Those of us that follow the consumer electronics industry have been hearing about the promise of netbooks for quite some time now.  The Consumer Electronics Association predicts the netbook category will generate $3.4 billion in 2009.  It seems like every major OEM, retailer and wireless carrier has plans to enter the game in some form or another. But until recently, consumers didn’t seem to be getting the message.  Based on Compete’s panel of users, we have seen consumer interest in netbooks grow to almost 1 million people monthly (26% growth) between January 2009 and June 2009 at retail websites alone.  Online interest at wireless carrier websites, which was non-existent in January, is now reaching over 300,000 people a month.

There are three main factors driving online netbook interest in recent months:

• Economy in recession.  Consumers’ wallets have been hit hard and they are more reluctant to shell out a thousand dollars or more on what may be seen as a luxury purchase, such as a notebook computer.  Even shoppers who don’t really understand what a netbook is best used for may consider one over a notebook simply because of its price.
• Back-to-school seasonality.  You’re heading off to high school or college and let’s be honest – you’ll probably use your computer more for storing music and surfing the web than for typing term papers.  The portability and other promoted features of netbooks are appealing to students, and parents like the less expensive price tag.
• Advertising.  Over the last year, there have been a myriad of product and strategic announcements surrounding netbooks, and consumer-focused advertising is finally starting to catch up.  Online, websites are starting to dedicate prime space to netbooks, which increases awareness and ease of browsing for researchers and shoppers.  The wireless carriers are beginning their advertising blitzes as well.

To date, online interest in netbooks has been concentrated at OEM and retail websites rather than wireless carrier websites.  This is a role reversal as compared to the mobile phone industry. (The carriers hold an order of magnitude advantage in mobile phone online traffic as compared to manufacturers and other retailers.)  There are encouraging signs though for the carriers.  Over 84,000 people viewed the HP Mini 1151NR netbook at VerizonWireless.com last month (about the same as the HTC Touch Pro).  These shoppers were actively in-market, as three of the top five devices these HP Mini shoppers also looked at were two netbooks at AT&T and a Verizon Wireless mobile broadband card.

A recent Compete survey showed that only 26% of all wireless prospects (prospects = visited a carrier website for a non-customer-related reason) were interested in purchasing a netbook from a wireless carrier.  The goal for carriers is obviously not just to sell the netbook itself but to lock consumers into service contracts, no matter the channel through which that happens.  Heavy subsidies in exchange for data service contracts not only generate additional data service revenue, but the exclusive lineup of products in some cases (read: iPhone) becomes a point of differentiation for the carrier as well.

Historically, consumers have been well-trained to expect discounted or free merchandise in exchange for their willingness to sign a service contract with the carrier, and this trend appears to be spilling over into netbooks as well.  More than three-quarters of consumers aren’t willing to pay more than $200 for a netbook.  A full quarter expects to pay less than $50 for this device.  If netbook pricing trends follow those of mobile phones, we could soon see most netbooks available for free with a data service contract.  Sprint and Best Buy are already subsidizing the Compaq Mini 110c for $0.99 with a service contract.  This may be a business model that works for the carriers, but I can’t imagine that all of these OEMs developing netbooks will be thrilled with the idea of commoditization of their products.

The good news is that consumers are starting to take notice of netbooks, much in the same way that mobile phone interest took off earlier this decade.  The bad news is that consumers are thinking about netbook pricing in the same way they think about mobile phone pricing.  The all-important holiday season is just around the corner, and you can be sure shoppers will be looking for subsidies in order to perceive their netbook purchase as more cost-effective.  If the subsidies are not there, perhaps shoppers will decide that heavily-subsidized smartphones have enough media and web browsing capabilities to meet their needs.  But that’s a topic for another blog…

Last week Verizon Wireless’s COO confirmed that the carrier would be begin selling the Palm Pre smartphone in ‘early 2010′. It’s no surprise that the Pre will wind up at both CDMA-based carriers eventually.  However, it is surprising how soon the device will be available from another carrier after its initial exclusive launch at Sprint in June 2009.The stakes could be high for Verizon Wireless here. Sure, they are the largest wireless carrier in the US, and the Palm Pre will be a great addition. But their last flagship device, the Blackberry Storm, fell short of its astronomical expectations, frustrating many who saw the Storm as a bona fide rival of the iPhone. If a Verizon Wireless Pre launch falls flat in the absence of another “blockbuster” device, the chances of attracting that ever-elusive iPhone killer could be slipping away.I got out my crystal ball (i.e. Compete’s online behavioral panel) to better understand who is shopping for the Palm Pre today, and what that could mean for the move to Verizon Wireless.

Carrier Customers’ Interest in the Palm Pre

Share of interest by carrier for online carrier customers that viewed the Palm Pre, June 2009.

Naturally Sprint customers are more active in researching the Palm Pre - they have immediate access to it and have received the bulk of targeted advertising for it. Still, few VZW customers looked at the device on Sprint’s website - no more or less than AT&T customers or T-Mobile customers. Is this an early sign that the Palm Pre won’t be as successful at VZW as Sprint? Or could it mean that these customers are so satisfied with VZW that they would never even think of switching carriers?

Incentives are a big factor in answering those questions (subsidies, rebates, offers, etc.) and since we don’t have any information about Verizon Wireless’s incentive plan we can’t really answer them. But there is a specific group of people that help us dig a bit deeper. They are who we call ‘pre-churners’. A pre-churner is someone who is a current customer of one carrier, but is actively shopping on other carrier websites. It is a measure of how many customers are thinking about jumping ship, making them an important group to monitor and measure on a regular basis. If a large proportion of Verizon Wireless’s pre-churners are shopping the Palm Pre, bringing the device on board may help retain those customers. If not, Verizon Wireless may want to look at which other devices do attract their pre-churners.

Verizon Wireless Pre-Churners’ Interest in the Palm Pre and iPhone 3G S

Percentage of VZW’s pre-churners that viewed each device online at the associated carrier during June 2009.

The 1.7% of VZW pre-churners interested in the Palm Pre is actually about 50% less than that of Sprint or T-Mobile pre-churners, suggesting that bringing the Palm Pre to VZW won’t actually help the carrier retain some of its riskiest customers. On the other hand, VZW’s 14.8% pre-churner interest in the iPhone 3G S is over 40% higher than that of pre-churners from Sprint or T-Mobile. Since online wireless shopping is largely concentrated at carrier websites (and traffic to iPhone-specific pages on Apple.com dwarfs traffic to Palm’s website anyways), I think it’s safe to say that AT&T’s exclusive deal on the iPhone still appears to be a major pain in Verizon Wireless’ side.

Will the Palm Pre be the golden ticket Verizon Wireless is looking for? It’s a solid device that should benefit from Verizon Wireless’s large customer base and keep them squarely in the press. Yet, you have to think that Verizon execs can’t sleep easy at night knowing their riskiest customers are actively shopping a competitor despite their best efforts to bring new, innovative handsets to the carrier.  Will the Palm Pre be a success for Verizon Wireless in acquiring and retaining customers? I guess we’ll find out in 2010.

Earth Day 2009 was a couple of weeks ago now, but the buzz around “going green” is still alive and well. Last week I counted that, during a commercial break from ‘My Name is Earl,’ 4 of the 5 ads I saw contained a green message or promotion.

In online advertising too, we at Compete have seen companies embrace green advertising across the board. All four major wireless carriers are currently heavily promoting paperless billing initiatives (my personal favorite: att-satisfaction.com). Motorola took going green one step further this year by introducing the Renew, a new cell phone made of recycled materials that uses sustainable manufacturing practices. When it launched, the Renew captured 6% of T-Mobile’s total handset interest, which is more than double that of the average T-Mobile handset at its price point. Still, most corporations have historically claimed that changing materials, manufacturing routines and shipping practices is too expensive and doesn’t add value for consumers. So what is changing? Why are companies starting to embrace going green?

It turns out that companies may not have to make a choice between helping the environment and increasing profits after all. As part of our quarterly Online Channel Effectiveness product, Compete surveyed over 900 wireless shoppers and asked them about their shopping and buying patterns. With regards to green products, we asked survey takers if they would be willing to pay more for consumer electronics products that were “green.”

As you can see, 59% of shoppers told us that they would be willing to pay extra for green CE products, and 10% offered to pay 50%+ more. Moreover, this survey was conducted during Q1, when most respondents were likely weighing the weak economy and their own economic circumstances in their answer to this question. You might be thinking, “but wait, everyone says they want to be green, but nobody actually pays for it”. Well, even if half of this 59% spends just an extra $1 on their next cell phone, companies would generate an extra $32M annually (roughly 30B cell phones are sold in the US every quarter).

So how can companies capitalize on this desire to go green? Appealing to consumers’ desire to be environmentally-friendly and save money are not necessarily mutually exclusive. Marketers have been successful at getting shoppers to pay more for environmentally-friendly products by clearly articulating what other savings the customer gets that should offset the higher purchase price. For example, high-rated Energy Star appliances typically cost a premium over comparable items but earn that money back in reduced utility usage. Similarly, replacing household light bulbs with compact fluorescent ones saves both electricity and having to replace the bulbs every year or so.

And that’s not just good for the environment – that’s good for business!

For the past two years, consumers and the media alike have ‘ooh’ed and ‘ahh’ed over the iPhone. And rightfully so. The sleek design, unique interface and ease of use were characteristics not frequently seen in the US cell phone market before 2007, and drew significant traffic to Apple’s website.

But, two years later, traffic to BlackBerry’s website has slowly overtaken Apple’s online iPhone traffic. Is the love affair with the iPhone over?

Generating website traffic is important for any online business, but it is crucial for cell phone manufacturers. The vast majority of consumers do their online cell phone shopping at carrier websites (AT&T, VZW, etc.). The manufacturer has very little direct connection with the shopper and thus less influence on their purchase. For cell phone manufacturers, developing a strong online presence that is independent of carriers is an important step in creating and sustaining a dialogue with shoppers and enhancing their overall interaction with the brand. All manufacturers are working to achieve such a presence.

The chart below shows traffic to U.S. phone-specific portions* of each manufacturer’s website between July 2008 and February 2009.

As you can see, it is typical for phone manufacturers to see a bump in traffic when one of their high-profile devices launches.

• Apple: 77% increase for the iPhone 3G
• RIM: 37% increase for the Bold and Storm
• HTC: 559% increase for the T-Mobile G1
• Samsung: 92% increase for the Instinct and again in late November for the Behold

What is remarkable here is RIM’s performance. Although the launch didn’t generate a traffic bump as dramatic as some others, they were able to sustain that online momentum over the last eight months. Lifts for the other manufacturers were larger, but temporary. This trend is likely driven by RIM’s execution of a well-conceived strategy.

First, RIM decided to reinvent BlackBerry as a consumer brand, not just a work device. They have embarked on several major promotions since Spring 2008, including the ubiquitous “Life on Blackberry” campaign. Other manufacturers mainly focus advertising specifically around device launches, and not so much as a branding tool. RIM has clearly stepped up its total advertising spending in both areas.

Second, they hyped the BlackBerry App World a LOT. “Blackberry applications” was the fifth most popular search term driving traffic to blackberry.com during Q1, and the App World didn’t even launch until April 1st!

Finally, they keep it fresh. We’ve only seen one iPhone release per year, and of course it’s the only phone made by Apple. RIM had a suite of popular devices launch in 2008 (Storm, Bold, Curve and Pearl on new carriers, Pearl Flip) to constantly keep their name in the news and in consumers’ minds.

What others can take from RIM’s example is the notion that, despite the hype, Apple and its iPhone are not actually invincible. Others can compete, and even conquer, the breakthrough device if they build compelling products, design smart promotional strategies and take the time and, yes, money to execute to perfection.

Who’s up for the challenge?

*We say ‘phone-specific’ to normalize for traffic that may visit Samsung.com to learn about TVs or apple.com to buy a laptop. It helps to make comparisons more “apples-to-apples.”

Recession doesn’t seem to be having much of an impact on the market for high-end TVs. According to a recent survey by Consumer Reports, 23% of respondents said they plan to purchase an LCD or plasma TV this holiday season.

It’s likely that some of the demand for these HDTVs is driven by the good deals right now. Price-conscious consumers may not be changing what they’re shopping for, but they may be changing where they shop.

When you think of electronics stores, Best Buy probably comes to mind. And when you think of low-price retailers, you probably think of Walmart. Now that times are tough, it looks like consumers are connecting the dots between the two and spending more time and attention shopping for CE products at Walmart.com

While interest in TVs at Best Buy (measured by unique visitor traffic to TV product detail pages) has increased just 10% over the past year, interest in TVs at Walmart has surged 123% to slightly overtake Best Buy. To make matters worse for Best Buy, the number of people that visit BOTH Best Buy and Walmart to shop for TVs increased by 74% over the past year.

Walmart is also gaining ground on Best Buy in terms of search activity. In November 2008, 2.7% of searches for TVs resulted in a click-through to Walmart.com, up from 1.7% a year earlier. In contrast, Best Buy’s share dropped from 2.5% to 1.8% in the same time period.

Will Walmart drive Best Buy out of the TV retailing business? Probably not, but consumers’ decreasing brand loyalty and increasing price consciousness should be a cause for concern. Only a better understanding of consumers’ increasingly sophisticated shopping behavior can keep marketers ahead of the game, allowing them to give consumers the products and shopping experience they want. Now that’s a present I’m sure everyone would like under the tree this year.

Not long ago, I bought a brand new 46” LCD HDTV just in time for football season so I could see every individual blade of grass swoosh by as my beloved Patriots went for touchdown after touchdown. And then… well, you all know what I’m talking about, so I don’t need to repeat it here.

Still, football season has just begun and I still have an HDTV hanging on the wall. So to keep my mind off Brady and the Pats, I decided to focus on the TV itself, wondering if my (somewhat impulsive) shopping patterns were typical of other consumers out there.

In terms of shopping, it appears that most people aren’t looking for TVs during the pre-season like I did, but are waiting until the promotion-filled holiday period and just in time for SuperBowl Sunday. The chart below shows last year’s interest in HDTVs at two of the top consumer electronics websites.

• Interest remained pretty flat throughout fall 2007, then spiked during the holidays. This type of jump is expected, but HDTVs sustained some of that interest through January and into early February - the Super Bowl was on Feb 3rd.
• The last two weeks of January generated a bump in interest for both companies as consumers prepared to get a new TV for the big game. Best Buy interest increased 16%, while Circuit City’s increased 43%

Now I only really considered two HDTV brands, Sony and Samsung, both because I’ve had good experiences with other products of theirs in the past. This type of halo effect is interesting, and I wanted to figure out if consumers mainly think about these companies in terms of TVs or other products. Below is a chart of the percentage of search referrals to each company’s website where the searcher used TV-related terms (HDTV, DVR, etc). I compared fall 2007 with holiday 2007 to get a sense if consumers’ search behavior changes from season to season.

• In September 2007, 5.5% of Samsung’s search referrals came from TV-related terms, as compared to 4.4% for Sony. This means that the vast majority of searchers weren’t necessarily looking for TVs on either site; Samsung visitors searched mostly for mobile phone-related items, Sony’s tended to look for laptops.
• Despite a large increase in shopper interest from the fall to the holiday period that was reflected in the first chart, the percentage of searchers looking for TVs on these two sites actually decreased heading into the holiday season

This tells me that there really could be a halo effect for both of these companies. Good experiences with one product that Samsung (or Sony) makes could lead to increased mindshare for another.

This presents an opportunity for companies that manufacture multiple categories of products to cross-promote and upsell products to increase consideration and mindshare among consumers that already have a favorable impression of the brand. On Tuesday, Jim Nail of Cymfony actually talked about the importance of social media on consumer mindshare in an ARF webcast . Playback is free for ARF members.

And as for football season? I’ll still spend most Sundays on the couch rooting for the Pats, hoping that lightning can strike again with Matt Cassel as it did originally with Tom Brady in 2001. And no matter what happens, I’ll be watching every tiny detail of it in 1080p, with 120Hz refresh rate and SRS TruSurround XT audio. Gotta love technology.