VHS tape, now you can

produce and distribute hundreds o copies at the click

o the button. As broadband has expanded fle-sharing

sites like Bit Torrent, Limewire and Emule, which allow

you to search or content on other users machines

and download it have became commonplace and

music, flms and TV have been downloaded illegally in

their billions.

Universal McCann research demonstrates as shown in the

graph below that this is not a niche activity, globally peer

to peer sites outperorm legal paid-or digital content.

Source: Wave 3 Power to the People Social Media

Tracker activities Ever Done online

The impact o this has been to remove the association o

payment with entertainment content, particularly among

younger age groups. It has also commoditised music and

flm due to the wealth o material we can now download

and store easily and we are less willing to pay or it. Even

i we are not actively downloading illegal content, the

culture o non-payment permeates.

Im not payingConsumers aced with unprecedented volumes o

content legal and illegal simply arent paying any more.

Research rom the Universal McCann Waves project

demonstrates that there is no appetite or paying or

content and services online advertising support is always

preerred. The graph below shows that consumer demand

is or ree to access ad supported.

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Buy Music in a digitalormat online

Bu y TV shows/flms ina digital ormat online

Download music roma Peer to Peer site (eg

Limewire.com)

Download TV shows/flms rom a Peer to

Peer site

60%

50%

40%

30%

20%

10%

I am willing to pay to

access websites

Preer advertising to keep

access to websites ree

13% 71%



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Advertising in the ree world 101

The uture is increasingly ad supported embrace it

All new websites and services depend on advertising

support or their revenue. This means that advertising has

a huge role to play in underpinning the uture economy.

There are a mass o new opportunities or advertisers and

brands rom the wealth o new an inventive media owners.

Get involved.

Embrace the new ormats being developed as sites

seek more advertising revenue. For example, Facebook

are creating ultra-targeted advertising and ads revolving

around social actions which means an advertiser

pays when a user recommends or interacts with a paid

or message.

Go to the consumerThe wealth o content now available means that

web users increasingly gravitate towards platorms or

applications that organise their web experience such as

video sharing sites, personalised homepages and photo

sharing sites.

Content and advertising needs to be taken to these

platorms rather than hidden away on a siloed website.

Web users should be encouraged to share branded

content.

Free content and services isdriving more time onlineThe more ree content and services are available online,

the more time we spend there and the less time we

spend watching TV, listening to radio. Consequently more

budget should go there.

Stand out in the world o distractionForget ragmentation this is distraction. The ree world

has created such a massive wealth o on-demand

content that competing or attention or engagement

becomes increasingly difcult.

This means the strength o the creative idea, multi-media

executions, user input and content ocus are increasingly

important.

Brands need to create

The uture o marketing is about doing not showing andbranded content is increasingly important, online and

real lie.

An economy driven by ree access is the perect

environment or branded content, services or events

Free is now the most important thing, whether that has

been made ree by branded support or investment is

now irrelevant.

The experience must be positive, useul, entertaining and

genuinely benefcial to stand out in the crowd o content.

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Example o brands navigating theFree World

Xbox 360 Messenger Tab:A partnership between Xbox and MSN Live Messenger in

France to create an area inside Messenger to deliver rich

video content on games and movies designed to reach

key hard to reach gaming audiences. The deal was

brokered by Universal McCann.

Why is it Free World riendly?It was built inside instant messenger, thereore taking

content to users and out o the normal web environment,

thus cutting through the avalanche o content. It also

provides users with unique video content thats not

available elsewhere.

How Successul:Recently it had a click through rate o 4%. Xbox 360

recently renewed the deal to stay on Messenger

or another 12 months.

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Intel Powers Music MySpace Initiative:Intel Powers Music was a Pan European, multi-lingual

environment within MySpace. The site had a distinct

non corporate look to build afnity with the key target

audience; digital musicians who spend most o their time

online. Intel launched a competition to fnd Europes new

SuperGroup via a MySpace page. MySpace members

were asked to vote or the best musician, best song and

best album cover. MySpace also provided members with

a way to upgrade their own music player and unique

other content on making music. The deal was brokered by

Universal McCann.

Why is it Free World riendly?:It was built in the platorm that users go to it went to

them, it provided exclusive content ree o charge and it

enabled a unique shared experience.

How Successul:Over 6 million + profle views; 60,000 Intel riends / new

advocates in just 13 weeks; 25,981 submissions or

myspace bands.



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Microsot Ofce Video Jug Branded Content:A partnership between Microsot Ofce and VideoJug

(an instructional video site) to convey the benefts o

Ofce 2007 in an entertaining way. The instructional videoscovered a series o themes such as What To Do I You

Send A Kamikaze Email and How To Write A PowerPoint

Presentation In Five Minutes. The deal was brokered by

Universal McCann.

Why is it Free World riendly?It reached users who were engaged and activity seeking

inormation about MS Ofce, and bought them genuinely

interesting and relevant content.

How Successul:

By mid 2008 they had collectively received 220K viewswith each viewer spending on average 2.5 minutes

engaging with the MS Ofce Brand.

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Example o brands navigating theFree World ...continued



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The Future

The consumers desire or ree is only going to increase

over time. As increasingly volume o content and services

gravitate to the web then the demand will become

multiplied. The core actors o Free World; processing

power, storage and broadband are only going to get

cheaper and become available to larger numbers o

people. This increased demand or ree to access will

increasingly move oine and a larger number o industries

will have to adapt and evolve their business and pricing

models.

The uture role or advertising and marketing is rosy as an

increasing number o businesses depend on commercial

support; advertising, sponsorship and partnerships. This

means marketing communications has a crucial role toplay as we move into the uture.

Essential Links

Free World Explained:

The seminal Chris Anderson Wired article

www.wired.com/techbiz/it/magazine/16-03/_ree

Inception o a theory:

The original blog post on the subject

http://www.longtail.com/the_long_tail/2006/11/the_rise_o_re.html

Some healthy scepticism:

The blog Read write web gives their verdict

www.readwriteweb.com/archives/beware_o_ree_world.php

The Trendwatching version:

They call it Free Love, which sounds a lot more pleasant

www.trendwatching.com/trends/reelove.htm



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Battlefeld Heroes: ElectronicArts new ree to play gamewww.

battlefeld-heroes.com

Basecamp: Online projectmanagement tool

www.basecamphq.com

Blyk: Free to access mobile phones or16-24swww.blyk.co.uk

Craigslist: The original ree classifeds sitethat has had a massive impact o local

newspaper revenue in the US.

www.craigslist.org

Grandcentral: Recently acquired by Google, a service that

centralises all o your phone services and numbers into one

online account, oering loads o phone services that would

have traditionally cost you cash. Currently Beta and US.

www.grandcentral.com

Habbo Hotel: Teen hangout working on the ree model.

www.habbo.co.uk

Freeconomy Movement: A return to the barter economieso old, have a skill? Swap it or something else.

www.justortheloveoft.org

Freeload Press: Free text books or US college students thatcontain advertising.

www.reeloadpress.com

Medicae: Vending machines in Japan that give you aree drink i you watch a 30 second advert while you wait

www.inventorspot.com/medicae_vending_machine

Metro: The worlds biggest newspaper, ree to read everymorning in over 100 cities world-wide

www.metro.lu

Movable Type: Blogging sotware, ree to downloadand install but costs i you want a commercial licence

or user support.

www.movabletype.org

MSN Live Messenger: Its kind o given that Instant Messenger

comes or ree, but i you think about it, its pretty cool

you can chat to anyone all over the world or nothing.www.get.live.com/messenger/overview

Photobucket: One o the largest photo sharing sites in theworld ree to access, extra money or premium account

www.photobucket.com

Photoshop Express: The ree to use trimmed down online

version o the desktop image sotware a response to ree

to use online rivals.

www.photoshop.com/express/landing.html

Picnik.com: Web based photo editing tool, as good as anydesktop sotware.

www.picnik.com

Skype: Strikes ear into the hearts o any telecoms company.Make phone calls over broadbandand now rom a wi-f

enabled mobile phone. Makes its money made rom Skype

Out calls when consumers call landlines.

www.skype.com

Spiralrog: One o the many ree ad supported musicdownloads. This one has a good library, but is US only and

it remains to be seen whether ad supported music can

be popular.

www.spiralrog.com

Sport Magazine: Free weekly sports magazine distributedin Paris and London.

www.myreesport.co.uk

Videojug: Instructional video site. More than just mindless

entertainment, although there is nothing wrong with that.

www.videojug.com

Wikipedia: The worlds biggest encyclopaedia. Free accessthanks to charitable donations, ree web hosting rom the

likes o Yahoo and user generate and maintained entries.

Would be am impossibility in the world beore the web.

www.wikipedia.org

Zoho: Online ofce applications and productivity, suchas word processors, project management systems and

database tools. Not yet Microsot Ofce, but shows a trend.

www.zoho.com


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