Is Sugar Mama a Niche or the Future of Advertising in the Age of Convergence?

Ken King, Senior Marketing Manager, SAS

Having the latest cool music is a part of teen and twenty-something life. Recording companies spend millions trying to get young people to buy their music. The problem for recording company executives is that young people's taste is hard to predict. If you asked me what type of music kids would like I wouldn't have a clue. I'm just not a cool guy anymore (if you don't believe me, just ask my 17-year-old son).

There is one old guy who is cool – Richard Branson, CEO of the Virgin Group. He may be cool, but I bet he couldn't pick teen music choices any better than I could. But his company's Virgin Mobile has an interesting strategy for testing the market for music downloads so they can push the stuff kids will most likely buy.

Virgin users can sign up for Sugar Mama, a service that gives you additional minutes for your mobile service so you can watch and rate a music video. This is a pretty fast and low-cost way to get quick market feedback. The user can buy the music or send a recommendation to friends. Presumably, the good tunes spread like a virus, while the duds are identified early. This data is very valuable to music promoters. If a video clip takes off in Chicago, the promoter can get on the ball and book a concert venue; if the kids in Atlanta won't watch it to the end, there is no reason to spend money for a concert.

When I was a kid, knowing the cool music was easy. I had a friend named Lex. Lex was the kind of guy that read Rolling Stone and other music publications. He had the latest stereo gear both at home and in his car. He was the first one I knew to make the big switch from 8-track to cassette tapes. All of us bag boys at the Publix supermarket bought the albums and tapes Lex recommended and steered away from anything he sneered at. If you were driving five guys to the bowling alley after work on Saturday night, the last thing you would want was for Lex to open your tape case and start laughing. When it came to music, he was our guru.

Lex went on to become a very successful DJ. Once he became successful, record company executives knew that his play selections could influence thousands of listeners. But they had no idea how influential he was in the days when we were all buying albums with our tip money. What if the record companies had known Lex in those days? They could have given him free albums in exchange for his opinion. If Lex liked an album, maybe 50 of us would become buyers and concertgoers. If Lex didn't like it, then any money spent marketing to me was a waste.

Sugar Mama makes that possible today. Virgin can identify the "early adopters" – those customers whose listening habits are early indicators of changing tastes, and the "influencers" – those listeners who influence the most other listeners. This improves the return on marketing spend, which is a major goal of almost every business.

I keep wondering how this might apply to other products. What if content providers had knowledge of the types of products I was interested in? For instance, our old dishwasher is acting up, and I know I am going to need to replace it. What if my cable company offered to give me a free day of service if I watched some informative ads about dishwashers during the commercial breaks in a football game instead of the broadcast ads for products I have no interest in? I'd prefer that.

Manufacturers spend lots of money on broadcast ads and incentives for retailers. Retailers pay salespeople to stand around waiting for me to show up and ask questions. I think either one of them would be willing to pay for a day of my cable service to reach me with their messages while I'm in a shopping cycle – especially if they had some buying history data about how frequently I actually made a purchase after accepting ads in the past. If my cable company got really good at this, I might even cancel my Netflix subscription and pay for my videos by watching ads targeted for me instead.

So maybe I'm not as cool as I was when Lex and I were driving around with the stereo blasting. But I have a lot more purchasing power than I did when I was bagging groceries for $2.10 an hour plus tips. Now that I have hundreds of choices for how I spend my entertainment dollars, the service providers who best meet my needs will get my business. Those who can't might as well be selling 8-track tapes.