What didn’t (and sometimes did) work. Part 3: publicity

What I’m listening to while I type: Return of the Grievous Angel:

Number three on my list of  five things that make web-tech start-up success more likely is ‘Twitter chatter isn’t enough, good press and advertising last longer’.

I spend more time than is probably good for my career in the pub four doors from our home. 

Me and hubby will sit in a particular corner and, because the landlord controls the TV remote, we watch a lot of sport and in particular a lot of La Liga. Aside from developing an awe-struck appreciation for the genius that is Messi and a schoolgirl crush on the sparkliness that is Balague, I’ve also noticed just how much of Sky’s ad space is bought by internet-based businesses.

It made me think about the value of traditional press publicity and non-digital advertising to digital businesses. Or why you need old-school media to make new media businesses really successful.

Online ad spend first overtook TV spend in the UK in 2009, and will overtake TV spend in the US this year or next (depending on your choice of analyst). Yet earlier this year, analysts were pointing to a bit of a bounceback for TV advertising led by web businesses including Google. And multi-media companies like Gannett have seen a 38 percent hike in TV ad revenues, albeit boosted by the Presidential battle and the Olympics.

“The biggest way to attract mass is still television,” Estée Lauder Chief Executive Fabrizio Freda told reporters at a briefing in New York in April.

So, if you’re a web company with a product already used by a billion people, and investors eating their children to have a share of your expected future earnings, what do you spend cash on?

Telling us Facebook is like a chair.

If you’re the world’s biggest-earning web business, where do you place a third of your ad budget? Into TV. And when you’ve got a great new product no-one uses, where do you tell people about it?

Google spent $1.5bn globally on advertising and promotion in 2011, over 4% of company revenueand, along with Apple and Amazon, has one of the highest ad-spend growth rates. There’s a great infographic here.

Here’s a game we can play. I’ll run through a short list of successful UK web businesses and see if you remember their TV ad:

Wonga
Asos
lastminute
Betfair
Bet365
Moshi Monsters
Wiggle
notonthehighstreet
Lovefilm

And, while you’re thinking about advertising, had a LoveFilm mailshot or a notonthehighstreet catalogue drop through your letterbox recently? Twenty-five-percent of spend on postal mailshots comes from home shopping businesses– and if that’s not what Lovefilm and notonthehighstreet are about, I’m a monkey’s aunt.

Yes, you can grow your business at speed if you hit the jackpot on a Facebook frenzy or Twitter trend spike, but it won’t be enough for long enough. You need press coverage in the early days and cash to spend on advertising once you’re growing.

I get a spike of roughly an extra 2,000 views each time I tweet about a new post on wreckoftheweek, more if it’s retweeted. But that’s digital peanuts compared to the spike a mention in a magazine delivers.

My point being that this is stuff you can do yourself for free and that makes a big difference at start-up. Press coverage, listings, forums, social media, search-engine-optimised content. It’s about hours and hard work, not marketing magic.

Basically, you need to work out where your potential customers are, go find them and say ‘Hi’.

hiGetting the press to notice you is the hardest bit. Like VCs, they move as a pack so one tech reporter writing about you generally leads to another interview.

What works in most business start-up reporting is a positive story focused on firsts (eg your software is doing something new), or numbers(eg investors have chipped in a nice big figure) or milestones (eg hitting a nice big user milestone). And with a feelgood personal story about the founder/s thrown in. Here’s an example of all four in one Guardian story: Songkick raises £6.3m in funding round.

With my start-ups I was generally pretty ok at getting initial press interest and web chatter but not so good at keeping the interest going (ran out of ‘first’ and ‘numbers’).

However good you are at attracting free publicity and web chatter, eventually it comes down to spending money on traditional advertising. Which means making money or attracting investors. Facebook may not need to advertise for more users, but it does need to use advertising to scrape off some of that studenty-stalkery-privacy-dodginess attached to its brand.

I’m going to wrap up with something from research by McKinsey earlier this year. Note the last sentence:

The results revealed that advertising fueled about 15 percent of growth in GDP for the major G20 economies over the past decade by generating new business. While some companies launched unsuccessful media campaigns and did not recoup their costs, such failures were outweighed by the companies with strong campaigns that increased sales, attracted new customers, or improved margins. On a microeconomic level, introducing digital media to the advertising mix helped companies increase their revenues, market share, and profit margins to a greater degree than traditional advertising alone. (Notably, digital media produced its effect by enhancing the impact of print and broadcast ads, rather than by replacing them.)

What didn’t work: newspapers

What I’m listening to while I type: Sea Sew

I’m not saying that newspapers are dead: individual newspapers will continue as businesses as long as the ratio between cost and revenue makes sense for the owner. But as a business model, we really are looking at the endgame.

Last week, Newsweek announced it was to end its print edition and go online-only in a bid to cut “legacy costs” attached to producing the printed product. Reports suggested $40m annual losses (one day I’ll do a chart showing how $40m/£40m is the default for stories mentioning newspaper losses), although other writers suggested it was that Newsweek just wasn’t good enough.

The same week, Guardian editor Alan Rusbridger was spitting bricks over a Telegraph story suggesting he was fighting to save The Guardian’s print edition against pressure to switch to online-only. It’s a story that surfaces periodically, not least because media commentators don’t believe The Guardian can turn around its £40m (yup) annual losses before the business runs out of money entirely.

The issue is that the cost of producing a newspaper has outstripped earnings from newspaper sales since the 1880s. Since when, the business model has become almost entirely dependent on the delivery of an audience to advertisers – and the valuing of that audience according to both demographic and size.

But the problem the business model now faces is that the assumption that equated size of audience to share of advertising revenue has been overturned by the shift to digital. Online audiences don’t deliver sufficient revenue because the advertising industry pays less for digital ads compared to print. The usual quote is that $100 advert offline = $10 on the web = $1 in mobile.

While 43 percent of Guardian News and Media’s readership is online, the company makes only one fifth of its income from digital. The Daily Mail is the most popular newspaper website in the whole wide world yet raises just 2.6 percent from online advertising. In May this year, the Daily Mail was selling 1.9m newspapers a day, but had 5.6m web visits a day. Despite web audience trouncing print, the Group’s news websites earned just £12m against £171m for newspaper advertising.

As Rusbridger tweeted in response to the Telegraph story: “Numbers for going digital only & junking print just don’t add up”.

It’s not just about newspapers having a business model dependent on (falling) advertising, but having a business model that separates product from sales. News is not the product that newspapers sell. News is an attractor: the attention attracted by news is what’s being sold.

 

nestle

In the next village to me is a big Nestle factory. When I walk the dogs, I smell the coffee. Nestle makes Nescafe, KitKats, pizza, icecream, petfood, babyfood…The branding is in the products, the quality is in the products. You know what to expect from a Yorkie; you know whether you like Dolce Gusto coffee.

The business model is that you buy the Nestle products you like, and 130 years ago that was the business model for newspapers. You don’t pay a monthly subscription to drink Nescafe. Shopkeepers don’t give you free KitKats in the hope that you’ll read the advert for insurance on the wrapper.

(I’m making the assumption here that it costs less to make a KitKat than Nestle sell it for. Unlike newspapers).

For newspapers to survive people have to want to read a newspaper. Whether you’re selling adverts or newspapers, you still need readers. But just how many newspapers you have to sell also relates to the size of the business you’re trying to support. The problem isn’t just with the newspaper sales model, but with the scale of the companies that run newspapers.

Newspapers are increasingly a by-product of the global corporations that run media businesses alongside successful insurance risk services (DMGT); contract printing (Trinity Mirror); TV stations, websites, magazines and nursing services (Gannett); TV, Hulu, publishing, Australian rugby league (News Corporation).

If all you need is to make enough money to pay a handful of staff and the print and distribution contracts, you don’t have to sell a lot of newspapers. It’s a model that still works at small-scale or local. But share dividends, company cars, pension schemes, city offices, ad campaigns, a $33m salary for the boss, well it adds up.

Am I saying newspapers can’t be big business? Yes, I am. But I’m not saying that newspapers can’t make money.

I am also saying that you can’t have a business branded by a newspaper but make your money selling insurance and running care homes. Eventually, the insurance-sellers are in charge and the loss-makers are cut or axed.

More importantly perhaps is that you can’t be a big, global, multi-purpose company and still expect to dance like a butterfly and sting like a bee when you’ve got a fight on your hands. As newspapers have now. As tech-VC Fred Destin puts it:

Most corporations are defined by the quality of their planning processes, which in turn become objectives against which execution happens and achievements are measured. Corporate behemoths, faced with change, stumble and fall. In fluid markets where everything can be priced and exchanged dynamically, startups thrive. They are the elemental unit of a cloud economy, highly adaptable and insanely good at one thing. But large corporations cannot adapt at the speed necessary to remain best of breed in all aspects of their business.

Here’s what I think we do with newspapers: we forget what we know about selling newspapers and look at what we’ve learned from the web.

The web is incomprehensibly massive and global yet personal. It’s like driving a car – we shut the door and think we’re the only ones on the road. It doesn’t matter how big the web is (or how few companies are running it); we travel around it according to our personal roadmap of interests.

A couple of weeks ago I challenged my entrepreneurial journalism students to come up with something they didn’t like about the news – a problem that needed changing. Each problem they raised came back to one thing – the news wasn’t personal.

It wasn’t that they only wanted to read the news that interested them, it was that they couldn’t easily access news they might be interested in.

The profession of journalism has been based on how to deliver news that most people would want to know. But most on the web is most products, most choices, most information, most of our friends, most people like us, or most like the thing we’re searching for – ie most of the things one person wants, in one place.

Apply that to news and you get most of the news that interests me, and some of my friends, and some people with the same interests as me – without me having to look for it. Does that sound like a newspaper to you? And then there’s that other bit – the things I don’t know that I might want to know.

So, given another run at investor funding , here’s what I’d do instead of launch a newspaper: I’d build what Facebook could have become on April 6th, 2005.