Future Trends Working Group - Internet Advertising · PDF fileFuture Trends Working Group ....

IAB UK Whitepaper Future Trends Volume 12, 2015

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Future Trends Working Group


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Contents

Page 2 Introduction

Page 4 It’s early days for wearables

Page 6 What are the opportunities for advertisers from wearable tech?

Page 7 How can data be used in targeting?

Page 8 Cheap and cheerful

Page 10 Wearables – likely market scale and business models

Page 13 So, how often do we think about sex?


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In troduct ion

Catherine Cr ibbin - Mobi le and Market ing Assistant, IAB UK

In the first ever whitepaper, the Future Trends Council cast our minds into the future and considered the ‘Living room of 2015’, with a real focus on tomorrow’s futuristic ‘multiscreen environment’. Fast-forward to today, and each household owns 7.4 connected devices, according to the latest YouGov data on behalf of the IAB. This trend of multiscreening is indeed both the present and the future, but where can multiscreening take us next? The answer is wearables. This time round the Future Trends Council have grouped together to discuss what this may mean for advertisers and consumers. So welcome to Future Trends 12 – Wearable Technology. Mike Reynolds from the IAB talks about the fact its early days for wearables and discusses the opportunities that connected devices will present once they hit the mainstream. Interestingly, Mike’s view on how wearables fit in amongst other connected devices is as a complementary device, rather than cannibalising the mobile or tablet, he discusses how they will bring mobile into further prominence as the central device to connect all wearables and bring them to life. Highlighting the need to shift away from a tech centric design to put the consumer first in terms of both design and benefits, Mike believes the future is bright for wearables. Tamara Jacobs discusses the opportunities for advertisers; never before has location tracking and physical activity data been so easily accessible and completely personal. She looks into the difficulties of sharing data, and the inherent challenges and opportunities of advertising on a device so personal as wearable tech.

Dan Calladine from Aegis Dentsu also believes wearable technology is in its infancy stage. Looking at the Apple Watch specifically, he comments on its likeness to the first ever iphone with high prices and arguably limited consumer benefits. In the same way that the most attractive features of the iphone came later, opportunities for wearable technology might blossom once killer apps and content are developed. The data generated through wearables would be unique and highly personal, so advertisers have the potential to send messages that are increasingly useful to consumers.

Tim Elkington takes a different look at the future of wearables. Using an example from Nivea as an indication of what is possible, he discusses the challenges of battery life and price in wearable tech and puts forward the case for cheap, disposable wearable technology. Giving examples of commercial opportunity and consumer benefits, he highlights the practicalities and scope for this kind of tech. Dr Alison Sprague talks about the history of innovative Apple tech and predicts the Apple Watch to lead the way in the world of wearables, but does not anticipate it to crack the market in the same way as it’s predecessor- the iPhone.


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Discussing the various market segments, she suggests that the lack of awareness as the biggest barrier to the Apple Watch becoming mainstream, but considers it as a potential and unprecedented success story in cracking the elusive ‘grey market’. Perhaps the destiny of the Apple Watch, or other wearable tech devices is to achieve what the iphone could not. Dr Simon Hampton looks at wearable tech from a psychological perspective. Honing in on what time actually tells us, and the genius of the wristwatch in that it is hands-free and therefore time-free to use, he celebrates the potential efficiencies of the smart watch. Noting how often we look at our smartphones and how often we think about time, Dr Simon wonders that if the smart watch’s features serve their purpose, it could be a great time-saving device.


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I t ’s ear ly days for wearables

Mike Reynolds – Senior Mobi le Execut ive, IAB UK Wearable technology is still in the infancy stage of its lifecycle and I think there are a few reasons for this. The main one is the fact that we’re not quite there yet from an ‘it just works’ perspective. At the moment everything sits in isolation, which, unless you’re a very early adopter, means becoming more connected isn’t as simple as it sounds. Making it easy for consumers is key, and seems like the next logical step for wearable technology. But what does ‘making it easier’ mean? For me, the role of smartphones and tablets becomes even more significant as they will play a massive role in this ‘making it easier’ concept. Mobile is the thing that connects the dots between all of these different wearable devices and becomes the remote control that brings them to life. Another reason I think wearable technology is still in its early days is because we’re not quite there yet from an ‘my parents would wear that’ perspective. I think this is slowly changing and we’re starting to see wearables coming to the market that you’d be happy to wear outside of the four walls of a tech start up in Shoreditch. This has been highlighted by the recent smartwatch launches from LG, Huawei, and of course Apple. All three have gone for a design centric approach, with the emphasis on smartwatches becoming ‘wearable’.

[LG Watch Urban]

I definitely think moving away from the tech-centric designs we’ve seen from previous smartwatches is a ‘smart’ move by these three tech giants…and small is definitely beautiful in this case. The final reason I think we’re not quite there yet with wearables is because we’re still at the ‘how will it actually benefit me’ stage of the adoption curve. There’s been some questionable use cases for wearable tech, a notable one coming from Sensoree with their sweater that interprets your emotions and displays excitement levels on an illuminated collar. Whilst this is quite a cool concept, it's not something that is going to be a catalyst to widespread consumer adoption. What’s really exciting, however, is developments in areas which have genuine benefits to people.


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One of these areas is healthcare, and a company that has recently launched its new health monitoring wearable device is Masimo. Coined the MightySat, the wearable device which fits on the end of the user’s fingertip measures oxygen saturation as well as blood flow and pulse. Having a personal device that keeps a track on your health could prove invaluable from a medical perspective, with the view to having a proactive approach to the prevention of illness. It’s cases like this which I think are going to change the world as we know it. Watch this space!


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What are the opportuni t ies for advert isers f rom wearable tech?

Tamara Jacobs – Brand Solut ions Manager, Bl inkx Media Digital technology has offered advertisers many opportunities to reach out to, and communicate with their target audiences, whether that be via rich media display, cinematic longform videos, social media posting or native experiences. The digital advertising industry finds itself in a conflicting position with reach continuing to be a top priority (and more easily achievable than ever thanks to programmatic), while simultaneously trying to deliver the most personal and authentic experiences to their end users. Enter wearable tech. It’s attached to your body and has the ability to monitor everything a person is doing, from the physical activity they’re engaging in, to their current geolocation. With this information available for capture, will brands be able to collect data on a level they never have before? And if so, how will they use it to create the type of integrated experiences that position wearable tech as the future of connected devices? As with any new movement, there are opportunities and obstacles – so what are they within wearable tech? Some have said that wearable tech is predicted to be bigger than the smartphone movement and advertisers will be the ones to propel its growth. The same people believe that there are great opportunities for expansion into this market due to low entry hurdles. However, market share isn’t great which makes it difficult to transition ads across different formats and verticals. Moreover, wearable tech doesn’t incorporate well with web analytics, making the process of sharing data with users who download apps even more difficult. In addition to the issue of sharing data, online ad formats won’t work in wearable tech. In order to be successful, formats must provide a service. For example, wearable tech has the ability to integrate a user’s surroundings with their current experiences. If a woman is walking down Oxford Street and passes by Zara and her recent desktop search history indicates that she’s been looking at their ecommerce site, wearable tech can prompt her with a sale notification, thereby making wearable tech a digital extension of the real world. At present, advertisers are still trying to determine the best way to incorporate their message into wearable tech devices. Messages will have to be authentic, personalised and welcomed by users, otherwise wearable tech will never be more than a fashion accessory. It is thought that wearable tech will offer brands the opportunity to connect with hard-to-reach consumers on the move, but I am curious to see whether those hard-to-reach consumers will opt-in for this kind of advertisement? Presumably, if they are hard to reach it’s because they are the types that reject unsolicited advertising and therefore experiences would have to be seamlessly integrated and flawlessly delivered if they are to be successful. Excited to see what the future holds…


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How can data be used in target ing?

Dan Cal ladine – Head of Media Futures, Dentsu Aegis

Recently, I went into Selfridges to see the Apple Watch. I was very impressed with the set-up there – very knowledgeable and well-mannered staff talking potential buyers though the features of the different watches, and letting us try on different versions with different straps, finishes and so on. While the Apple Watch section was full, the rest of the watch department a few metres away was very quiet, with the unoccupied staff looking over slightly wistfully at the Apple customers. The first Apple Watch isn’t for everyone. I think that it’s for the sort of person who can afford to spend over £300 on a watch pretty much on a whim, but there are probably quite a few million people like that in the world. The success of the Watch will mean future watches though, and in a couple of years there will be more buyers, and more reason to buy. The iPhone didn’t come with many compelling reasons to buy; the killer apps like Instagram, Angry Birds, CityMapper and more came later, and the same will be attempted with the Watch. What it offers to agencies is the chance to (potentially) collect and target on far more data about customers. I’ll say potentially because we really need to see how this plays out, but there are a lot of potential types of data that could be collected and used for targeting and more. Locat ion – the Watch will be with you all day, and track where you were, and when. What areas do you go to most often (work, home, other)? Interests – What sort of places do you go to? How often do you go to the pub? To restaurants? To the cinema? To football grounds? Are you the sort of person who is out at 3am on a Sunday morning? Retai l – What sort of shops do you go to, and how often? Health – Since it’s strapped to your wrist, it also acts as an activity tracker. There are already insurance policies (for example john Hancock in the US) that are offering insurance policies based on data from an activity tracker, similar to the car insurance policies that use ‘black box’ trackers, and Apple is actively developing its HealthKit suite of services around this sort of data. The Watch could supply data on how active you are, how often you exercise, and also your state of health over time. These are all *potentally* areas that smart watches could provide additional data for targeting. Provided that industry takes privacy concerns with the responsibility they deserve and ensures that consumers can control the data they exchange for some kind of benefits (e.g. health assessments, more accurately priced insurance) then it’s possible that advertising could soon be more personalised and useful to consumers offering for example: Offers to a new local restaurant targeting people who are often out late at weekends. News of a new documentary film about Haute Couture to people who are frequent luxury shoppers. Personal training for people who find it hard to motivate themselves to exercise when it gets colder.


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Cheap and cheerful

T im Elk ington – Chief Strategy Off icer, IAB UK Most people assume that wearable technology will be sophisticated and expensive and with the Apple Watch retailing at up to £12,000 then it seems that this is a fair assumption. But what if wearable technology is sophisticated and cheap? What if wearable technology ushers in an era of disposable connectivity, what would that look like and what are the possible uses for cheap, wearable technology? There is an interesting precedent for this type of application of wearable technology. Nivea’s award winning Brazilian beach bracelet is a perfect example of how brands might use technology in this way. Delivered as a pull out from a magazine advertisement, the bracelet could be worn by a child and synced with a smartphone app that tracked the proximity of the child to the parent on the beach. If the child strayed too far then the parent would be alerted and could use the app to locate the child on the busy beach. This enabled Nivea to extend its brand footprint from protecting children from sun burn to protecting them from getting lost on the beach.

The bracelet didn’t cost the user anything and although in theory it was reusable I imagine that once it was covered with the usual beach mix of sand, sun cream and ice cream it was quickly disposed of. In future Nivea could choose to deliver the bracelets with every purchase of sun cream, making them available on a more long-term basis. Although environmentally questionable, providing technology with an intentionally limited life span does solve one question – battery life and recharging. Removing the need to provide a re-chargeable battery, lead and plug greatly reduces the price, size, packaging and shipping cost of technology. Imagine a festival providing an entry bracelet with location functionality and a QR code that could be scanned by an app to give the location of a defined group of people. This means that you could always find your friends at the festival. The bracelet could also contain pre-loaded proximity based offers that could alert your smart phone when near the relevant food outlet or bar. With an intended life span of only a couple of days this technology could be delivered at relatively low cost on a large scale and would be a great opportunity for brand sponsorship and other commercial opportunities.


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There could be similar opportunities in fitness / health, for example marathon runners could use wearable technology that tracked their position and monitored heart rate so that friends and family could easily track their progress. Another possible use could be in shopping malls where wearable technology could make sure that the user was aware of all the latest offers and sales and could even be configured to their interests via a smart phone. Wearable technology need not be expensive to be effective. It could be cheap and disposable and still play a vital role. As with so many other things the most important factor will be to define objectives. It might be that objectives are limited and extremely time specific and that wearable technology could find its place in this light touch area of minimal functionality but maximum utility.


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Wearables – l ikely market scale and business models

Dr. Al ison Sprague – Partner, CEG Europe Apple has led, grown, transformed and now dominates the smartphone and tablet segments and is expected to do the same for smartwatches. Smartwatches are expected to account for the lion’s share of the wearables market with glasses and fitness/health bands remaining niche. But how big is the market likely to be and what business models will emerge as Apple leads the way? So far awareness of wearables, unlike smartphones, is not universal. Ofcom reported in August 2014 that 40% of adults had not heard of smartwatches and 46% had not heard of smart glasses.1 In contrast and unsurprisingly, of children aged 12-15, 81% were aware of smartwatches and 77% of smart glasses. Apple’s pre-launch of its smartwatch on 9th April 2015 followed by its continued slick advertising will have increased product awareness. No doubt the buzz will amplify significantly on Apple Watch launch day and awareness will end up considerably higher than Ofcom reported. Indeed that is imperative as the watch is a luxury and a complementary product rather than a ‘must have’. When the iPhone 6 launched, the Evening Standard’s headline (with accompanying photo) read: “Thousands queue outside Covent Garden Apple store to get hold of latest handset.” For the Apple watch, online pre-orders were available on 9th April, alongside demos at the stores. Jeremy White from Wired reported that the Covent Garden Apple Store was fairly quiet by 10am on the day. Is this an early indication that the market size is going to be massively smaller than smartphones or simply that the early adopters were stuck at home queueing to place their pre-orders on a crowded website? There’s a number of reasons why the Apple Watch may not crack the market in the same way that its other products have. These include, but are not limited to:

• It’s not a necessity (compared to a mobile phone) • It’s a complementary product, working better alongside other devices (especially

smartphones) • The usual share of wallet constraints • Attractiveness to only certain demographic groups • Possible aversion to wearing a watch • Possible aversion to continuous, very close, personal and physical communications.

Consider Figure 1 below - we can identify around 3 penetration segments: mainstream (75% plus – think TVs, mobile phones and broadband); middle ground (think games consoles and so far smartphones and tablets); and low penetration (e-readers and thus far smart TVs (which should at some stage easily hit the middle ground)). The slopes of the curves are important – it can be seen that the take-up of both smartphones and tablets has grown rapidly.

1 See pp 44-45 in: http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr14/2014_UK_CMR.pdf


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Figure 1: Take-up of communications devices

Source: Ofcom2 One thing that appears to be holding back smartphones and tablets from becoming mainstream appears to be age. The 65+ age group appears to be resistant to these technologies and there’s a real drop off in take-up in the 55-64 age group. In future this of course will change as the population ages. However, given the relative lack of awareness of wearables amongst older people and the current resistance to even the standard devices (i.e. smartphones and tablets) it seems highly unlikely that the Apple Watch will become mainstream for a good while. Figure 2: Take-up of communications devices by age

Source: Ofcom3

2 See Figure 1.28 in: http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr14/2014_UK_CMR.pdf 3 See Figure 1.29 in: http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr14/2014_UK_CMR.pdf


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Early adopters of the Apple Watch will pay in full for the device (£299 for the cheapest sports watch to £13,500 for the “18-carat rose gold with rose grey modern buckle 38 mm Apple Watch Edition”). Smartphones followed the path of: outright purchase for the early adopters; the next segment once prices had fallen somewhat; subscription packages for a large proportion of the take-up; and late adopters buying refurbished phones on eBay etc. Tablets have followed a similar path, with the subscription model offering either the device plus data or a ‘free’ tablet on top of a smartphone package. The Apple Watch is expected to follow a similar path. Apple Watch will no doubt lead and grow the wearables market but it is highly unlikely that wearables penetration will be as strong as smartphones and tablets. That said, the smartwatch concept is ideally placed to penetrate demographic segments that have no interest in smartphones. Apple reportedly ditched several advanced health monitors (such as blood pressure sensors) during the Apple Watch product development stage owing to manufacturing issues and reliability problems.4 If Apple were to re-visit and perfect these features (and others, such as security and safety monitoring), Apple Watch could become the almost universal wearable product, penetrating the elusive (but increasingly growing) 65+ age group and possibly the 55-64 group. If not Apple, then there is a sizeable market opportunity for someone else to crack that market opportunity.

4 See: http://www.wsj.com/articles/challenge-of-apple-watch-defining-its-purpose-1424133615


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So, how often do we think about sex?

Dr of Phycology Simon Hampton, IAB’s resident psychologist That’s what came to my mind when the IAB investigated the frequency with which we seem to think about our Smart Phones as measured by how often we look at them. Is it as often as women are said to think about chocolate and men about anything edible? And it made me think (again), ‘are we asking the wrong question?’ ‘How often do we think about reproduction in its wider selfish-gene sense?’ The answer is constantly. Implicitly, explicitly, consciously, unconsciously, we are always thinking about and trying to solve the myriad problems that together amount to the general problem of replicating our genes. It is what thinking evolved to do. These problems – of food, resources, shelter, image, status, kin, friends and foe - take time, comprise time, organise our time. For some – those that become more apparent, immediate and doable – we make time. For others we reluctantly give time. How often do we think about time? All the time. And this takes us to wearable technology. Why has it come to us most persistently in the form of the wrist watch? Because it turns out that the mother of invention decided that the watch was the first necessity, the first and, to date, only really useful and wearable tech. Here we need to disambiguate between features and benefits. What is the one necessary feature of a common-or-garden $5 wind-up? That it tells the time of the given day. The benefits? Absolutely everything and anything that the fact of the time subsequently tells the user: How long since breakfast and until lunch?; Am I on time, early or late? What are the implications? How much time do I have left?; How productive have I been?; How idle?; Am I good or bad? What is my cat, dog, partner, child, boss, mortal enemy doing now? Can I get from A to B? Have I got time to look in on C? When does this bit of my life end and the next bit begin? Add-ons such as stopwatches, day and date, and moon-phases are useful in that they allow us to test the foregoing questions more precisely or more generally. And they are useless when take up more time that they preserve, are pointlessly precise or hopelessly vague. When they cannot tell us what to do with our time. The lesser-uttered genius of the wrist watch is that it’s hands free and therefore time-free to use – the pocket watch had no chance. Whatever its features tech doesn’t work – it has no benefits above the humdrum of fashion - if it doesn’t do time well: Save it, stretch it, double, dice it, organise it, defy it. If at some point in time the IAB launches research showing that, we look at our Smart Watches less often that we do our Smart Phones I will bet that their participants don’t wiggle with embarrassment. They will be too pleased with how efficient they are.

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