The digital revolution has touched us all, bringing extraordinary services to our finger tips and improving our lives in ways that would have been inconceivable just a short time ago. In recent years, Chicago has seen a variety of new technology companies explode onto the digital scene. While Groupon has understandably garnered a huge amount of attention on its own, there have been many other successful Chicago startups, some since acquired but many others still growing rapidly and independently in a variety of fascinating digital sectors. Every week, it seems, a new digital company is born in Chicago.

Recognizing the importance of capital to early stage companies, but also the critical role that an experienced mentor can play in helping a CEO navigate turbulent early stage waters, a group of founders from Chicago have come together to found and fund a unique venture capital effort: The Chicago FireStarter Fund. The fund has $5.7 million in committed capital from 42 founding members. The founders each have a successful track record in starting and growing digital companies and bring investment capital plus extensive management experience to the fund. I’m delighted to be one of the fund’s founders, helping Chicago-area entrepreneurs as best I can.

comScore’s roots were seeded here in Chicago when my co-founder Magid Abraham and I first met while both working for Information Resources (IRI), so it’s a pleasure for me to be able to help other Chicago area founders as they build their businesses. The Chicago area has long been associated with successful information and technology companies, with comScore, IRI and Groupon immediately coming to mind. Who knows, maybe even the next $5 billion IPO will be one of the portfolio of companies funded by FireStarter!

The fund will focus its investments in companies that are:

• Digital Media & Marketing, Software as a Service or eCommerce (with a focus on social, mobile and big data)
• Incorporated in the U.S. The fund can invest in companies anywhere in the United States. However, given that all of the fund’s members are based in Chicago, it is likely that most of the investments the fund makes will be in the greater Chicago area, Illinois and the upper Midwest.

FireStarter will source investments directly from through its member network and through its relationships with many venture funds, entrepreneurs and industry leaders Companies that would like to apply for a potential investment by FireStarter can find all of the relevant information here.

Ever since leading comedian Louis CK announced the release of his new stand-up comedy special for $5 over his website louisck.net, the media has been abuzz about the potential for this sort of digital distribution model to be successful and shift the paradigm for the way content is marketed and distributed. The results appear to show that CK’s effort was a fairly unmitigated success, generating more than $1 million in revenue against $250,000 in production costs. After covering his costs, CK generously donated a significant portion of the proceeds to several charities, paid his staff handsomely, and kept the remainder for himself – truly a win-win-win effort.

I remember the last digital content distribution experiment generating this much discussion back in October 2007 when world-renowned band Radiohead decided to launch its new album, In Rainbows, over the web using the highly experimental pay-what-you-want model. Offering its fans free access to its new album under a digital honor system, it was hoped, would generate enough goodwill that people would gladly pay a reasonable amount to download the album. But if a consumer wanted to download it for free they were allowed to do that. At the time, comScore data showed mixed results. Approximately 3 out of 5 downloaders did so while paying nothing, and the average downloader paid just $2.26. The average among those who paid something was around $6.

What was interesting about the Radiohead model is that despite the fact that it created goodwill with its fans, some music enthusiasts at the time were used to illegally downloading music for free and perhaps felt entitled to download the album without paying for it. The Louis CK experiment did not offer consumers such an option and set a simple and reasonable price of $5, while understanding that some particularly motivated freeloaders could probably find a way to get a copy of the download for nothing. Nevertheless, enough fans clearly found the $5 price point reasonable and made the purchase without a second thought, delivering value to the audience and content producers without as much need for other players in the traditional distribution chain.

I also found interesting CK’s comments about why the economics of this model were so favorable. He noted that his site and that of a major studio have the same bandwidth, which levels the playing field from a distribution standpoint. All of the economies of scale with traditional marketing and distribution channels go away when content gets distributed over the web and the individual content owner/publisher can compete with traditional media companies. Now there is certainly some truth to that, though I would also argue that not every content owner/publisher is able to get the free media exposure that a top comic like Louis CK can attract. In the weeks surrounding its release, you couldn’t help but see him all the late night talk shows or the slew of articles talking about his experiment.

Putting the pure economics of the model aside for a moment, another fascinating aspect of the CK experiment is exactly who paid to download the content. We took a look at the demographic composition of these downloaders for the month of December and found particularly heavy skews towards audiences that are often not easily reached via traditional media channels. In particular, the downloading audience was overwhelmingly male (94%) and between the ages of 18-34 (82%). In addition, most came from middle-income households with the majority (51%) making between $40,000 and $74,999 per year. There was also a very notable skew towards people in the South, which accounted for a majority (55%) of downloaders.

Combine all these demographic characteristics, and you get the profile of a working class 18-34 year old male in Middle America, a segment of the population critically important to advertisers because of the expected future growth in their spending power.

So we have a segment of consumers that is both willing to pay, but also valuable to advertisers, which begs the question of which is more appropriate: a pay model or ad-supported model. I’d argue that if you can get consumers to pay for content that is almost always the better choice, since you would need to reach an audience many times larger to derive anywhere near the same amount of revenue via a pay-for-content model.

Is there an opportunity to maximize revenue using a hybrid model, where you charge consumers but still include some advertising or sponsorship of the content? It’s certainly possible, but in CK’s case I think part of the willingness of consumers to buy was the authenticity with which he presented the choice to buy to consumers. In a message posted to those who might “torrent” the video, he wrote, “Please bear in mind that I am not a company or a corporation. I’m just some guy. I paid for the production and posting of this video with my own money.” Would people heed his message had he also taken corporate advertising money? Perhaps not.

So the economics of this direct-to-consumer model are very interesting, and I would argue, context-specific. What works for the goose may not work for the gander. Because Louie CK comes across as a genuine guy who has worked hard and paid his dues for his success, many of his constituents identify with that fact and are willing to chip in the $5. But clearly not every content producer would engender the same sort of loyalty from his / her fans, so there’s a legitimate question as to how far out this model might extend.

And ultimately, I don’t think we’ll know any better until more entertainers across a wider spectrum of talent continue to experiment and give us more data to analyze. I enjoy seeing entertainers like Louis CK succeed in these efforts, but I suspect many others would not be so lucky. Not every one of them would be able to generate enough free media to make up for the marketing muscle big corporations can provide.

So until we know more, I will just say that in the right instances these models show promise. But, I suspect, they lack the ability to scale in a way that would truly prove disruptive to the current economic model for professionally produced content.

But that doesn’t mean the artists should stop trying…

For those of you who may not be aware, Saturday, January 28th is the fourth annual Data Privacy Day, a day devoted to promoting best practices to help equip business and consumers to protect their online data and privacy. comScore is delighted to be helping lead this effort as Data Privacy Day Champion.

In support of this critically important issue for our industry, I particularly enjoyed participating in the OnlineTrust Alliance panel at the Mid-America Club in Chicago this week along with three industry leaders: C. Steven Baker, Director of the Federal Trade Commission, Midwest Region; Chris Babel, CEO of TRUSTe; and John Roberson, Executive Director, Small Business Development & Resource Center, Chicagoland Chamber of Commerce. The panel was moderated by Craig Spiezle, Executive Director & President, Online Trust Alliance.

From Left to Right: Chris Babel, John Roberson, Craig Spiezle, C. Steven Baker, Gian Fulgoni

The panel focused on the importance of privacy and data protection for businesses large and small in the digital information age. Never has it been more important for any business to adhere to best practices and establish the proper procedures and protocols to prevent data incidents from occurring. In fact, I made the point during the panel discussion that I believe privacy and data protection should rank high on the priority list of every company CEO.

As a market research data and business analytics provider, comScore has long recognized the importance of this philosophy. In fact, I wrote a blog post about this several years ago that you can read here. comScore has invested substantial resources in making our data collection and privacy practices the best they can possibly be. Central to this effort is adhering to industry-accepted best practices regarding the collection and secure storage of the data collected by the software that our panelists provide us explicit permission to install.

The panel agreed that the vast majority of businesses want to get data privacy and protection right and do right by their customers. But to achieve this end, we must remain vigilant as a community, be proactive in our collective approach to these issues, and continue the education process so that businesses that are not adhering to best practices can get on board. It can take years for businesses to establish trust with their customers, yet erode that trust with a single incident of data loss, so taking proactive steps to ensure such issues never arise is vitally important in this day and age.

We thank the OTA for hosting this valuable event with us, and we look forward to continuing to champion the causes of data privacy and protection.

comScore recently released a report titled Next-Generation Strategies for Advertising to Millennials highlighting results from a study of the unique characteristics of this generation and how to effectively market to them across media. Figure 1 illustrates how trends of advertising effectiveness among differing age groups have stayed consistent over the last 50 years, with older audiences tending to generate higher lifts in Share of Choice (comScore’s advertising effectiveness metric) compared to younger audiences – Millennials being no exception as illustrated by the 2011 study.

Figure 1: Average Lift in Share of Choice among Older versus Younger Groups

At the core of the comScore report is the concept of targeted advertising, which enables marketers to more effectively reach a specific audience and address its unique needs rather than attempt to win over all segments of the population with one general message. Advertisers are recognizing the advantages of dividing consumer markets in an effort to increase share among specific, more valued segments deemed to be prime targets for their products.

The degree to which population segments are targeted tends to vary across advertisers. African Americans, for example, are a group targeted by marketing heavyweights Procter & Gamble and McDonald’s, who spend nearly $90 million and $38 million, respectively, advertising to them in one year alone¹. These examples are not typical, however, as the majority of marketers don’t target advertising to African Americans. In fact, of the $263.7 billion spent annually on advertising within the U.S., less than one percent targets African American consumers² . Why is this important? African American buying power is currently at an all-time high and is forecasted to exceed 1 trillion dollars by 2012³ , and there is an increasing amount of research demonstrating that African American audiences react positively to African American-targeted messages (Appiah, 2004). Thus, targeting this segment can be valuable for marketers.

Previous research has shown that African American consumers sometimes respond more favorably to ads that feature an African American cast compared to ads featuring a non-African American cast (Whittler, 1991). Simply manipulating the ethnicity of an ad’s cast may be a more cost effective alternative to developing an entirely different campaign. This claim is supported by results from comScore’s creative testing database. African American responses to two types of advertisements – those with an African American cast, and those without an African American cast – were compared using data sets balanced by product category. Over half (57%) of the diagnostic items examined scored significantly higher for ads that contained an African American cast.

Figure 2: African American Diagnostic Elements with Statistically Significant Differences (95%+ Confidence Level) between Ads with and without an African American Cast

Although a relationship can be observed between the response to advertising by an African American audience and the ethnicity of the cast, perhaps there is yet another layer of differentiation that should be taken into consideration. Some research suggests that factors in addition to using relevant images (i.e., cast ethnicity) -- such as the audience’s identification with its own ethnicity -- can also affect the extent to which an ad is received positively (Green, 1999). In other words, some research proposes that African Americans’ response to African American-targeted advertising is mediated by their level of ethnic identification. For example, a study revealed that African Americans with strong ethnic identities responded more favorably to African American-targeted media compared to media that was targeted to Caucasians. Conversely, African Americans with weaker ethnic identities displayed no difference in responses between the two types of media (Appiah 2004). While these findings contribute critical knowledge to the field of marketing research, it involves a construct (i.e., ethnic identity) that isn’t easily or efficiently accessible to marketers in the creative development stage of targeted advertising.

Similarly, another point of view contends that contrasting age groups experience and interpret their environment differently based on the state of societal norms. This may especially be true in the case of African Americans due to the dramatic shifts in civil rights that have occurred in the last century. Is it possible that an individual’s identification with his/her ethnicity is largely dictated by age, and this in turn dictates his/her cultural lens?

Ellis Cose might agree. In a recent book (titled The End of Anger: A New Generation’s Take on Race and Rage) Cose discussed various segments of African Americans that were a direct result from his research on age groups. The oldest group experienced much of the horrors of life during the times of segregation, the civil rights movement, and other racial struggles endured near the middle of the 20th century. While the following generation wasn’t directly involved with the civil rights movement, they were the first group of African Americans to break down walls of segregation at many institutions (e.g., universities, corporations, etc.). Finally, the youngest group termed “Believers” by Cose and roughly analogous to the Millennial generation, is a segment of African Americans who were raised in a world where explicit demonstrations of racism were condemned. This group, according to Cose, is likely to believe that racist barriers no longer apply and that no group is limited based on skin color.

Another comScore study used the comScore Share of Choice metric to determine ad effectiveness. Ads were separated into two groups: those with an African American cast, and those without an African American cast. Next, respondents were categorized into three age groups similar to those discussed by Cose — the youngest being the Millennial generation (age 16-29 years) and the oldest we term Seniors (age 50+ years). Finally, respondents were split into groups according to their ethnicity, focusing on African Americans and Caucasians only.

In the case of the non-African American casted ads, we see that Senior Caucasians scored substantially higher than the younger Caucasian Millennials. This aligns with comScore’s finding of older individuals generally being persuaded more easily. However, Senior African Americans’ results were, on average, nearly identical to those for the younger African American Millennials, indicating they are similarly persuaded in the case of non-African American casted advertisements.

Figure 3: Average Lift in Share of Choice for Non-African American Casted Ads (N=116)




We found the trend to be quite the opposite, however, when the cast was of African American ethnicity. Here we see the older group of African American Seniors scoring much higher than younger African American Millennials, which aligns with the general findings. Senior Caucasians, however, actually scored slightly lower than their younger Caucasian counterparts in the case of African American casted advertisements.

Figure 4: Average Lift in Share of Choice for African American Casted Ads (N=24)

These results suggest that, among African Americans, the older generation possesses strong ethnic self-identification likely based on their experiences with racism and the civil rights struggle, which in turn affects their perceptions of advertising communication. This can be seen both in the lack of typical lift versus younger African Americans when exposed to non-African American casted advertising and also the large lift versus the younger generation for advertising with an African American cast.

The findings for older Caucasians essentially mirror African American results. This suggests the presence of strong ethnic self-identification among older Caucasians and possibly lingering biased tendencies among some in this generation.

Interestingly, one could argue the trends are extremely similar to those revealed by Appiah (2004) if the age variable in the current study was used to represent ethnic identification level. Perhaps future research should examine the relationship between age and ethnic identification which may shed light on how the younger generation is altering societal views on race.

It is also both interesting and encouraging that among the Millennial generation, African Americans actually scored directionally higher than Caucasians for non-African American casted ads (5.5 vs. 4.4), and Caucasians scored higher than African Americans for African American casted ads (5.6 vs. 4.2). This should not be interpreted as saying that the younger generation responds better to advertising containing a cast of a different ethnicity from themselves. Rather, it is evidence that Millennials may be less affected by racial disharmony and barriers felt by preceding generations.

As for targeted advertising, these findings support the notion that it is critical for marketers to be able to identify their target audience so creative development can be tailored to optimize effectiveness. Using African American-targeted advertising when the intended audience includes older African Americans is likely to be worthwhile in terms of sales effectiveness. However, when the target is younger African Americans, there isn’t strong evidence of a payoff from the use of an African American cast.

Brazil’s social networking market has a new leader. Earlier this week comScore released results showing that Facebook surpassed Orkut in December, becoming the largest social networking destination in Brazil for the first time.

Facebook’s ascent in Brazil is impressive with the site gaining 23.7 million unique visitors in the past year, tripling its audience and rapidly narrowing its gap with long-time market leader Orkut. Facebook closed out the year reaching 36.1 million Brazilians to secure the #1 spot in the market.

Perhaps even more impressive than Facebook’s audience growth is the rapid increase in engagement among its users. In only 12 months, average time spent on Facebook went from just 37 minutes per visitor to nearly 5 hours, making it the third most engaging web property in the country behind Microsoft Sites and Google Sites.

As discussed in the recent comScore study It’s a Social World, Brazil was one of just a handful of global markets where Facebook did not lead the local social networking category – until now.

A closer look at the top 10 fastest-growing markets for Facebook in terms of site visitors revealed that more than half of these were countries where Facebook either did not lead until very recently or where the site does not currently lead. Vietnam, which in December 2011 was the fastest-growing Facebook market when compared to the previous year, saw Facebook surpass local site Zing Me in November. Brazil, the second-fastest growing market for Facebook and largest in terms of absolute visitor increase, saw the site take the lead in December. In the Netherlands, the sixth-fastest growing market, Facebook surpassed local destination Hyves in July 2011.

In four of the top-gaining markets – Japan, South Korea, Russia and Poland – Facebook does not currently lead the local social networking ranking. But given Facebook’s growth in these markets, and if the example of Brazil is any indication, there is a likely chance that Facebook will capture the lead in at least one of these countries (and perhaps more) during 2012.