AT&T Deal Not Likely to Pull Palm Out of the Muck

Palm is expanding the distribution of its smartphones, the Palm Pre Plus and Palm Pixi Plus, by making them available through AT&T. While the move isn’t likely to hurt Palm’s fortunes, it’s not clear whether it can do much to help the flailing company.

AT&T will start carrying the Palm mobile phones in a few months. The Pre Plus will retail for US$149.99; the Pixi Plus will sell for $49.99. Both prices are contingent upon a two-year service contract and $100 mail-in rebate.

Palm is clearly in survival mode; after several years of lackluster growth, the smartphone manufacturer experienced a crisis last week, when it announced sales projections for the coming quarter that were markedly lower than Wall Street’s already-low expectations . Palm stock tanked and several analysts wrote off the company as a viable player.

No Palm Buzz

The plan to distribute its smartphones through AT&T, announced the Monday, failed to impress many observers. Palm’s troubles, which appear to be centered more on its branding and inability to connect with consumers and developers, go too deep to be solved by any single distribution agreement.

Palm has become irrelevant against the giant marketing machines known as “iPhone” and “Droid” — it’s that simple, Giovanni Calabro, VP of user experience at Siteworx, told the E-Commerce Times.

“No matter how many subway advertisements they purchase, the buzz and word of mouth is around Apple and Droid,” said Calabro, “and where the buzz goes, the development goes. This means there will be more developers working on phone apps for these iPhones and Droids to gain visibility. In all, Palm hasn’t done anything to improve the phone’s user experience to trump Apple or Google.”

AT&T Carries Everyone

Furthermore, the distribution agreement that Palm is banking on to salvage its operations is with AT&T — which carries a number of devices, including the iPhone, and continues to ink new distribution agreements by the week.

In fact, in another Monday announcement Dell said that its Android-based Aero smartphone will be carried by AT&T.

There will need to be active promotion of Palm’s handsets by the sales staff, as well as a focused marketing effort, in order for this distribution deal to make a meaningful difference to the company, Azita Arvani of the Arvani Group, told the E-Commerce Times.

Back in the Day

If Palm had tried something like this a few years ago, it might have worked, Rob Enderle, principal analyst at the Enderle Group, told the E-Commerce Times, “but now they have a fraction of the funding they initially had, and the Palm Pre is looking dated. It is actually not a bad phone — particularly with the mobile hot-spot on the Pre — but they can’t really afford to get the word out now, and another infusion of cash seems unlikely.”

Indeed, the news that AT&T would be distributing Palm prompted more talk about how its devices were trailblazers in the company’s heyday than any forward-looking observations.

“It’s too little, too late,” said Jack Vonder Heide, president of Technology Briefing Centers.

“Palm has seen its day,” he said. “They were first mainstream mobile device, the first color device. They were the industry leader, but they fell behind the tech curve.”

What is really sinking the company is the fact that it is so highly leveraged and its stock price has plummeted.

“I don’t see how [Palm] will raise the necessary cash to pull itself out,” said Vonder Heide.

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Stat Firm Reports Less Than 1% of Subscribers Playing Netflix Games

Less than 1% of Netflix’s 221 million subscribers are playing the service’s games each day, according to a report from CNBC.

Based on statistics from Apptopia, the report revealed that there have been 23.3 million global downloads of Netflix’s mobile games and an average of 1.7 million subscribers are engaging with the games daily.

When Netflix announced its move into games in November, it was seen as a revenue diversification strategy made at a time when it was drowning in cash. Since then, the streaming service has seen a massive exodus of subscribers — 200,000 in the first quarter, nearly a million in the second quarter — so gaming could be even more important to the service now than when it initially launched.

However, it’s likely gaming will be on a back burner for a while. “I wouldn’t expect to see a lot of aggressive movement on the games front until they stabilize the subscription tier and are seeing some momentum from the ad-supported tier,” Ross Rubin, the principal analyst at Reticle Research, a consumer technology advisory firm in New York City, told TechNewsWorld.

“This report from Apptopia must be devastating to Netflix senior management,” observed Mark N. Vena, president and principal analyst at SmartTechResearch in San Jose, Calif.

“It confirms what many industry experts have long suspected: gamers do not see the Netflix brand as even remotely appealing for gaming versus traditional mobile, PC and console gaming platforms,” he told TechNewsWorld.

That lack of appeal will deny Netflix the ability to strengthen its subscription business and drive incremental revenue through gaming, he added.

No Need for Concern

Other analysts maintained the Apptopia findings wouldn’t be causing too much consternation in Netflix’s executive suites.

“Netflix should continue to be vigilant and observant of consumer response as it builds out its still-nascent games portfolio, but I don’t believe it should be overly concerned,” said Paul Erickson, research director at Parks Associates, a market research and consulting company specializing in consumer technology products, in Addison, Texas.

“The company is playing the long game when it comes to being a provider of connected entertainment, and it is learning its subscriber base’s habits as it progresses,” he told TechNewsWorld. “It is still early for its gaming aspirations, and I don’t believe that its current play with mobile apps is the end of its gaming strategy — only the initial stage.”

George Jijiashvili, principal analyst with Omdia, a research and consulting firm, in London, called Netflix’s approach to gaming “cautious and measured.”

“Netflix gaming was launched worldwide last November with just five games. Nine months later, it now offers 26 exclusive games, including ones made by its acquired studios,” he explained to TechNewsWorld.

“Netflix has also recently unveiled several upcoming games as tie-ins for their respective Netflix TV series. Based on its acquisitions and activity in this space, I think Netflix remains committed to gaming,” he said.

Dubious Value Proposition

Michael Inouye, a principal analyst at ABI Research, a global technology intelligence firm, agreed that Netflix should not be too concerned about the Apptopia findings. “If Netflix is concerned, then they had unrealistic expectations,” he told TechNewsWorld.

“Breaking into the gaming market as a previous outsider is never an easy task, especially when you are targeting mobile games,” he said.

“While Netflix’s mobile games, which still number less than 30 titles, may be included in the subscription — without ads or in-game purchases — these games are essentially competing against free,” he explained.

“Most mobile games are still free to play and most consumers have accepted both ads and in-game purchases, so long as it isn’t ‘pay to win’ — meaning you have to pay in order to advance or win,” he added.

Vena pointed out that Netflix is competing in a space with robust competitors who are offering a strong value proposition. “Netflix’s value proposition is very difficult to promote and defend in the gaming space,” he said. “Unless it provides some brand tie to their streaming content properties — which may be a non-starter — it’s hard to fathom how Netflix can differentiate itself in any meaningful way.”

More Marketing Needed

“Netflix is a company known for streaming video entertainment, not gaming,” Erickson observed. “Neither the brand nor the service resonate with the public as a known quantity when it comes to gaming. Without an active marketing campaign and branding push, the change in consumers’ brand perception will remain slow and gradual.”

“Right now, in the early stages of their gaming strategy, game content is positioned as a value addition to its video content,” he continued. “Whether mobile gaming remains a value-add to increase subscriber stickiness and increase the perceived value of a Netflix subscription long-term, or the company makes a broader content and brand push around gaming, remains to be seen.”

Inouye noted that even though there is a link to Netflix’s games at the bottom of its app, it hasn’t done a significant amount of marketing. “That is understandable given the current size of its gaming library,” he said, “but as this fills out, or when new titles based on hit shows launches, I would expect more direct marketing efforts on their part.”

Rubin agreed that Netflix could do a lot more to promote their games and suggested that might change when the company launches one of its proposed new tiers of service. “With the launch of the ad-supported tier of Netflix, it could provide them with some inventory to promote their games,” he said.

Jijiashvili cited three reasons for the subdued response by gamers to Neflix’s offerings: small selection, low subscriber awareness and mobile device exclusivity.

“Smart TVs, monitors, set-top boxes and digital media players are the preferred devices for watching Netflix at home,” he explained. “I believe many Netflix subscribers rarely go on its mobile app for this reason.”

“If Netflix were to deliver its games to more devices — for example, via cloud gaming — I think it could significantly boost subscriber engagement with its games,” he said.

‘Destined To Fail’

Inouye agreed that content is a problem with Netflix games at the moment. “Netflix doesn’t yet have enough unique content,” he said. “Even though some of the titles may be exclusive, many have the same game archetypes as other popular mobile games.”

“Netflix needs more unique IP that leverages its most popular video franchises,” he continued. “The Stranger Things games are a prime example here, Netflix needs more of these types of games, rather than repackaged mobile games with little ties to their library of exclusive content.”

“That is likely the goal, but it takes time to develop these games and build up the library,” he added. “The challenge will be finding a way to get the timing right between the lifecycle of the video franchise and development time and investment on the gaming front.”

Still, there are those who contend that Netflix made a big mistake getting into gaming in the first place. “Nobody needs Netflix to provide games, just like nobody needs to sign up for a video on demand when they are at a sporting event,” observed Michael Pachter, managing director for equity research at Wedbush Securities in Los Angeles.

“There is no natural connection between Netflix’s business and games, and their foray into gaming is destined to fail,” he told TechNewsWorld. “This is like McDonald’s selling groceries, because they serve half of the population and the population eats there. It isn’t logical that they would add groceries to their offering. Netflix adding games is similarly misguided.”

John P. Mello Jr. has been an ECT News Network reporter since 2003. His areas of focus include cybersecurity, IT issues, privacy, e-commerce, social media, artificial intelligence, big data and consumer electronics. He has written and edited for numerous publications, including the Boston Business Journal, the Boston Phoenix, Megapixel.Net and Government Security News. Email John.

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4 Ways To Build Customer Loyalty Amidst Sky-High Inflation

customer loyalty

With inflation in the U.S. hitting 9.1% in June, merchants are facing enormous challenges when it comes to building customer loyalty — and keeping it.

Given that brands are facing declining margins as inflation hits them hard too, how can they build a more loyal customer base without resorting to deep discounts to move product?

There are better options related more to keeping customers engaged and making them feel appreciated, so in the long term they remain loyal to that brand.

Following are four strategies to help brands meet their customer engagement and loyalty objectives.

1. Focus on marketing that benefits customers and protects return on ad spend

One option that brands can start with is to evaluate their marketing efforts and focus on pricing models which not only protect return on ad spend (ROAS), but also benefit customers.

Two beneficial types of marketing that don’t rely on a pay-for-exposure or cost-per-click model are referral programs and affiliate marketing. Both approaches enable retailers to reduce their marketing spend while consumers save money, earn bonuses, or get insider access to exclusive products or deals.

Referral programs recognize existing loyal customers and use their trust in a brand to capture new customers. Typically, brands incentivize the existing customer (the “referrer”) by offering the referrer a small reward for sending along new customers (“referees”).

Retailers can protect the efficiency of their spends by only offering referrers an incentive when a referee makes a purchase, such as a small flat-rate bonus if their referee completes an order at a minimum purchase threshold.

With affiliate programs, brands operate on a pay-for-performance pricing model, in which a site or individual (aka “publisher”) promotes the brand’s products to their audience, and if audience members make a purchase, the publisher earns a small commission of the completed transaction.

Like referral programs, affiliate programs also offer a built-in positive ROAS because the marketing spend (payout to publishers) is always based on actual sales.

Affiliate marketing is a critical component of many brands’ marketing initiatives because it can economically expand the reach of the prospective customer pool to relevant audiences at scale. In addition, participation in affiliate marketing helps to position retailers to take advantage of up-and-coming promotional techniques offered by third-party loyalty and cash back publishers who offer tools to help customers capture cash back for shopping.

This brings us to the next point…

2. Offer customers an easy-to-understand rewards option: cash is king!

Earning cash back on credit card purchases is a well-known and loved tool. But now, cash back rewards for shopping are growing in popularity due to programs such as Honey and Capital One Shopping, so consumers are becoming used to the ease of receiving cash back rewards for online purchases in addition to credit card cash back.

The importance of providing easy-to-understand and simple-to-use rewards cannot be overstated. For one, cash back for shopping is easy to redeem and typically there are lower “minimums” for redeeming rewards. Aside from the convenience and simplicity, cash back-on-shopping programs are proving helpful to consumers who are tightening their belts in these inflationary times to offset higher costs.

Most retailers are not positioned to offer cash back to consumers directly. Instead, to gain exposure to customers participating in these types of programs, retailers with affiliate programs need to ensure they allow their brand to be showcased in those publishers’ outlets, which may include an app or browser extension that enables customers to earn cash back from any online retailer they visit.

Today’s eagle-eyed budget-conscious consumers will more likely shop at a store with cash back available, so retailers must use every tool possible to maximize their store’s appeal to these consumers.

3. Offer BOPIS to capitalize on convenience

“Buy online, pick up in store” (BOPIS) is more popular than ever because consumers can shop from the convenience of their home and pick up purchases in store, saving shipping costs in the process. BOPIS allows retailers to meet the customers literally where they are and satisfy their expectations for convenience.

With many retailers sitting on excess inventory, sellers can emphasize their BOPIS programs with a special merchandising offer to get customers to leave their cars and enter the store to increase the chances of an impulse purchase.

Retailers using the BOPIS tactic should aim to create opportunities for foot traffic as they try to unload excess inventory. In effect, they can potentially convert those online purchasers into in-store shoppers by placing well-priced or already discounted items near the front of the store in an attempt to drive those sales.

4. Creatively leverage proprietary loyalty programs

While loyalty programs from a particular retailer are not a new concept, rewarding consumers with points on every purchase is effective because it increases engagement with the incentive of a deal or interesting product at a future date. Customers keep spending and have an aspirational goal to reach to qualify for their next discount.

Rather than only dangling that “future discount” carrot, retailers should think about how they’re adding value too. Because of the wealth of permission-based customer data available to brands through their proprietary loyalty programs, they can get creative with strategies that add customer value, such as:

  • Personalization. If the consumer regularly buys a consumable, auto-remind them to repurchase around the time they’re likely to be needing a refill of that product.
  • Cross-promote other relevant product verticals. Highlight similar products/brands in the same categories that a given customer usually buys from. Or consider exposing them to new categories such as “best rated” or “most popular” products. Retailers should choose which products/verticals to promote based on margins, inventories, and other pertinent factors.
  • Subscriptions for necessities. Auto-replenishing subscription programs have been used to great success, most notably by Amazon Prime’s “Subscribe & Save” for everyday essentials. Sephora just launched “Auto Replenish” which offers subscribers a small 5% discount while at the same time effectively locking in a predictable revenue stream. This is a smart strategy, especially with inflation leading consumers to rein in discretionary spending in lieu of required expenditures like groceries and gasoline.

Conclusion

Retailers today need to make themselves the hero to the consumer. Not just with discounts, but by making their life better or adding convenience in some way. In effect, what will customers remember when we get through this latest challenging economic era? It’s not just going to be the lowest prices; it’s going to be how the brand provided value at a time when consumers are watching every penny.

Michelle Wood is VP of Merchant Development at Wildfire Systems.

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