I’ve just spent a week concentrating on the New York startup scene. While not as organized (and insular) as the Bay Area bubble I usually live in, it is very vibrant indeed. And there’s definitely money here:-)
You can’t help dealing with the media industry if you are looking at entrepreneurship in New York. Most of the large media buyers, and many of the brands they buy for,are there, as are many of the outlets. And the tension between old and new ways of doing things is palpable. The ad agencies are trying to figure out how to consolidate their traditional power around all the new online media outlets, but the power has definitely shifted within the agencies. The creatives can’t be the gods anymore, because campaigns can be measured. And what old-school Madison Avenue guy knows what creative will appeal to mobile consumers who buy through m-commerce apps that are just beginning to roll out? How do you brand in this new environment? They haven’t a clue yet. No one does.
The media are also struggling. While I was in New York, Rupert Murdoch launched The Daily, a newpaper for the IPad. No one here can figure out how it will make money.
One thing is certain: there’s no magic in display advertising anymore, no matter what medium it is placed in. One company I spoke to told me that most click-throughs are mistaken, and counting them is meaningless as a conversion number. So what actually constitutes a conversion? Well, remember when Dell first went on Twitter and sold out all it’s outlet merchandise over night? Remember W00t, which sells one item a day and tries to sell it out? Those were/are meaningful conversions. Conversions, increasingly, are direct sales– sales that can be traced back to where the buyer found the offer. That’s why Groupon is so successful. The merchant who participates in a Groupon campaign can count the number of people who redeem his Groupon. That makes him want to participate again, and also to make him tell the store next door what he did. (they will undoubtedly ask when they see his foot traffic increase) Groupon doesn’t require heavy-duty creative. It’s Val-pak for the 21st century. However, there is still an unsolved conundrum. Are the Groupon customers the ones who will be loyal and come back even when you want to make a profit on what you are selling? Are they the RIGHT customers? Probably not. Those customers are the deal junkies, for whom brands don’t matter. If you are a brand, you don’t want those. They produce too much churn. Branding DOES require creative, and it takes a long time. And it can’t be measured. So far, the agencies that control the brands’ budgets are directing them into the same old activities, and not into what really can be measured. After all, where are the fees and commissions for Groupon? I think another disruption. Is coming as both brands and media come to grips with mobile commerce. My Starbucks app and my Checkpoints app are two sides of the same brave new world.
One thing is certain: there’s no magic in display advertising anymore, no matter what medium it is placed in. One company I spoke to told me that most click-throughs are mistaken, and counting them is meaningless as a conversion number. So what actually constitutes a conversion? Well, remember when Dell first went on Twitter and sold out all it’s outlet merchandise over night? Remember W00t, which sells one item a day and tries to sell it out? Those were/are meaningful conversions. Conversions, increasingly, are direct sales– sales that can be traced back to where the buyer found the offer. That’s why Groupon is so successful. The merchant who participates in a Groupon campaign can count the number of people who redeem his Groupon. That makes him want to participate again, and also to make him tell the store next door what he did. (they will undoubtedly ask when they see his foot traffic increase) Groupon doesn’t require heavy-duty creative. It’s Val-pak for the 21st century. However, there is still an unsolved conundrum. Are the Groupon customers the ones who will be loyal and come back even when you want to make a profit on what you are selling? Are they the RIGHT customers? Probably not. Those customers are the deal junkies, for whom brands don’t matter. If you are a brand, you don’t want those. They produce too much churn. Branding DOES require creative, and it takes a long time. And it can’t be measured. So far, the agencies that control the brands’ budgets are directing them into the same old activities, and not into what really can be measured. After all, where are the fees and commissions for Groupon? I think another disruption. Is coming as both brands and media come to grips with mobile commerce. My Starbucks app and my Checkpoints app are two sides of the same brave new world.
