I admit I wasn’t expecting to be bowled over by the arrival of Hulu Plus. But even considering my low expectations, the official unveiling of the service leaves me underwhelmed. The service will carry a price tag of $9.99 per month, for which subscribers will have access to multiple seasons of older TV shows no longer on the air, as well as all episodes from the current seasons of many shows on the participating networks (NBC, Fox and Disney/ABC).

Hulu CEO Jason Kilar told PaidContent that Hulu Plus will be “incremental and complementary.” Maybe. But even if this service delivers the extra bit of revenue Hulu needs to achieve its holy grail of becoming cash-flow-positive this year, the company won’t hit a home run until it shifts the cost/value proposition in favor of the latter.

Here are some specific steps that would help:

• Either lower the total fee to somewhere on the order of $7.99 or offer a “lite” version for, say, $4.99 per month.
• Reduce the ad load in the paid service. The Wall Street Journal reported today that Hulu Plus will run “as many ads as the free version of Hulu.” As a consumer, if I’m paying $10 a month for content, the first thing I expect is to see fewer ads than in the free version of the same service. In fact, I’d go further and argue that a $10 subscription should guarantee NO ads, a la HBO.
• Go deeper in offering content depth and exclusivity. I realize there are contractual obligations that preclude the level of access that consumers would like to have, but $10 should net something more than a deeper catalogue of back episodes of shows that are mostly available on the free service. One attractive possibility might be a live broadcast of a season premiere or season finale, or at least a shorter delay between broadcast and streaming for select content (say, 2 hours instead of 24).
• Hurry up and line up other content providers, starting with CBS. I expected CBS to be part of the Hulu Plus launch announcement, but so far the network is MIA from the service. The only media companies supplying content to Hulu Plus are the joint venture partners: NBC, Fox and Disney.
• I realize getting Viacom on board will be a stretch, but I hear incessant grumbling about the absence of Comedy Central from the Hulu lineup.
• Hulu on the iPad/iPhone has been a long time coming, but support for other devices and operating systems (Android, PS3, Xbox 360) needs to happen ASAP to build critical mass. Hulu’s “guided tour” of Plus suggests the service will be available on PS3 in July, while the rumor mill suggests it will be available on Xbox in early 2011.

I know this is an invitation-only “soft” launch and some of the things that I (and probably millions of other consumers) would like to see will happen over time. Still, I can’t help feeling a sense of disappointment, and I suspect I’m not alone.

Whether Hulu Plus can successfully monetize the 58.9 million people who watch full-length TV shows online in the US is anyone’s guess. Online video viewing in general is shifting to longer form content (and with it, online video advertising dollars), and Netflix has proven that viewers are more than willing to pay a subscription fee for an excellent online video service—actually, an excellent ad-free online video service. The question is whether Hulu Plus’s video archive will be “excellent” enough to overcome customer qualms with advertisements and sustain long-term growth. So far I’m not convinced.

Japanese businesses have been trailblazers when it comes to the use of internet and mobile technology. Two leaders in particular are eying overseas expansion in the face of domestic economic stagnation. Softbank and Rakuten, two very different yet equally ambitious Japanese firms, have been arranging foreign e-commerce partnerships at an astounding pace. And it could mean serious competition for Amazon.

Softbank, which combines solid financials based on its mobile, broadband and fixed-telecom businesses, has been increasingly investing in their internet service offerings. According to their latest company reports, mobile services remained the core business, with net sales of ¥1,701.4 billion ($18.2 billion) and 1,243,700 subscriber additions in FY2009 (April 2009-March 2010).

Like AT&T in the US, Softbank Mobile is the sole provider of the iPhone and iPad in Japan, providing a huge boost to average revenue per user. Internet services, including advertising, services and e-commerce, accounted for over ¥520 billion ($5.6 billion) in net sales during FY2009, an increase of ¥7.8 billion ($83.5 million) over FY2008.

Rakuten, on the other hand, operates on a significantly smaller scale but is showing tremendous growth. According to their FY2009 results, net sales amounted to ¥298.2 billion ($3.2 billion), a 19.4% increase over the previous year. In Q1 2010, Rakuten is off to a strong start with net sales of ¥79.2 billion ($848.0 million), up 19.3% verse Q1 2009. Sales are focused within Internet services (e-commerce, travel, portals and online media) and online financial services (credit card, banking and securities).

Both of these companies, along with Amazon Japan, are vying for dominance in the same space: Japan’s Internet, mobile and e-commerce markets. eMarketer estimated Japan had 93.4 million Internet users in 2010, ranked third in the world, and the International Telecommunications Union estimated Japan had nearly 115 million mobile subscribers in 2009. According to the Ministry of Economy, Trade and Industry, e-commerce (including travel) in Japan reached totals of ¥2.93 trillion ($31 billion) in 2008, an increase of 14.8% year-over-year, as reported in Rakuten’s Q1 report.

Marsh Research found that 96.3% of Internet users in Japan purchased goods online in March 2010, suggesting a mature and sophisticated consumer market. The same study showed that 68.9% of online buyers in Japan purchased items at Rakuten, followed by Amazon at 38.1% and Yahoo! Shopping (a subsidiary of Softbank) at 34.3%.

The combination of domestic saturation and high rates of mobile and online spending has led these two companies to amass serious amounts of cash. With that cash in hand they are ready to capitalize on opportunities in foreign markets, despite a weakening yen.

Rakuten was the first to make a move in 2010, as TechCrunch reported a joint venture with Baidu to build an online B2B2C shopping mall in China based on Rakuten’s Japanese site. According to Rakuten’s quarterly statement, the site is scheduled to go live sometime in the second half of 2010.

Softbank has been silently investing in Internet companies in China for years, but in May 2010 Marbridge Consulting reported a new partnership between Yahoo Japan and Chinese e-commerce firm Taobao that will allow cross-border linking of sales and inventory data. Taobao is the largest e-commerce site in China and part of the Alibaba Group, which Softbank has been an investor in since 2000.

The two firms are salivating at the potential access to a huge and growing market of online buyers in China, estimated at 108 million in December 2009 by the China Internet Network Information Center (CNNIC).

Not satisfied to dominate Japan and enter the rest of Asia, Rakuten is also looking further afield. Setting their sights across the Pacific, the company purchased Buy.com for $250 million to bolster their US and European reach. Moving fast in the month of May, Rakuten also announced a partnership with Indonesia’s largest media firm, PT Global Mediacom Tbk. This partnership will bring Rakuten’s online marketplace to approximately 20 million Internet users in the country, according to the ITU.

Two weeks ago, Rakuten made another move in Europe, acquiring the French e-commerce website PriceMinister for €200 million ($280 million). In an interview with LeJournalduNet, Hiroshi Mikitani, CEO and founder of Rakuten, said that they intend to use PriceMinister as their European platform and want to expand the site into Germany and Spain as well. He also stated that there are no immediate acquisitions on Rakuten’s radar at the moment, but that could change very quickly.

Last year, TechCrunch speculated that Rakuten could be Amazon’s biggest competition that no one had heard about. While that article may have jumped the gun, it proved prophetic. Recent partnerships and acquisitions suggest that Rakuten has emerged as a real threat to Amazon and other dominant e-commerce players in the US, Europe and Asia-Pacific.

Softbank is a unique company that has successfully integrated a steady and profitable telecommunications industry with online services, a feat that has been elusive for US companies (see AOL). For now, they appear content with a more concrete expansion into the largest consumer population in the world, China. It will be interesting to see how the Yahoo! Japan-Taobao link plays out in the eyes of the government, if it will cross or coalesce the growing nationalistic protectionist sentiment among China’s ‘netizens’ and government.

Either way, competition for worldwide e-commerce supremacy just got much more fierce.

Note: all currency conversions made at annual 2009 average. Rakuten logo via Wikipedia.

Last week saw the annual Future of Digital Marketing conference in London, presented by Econsultancy. For me, a long day’s exposure to many stimulating speakers boiled down to a multifaceted take on the concept of value. How can marketing deliver value for advertisers in 2010? What value (and values) do consumers look for when they consider the options presented to them? What new behaviors made possible by digital media are attaining value? Below are a few points raised or prompted by the occasion.

Value comes in many forms these days.

At the most basic level, there is value in technology itself, including Internet access and mobile devices. These things make it easy to get information, find products and services, save time and save money. A milestone in this appreciation of technology as value, as keynote speaker Gerd Leonhard reminded us, is that from July 2010, access to broadband will be a legal right in Finland.

While some things are gaining value, others are losing it. A corollary of recent technological development, Leonhard observed, is that the intrinsic value of copies (such as songs, video and written content) has declined, turning many old business models on their heads. Now it is often the context of information or creativity that makes it valuable, and those who can create a compelling context will attract audiences.

One of the greatest sources of contextual value is online community. Facebook is the headline example—demonstrating that not only the site itself but advertisers who use it well can reap big rewards. But there are countless examples of smaller communities creating value through shared interests.

One speaker, Rowan Gormley of Naked Wines, has built his business on a blindingly simple win-win premise: Wine lovers get together to support independent winemakers with a proven pedigree, and commit to buying specific wines before they are made. Because the winemakers effectively pre-sell those wines, they don’t need to market them, and many upfront costs are also met. For their part, buyers save an average 33%—often more—on the wines themselves. The earlier they commit to buy, the lower the price.

Of the 80,000 members of Naked Wines, 20,000 also spend £20 per month to support winemakers who need modest investment to launch a new wine or begin a new project—perhaps buying an additional parcel of land to cultivate. In 2009, Gormley noted, Naked Wines was the largest single investor in new wine ventures in the world. Beyond this, the company works to harness the full value of users’ comments and to provide good customer service.

It’s not difficult to see the concrete value in Gormley’s business: for winemakers, for wine drinkers, and for Gormley himself, who clearly loves his job. Tom Savigar of the Future Lab discussed value in a broader sense. Savigar aimed to look “beyond retail” in his keynote speech, and ask questions that are fundamental in the multichannel age: “Why do I go to a store? Why do I go to a Website?” What are the differences, and how are these categories blurring as we all learn to shop in different ways?  More importantly, how are retailers recognizing the value they provide, and using that knowledge to rethink their businesses?

Angela Maurer, senior marketing manager at Tesco.com, lifted the lid on the grocery giant’s API strategy to reveal another win-win situation. First, Tesco managers spent some hours together brainstorming ideas for online and mobile applications, and drew up a list of priorities in various areas. These were written on Post-It notes and stuck to the walls of their very large meeting room. That same evening, the firm threw open the doors to interested programmers recruited online.

Browsing among the posted ideas, programmers could choose the projects they wanted to tackle. Tesco managed the assignment process, and gave programmers all the information they needed about the store’s API and related infrastructure. Result: Tesco is taking advantage of some of the best brains in the field, programmers get payment and credit, and the customer gets better service. Moreover, said Ms. Maurer, the entire process of brainstorming, commissioning and delivery took a tiny fraction of the months that older processes would have required.

Marks & Spencer is also squeezing extra value from existing assets—in this case, its branded video content—according to Chris Gorell Barnes. Barnes is CEO of Adjust Your Set, which helped the retailer launch M&STV. The site is now populated with more than 1,000 pieces of intelligent content, and has generated over 4 million minutes of views.

Much of the content is also syndicated for broadcast on video sharing sites, social networks and other content and media portals. Crucially, these videos incorporate a click-to-buy facility, taking viewers straight to M&S for purchase. So far, data shows customers who viewed M&STV spending 23% more. And, said Gorell Barnes, video delivers value in other ways. His firm has seen e-mail response rates rise by up to 300% when outgoing messages contain video elements.

Inevitably, Facebook plays a growing role in any assessment of value on the Web. Beyond its importance to users and product advertisers, however, is its growing value as a broadcaster. As Gerd Leonhard noted, even content from major media owners is increasingly seen within this social environment, as a currency shared between friends or given new meanings by Facebook groups. Content owners are just beginning to think about how this may raise or lower the value of what they produce, and how their business models need to alter in response.

The emerging mobile arena was another key topic of the day. Douglas Orr of price comparison engine Sccope discussed the rapidly growing market for mobile commerce. His firm is the global m-commerce partner for BlackBerry, which aims to launch mobile buying facilities from this August. Orr and other speakers on mobile were joined on a panel by Jo Vertigan, Head of Digital at England 2018 (promoting England’s bid to host the FIFA World Cup eight years from now) and Patrick Mork, CMO of GetJar, a site offering “appsolutely everything” in the way of applications for mobile handsets.

M-commerce promises greater convenience for buyers and a new revenue stream for sellers. But what other values attach to mobile? Are apps better value for advertisers and consumers than mobile Websites? Advertisers often opt for a site strategy, which removes the need to cater for different handsets. But will the mobile Web win out in the long run?  

Mork, not surprisingly, favored apps over sites. Apps offered deeper brand engagement, he said; users experienced no network delays, and payment was (at the moment) easier and more secure from within an app. But he acknowledged that advertisers interested in reach probably find better value in building mobile sites.

A final insight agreed by all the FODM speakers: The pace of change in the industry, though frightening, is also inherently valuable, keeping marketers on their toes and sparking innovation.

“It’s so thin!” exclaimed one of my colleagues as I unboxed the new iPhone 4 yesterday – 24% thinner than the iPhone 3GS, in fact. Yes, thin is in with Apple’s latest magical device, and the overall effect is fairly dramatic.

In terms of design, Apple is to electronics as Audi is to cars. Like Audi’s most recent models, this latest iPhone goes in a slightly blockier design direction than its predecessors. I wasn’t wowed by it straight out of the box, but it feels better in your hand, which is good for those few occasions when you’ll actually use it as a phone. Changing an icon like the first iPhone and 3GS is a challenging proposition, so Apple deserves some credit for going in a different direction, especially when that decision results in greater utility for the end user.

Still, the aesthetics of the case are unlikely to stand in the way of anyone wanting the iPhone 4, especially when the screen resolution is so much clearer. Thankfully, my particular model seems to have been spared some of the screen defects that others have noted. Looking at the home screen next to that of the iPhone 3G makes me feel like my vision had just improved – all of sudden the screen isn’t so blurry anymore.

Leaving aside the specs of the much-discussed retina display and the much-dissected glass used for the screen, this major step forward will make the iPhone 4 a far better platform for not only consuming media but also producing it. Even the photos I shot on the iPhone 3G’s 2.0 megapixel camera look sharper and brighter on the iPhone 4. How long will it be until we see a music video or feature-length film shot entirely on the iPhone? Answer: probably not long.

Along with the improvements to the display, the feature set and performance upgrades are the real story here. With newfound slimness comes far greater speed. My aging iPhone 3G seemed positively sluggish by comparison. And in my limited trial, the enhancements, such as unified in-box, app switching and multitasking, all worked as advertised (I didn’t have a chance to get any FaceTime).

So, what does this mean for marketers? Mark my words, iPhone usage will skyrocket. The epic pre-order snafus will do little or nothing to dampen consumer enthusiasm, and I frankly don’t see tiered data pricing as a significant near-term impediment for sales or usage either, although network issues with AT&T are sure to crop up. But fortunately for those in-market smartphone buyers who want to opt for another carrier, there is a bumper crop of highly capable devices. For example, Verizon and Motorola just yesterday launched the new bigger and badder Droid X, and the battle between Apple and Android is only going to get more intense. It’s entertaining to watch, but the key takeaway for marketers is that it will drive more consumers to smartphones and the mobile Web, and in turn, make mobile a more viable marketing platform.

There were three big news stories last week in the social network business: AOL sold Bebo for a reported $10 million to an investment group; MySpace co-president Jason Hirschhorn left the company to return to New York; and Reuters reported that Facebook generated revenue of $700 million to $800 million in 2009—a higher figure than had previously been estimated.

The timing of the Facebook news—appearing in the same week that two of its competitors had negative news—surely wasn’t an accident. I’ve been hearing whispers about Facebook’s strong ad sales performance, particularly its self-serve product, in the past few months. I think this slightly more public statement about its revenues (which was attributed to “two sources familiar with the situation”) is a sign that Facebook is getting closer to filing for an initial public offering.

It also means that Facebook is asserting itself not only as a social-networking giant but also as a real rival to Google, Yahoo! and Microsoft. In May, Facebook was the number 4 property on the Web, according to comScore. It reached 130.3 million unique visitors in the US, trailing only Microsoft (160.1 million), Yahoo! (167.2 million) and Google (179.2 million).

In December 2009, I projected total social network ad spending would reach $1.3 billion in the US this year, up 7.1% over 2009. I am starting work on a revision to that forecast, and Facebook’s strong performance will be a key component.

Thus far, Facebook has significantly trailed its portal rivals in ad revenue. My eMarketer colleague David Hallerman forecasts that Google will have net US advertising revenues of $9.55 billion this year, Yahoo! will garner $3 billion in the US and Microsoft will net $1.2 billion. The figures all exclude traffic acquisition costs, or fees paid to partners to send traffic back to the portals.

Back in December I predicted marketers would spend $450 million on Facebook advertising in the US and $155 million outside the US, for a total of $605 million worldwide.

Since last December, it has become apparent that Facebook’s self-serve ad product has performed much better than I expected. USA Today reported last week that self-serve ads brought in $300 to $400 million in revenue in 2009. The self-serve system allows advertisers to create small ads that appear on the right-hand side of Facebook pages and then target the ads to segments of the Facebook audience. Facebook’s other revenue streams are branded ads (sold by its in-house sales team), virtual gifts and virtual currency. The latter is only now starting to be rolled out.

Media reports have estimated Facebook’s total revenue at anywhere between $1 billion and $2 billion this year. In an interview with Inside Facebook this week, Facebook CEO Mark Zuckerberg said “the [revenue] estimates are not so far off in either direction that it’s causing us any pain.” Facebook currently derives the majority of its revenue from advertising, but some reports have said that virtual currency could bring in significant new funds. The terms of Facebook Credits mean that it gets a 30% cut of any transactions done using Credits.

I’m several weeks away from publishing our own revised social network ad spending forecast, but I believe this will be the year that Facebook will start to close the revenue gap between it and its larger competitors. It has already passed AOL in US traffic, according to comScore, and it is not out of the realm of possibility that it could pass AOL’s $890 million in net US advertising revenue.

Image courtesy of Facebook.