Apple Acquires Beats: What does it mean from a marketing perspective?

Apple has decided that instead of putting a dent in all that cash by buying back stock and increasing their dividends that instead they will instead make it's largest acquisition ever by acquiring Beats Electronics.  Last year Beats Electronics revenue was estimated to be around $1.3 billion so with the $3.0 billion price tag for the acquisition Apple definitely paid up for the company.  

Many of the critics of these move question why Apple would target Beats over other music companies such as Pandora.  From my perspective though, I completely understand the move and I think they will generate a positive return on their investment.  I view Apple as a marketing company that masquerades as a technology company.  When it comes to the headphone market Beats does not produce quality headphones according to the experts, but no one can deny that they have not done an excellent job of marketing.   The person behind that marketing vision is the music mogul, Jimmy Lovine, who is the number 2 at Beats Electronics.  Apple and Steve Jobs has always had a love affair with music and with Jobs gone Lovine could become that guy who brings in a great new marketing vision that surrounds the music side of Apple's business.  

So they paid $3 billion all to acquire Lovine?  Of course not, but I think that played a major factor in targeting the acquisition of Beats.  In the future I can envision Lovine completely gutting the current iTunes and iRadio platforms.   With Apple's revenues sliding downward every quarter on the music side they need a visionary to come in and figure out how to market Apple's music to compete with the likes of Spotify, Pandora and to a lesser extent last.fm. 

As far as what other benefits from a marketing perspective this acquisition can provide Apple is as follows:

• Selling the stylish headphones in the store pairs nicely with the equally as stylish Apple products.
• Including the beats headphones in all future iPhone sales, or providing a premium iPhone package that includes the headphones at a discounted rate.
• Capturing the enormous profit margins that the headphones generate.

Soundcloud: "You Tube of Audio"

When it comes to social media you cannot explore and actively use every new company, platform, app, etc.   I like to think though that I do a pretty good job of staying up on the most popular or the ones that seem the most beneficial to me.  One of latest social media platforms, SoundCloud, is one that I have not used yet but I've heard about it, read articles about it and seen many friends tying their Facebook accounts to their SoundCloud accounts.

So, what exactly is SoundCloud?  At it's core it's a social media platform similar to Instagram for playing mp3 audio files.  At first thought, you think there has to be something that already fills this niche.   The reality is though that there really isn't which is surprising that the niche stayed unoccupied for so long.  With SoundCloud artists, particularly Indie and upcoming artists, upload new songs, jam sessions, songs their actively working on, etc to the news feed.  Similar to other social media platforms you can follow the artists or non-artists who are uploading mp3's based on your musical preferences.   You can also be a passive user, meaning you can just follow other users and not post anything.

   

With over 250 million users this is the largest music platform of it's kind.  Personally, I'm a huge music fan and listen to 3-4 hours worth of music per day.  I'm actually embarrassed that I'm not one of the 250 million users because clearly their is some significant value being gained from all that are apart of it.  The reality is though sometimes you don't start using a new social media platform simply because of the limited time you have available.  Even though I've heard of SoundCloud now for close to a year I'm a loyal and paying subscriber of Spotify.  

After doing some research on SoundCloud for this blog post I certainly can see the value in this and it's a different value that Spotify currently provides.  The primary reasons being that it's a free service to use and being first to find new artists/songs is something I take pride in.   Of course, I listen to the mainstream stuff as well but finding new songs and groups takes work and that music becomes more special to you.  If this new platform helps me become more efficient and effective in fulfilling what music does for me then I think they just may have a new loyal user.   250,000,001 users it is!

The E-commerce of Harding Earned Savings

I'm currently reading The Intelligent Investor which is a book written way back in 1949 ... long before this thing called in the internet was invented.   As a MBA student with a concentration in finance this qualifies as my casual reading because the disciplined, long term vision investing requires is fascinating to me.  It's fascinating to me because it is one of the most important things in your life yet people do such a poor job of putting it as one of their highest priorities.   For me, this is something I will never understand.

OK enough of the soapbox!  Onto the topic I wanted to write about today which is the rise of online brokerage accounts and the pitfalls they've create for people.   It's no secret that online brokerage accounts have become commonplace.   The revenues generated from online brokerage accounts are staggering as documented in this article.

    
The problem with these accounts is that now everyone can become a 'trader' of their hard earned savings.   At a drop of a hat you can speculate on any stock and get burned just days, weeks or years later by your in-the-moment emotional decision to sell that same security just as easily.  Of course, handing over your investment decisions to the 'professionals' doesn't safeguard you from anything as we know from our experience with The Great Recession.  That being said, the main problem I have with these online brokerage firms is that the majority of the people should not have the ability to buy and sell securities with their hard earned money as easily and quickly as they can.  The reason is because the majority of people cannot separate the emotion from their investment decisions, as shown in the chart above.  They get caught up in the emotion and the moment and make very poor decisions with their money.  Only the 'professionals' should be day trading but now anyone can be a day trading.  The daily market movements to the upside and downside an emotional roller coaster but the development of companies strategies is a years long story, not a daily one.  Naturally, companies such as TDAmeritrade know this and have made huge profits on the securities transactions.

Of course, I do not expect this trend to reverse but I think more should be done to expose the downside of these online platforms.  The online brokerages though are driving the bus in marketing all the grand possibilities of double, tripling, etc your hard earning savings.   As they as always say, if it's too good to be true it probably is.  The problem is that most people won't learn these lessons until many $9.99 transactions later and losses incurred on investment decisions that were made based off emotion instead of logic.   For all the positives the internet has created, I certainty think this qualifies as one of the negatives. 

Now Trending: Department Store's New Outlet Malls

Back in April I read this article about the over-saturation of outlet malls in the U.S.  Historically, outlet malls were cheap real estate space compared to the traditional mall retail space.  As this graph below shows though this is no longer the case.

Now at this point, you are probably asking yourself how does this relate to internet marketing?  The answer is simple.  With the rising retail space cost and growing popularity of online shopping major department stores are now planting their outlet stores on the World Wide Web in addition to their traditional physical outlet store fronts.  In the near future, I would have to imagine the popularity (and profitability) of the online storefront will take center stage for major department stores such as Nordstrom's and Neiman Marcus. 

To me this is a very interesting trend.  The outlet malls have existed for decades but the major department stores never participated in this arena.  I would assume because they wanted to maintain their 'exclusivity' feel.  It has become apparent though that with the growing outlet rental space cost, this WWW retail space has become a revenue area that is too large for the department stores to ignore.  They are no longer above selling their products in this area and as a-matter-of-fact they have decided to jump into the pool head first by creating physical outlet store fronts as well as online outlet store fronts. 

Nordstrom's Rack and Neiman Marcus Last Call are the stores major outlets now.  

     

From what I can tell both companies are selling exactly the products that are sold in their flagship stores.  It will be interesting to listen to future quarterly conference calls to hear what percentage of revenues these store fronts are generating for these two companies.  If these are the exact products I think these stores are going to a major advantage over a number of retail clothing companies such as J.Crew.  The reason is because while J.Crew also has physical and online outlet store fronts they are offering lesser grade products made specifically for the outlet environment.  To me this is alright if you are willing to sacrifice quality but I personally believe that lessens quality of the product in the flagship stores and hurts the brands perception from it's customers.  

This latest trend seen in the online marketing world is just another example of the power of the online shopping experience and online marketing! 


 

My Points: The Concept for the Website

For years I have been a big online shopper and would probably consider myself an earlier adopter.  I always have taken pride in finding name brand name merchanise for prices that most would think isn't possible.   

Because of this online shopping obsession I got some 'spam' mail for a online shopping website called MyPoints.com probably five years ago now.   For whatever reason the email got my attention and I looked into what it was all about.  At first glance, it seemed to simple and to easy to earn the reward points they were touting.  The thought of saving additional money though, the professional looking website and the fact that I did not have to provide credit card information led me to sign up.

The premise is simple: 

Five years later I still use MyPoints.com and I have received about $300-$400 in various gift cards with the points I have earned!  What a concept!   

What's in it for MyPoints.com and the various retailers that they work with?  In my opinion, it's pretty simple from the retailer standpoint.  By having the incentive for the MyPoints.com members to earn more points they will go through their website to reach the retailer they want to buy from.  With the same products being offered for the same price on so many websites the online retailers need that one extra catalyst that steers the customer to pick their website over another retailer's.   

Before I buy anything now online I will check MyPoints.com to see if they are partnered up with the retailer.  If they are not, I will actually spend the time to look for a retailer who carries the product at the same price or better and is paired up with MyPoints.com.   

This website and business model is not unique.  I have found other websites over the year offering similar services but my loyalities have been cemented.   It's just another great example of the creativity companies are coming up with to grow revenues and their brand awareness.   

Google Paid Search: what do they do with all that money?

This week I have spent some time researching Google Adwords and getting myself familiar with the concept of paid search.   I knew Google made a lot of money off of advertising but I had no idea it represented 97% of their total revenue.  I also find it interesting is the words that are the most expensive.  Insurance ... really?  I would have never guessed that if someone were to give me 3 guesses.  I wish I could find where Google discloses how much money they make annually on some of these Adwords.  A simple word can generate billions of dollars a year for Google ... what a concept.

One of the main takeaways I got from doing this research is that it made me realize the things that Google does that are not deemed 'sexy' (Paid Search) is what is funding all of their 'sexy' ideas that get all the media attention.   

The first couple things that come to mind are of course Google Glass and then the drone project and Project Tango to name a few.   More information can be found here in this article. To me this is brilliant by Google.  On CNBC I've heard some critics question Google on why they are wasting money on all this frivolous pie-in-the-sky ideas.  I take what they say with a grain of salt though because these are investors looking at Google's quarterly profits and trying to maximize the profits in the near-term. 

In my eyes, Google has this beautiful cash cow in paid search and they are trying to hit the lottery with another revolutionary idea.   To not rest on what made you successful in the first place is easier said than done for many companies.  I applaud Google for constantly trying to attack the market with new ideas and to step out of their comfort zone and to find the next big thing. 

Pinterest: An Online Shoppers Dream

The stigma of Pinterest when the site first gained popularity was that is was only for females.  I followed the crowd for a while on that theory before I finally when to check it out for myself.  What I found out is that, in my opinion, it is an online shoppers dream come true.   

The real beauty of Pinterest is not the obvious aspect where you store a beavy of ideas you come across while searching the web. The real beauty lies in the ability for your pins that are linked to an online store to become real-time coupons.  For example, I have a pair of shorts from Macy's pinned and when the item when on sale Pinterest notified me with this email: 

From an e-commerce perspective Pinterest is brilliant.  I can't remember how many times I have either completely forgotten where I found an item online I liked or did not want to buy the item at the current price.   It's clear that the savvy online stores understand this as they make pinning an item/image from their page very user friendly.   An example of this can be tied to my blog post from last week about Bonobos.  On there website you can simply click the Pinterest logo and move it onto one of your boards.