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Innovate or Die: What Facebook’s Instagram Acquisition Means for the Market Research Industry

As an industry, we have some pretty good “old-school” tools, such as brand tracking, and the like. But these methods increasingly feel outdated in a mobile world. The future belongs to the innovative market research companies that can figure out how to accurately measure digital, mobile and social, in addition to the traditional mediums. The companies that come out with breakthrough methodologies and brand frameworks suitable for the times we are living in, will reap the benefits.
Editor’s Note: Allan Fromen of GfK has another home run post that echoes exactly what I and many others have been saying for a while; “same old same old” in MR just isn’t going to cut it anymore. In all of my conversations with suppliers and clients, through analysis of the GRIT data as well as myriad other sources the message is summed up succinctly by the title of this post.
This isn’t hyperbole, it’s not being a doomsayer, and it’s not being intentionally provocative (well, maybe a little of that, but still…). Technology is advancing at such a rapid pace and disintermediation is occurring so regularly now that in order to be successful MR firms must simply reexamine their business models and value proposition to be prepared for new competitors emerging every day.  It’s certainly the message here at The Market Research Technology Event; I hope we are all listening.

By now, you have probably heard the incredible news that Facebook bought Instagram for $1 billion in cash and stock. For the few of you who avoid the news and water cooler conversation, here is a recap:

Facebook bought Instagram – a two year old start-up, with about 30 employees, a single product (it’s a photo sharing app), and exactly zero dollars in revenue. Why spend a billion dollars on a company that has no revenue? Here is why:

As I’ve said before, the future is mobile. This is not some next generation prediction – it is happening NOW. We have officially hit the turning point in the US, with over half of us now owning smartphones (vs. dumb phones that do not have email or web browsing). Worldwide, smartphone sales and use are unprecedented, far eclipsing radio’s growth in the 1920s and 1930s, television’s in the 1950s and early 1960s and PC’s in the 1980s.

Why do you think Google gives away its Android software to hardware companies? Google knows the future is mobile and it is doing everything it can to be a major player. And it’s working. By one account, 700,000 Android phones are activated each day (according to TruthDive). Google’s mobile ad revenues are expected to more than double from an estimated $2.5 billion last year to $5.8 billion in 2012, and $10 billion estimated for 2013 (per Cowen analyst Jim Friedland).

Instagram accumulated 30 million passionate members – even though it was only available on the iPhone. Less than a week after launching on Android phones, it quickly added 5 million members, which is when Facebook jumped in to buy it.

Facebook is smart enough to know the future is mobile and they also have enough critical self-awareness to recognize that mobile is an area where they have significant weakness. More and more of their users are accessing Facebook on smartphones, but the company readily admits in their IPO filing that its smartphone app’s inability to show ads or contribute “any meaningful revenue” continues to be a concern. When you cannot monetize an incredible driver of growth like mobile, it is time for something drastic – thus the Instagram acquisition.

So if the future is mobile, what does that mean? Well, it most certainly means that advertising is going to shift to mobile as well, because that is where the eyeballs are, and users have significantly higher engagement with their mobile device. Mobile advertising is estimated to grow exponentially in the coming years. According to one estimate, the ad revenue earned through mobile sites and app advertising is expected to rise to $20.5 billion by 2015.

What does all this have to do with the market research industry? I recently met with a very senior market research leader in a Fortune 500 company. He lamented that while he has the tools to track traditional messaging platforms, such as TV for example, he felt as if he could not accurately measure the newer platforms, such as digital, social, and mobile.

Unfortunately, I’d have to agree. As an industry, we have some pretty good “old-school” tools, such as brand tracking, and the like. But these methods increasingly feel outdated in a mobile world. The future belongs to the innovative market research companies that can figure out how to accurately measure digital, mobile and social, in addition to the traditional mediums. The companies that come out with breakthrough methodologies and brand frameworks suitable for the times we are living in, will reap the benefits.

John Chambers recently remarked that since 1995, when he became CEO of Cisco, 87% of the companies on the Fortune 500 are off the list. The implication is clear – you either innovate or die on the vine. The market research leaders of the future are those companies that can innovate and create tools to measure the new platforms that are the growth engine of tomorrow.

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6 Responses to “Innovate or Die: What Facebook’s Instagram Acquisition Means for the Market Research Industry”

  1. edward04 says:

    April 30th, 2012 at 4:28 pm

    I confess to be being baffled by the sense of excitement aimed at, as I don’t see the “killer insight”. That mobile is predicted to be an area of huge growth is becoming commonplace; that innovation is necessary in order to prosper – no news there. That we need as an industry to evolve our tools (including mobile) to capture new habits, driven by new technologies – nothing new there either. Why then take an angle that sets up a “new world” versus “old school” – isn’t this a convenient but artificial dichotomy? Isn’t that an easy trick to set up an imaginery dusty world of “old research”, only to position onesself advantageously, or at least open the door to introduce a “solution” to the “problem”? My viewpoint is a different one – there are new tools aplenty, all being promoted with vigour, but at what stage of development are they “brought to market”, what validation has been carried out?. Impact is the name of the game, at least from a Client perspective – and yes, methodologies do need to evolve, accuracy of measurement is of course important. However – and nothing against whatever new tools, better ways of measuring – I’d say that we’ve actually got a pretty good range of tools, it’s MR’s ability to bring the tools to bear that we need to be mindful of. And the way we present ourselves needs to reflect (my personal view) our core strengths – methodological rigour and validity.

  2. Adriana Rocha says:

    April 30th, 2012 at 4:34 pm

    Great piece! Couldn’t agree more with Allan when he says “The market research leaders of the future are those companies that can innovate and create tools to measure the new platforms that are the growth engine of tomorrow.” and “The future belongs to the innovative market research companies that can figure out how to accurately measure digital, mobile and social, in addition to the traditional mediums. “

  3. Tom says:

    April 30th, 2012 at 4:49 pm

    “Why spend a billion dollars on a company that has no revenue?”

    And then a few paragraphs later:

    “When you cannot monetize an incredible driver of growth like mobile, it is time for something drastic – thus the Instagram acquisition.”

    Who, er, also can’t monetize it? ;)

  4. Aaron Burch says:

    April 30th, 2012 at 9:49 pm

    Great article Allan. Totally agree!

  5. Simon Chadwick says:

    May 2nd, 2012 at 2:48 pm

    It’s not that there isn’t innovation in this field. There is, and plenty of it. But you might not be looking in the right places. After all, before migrating to these shores, Jana sprang at us out of Kenya. And India-born Informate (now headquartered in Indonesia) dominates passive mobile measurement in APAC, while quietly establishing important beachheads in the US and Europe.

    The trick for established research companies will be to know when to innovate themselves and when to ally with the innovators. Then it will be how to integrate this into their other tool kits alongside all the other innovations that are coming at us from all sides.

    The winners will be those who can do this successfully and add to the impact that their clients have in their own organizations as a result. Interestingly, Allan’s own company is one of the quietly better ones at doing this ;-)

  6. Jeffrey Hennings’s #MRX Top Ten – MR Roles Are Changing | GreenBook says:

    May 15th, 2012 at 7:45 am

    [...] Innovate or die: What Facebook’s Instagram acquisition means for the market research industry – Allen Fromen of GfK says that when Facebook pays $1 billion for a 30-person mobile-software company with 1 product and $0 in revenue, it’s proof that mobile is the future. If you’re an agency, he says, get your company on board with mobile now. [...]

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