Well, when exactly do you mean?”

– The Smiths

Let’s face it.  None of us like paying the cable companies hundreds of dollars for a bunch of channels we hardly watch, let alone having them set against a backdrop of pre-defined viewing schedules.  Even with DVR’s it’s insanity writ large.

Earlier this week, Reuters reported that travel price comparison site Travelzoo has seen its shares drop over 75% since July of last year and that the company has hired bankers to explore potential “strategic opportunities.”

For a company that weathered the 2000 dot-com bust, has a growing base of 24 million users and a reported $143 million in 2011 revenue, I’m left wondering can the boat really be out of gas?

Well, not if you look at the overall travel market.

According to Benchmark analyst Daniel Kurnos, the hotel industry is viewed as “predominantly favorable, despite ongoing macroeconomic headwinds.”  Additionally, recent data from Pegasus Solutions (also included in Benchmark’s report) showed that booking windows continue to lengthen for leisure and business travel, and that passenger load factors and aircraft utilization are reaching pre-recession levels globally.  Both of these lead one to conclude that travel demand should improve modestly in 2012 despite elevated oil prices and other economic issues.

So what could possibly be putting so much downward pressure on Travelzoo’s share price?  Well, a look back at past earnings history Vis-a-Vis analyst expectations paints a pretty telling story I think.

As the following table shows, Travelzoo had been blowing away the analysts quarter after quarter, racking up an impressive 69% increase against EPS estimates over the five quarters leading up to Q2 2011.

Unfortunately, when the Q2 2011 numbers arrived, Wall Street – rather than averaging the resulting 6 quarters worth of increases (53% on average according to my math) – simply held out for more and started shorting.  In my mind, a company posting numbers like this – against a difficult macro-economic backdrop – deserves at least one pass.

Personally, I’m bullish on the travel industry and the price comparison market in general.  To wit, according to a recent Forrester Research report, online shoppers in the U.S. will spend approximately $327 billion in 2016, up 45% from $226 billion this year and 62% from $202 billion in 2011. Forrester also states that in 2016, “e-retail will account for 9% of total retail sales, up from 7% in both 2012 and 2011”, representing a compound annual growth rate of 10.1% over this five-year forecast period.

While much of this growth will likely come from online retailers improving their web sites and services, the key factor is that each shopper is expected to spend more on average.  Forrester anticipates that in 2016 U.S. consumers will each spend an average of $1,738 online, up 44% from $1,207 in 2012.

You heard me…  44% over the next 4 years!

In my mind, price comparison sites such as Travelzoo and others are likely to benefit handsomely from these increases, which should ultimately be accretive to their public equity.  If that ends up being the case, you’ll find me and other like-minded folks standing on the side of the boat…

Smiling and waving…

Expectations for 2012 in the technology and digital media spaces have never been higher – even with the backdrop of global economic uncertainty and the less than stellar IPO showings of the industry’s best and brightest.

We believe 2012 will be a great year for technology and media companies – especially those focusing on mobility and enterprise-level social platforms.

However, if asked to provide our top 5 predictions for 2012, this would have to be it.

1.  Social engagement will swing back to on-deck solutions

For those millions of brands that have flocked to Facebook, Twitter and other mediums in order to draft off their large user communities and target distinct customer sets, the gains in tonnage of “likes” or “follows” were not met with a correspondingly high amount of brand engagement (see our earlier post on this issue – Boomerang).  Further, these very same social networking sites share very little in the way of user data with the brands that use their platforms, making it very difficult to measure their true effectiveness or determine an ROI on the social media spend.  As a result, a number of companies are moving their social spend back to their own websites or portals – which were largely ignored in favor of outbound social efforts – and are leveraging third-party social sites as feeders.  This pendulum swing of bringing social engagement back “on-deck” for companies and brands has already started to power a new breed of platforms and service providers focused on bringing robust social functionality and deep analytics directly to the enterprise.  Companies such as iQ Technologies have been successful in demonstrating both the functionality and efficacy for companies large andsmall and I expect this trend will continue to grow.

2.  Feature phones will continue to maintain relevancy

Contrary to the many reports, graphs and analyses that have been published on this issue, feature phones still hold dominant market share globally – travel anywhere outside the US and observe the device usage and you will see what I mean.  While this industry is admittedly a melting ice cube due to the prolific growth of smartphone adoption – economic and carrier issues will continue to keep this market segment afloat (globally) in the near term.  This spells opportunity for companies such as Velti and Motricity who have historically dominated the carrier market for feature phone solutions but were extremely late to the smartphone game.  Approached wisely, these two companies still have an opportunity to shape the mobile conversation as the world moves increasingly to smart devices.

3.  Apple will largely disappoint on TV

This will be not for a lack of trying I might add but candidly the market expectations for an Apple uber-TV device will simply outpace reality.  Further, given Apple’s need for complete control, and the programmer’s fear of harming the cash cow that cable represents tells me that we are still a ways from Apple disrupting the TV business as it did the music business.  This is one prediction I hope I completely get wrong.

4.  Online video will see more consolidation

To some who have dismissed Senzari as another Pandora knock-off is to misunderstand what the product has to offer.  In my mind, Senzari is to Pandora, what Grunge was to Rock-n-Roll.  A fresh, yet irreverent take on streaming music that takes advantage of your social graph around something that is inherently personal, yet expresses who we are as people.

Clearly the company has unique opportunity to generate a kind of grassroots, youth driven listener growth curve experienced by bands such as Soundgarden, Nirvana, Mother Love Bone and Pearl Jam.  However, there are a number of areas that the product still needs work on.  Its use of Flash as its web player (honestly?), some broken links for content sharing (grrrr) and its lack of AirPlay functionality (duh!) top my list but there are others.  However, the product is still in Beta so I’m willing to give it time to get more user feedback and work out these early kinks.

Net-net, there’s a lot to like with Senzari and the product should only get better with time.  While not a real competitive threat to Pandora today, it’s clearly a platform they should watch carefully.

And so it is with brands and the meteoric rise of their proliferation on various social networks.  Their aim – to extend their brands in an effort to increase reach and engagement – is the appropriate one given the reach social networks have to offer. Like the boomerang, they’ve thrown themselves into the social cloud but will it come back to them as they intend?  Have they really accomplished anything at all?

An interesting report from PageLever, as reported by TheNextWeb, details what many have been missing – the difference between an “active” user and an “engaged” one.  As the report shows, active users are really defined as people who’ve viewed your fan page or piece of content, but an engaged one actually takes an identifiable action – clicking “like”, sharing the page/article, commenting, tweeting, etc.  While this may seem elementary, the numbers are anything but.  According to PageLever, the net result of this phenomenon is that less than 2% (Yes, less than 2%) of your users are actually engaging with your content.

Recently, I re-tweeted an article on the challenges Flipboard is facing with respect to potential publisher copyright infringement (see “Flipboard CEO’s claim: We’re not building a business “on the backs of publishers”).  In my re-tweet I made the comment “Not Good!” which obviously irked Mike McCue as he responded with a “Not True” comment on my re-tweet.

As I pondered Mike’s comment, I thought I should clarify my position on this, as it may have been misconstrued.

First, anyone who knows me knows I am very vocal when it comes to the rights of publishers to have their works protected from unauthorized duplication or distribution. I have been fortunate in the many ventures I have been involved with to have negotiated critical media distribution partnerships with numerous organizations including NBC, Disney/ABC, Fox, BBC, Bloomberg, Viacom, AP and others.  I believed then, as I still do, that working with the publishers to appropriately license their content has additional ancillary benefits beyond simply getting rights to their programming.  Further, it’s just the right thing to do as they are the owners of the content and it is neither cheap nor easy to produce.

As a result, I have rallied against companies such as ivi, FilmOn and other aggregators who continue to distribute content that they have no legal rights to and who make bold claims as to how they’re different and that the rules the rest of us follow don’t apply to them.  This hurts the content owners as well as legitimate aggregators.

In the case of Flipboard, I stand by my comment to Mike’s admission in the MediaBeat article that Flipboard is likely “violating publisher’s copyrights and hoping they will forgive it.” If the rights to the content have not been obtained, then the content should not be re-distributed whether you’re monetizing it or not.  To do otherwise, is “Not Good.”

However, I believe Flipboard represents a unique opportunity that needs to be explored, and people’s attempt to lump them into a category of rogue content aggregators is equally “Not Good.”

First, I appreciate Mike’s candor in the article and his efforts to build his business in partnership with the publishers and not on their backs.  While others may take “screw you” attitude towards content publishers, Mike seems to recognize that Flipboard resides in a grey area, and that his business is better off embracing content owners rather than pissing them off.  I think the MediaBeat author glossed over this part, which was unfortunate.

Second, content owners or publishers must recognize that Flipboard is essentially an experience.  It’s a unique way to visualize what consumers already have access to via a host of news feeders or social platforms.  Whereas on Twitter we are exposed to links to articles shared by our friends, Flipboard actually images the articles in the experience in a manner that is extremely visually appealing.  The obvious net result is that consumers are more likely to actually consume the content that is shared, rather than glossing over the link title, which is what happens in a majority of cases.

I’m quite certain publishers recognize the benefits that Flipboard provides – increased distribution in a visually appealing manner that should stimulate greater time spent with the content itself.  That’s pretty good in my book but we still need to address the question of compensation to the publisher or content owner.

Now compensation can mean different things to different people.  Various embodiments of this compensation scheme could include:

- Simple exposure and brand extension with engaged consumers through Flipboard’s appealing interface;

- Implementation of a pixel into the image so the publisher actually gets page view or impression credit for views generated via Flipboard, thereby providing lift to the ever important publisher KPI’s;

- Advertising flow through from the publisher alongside their content into the Flipboard experience, thereby ensuring that ad dollars are obtained for the content in question.

Clearly there’s a myriad of ways the content owner can be compensated and benefit from the Flipboard platform without killing that which is keeping content in the hands of consumers in an engaging and unique manner.  In this case Flipboard.  If publishers or content owners are not able to see the inherent benefits of such a partnership, then that my friends is truly “Not Good.”

“Stealing is not right… and it is stealing.”

– Ari Emanuel, William Morris Endeavor.

Over the past four months or so, two companies have literally become household names in the broadcast television industry.  While most companies achieve this level of notoriety through the development of a disruptive technology or new consumer craze, both ivi and FilmOn have achieved it through the flagrant disregard of US copyright, re-transmission consent and a host of other laws or rulings designed to protect both content owners and consumers.

Now, we’ve all seen this story before with companies such as Redlasso, Limewire, etc.  Each built their business off the distribution and monetization of 3rd party content that they had no rights to.  Their position was indefensible and in the end they either worked with the content owners to reach a mutually beneficial arrangement or simply shut down.

Fast forward to today, and courtesy of some very dubious interpretation of US Copyright law and petitions to the FCC, the pirates are attempting to “force the broadcasters to work out a deal” according to a Wall Street Journal interview with ivi CEO Todd Weaver [my emphasis added].

What I find interesting in the case of ivi is the duality of their position.  On one hand, ivi claims that they are not a cable company and as a result reference Section 111 of the US Copyright law that enables certain, non-cable organizations to make use of broadcast television content – provided certain criteria are met – under a compulsory license scheme.  The net result of the compulsory license argument is that ivi would be able to pay less than fair market value for the broadcast content that it distributes.  Here, ivi’s analysis is flawed, as the exemptions from exclusivity for what are called “secondary transmissions” of broadcast content are essentially only available to Multi-Dwelling Unit (MDU) providers, satellite carriers, educational providers and non-profits.  The only glimmer ivi has in this section is sub-section a(3) that states:

“the secondary transmission is made by any carrier who has no direct or indirect control over the content or selection of the primary transmission or over the particular recipients of the secondary transmission, and whose activities with respect to the secondary transmission consist solely of providing wires, cables, or other communications channels for the use of others: Provided, That the provisions of this clause extend only to the activities of said carrier with respect to secondary transmissions and do not exempt from liability the activities of others with respect to their own primary or secondary transmissions;”

However, by virtue of its video player and grid guide, ivi falls well short of this definition as they go beyond being the “dumb pipe” and are actually the enablement platform and presentation layer of the content.  In essence, a cable company.  Oops, did I call them a cable company?

Yet on the other hand, they are petitioning the FCC to actually designate them as an online cable company, thereby forcing the broadcasters to enter into some sort of negotiation, re-transmission consent or must-carry designation for the benefit of ivi.  Alternatively this would give them better legal footing under Section 111 of the US Copyright law, specifically sub-section (c) that allows certain cable systems to engage in the secondary transmission of broadcast signals “where the carriage of the signals comprising the secondary transmission is permissible under the rules, regulations, or authorizations of the Federal Communications Commission.”  Thus, they would be designated a cable system AND get to participate in the compulsory license scheme.

Not a bad proposition, but ivi needs to clearly define what it is – cable company or not?

But I digress….  The real ramifications here, other than companies like ivi and FilmOn giving legitimate content aggregators a bad reputation, is what this portends for content owners should ivi be successful.

In such a situation, companies like Hulu, YouTube, Comcast’s xFinity and other online content platforms would strive to be designated as this quasi-androgynous online cable operator and benefit from the compulsory license scheme.  Unless I’m much mistaken, I imagine the team at Hulu would love to change the economics of the content deals they have with their owners – imagine immediate profitability!

It’s well known that the cable industry needs to evolve with today’s changing technological and consumer environment.  But by stripping away the ability for a content owner or producer to negotiate in the open market a fair price for their wares and require them to accept a compulsory license fee (which is an infinitesimal fraction of what it actually costs to produce the content) the industry as a whole will fold in on itself.  Who cares if you can pay $4.99 for a cable package if there’s nothing to watch?

While I don’t see believe that we are facing an Armageddon of the content industry, I do believe that ivi’s tactics amount to little more than a unique (and ballsy) way of avoiding the very real necessity of appropriately licensing content from the broadcasters.  I’ve negotiated numerous transactions at the national and local broadcast level for online and mobile distribution of video and these deals are not difficult to come by as nearly all broadcasters and cable programmers are open to working with online service providers.  Maybe ivi should drop the legal scheming and pick up the phone.  They just might be surprised.

Applications…  Seems like everyone is talking about them, using them, developing them, slamming them or hailing them as the next big thing (see Wired’s article – The Web is Dead. Long Live the Internet).  There are apps that connect you to your favorite social network, bring you fantastic deals on products and services, tell your friends where you are, allow you to watch video or just play a simple game of solitaire.

Love them or hate them, use them or don’t, applications have taken the mobile industry by storm and demonstrate that mobile communication is more than just telephony and email.  Apps are a critical part of a vast eco-system that bring us together and connect us with information, products and services in ways that are engaging, informative and entertaining.

All of this is well and good for consumers and businesses alike. I mean, we’ve been using apps since the advent of the PC and it’s only natural that given the proliferation of smart phones and mobile Internet devices that applications would find their way into the mobile diaspora.  What I find troubling is that one screen remains largely ignored, and it just happens to occupy the biggest space in our lives even to this day.

Yes, I’m talking about – GASP! - The television.

Now I’m quite certain many will argue that television apps already exist.  Yahoo’s ConnectedTV platform is an example of taking the app concept and moving it into the living room.  The problem with this and other such efforts is that they are taking the mobile model and applying it to the television.  Haven’t we learned that each screen occupies its own unique space in the lives of consumers and to copy one business model to the other is fraught with peril?

Today’s TV app environment is what is commonly referred to as the Unbound Application.  This refers to applications that exist in and of themselves and have little or no context to what is being watched on TV.  But what about actually linking the app to what is being displayed on TV (i.e. a “Bound Application”).  For example, you could be watching Food Network’s Diners, Drive-in’s and Dives that is covering a pizza shop in San Diego and have the Google Maps app appear, showing the address and phone number of the pizza shop as well as the recipe for the pizza being made on that show – as it airs!  Or, you could be watching Showtime’s Dexter and have a trivia app pop up giving you the back story or trivia on the current episode.  Or, perhaps you’re watching a football game and a twitter list of trending topics on that game could appear showing you what other fans think of the game and allowing you to interact as well.

Theses so-called “Bound Apps” have the power to take advantage of what you are watching and provide contextually relevant information framed by the content being displayed on screen.  It is the next evolution of the application environment.  Just as we saw traditional PC web viewing giving way to the power of Unbound Apps on the mobile deck, we now need to work to bring Bound Apps to the living room.

We have a lot of work to make such an environment a reality however.  The STB monopoly needs to be broken up, allowing for a more open framework for 3rd parties to develop upon (as I’ve blogged about previously), and the cable, DTH and Telco-IPTV industries need to agree on a set of standards for the delivery of IP based services to the set-top-box.

The television still represents the Captain Kirk chair of video viewing, regardless of what the cable-cutters say.  We as an industry are well overdue to bring this amazing medium into the 21st century.  Who’s with me???