Category Archives: Ecommerce

HP’s Less Crummy Than Expected Q1 Spurs Wishing, Hoping

After months of dismal news, HP had something positive to report to its shareholders: fiscal Q1 numbers that exceeded both Wall Street and company expectations. Granted, the bar was set exceedingly low for the company, which shocked investors last year with news that it would have to take an US$8.8 billion impairment charge, $5 billion of which was directly attributable to its Autonomy acquisition.

Still, investors welcomed CEO Meg Whitman’s litany of achievements: HP beat its non-GAAP diluted outlook for the quarter by $0.11 per share. It improved execution; ramped up its channel and go-to-market efforts; and began seeing a positive impact from the restructuring program it announced in May 2012.

The company will continue to improve this year, Whitman said.

The promise of a rosy future apparently was enough to dampen the bad news for investors in the here-and-now.

For the first quarter, net revenue of $28.4 billion was down 6 percent year over year and down 4 percent when adjusted for the effects of currency. Profit was 82 cents a share, down 11 percent from a year ago.

However, analysts had been expecting even worse: sales of $27.8 billion and profit of 71 cents.

Troubled Waters

Once their surprise at the better-than-expected earnings wears off, investors’ dour view of the company will likely resurface.

“While HP beat analyst expectations, results are far from demonstrating a sustainable company in the fast-changing personal technology market,” Adam Hartung, principal of
Spark Partners, told the E-Commerce Times.

HP is fast on the road to irrelevance, and the most recent earnings report does not change this, he declared.

What Whitman has done is adopt a spaghetti strategy for recovery, said Hartung. “She’s throwing all the technology she can find against the wall, launching products such as Chromebooks and Android tablets, while also preparing to launch some Windows 8 products with Microsoft subsidies. She’s hoping something will stick with the market and create revenue growth while she keeps trying to cut costs.”

“This approach will have no more value long-term than the commodity sales PC business did,” he predicted.

Samsung and Amazon both have demonstrated that licensed products such as Android can succeed in the market if a company invests heavily to modify them in innovative ways, resulting in higher sales, Hartung added.

“HP has not done this,” he maintained. Instead, HP has been “rifling through fast launches of unexciting generic implementations which leave customers far from paying a premium price or buying in droves.”

Business Units Faltering

A deeper dive into the earnings report gives little reason for hope, Andreas Scherer, managing partner with Salto Partners, told the E-Commerce Times.

“If you take a look under the hood, you’ll see that all major business units are down year-over-year and quarter-over-quarter,” he said.

For example, Printing and Personal Systems brought in $14.13 billion revenue — $1.02 billion less than the $15.15 billion it accounted for in Q1 of 2012.

“This division of HP is competing in a tough market segment without any significant market share in hot segments such as tablets and smartphones,” Scherer said.

Enterprise Services brought in $5.919 billion revenue, dropping more than $433 million quarter-over-quarter, he pointed out.

“What’s even worse — the group only delivered only $76 million EBIDTA,” said Scherer. “A service organization operating at 1.3 percent EBITDA margin is at this revenue level a significant concern.”

Another 5-10 percent drop in revenue and HP is going to lose a lot of money in this business unit, he added.

Of course, Whitman gave a more upbeat outlook for the rest of FY 2013, Scherer noted.

“This could mean that the sales pipeline across the major business units looks stronger than the current numbers indicate,” he suggested. “It could mean that there are new products in the pipeline that can make an instant impact. Or it could mean that HP’s strategy is simply hope.”

Holistic Tech Support in a DIY World

The evolving technological needs of consumers have prompted changes not only in tech support services, but also in the business strategies of technical support providers. Those providers need to adjust their business models in order to effectively meet consumers’ needs and remain relevant.

At first glance, many recent innovations would seem to eliminate the need for tech support. CE manufacturers and industry consortia have spent the last few years developing solutions that are easier to install and configure, with automated device discovery mechanisms built into the operating systems of the device, intuitive installation processes and “one-touch” security configuration.

As a result, the do-it-yourself approach has become the dominant way to setting up new devices within broadband homes, even for relatively complicated items such as a home network.

Parks Associates research finds 60 percent of U.S. broadband households now set up their home networks on their own, an increase of 11 percent from 2009. The DIY percentages are even higher for other devices, from smartphones to tablets, where the vast majority of consumers — 70-80 percent — set up them on their own.

Almost 75 percent of these DIY consumers report the process was convenient with minimal problems. This finding would seem to indicate a diminishing market for tech support; however, only 51 percent of these DIY consumers would prefer to set up devices by themselves next time, which indicates a significant opportunity for support services.

The Connected Home Environment

The digital home has transitioned from a few devices with independent functionality to a myriad of broadband connected devices that share computing resources and information. This connectivity and interdependence among devices make it difficult for consumers and technicians to isolate technical issues.

Approximately 25 percent of consumers with a networking-related problem contacted their broadband service provider for assistance, regardless of where they purchased their home networking equipment. Denying this assistance ultimately will hurt the service provider’s brand, especially as consumers want a solution that covers all their support needs, including disparate gadgets such as computers, tablets, and smartphones.

Parks Associates research finds 72 percent of consumers interested in technical support feel the service should be able to fix every technical problem they experience.

Companies should embrace this market opportunity by creating holistic support services that are dynamic and comprehensive. This type of solution covers the digital ecosystem of consumers’ homes as well as the lifecycle of their digital lifestyle products and services.

Holistic support involves two components:

  • The extension of support services beyond product support to pre-purchase consultations, advice on devices and upgrades, and customer service ultimately aimed at enhancing the digital lifestyles of consumers, including proactive diagnosis and troubleshooting of consumers’ technical issues
  • A variety of service touch points and business model options to resolve issues effectively and meet consumers’ needs

More than 75 percent of U.S. broadband households have a home network, and that’s expected to grow to approximately 91 percent by 2015. The connected home ecosystem will also expand as manufacturers continue to woo customers with more functionally integrated devices. Parks Associates believes that all models of major products and systems will evolve to include IP connections by 2016.

Holistic services represent revenue and brand opportunities for service providers, CE manufacturers, and retailers.

Service Providers

Service providers, including broadband, pay television, voice and wireless operators are adding new services to their portfolios and are playing a greater role in the digital home. They consistently face competitive threats from retailers, CE manufacturers, broadcasters and technology innovators, which offer service substitutes such as online video.

Google, for example, is making strides with Google Fiber, the company’s high-speed Internet and pay TV service. In this highly competitive market, service providers must be vigilant about keeping consumers happy and loyal.

The increasing use of residential gateways and advanced set-top boxes has not only enabled service providers to introduce advanced entertainment options to consumers, such as TV Everywhere/ multiscreen services, but also allows providers to bundle or include value-added services such as security, energy management, and home and automation applications. These devices can be further leveraged for the provision of technical support services.

The TR-069 standard, now commonly used in set-top boxes and residential gateways, enables bi-directional communication between the consumer’s devices and providers’ servers. By using these devices, service providers can enhance their technical support services through monitoring, proactive support and automated break/fix.

Retailers

Brick-and-mortar consumer electronics retailers in the U.S. have been steadily losing customers over the past few years. Retail stores are, in some cases, being relegated to the role of “showrooms” for consumers looking to inspect a product before buying online.

Retailers’ business strategies going forward should include measures to bring customers back into the stores, boost customer satisfaction and maintain loyalty. Providing holistic support is a means by which retailers can differentiate themselves and develop long-term relationships with consumers.

Most CE retailers have established premium technical support services to assist with the setup and installation of devices, as well as for troubleshooting common technical problems. Many also offer mobile handset protection plans and extended warranties for major consumer electronics.

Going forward, retailers are well positioned to offer more holistic or one-stop shopping for technical support services. They have the additional consumer touch point of the in-store help desk. This touch point gives consumers an option more affordable and convenient than having a technician visit their home. By extending premium technical support service to include pre-purchase advice, retailers can leverage the growing use of stores as research sites to drive consumers toward specific products or brands.

Consumer Electronics OEMs

Product manufacturers face declining margins as prices for major consumer electronics have fallen significantly over the past few years. OEMs are adding connectivity and service packages to differentiate their products and combat revenue erosion. Large CE manufacturers have historically provided technical support for their products, but establishing a service-oriented presence that extends across other product categories and brands would be a complex task. They do have two distinct competitive advantages, which can be leveraged in this market:

  • They maintain the greatest presence on their computing devices; this positioning can be leveraged in marketing efforts for premium support services.
  • Those with brick-and-mortar stores can provide help desk services from the store and use them to establish a brand association with customer services.

Building the Market

At heart, consumers want an efficient and comprehensive support solution that covers all their needs for computers, tablets and smartphones. Services that combine software solutions, on-call support and device repair/replacement will resonate with consumers.

The Geek Squad service from Best Buy, for example, is one of the leading technical support services currently available to consumers. Along with purchasing devices, Best Buy consumers can bundle services, which include device setup, product warranties and technical support. This value proposition resonates with consumers, who would otherwise have to seek these services from different entities, each charging additional monthly or transactional fees.

Service providers, retailers and CE manufacturers all have unique business characteristics which make them well-positioned to offer holistic premium technical support services. Consumers also indicate a preference to receive technical support from these players. Among those consumers who desire comprehensive technical support, nearly 50 percent are likely to use the service if it is offered by a retailer, service provider, or CE manufacturer.

Although there is great benefit in offering holistic premium technical support services, creating those services presents the additional challenge of managing consumers’ expectations of what constitutes basic (i.e., entitled) technical support and premium support.

Consumers differ widely in the amount that they are willing to pay for technical support services and show a slight preference for subscription-based plans versus per-call costs. They are more likely to use subscription support for other devices, such as smartphones, tablets and game consoles, than they are to use such support for a computer. Interestingly, the more devices a consumer owns, the more likely it is that they will purchase a technical support subscription.

Parks Associates estimates U.S. tech support revenues will exceed US$8 billion in 2017, benefitting the service providers, OEMs and retailers that can best leverage their market positions to deploy a comprehensive tech support solution.


Patrice Samuels is a research analyst at
Parks Associates.

Google Juices Mobile Ad Delivery

Advertisers running mobile ads have some homework to do on the Google mobile ads system; the search giant this week provided more specificity about its AdWords Enhanced Campaigns, which lets mobile advertisers adjust bids by device, location and time of day within a single campaign.

For example, a pizza restaurant may pay more for ads running during the week if it’s located in a business district. That same pizza place might place a higher percentage bid on ads served to a smartphone within a half-mile of the restaurant location, as opposed to someone searching for somewhere to eat lunch that is a mile or more away.

More on Enhanced Campaigns

The move to Enhanced Campaigns blends mobile ads more closely with desktop ads, as well as ads served on tablets and other devices. The new enhancements focusing on mobile follow changes made to AdWords in early February.

Google made some of these changes to tie multiple screens and devices together.

“In the multi-screen world, it’s increasingly important for marketers to reach people in the right context, like location, time of day, and the device they’re using,” Google Group Product Manager Surojit Chatterjee told the E-Commerce Times. “The combination of these different signals impacts what someone may be looking for or hoping to do, and enhanced campaigns help advertisers flex their bids and messages to reach customers in the right contexts.”

Google offers some advantages over other ad targeting platforms, but recent changes actually took some popular targeting features away from marketers.

“Google’s mobile targeting capabilities are more nuanced and refined than Bing’s, although Enhanced Campaigns does remove some control from marketers,” Greg Sterling, founding principal of
Sterling Market Intelligence told the E-Commerce Times. “In the mobile display advertising world, however, there are lots of potential targeting parameters available on networks and exchanges that include location, day part, audience demographics and so on.”

The new features actually take away mobile-specific ad buys to some degree. “You could bid exclusively on mobile devices and keywords and entirely opt out of PC AdWords in the past,” said Sterling. “Now you cannot, but you can adjust bids to pay more or less for more mobile consumers — I suppose 100 percent less if you want.”

Who Moved My Mobile Ads?

Google held a webinar Thursday to discuss its enhanced campaigns and demonstrate how to adjust campaigns for mobile bids. Google will run additional webinars on Thursdays over the next few weeks to help AdWords users learn more about the new enhanced campaigns.

Several participants in the webinar tweeted under the hashtag #enhancedcampaigns, and some of their tweets show that AdWords users are not all on board with the changes.

A Twitter user (and obvious Lord of the Rings fan) by the name of #JediReflex tweeted, “One does not simply enhance campaigns. It is folly!” -Boromir on #Enhanced Campaigns. A previous tweet from the same user puts campaigns into perspective: “#ThatAwkwardMomentWhen you realize that those hundreds of campaigns you built out need to go away now. #EnhancedCampaigns”

Some users, though, are warming up to Enhanced Campaigns. Twitter user @JBGuru posted “I like parts of #enhancedcampaigns but still needs separate tablet bidding and a few more improvements.”

The changes may just be Google being Google, said Andrew Miller, founder of
Your Search Advisor. “I’ve always been a big believer that it’s Google’s world, and we’re just playing in it,” Miller, founder of told the E-Commerce Times. “We have to play by their rules.”

AdWords advertisers can use the webinars to learn about some of the changes, but it will take legwork for users of the advertising platform to get caught up.

“We’ve already spent a lot of time digging through the content Google’s published,” said Miller.

Spring Migration

AdWords users may change over to enhanced campaigns in advance of its migration. The company plans to upgrade all campaigns in mid-2013, wrote Sridhar Ramaswamy, senior vice president of engineering at Google, on the AdWords blog. Advertisers are advised to learn the new system, however, before making the move.

“We have to spend a lot of time preparing and planning before presenting to clients,” said Williams. “We have to make sure we’re not setting our clients up to losing ROI, sales or leads because the user settings are not clear.”

Looking Ahead

The changes will allow ad professionals to save management time, Miller said, by cutting down on the number of campaigns. Still, Miller and his firm will proceed with caution

“We’re telling clients we’re managing this slowly,” he said. “We can’t guarantee that we’re going to have apples to apples comparisons right away.”