Tuesday, May 17, 2011

"The whole point of any medium, where it is video or writing or painting or film is to expand our thinking and expose us to new ideas, not repeat the same ones over and over ad infinitum...Tell me what I don't know. Tell me what I never even thought about before." Michael Rosenblum

" For it to be a content business, content people have to run the company. The business has to be obsessed with what it’s consumers want and be able to give them that and much more. In fact then need to give them things that they didn’t know they wanted. Content consumers ultimately need to be surprised and fully expect their sources of information to be smarter than they are about the topics they are reading or viewing." Larry Kramer

"It will be very hard for people to watch or consume something that has not in some sense been tailored for them." Eric Schmidt

Today's image: Leaning Tulip by Fred Winston. Wonderful. Thank you for sharing.

Let's suppose you launched a business in November of 2008 and in April of 2010 your business had achieved a value of approx $1.35 billion. Let us say your revenues that Spring were on pace to make $1 billion in sales faster than any other business in history. Let's agree that in October of 2010 your business was operating in over 150 markets in the USA, over 100 markets in Europe, Asia and South America and you had over 35 million registered users.

What if?

What if in the Fall of 2010 you were offered $3 billion to sell that business and then weeks later you're approached by another suitor who offers you over $5 billion to sell?

What if your 2011 projections indicated you were in good shape, pacing to deliver between $3 and $4 billion in revenues. Would you dare change anything?

It's the true story of Groupon and here's how they've answered those two what if questions...

They said no. They were not interested in selling (Yahoo! and Google were the rumored buyers)


They decided while business was good it was time to change things, invent another product and introduce a different business model.

Imagine that.

A company that's about two and a half years old which is on track to produce revenue equal to about 21% of US radio's total revenue in 2010 (using BIA/Kelsey estimate of $14.1 bil, and $3 bil rev assumption for Groupon) and instead of being laser focused on tweaking and optimizing their existing business model they've decided to also change up their own game, innovate and launch another business.

Before you continue reading, please watch the following video.

Clearly, Groupon and its competitors (over 100 similar US sites) are having an impact on local ad spending.

Allow me to suggest that Groupon Now has the potential of changing the local direct game yet again because its value proposition is fundamentally different. Groupon is putting the third screen to work and doing it in real-time, they've entered the brave new world of the mobile pure play.

"Mobile is huge for Groupon...I believe we could see us doing 50 percents of deals sold/purchased in the next couple of years" said Michael Shim, Groupon VP Mobile Partnerships. As eMoney writer Tricia Duryee reports "Mobile, along with social and local, will be one of the largest drivers for Groupon's deals business over the next few years...Shim said the service has also exceeded expectations, with more than 1,000 merchants already signed up to offer real-time deals. 'We’ve been inundated with demand. Groupon Now is about local discovery. What can I find around me?…We are just getting going on where we think it will take our business.'" [ref]

Introduced last week and more than 1,000 merchants already signed up. Pop quiz: what's your best take rate story? Is it a compelling one-sheet being used on the street and on your site?

My sense is there are strategic issues involved. Here are four to consider.

1. The practical notion of "Local" is being redefined. We're moving from the traditional big/generalized (e.g., DMA, SMSA, US Census block code) to the new small/personalized (think GPS or exact position within three meters). A new marketing grammar, a new sense of place, will be one of the second or third-order effects in the growing adoption of location-based services.

2. New players want in, others want bigger local shares. Local has not been 100% owned and operated by the usual suspects (i.e., the traditional incumbents including print, broadcast and out of home) for a while now but it's getting ever more competitive. Local and hyper-local is where everyone wants to be next. Everyone includes Google, Microsoft, Yahoo!, Pandora, and [insert the name of an advertising or ad-supported company here].

3. New rules of engagement are emerging and with them new expectations are being created. The metrics used in buying and evaluating local media will likely change and affect some share of local ad spend. From buys based upon audience estimates and proof of performance (run as ordered?) to registered users and completed transactions (products/services sold). Moreover, performance pressure will increase. From flights evaluated over days and weeks to flights evaluated over hours in real-time. In this new always-on connected world it's certainly possible that price and item copy will be placed, judged on actual in-the-moment purchase behaviors. Impulse purchasing is exploited, solutions defaulting to mobile (i.e., Help, I'm hungry or I'm bored). As ever, the research tool preferred by local retailers continues to be the cash register.

4. Creating awareness without generating completed transactions will become less and less attractive to buyers, especially those local merchants provided more performance-based options. Branding or pure image driven advertising will become more difficult to justify. John Wanamaker gets credit for the famous adage "Half the money I spend on advertising is wasted; the trouble is, I don't know which half" but as AdWeek's Michael Wolff wrote just yesterday on the subject of digital marketing and TV's upfront week "...15 years into our ability to measure the absolute effectiveness of the way and the methods by which we sell something, and, still, TV advertising, which measures nothing, guarantees no sales, offers no data, registers no interest, quantifies no desire, provides no follow-up, and which no sentient being watches anyway, is making more money than ever before. Waste works." [ref]

While I appreciate Michael's point of view there remains major work to be done on the metrics used in the buying and selling of digital media. Serious debate continues and we have yet to reach a consensus relative to accepted definitions and measures. Bravos to IAB for their ongoing efforts. Further, while Steve Jobs continues using TV to sell his iPhones and iPads I'll remain bullish on the potential of TV advertising done right. We'll stipulate here that doing TV right is not at all easy and most don't do it right, however, Apple stands out as a good example of just how powerful TV advertising can be. Target, the merchant, is another exemplary TV advertiser. There is, imo, a significant share of the $65.9 billion in annual US TV ad spend [2010 cit] that is pure waste.

"At every crossroads on the path that leads
to the future, tradition has placed 10,000 men
to guard the past."
Maurice Maeterlinck

What's a broadcaster to do?

To those working in radio, those progeny of the first generation wireless, the true real-time media pioneers, let me offer five suggestions. As well, let me encourage you to share your thoughts, ideas and suggestions via comments here below.

1. Game it up. At your next sales meeting, play the Groupon Now! video and give sellers the following homework assignment. "How do we pitch Big Frank? What is our value proposition that will blow Big Frank's face off? How will we help him to fill his empty tables?" Make it a pitch competition. On pitch day encourage brutally candid discussion. Vote first, second and third place winners. Let the sales team and a good representation of staff not on the sales team participate in the voting. For those already deep into "Deal of the Day" and other discount coupon strategies, how are you measuring up? Would Big Frank buy your offer over Groupon Now? Do you have a video that demonstrates how your program works? A video that clearly articulates value that the prospective client can understand? Does your value proposition match or exceed the one offered in the Groupon Now video? You must have and present a compelling, engaging story. Remember Leo Burnett's counsel on great advertising being three messages: "Here's what we've got. Here's what it will do for you. Here's how to get it."

2. Work your network. Start a serious conversation with others. What's happening with Groupon, LivingSocial, et al in your market and others? What are your colleagues (and clients) hearing, learning and doing? What's the RAB's best thinking on this? Take the advice of Dr. Jeffrey Cole and ensure that your learning curve is consistently steeper than your action curve. "You have to be paying attention, learning and watching." Do your homework. Be prepared for your client's phone call asking you "What do you know about Groupon?"

3. Make something happen. Get in the game. Take measured action and experiment. Be willing to fail and learn how to fail faster. Be agile. Embrace iterative development. Take the winner of your pitch competition (see #1 above) for a test drive. Carefully study the results. Revisit your design and fine-tune or blow up and move on to your second place winner. Repeat. Move on to your third place winner. Hold another pitch competition.

4. Give your team a better chance to win. Be the best that radio can be. The anecdotal evidence would suggest 7 of every 8 potential merchant deals are rejected by Groupon. Can you imagine a radio sales manager failing to approve 7 out of 8 orders for new business? Even if it turns out not to be true let's admit it...7 of every 8 being rejected makes a killer urban ad legend for Groupon. If what Groupon is doing is working it's working, in part, because they do qualify their clients and work within a creative framework designed to optimize performance on the Groupon platform. Radio should consider taking a more pro-active, aggressive approach in working with clients to develop creative that plays into radio's inherent strengths and utilize smart scheduling of that creative to maximize the chances of producing best results for the client.

5. Check out what Fred Jacobs and the digital ninjas of Jacobs Media have to say about all of this. They're offering a good read. Make the jump to the always informative jacoBLOG here.

Keep in mind Groupon was Andrew Mason's second attempt at using the platform he developed. His first, ThePoint, failed to produce the results he expected but he didn't give up, he moved on to invent Groupon. Now he's inventing Groupon 2.0 What's your team up to?

Ever tried. Ever failed. No matter.
Try again. Fail again. Fail better.
Samuel Beckett

Footnote: What did Google really want? My guess is Google - if they really did make an offer - already having the superior tech skills, wanted Groupon's creative staff and their local sales team. It would have been a very savvy accretive acquisition in their local strategy. They have since launched Google Offers.

Previously: My post about Groupon from late last year: Nobody likes it but the audience.

Finally, a must-see video and a book recommendation. Thanks for stopping by.

Bonus: TED: Eli Pariser: Beware online "filter bubbles."


The Filter Bubble: What the Internet Is Hiding from You by Eli Pariser.
Amazon info.

Reviewed by Jesse Walker: The Facebook Friend in the Plastic Bubble

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