Heath Anderson's Strategic Brand Management blog.

Monday, July 16, 2007

Relevance and Some Search Engine History

Lets jump right in and pick up where we left off on the last blog - relevance.

Relevance is such an interesting topic and today I'd like to cover a few additional concepts and discuss relevance in the context of the search engine category.

When we look at strategies to create or maintain relevance, three main strategies emerge: trend neglectors, trend responders, and trend drivers.

Trend neglectors are companies that operate independent of the market and ultimately fail to maintain relevance. Digital, the microcomputing leader that ignored the advent of the PC, is a great example. They neglected the market, lost relevance and ultimately failed.

On the other hand, trend responders attempt to recognize, evaluate and capitalize on trends they deem as opportunities. The successful trend responder will be able to discern between trends that have staying power and those that are merely fads. The book offers a great example of the trend responder by taking a look at the fast food industry and the emergence of the healthy fast food subcategory (ie - Subway, Sweet Tomato, Souper Salad, etc.). McDonald's in the staple of fast food; however, they've made sizable attempts to capitalize on the rather recent demand for healthy fast food. From new product introductions like Salad Shakers, the McLean Deluxe and Grilled Chicken Flatbread to co-branding premium salads with Newman's Own and acquiring brands like Chipotle and Boston Market, McDonald's challenge has been to stay relevant by attaining credibility in the new healthy fast food market.

The third group of organizations are the trend drivers. Trend drivers are a rarity. They are the ones that actually participate in the creation of a new category or subcategory. They are the innovators and the ones that hit the market at just the right time (the importance of timing can not be understated).

In looking at relevance, I thought it might be fun to take these concepts and apply them to the search engine category. Search engines have been an emerging market for some time now and many companies have come and gone. Who are the trend neglectors, the trend responders and trend drivers? Better yet, I'd propose that each major brand might actually display characteristics of all three categories. BTW - my discussion will be a bit basic given the remoteness of my location (I'm on the tiny Greek island of Amorgos) and lack of a good connection which means that my history will have to come entirely from memory.

To start the discussion, let's address the 10,000lb gorilla in the room - Google. Google certainly wasn't the first search engine. There were many more that proceeded Google. But, what Google did was come in with superior technology (the use of off-page link analysis in its ranking algorithms) and provide a better search experience. At the time, Yahoo, MSN, AltaVista, AOL, HotBot, GO, Netscape, DirectHit, NBCi, iWON and the other top search sites were moving in the portal direction. Search was just one of the many features that these sites were focused on. It was this momentary lapse of focus at the top engines that provided the perfect opportunity for a better technology and better search engine to emerge. Thus, Google entered the picture as a trend driver and redefined search. In the process, they relied on their superior product to generate word of mouth. The end result was that they gained market share, took over the search space and have yet to relinquish their stranglehold on the industry.

Google is also a great example of a trend responder. As Google was building its online dominance, the need to monetize search became apparent. There was a company back in the late 90's whose name escapes me at the moment that actually tried the pay per click concept. The timing was wrong for them and they failed. But, the concept of pay per click would not be a failure for long. GoTo came about at about the turn of the 2000, brought back pay per click and struck gold with their AOL and AltaVista distribution agreements. Distribution agreements with Yahoo, MSN and Netscape would soon follow. Google's response was to create their own pay per click advertising platform. But, as normal, Google took the concept of pay per click to a new level by making it smarter (with the implementation of click through rates into the ranking formulas), automated and more user friendly.

Google's overall rise came at the demise of several small engines but most notably Google knocked Yahoo and MSN down several notches. Yahoo used to be the leader in the search engine industry. Their human powered directory was the place to be located. But, as the search category was changing, Yahoo was forced to follow the lead of Google. Instead of developing their own crawler based capabilities like MSN, Yahoo went the direction of acquiring FAST and AlltheWeb for their search technologies to combat the growing Google threat. Unfortunately for Yahoo, by the time that they could produce a reasonable search product, Google had stole the show. Yahoo was once the trend driver with their directory but they would latter become the classic example of the trend responder with crawler based search. Yahoo was also forced to follow the lead of Google in the pay per click advertising side of search. Yahoo eventually bought the company that took pay per click mainstream - GoTo (which had changed its name to Overture).

The last example that I wanted to provide is LookSmart. LookSmart used to be a very viable human powered directory. In fact, at one point in time they had a solid distribution agreement with MSN and significant traffic of their own. The reason that I provide the LookSmart example is that they are probably a good example of the trend neglector. They failed to see past the limitation of a human power directory and recognize the need for the automation of bots to organize the web. As a result, once their relationship with MSN dried up, LookSmart became irrelevant.

Sunday, July 15, 2007

Citgroup and the Concept of Relevance

Today I'm going to really briefly touch on Citigroup and move forward into the concept of relevance.

The Citigroup example in the book highlights how a portfolio has to constantly evolve in a managed fashion. In 1998, Citicorp and Travelers Group merged. At the time of the merger, the key brand assets included Citibank, Travelers Insurance, Salomon Smit Barney, Primerica Financial Services and Commercial Credit. However, post merger the new organization was faced with complex decisions as to how best manage a combined and diverse brand portfolio.

The result? Citigroup employed a hybrid portfolio aimed at their three main financial service areas: consumer brands (branded Citi with the red umbrella stylized to fit over the bold "citi" prefix - Citibank, Citifinancial, Citimortgage), institutional brands (branded Citigroup with the red umbrella - Citigroup Corporate and Investment Bank, Citigroup Private Bank, Citigroup Asset Management), and specialty brands that retained their own branding (SmithBarney, Travelers, Primerica, Banamex).

What's essential here with the Citigroup example is the method it handled the merger, the use of the merger as a catalyst to take inventory of the brand assets and the resulting organization and management of the new portfolio.

Now, let's shift gears and take a look at this quote in 1977 from the CEO of Digital, the leader of minicomputers back during the 60's and 70's.

"There is no reason to believe anyone would want a computer in his or her home."

Obviously, this quote was so very wrong but what it does is introduce to us is the concept of relevance. What is relevance? Relevance occurs when there is a perceived need for a product category and when a brand is among the set considered by the consumer to relevant to a product category.

The book provides a great example in taking a look at Powerbar and the dynamic evolution of the energy bar industry. Powerbar entered the snack bar market dominated by Snickers in 1986 and created a whole new category - the energy bar. The energy bar was positioned as athletic, energy food. Out of Powerbar's success, competitors like Clif Bar and Balance entered the market and pushed entirely new sub categories of energy bars - those that actually tasted good, those for women, diet bars, etc. As a result, Powerbar was forced to keep pace and maintain its relevance in an ever changing yet growing industry. To put the growth of the industry in perspective, in 1996 the energy bar industry generated about $100 million and by 2001 the industry had exploded to a $700 million a year industry.

An important aspect to understand about relevance is that relevance has as much to do about the category as it does the product or service. For instance, simply take a look at minivans. You can be the best and most well known minivan maker in the world but if consumer demands have shifted to SUVs, you are no longer relevant to the market. Or, for a more exact example, take a look at AOL. AOL dominated dial up internet services. However, dial up is largely a thing of the past thanks to DSL and high speed cable. As a result, AOL is struggling to find its relevance in the market of today.