Thursday, December 23, 2010

December Observations: Five Years of Columns!

Observations: Five Years of JLO Columns
by Jim Lyons

[December 23, 2010] As mentioned at the end of my November 2010 Observations, that column completed five years of monthly musings on my part, and while I am determined to continue for the foreseeable future, it is a good time to look back and reflect on those 60 columns in conjunction with our other year-in-review pieces in the Observer.

I have compiled and included a table (included at the bottom of the page) with the title, brief synopsis, and link to each column, and I will mention a few of what I consider to be the high points (and maybe a few low points). As is my usual practice, I will also try to discern a few patterns and trends that emerged and provide clues on the direction of our industry.

My very first column was titled, “Hard Copy Time Capsule” and recounts an actual incident where I found a group of ten-year-old Observers during an (obviously rare) office cleanup that accompanied a career change. The three issues were from 1995 and between them include many articles that ten years later seem very significant in what became big things in the printing and imaging industry. Also included, predictably, were articles on things that proved to be inconsequential in hindsight. In that column, I pointed out the early predictions of growth in color printing and all-in-ones, which by 2005 seemed obvious, as well as many companies who had been industry participants in 1995 that were distant memories ten years later.

Following that initial work, many of my early columns continued to draw on memories, with comparisons made to current situations. In this vein, I had fun following the comparison of the previous page description language (PDL) wars of the late 1980s to what in 2006 seemed like a major crossroads for Adobe’s PDF, with the looming threat from Microsoft Vista and its built-in XML Printer Specification (XPS). Much of the fun came from the fact that those rivals were the same, 15 years later. And little did we know then that four years later, the Adobe battlefront would involve another historic rival, Apple, though this time the battle was over the viewing technology Flash and its inclusion (or lack thereof) in Apple’s mobile devices. And as for PDF? Its role as a universal, portable format has survived quite well and is evident across the spectrum of traditional operating systems as well as the ever-growing universe of mobile platforms.

However, following some feedback about my early columns being great “back in the good old days” fodder, I was determined to be more forward-looking, a trait to which I had long practiced during my corporate days. Since then, attempting to provide inspiration by looking ahead at potential opportunities and threats in the printing and imaging industry has become a major emphasis. This process includes ferreting out up-and-coming companies and technologies, shifts in industry practices, and customer behavior that may be either coming in or going out.

On the new company/application/platform side, I am pleased to have written early about the “YouTube for Documents,”, and its emergence as an important new company in May 2008. In back-to-back months at the end of 2007, I wrote about the potential of WiFi printers and the new Amazon Kindle, and during the most recent two years, I have covered social media numerous times, with a special emphasis it would seem on printing-related Twitter stories. During that same time period, my interest in mobile platforms, and especially Apple’s iPhone/iPad and the printing and viewing options they bring to bear, may have become a bit tiresome for many, but for those of you in that category, ignore at your own peril! Examples include my fascination with “FlipBoard,” a new viewing app I examined in mid-2010, and which recently won Apple’s “app of the year” award, and the somewhat similarly named Google feature “FastFlip,” available on mobile devices and traditional browsers and likewise “observed” earlier in 2010 and recently “promoted” on all Google News Web pages.

Going back to my first year in 2006, I covered the existing industry practice of price rebates as I perceived this custom was beginning to fade. I also looked at the “razor and blades” pricing model, with low hardware prices and margins and manufacturers making up the difference (and more) on relatively expensive, high-margin supplies.

On the rebate front, my predictions for “the end of the rebate, as we know it” seems to have come to pass. A more or less random sample of printer deals (oriented to consumer markets where rebates have always been most prevalent) shows that, at anyway, the most recent great prices for printers and all-in-ones do not include mail-in rebates, at least in the huge majority of deals from a wide variety of resellers. The razor-and-blades pricing front, however, is a different story. Despite well-documented efforts by Kodak, Lexmark and others to sell the base printer platform for higher margins to enable less expensive ink, cheap printers and costly ink still seem to rule the day. A recent Black Friday excursion yielded results that surprised even me frankly, with HP ink jet printers at Walmart starting at $29 and HP’s recently announced e-all-in-one basic model at little more than half of its original list price. Unquestionably, industry leader HP is still going with the razor-and-blades model to produce the firm’s profits.

How has the world changed? How have I changed? How has the writing changed?

So beyond the general intention to move away from a nostalgia orientation and toward future trend identifications (for the most part), what else do I detect in my 60 Observations columns?

I sincerely hope the quality of my writing as well as my research and knowledge of new technologies has improved. Taking on contract writing duties for the Observer has helped across the board, and I am grateful for that opportunity. Including a little humor, irony, and pop culture is always a goal. And the access to industry chatter via Twitter and other social media has changed the level and currency of my tech awareness, without doubt.

While I do not remember my editor ever mentioning it (bless her), one cringe-worthy “feature” of my early columns were titles that were often in rhetorical-question form, ending with a question mark. In fact, a quick review shows fully half of the titles of my first year’s pieces were in question format. Perhaps I was watching too much Jeopardy back then?

A personal/professional change for me that occurred during these last five years has been devoting an increasing proportion of my time and energy to teaching for the University of Phoenix, both in marketing and economics. I brought this knowledge to bear early, as my first-year experience with the processes at the highly-automated University of Phoenix showed me that in many academic settings, the term “paper” is really a misnomer, as an electronic document through its multiple steps of creation, submission, and evaluation (grading), is rarely reduced to physical form.

Other evidence of my growing academic bent can be found in my topic selection. In 2010, I covered “memorable industry advertising taglines” in a two-part feature and the application of “neuromarketing” techniques to understanding consumer preferences between hard copy and display formats. I trust at least some of my readers have found these forays into the modern world of marketing to be of interest and provide a good mix with my new-and-different themes about industry players and trends.

I am going to close up the “collection” at this point, as too much indulgence in reminiscing cannot be good for you! With that said, it has been a great five years, and I look forward to continuing. And as always I appreciate your readership.

Tuesday, November 30, 2010

November Observations: All That Glitters...

Observations: All That Glitters...
by Jim Lyons

[November 30, 2010] As we begin to approach the last days of 2010, many of us are getting ready to write wrap-ups about the year’s activity, with recaps of industry developments in various categories. For me, these retrospectives include the use of social media and smartphones, or more broadly, mobile printing applications, many of which I have already covered. In addition to going back to my year’s worth of notes and articles, it is also a time to seek out those brief tickler file entries and scan the environment for new entries in these categories for solutions or products which I might have missed outright. It is a time to “make good” by including these unexplored or previously undiscovered items in their rightful place as important, or at least potentially important, to the printing and imaging industry.

These latter two categories (the previously uncovered or unexplored) include apps that carry “print,” “printer,” “paper” or the like as part of their names. Just as I have covered in some detail the companies behind “Print Central” and “Print Your Twitter” over the past year, I also have a newer, less-explored list of companies and apps like “,” “Instapaper,” and “ACTPrinter.” These names seem to imply an involvement in printing and imaging and perhaps represent an opportunity for our industry either in working directly with the companies involved or at least learning something about what these firms are doing. But, as the old saying goes, “All that glitters isn’t gold,” so what about these emerging upstarts?

The first target of my investigation is Houdah Software, and its product, ACTPrinter, which I have been using for a few months on my iPhone. In addition to being intrigued by the name of Houdah’s app, I was originally drawn to the firm’s iTunes entry and logo (see illustrations), the fact that Houdah offers Sudoku as well as printing software, and the interesting company name. This interest led me to a recent extended interview, first by e-mail and then by phone, with Pierre Bernard, founder of Houdah Software s.à r.l. of Luxembourg, where Bernard remains the company’s sole employee.

Screen-shot from iTunes App Store shows Houdah's range of apps.

JLO: Can you provide a quick description of ACTPrinter and the target users?

Bernard: ACTPrinter is best described as a virtual printer. Basically, anything that can be printed can be sent to ACTPrinter. ACTPrinter was created with electronic tickets (boarding passes, cinema tickets, etcetera) in mind. It seems quite a waste of paper to print such tickets only to discard them once you boarded the plane, entered the theater. Many airports already have machines capable of scanning bar codes off LCD displays. Their number is rapidly expanding as many airlines introduce their own digital boarding pass creators. But why have one app for each and every airline you plan on traveling with? ACTPrinter can carry the boarding passes of any airline.

Moreover ACTPrinter can hold your hotel room confirmation, printed maps, notes you made ahead of travel, etcetera.

JLO: How did Houdah get into this area? I notice your apps vary greatly—what triggered the interest in ACTPrinter? Do you have a printing or graphics/imaging background?

Bernard: Houdah Software is indeed quite unique in that I did not focus on a single area of interest. I try to create products I need myself. I either see a need or I see an existing solution that I feel I can improve upon. The first Houdah Software product was HoudahSpot: a file search tool. The next was HoudahGeo: a photo geocoding solution. On the iPhone, I started out with a Sudoku [program], a currency converter, and a tip calculator. These were followed shortly by ACTPrinter.

JLO: What are some specifics about you and Houdah ? Where are you located? How long have you been in business? How big is the company? What are your future visions/dreams?

Bernard: Houdah Software s.à r.l. is based in Luxembourg, Europe. It was founded in late 2005. It is a one-man company with some help from the family. (Although the Windows client for ACTPrinter was created by Joe Acklin of JTA Software.) [Editor’s note: the ACTPrinter software, much like many of the printing-oriented mobile apps, requires a companion app on either the user’s Mac or Windows machine, in this case for the actual rendering (virtual printing) of the ACTPrinter-readable files, and residing on the same LAN for file transfer.]

I am currently working on a Mac application, which will be sold through Apple's upcoming Mac App Store. Tembo is again a search tool based upon Apple's Spotlight engine. Its purpose is to make searching and finding both easier and faster.

JLO: Do you see ACTPrinter complementing or competing with actual printing? For example, HP's new ink jet printers feature a number of print applications (e.g. movie tickets, maps, etcetera) that would be replaced by "printing" to your smartphone and using it that way, without ever actually printing.

Bernard: ACTPrinter is surely meant to replace much of the casual / nonsense printing: tickets, will-call numbers, phone numbers, etcetera—the stuff that used to waste a full sheet of paper for only a word or two…or was used only once.

Feedback has shown that ACTPrinter went way beyond that. People save much more paper by printing all kinds of documents to ACTPrinter. What was meant as a traveler’s tool has grown into a business tool. Why waste paper to print an e-mail just so you can read it back home, during commute, etcetera?

The current HP approach to boarding passes is printing via dedicated apps - Houdah has different ideas.

JLO: Back to more on those customers. What is the feedback from your users? What else would you like to do with ACTPrinter in future versions, based on your vision and/or user feedback?

Bernard: ACTPrinter is our best-selling iOS application by a wide margin. Customer reception has been tremendous. ACTPrinter quickly outgrew its original purpose. Users use it to carry far more than the occasional e-ticket. ACTPrinter came to be the place to store all of one's travel documents.

Many users actually extend the use of ACTPrinter far beyond traveling. They print large documents to read on a commute.

ACTPrinter recently gained sections. These allow for the users to manage their documents. Newly printed documents start in the Inbox. From there one may file them to other sections (e.g. group documents by trip). One may also consider the Inbox as a list of unread documents. Upon reading one may file a printout to the "read" section or create an "action pending" section.

Folders were the most requested feature for a long time. I waited quite a long time to get moving on this. I wanted to get it exactly right. While the users were requesting folders, I always knew that creating file hierarchies as known from desktop computers would spell doom to the simplicity and ease of use of ACTPrinter. I believe collapsible sections are a good solution for mobile devices. All documents are a maximum of two taps away. The sections use up very little of the precious screen real estate.

I am surprised and delighted by the new uses our users keep discovering for ACTPrinter. Some actually get to push the limits of both the application and their devices. They try to print entire books. The thing is that iOS applications are limited in the amount of RAM they may use. Thus printing large documents may fail over the fact that ACTPrinter needs to briefly hold on to the document during printing, i.e. keep it in RAM. Once the printout is transferred, it is saved to "disk." That is only limited by how "big" the iPod/iPad is.

That is probably what is up next for ACTPrinter: find a way to break up printouts for segmented transfer, saving, and loading. Thus making it even more versatile.

JLO: Specifically, in terms of the very short-term future, what about the Apple iPhone/iPad operating system, iOS 4.2, and its feature set, including AirPrint of course?

Bernard: We are already taking advantage of the multi-tasking feature, and thinking ahead, perhaps with AirPrint, our app could work as a place for temporary document storage pending an available printer coming within the range of the smartphone or iPad.

JLO: You mention the success of ACTPrinter. Can you quantify this for us?

Bernard: The ACTPrinter software has been a great success and, including its days of being a free download [before its current pricing of $1.99], has had 92,600 downloads [as of the end of November 2010]. But the way to really measure active users is by upgrades, and since our latest version went up on the Apple App Store just a few days ago, we have had 30,000 upgrades.

JLO: And lastly, what about those names? Where do “ACTPrinter” and “Houdah” come from?

Bernard: “ACT” is an acronym for “All Cocoa Touch,” a reference to the original mobile app programming language. Houdah [pronounced How-da] is the Indian name for an elephant saddle and is in recognition of the Apple Safari Web browser and our initial Web-browsing-based product’s tie-in to that, i.e. a “comfortable” way to be on Safari.

My Thoughts

The ACTPrinter customer approach is somewhat mindful of GreenPrint and its “eliminating the last useless page” of Web print-outs, which caught the attention of Walt Mossberg several years ago, and then caught mine (see "Making it to the Top of the PR Mountain"). And of course the conversion of “what would be printed” to something more ethereal shares a lot in common with the huge trend in eBooks and other viewing technology, which have been covered numerous times during the five years of this column.

Yes, it has been five years! This is my 60th monthly column for the Observer, and it has been a pleasure. I look forward to doing many more, my Lyra bosses willing that is, and after all, I still need to write about Instapaper and!

Monday, November 29, 2010

HPQ Q4FY2010 Printer metrics and commentary

It almost snuck by us with the Thanksgiving break and all, but here are some printer-related highlights from HP's Q4 announcement, last Tuesday.

From the earnings-call transcript:

[from prepared remarks] Leo Apotheker - Hewlett-Packard - CEO, President

IPG achieved another strong quarter, including share gains in both laser and ink, and we continue to innovate around e-Print and web-connected printers. I'm very excited about the opportunity available to us to shape the cloud and mobile Instant-On platform.

[from prepared remarks] Cathie Lesjak - Hewlett-Packard - EVP, CFO

We continued to see momentum in the commercial sector, led by strength in converged infrastructure, managed print services, and commercial printers and PCs. We posted solid double-digit revenue growth across our hardware businesses,...

Commercial printer hardware and PSG commercial revenue grew 22% and 20%, respectively. Additionally, in Services our book-to-bill ratio for the trailing 12 months remains comfortably greater than one.

Imaging and Printing had a strong quarter. Revenue grew 8% to $7 billion, fueled by year-over-year hardware revenue growth of 16%, and supplies revenue growth of 6%. Segment operating profit totaled $1.2 billion, or 17.4% of revenue. Total printer unit shipments increased 14%, and we gained market share across all printing categories, with particular strength in higher-usage segments.

Commercial printer units increased 43%, with multi-function printer units up 83%.
Business ink and wireless printer units were up 22% and 53%, respectively. In addition, we shipped almost two million web-connected printers in the quarter. We continue to innovate across our portfolio. In September, we announced cloud print for businesses, using HP Print Apps, as well as new software capabilities for enterprise printing. In our hardware portfolio, we introduced new products in our Inkjet, LaserJet and Designjet categories. Finally, we are delivering on our growth initiatives in retail publishing and managed print services. During fiscal 2010, we more than doubled our retail publishing install base, and delivered very significant growth in managed print services signings.

[from Q&A]

William Fearnley - Janney Montgomery Scott - Analyst
Thanks. A question either for Cathie or VJ. How should we be thinking about the balance between IPG operating margins and unit growth? I mean operating margin was above 17% in a strong hardware quarter. Is 17 to 17.5 plus the new operating margin target, or do you see having to invest more in sales staff, promotions, things like ePrint, R&D to help keep units strong?

Vyomesh Joshi - Hewlett-Packard - EVP, Imaging and Printing Group
Well, I think IPG had a strong quarter. And we want to continue to invest into unit growth and innovation, because that's really the driving force for IPG continuing to grow revenue. If you look at the unit growth, we want to continue to drive units in 2011.

As a matter of fact, we would like to put at least 20% unit growth for LaserJet in Q1. As far as the innovation is concerned, the ePrint, we are getting very good reception. As I mentioned in the -- our Analyst call, 2 million units in Q4, and 5 million units in calendar 2010. We absolutely believe that our innovation that we are driving will help us to drive more supplies growth, and really establish IPG globally.

Monday, October 25, 2010

October Observations: Neuromarketing and Paper—Bringing Together the New and the Old

Observations: Neuromarketing and Paper—Bringing Together the New and the Old
by Jim Lyons

[October 25, 2010] As readers of this column will recognize, I am drawn to new and different techniques and methodologies. This attraction has been true throughout my career in marketing printer products and is also true in my other passion of late, teaching marketing and economics to graduates and undergraduates at The University of Phoenix. This propensity for exploring the “new and exciting” (to me, anyway) has led me, in the realm of my printing industry interests, to looking at new computing platforms and information appliances, such as today’s mobile devices, and projecting their impact on the role of paper and printing. In the latter, the academic environment, I have enjoyed learning as much as I can about the related fields of behavioral economics and neuromarketing during these last few years.

So I was very happy indeed when not long ago, I was led by a Twitter link (another passion) to a post at the Neuromarketing—Where Brain Science and Marketing Meet blog, titled, “Paper Beats Digital for Emotion,” that perfectly captured the confluence of my previously stated interests. As gathered by the short name of the blog in question, neuromarketing is the study of the human brain's reaction to various marketing-related questions that have traditionally been the quest of conventional marketing research, like surveys and focus groups. By using brain science and tools such as functional magnetic resonance imaging (fMRI) machines, marketers are beginning to probe beneath the surface of the conscious mind, with the goal of understanding consumers better, either in analyzing reactions to advertising and promotional messages (and in this case, the medium itself) or to the products’ and services’ attributes (for those familiar with the Four P’s, the “promotion” and the “product”). The premise behind neuromarketing is that while in many purchase decisions, consumers cannot really describe why they act the way they do, their reasons may be evident if brain reactions are measured.

In the blog post in question, neuromarketing expert Roger Dooley writes about a study by branding agency MillwardBrown, conducted for the UK’s Royal Mail, which reviewed measurements of consumer reactions with an fMRI machine, and concluded that paper-based direct-mail had a stronger emotional impact on respondents than digital advertising. To quote from Dooley’s post (which in turn quotes from the original study), “The research project used fMRI brain scans to show that our brains process paper-based and digital marketing in different ways, and in particular, that paper ads caused more emotional processing. According to the study, physical media left a ‘deeper footprint’ in the brain, even after for controlling for the increase in sensory processing for tangible items.”

Much of Dooley's post goes on to defend the importance of digital advertising, highlighting many of its capabilities for interactivity, for example, which are beyond the realm of paper. However, the study clearly makes the point that our attachment to paper, whether photos, office documents, or books and magazines, is linked to an indescribable but very real response to items that are tangible, familiar, and comfortable. 

The Nuts and Bolts of  Neuromarketing

Neuromarketing is relatively new, as the average age of the majority of work regarding the subject (and its academic cousin, neuroeconomics) is at most a few years old. The “industry standard” college marketing textbook, Marketing Management by Philip Kotler and Kevin Lane Keller, omits any mention of the term “neuromarketing” in its 12th edition (copyright 2006), but by its 13th edition (copyright 2009), the authors have included a pull-out box titled, “Marketing Insight—Understanding Brain Science,” in the chapter on conducting marketing research and forecasting demand. (Remember last month’s column on the textbook business, where we reported on frequent edition rollovers viewed by some as value-destroying profitability schemes? In this case anyway, I am pleased to see real value in a new edition!)

To quote the authoritative text (13th edition), “As an alternative to traditional consumer research, some researchers have begun to develop sophisticated techniques from neuroscience that monitor brain activity to better gauge consumer responses to marketing stimuli...The term neuromarketing has been used to describe brain research on the effect of marketing stimuli. By adding neurological techniques to their research arsenal, marketers are trying to move toward a more complete picture of what goes on inside consumers’ heads.”

In addition to the typical caveats on the cost of conducting the research (as expected, quite high given the need to measure brain waves on one respondent at a time via an fMRI, which was done in the MillwardBrown case, as mentioned), Kotler and Keller point out caveats around complexity and ethics concerns. “Given the complexity of the human brain, however, many researchers caution that neurological research should not form the sole basis for marketing decisions. These research activities have not been universally applauded though. Critics think that such a development will only lead to more marketing manipulation by companies.”

Using the power of neuromarketing, and its measurement and interpretation of the brain’s reactions, in combination with traditional research methods may be the key to understanding our subconscious and emotional reactions to paper, and attitudes about printed material. Kotler and Keller summarize (more generally), “One major finding to emerge from neurological consumer research is that many purchase decisions are characterized less by the logical weighing of variables than was previously assumed and more [quoting a recent study] ‘as a largely unconscious habitual process, as distinct from the rational, conscious, information processing model of economists and traditional marketing textbooks.’ Even basic decisions, such as the purchase of gasoline, are influenced by brain activity at the subrational level.”


The future of paper is certainly a complex story and has yet to unfold (pardon the pun). But techniques related to neuromarketing, focusing on the subconscious and other deep-rooted consumer preferences and decision-making, certainly offer intriguing possibilities that can help predict when and where paper and print will survive and prosper. The Royal Mail case offers one such example and is an indication of further work that needs to be done.

Monday, September 20, 2010

September Observations -- Back to School edition -- the state of college textbooks

Observations: Back to School edition -- the state of college textbooks

“I suppose I could collect my books and get on back to school,” is a familiar line from a well-known song and an extremely popular radio hit during my first year of college oh so many years ago. So when it is “Late September” (again, quoting from the same song, though where I live, the timing is typically a month or more earlier in the year), my idle thoughts are often pulled “back to school.” After many years away from academia, I am back and recently much more actively involved. I have offspring in pursuit of undergraduate and graduate degrees and have been working on the faculty side, teaching graduate marketing and undergraduate economics for the University of Phoenix (UOP). My teaching is in addition to my awareness, as writer of this column and commentator, of all things “print,” and my interest is always piqued by a printer or printing situation in a state of flux. And if there was ever a product category in flux, the college textbook market is it.

So I could not have thought of a better theme for my September 2010 Observations column than college textbooks and opportunities that may be coming to the printer industry. I am far from the only industry commentator to pick up on the many issues and changes in the textbook industry—far from it. Frankly, what started as a simple matter of pulling together sources for this column quickly became a bit overwhelming. Between traditional textbooks and new laws, the used and rental markets for texts, print-on-demand solutions, and various e-book schemes, past and present, the college textbook market is extremely dynamic, to say the least. However, I have pulled together some interesting examples, including personal experiences, and conclude that this industry has only just begun to change.

Textbook Economics

As a teacher of marketing and economics, I am always on the lookout for interesting articles to help make subjects come to life for my students. I had a major windfall earlier this year for my pricing and supply-and-demand discussions with a piece that appeared in broadcast form and also via the Web from the combined CNN-Money news organization. Titled, “America’s Nine Biggest Rip-offs,” the piece highlights such obvious “rip-offs” (mostly products and services with extremely high profit margins) including text messages, movie popcorn, and hotel minibars. And right there with them, number six on the list, are college textbooks, with students taking an average hit of $900 during a typical year of study. But unlike the examples of movie and hotel room treats, where raw material costs being a small fraction of the retail price, and thus inspiring the ire of CNN-Money, the textbook category was attacked for having overall prices rise at twice the rate of inflation (from 1986 to 2004) -- which as parents like me will attest, also sounds a lot like a typical college tuition price-escalation curve!

Also cited as part of the textbook “rip-off” are obsolescence-inducing product rollovers (called new editions in this business), where replacement versions with moderate-at-best enhancements devalue previous versions too soon after they were purchased as new, and thus severely erode the old books’ “used” (i.e. aftermarket) value. Sound familiar? And for those not directly familiar with textbook sticker shock, take a look! (See illustration…)

In my classes, I ask students to talk about why these “rip-offs” exist, and thoughts about “captive markets” and “lack of competition” often arise. The presence of these factors may indicate an opportunity for disruption or a new way of doing things and perhaps a call for regulation. And as I’ve looked around the college textbook industry for examples, all of these are present.

One of the most durable concepts in economics is that of Adam Smith’s eighteenth-century “invisible hand,” which dictates that forces in the economy and society at large will lead to suppliers meeting the needs of consumers, in this case, better bargains on textbooks that will only be used for a short period of time. The classic remedy is the presence of the aforementioned used or resale book market, with a combination of traditional intermediaries or newer ones (e.g. the college bookstore or eBay), but, again, quickly obsoleted editions may be increasingly blocking the effectiveness of this approach. Rentals of textbooks have become popular of late, too, though the rental prices often carry similar sticker shock to the new, retail purchase prices, with rentals often amounting to half of retail and including shipment costs and hassles. (The role of government and specifically government regulation might be thought of as the more visible hand – see illustration.)

 The NY Times Freakonomics blog takes on recent law regarding textbook pricing disclosure

Textbook Technology

Thus, enters technology … with all the promises (and successes) of e-books over the last several years. This year’s emergence of sub-$200 Amazon Kindles and their ilk, along with the more versatile Apple iPad, which has been touted by many as the key to “the future of book publishing,” all beg the question, “What about electronic textbooks?” The electronic solution certainly argues for lower costs, though the aforementioned “rip-offs” article reminds us that the issue is really not about cost. E-books are hardly a new idea—for example, Amazon’s Kindle DX was touted as a textbook solution at its introduction several years ago, with participating universities in a trial program. (See the 2010 Reed College report for their “close but no cigar” appraisal.)

We know that a number of new tablets are poised to enter the field of electronic textbooks, which is already estimated to have generated about $40 million in sales in 2009, according to Rob Reynolds of Xplana, who is quoted in a market overview in The Wall Street Journal by Jeffrey A. Trachtenberg (see “Textbooks up their game,” 8/19/2010). The piece discusses several iPad-based initiatives and points to the opportunity to make e-textbooks enhanced, multimedia learning tools and more than simply repurposed PDF versions of the hard-copy versions.

Textbook Marketing

But what about the users? There’s a bit of marketing wisdom that dictates it always pays to make sure that “the dogs eat the dog food”— no matter how many improvements, bells and whistles, packaging changes, ad campaigns, jingles, etc., testing what the customer really wants and likes is still vitally important. And so far, results, at least one notable set of results, would indicate that a majority of students prefer traditional texts. RIT’s “Print in the Mix” Web site (“a clearinghouse of research on print media effectiveness”) reported on a study at 19 campuses in the fall of 2009 which concluded, “74 percent of U.S. college students still prefer to use a printed textbook when taking a class.” While a 74 percent majority is impressive, the inclusion of the word “still” in the headline infers a future of change.

My Experiences

And what about my own hands-on experience as a faculty member, using the University of Phoenix’s completely electronic e-textbook library, for my own use as well as that of my students? I have written before about the artifact nature of the term “papers” in the UOP academic process, at least the way my classes operate. Students complete individual and team assignments once a week during our accelerated classes, which I grade and turn around within the six-day requirement. However, the papers are rarely if ever “reduced” to hard copy, at least on my end. Like my faculty peers, I have become adept at using the tools of the trade such as multiple monitors and Microsoft Word’s “comment” feature. I do not even own a red pen. So what about textbooks? Our entire assigned library is in e-book/PDF format and consists of popular (and a few obscure) titles from the catalogs of McGraw-Hill, Pearson, and other major textbook publishers.

For the most part, I use the textbooks online via Adobe’s Acrobat reader, with the occasional chapter, or more likely a section, printed locally, in my office or the University’s, for further study, perusal, and/or markup. I eagerly await an iPad or Kindle solution (based on the digital rights management solution yet to be completed – see illustration), and those occasional prints will no doubt be reduced as I read and annotate on the comfort of my iPad and free myself from the restraints of a traditional PC.

So far the lack of a Digital Rights Management solution for University of Phoenix ebooks is standing in the way of iPad access

As for my students? I have been asking their opinions and practices on a regular basis for some time, and their responses are all over the map but generally fall into three categories: read exclusively online; print chapter-by-chapter on home printers or at places like Fedex Office; or source the traditional hard-copy versions from resellers like Amazon (new or used) and go about their reading the old-fashioned way. Fittingly, the nature of their responses is one of my big lessons for all my marketing students (along with the dog-food analogy): markets are composed of segments!

Now as I reach the end of my allocated word count and go back to read my title, “The State of the College Textbook Industry,” I realize how I have only really scratched the surface, and this topic was perhaps an overly ambitious undertaking. So many more sides of the discussion remain, with future prospects for the industry and potential debates and arguments. But the end is here, and it is time to move on. Once again, sounds just like college!

Thursday, September 09, 2010

Thanks Adventures in Office Imaging!

My thoughts on Managed Print Services, at least a few of them, were solicited recently by Nathan Dube at the Adventures in Office Imaging blog. In MPS Interview #7 (just like Mickey Mantle), I respond to some basic questions on the state of Managed Print Services, past, present and future.

Thanks to @DubiousMonk!

Thursday, August 26, 2010

August Observations -- From the Magazine Rack and What a Difference a Year Makes!

Observations: From the Magazine Rack 2010 – What a Difference a Year Makes!
by Jim Lyons

In 2010, the iPad has been huge as a platform for traditional magazines and new forms of magazine-like publications

In my Observations column just over a year ago (see “Jim Lyons Observations June 2009 – From the Magazine Rack”), I observed that Time’s Mine was an interesting, ongoing experiment with a personalized magazine. In what looked like a traditional hard-copy magazine, Mine was a response to the long-heard siren-song of personalizing content, culling articles based on subscriber profiles from a bevy of Time, Inc. publications. At the same time, I reflected back on other Observations columns, earlier in 2009, that covered the conversion of traditional hardcopy magazines such as PC Magazine to Web-based viewing/subscription sites like Zinio ( and somewhat experimental projects like The Printed Blog and HP’s Tabbloid that seemed to reverse the trend back to a hard-copy orientation. It seemed as if the magazine world was facing an unprecedented level of change, and even excitement, though in the face of significant threats.

Well, one year (and two months) later, that level of change, in some ways seems trivial. What is the catalyst for the recent tumult? The April 2010 introduction of Apple's iPad is the one significant event over the past 14 months that can be linked to so much more change in the magazine world. While the iPad has set sales records and offered new ways of doing many different things, and more generally inspired new ways to think about networked and tablet computers, one of the biggest opportunities presented by the iPad (and its ultimate offspring and offshoots) may be for magazines and newspapers to change the way they reach their readers. While the book world and its transition to e-books really started earlier, with the introduction of Amazon's Kindle as a major milepost along this evolutionary path from print to electronic, the iPad can be blamed, or credited, for shaking loose the vision and potential rebirth of magazines (and potentially, but to a lesser extent, newspapers).

Magazines and iPad Viewing

With the iPad launch, and in the months following, many magazines, including Popular Science, Sports Illustrated, Wired, and even People, have been formatted, and are sold, for the iPad’s distinct viewing capabilities. While the results have been praised, the business model is still yet to be worked out. For example, a single issue typically costs five dollars through the iTunes app store, and one year's subscription to the print version may be about the same, at least via many easily available promotional offers. There have been accusations that these iPad-specific magazine versions are gimmicky and destined not to last, and some industry observers, such as Techdirt’s Mike Masnick, have even compared them to the multimedia CD-ROM “revolution” of the 1990s (see “More People Recognizing That Media iPad Adaptations Feel Like CD-ROM Media”).

Zmags, which I covered in my May Observations column, is in beta with an iPad viewer

A look to the iTunes app store for iPad-specific apps or browsing for mobile-oriented Web pages geared for the iPad yields glimpses of some old friends. Remember Zinio (see “Jim Lyons Observations January 2009 – PC Magazine is Dead, Long Live PC Magazine”)? How about the more recently covered Zmags (see “Jim Lyons Observations May 2010 – Zmags—Another Online Viewing Alternative”)? HP’s MagCloud, (see “HP Enhances MagCloud Service, Offers ‘Blended Viewing Options’ for Magazine Readers", originally designed to help Indigo press owners (print service providers or PSPs) build volume by funneling short-run magazine print jobs to them, now has its own iPad app that offers partner magazine publishers the option of online viewing via Apple’s tablet, in addition to print-on-demand capabilities. Missing in the line-up, so far anyway, is Google’s Fast Flip (see "Jim Lyons Observations April 2010 – Google Fast Flip—More Innovation in Magazine and Newspaper Viewing”). Although this technology continues on with a mobile phone viewer, the firm has pulled back its presence on the Google News home page. Of course, the majority of these devices and apps are geared to the viewing of material prepared for print and then made available (i.e. “repurposed) for online as well. The exception is Fast Flip, which is based on viewing Web pages in a magazine style—a “flip through” format (as the name implies).


However, the biggest news on the iPad magazine front from the summer months is the launch of Flipboard (, the self-titled producer of “your personalized social magazine,” which includes Web pages and RSS feeds of your choosing (à la Google Fast Flip), but also intermingles material from your own Facebook and Twitter feeds (see image below). The excitement and rave reviews (see The Wall Street Journal’s Katie Boehret, “Your Own Digital Magazine”) have led to widespread downloads along with some start-up hiccups and threats from server issues (see “Flipboard hype crashes iPad app's servers”) and legal questions (see “Is Flipboard legal?”).

Flipboard has become an iPad sensation as "Your Personalized Social Magazine," but except for my plea for interested souls, there has not much Twitter action on "Flipboard printing"

Flipboard delivers dynamic and very personalized content and is far from the static PDF examples above and for that reason, seems like perhaps an ideal candidate for some printing as users attempt to capture a “moment in time” that conceivably combines their online worlds. So far neither Flipboard nor its user community seem to have given printing much thought, as evidenced by a search of Twitter for “Flipboard printing” that turns up only a few obscure references (see image below). After a few more months of maturation, however, we would not be surprised to see a printing need emerge, just as with the iPad at large. (See bottom of post for additional links related to Flipboard.)

The Return of the Ultimate Countertrend?

Clearly the world is changing quickly around this space, so stay tuned. But there are some comforting moments of stability … and even nostalgia. Earlier this week, I received an e-mail from an old friend I met while covering this “beat,” Joshua Karp of spring 2009’s first darling (and then defunct) The Printed Blog (see "Jim Lyons Observation, April 2009 – Ultimate Countertrend—The Printed Blog”). Karp’s e-mail announced … drumroll please ... the return of The Printed Blog! With these words, Karp announced a subscription-based, paid model, with the following description that will no doubt warm the hearts of at least some of my readers.

I wanted to let you know that I've restarted The Printed Blog. We re-launched because there is no publication that brings you the best of the web, curated by people you follow and respect, in a beautiful print format every week - and there needs to be. Sometimes, it's just nice to sit down - on the train, or a couch, or at a café, and to read something on paper. Not everything is always better online, by default. We believe that the web is best suited for cutting and pasting and searching and linking and transacting - and print is best for actually CONSUMING information, and, ironically, the more content is pushed online, the more important print is going to become.

For more info, stay tuned here, or hit

As I love to preach to my MBA marketing students: segments, segments, segments… We learn over time that as fast as things change, different users have different needs, at different times, and for different purposes. Printing and viewing have already coexisted for generations (remember 35mm slides?), and will no doubt continue their jostling for some time to come. Be sure to watch this space for further developments.


Other Links for Flipboard (and iPad magazine) commentary

Monday, August 23, 2010

HPQ Q3FY2010 Printer metrics and commentary

From the Earnings teleconference, here are the comments and number.

From HP Earnings Teleconference Q32010 August 19 2010

Available at HP Investor Relations site.

(Opening summary, as presented by interim CEO Cathie Lesjak)

Looking at the details of our performance by business. Revenue in the imaging and printing business grew 9% to $6.2 billion, fueled by year-over-year unit shipment growth of 16% and supplies revenue growth of 5%. Commercial hardware revenue increased 28%, while consumer hardware revenue grew 4% compared with the prior year quarter. Segment operating profit totaled $1 billion, or 16.9% of revenue. We continue to lead the market with innovative new products. In June, we launched the ePrint platform and the ePrint Center and announced we were expanding our portfolio of web-connected printers to include all printers above $99. This strategy is driving success with third quarter consumer Inkjet hardware shipments up 9% year-over-year, led by 64% growth in wireless printers and OfficeJet growth of 16%.In addition, our retail publishing footprint continues to expand both in the US and across the world. Commercial printer unit shipments grew 44% with strong mono and color laser shipments as hardware availability improved significantly from the prior quarter. We continue to see strong momentum in our growth initiative in the enterprise and commercial print market, both graphic arts and managed printer services grew double digits. Multi-function printer shipments increased 47% over the prior year period, and HP Indigo Digital Press page volume was up 22%. We will continue to aggressively target these markets, leveraging our technology leadership to drive the shift from analog to digital printing.

(Selected Q&A – printer and supplies related questons and answers)

Brian Alexander - Raymond James - Analyst

Thank you. Good evening. Cathie, you mentioned increasing investments in R&D and sales and marketing in your prepared remarks. It seems like a quite a few investors believe the next CEO might decide to noticeably step up the pace of investment as they assume the Company has systematically underinvested in recent quarters, so the concern is this would create near term margin pressure and perhaps even a reset of earnings expectations, so I'm just wondering if you could address the premise that HP has been underinvesting and do you plan to reflect the possibility of the next CEO investing more aggressively when you provide the FY 2011 outlook at your analyst day?

Vyomesh Joshi - Hewlett-Packard - EVP - Imaging & Printing Group

Brian, this is VJ. At Ipex, we introduced our next generation of Web Press, we got a phenomenal feedback. On June 6, we introduced all of our new web connected printers, that below $99, every single printer will have an e-mail address and you could see the results. We gained two points of market share in Inkjet. We had 16% unit growth in every single category, we are increasing our market share so from an innovation point of view, we are on fire. As a matter of fact, the feedback that we get that the product portfolio that we have right now is the best in the last six years.

Ben Reitzes - Barclays Capital - Analyst
Yes, thanks. Could you talk a little bit about what you're seeing in the businesses from this context? I mean, I think some might be surprised that a lot of the revenue upside was in PCs and services versus my model and obviously there's been strength in enterprise and there's been strength in printers for some, and I just would have thought maybe supplies or some of the other things might have picked up more. I was wondering if there's shortages there and if you could just talk about the segments a little more because I think PCs were a lot better than expected and services revenue as well, and some of the others look like there might still be some shortages and what not heading into the next quarter.

Cathie Lesjak - Hewlett-Packard - CFO, Interim CEO

So Ben, in terms of supplies growth, so we had 5% supplies growth year-over-year and on a constant currency basis that was8% supplies growth, so still, quite strong supplies growth and as we've talked most of this year, we have this roughly threepoints of currency headwind and we see that continuing into Q4, so if you think about supplies growth, we think about it in terms of kind of reported mid single digits and on a constant currency mid to high single digits for Q4.

Ben Reitzes - Barclays Capital - Analyst

And was there still constraints in the quarter?

Vyomesh Joshi - Hewlett-Packard - EVP - Imaging & Printing Group

No, I think-- this is VJ, Ben. There are no constraints. I think the LaserJet you can see 44% unit growth that we delivered and clearly, we have a tremendous demand here. The LaserJet brand is fantastic, and we are expecting in fourth quarter at least30% unit growth for the LaserJet, so we believe that the demand is strong, we continue to get out of the availability and in the supplies, you'll also remember that we are gaining share against refill and reman so we are really driving our supplies sell out, we absolutely believe that putting more units now and valuable units and with web connectivity and the stuff that we are doingwith ink in the office we will continue to see very good growth.

Bill Fearnley - Janney Montgomery Scott - Analyst

Yes, thanks. If I could address the question of VJ in printing. It appears that the supply chain is fixed and so with the strong hardware performance this quarter, you still came in at the high end of the 15 to 17% range, so should we start, should we bethinking about IPG operating margins in the 16 to 18% range given that the strong hardware performance and then I have aquick follow-up.

Cathie Lesjak - Hewlett-Packard - CFO, Interim CEO

Let me address that. We don't let VJ talk about those things. Our guidance for this year is 15% to 17% and we're not really changing that at this point. We will talk more about what our guidance is for 2011 at our security analyst meeting. Our goal isto get as much growth as we can in the good usage hardware units and stay within our 15 to 17%.

Bill Fearnley - Janney Montgomery Scott - Analyst

And have you seen any effect of the expanded Canon relationship any benefit there in the most recent quarter?

Vyomesh Joshi - Hewlett-Packard - EVP - Imaging & Printing Group

I think we have started with the copier lineup. We like the lineup that we got. We are selling managed print services , we had a very good quarter, sort of what total contract value for managed print services and I think the very important part is we want to continue to invest and innovate because innovation is our blood line so we want to make sure that not only do we place high usage unit but also we continue to innovate.

Jeff Fidacaro - Susquehanna Financial Group - Analyst

Great. Thanks for taking the question. Just on the supply side grew 5% in the quarter. Could you talk a little bit about how the inventory looks there? Was there any points contributed to a channel fill and I may have missed this but how is the fiscal fourth quarter shaping up, is that sort of a mid single digit type growth again?

Vyomesh Joshi - Hewlett-Packard - EVP - Imaging & Printing Group

I think the channel looks very satisfying as Cathie mentioned. We are focused on making sure that we put the right units in the place and get the right sell out. As far as the Q4 is concerned, we continue to look at the mid single digit range.

Cathie Lesjak - Hewlett-Packard - CFO, Interim CEO

And I think I should have said that we got the 8% constant currency growth without channel, the benefit of any channel fill, unlike some of our competition.

Wednesday, August 11, 2010

Thanks American Printer Blog -- hosting Part Two of my guest post

My friends over at the American Printer In Focus blog have flattered me by hosting another guest post, Part Two in my ink-and-toner-economics series. Check it out, please! Inkjet vs Toner, Part Two.

Wednesday, July 28, 2010

July Observations: Memorable Hard Copy Advertising Taglines—Part Two

In last month’s Observations column (see “Observations: Memorable Hard Copy Advertising Taglines—Part One”), I explored some printer industry taglines, after being inspired by an article in Forbes magazine on the “25 greatest advertising taglines.” The list was the result of voting by a group of corporate CMOs, including Xerox’s Krista Carone, who shared further thoughts about some of her company’s greatest (and longest lasting) advertising achievements. The column just did not seem to offer enough space to go beyond Xerox, so in this second part of my “tagline” observations, I look at some advertising experiences with HP and our industry at large.

HP’s “Set Your Lasers On Stun” and Dalmatians

HP's Garage is perhaps the most enduring symbol of the "original" Silcon Valley company.

HP’s LaserJet celebrated its 25th anniversary last year (see, “Observations: 25 years of the LaserJet”) and has certainly earned a role in the “product Hall of Fame,” for the printer industry and for products and marketing in general. But what about advertising? Some long-time HP employees recall an early ad, put together with Microsoft, touting the crisp, clean laser-printed copy available by combining the mid-1980 wonders of Microsoft Word (pre-Windows) with the new HP LaserJet. The ad carried the tagline, “Set your lasers on stun,” and while that line did not endure, it was a favorite with Star Trek fans. (I admit to not being a Trekkie, so I took a few years to make the association to one of Captain James Kirk’s favorite lines, “Set your phasers on stun.”)

And it was just a few years later, with the advent of new LaserJet models around the beginning of the 1990’s, when HP seemingly struck gold with the “Dalmatians” theme to advertise its new LaserJet printers. The theme was a natural, with the lovable black-and-white-spotted dogs featured in print and television ads associated with the latest and greatest monochrome-only printers of the day.

Ask The Experts

As last month’s interview with Xerox’s Carone pointed out, there are “taglines” per se, and then there are other advertising-industry descriptors for other themes. For example, Xerox’s successful “Document Company” phrase was never a tagline but a “signature statement.” So at the risk of over-simplifying, how did these two HP themes size up? While they are warmly remembered by insiders, neither has stood the test of time in the minds of the public, as HP continues to roll out new themes and taglines on a regular basis—see, for example, this year’s “Let’s Do Amazing” effort (see illustration below).Carone’s wisdom on what makes for “great” or at least memorable taglines included “an ability to transcend generations and markets.” She explained that they tend to strike a societal chord, which in turn, gives them long-term staying power and relevance. As mentioned, the Star Trek-themed “stun” ads were not meant to transcend generations but were quite focused on a techy (and trekkie) early-adopter segment, very important in the early days of a new product. But HP rolled out the Dalmatian theme to appeal to a much broader and more mainstream audience, five years following the first LaserJet printers, and the firm may have missed the opportunity for that theme to live on longer than it did.

Branding experts Lynn Parker and F. Joseph LePla, in their 2002 book “Integrated Branding,” discuss the importance of “hanging in there” with brand-related motifs and images. They cite HP’s Dalmatians campaign as a good example of not following their advice that “associations must be used for the life of the brand,” even recalling an instance that brought this example literally very close to home for me. Parker and LePla write, “Local schoolchildren in Boise, Idaho, were asked to do advertisements for Hewlett-Packard’s LaserJet printers as a school project. Even though it had been several years since HP’s LaserJet brand had featured Dalmatian dogs in its advertising campaign, most of the kids drew Dalmatians in their ads. Dalmatians had obviously become a valuable association for HP that implied professional-quality printing. However, that value was never leveraged as a lasting part of the customer experience.” While the authors’ observation sheds light on the importance of patience and consistency in marketing, does it also, give us possible insight into where HP was getting its ad ideas. But surely those school kids were not really creating the ads … were they?

YouTube Experiment

Integrated campaigns aside, the Forbes piece on best taglines highlighted memorable TV commercials, and as we are trying to recollect and/or document the memorable ones from our industry, why not query that repository of seemingly all things video, YouTube? My first search, for “Dalmatian commercial” yields a selection of ads, mostly for, you guessed it, Budweiser and Miller beer spots, with nary an HP entry in sight. I then tried a more generic search by simply entering “printer commercial” into YouTube’s search field, and came up with some interesting (if not exactly inspiring) choices. I will leave it to my readers to sample some of the clips on their own, in the privacy of their own cubicles or homes (yes, some of the examples are a bit risqué), but suffice it to say that the available evidence leads one to conclude the printer industry is still probably searching for its first true “killer ad!”

Wednesday, June 23, 2010

June Observations: Memorable Hard Copy Advertising Taglines — Part One

by Jim Lyons

I have been teaching an MBA-level consumer behavior class recently, and that may be why I gravitated so strongly to a recent online article about favorite advertising taglines. The article in Forbes was based on a survey that asked corporate chief marketing officers (CMOs) to identify the most popular advertising taglines of all time, and here is a quick question for you: What do “Think different,” “Just do it,” “A diamond is forever,” and “We try harder” all have in common? Along with 21 other entries in the “Top 25,” they have little or nothing to do with the printer industry!

The Observer [where this column also appears] does not shy away from reporting and commenting on printing and imaging companies’ advertising, including coverage of recent campaigns by Kodak, Lexmark, and HP, but do any of their taglines, i.e. “Print and Prosper,” “Outsmart Evil Ink,” or “Let’s Do Amazing,” resonate in the old brain in the same way as, “You deserve a break today,” “Got milk?” or “When you care enough to send the very best?”

Among the CMO's who participated in the survey were two from our industry, including Xerox's Christa Carone, who shared some further insights for this column—about taglines generally and some industry specifics. In addition to being on the voting panel, Carone, who has been the Xerox CMO since 2008 and was recently appointed a company vice president (May 2010), is quoted in the Forbes piece referencing Verizon’s “Can you hear me now” tagline as used recently in conversation by her 6-year-old daughter. In a follow-up conversation, Carone helped shed some light on what it took to make the list and shared a few thoughts on why the printer industry was shut out, at least from this particular list of 25. “While the process did not include a lot of science and relied more on ‘gut calls’,” Carone told us, “The favorite taglines do have in common an ability to transcend generations and markets. They tend to strike a societal chord, which in turn, gives them long-term staying power and relevance.”

Carone noted that business-to-business (B2B) campaigns, where many if not most printing and imaging ads are aimed, are typically much more targeted than mass-market, consumer-oriented advertising, so they are almost by definition not going to be as memorable, at least among a wide audience. She explains, “The telecom market, for example, is so broad that it’s possible to establish and form a single-line impression that lasts and permeates the consciousness of people from tweens and teens to older folks.” While B2B has its limits, she pointed to Xerox’s recent campaign that features the tagline, “Ready for Real Business,” and its role in welcoming the integration of recently acquired Affiliated Computer Services, Inc. (ACS) and priming the market for business services that Xerox is now ready to play on a broader scale.

This re-positioning of Xerox, from a more print- and copy-centric version of services to a more generalized offering for which ACS is known, recalls an earlier time when another effort by Xerox to transform its corporate identity comes to mind. “The Document Company” was a Xerox “signature statement” (not to be confused with a tagline), and though the phrase has been out of official usage for about ten years, it still endures. A simple but powerful slogan, “[the Document Company] was helpful in building out the services business for Xerox in the first place, that it was not all about the paper document,” according to Carone. Coming from the copier company that decades earlier saw its company name became so synonymous with its product/service that it became a verb (“Xerox-ing” a page, à la “Googling” a subject), “The Document Company” served quite effectively to help position the firm in a new light.

In terms of originally defining Xerox as the copier company and proving a tagline’s staying power, however, the endurance of the Xerox monk and the “It’s a miracle” television advertising spot is tough to beat. Although not really a tagline in the strictest sense, that slogan and the original 1976 Super Bowl commercial cling to fame, primarily via the propensity for annual recaps of memorable ads from “the big game,” says Carone. Eight years before “1984” and Apple’s famous commercial for the original Macintosh, the Monk whose need to create 500 copies for his Monsignor led him to Xerox, lives on via YouTube and those once-a-year retrospectives of memorable TV ads.

With my personal background that includes many years working in HP’s LaserJet business, I fondly remember some of the campaigns of which HP employees were particularly proud. Next month, I will share my observations about those and other memorable advertising campaigns, if not taglines, from our industry.

Friday, May 28, 2010

May Observations: Zmags—Another Online Viewing Alternative

by Jim Lyons

Over the last four-and-a-half years, my Observations column has highlighted numerous alternatives and enhancements to printing. One of the most frequently covered areas, in a variety of forms, is the transition from traditional print to online, non-paper-based “information consumption.,”. I have covered e-books, smart phones, and magazines and newsletters converting to online publishing, with PC Magazine and our very own Hard Copy Observer being two notable examples from the latter category. Just last month’s Observations looked at Google’s news viewer, Fast Flip, and as I keep looking at this space, more and more continues to meet the eye.

Zmags is a growing company helping to facilitate the movement to online viewing, or “information consumption,” that I had a chance to get to know better recently. Starting out in Denmark, the company shares the same 4.5-year lifespan with this column, and helps publishers in the conversion of their magazine content from traditional paper-based to online., and Zmags also participates in the massive, if not quite as visible publishing space that includes brochures, catalogs, flyers, and other marketing collateral.

Going back about 15 years in the printing industry, we started to see the “paper pie” being used in high-level strategic presentations by printer executives. This pie chart, combining all the world’s printed pages (totaling some many trillion annually), showed by category the very small presence of digital printing (in the low single digits as originally presented), just basically office printing and copying at the time, and huge categories of traditionally-printed books, magazines, and newspapers, magazines, and brochures, catalogs, and flyers, to illustrate the opportunity for digital to supersede analog printing. Based on economies brought by electronic distribution (up until “the last mile” where digital printing would step in), customization and shorter print runs were the promise of “distribute and print.” Of course this switch to digital printing could be viewed as only the intermediate step, with non-printing solutions eventually winning out, and this end point is where we could be heading with Zmags, if the firm’s relatively early success is any clue.

Started in Denmark by current CEO Jens Karstoft and two other people, Zmags began as an individual online magazine. After some time passed, the threesome realized that the tools the firm had created were the real value and could be used as a platform by other magazines and the broad world of marketing collateral. Originally self-funded, the company raised $7 million in 2008 to get into the U.S. market and now employs 50 people globally, with about half in Denmark, 20 in the UnitedStates, and five in a small office in the UK, serving 2,500-3,000 customers. Zmags classifies the market into three categories: magazines using the Zmags online publishing platform;, marketing communications clients who publish brochures, catalogs, and flyers online for their clients;, and individual retailers and e-commerce companies either going online or starting online with catalogs and other Web-based sales materials.

When we covered the online conversion of PC Magazine at the beginning of 2009 (Observer, 2/09; /TheLyraWeb/ShowArticleFromFoundset.aspx?ID=1095), we identified its publishing platform as belonging to the vendor Zinio. While Zmags acknowledges Zinio as a primary competitor (along with a few others), at least in the magazine publishing space, Zmags highlights its self-service feature as popular among a number of customers, and assays the firm’s key differentiator is, the ability to track, analyze, and report on reader behavior (pages viewed, time spent per page, videos watched, links clicked, products added to shopping cart, etc.), in other words )—who is reading or looking, when and how often, and what actions are taken as a result, whether drilling down into advertisements in the case of magazines or ordering online in the case of e-commerce.

In a recent interview, Zmags CEO Jens Karstoft and vice president of marketing Peter Velikin described the company’s evolution and future and how they see the needs of the three market areas they have defined. In terms of the three areas of customers served by Zmags—magazines, marketing communications, and online retailers—we asked about distinctions between the latter two. Velikin explained, “Marketing communications and commerce, the difference is that there are two different purposes. The goal of e-commerce customers is to increase the volume and efficiency of their online channel— – online catalogs created with Zmags enable retailers to expose more products, in context, to their target customers and increase conversion rates. Marketers, in contrast, are trying to maximize the time customers spend with their brand and to present their product or service in the most positive light. Tracking and reporting on reader behavior is very useful to our customers in all markets.” ”

When asked to explain in further detail the actual transaction taking place, Velikin describes the Zmags business model as follows, “We are a Software as a Service (SaaS) company, i.e. there is no software for customers to install; they pay an annual subscription fee. Our customers purchase a number of ‘activations.’ An activation is a publication that is created, e.g. a monthly magazine will need 12 activations, one for every issue published, and customer service and support is included in the flat fee.” Velikin concludes, “We have a very simple business model that works to our advantage.”

Zmags and Printing—Threat or Opportunity?

With respect to specific Zmags implementations that drive printing, Karstoft explains, “Yes, there are, especially [related to] books, white papers, etc.,” which go along with the specific content being viewed. While the Zmags solution includes the facility to print locally (see image at ***), we probed a little deeper and asked whether online capabilities like Zmags take away from printing in the long run. Velikin answered, “I think that a bigger portion of information will be collected online—this means less print, more online solutions. This is happening. Zmags offers a great solution for these companies that are looking to embrace the online world but still want to leverage their investment in the offline world (i.e. materials intended for print). In this respect, even though ‘Yes, people will print less if they use Zmags,’ Zmags is synergistic to print companies because it preserves the layout and the mode of consuming information. This means that people will continue to invest in materials that would be suitable for print or online distribution.”

Going back a decade and a half, and as the Web emerged as a legitimate place to go for consumer information, much was made of the repurposing of content, with consoling words to content creators that getting print-oriented materials online was simply a matter of putting the existing print materials into an online format. This scenario led to the creation of the term, meant to be less-than-flattering, of “brochure-ware.” Today Velikin notes, “Converting hard copy to online changes expectations, not just simple conversion.” Karstoft adds, “Taking the offline version and putting it online means big changes—[the new version] needs to be an active magazine, interactive, etcetera, customized for the online reader experience.”

Karstoft continues, “Between the three areas [of magazines, marketing communications, and e-commerce, the Zmags business is] evenly split across them, [but we are] more focused on marketing corporations (collateral). [We] see the market space now with lots of people making investments, and we have customers who benefit from using Zmags in the publishing world, but a fundamental business model problem is that online rules are different. [It’s a] whole other ecosystem. [Going online, by itself,] won’t save the business! [Clients will be dealing with] different variables, distribution, biz model, etcetera...”

With the recent weeks’ tech news dominated by the Apple iPad and its lack of support for Adobe’s Flash technology developing as the major battleground in an Adobe/Apple war, we felt obliged to ask Zmags three questions on Flash, a technology currently prominently featured in the firm’s platform. Karstoft responded, “The Apple iPad is the next evolution of portable devices, covering ‘sofa surfing.’ [As a vision,] we are delivering content in a user-friendly way. We don’t convert PDF to Flash, we convert offline materials to an online experience. We have a flash viewer that is best suited for viewing on a large screen, such as a PC, and a non-flash mobile viewer, (to be released soon,) that is optimized for viewing on most mobile devices, including iPhone, iPad, and Android devices.”

Understanding customers and their needs, including the intermediate publisher as a client/customer and their customers, corporate marketers, and end users, is a key to business success. Zmags seems to have a good handle on those ever-changing user needs and has a good chance to be very successful in its pursuit of new viewing alternatives.

Thursday, May 20, 2010

HPQ Q2FY2010 Printer metrics and commentary

Below find the updated spreadsheet on HP's printer business, as updated during this week's earnings announcement and discussion. Some of the commentary includes:

CEO Mark Hurd, prepared remarks:

IPG continues to make significant progress in placing units with high page consumption such as ink in the office, wireless, and graphics, each of which grew more than 30%. We installed roughly 2400 retail photo kiosks this quarter and expect roughly 7,000 placements by year-end. Managed print services had strong signings and Indigo press pages grew 26%. We continue to make significant investments in this business while delivering 17.2% operating margin.

CFO Cathie Leskjak, prepared remarks:

Looking at the details of our performance by business, during the second quarter, revenue in the Imaging and Printing business grew 8% to $6.4 billion. Consumer hardware revenue increased 16% and commercial hardware revenue grew 13% compared with the prior year quarter and supplies posted solid 6% growth. Segment operating profit totaled $1.1 billion or 17.2% of revenue. Total printer unit shipments grew 9%, with consumer printer units up 15%. Commercial printer units declined 8%, reflecting constrained product availability. During the quarter, laser printer average selling prices increased as we focused on placing high value units. We expect LaserJet system availability to improve significantly in Q3 with more than 30% year-over-year unit growth next quarter. For the full year, we still expect double digit unit growth for both Inkjet and LaserJet printers.

We continue to gain significant traction in our growth initiatives with managed print services, retail publishing and commercial graphics each delivering double digit growth. Managed print services had multi-million dollar wins in every geography across diverse industries including financial services, telecommunications, and transportation. HP's managed print services offering is being recognized by customers and industry analysts for its industry leading management tools and infrastructure, and its ability to deliver focused solutions for customers. Retail publishing has had several large wins, installing approximately 2400 systems this quarter. In our commercial graphics business, growth accelerated across the portfolio with digital impressions up 26% from the prior year.

From the Q&A following, four distinct questions regarding printing and imaging, with some very interesting answers from Hurd and Lesjak.

Bill Shope - Credit Suisse - Analyst

Okay, thanks. Mark, can you walk us through your strategic rationale on the PALM deal, and then going forward should we still assume that most of your future acquisition focus will be at least more enterprise focused than consumer?

Mark Hurd - Hewlett-Packard - Chairman, CEO

Well, our enterprise -- our history has been more acquisitive certainly in the enterprise but again, Bill, like we've said before, all of our acquisitions, regardless of where they are, go through a pretty extensive filter in terms of making sure they are strategically sensible, financially sensible and that we can actually operate and get some incremental leverage in operating performance out of it. So it's got to hit all three filters.

I think in this case, of PALM and our planned acquisition of PALM, it really has more to do with the intellectual property and the fact that when you look across the HP ecosystem of interconnected devices, it is a large family of devices and we think of printers, you've now got a whole series of web connected printers and as they connect to the web you need an OS. We prefer to have that OS in our case to be our IP where we can control the customer experience, as we always have in the printing business and that's a big deal to us. You can certainly make the same case for smaller form factor products in the mobile world like Slate and some other products and again, I don't want to tell you that we're not going to have --

Microsoft is probably one of the best relationships we've got in our Company and they are still extremely important to us. There are a couple of form factors, though, that are very attractive for us and there are small form factors where we think the IP can be very additive to us. So it isn't precisely, Bill, a SmartPhone play as I've seen some people write. Clearly that's a $45billion total available market that is growing and so that is an attractive market, but it is for us strategically broader in the context of the number of HP interconnected devices where we can leverage the IP and that's what we plan to do.

Ben Reitzes - Barclays Capital - Analyst

Thanks a lot. Mark, could you talk about what's going on in printing? I was kind of stunned by the guidance for laser printer snext quarter, up 30%. It would seem like there was a significant deferral or push out and last quarter you said that the constraints would be over by this quarter and now it's by next quarter, I'm just wondering if this is a firm target or a moving target and then just how we reconcile the printing units for the year that way.

Mark Hurd - Hewlett-Packard - Chairman, CEO

Sure, thanks, Ben. Listen, we think we'll have a strong quarter this being Q3 in terms of unit placements for lasers. I'm not thrilled with the Q2 unit numbers, but I am pretty pleased with the types of units we put in the market. The ASPs were up significantly in lasers, so the units we could get, we got the right units, if you will, from a printer placement perspective. So I think you should expect a very strong back half in laser and a very strong Q3 and we have good line of sight and good visibility to that going into the quarter. Demand has continued to be strong. I think, Ben, when you talked about the broader printing business, a very strong quarter for us obviously in ink placements again, we felt very good about our ink line up of products, the growth in wireless printing and in web connected printers continues to be very strong. So I think IPG very strong in ink. As we mentioned in our script and in our opening messages, the position in retail photo kiosk, Ben, is a big deal. We installed as many retail photo kiosks in the quarter as we had for the entire life of the product, so for us this was a doubling of that base. We plan to exit at over 7,000 as we exit the year. Managed print services had another very significant quarter and again, the importance of those two businesses for us are those are long term businesses, managed print services five year contracts, retail photo kiosks staying installed nine and 10 years,100% connect of supplies to those products and they are beginning to be a meaningful part of our portfolio. So I think across IPG, when you look at the supplies growth we reported, which is the dollar number as opposed to the local number and the local number would have been yet higher. Ben, overall we felt very good about the IPG quarter, and we've worked hard to get the business in a position to be able to do what we've just reported. The one thing we really want to get done is what you opened with. We want to get the laser printer number into a position where we're driving unit growth and the demand is there.

Ben Reitzes - Barclays Capital - Analyst

It sounds like you're guiding for acceleration in the segment, so that's the bottom line, right?

Mark Hurd - Hewlett-Packard - Chairman, CEO

Yes, listen. We feel good about the position of the segment. Now, as you know, the acceleration of the segment and sometimes comes with a price and as we place more units when we see the demand opportunity, but that's one of the reasons we've worked so hard on the supply chain, to put ourselves in a position to actually get that acceleration, or if you will, seize that acceleration when the opportunity presents itself. And Ben, I think that's the position we put ourselves in.

Ben Reitzes - Barclays Capital - Analyst

Thanks a lot.

Cathie Lesjak - Hewlett-Packard - CFO
Ben, the other thing I'd add is that we did say at the end of Q2 and we still believe this is the case, that we will get double digit growth in laser units and ink units for the full year and if you actually look at the results that we teed up in terms of laser unit placements in Q2, they were not materially different than what we had expected going into Q2.

Ben Reitzes - Barclays Capital - Analyst

Okay, thank you.

Mark Hurd - Hewlett-Packard - Chairman, CEO

Yes, thanks, Ben.

Scott Craig - Banc of America Merrill Lynch - Analyst
Thanks, good afternoon. Cathie, can you maybe look at the IPG margins over the next couple of quarters as you see the hardware increasing perhaps as a percentage of sales, particularly given the laser growth that you're looking at? How does that impact the margins of that business and your thought process around the range of what possible margins could be in there throughout the rest of the year? Thanks.

Cathie Lesjak - Hewlett-Packard - CFO

Well, I'm not really going to update the guidance for the full year beyond the 15% to 17% that we think are kind of the margins for IPG this year. We believe we can definitely manage anything that's coming down the pike right now in that range. On the hardware unit placements can uptick significantly and we still absorb it and that's because we've just done a great job of frankly making operating IPG in a tighter way and getting supply chain costs and OpEx costs out of the cost structure, so that we're able to absorb these unit placements and still maintain industry leading profitability.

Mark Hurd - Hewlett-Packard - Chairman, CEO

I think to Cathie's point, this is a big point, Scott, in a very strange way 2009 was really a blessing for us and I'll emphasize in a strange way, because it really got us sharper and IPG is a really good example of that. We thought we were going in pretty sharp and we certainly sharpened up. Our ability now to deal with some of these issues has just given us more flexibility, to do the kind of unit performance that we've talked about here for the full year, forget this quarter or that quarter, but when you look at the full year unit performance and the opportunities we have in terms of placements. Again understand, Scott, we've done this while investing and placing these retail photo kiosks. So I want to make sure this is no trivial issue that we've been able to absorb the start up of the managed print services businesses, we've been able to install these retail photo kiosks, which are very similar to the printer model just bigger units, forecast the growth to take the unit growth in Inkjet, the forecast that we have in laser and do all of that within the targeted margins that we've described, and this has given us a level of flexibility that, frankly, if you went back three or four years, we simply couldn't have done this and so this is a big deal for us.

Cathie Lesjak - Hewlett-Packard - CFO

Scott, it's not just about the P&L. It's also about working capital management. We have -- we're able to operate with much lower channel inventory levels today because we've improved our efficiency on that side, and then also the owned inventory levels are down significantly year on year, again this quarter. And we expect continued improvement in that space and so it's really the entire ecosystem of the IPG business, both the income statement and the balance sheet and our partners.

Mark Hurd - Hewlett-Packard - Chairman, CEO

Great. Thank you.

Scott Craig - Banc of America Merrill Lynch - Analyst

Thanks, I'll keep it to my one question.

Brian Alexander - Raymond James & Associates - Analyst

Thanks, just to go back to the laser business, sorry for beating a dead horse, but can you just be a little more specific on what caused the core laser units to be down 8% after growing 11% last quarter while the market growth was actually accelerating? What specifically needs to improve? Seems like the product constraints have been prevalent for multiple quarters. So is any of this intentional seeding of market share due to low price points by competitors, and if you could comment on supplies, did the growth in local currency accelerate in line with your expectations and do you think that will continue for the balance of the year as placements for lasers pick up? Thanks.

Cathie Lesjak - Hewlett-Packard - CFO

Well, on the laser side it's really capacity. Just the inability to get as many laser units as we wanted and the demand that we had for them so two things have happened. One is demand has picked up and improved more than what we had expected. That's good news and it's also bad news because we haven't been able to get the capacity. We have a very strong backlog coming out of Q2, and like I said earlier, what happened in Q2 in terms of the laser unit decline is not really a surprise to us. It's materially what we had expected going into Q2. This was always going to be a back half, very strong back half unit placement for lasers in order to get to the double digits for the year that we believe is very doable.

Mark Hurd - Hewlett-Packard - Chairman, CEO

Yes, Brian, this is where we expected to be roughly speaking. There was no sort of surprise to us. I think what -- I would characterize it differently. We would like to have had more. That's probably the better way to think about it and let me make sure I'm clear with you. No, we did not do any hold back because of price points, quite the opposite. We were pushing as hard as we could towards the end of the quarter and we're pushing as hard as we can right now. The demand is strong, so to Cathie's point that's the good news.

The bad news is we haven't been able to fulfill as much customers want. The brand loyalty to HP is just, unless you're here feeling it you wouldn't get it. It is just amazing how our partners and our customers stick with us on this and we're going to get better at this and I'm telling you, I think you three will turn on it. To your point about supplies, supplies have been strong. It's good news and I think it's also not just the unit placements, as we've talked before, Brian. Getting the right units placed is actually more important than the unit -- number of units that get placed and to some degree I think you saw that show up in Q2 as well. When you look at the ASPs in the laser business, let me flip it around, what we were able to focus on was getting the right units out and that did pay dividends within the context of a number that clearly we just wish was better. Okay, well let me wrap it up here. I think the conclusion of it for us is we feel very good about the broad based growth in the quarter, 13% growth for us is, we think, a good result, not only the fact that we grew 13, but the fact that it was contributed to across regions and across our businesses we think was extremely positive. We are a stronger Company today and I want to emphasize that based on our portfolio, our scale, and our consistent execution. Now, at the same time we have more work to do to transform ourselves to reach our potential. So as good as we feel in some respects about what we've done, we are still not to our full potential and we feel good about our position, which gives us the confidence, as we described here, to raise our outlook from where we previously had it.

So thank you all for joining us. We do appreciate it.