Focus On: David J. Reibstein

Super Bowl Ad Previews: Fewer Surprises, More Buzz

Posted on February 1, 2013

superbowl-2013-logoCall it a case of Super Bowl creep — whereas game day used to be zero hour for companies to unveil their most eye-catching, conversation-sparking new ads, many firms are jumping the gun and releasing their spots early via social media.

With more than 48 hours to go before kickoff, commercials by Budweiser, Volkswagen, Coca-Cola and others have already racked up millions of views on YouTube. Some firms are only showing pieces of their ads, with the full spots to be unveiled during the Super Bowl. Coke released a portion of an ad and is asking viewers to vote on how it will end come game day. Doritos has released videos from the finalists in its 2013 Crash the Super Bowl contest, which invites people to create their own spots, and is asking viewers to vote on the winner.

While these companies are losing the element of surprise that once surrounded Super Bowl ads — which, according to a New York Times story, cost as much as $4 million for 30 seconds of screen time this year — Wharton marketing professor David Reibstein and operations and information management professor Shawndra Hill say the practice actually allows firms to get a better return on their considerable investments.

“Everyone always oohs and aahs at the outrageous costs of a Super Bowl ad,” Reibstein says. “But when you look at it in terms of cost per exposure, the cost goes way down when you start adding in exposures that companies are getting online, where people are looking at [an ad] and creating some buzz.”

Because airtime during the Super Bowl is at such a premium, Reibstein adds, putting an ad on YouTube also gives companies the option of showing extended versions of the spots that couldn’t be shown on TV. He hasn’t had a chance to watch any of the spots yet, but expects perennial fan favorite Doritos to once again be a top vote getter. “They have really developed a whole niche for consumer-generated ads, and allowing viewers to pick the big winners is a really clever approach,” he notes. “I expect that it’s going to pay off big for them again this year.”

But as the Internet becomes more of a destination for advertisers to engage with customers, will the Super Bowl begin to lose some of its mystique? Not any time soon, Reibstein predicts. “There are always lots of ads on social media, but I think because something is a Super Bowl ad, it’s going to automatically get more attention than if it were just a regular ad.”

And people aren’t just watching the ads around the time of their airing on the Super Bowl, according to Hill, who is studying how companies can use social media to build consumer engagement. “People continue to search for and comment on these ads on YouTube well after the Super Bowl is over,” she notes. Ads that were shown during the 2011 Super Bowl got a bump during the 2012 game, and Hill expects the same effect will happen again this year.

“In the past it was really hard to go back and review an ad unless you recorded the entire Super Bowl,” she says. “But now it’s really easy to do on YouTube, and people are doing it in large numbers. When you look at the number of views that some ads got during the Super Bowl, for some brands it was in the order of hundreds of thousands. But many of them have gotten in some cases two times the amount of views since last year’s Super Bowl. I think that is fascinating, especially when we are talking about orders of hundreds of thousands of people.”

Hill, who plans to collect data in real time during this year’s game, has found in studies of viewer response to other television shows that people tend to comment more about content they are seeing for the first time. While companies may be losing some of the in-the-moment reactions they would have generated by debuting their ads only during the Super Bowl, Hill predicts that plenty of viewers will still be seeing the ads for the first time during the game.

“The Super Bowl is a huge opportunity to get eyeballs on your brand from every single demographic all across the country all at one time,” Hill says. “And you need that — you can’t just use YouTube in most cases and expect the ad to be talked about. A lot of what prompts all of this attention is the fact that so many people watch the Super Bowl.”

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Estee Lauder’s New Skin Care Brand in China: The Potential for High-risk, High-reward

Posted on October 15, 2012

Can Estee Lauder Companies make “Osiao” a household word in China’s luxury skin care market?

The New York-based manufacturer of skin care, makeup, fragrance and hair care products is banking that Chinese women will buy a new high-end brand tailored specifically for them, designed to promote what Estee Lauder’s scientists say Asian women want most in a skin care product — “natural radiance.”  

Already known for such brands as Bobbi Brown, Clinique, MAC, Origins and La Mer, among others, Estee Lauder’s decision to launch a whole new brand — rather than simply a new product — suggests the company is confident that an initiative begun more than five years ago will expand Estee Lauder’s footprint not just in China, but throughout Asia. The Osiao product line is expected to sell for between US$45 and US$190.

The venture is not without risk. Osiao — which is being introduced this month in only two department stores in Hong Kong and on some Cathay Pacific Airways Hong Kong flights – already faces competition from other Asian skin care products. In addition, its success depends to some extent on continuing strength in the high-end luxury market, despite weakening in the Chinese economy overall. And some observers question whether a hybrid product like Osiao will appeal to Chinese women. According to a New York Times article, Osiao will use English labels but its formulas will contain such ingredients as ginseng, Asiatic pennywort and ganoderma.

Wharton faculty familiar with the Chinese market are generally optimistic about Estee Lauder’s venture, while also noting the challenges that any new brand faces. “As part of the Estee Lauder family, Osiao can and should leverage the high brand equity of Estee Lauder in the Chinese market, at least in the initial stage,” says marketing professor Qiaowei Shen. “Brand name is still a very important element when Chinese consumers are choosing their skincare products.” While it probably won’t be hard “to convince some consumers to try the new brand, the difficult part [will be] to convert them to loyal customers. The true quality of the product is ultimately the key.”

The concept of using Chinese herbs as ingredients in skincare products is not new, Shen adds. “A brand that claims to specifically cater to Chinese or Asian skin types does not necessarily win market share. Many brands originating from Korea and Japan, which are designed for Asian skin by nature, already have products with ginseng or other Chinese plants as ingredients. How is Osiao different from these?”

The market “is there [and] the brand will enjoy a glow from the [reputation] of the parent company,” says Shen. “But in the end, whether consumers are going to repeat their purchase and spread positive word of mouth depends on whether the product quality lives up to their expectations.”

A More Sophisticated Market

Estee Lauder, founded in 1946, is experiencing strong growth in China. The company reported a rise in fiscal fourth quarter earnings of 25% and a 9.2% increase in revenue, to $2.25 billion. According to an article in The New York Times, fiscal 2012 is the first year that sales in the Asia Pacific region exceeded $2 billion. The company sells its products in more than 150 countries and territories mainly through limited distribution in, for example, high-end department stores and perfumeries, and specialized retail stores. China, with sales of $500 million, is its third largest market, behind the U.S. and Japan.

Wharton marketing professor Barbara Kahn gives Estee Lauder high marks for “understanding how important skin care is to the Chinese consumer. One of the key differences between China – and Asia, in general — and the U.S. is the importance of skin care products. If you look at a typical drugstore, even a Sephora in Asia versus one in the U.S., you will see a larger percentage of the store devoted to [those items].” Kahn also points out that Chinese consumers think of the skin care process “as a multi-step regime, and they take it very seriously. They are generally more sophisticated in this category than the typical American consumer.” Given the importance of the skin care category “and the amount of money consumers are willing to spend, this strategy of developing a new local brand makes a lot of sense.”

Estee Lauder’s initiative is “brilliant [as well as] risky,” according to Wharton marketing professor David Reibstein. In China, he says, a number of trends come into play: “A strong desire to be beautiful, with a heavy concern about skin care; a desire to be on the leading edge of fashion and skin care [as shown by] designer clothes, shoes and cosmetics all coming from other parts of the world; and a desire for, and intrigue with, foreign brands [as shown by] the popularity of some of the most visible fashion brands.”

The fact that Estee Lauder understands “the Chinese market, the skin care needs of the market, premium positioning and branding, and how to gain distribution” suggests the new brand will be a “winner,” Reibstein adds. The risk for Estee Lauder is that “it’s a crowded market…. The big question is whether there is room for both La Mer [another premier skin product from Estee Lauder] and Osiao.”

Wharton operations and information professor Marshall Fisher – who was in China recently teaching a global supply chain management course — breaks the scenario into two questions: Will a high-priced product sell in China, and how much should the company adapt the product to Chinese tastes?

The answer to the first question “is clearly ‘yes,’ if you look at the number of successful luxury brands that have entered the country,” Fisher says. “The reason is that even though average disposable income in China is below [that in] the West, it is such a big country that the top of the income pyramid is huge. This has made China a prime target for luxury brands.”

Products entering China have adapted to varying degrees, Fisher adds. “Nike changed little, but KFC changed almost everything; their comment was, ‘All we brought from the U.S. was the picture of the Colonel.’ Both have been highly successful in China. Evidently, people who buy Nike buy it in part because it is a Western brand, and adapting it too much would destroy that value. I would guess that Estee Lauder is more like Nike than KFC.” 

At a dinner on the last day of their course, Fisher discussed this second question with the head of Starbucks in China. The Starbucks executive noted how the company eventually “tweaked Starbucks’ menu and flavors enough to make them appealing to Chinese consumers,” says Fisher. “His remark was that they finally figured out that consumers in China who buy Starbucks are looking for a Western experience, but one that is tuned to their taste buds.”

Competition from Other Brands

Fisher’s co-instructor in the global course was Edwin Keh, CEO of the Hong Kong Research Institute for Apparel and Textiles. He recalls a presentation at Wharton earlier this year in which he learned two things: First, that “Chinese consumers like lightly scented products and think a lot of Western products are too strong and overpowering. And second, that the Asian market sells [more] skin protection, skin tone lightening and moisturizers than the West, probably because the Chinese market is dominated by urban professionals who work in crowded and polluted environments.” Also, he noted, “light skin tone is considered a sign of beauty.”

Osiao “looks to be a very exclusive high-end niche brand” being launched at a top Hong Kong department store that is equivalent to Saks or Neiman Marcus in the U.S., Keh says. “The line can command a higher price point and probably will have fairly small volumes for the immediate future. This may be a good way to test the market and tweak the product.” But Keh, like others, points to the “significant brand competition from Japanese and Korean beauty brands, [which] align very well with the Chinese consumer and have near-market advantages.”

Beauty products and next-to-skin apparel “are tough to sell and expensive to market, especially in China,” Keh adds. “So a new brand will be high risk, high return. It will be interesting to see how this plays out.”

Although some observers express concern that Osiao could cannibalize Estee Lauder’s other brands in China, Shen does not see this as likely. “Given its pricing and positioning, it is targeting a different consumer segment from the average consumers of Estee Lauder and Clinique,” its two best-known brands in China. Instead, “the introduction of Osiao seems to explore the market opportunity with the ever-growing wealthy class in China. There is a segment of affluent Chinese consumers who are willing to spend a lot on skincare products. The economic downturn of China has little impact on the behavior of this segment.” Keh concurs: “The timing of the release could have been better, given the recent doom and gloom, but the rich Chinese consumer is still spending and there are still lots of rich Chinese. So I don’t see [the current economy] as an issue.”

Wharton marketing professor John Zhang describes why he thinks Osiao represents “a very far-sighted strategy. Up to this point, Chinese consumers worship anything Western, especially in cosmetics. However, at some point in the future, Chinese customers will become more rational, they will want to go back to their roots, they will value their own heritage and they will want the things that are good specifically for them. When that day comes, pure Western brands will lose their luster,” but Osiao may not.

Building a new brand from scratch is clearly expensive, he adds. “For that reason, starting in Hong Kong is a good way to test the water. In addition, it is also a good way to establish the high-end positioning. I believe that the success of the brand will depend on two things. First, there has to be solid science behind the new formulation. Without it, the brand will not succeed in China for long, and ginseng alone will not carry the brand for sure. Second, good marketing must balance modernity, tradition and science, especially in cosmetics.”

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Brand-building in China

Posted on September 17, 2012

Wharton marketing professor David Reibstein is on a mission. In his role as chairman of the American Marketing Association’s board of directors, he recently signed an agreement with the Chinese government to provide both training and certification for all state-owned enterprises, which represent about 65% of the Chinese economy.

“The Chinese government wants to improve the level and quality of marketing in Chinese companies,” Reibstein says. “The AMA will be supporting that.”

It’s a big job, and not just because of China’s size and population (more than 1.3 billion). “China is really good at one of the four ‘Ps’ of marketing – price – and not very good at the other three – product, place and promotion,” Reibstein notes. The country’s success at keeping costs — and therefore prices — low means that “the development of other dimensions has been thwarted.” Consequently, Chinese companies have not felt the pressure or the need to improve product, place and promotion.

Going back to U.S. history for an example, Reibstein points to the initial success of auto maker Henry Ford, who was able to mass produce huge numbers of cheap black cars. Only when General Motors started making models that were more stylish and offered more choice in design and performance did Ford feel the pressure to become more customer-oriented.

China is now beginning to feel that same competitive pressure in the form of price wars, which in turn heats up the pressure to produce better products. “But in order to come up with a better product,” says Reibstein, “you need a clear understanding of both competition and customer segmentation” – defined by the AMA website as “the process of subdividing a market into distinct subsets of customers that behave in the same way or have similar needs…. Each subset may conceivably be chosen as a market target to be reached with a distinct marketing strategy.” Historically, Reibstein states, “Chinese companies have not done any segmentation, which means there is little understanding of the different needs of customers.” But Reibstein says he has also observed, over the last few years, the growth of new brands and a wider variety of choice in the Chinese marketplace. As one multinational marketing executive recently told him, “China is not just one country. It is more heterogeneous than [one] might think.”

During a recent presentation in Beijing with alumni, faculty and students from CEIBS (China Europe International Business School), Reibstein showed a list of the top 100 global brands by brand value. Coca-Cola was number one, followed by IBM, Microsoft, Google, GE, McDonald’s, Intel, Apple, Disney and HP. No Chinese brand was on the list, although a close contender is computer and electronics manufacturer Lenovo. “Interestingly, they got where they are by buying the brand,” Reibstein says, referring to Lenovo’s $1.75 billion purchase of IBM’s ThinkPad division in 2005. “Lenovo was already manufacturing the product.” Reibstein also cites efforts by Haier, the Chinese consumer electronics and appliance company, to buy Maytag, a well-known competitor, for its brand value – a potential deal that “scared [rival appliance maker] Whirlpool so much that it bought Maytag even though it didn’t need it. What Whirlpool did need was to keep Haier out.”

With top-selling, differentiated brands come high margins, Reibstein told his audience in Beijing. The gross margin for Coca-Cola is 61%; for P&G, 49%, and for Apple, 44%. Yet the gross margin for Hon Hai, the parent company of Foxconn Technology Group, which manufactures the iPhone, is 8%. At some point, companies like Hon Hai and Foxconn “are going to be concerned about whether they are making money on unbranded products,” even with their low-cost manufacturing advantage, Reibstein says. 

He also noted the interplay between price, brand and brand image. Along with low-cost goods, for example, comes the perception of lower quality: “Look at German cars; they are good cars, but we think they are good because [the German car companies] charge a high price,” he says. “If I have a higher price, I have the perception of a good brand. It’s very hard to charge a low price” for a particular item and have consumers see that item as a high-quality brand.  

Reibstein also notes the success that a number of Asian countries have had in creating global brands. Mention Japan, and one thinks of Toyota, Honda, Lexus, Infiniti, Panasonic, Sony, Fuji, Cannon and Oki. Korea has Hyundai, Samsung, LG and Daewoo. Taiwan is known for Acer, Asus and HTC, while Singapore has Singapore Airlines, Tiger Beer and Tiger Balm. 

According to global branding consultancy Interbrand, the top 20 Chinese brands are, in descending order, Chinese Mobile (telecom); followed by China Life, China Construction Bank, ICBC, Bank of China and Ping An (financial services); Tencent (Internet services); Moutai (alcohol); China Merchants Bank, CPIC and Bank of Communications (financial services); Baidu (Internet services); Lenovo (electronics); Wuliangye (alcohol); SPD Bank (financial services); Tsingtao (alcoholic beverages); Anta (sporting goods), and Citics and CMBC (financial services). Number 20 is Alibaba (Internet services).

China did get brand payback from the 2008 Beijing Olympics, which Reibstein says has had a huge impact on the country’s image. “It drew a lot of people who had not been to China and probably thought of the country as a highly military, backward impoverished place. Instead, people [became aware of] how modern the country has become.” For China, it means economic benefits in the form of increased tourism and the potential for more business relationships.

But the country still has a long way to go, he adds, citing a recent survey in which 62% of respondents indicated that current Chinese brands are perceived to be behind other international brands. While Chinese brands are strong on perception of “good value,” they are poor on perception of “safety, trust and ethical … issues,” Reibstein told his audience, adding that concerns over quality, safety and durability are the biggest challenges Chinese brands face. Quality improvement is at the top of the list.  

A Chinese official in charge of promoting China’s overall brand image recently complained to Reibstein that the money the official spent advertising China on CNN had not produced any noticeable results. “When he asked me why, I pointed out that brands are built first by offering consumers a consistent product experience,” says Reibstein. Only secondarily does advertising build the brand.” Once quality is enhanced, then public relations and advertising can “play a big role in awareness building and communicating improvements in quality.”  As long as China “continues to make substandard quality products,” Reibstein adds, “no amount of advertising” will overcome that perception.

 

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Does NBC’s Olympic Coverage Deserve the Gold?

Posted on August 13, 2012

Now that the major controversies surrounding NBC’s coverage of the Olympics are old news – including the network’s decision to tape delay the opening ceremonies and many of the events – it’s a good time to look at who won and who lost during the airing of the games, what was done well and what could have been done better.

Wharton marketing professor Eric Bradlow, for example, suggests that because “we are in the super-information age, people want to see events when they happen.” He cites recent research showing that “even if you don’t know the outcome, but you know that others do … you enjoy it a lot less. I think this is what [happened] with NBC’s coverage.” Given that situation, NBC should consider reporting those outcomes “instead of pretending they are highly uncertain, and then give a more detailed analysis of what we saw.”

Another possibility is “segmentation. NBC could have two versions, one for people who have seen [the event] already, and another for those who have not.” He acknowledges this approach would increase the costs of coverage, but says it would “dramatically increase reach as well.”

Bradlow also notes the “over-saturation effects” of the coverage, starting with the “Today” show in the morning “where it’s all Olympics. I think it’s good that NBC has wisely become synonymous with the Olympics, but it’s almost too much.”

As for the sponsors, “I can’t remember one major [sponsor] from the Olympics other than Visa,” he notes. “Maybe there are others, but the length of the event leads to the diffusion of the message. This is very different than the Super Bowl.”

Scott Rosner, Wharton practice professor of legal studies and business ethics and associate director of the Wharton Sports Business Initiative, gives NBC credit for “not trying to reinvent the wheel” with their coverage. “It’s not a business in which you take a lot of risks, especially if you’re NBC and this is one of the few things you have going for you.” In addition, Rosner says, “you can’t argue with the ratings,” which have been high.

He points out that “there are very few things people congregate around in mass numbers, and most of those happen to be live sporting events.” What’s interesting about the Olympics is that “they aren’t being consumed in real time, but we are still watching the coverage. It’s more for the storylines than for the results.” This goes back to why this strategy works for NBC, Rosner says. “Think about what they are building their nights of programming around: swimming, beach volleyball, track and field – sports we would never care about if it weren’t the Olympics. Normally these sports get terrible ratings. But there is this sense of national pride. If there is one thing about Olympians, they have amazing stories. And NBC tells those stories well. Even if we know how [an event] ends, we want to know the means. That gives sports a competitive advantage over other industries: It is unscripted drama, and it is compelling television.”

But Rosner also suggests that in the storytelling arena, the network could have done an even better job. “They focused on the handful of athletes they thought would be a success,” even though “there were so many other unbelievable storylines.” So while it was good that the women’s soccer team got lots of attention, “the women’s basketball team didn’t, nor did the women’s water polo team.”

As for the initial criticism raging around Twitter over the tape delays, “my sense is that those criticisms subsided,” Rosner says. “The reality is that when you are NBC and you are paying billions for the rights to broadcast the games, you need to be able to monetize it. It’s a business. It was a business before Comcast [owner of NBC], and it’s a business now. Doing it in real time doesn’t allow you to monetize it because you aren’t in prime time. Who is going to watch?”

As for the sponsors, Rosner feels they have generally gotten their money’s worth, although “you will start to see some turnover if the prices keep going up…. The IOC [International Olympic Committee] is already going after Google and Facebook to be sponsors of” the games in Soshi, Russia, in 2014 and Rio de Janeiro, Brazil, in 2016.

Wharton marketing professor David Reibstein was in China for the first week of the Olympics. “Almost all I saw were events that China had won,” he says. “It gave me the impression that China had a huge lead in medals. I knew that wasn’t totally the case and figured the Chinese government was manipulating the coverage to give that impression and to build pride in the country. Then I returned for the second week to the U.S., and it was just the same — almost all the coverage this time was of the U.S. winning. I take it from this that … people like to see their country doing well, and the networks naturally cover what the people want to see. China watches every badminton and ping pong match and we watch track and field, volleyball and basketball.”

Reibstein also notes the positive influence social media had on the events. “Social media let the audience hear more from the athletes and ‘humanize’ them. Also, others were able to engage their friends on the events they liked. I have no doubt this was a big enhancement to the games.”

Looking ahead, Rosner suggests that NBC will have an easier time broadcasting the games in Rio because the time difference with New York is only one hour. It will be much harder in Soshi in two years, and in Pyeongchang, South Korea, in 2018. Already, he says, “the larger issue with the Olympics is the way people are changing how they consume TV and media in general. By 2018, who knows what will be happening?”

 

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Why Going Private Won’t Solve All of Best Buy’s Challenges

Posted on August 10, 2012

(Eds. Note: Post has been updated to include comments from Wharton senior fellow and lecturer Stephen Sammut about the private equity financing of the deal.)

Best Buy’s already-uncertain future got murkier this week, with a proposal by founder and former chairman Richard Schulze to take the company private.

Schulze has said he’s in talks with private equity firms to help fund the deal, although he is reportedly at an impasse with the company’s board in moving toward making a formal offer. Best Buy has struggled recently due to the weak economy and customers increasingly turning to online sites, where prices for electronics are often cheaper.

“There are PE firms that specialize in troubled situations. Such firms are comfortable with companies like Best Buy,” says Stephen Sammut, a Wharton senior fellow and lecturer. “There is, however, a price to be paid. If PE funds can’t model for a successful exit based on the prevailing share price, they won’t do the deal. If the share price that they would have to pay fits, then [a deal] is possible. If I were a shareholder, I wouldn’t count on a premium.”

Earlier this year, the firm announced plans to close 50 locations by the end of 2012, lay off 400 workers and shrink the size of some of its stores in an effort to stave off further losses. At the time, however, Wharton marketing professor John Zhang predicted that “Best Buy’s struggle is just beginning,” noting that CDs and DVDs, which were once a staple for the retailer, are now increasingly being bought online. He also pointed out that mobile phones give customers the ability to immediately compare prices for expensive electronics, making these  customers less subject to sales tactics at individual stores.

Schulze was forced to resign from the chairman position after the Best Buy board discovered that he had failed to inform them about accusations of personal misconduct involving  former CEO Brian Dunn.

According to The Wall Street Journal, if Schulze is able to take Best Buy private (he already owns about 20% of the company) he plans to curb the recent downsizing efforts and focus on cutting prices to compete with online sites like Amazon.com. He also plans to  beef up in-store customer service to rival that found at Apple.

“Clearly, something has to be done at Best Buy in order to survive,” Wharton marketing professor David Reibstein says. “It is not obvious why the firm has to be taken private to accomplish this. The big question is whether the new strategy will succeed and for how long.”

Sammut notes that the concepts behind taking a company private apply in Best Buy’s situation. “Once private, with an infusion of new capital, management can develop new strategies and test them in the market without the glare of Wall Street looking at quarterly earnings,” he says. “This could be an example of private equity being a positive force in preserving jobs and serving as a means for companies to reorganize in a changing market environment.”

The challenge for Best Buy, Reibstein notes, is that customers will likely continue to use the stores as showrooms, coming in to look over expensive electronics in person, “getting tons of service and advice” from Best Buy’s sales staff and then making their purchases online. “The prices at Best Buy will have to be within range of online prices,” he adds.

But offering prices that low will be difficult if Schulze intends to retain the current size and number of stores and increase the level of customer service. “For service to be good, minimum-wage employees will not suffice,” Reibstein points out. “So it will be a challenge. That said, Nordstrom and others have thrived on this strategy through the Internet shift.”

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Will Google+ Help the Search Giant Succeed at Social Networking?

Posted on July 1, 2011

With this week’s “invitation-only” launch of Google+, the search giant unleashed its latest attempt to stake a claim in the social networking space. But can Google successfully take on Facebook?

Critics point to Google’s underwhelming experiences with previous social networking applications, including Buzz and Orkut, as examples of the company’s inability to accurately assess market needs and respond effectively. But others point to Google’s deep pockets, previous successes in search and strengthening Android mobile platform as reason to believe the company can make an impact in the social media sector as well. Google+ also has the advantage of learning from Facebook’s shortcomings — for example, the new service allows users to be selective about which information is shared with different groups of followers.

“Just because it is Google doesn’t mean that [Google+] will have instantaneous success,” says Wharton marketing professor David Reibstein. He points to some of Google’s previous failures, including Google Wave, which was intended to take on Microsoft Outlook and instant messaging services by offering a mix between chat and email. Then there was Google Buzz, which was seen as an attempt to go after Twitter and Facebook. Reibstein says those misses came because Google did not fully understand “what all is involved in those businesses … basically, not understanding the customer well enough.”

Kartik Hosanagar, a Wharton professor of operations and information management feels differently. ”Google’s advantage is that it has a lot of cash and it can afford to build, learn, fail and restart,” he notes. “Clearly, Orkut and Buzz have not worked out as well as planned. But Google can afford to restart. More importantly, as a late entrant, Google+ has the advantage of learning from Facebook’s mistakes and delivering a product without those deficiencies.” Hosanagar says that the biggest user frustrations with Facebook have revolved around privacy concerns and contacts management. “Google+ is specifically focused on fixing these issues.”

Features of Google+ include the ability to create groups or “circles” of contacts, such as circles for friends, family and acquaintances; users can choose what  information and updates they share with each circle. In addition, Google+ offers video chat and group-texting applications, and allows users to instantly upload photos and videos from Android smartphones. The service also has a “+1” button that is similar to Facebook’s “Like” feature. (For more, CBS has compiled a roundup of Google+ reviews from across the web.)

But Google is moving forward cautiously with its latest effort. Vic Gundotra, a Google senior vice president, told the Wall Street Journal that “fundamentally we believe online sharing is broken.” He continued, “We’re not going to nail it on our first attempt, but we’ll work as long as it takes.”

Google, of course, seems to have a penchant for launching beta products. Soon after opening the invitational rollout for Google+, it temporarily discontinued new registrations, citing “insane demand.”

According to Reibstein, Facebook “ought to be able to very easily respond” to the Google+ “circle” feature, if not others. “The question is how sustainable is any advantage coming out of Google+, which means something not easily replicable.” He adds that with its video chat capabilities, Google+ may deliver a strong challenge to Internet phone service Skype, a possibility also noted by Om Malik, founder and senior writer for technology trends site GigaOm.

“Google has to play to its strengths — that is, tap into its DNA of being an engineering-driven culture that can leverage its immense infrastructure,” Malik wrote. “It needs to look at Android and see if it can build a layer of services that get to the very essence of social experience: communication.” He predicts that Facebook is safe for now, arguing that “the only way to beat Facebook is through a thousand cuts.”

During a discussion on social media at last week’s Wharton Global Alumni Forum in San Francisco, panelists were asked why Google has had such difficulty in developing a social networking application with staying power. Panelist Ethan Beard, Facebook’s director of platform partnerships and former director of social media and head of new business development at Google, noted that the companies have two distinct cultures.

“There’s a fundamental difference [between Google and Facebook] in how the products are designed and in how the design process takes place,” Beard said. “Google is very academic…. Some of the greatest thinkers in computer science now work at Google. The design process … is focused on building a really cool back end that sifts through the data and pops out the result.”

On the other hand, Beard described Facebook as having more of a “hacker culture,” in the sense that “instead of working on the back end and throwing up any front end, we start with the designers and say, ‘What if a user saw this [on the front end]?’ and then ‘OK, that’s good, now go build the back end as fast as you can so we can start to play with it.’”

Cultural challenges aside, Hosanagar is optimistic about the prospects of Google+. “There’s nothing in Google’s DNA that prevents it from building a good social product,” says Hosanagar. “Given how big the social space is, and how much bigger it will be, Google is doing the right thing by trying for a third time.”

In the end, much depends on how many “+1s” Google+ gets from users. “Whether Google+ will stick will depend to some extent on the whims and fancies of unpredictable consumers,” Hosanagar notes. But Reibstein says the imponderables lie elsewhere: “I am not at all confident [Google] has a real feel for understanding what the marketplace needs.”

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Super Bowl Commercials: False Advertising?

Posted on February 7, 2011

Every year, the hype over Super Bowl ads is almost as big, if not bigger, than the hype over the actual game. And in both cases, some years have delivered better than others. This year was not one of the good ones all the way around. [For those actually interested in football, the Green Bay Packers edged out the Pittsburgh Steelers 31 to 25.)

As for the commercials, if it wasn't the huge number of automobile ads and movie trailers that made it hard to remember which car or movie was being pitched, then it was the ads that managed to offend groups ranging from Tibetans, Italians and senior citizens to women, parents and people opposed to drivers using Facebook while behind the wheel. There were, of course, exceptions, with some commentators offering positive reviews of ads for Volkswagen (with its mini Darth Vader), Motorola (love, flowers and Big Brother), Pepsi (love in a can), Chrysler (love note to Detroit), Best Buy (a space-age Justin Bieber), E*Trade (talking babies) and CarMax (mermaids and geeks), among others. The ads, good or bad, cost advertisers between $2.5 million to $3 million for a 30-second spot, according to news reports.

KnowledgeToday asked Wharton marketing professor David Reibstein to give us his views of this year's Super Bowl ad tournament.

”Rating the best ads for the Super Bowl always depends on what criteria are being used," says Reibstein. "Most of the popular ratings are based on how much enjoyment people got by watching the ad. It is not necessarily the best-producing ad for the firm. In fact, often, it is quite the opposite. Yet, many of the ad agencies that produce these ads are striving to get attention and to demonstrate their creativity and production capabilities while paying less attention to whether the ads will yield the desired results for the firm."

Below, in his own words, are Reibstein's favorite Super Bowl XLV ads (in no particular order):

  1. The Bridgestone ad with the beaver -- has an animal, which helps ... and it clearly states a product benefit.
  2. Pepsi Max had several ads, but the best was “Love Hurts”. It is very cute and communicates the product benefits. I also liked the one with the date where we could hear what each of them were thinking.
  3. CarMax was unusual and not a well known brand, but you got the [message] that they were all about service like in the “good old days.”
  4. The Coke ad with the border crossing illustrated we can let issues between us go away for a Coke.
  5. The NFL ad showing all the old TV programs with football in them [illustrates] how pervasive the sport is in all parts of our life — with programs from different eras and for different audiences. The nostalgia was great and undoubtedly held attention.

My least favorite ads were those that focused on the production, often sci-fi, to demonstrate [technical] capability but had little information about the product. Several ads fit into this category.

  1. One that I thought was hilarious, but sent the wrong message, was the Dorito ad with the dog running into the door. It showed that Doritos are a big draw for dogs and would make a great dog treat.  Wrong message, yet I am sure it will get high ratings.
  2. The VW ad with the powerful Darth Vader was cute, but says absolutely nothing about the car.
  3. The Coke ad was too much sci-fi and got distracted by the production.

As for the wisdom of companies spending $3 million for a single 30-second ad, Reibstein notes that it is a question of “simple logic:” Approximately 100 million viewers are watching these ads, he says, which is “just under $30 on a cost per thousand (CPM) basis. That’s in the ballpark for what you pay for a normal ad, plus all these ads get re-shown on so many different websites and in so many newspapers that the total amount of exposure is much greater. So while it looks like an outrageously expensive process, it’s probably a pretty good bargain.”

The $2.4 Million Dollar Question: What Is the ROI for Super Bowl Ads? Knowledge@Wharton

Super Bowl Showstoppers: Despite the Economy, the Big Game Is Still on for Advertisers: Knowledge@Wharton

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