Music Ally

Claes Loberg is CEO of Guvera, the latest free ad-supported download service to get a licence from Universal. Based out of Australia and the US, Guvera is expected to launch late this year; its model is ambitious but rather innovative, aligning fans’ music tastes with the brand identities of certain advertisers so that brands effectively buy tracks on behalf of music lovers.

We talked to Loberg for a feature in the latest Music Ally Report which looks at the future of legal free music models. Subscribers can read the piece here while non-subscribers can sign up for a free trial. Be sure to read the Q&As we published earlier in the week with We7’s Steve Purdham; Pandora’s Tim Westergren; former Mashboxx and Grokster boss Wayne Rosso; and Rebel Digital’s Robin Kent.

The interview with Claes Loberg of Guvera can be found after the jump.

Q: How did Guvera come to be?

A: I was in London in 2002 and was working with the guys at the Branded Content Marketing Association trying to figure out where advertising moves when it moves out of TV. The purpose was: how do you measure the value of advertising if advertisers get into branded entertainment? The idea of brands owning and creating content doesn’t make sense, because brands can’t associate themselves with the failures of the entertainment industry. Brands can’t afford for stuff not to be a hit.

So I started looking at whether we could reverse the ad model and create something that is channel-based where instead of advertisers selecting what groupings of content to advertise on, could advertisers become the channel and house all of the content that is relevant to their brand?

Q: You’re launching an ad-supported free download service just as the industry is starting to question the free model. What makes Guvera different?

A: From our perspective, the reason why any other models are not working is that there’s a bigger problem than customers not paying for content. The bigger problem is the ad industry itself.

The music industry have been trying to get advertisers to pay for content but the ad model they’re using is based on TV advertising. That works when you run an ad model where you control the stream and advertisers can disrupt that stream. But in an interactive world where you can get past ads, any concept based on disruption or banner ads where you’re distracting people doesn’t work. The 1950s model no longer works – disruption or distraction advertising isn’t the way ahead. The only way you can do it is engagement based advertising.

Q: Ultimately isn’t the problem that there’s not enough money in the ad industry to pay for legal downloads?

A: The ad industry is a 600 billion dollar industry. The lion’s share is being spent on TV because the whole ad world knows what TV is. Deep down they know it’s not working but the question is: where do they put those funds? If you are trying to access digital ad dollars and be another place for advertisers to spend their money – disrupting the stream hoping they’ll be annoyed enough to pay – it doesn’t work.

If you try and create something useful for advertisers, if you create a place where the TV dollars can move across, then you’re looking at taking the TV dollars away and they are by far big enough to pay for the music.

Q: But other services have already told us that it’s difficult to avoid either having to employ a huge sales force or losing out because of discounting around the ad networks…

A: Advertisers want to lump us in to a CPM model or a CPC model because that fits with how they buy space. But our first point is getting across that they’re paying for engagement. It’s not so much that the brand is paying for the downloads, they don’t buy from us saying they’ll pay x per download. They’ll pay x per customer. $3 per customer for a brand means the customer could download one or two tracks and stream 20 or 30 tracks.

We’ve modelled the simplicity of how you build the channels on a Google AdWords model, so that even a small business could build themselves a channel and say they want 25-30 year old people in London up to the value of $3 per customer up to a total of 100 customers.

That creates a truly sustainable element open to many more advertisers. Much as Google is responsible for finding advertisers, they are of course dealing with the bigger ad buyers too but the wider group is the millions of people who as they search Google go on to create their own campaigns. Our guys are dealing with a few hundred media buying companies and each of those have our materials, but the wider concept is that it has the same flexibility for hundreds of thousands of mid level businesses to use as an engagement tool.

Q: Talk us through the Guvera experience – for both customers and brands.

Brands don’t choose the songs in their channel. They choose tags that match the attributes of their brand personality such as angry, happy or whatever. That populates a list of suggested songs. They choose 20 of the suggested songs or pick a selected artist and that creates the brand spine – the songs that best represent their brand. That presents the food for the algorithm to match what songs are similar, so if I’ve chosen AC/DC and you search for Metallica, the algorithm figures they’re similar and puts them on the Jack Daniels channel.

What the consumer then sees is relevant to their own tastes but also a match to what the brand has selected. When you search for a song, Guvera has rules that there must be a minimum number of brands that will pay for that song for you. If you search for a song, once you choose which brand will pay for it, you get taken to that channel. If you try to download more tracks it will pop up and say ‘your quota’s full, click through to look at another channel.’

The most common question we get is ‘why wouldn’t you choose the brand at the top?’ – but when you click the brand all that other content related to the brand fits the brand’s personality. We’re using brands as a tool to find the music.If you don’t know what music you’re looking for, currently you’re relegated to matching tools or searching categories/ subgenres. Realistically people don’t what fits in a subgenre but most of us know what a brand’s sound would be. You could already explain what you’d expect to find in Levi’s, for example.

The beauty of it is the brands, having done mindshare exercises of understanding what music you associate with them, can in turn use the music to develop their brands. This allows us to truly do something useful to get advertisers to spend money in digital.

Q: But doesn’t this make it seem like certain artists are endorsing certain brands?

A: There’s no association with an artist from an endorsement standpoint. We’ve worked with the BMIs and the PRSs to work on what happens when a customer searches on Guvera. Absolute control in the backend lies with the artists. There’s an engine for labels, artists and publishers to put restrictions on and say ‘never can this song be paid for by a tobacco company or a Walmart or whatever they don’t agree with.’

Once you go to the channel there can never be just one artist inside of that channel. There’s a ratio worked out with record labels and rights bodies so that there are different artists and tracks in there. So if you clicked Pepsi you wouldn’t find all Rolling Stones. This is where the value starts to shift with the advertiser.

Q: Even so, surely it’s going to be tough for Guvera if you don’t have key artists in the catalogue…?

A: Take music ringtones. At the very beginning with ringtones they couldn’t get composers and artists to be associated. Then once they realised that the model had changed and where they were getting money from had changed, many more people wanted to offer those ringtones. Of course we’ll miss out on some artists but this may change when they realise that Guvera’s not trying to create a relationship of endorsement – we’re offering a mode where brands offer up credits.

Q: And are these really unprotected MP3s, or is there a catch as there was with Spiralfrog?

A: The tracks are DRM-free downloads. The whole concept is you 100% cannot disrupt or distract or forcefeed ads on them. That whole concept has to be abolished

Q: So what’s next for Guvera?

A: Universal is the first major we’ve publicly announced; the second announcement will be next week, the third one hopefully soon. Our first live beta version will be in Australia on December 15^th then February 1^st in the US.  Then there’s video. We’re creating the ability to monetise all content so we’ve been in conversations with Sony Pictures, HBO and also news bodies and all sorts of content. If you imagine these branded channels they can house all kinds of content.

Tags: ad supported music, branded, branding, claes loberg, disruption, distraction, guvera, spotify

This entry was posted on Friday, December 4th, 2009 at 9:29 am and is filed under Interviews. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.