What you need to know to survive as a corporate leader in the digital world.

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The 2012 State of the New Digital Economy

Aericon Insights ResearchFor Chief Executives and Marketing Professionals

August 2012

Aericon is a full service digital marketing agency headquartered in Boston, MA. Our focus is on results oriented agile digital marketing programs. We provide strategy, creative and technology services.

www.aericon.com

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PREFACE The New Digital Economy

PART 3 The Cloud Rush

PART 6 One Area CEOs Should Focus On in the Current Economy

PART 1 Decision Makers Can No Longer Ignore Digital

PART 4 Social Media Takeover

PART 2 Mobile Mania

PART 5 The Facts That are Driving Change

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Contents

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Preface

The New Digital EconomyOxford Economics released a detailed white paper, in mid 2011, entitled “The New

Digital Economy,” based on a series of questions they asked 364 corporate decision

makers and other c-level executives and thought leaders. The research paper was produced

in collaboration with AT&T, Cisco, Citi, PwC & SAP. We have reviewed the report, updated it

with research from McKinsey, KPMG & the International Telecommunications Union, and

combined it with an insights from our very own Digital Expert and CEO Dean Whitney.

Based on both quantitative and qualitative global research conducted by Oxford Economics and sponsored by PwC, AT&T, Cisco, Citi, and SAP, this white paper presents key topics that are transforming the global marketplace.

364 corporate decision makers and other c-level executives predict the future

The New Digital EconomyHow it will transform business

A research paper produced in collaboration with AT&T, Cisco, Citi, PwC & SAP

http://www.pwc.com/gx/en/technology/publications/assets/the-new-digital-economy.pdf

One year later the relevancy of the report remains sound with many of the fears and hopes of last years leaders coming to fruition in 2012. This report gives us a current view on a changing economy, touching on the effects of Cloud based Technology, Mobile Commerce, Business Intelligence and Social Media. We will re-view this report again in 12 months time. We also look forward to your feedback and comments.

Survey profile This global survey of 364 business execu-tives was conducted in December 2010. Of the respondents, 19% hailed from the US, 20% from the UK, 15% from India, 14% from Japan, and 8% each from China, Brazil, Mexico and Australia. The survey represented a broad range of industries, including financial services (26%); manu-facturing (19%); technology, information, communication and entertainment (18%); retailing and consumer products (15%); and life sciences and healthcare (11%). More than half (52%) of respondents worked at firms with revenues of more than $1billion; 25% had revenues of $500 million to $1billion; and 23% had revenues under $500 million. Approximately 46% held c-level titles; 27% were senior vice presidents, vice presidents or directors; and 27% were heads of their business unit or department.

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Decision Makers Can No Longer Ignore Digital

The new digital economy is here to

stay. The barriers to entry are being

lowered and there is a constant threat to

established business models that don’t

keep up with societies growing digital af-

finities. The race is on. Emerging markets

represent vast opportunities for estab-

lished brands and a melting pot of con-

sumption for new ones. More and more

executives are realizing that its time to get

serious about the new digital economy and

initiate change; before they are forced to.

PART 1

Nor do they intend to

What should CEOs be doing to ensure their firms remain competitive in this disruptive environment?

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Mobile Technology:From mobile payments to mobile

gaming and web surfing, smartphones and tablets usage is skyrocketing.

Cloud Computing:The days of building expensive and

time consuming local hosting networks is over. The cloud is faster, cheaper and less averse to technical difficulties.

Social Media:Corporations are fighting for your

attention against everybody from teenag-ers with an iPhone to blogging moms. Our world has gone social. “We” the people have the power, “You” the corporation need to operate with that mindset.

The three vital areas executives intend to focus on over the next five years are:

Mobile technology

Business intelligence

Cloud computing

Social Media

0% 10% 20% 30% 40% 50% 60%

FIGURE 1: Digital Megatrends

Which do you believe will have the greatest positive impact on your business over the next five years?

The new era of connectedness enables any individual or organization in the global network to sense, analyze, and respond to create value, and exploit untapped opportunities.

Mobile ManiaIs it even a question anymore that the

mobile Internet will play a large role in

any businesses development?

It’s predicted that by

2014, mobile Internet

searches will overtake

desktop Internet usage.

PART 2

How to make business sense of mobile

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Your business needs to have a budget for marketing and technology. The question is, what percentage of that budget should you invest in mobile. Can you engage customers or solve problems with the native features of their smartphones and tablets?

optimization (SEO). And SEO ties directly back to the importance of content. It’s not just keywords that matter, but the need to produce high-quality content to impact your credibility in the eyes of Google.

The majority of c-level executives said mobile devices are game changers and they will be investing heavily in mobile technologies.

You don’t have to be a c-level executive to understand that the way we communicate with people is becoming more mobile than ever. However most people don’t have the checkbooks or the vision to know what and where to invest.

The content and user-experience online needs to be optimized for mobile. This rein-forces the critical nature of search engine

The facts According to Nielsen’s report on the US mobile market in February 2012, smart-phone usage is growing and 49.7% of mo-bile subscribers now own a smartphone. comScore reports that more than 100 million U.S. mobile subscribers now use smartphones.

❖ Of the worlds 4 billion mobile phones in use, 1.08 billion are smartphones and 2.05 are SMS enabled.

❖ 86% of mobile Internet users are using their devices while watching TV.

❖ 29% of mobile users are open to scan-ning a mobile tag to get coupons.

❖ On average Americans spend 2.7 hours per day socializing on their mobile device.

❖ 91% of mobile Internet access is to socialize.

❖ One half of all local searches are per-formed on mobile services.

Your business needs to have a budget for marketing and technology. The question is, what percentage of that budget should you invest in mobile. Can you engage customers or solve problems with the native features of their smartphones? Can you better enable employees with data or business automation? And do these benefits outweigh the benefits of all the other stuff you need to spend money on? 9

0% 20% 40% 60% 80% 100%

FIGURE 2: Mobility Supports Business Growth

How strongly do you agree with the following statements for your business over the next five years? (% stating agree or agree strongly)

Our investment in mobile-enabled technologies will focus on supporting business growth

We will have to mobile-enable our workforce to stay competetive

Our business models will be changed by mobile technologies supporting employee productivity

Mobile consumers will transform our business models

We will apply location-based technologies to enhance our mobile propositions and services

You can build a mobile version of the website

If you do have the cashflow a mobile ver-sion will lead to a better user experience. Although building a separate mobile site isn’t as cost effective as building a respon-sive design site.

However, one problem with a responsive design site is that its mobile version will have all the same copy as your regu-lar website. A mobile website should have content that is much shorter and simpler for the smaller screen because “the lack of context reduces text com-prehension” [2]

At the end of the day, your decision should be driven by return on investment.

1 2You can build a website that is responsive design

When a website is built with responsive design capabilities, the information dis-played on that website suddenly inherits the abilities to morph in size. Layout, text, pictures, and action buttons are all scaled to fit whatever size screen you’re using.

If you’re having trouble picturing what responsive design looks and acts like, try it out right now.

Jeffrey Zeldman, founder of Happy Cog, a reputable web design and user experience consultancy agency, named responsive design as number 2 on his list of “Top Web Design and Development Trends for 2012″. Having your messaging displayed seam-lessly across all platforms is essential for marketers and responsive design makes that integration possible. That means for the everyday on-the-go web user, your life just got a whole lot more zen-like. No little buttons, no awkward formatting, and no tiny text sizes coupled with bad zoom capabilities.

Responsive design is typically cheaper than building a mobile app or mobile ver-sion of a website.

There are 3 ways your business can “do” mobile

You can build a mobile native application You might think that it would be more ef-ficient to build either a responsive design website or a mobile site. Seemingly that would cover all bases. You’re content would be sized appropriately whether you’re using mobile, tablet or a computer. But, you still should consider building a native mobile application, because of how powerful and influential the Apple and Android marketplace is.

App stores are huge channels that can reach wide audiences.

Different audiences like looking at dif-ferent content through different portals. Some of the most profitable and popular mobile applications fall within the gaming and social networking categories.

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The Bottom Line At the end of the day, you need to spend time understanding who your mobile users are and what they want. Depending upon your cash flow you need to deter-mine the ROI of a mobile application vs. a native application vs. a responsive design mobile presence. That said, there’s an affordable mobile solution, for your com-pany, available right now; and you should start investigating which option makes most sense for your business.

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This cloud rains healthy cash flow, accelerates time to market, and lowers cost

46% of companies surveyed

said they planned to

invest heavily in cloud computing. A report

by KPMG said, “the vast majority of senior

executives surveyed expect Cloud invest-

ment in 2012 to skyrocket, with some

companies planning to spend more than

a fifth of their IT budget on the Cloud

next year.”

Before the cloud In 2008, Aericon CEO Dean Whitney was Digitas’ Vice President of Internet So-lutions. He managed a wide-range of campaigns that required hosting large amounts of data on servers rented from third-party providers.

At the time servers were expensive and required constant maintenance to make sure they wouldn’t crash.

Cloud-computing wasn’t an option at that time. If it had been, Whitney wouldn’t have encountered difficulties one August after-noon during the launch of a web-based client project.

“On the first day of launching a large online client project our web server crashed. It was chaos. The campaign was so successful that our websites were bombarded with traffic. And the servers couldn’t handle it. We spent the whole day working on the servers get-ting them back online. If we were hosting that data in the cloud, something like that would have never happened. We would have hosted all that information on a cloud-hosted server space. It would have programmed settings that would automatically increase bandwidth and infrastructure to accommodate whatever traffic we were receiving at that time,” said Whitney12

The Cloud RushPART 3

The view of cloud computing remains mixed as the technology brings benefits and risks in equal measures.

What is the cloud?When people talk about “it” being in the cloud, what they are describing is any and all of their data being stored on a server that can be accessed from any computer with an Internet connection. Your com-pany doesn’t own the server and doesn’t need to maintain the server. The cloud enables the real-time delivery of Internet computing services.

Six reasons why the cloud is awesome If you haven’t staked your claim, it’s now time to figure out how to use the cloud to benefit your company.

Lower costs:A 2009 Booz Allen Hamilton (BAH)

study concluded that a cloud comput-ing approach could save 50 to 67 percent of the lifecycle cost for a 1,000-server deployment [3].

Cap-Ex free computing:Will lead to a healthier cash flow.

You can rent server space from a cloud within minutes without the hassle of building a server infrastructure, which can be expensive, time consuming, and requires the constant supervision of specialized employees.

Deploy projects faster and foster innovation:

There’s nothing to install, you don’t need to network a new hardware server.

Scale as needed:You can buy space on a public,

private, hybrid or community cloud.

Lower maintenance costs:Less physical resources equals less

physical maintenance and power usage.

Resiliency and redundancy: If there’s an outage, cloud services

are equipped with disaster recovery services.

Is there anyone who questions that the mobile Internet is here for good?

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The 2012 Future of Cloud Computing Survey results (released on June 20, 2012 at the cloud leadership

dinner) reveal several important changes in respondents’ perceptions and plans regarding cloud implementation.

http://northbridge.com/2012-cloud-computing-survey

People are much more persuaded by

other people than they are by brands.

If you think about all the people that are in

the market to buy a car, of those people,

which ones would you ask for advice on

which car to buy? Those are the people you

want to reach and influence.

If you can have an impact on them, they are more likely to tweet, blog and generate that word of mouth message.

Technology is catching up with human-ity in a sense. It’s forcing brands to make really cool content because you can’t buy your way into the minds of consumers.

Back in the recent old days, when a compa-ny did a product launch, they’d buy TV spots, website banner ads and other media buys.

Dean Whitney talks social

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Social Media TakeoverPART 4

Social connectivity is where influence takes place

There’s absolutely no doubt that social networks continue to play an increasingly important part in many people’s lives. EMarketer predicts there will be a massive 1.43 billion social network users in 2012, representing a 19.2 percent increase over 2011 figures.

http://www.emarketer.com/Article.aspx?R=1008903

Companies are forced to create unique and engaging content because they’re no longer able to buy that kind of attention. Consumers ignore TV spots and banner ads with DVR and

The thought process of a brand has changed from: “How can I force my brand message down the consumers throat” to “How can I create really cool material besides the widgets I make or services I offer. Content that people truly get excited about”

Word of mouth is a lot cheaper than any other form of customer acquisition be-cause the lead is already a referral from a trusted source. When you’re generating WOM referrals your close rate is going to be much higher. That is always going to be more effective than regular discovery or paid advertisement.

Social media makes introductions for youIf there is a gadget website, I’m not going to tell my grandma to go there, but if I know someone that loves gadgets, I’m going to tell them about it. That WOM needs a much more targeted and effective message.

How the web works.For most people there is a behind-the-scenes technology in web pages that tracks their activity. As a result a

consumer profile of each visitor is built invisibly in the background.

For example, if you’re in the market for a car and start looking around on the Inter-net for one, what happens when you go to a web page is that there are real-time bidding mechanisms in the background and in a split second the GM or Ford or Honda will bid to show you their ad, based on how desirable your consumer profile is.

If your brand is active on Facebook and you create a compelling and engaging ad campaign, and someone personally emails that ad to someone in their trusted audi-ence, its going to hold more weight than a banner ad or TV spot.

What’s so compelling about social? How has traditional marketing been work-ing for you lately? Is it generating the same leads it used to five years ago? Is your cost per lead on the rise?

That question shouldn’t discourage marketers to abandon traditional market-ing initiates — remember it’s a healthy balance between traditional and new-age marketing that will yield success.

My point being, it’s not important whether or not you’ve explored or supported social media before reading this white paper.

Today, marketing is driven more by hard numbers than ever before. Decision-mak-ers have the tools to tap into the pulse of target customers, listen to what they want and give it to them.

This social revolution is an extremely compelling reason to re-think, re-allocate, and maybe increase your marketing budget. Because now we know where the leads are coming from, we can measure what return there is on running a Face-book contest, and we see that strategic blogging is responsible for a rising in-crease in web traffic and leads. 15

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The Facts That are Driving ChangePART 5

Sweeping change: With 20.4 trillion dollars up for

grabs in the digital economy (according to research firms IDC and iDate) we are heading into a major period of change. Mobility, cloud computing, business intel-ligence and social media will be restruc-turing and organizing both developed and developing economies.

Industries undergo digital transformation:

It’s the only way they will be able to com-pete in a restructured global economy that is digitizing fast.

a. “While new firms will embrace the digital marketplace straight away, established firms will need to transform how they sell, price, pro-duce and deliver products and ser-

vices. Executives indicate this digital metamorphosis ultimately will help their firms provide more responsive customer care (60%), reduce the time required to complete tasks (60%) and improve employee productivity (58%).”

The digital divide reverses: Cash rich companies in the devel-

oping world are heavily investing in new technologies…it’s becoming a desperate land grab in a virtual world where the barriers have been breached. The deciding factor may simply be a matter of attitude.

a. At the end of 2011 according to The International Telecommunications Union (ITU) there were 4.5 billion mobile subscriptions in the develop-ing world. Mobile penetration in the developing world is now 79 percent.

Six insights you won’t want to ignore

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Business effectiveness and productivity is not just making more stuff, but systematically figuring out the right things to make.

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The emerging-market: Customer takes center stage.

Rapid economic growth, along with rising populations and income levels, are putting emerging markets at the center of corpo-rate growth strategies.

a. In markets like China and India, disposable income growth was soar-ing at 8%, at the time of this report as opposed to just 2% in the US and 1% in Japan. April 2012, IBIS World reports a further slow down to under 1% for the US.

Business shifts into hyper-drive:

In today’s business environment real-time business intelligence and predictive analysis will be required not only for faster decision-making, but to cope with unex-pected market risks and opportunities.

Firms reorganize to fully embrace the

digital economy: New lean and agile companies are storm-ing the new digital landscape, unencum-bered by prohibitive rules and rigid poli-cies. The best method to adapt to change is to embrace it, companies like IBM are moving towards a network structure which is more market like and organic, globally integrating organizations that can locate anywhere to take advantage of low costs.

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FIGURE 3: China becomes the worlds largest economy

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One Area CEOs Should Focus On in the

Current Economy

PART 6

Dean Whitney, Aericon CEO

We have entered the golden age of

design. From a product maturity

perspective digital innovation has set the

bar extremely high. Great design, func-

tionality and performance have gone

from being excitement factors to basic

expectations.

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You need to look at the entire online brand experience.

This interface is open 24/7. Bright and shiny things easily sway consumers. Especially when these links and images are popping up in their streams and being talked about by their friends.

It’s hard to predict in what scenario your audience will engage your brand. Will they be doing a search on a smart phone after seeing something on TV that sparked an idea? Will they be clicking a link from

an email on their iPad while waiting at a doctor’s appointment? Whatever the case the experience should be in line with your brand promise, enjoyable and intuitive.

The social network Digg, once valued at $175m, just sold its remaining assets to the LinkedIn and the Washington Post for $500k. In 2008 MySpace was over-taken by Facebook as the world’s largest social network. Instagram was bought for $1 Billion while the one time leader Flickr’s future is in question. And who would have invested in another social

network where you could share pictures? New York Angel Chairman Brian Cohen invested in Pinterest.

How will you innovate? More than ever, innovative businesses can disrupt the marketplace, defy all reason and become successful. Clever ideas and sweat equity can challenge competitors with much deeper pockets and greater re-sources. How will you innovate? How will you listen to your customers and strive to make your brand experience something to talk about?

FIGURE 4: Market Maturity

technology features experience

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Aericon is a full service digital marketing agency headquartered in Boston, MA. Our focus is on results oriented agile digital marketing programs. We provide strategy, creative and technology services.