scott galloway - best practice: 0 or 1 - winners & loosers in a digital world
DESCRIPTION
It‘s never been easier to be a billionaireor harder to be a millionaire as a digitalecosystem fosters a “winner takesall“ environment. Professor Gallowaywill explore key trends in mediaconsumption, demographics, emergingplatforms and their cumulative effectof business. Specifically, who benefitsfrom the shift and who is on the wrongside of this tectonic shift (i.e., the losers)?TRANSCRIPT
Scott Galloway | July 10, 2012
@profgalloway
Facebook/l2thinktank
Winners & LosersBEST PRACTICE: 0 or 1 --
in a Digital World
Intro:
Winners, and losers, have emerged.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E0
1
2
3
4
5
6
7
8
9
10
0
5
10
15
20
25
30
35
Newspaper Industry Help Wanted Classified Ad RevenueGoogle Revenue
In B
illi
on
s
Revenue(2000–2010)
Google Killed the Newspaper Star
Sources: Google, cnet News; naa.org; TheLadders
What is this data set?
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E0
1
2
3
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5
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9
10
0
5
10
15
20
25
30
35
Newspaper Industry Help Wanted Classified Ad RevenueGoogle Revenue
In B
illi
on
s
Revenue(2000-2010)
Sources: Google, cnet News; naa.org; TheLadders
And what is this?
Google Killed the Newspaper Star
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E0
1
2
3
4
5
6
7
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9
10
0
5
10
15
20
25
30
35
Newspaper Industry Help Wanted Classified Ad RevenueGoogle Revenue
In B
illi
on
s
Newspaper Revenue vs. Google Revenue(2000–2010)
Sources: Google, cnet News; naa.org; TheLadders
Google Killed the Newspaper Star
-92% in Newspaper Revenue vs. -92% in Newspaper Revenue vs. +1541% for Google
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E0
1
2
3
4
5
6
7
8
9
10
0
5
10
15
20
25
30
35
8.7
5.7
4.44.0
4.65.1
4.7
3.8
2.2
787MM 723MM
19MM 86MM 439MM1.5
3.2
6.1
10.6
16.6
21.823.6
29.3
Newspaper Industry Help Wanted Classified Ad RevenueGoogle Revenue
In B
illi
on
s
Newspaper Revenue vs. Google Revenue(2000–2010)
Sources: Google, cnet News; naa.org; TheLadders
Google IPO
Google Killed the Newspaper Star
-92% in Newspaper Revenue vs. +1541% for Google
Source: Mary Meeker, Internet Trends, April 10, 2010
2007 2008 2009 20100.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
YouTube
MSN
Yahoo
Share of Global Online Time Spent(2007–2010)
“The top 10 Web sites accounted for 31% of US page views in 2001, 40% in 2006, and about 75% in 2010”
--Wired Magazine, August 2010
Web Dead, Internet Thriving
Facebook and the Seven Dwarves
Jun-
08
Aug-0
8
Oct-08
Dec-0
8
Feb-0
9
Apr-0
9
Jun-
09
Aug-0
9
Oct-09
Dec-0
9
Feb-1
0
Apr-1
0
Jun-
10
Aug-1
0
Oct-10
Dec-1
0
Feb-1
1
Apr-1
1
Jun-
11
Aug-1
10
10
20
30
40
50
60
70
80
Bil
lio
ns
of
Min
ute
s S
pen
t
All Other Social Media Sites:(Myspace, Twitter, LinkedIn, Tumblr, etc.)
Source: comScore
Minutes Spent on Social Networks Each Month(June 2008–August 2011)
2005 2006 2007 2008 2009 2010 20110
5
10
15
20
25
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
US Consumer Magazine Ad Spend Facebook Revenue
What is this?(2005–2011)
Sources: Bloomberg News, Business Insider, TechCrunch, eMarketer, AdAge
In B
illi
on
sWho’s Next?
Revenue
2005 2006 2007 2008 2009 2010 20110
5
10
15
20
25
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
US Consumer Magazine Ad Spend Facebook Revenue
Revenue(2005–2011)
Sources: Bloomberg News, Business Insider, TechCrunch, eMarketer, AdAge
In B
illi
on
sWho’s Next?
And this?
2005 2006 2007 2008 2009 2010 20110
5
10
15
20
25
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
US Consumer Magazine Ad Spend Facebook Revenue
Magazine Revenue vs. Facebook Revenue(2005–2011)
Sources: Bloomberg News, Business Insider, TechCrunch, eMarketer, AdAge
In B
illi
on
sWho’s Next?
2005 2006 2007 2008 2009 2010 20110
5
10
15
20
25
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
18.5 19.2 20.118.5
16.7 15.8 15.3
10MM 50MM 150MM 265MM
650MM
2.0
3.7
US Consumer Magazine Ad Spend Facebook Revenue
Magazine Revenue vs. Facebook Revenue(2005–2011)
Sources: Bloomberg News, Business Insider, TechCrunch, eMarketer, AdAge
In B
illi
on
sWho’s Next?
[email protected]@L2ThinkTank.com
Powering the Print Industry
Autom
otive
Food
Retai
l
Pharm
a
Home
Trave
l
Technolo
gy
Finan
cial
Ser
vice
s
Med
ia
Cosmet
ics
Apparel
& A
cces
sorie
s
Leading Magazine Advertising Category Growth(Q1 2011 vs. Q1 2012)
-34.6%
-15.2%
-5.6%
-5.5%
-4.4%
-3.8% -3.0% -1.0% -.2%
+7.1%
+13.2%
Source: Publishers Information Bureau (PIB) with Kantar Media as city MPA, April 4, 2012
August 2010:
Facebook launches “Places”
December 2011:
Facebook acquires Gowalla
Taking on Foursquare
February 2011: Facebook launches
“Pinned Posts”
And Pinterest?
“After a brief blip in Google+’s traffic surrounding the site going public, we saw a prolonged and sustained downward trend in overall activity coming from the site.”
- Gabe Donnini, Chitika
Public Beta
Indexed Referral Traffic Google +(Sep-18 to Oct-12)
Not “Sticky”
Google+ Not So Sticky
The E-commerce Opportunity
In 2010 68% of affluents indicated they purchased a product or service via the internet…
…in 2011 the percentage
jumped to 92%Source: Affluent Consumers and How they Use the Internet, Social Media, and Mobile Devices, Unity Marketing, November 2011
A more daunting Giant?
Their favorite websites?
Source: Affluent Consumers and How they Use the Internet, Social Media, and Mobile Devices, Unity Marketing, November 2011
54
321
The New Retail Giants
Source: comScore Media Metrix
20.4%
16.2%
Amazon eBay Alibaba Apple
Percent Reach of Global Internet Users(June 2011)
North America Europe Asia Pacific Middle East / Africa Latin America
11.3%9.7%
Referral Traffic: 2011 Digital IQ Index®: Beauty
Upstream & Downstream Traffic to Beauty SitesTo and From Sephora.com and Amazon.com
(2010 vs. 2011)
17.50%
27.50%
25.45%
36.36%
20.00%
22.50%
16.36%
21.82%
% of Brands for whom the following are a top eight
source of upstream traffic
% of Brands for whom the following are a top eight
source of downstream traffic
2010 2010 201020102011 20112011 2011
Overview:
The Digital IQ Index®
[email protected]@L2ThinkTank.com
Digital IQ Index®
The only brand audit that benchmarks
the digital performance of brands
Ranks brands on the following dimensions:
SITE &E-COMMERCE
DIGITAL MARKETINGSearch, Email,
Display, Innovation
SOCIAL MEDIAMOBILE
3rd Annual Study Published
October 11, 2011
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
0
200
400
600
800
1,000
1,200
1,400
Population with Income >$30,000 USD(1995–2025E)
US Europe Japan China RoW
+300 Million(1995-2010)
+600 Million(2010-2025)
The Addressable Market for Luxury
140+
110–139
90–109
70–89
>70
Genius:
Gifted:
Average:
Challenged:
Feeble:
Digital efforts are a point of competitive differentiation
Engaging and brand-enhancing; takes risk
Predictable, few innovation leaps
Limited innovation, experimentation and engagement
Nascent digital footprint; Investment does not match opportunity
Categorizing Results
Brands parsed into five categories based on Digital IQ score:
Overview:
The Rankings
RANKING: Challenged
Digital IQ Index®: Fashion (2011)
RANKING: Average
Digital IQ Index®: Fashion (2011)
Key Findings
Genius Gifted Average Challenged Feeble
8%
24%
35%
22%
10%
Digital IQ® Dispersion 2011: Fashion (% of Brands per Digital IQ Class)
The standard deviation across Fashion Digital IQ decreased from 39 in 2010 to 25 in 2011 suggesting that it is becoming increasingly difficult to
differentiate.
The Race is Tightening
Punching Above Their Weight Class
Digital IQ by Parent Company
The Digital IQ of public companies significant outpaces that of private companies suggesting the pressure the markets put on signaling innovation.
U.S. (n=17) Great Britain (n =7) Italy (n=14) France (n=10)
108
9998
92
Average Digital IQ by Country of Origin(October 2011)
Red, White & Digital
Greatest Year-Over-Year Gain(2010 vs. 2011 Digital IQ Percentile Rank)
Greatest Year-Over-Year Loss(2010 vs. 2011 Digital IQ Percentile Rank)
Donna Karan Alexander McQueen Ermenegildo Zegna Christian Dior Salvatore Ferragamo
43% 43% 41%
25% 24%
Hermès Oscar de la Renta Armani Prada Chanel
-35% -34% -33% -33%
-17%
Biggest Winners & Losers
Top 10 Overachievers (Facebook Fans vs. Global Google Searches)
Burberry Giorgio Armani
Dolce & Gabbana
Christian Dior
Jimmy Choo
Ralph Lauren
Chloé Gucci Yves Saint Laurent
343%308%
165% 156%
94% 82% 80% 69%
2%
Top 10 Underachievers(Facebook Fans vs. Global Google Searches)
Theory
Max
Mar
a
Donna Kar
an / D
KNY
Mulb
erry
Stuar
t Wei
tzm
an
Cather
ine
Mal
andrin
o
Badgle
y M
isch
ka
Alfred
Dunhill
Valen
tino
Zac P
osen
-88%-89%
-90% -91% -91% -91% -92%-93%
-95%
-99%
Facebook Overachievers & Underachievers
Shifting Centers of Gravity
People Talking About This: Global Luxury Facebook Pages(April 2012)
TaipaiMexico City, Mexico
Tunis Bangkok
Istanbul
Kuala Lumpur
vLondon
v Paris
In the Company of Genius
Four SeasonsReallocation of capital.
Digital and the Balance of Power
Cost Per Booking by Distribution Channel(2010)
Digital IQ = Growth in RevPAR
Relationship Between 2012 Digital IQ & 2010-2011 growth in RevPAR
(Hotels with Published Data, N=22)
The End of Command and Control
Only 17% of hotel brands host user reviews……brands with reviews
sent 39% less traffic to OTAs
In the Company of Genius: Four Seasons
In the Company of Genius: Four Seasons
Allocation of Capital
FragranceThe Importance of Ownership
Fragrance: Digital IQ by Ownership
Licensed Owned 80
85
90
95
100
105
110
-
5
10
15
20
25
30
35
90
108 31
22
Average Standard Deviation
n = 39 n = 24
Digital IQ by Ownership Structure: Fragrance IQ(June 2012)
Huge digital assets…
8,762,020
1,028,899 894,165
Average Facebook Community Size by Ownership(May 2012)
Celebrity Licensed Owned
…But considerably underleveraged
BenefitLeapfrogging in China.
China
U.S.
Japan
United Kingdom
France
740
257
97
50
43
450
224
94
44
39
2010 vs. 2015: Internet Users in the World's Largest Luxury Markets
(In Millions)
2010 2015
China Rest of World0
100
200
300
400
500
600
700
800
Internet Users: 2015
China U.S.Japan United KingdomFrance
Source: eMarketer, April 2011
Internet Tidal Wave
Source: MckInsey, 2009
China U.S. Japan
80%
30%19%
20%
70%81%
Customer Demographics: World's Three Largest Luxury Markets
18-44 45+
The average age for a millionaire in the U.S. is 54 years old vs.average age for a millionaire in China of 37 years old.
Digitally Native
2005 2006 2007 2008 2009 20100
2
4
6
8
10
12
14
16
18
U.S. United Kingdom Korea Japan
Online Sales as a Percentage of Total Retail Sales: Apparel(2005-2010)
2005 2006 2007 2008 2009 20100
2
4
6
8
10
12
14
16
18
Source:BCG, 2011
The Greatest Opportunity in a Generation
2005 2006 2007 2008 2009 20100
2
4
6
8
10
12
14
16
U.S. United Kingdom Korea Japan
Online Sales as a Percentage of Total Retail Sales: Skincare & Cosmetics(2005–2010)
2005 2006 2007 2008 2009 20100
2
4
6
8
10
12
14
16
Source:BCG, 2011
The Greatest Opportunity in a Generation
Benefit Dolce & Gabbana Johnnie Walker Burberry Audemars Piguet
67%
48% 44% 40% 37%
Top Five: Greatest Year-Over-Year Gain or Loss2010 vs. 2011 Digital IQ Percentile Rank
Vacheron Constantin
Van Cleef & Arpels
Chivas Regal Wuliangye Moutai (Maotai)
-41% -43%
-56%
-67% -68%
Top Five: Greatest Year-Over-Year Gain or Loss2010 vs. 2011 Digital IQ Percentile Rank
Launched E-commerce
China IQ: Biggest Winners & Losers
Sina Weibo: 98K+ fansKaixin: 225K+ fans
“Flirt” Videos: 1M+ views
Strong presence on multiple social
platforms
Benefit: A Beauty
Youku: 430K+ views
Estée Lauder A focus on the organization.
Multi-Brand Organiza-tions (N=25)
Other: Privately Owned (N=17)
Other: Publicly Traded (N=10)
109
9287
2012 Digital IQ Index®: HotelsAverage Digital IQ® by Ownership Structure
(March 2012)
Independent Brands
The Enterprise Outpaces the Independents
5 OF TOP-10 BRANDS:
Estée Lauder
Companies
Digital IQ Index®: Beauty(2011)
And in Beauty
Dior Smashbox Origins Estée Lauder Shiseido
45%
38%
28%25%
22%
Aveda NARS Perricone MD La Mer Neutrogena
-11%-14%
-17%-19%
-21%
Greatest Year-Over-Year Gain(2010 vs. 2011 Digital IQ Percentile Rank)
Greatest Year-Over-Year Loss(2010 vs. 2011 Digital IQ Percentile Rank)
2010 Acquisition
Biggest Winners & Losers
To date brands have focused on FB Growth + Programs + Online BuzzFacebook: Community Size
Facebook: Programming + Best Practices
Facebook: Engagement
Facebook: Global Integration
YouTube
Digital Marketing Innovation
Online Buzz
Overall: Beauty Industry(Digital IQ Index®: Beauty 2011)
Limited Digital Marketing Innovation
Analysis includes top 55 Global Beauty & Skincare Brands across Channels
& Price-point
L2 Digital IQ Index®: Beauty (Social Media)
Facebook: Community Size
Facebook: Programming + Best Practices
Facebook: Engagement
Facebook: Global Integration
YouTube
Digital Marketing Innovation
Online Buzz
Beauty Industry vs. Dove(Digital IQ Index®: Beauty 2011)
Facebook Advertising + Programming Strategy:
Grew from 300k fans to 4.3 MM fans over 2011
However…low Facebook
engagement
Dove has focused on FB fan acquistion
Facebook: Community Size
Facebook: Programming + Best Practices
Facebook: Engagement
Facebook: Global Integration
YouTube
Digital Marketing Innovation
Online Buzz
Beauty Industry vs. Clarins(Digital IQ Index®: Beauty 2011)
Strong FB engagement rates in category; Experimenting with gamification, Facebook
Commerce and Product-focused content
Primarily organic growth strategy has resulted in
180,000 fans
Clarins: Strong Programming Leads to Engagement
Beauty Industry vs. Lancôme(Digital IQ Index®: Beauty 2011)
Facebook: Community Size
Facebook: Programming + Best Practices
Facebook: Engagement
Facebook: Global Integration
YouTube
Digital Marketing Innovation
Online Buzz
Michelle Phan partnership generates
platform-centric competitive advantage
Lancôme: YouTube Dominance
Beauty Industry vs. Chanel(Digital IQ Index®: Beauty 2011)
Facebook: Community Size
Facebook: Programming + Best Practices
Facebook: Engagement
Facebook: Global Integration
YouTube
Digital Marketing Innovation
Online BuzzUnderinvestment across
the board, but brand equity equates to huge
organic buzz
Coupling TV Commercials with Long
Form Video leads to strong YouTube
engagement
Chanel: Organic Buzz + Long Form Video
Facebook: Community Size
Facebook: Programming + Best Practices
Facebook: Engagement
Facebook: Global Integration
YouTube
Digital Marketing Innovation
Online Buzz
Beauty Industry vs. Clinique(Digital IQ Index®: Beauty 2011)
Overall #1 aggregate scores across
dimensions
Clinique: Top Overall Scores
Facebook: Community Size
Facebook: Programming + Best Practices
Facebook: Engagement
Facebook: Global Integration
YouTube
Digital Marketing Innovation
Online Buzz
Beauty Industry vs. Estée Lauder Company Brands(Digital IQ Index®: Beauty 2011)
Strong aggregate scores across dimensions
suggests ELC is fast follower
The corporation lags in FB engagementELC Brands:
AvedaBobbi Brown
CliniqueEstée Lauder
MACOrigins
Smashbox
ELC Demonstrates Enterprise Dominance
Estée Lauder
Bobbi Brown
Origins Aveda Smashbox MAC La Mer Clinique
Live Chat ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
User Reviews
✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Estée Lauder Companies Efficiencies
Top 10 Sites: 2011 Digital IQ Index®: Beauty (August 2011)
Site Rank Brand Tech User InterfaceCustomer
ServiceProduct Page Account
E-commerce(10)
Content / Innovation (10)
Brand Trans. (10)
Total (45)
1 Bare Escentuals 2.7 2.9 3.0 4.6 5.0 9.0 8.0 7 42.2
2 Smashbox 4.0 3.0 3.0 3.5 4.8 7.9 7.0 7 40.1
3 Bobbi Brown 4.8 3.5 3.3 3.7 3.5 6.6 6.0 8 39.2
4 Benefit 3.8 3.0 2.8 4.4 3.8 7.0 6.5 8 39.2
5 Clinique 3.4 4.0 3.3 3.5 3.3 7.3 8.3 6 39.0
6 Estée Lauder 3.0 3.2 3.3 4.6 3.5 6.6 7.5 7 38.6
7 M.A.C Cosmetics 3.6 1.7 2.8 3.0 3.8 6.8 7.0 10 38.6
8 Aveda 2.9 3.3 3.5 3.2 4.5 6.9 5.3 5 34.5
9 Burberry Beauty 1.8 2.3 3.3 3.0 3.8 7.4 3.8 8 33.2
10 Lancôme 2.4 4.3 2.5 3.9 3.8 7.8 4.5 4 33.1
The Opportunity Around Enterprise
BurberryShareholder value.
British + Plaid + Innovation
Burberry
Louis Vuitton
Chanel
Swarovski
Dolce Gabbana
Tiffany & Co.
1.9%
2.7%
0.8%
2.4%
0.6%
5.2%
29.0%
2.9%
6.9%
4.8%
2.1%
4.2%
Percentage of Traffic From Facebook to Luxury Brand Sites
September-11 September-10 Unique Visitors (000)
894
675
644
487
278
147
Source: comScore Media Metrix, Europe, Sept 2010 vs Sept 2011
Here Comes Everyone
Facebook Fans & Friends are 10x as Likely to Visit Site
Series1
0.25%
2.7%
Visitation of Burberry Website United Kingdom (% Reach)
Total InternetBurberry Network (Fans and Friends of Fans)
Source: comScore Social Essentials, U.K. September 2011
0
2
4
6
8
10
12
0
200
400
600
800
1000
1200
1400
1600
1800
Share Price(May 2008 - November 2011)
Burberry Dow Jones Luxury Index
November 2008 November 2011
November 2009:Art of the Trench
January 2011:Site Relaunch
April 2011:M-commerce
October 2010:2 MM Facebook fans
March 2010:3D Fashion Show
August 2011:F-commerce
Dow Jones Luxury Index (DJLUX)
+136%(From November 2008)
Burberry (BRBY: LSE)
+397%(From November 2008)
Digital IQ = Shareholder Value
Burberry
LVMH
PPR
Luxottica
Swatch
Richemont
12.2
9.8
8.7
7.1
8.9
9.5
Enterprise Value / EBIDTA(2011)
Burberry
LVMH
PPR
Luxottica
Swatch
Richemont
21.2
17.4
13.8
18.9
16
17.7
Price / Earnings Ratio(2011)
Source: Barclay’s Capital, December 14, 2011
Digital IQ = Shareholder Value
Youth
Commonalities?
3. Genes
2. Lifestyle
1. Social
Source Code(can be fooled)
Productivity
Adding Value
To the next generation
Fitness
Mental
Amplitude
Gratitude
How?
€
infant mortalityConflict
Genocide in the 20th Century
Battle Deaths in Wars1946–2008
Democracies & Autocracies1946–2008
International Peacekeeping1948–2008
Vegetarianism1984–2009
Approval of Spanking1954–2008
