“Apple is in discussions with the big music companies about an ‘all you can eat’ model for buying music that would give customers free access to its entire iTunes music library in exchange for paying a premium for its iPod and iPhone devices. Finally, it looks like the industry (or at least Apple) is ‘getting it’. The real question is not whether the big music companies will go for it, but rather, who will be the first one to get smart and agree to offer it?”

Wired has a look at how the good and bad of Apple, their Yin and Yang, have come together to form a company that actually works. The piece looks at Steve Jobs’ unusual and abrasive management style, otherwise known as ‘Management Techniques From the Dark Side’. It’s essentially a list of counterintuitive, suspicious-seeming and downright evil management techniques that work - for them.”

Yesterday, AOL paid $850 million in cash to acquire Bebo, a social networking site that is a distant third to MySpace and Facebook in the US.

eyebrows have been raised in response to news of the deal because Bebo’s traffic levels are only a fraction of those seen at MySpace and Facebook. Bebo had 22.4 million unique visitors worldwide in January, according to comScore Media Metrix. Facebook and MySpace both had more than 100 million worldwide visitors that month.

In February, MySpace’s share of US Internet visits was 67 times larger than Bebo’s, according to Hitwise. In fact, 22% of visits to Bebo last week came from people who had first visited MySpace, Hitwise reported.

Nor does Bebo seem set to add significant revenue for AOL, at least not immediately. According to financial data obtained by AllThingsD, Bebo earned just $20 million in 2007 worldwide. eMarketer estimates that advertisers spent $510 million on MySpace and $145 million on Facebook in the US alone last year.

However, Bebo has been quietly innovative in areas of online marketing that are just now starting to get attention. It is a pioneer of widget marketing, having partnered with prominent widget developers in December 2006, five months before Facebook opened up its platform.

Bebo also hosts KateModern, an online video hit. The site is developing other short-form online video content, along with unique ways of integrating marketers into the video storyline. It also has found novel ways to allow viewers to participate in the action both online (by interacting with the video’s characters on their profile pages) and offline (producers invited fans to watch the filming live last month).

Another thing going for Bebo: its users spend more time on the site than those at Facebook or MySpace – an average of 217 minutes apiece in January, according to comScore Media Metrix. That’s 18 minutes more on average than was spent on Facebook, and over an hour more than on MySpace.

Information from AOL is sketchy on the details of how Bebo will be integrated into its other properties, other than statements that it will be paired up with the messaging services AOL IM and ICQ.

There can be no denying the unique ability of social networks to bring people together in ways that were previously impossible. For marketers, it is also clear that social networks provide powerful branding solutions, taking online advertising beyond banners and clickthroughs into endeavors such as community building and customer interaction.

Bebo and its social networking brethren have so far only scratched the surface of what is possible in this space. AOL obviously plans to capitalize on Bebo’s innovations and online advertisers should hope that they succeed.

Get the facts behind the social networking buzz. Read eMarketer’s Social Network Marketing: Ad Spending and Usage report.

“Ready to put on your thinking cap? There’s a report out of the UK regarding an ‘experimental helmet which scientists say could reverse the symptoms of Alzheimer’s disease within weeks of being used’. The helmet is to be worn for ten minutes every day and stimulates the growth of brain cells using infra-red light. The article explains, ‘Low level infra-red red is thought to stimulate the growth of cells of all types of tissue and encourage their repair. It is able to penetrate the skin and even get through the skull.’ Human trials are due to start this summer.”

V programs viewed online are more engaging than those screened on a television set.

That is the main finding of Simmons Research’s “Multi-Media Engagement” study, as cited in MediaPost.

In order to measure engagement, Simmons had consumers rate media on trustworthiness, inspirational value, and other attributes.

Viewers were 47% more engaged in ads shown during TV programs shown online than those shown on programs watched on a TV set. They were also 25% more engaged in the content of shows watched online than on a set.

The online effect was true for magazines as well. Consumers were 18% more engaged with ads in online versions of magazines compared with print versions, and 15% more engaged in magazine articles online than in print magazines.

In general, however, print had higher levels of engagement than TV or the Internet.

The survey was conducted online and by telephone from October 2006 to September 2007.

Group M, the media planning and buying agency owned by WPP Group, has forecast that spending on Internet advertising in the UK will surpass spending on TV ads in 2009 - making the UK the first of the world’s major economies to see TV spending overtaken by the Internet.

The conclusion is based on a predicted rise of almost 31% in online ad spending in 2008, compared to 1% annual growth in TV ad spend.

This Group M forecast puts 2008 UK online ad spending at £3.4 billion (with 65% coming from search). This total is slightly higher than eMarketer’s most recent estimate (£3.24 billion). If eMarketer’s projection is nearer the mark, it may be 2010, rather than 2009, before TV loses its top spot in the UK pecking order. But the changing of the guard is not far off!

The Interactive Advertising Bureau “Online Advertising Study” published in October 2006 came to very similar conclusions, estimating that Internet ad spending amounted to 10.5% of total media spend in the UK for the first half of 2006, against television’s 22.7% and 11.4% for national press.

This tends to confirm that Britain now has a higher proportion of total spend online than any other country. (Globally, online spending averages just 5.8% of total ad spend, according to ZenithOptimedia.)

Of course the UK media landscape is unusual. For one thing, the print sector remains pretty healthy. Also, the phenomenal rise of the Internet has encouraged significant spending on the Web by UK advertisers, and hard evidence of online successes breeds further investment.

Moreover, the dominance of television as an advertising vehicle is less pronounced in the UK, because TV programming is not funded by advertising to the same extent that it is in the US and elsewhere. The country’s leading TV broadcaster, the BBC, was established with a “public service” remit, and has always been supported chiefly by an annual license fee (in 2007, £135.50 for households with a color TV set, and £45.50 for black and white).

Nonetheless, the channels that do rely on advertising - including (among others) terrestrial channels ITV1, ITV2, Channel 4 and Channel Five, as well as cable and satellite broadcasters - have helped to ensure that TV ads have a long and proud tradition in Britain. The fragmentation of TV audiences in the UK is a real worry, because TV has been the leading medium for advertising in the country for decades - since the explosion of commercial advertising after World War Two.

The ratio of advertising to content on British TV is much lower than in the US. A typical hour-long program will have at most four commercial breaks, and one of these will rarely contain more than 5 or 6 ads. Yet TV is acknowledged to be the channel that’s most memorable for consumers, and often best for brand messages - at least historically.

Against this background, it’s taken time for many of the UK’s iconic household brands to even contemplate turning their back on TV. In fact, they are not so much leaving this traditional channel, as scaling back (especially when broadcasters can no longer promise consistently large audiences). Brands of all kinds have had real success with online campaigns, or integrated campaigns that cost far less than TV, now that their audiences are transferring so much of their attention to the Web. That’s the trend that’s set to continue.

“As more and more businesses become dependent on barcodes, people are pointing out common problems involving the security of one- or two-dimensional barcode software. You might scoff at this as a highly unlikely hacking platform but from the article, ‘FX tested the access system of an automatically operated DVD hire shop near his home. This actually demanded a biometric check as well, but he simply refused it. There remained a membership card with barcode, membership number and PIN. After studying the significance of the bar sequences and the linear digit combinations underneath, FX managed to obtain DVDs that other clients had already paid for, but had not yet taken away. Automated attacks on systems were also possible, he claimed. But you had to remember not to use your own membership number.’ The article also points out that boarding passes work on this basis — with something like GNU Barcode software and a template of printed out tickets, one might be able to take some nice vacations.”

the numbers aren’t good. Credit card and social security theft was at an all-time high, with even more losses expected in 2008. Information thieves, it seems, are just one step ahead of IT security. “While companies, government agencies, schools and other institutions are spending more to protect ever-increasing volumes of data with more sophisticated firewalls and encryption, the investment often is too little too late. ‘More of them are experiencing data breaches, and they’re responding to them in a reactive way, rather than proactively looking at the company’s security and seeing where the holes might be,’ said Linda Foley, who founded the San Diego-based Identity Theft Resource Center after becoming an identity theft victim herself.”

A year’s worth of research from Simmons, a media consultancy, shows that Internet video watchers are 47 percent
more engaged by the advertising they watched than were traditional TV viewers, according to MediaPost. The same
study found that viewers were 25 percent more engaged in the content on the shows as well.
That’s excellent news for networks like NBC, which has been making aggressive moves to put its shows online (though
not through iTunes) in advertising-supported streaming and downloadable formats. The network appears more
interested in mimicking the traditional free, ad-supported model of television than it does in pushing paid downloads,
and the Simmons study may vindicate that decision (even if NBC’s strategy confuses some viewers in the process).
The study results will also provide fodder for both writers and producers in the ongoing Hollywood writers’ strike, which
has largely centered on the residuals formula for Internet-provided content. With online video proving so (potentially)
lucrative, both sides may have extra incentive to dig in their heels so as not to leave too much cash on the table for the
other side to snap up.
And all of this is happening at a time when online ad money continues to flow from the great Madison Avenue Money
Spigot. Back in November, the Internet Advertising Bureau reported that Internet ad revenue topped $5.2 billion in the
third quarter of 2007, up a full 25 percent over a year before. Combine that with consumers who actually pay attention
to ads, and you have an adman’s paradise in the making. How long will it be until the serpent of consumer
overstimulation does to the new medium what it has already done to television ads?

Apparently, the only legal use for the iPod would be the transfer of originally authored music not under any copyright protection. Law enforcement officials in the country have publicly stated they are not currently enforcing the law regarding transfers of music from CDs.

Copying music from a CD onto Apple’s (Nasdaq: AAPL) iPod or a computer hard drive in Australia is effectively breaking the country’s copyright laws, which do not have the “fair use” clauses as in the United States and Europe, according to numerous media reports.

This would include the transfer of legally purchased music onto the iPod, which has about 100,000 users in Australia.

Still, even with so many Australian iPod users, aussies cannot purchase music from the iTunes Music Store in the United States due to requirements that the credit card used for purchasing be billed to a U.S. address. That credit card requirement bars them from the only source of music that can be put directly onto an iPod.

Music purchased from Australian online music sites, such as Telestra, which supports Windows Media Player 9 digital rights management, meet the Australian legal standard because it is being sold under the authority of the copyright holder. However, the .wma format used for that music would have to be downloaded to a computer first and then changed to an iPod-usable format, and only then could it be transferred to the iPod — a transfer that is illegal under aussie law.

MP3 Standard

One of the benefits of owning an iPod in a region without access to online music purchases is its support for the MP3 standard. That allows music buyers to rip legally purchased CDs onto a PC or Macintosh and transfer to the mobile player for digital listening.

Apple has not said whether it is pursuing the opening of an Australian iTunes Music Store, which would make music legally available for the iPod.

Apparently, the only legal use for the iPod would be the transfer of originally authored music not under any copyright protection. Law enforcement officials in the country have publicly stated they are not currently enforcing the law regarding transfers of music from CDs.

Two Mountains to Climb

Apple now faces two challenges in its bid to maintain leadership in digital music, and they both point back to interoperability and licensing. To date, Apple has not allowed other stores access to its digital rights management (DRM) technology, FairPlay, nor have they elected to support other DRM standards on the iPod.

In a much publicized move last week, RealNetworks (Nasdaq: RNWK) released Harmony Technology, which provides a gateway to playing music purchased from non-Apple online music stores on the iPod.

Apple countered with a veiled threat of legal action under the Digital Millennium Copyright Act (DMCA) and the possibility of a software update to disable Harmony Technology from working on its iPods.

Independent Compatibility Development

RealNetworks has taken the stance that it has not violated the DMCA and issued a statement last Thursday promoting its cause.

“In fact, the DMCA is not designed to prevent the creation of new methods of locking content and explicitly allows the creation of interoperable software,” the company said.

It added: “Harmony follows in a well-established tradition of fully legal, independently developed paths to achieve compatibility. There is ample and clear precedent for this activity, for instance, the first IBM (NYSE: IBM) compatible PCs from Compaq.”

Consumers Demanding Options

Recent Gartner (NYSE: IT) research shows that regardless of the outcome of corporate battles over proprietary standards, consumers want options.

In the report, Global Music Services Face Local Laws and Expectations, G2 senior analyst and report author Michael McGuire wrote, “If a significant number of consumers expect that digital content purchased over the Internet can be shared among family members and friends without infringing copyright laws and contractual agreements, this might directly affect the success of the online business model.”

McGuire also points out in the report that while a First Sale Doctrine does exist in the United States, one does not exist for digital media. The First Sale Doctrine addresses such uses as when consumers grow tired of music and sell it to used-record stores, or public libraries allowing the public to borrow copyrighted works.

Inside Digital Media analyst Phil Leigh has appraised the worldwide market for recorded music in the neighborhood of $35 billion. Leigh said this is too big a market to ignore, as a portion of it transitions to the digital realm.