Category Archives: Nextness 101
“Oh -- what’s this,” asks a guest, nervous.
“A lamb roast! And look, I’ve already put the sauce on it! Capers,” you say.
You’ve a right to be smug. You’d already checked your guests weren’t vegos. This lamb’s going to be the best thing they’ve ever eaten.
Then: “I’m allergic to capers,” your friend says sadly.
From perfection to disaster. The dinner did not survive its first contact with the eater.
We’re all tempted to make a product perfect before we release it to the world.
In digital agencies, that tendency’s embodied in a process called Waterfall. At its least subtle it’s basically Big Design Up Front. The client defines their need. The agency comes up with a strategy. Wireframes. Designs in Photoshop so you can see how it’ll look. Build it. Test it -- just to make sure it doesn’t break. Launch it. Maintain it. The whole process is signed off with the client in advance, to a strict budget and with agreed deliverables.
It’s how many agencies work. Even non-digital ones: in traditional agencies, the Waterfall-style process went a little something like this. Insights/strategy. Write a brief. Get the creatives involved. Research perhaps, to choose which execution is best. Plan the campaign. Bam -- pull the trigger. The campaign rolls out. It’s measured. Then it’s over.
Now imagine a different dinner. “Come in, come in. Drinks? Oh you bought some, lovely. I’ll open them. Now what are you hungry for? I’ve got lamb? Oh you want a lamb salad? Let’s do that. Yes you chop up the tomatoes, thanks…” Less perfection, a bit more messy, but everyone gets what they need and want.
That’s agile and lean.
The Manifesto for Agile Software Development was created by software developers in 2001. In it, their stated values are:
- Individuals and interactions over processes and tools
- Working software over comprehensive documentation
- Customer collaboration over contract negotiation
- Responding to change over following a plan
Sounds good doesn’t it?
Agile software development was gradually codified:
- Tasks are broken into small increments with minimal planning.
- Iterations are short time frames (“timeboxes”), worked on by a team.
- Team size is typically small (5-9 people), cross-functional and self-organizing. Most agile teams work in a single open office (“bullpen”).
- Face-to-face communication takes preference over written documents. A daily “scrum”, lasting not longer than 15 minutes, is held where the project is discussed verbally.
- At the end of the iteration a working product is demonstrated to stakeholders. The measure of progress is how much written and working software exists.
We’re inherently suspicious of jargon, and the model seems hard to scale.
But it’s all reasonable, even laudable. Especially today -- when technology’s changing so quickly. Not just technology -- the whole world.
Eschew the big perfect thing and make a “Minimum Viable Product.” Cheap, functional, rough. This is what Twitter looked like when it launched.
Allow the user to interact with and explore the MVP. Their behaviour can change what you do next. (The Twitter hashtag, for example, was invented by a user in 2007. Now 11% of tweets contain them.)
Is your idea not gaining traction? Change it. It could be a small matter of iterating: continually making improvements. Or it could require a pivot: Twitter was originally a podcast-directory called Odeo. Instagram started as a messaging/check-in service called Burbn before it became a photosharing app. Now it’s worth a billion dollars. Fail fast and get it over with.
So what’s the problem?
Agile and lean principles make intuitive sense. And who doesn’t want to emulate a start up?
But STW Digital Chief David Trewern, who’s used agile principles effectively in DTDigital (the agency he founded) -- and seen them work well in other STW companies -- sounds a cautionary note.
He agrees waterfall’s not ideal, when it becomes “all about controlling the inputs and outputs and constraining the creative and organic process -- from which brilliant and unexpected ideas emerge,” he says. As for agile and lean, though:
Pure agile works well for the right project and team. But the reality is that the objectives and parameters of many projects are not a good fit for pure agile, and many teams and clients are not ready or aligned enough… fixed budgets, time frames and mindsets mean that pure agile can be dangerous.
And many clients agree.
As Leisa Reichelt wrote, ”[Clients] effectively pay a premium for an agency who knows what they’re doing to do that thing well. It tends not to play well for an agency to then spend the duration of the contract being actively uncertain, making hypotheses and validating them, using the client’s money to ‘learn’.”
And as for emulating start-ups -- well, as much as we’d love to copy their every move right down to the last detail, we’ll save that til we’re flush with venture capital.
Though they’ve been kicking around agencies for a few years - Made by Many in particular have eloquently championed an agile-inspired approach that works very effectively for them - the concepts of agile and lean have hit the mainstream.
The latest edition of Google’s Think with Google included a feature on Agile creativity: how ad agencies are working at the pace of digital. In it, they offer and expand on 7 key tips to be faster and more flexible:
- Physically (or virtually) co-locate
- Add technologists to the creative team
- Develop t-shaped talent
- Get “real-time” insights
- Plan an offsite “idea-thon”
- Iterate and test campaigns
- Partner on pilot projects
Take a few minutes to explore it.
It’s certainly not a rule book. It’s not a manifesto. It’s light on jargon. Though it’s rare to see them stated so simply and practically, none of the ideas are original.
But it combines ideal agile and lean principles and practices with the reality of agency life.
It’s a good balance.
Simplicity + creativity + lovely people = Tumblr.
Tumblr is a blogging platform, and a very nice one too. It lets you quickly and easily set up a blog, customise the look of it with its own URL and a range of themes, and post anything at all: images, video, text, quotes and audio.
But easily setting up a beautiful blog is only half of what Tumblr offers.
The other half is its community: millions of Tumblrs from around the world that you can Follow, and – similar to how your Twitter feed works – see their updates on your Dashboard. You can express your appreciation of someone’s post by clicking a heart icon to Like it. You can share a piece of content you love by Reblogging it onto your own blog, a feature which, long before a retweet button, helped great content go viral in minutes.
Unlike its blogging platform competitors WordPress and Blogger, there is absolutely no pressure on users to post in depth content. Just click, make sure you make it clear where the material came from, and go. Of course, this doesn’t stop people from crafting high quality posts. It just means you don’t have to. If you’ve never blogged before or don’t know what you’d talk about everyday, Tumblr is the best place to start.
And unlike Twitter, it’s highly visual. Embedded video and images make Tumblr a feast for your eyes.
Why you should be on Tumblr.
1. See culture unfold.
Sometimes it feels as advertisers and communicators focus too much on pre-digested culture: reading trend reports instead instead of picking what’s next from observation; collecting stats about the power of social media rather than loving it themselves; studying industry blogs or watching award show reels to see what’s hot. The problem is, you’re just watching the watchers. Occasionally useful, but ultimately it’s all second hand.
But when you’re on Tumblr, you see raw culture getting made. Clothes, books, art, products, people, photography styles, acronyms, slang, and memes: the most creative people in the world are on Tumblr posting what they love, what inspires them and what makes them laugh. Why not cut out the middle man and get it straight from their mouths?
2. Build your visual sense.
Twitter gives you a wonderful overview of the ideas and issues that are spreading through your network. But it can be a bald summary without images. Tumblr, with its ability to embed high-res images, photosets, gifs and videos, sparks your visual creativity. It prompts you to learn new creative skills yourself (food photography, say, or lomography, or tilt-shift techniques). And in surveying the stream of images every day, you develop a strong sense of taste: what makes one image fresh, another poor or hackneyed.
3. Curate your inspiration.
Tumblr acts a perfect online scrapbook to house your inspiration where once you’d use a moodboard or a Moleskine. If you’re worried that making your private inspirations public would destroy your mojo, think again.
Revealing influences is the confidence of a true creative person: you can see where the ideas come from, because even with the same ingredients I know you can’t bake what I’m about to with it.
4. Follow inspiring people.
- Visual creatives: Maximum Radical / Pablo Marques / Anna Rose Kerr / Joanne McNeil / Nevver / F**** yeah, ads / Yokoo / Things Magazine / Tulle Tulle / Corwood / Hrrrthrrr / Semisetadrift / The Beastie Boys / Lady Gaga / Textbook / 50 watts / Here’s some awesome / Curator of curiosities.
- Writers: Tess Lynch / Molls / Jean Hannah Edelstein / Rachel Hills / Britticisms / Natasha Vargas-Cooper / Alex Balk / Austin Kleon / Arianna Stern / Mills Baker.
- Planners: Thought you should see this / Curiosity Counts / Mike Arauz / Alex Campbell / Amanda Mooney / Bud Caddell.
- Memes and hilarity: Rocketboom / Unhappy Hipsters / Clients from hell.
- Media: New Yorker / N+1 / GOOD / Guardian / The Economist / The Atlantic / NPR / Life.
- Brands: Iceland (the country – so cute!) / Myer / EMI / IBM.
Are we taking our own advice?
Let’s get down to business.
So those are the all the happy, positive, inspirational reasons you should be on Tumblr. Now let’s talk about the strategic ones. Even people who have a successful blog on Blogger or WordPress now have a presence on Tumblr. Tavi has Tulle Tulle; Miss Moss has no less than four Tumblrs! It’s for the four reasons above and one other important one: there is no better platform for circulating content and building your traffic than Tumblr.
- There are more than 22 million Tumblr blogs, and its network gets 8.7 billion pageviews a month, globally.
- With the Reblog feature, your content can be shared in seconds.
- With one click, people can follow your Tumblr and never miss another post.
Should brands be on Tumblr?
It’s bizarre that more aren’t.
- It’s a great platform to share the diverse snippets of content that all brands create these days but can’t always find a natural home on a brand website – at least not quickly.
- It’s perfect to curate and showcase the inspirations, values, mood and lifestyle behind your brand.
- Tumblr is a friendly, welcoming environment which rewards creativity and quality, where ever it comes from – including brands.
Why not join right now? And if you are on Tumblr, feel free to leave your URL in the comments so we can follow you.
But something happened last week that took this technology out of the dull realm of “hey maybe we could use this on the train instead of carrying our Oyster/Myki cards,” and into the realm of potential rapid innovation and delight.
What is it?
It’s so easy: it’s just a wireless technology. It’s a simple and secure way for two smartphones or devices held close together to transmit data to each other; and it allows them to read information from smart tags embedded in posters, stickers, and other products. That’s really it.
If you need a more technically-detailed summary of NFC, we recommend this one by Ars Technica.
Google Wallet: a ”single tap” payment system for smartphones equipped with NFC technology.
“The future of commerce starts today,” Google said last week, launching Google Wallet, a “mobile app that will make your phone your wallet.” It stores virtual versions of your existing plastic cards on your phone, along with your coupons, and eventually, loyalty and gift cards.
It also perfectly syncs with Google’s “Groupon-killer,” Google Offers. Google Offers are deals on products and services at local or online businesses. Whenever you buy or save a Google Offer, it automatically syncs to your Google Wallet so your offers are always with you.
For example, “Google is currently offering a $3 deal worth $10 of merchandise at Floyd’s Coffee Shop in Portland. Rather than print a coupon to present to the merchant, a Google Wallet customer would store the deal on his Google Wallet and use his phone at Floyd’s compatible NFC register to redeem the offer.”
Wallet, Google hopes, and the accompanying Offers system is “mobile, local, personalized, serendipitous, and open.” If you walked into a grocery store, an NFC-enabled phone
… could pop up a grocery shopping list because it’s detected where you are. When you’d collected the goods, you’d pay at the checkout merely by tapping your phone to the sensor, and the transaction happens instantly, along with loyalty point awards and so on.
What does NFC mean for our business?
You regularly frequent a large coffee chain, let’s say Starbucks, but you haven’t stopped in for three weeks. The Starbucks boffins could create a program that recognises this change in behaviour and, with your permission, sends you a message checking you’re okay and asking if you’d like a free drink. Just imagine – maybe you’ve done something as simple as move office and there’s no longer a Starbucks on your way to work. The NFC app can recognise a store close to your new journey and offer a tailored discount. Perhaps as you walk in, you receive a message offering you a free snack with your coffee, which you can redeem immediately through the wonders of NFC. The brand has gone out of its way to check that you’re okay and thrown a free caffeine hit into the bargain. Brilliant: you’re now as loyal as an old dog.
As well as helping build loyalty and target offers, it could change how we use product warranties, and how we use the supermarket. It could make our medical records portable and shareable with health professionals. It could help people meet each other and communicate in real life, like an advanced version of Bump.
Is it really a big deal?
Google Wallet is rolling out with selected partners only in America, and only on Android. Isn’t that a bit niche? Well, here’s something not-niche: Apple is rumoured to be including NFC capability in its iPhone 5. Experts told Bloomberg,
- Apple also could use NFC to improve how it delivers mobile ads to customers’ handsets and charge higher fees for those ads.
- NFC would let Apple’s iAd advertising network personalize ads to the places where a customer is spending money. That could double or triple the ad rates that Apple charges.
- Apple has created a prototype of a payment terminal that small businesses, such as hairdressers and mom-and-pop stores, could use to scan NFC-enabled iPhones and iPads.
- The company is considering heavily subsidizing the terminal, or even giving it away to retailers, to encourage fast, nationwide adoption of NFC technology and rev up sales of NFC-enabled iPhones and iPads.
What’s its status in Australia?
While NFC is used in transit, bill payments, and marketing in Asia Pacific countries like Japan and South Korea, Australia has been slow to keep up. Despite early trials, there’s no “burning need” or business case for contactless mobile phone payment here, analysts say.
We like this summary by the Barbarian Group, which draws parallels to the uptake of SMS, then GPS:
We’re currently in the early adoption phase of the cycle, when very few people have phones with NFC technology and when there are very few channels with which to use it. But when the right big idea comes along, I expect to watch NFC catch fire and for the next Twitter or next Foursquare to emerge along side it.
Exciting stuff. Keep up to date on the rollout of NFC with NFC World.
Twitter helps you connect with like-minded people and their thoughts, and provides a personalized mix of news and ideas, writes David Trewern, STW’s Chief Digital Officer.
I typically scan tweets for a minute or so at a time. And from that minute, I learn so much. I get an instant sense of what is happening in the world right now, in my industry, among colleagues and friends. I can follow links and go deeper if I choose. It’s like a personalized newspaper updating every second of the day, pushing out headlines that can be absorbed in the time it takes for for your morning coffee to be made.
No two Twitter feeds are the same. You can tailor and refine yours depending upon whether you want work insights, comedy, or connection with family or friends. Or, of course, a blend of all of them. If at any time you don’t like what you’re reading, follow different Tweeters!
To help get you started, here is a selection of my personal favourites. Follow them by clicking on their usernames below – or by following this list.
@McKQuarterly: Links to great articles and new ideas for business.
@HarvardBiz: Management and strategy tips.
@DeepakChopra: A fresh perspective and zen thoughts that help keep me centred, and focused on a bigger picture.
@MikeCSTW: STW Group CEO Mike Connaghan is new to Twitter too, so say hello!
@ChrisJohnSavage: Insights from STW Group’s fearless Chief Operating Officer Chris Savage.
@Hitwise_AP: Data and insights on Australian Internet use.
@AlainDeBotton: Writer and philosopher deftly summarises human nature.
@Forrester: Research on business and technology aimed at leaders in our and clients’ industries.
@Ogilvy: This is an aggregator of blog content produced by Ogilvy staff worldwide.
@BDGiesen: Ogilvy Australia’s digital influence guy.
@ThomasCrampton: Ogilvy Digital Inluence Director for Asia tweets digital insights and interesting ideas mixed with a bit of fun.
@NeilTLawrence: STW’s Executive Creative Director on what he is reading, thinking and making right now.
@the99percent: You’ve had the brilliant idea – now what? Creative industry productivity insights from Behance.
@TomMoult_Ogilvy: Entertaining commentary from the Ogilvy Australia Executive Chairman.
Who have I missed? If you have favourite Tweeters, please do share them in the comments.
David Trewern is the founder of DTDigital, the “integration guy” at Ogilvy Melbourne in his role as Executive Director, and the “digital guy” at STW Group, leading digital innovation across all 75+ companies. You can follow him on Twitter at @DavidTrewern. His last article for Nextness was Making friends in the digital age: a manifesto for brand enlightenment.
At its simplest, “transmedia” storytelling is a story told over a variety of platforms, like movies, TV, toys, books and games. But there is nothing simple about the intricate, fascinating and satisfying web these stories weave, sustaining hours of attention and garnering huge word of mouth in a time when engagement is the holy grail.
What is it – and, more importantly, how do transmedia storytellers do it?
In the ideal form of transmedia storytelling, each medium does what it does best-so that a story might be introduced in a film, expanded through television, novels, and comics, and its world might be explored and experienced through game play. Each franchise entry needs to be self-contained enough to enable autonomous consumption. That is, you don’t need to have seen the film to enjoy the game and vice-versa. As Pokemon does so well, any given product is a point of entry into the franchise as a whole.
The example he gives of successful transmedia storytelling is The Matrix franchise, where key bits of information are conveyed through three live action films, a series of animated shorts, two collections of comic book stories, and several games.
He has also noted some characteristics of successful uses of transmedia:
- There is no one single source or ur-text where one can turn to gain all of the information needed to comprehend the transmedia universe.
- Most often, transmedia stories are based not on individual characters or specific plots but rather complex fictional worlds which can sustain multiple interrelated characters and their stories.
- Ideally, each individual episode must be accessible on its own terms even as it makes a unique contribution to the narrative system as a whole.
- A transmedia text does not simply disperse information: it provides a set of roles and goals which readers can assume as they enact aspects of the story through their everyday life. (For example a child playing with a Star Wars toy makes up actions the toy will take; a reader of the entire Harry Potter series can invent complex backstories for minor characters in the form of fan fiction.)
The trend is reconfiguring the entertainment industry, “affecting everything from how stories are made, down to titles on business cards.”
What does it mean for brands?
Traditionally, brands have a single unifying idea that is driven home through multiple “touch points.” The execution is tailored to the “channel” (emotion in 30 second spots, rational information in print ads, and everything on the website) but it is all recognisably part of the same campaign.
That was perfect when you could pay to get people’s attention. But now the people we’re trying to reach are pirating their TV shows and skipping ads, reading newspapers less frequently, and spreading their attention across blogs, games, social networks, and of course, real life. That’s why most campaigns now involve a mix of earned, owned and paid media.
So how can brands use transmedia storytelling techniques to get people’s attention?
Instead of one simple message targeted to a few channels, brands and organisations would develop a complex and in depth “evolving non-linear brand narrative,” says Faris Yakob.
Different channels could be used to communicate different, self-contained elements of the brand narrative that build to create an larger brand world. Consumers then pull different parts of the story together themselves. The beauty of this is that it is designed to generate brand communities, in the same way that The Matrix generates knowledge communities, as consumers come together to share elements of the narrative. It has a word of mouth driver built in.
This is complex, difficult and high risk, but the rewards for doing properly could be immense. That’s because transmedia storytelling it is perfect for today’s consumer, spread across multiple platforms and highly connected to others through social media. As Henry Jenkins says:
Transmedia storytelling is the ideal aesthetic form for an era of collective intelligence. Pierre Levy coined the term, collective intelligence, to refer to new social structures that enable the production and circulation of knowledge within a networked society. Participants pool information and tap each others expertise as they work together to solve problems. Levy argues that art in an age of collective intelligence functions as a cultural attractor, drawing together like-minded individuals to form new knowledge communities. Transmedia narratives also function as textual activators – setting into motion the production, assessment, and archiving information. The ABC television drama, Lost, for example, flashed a dense map in the midst of one second season episode: fans digitized a freeze-frame of the image and put it on the web where together they extrapolated about what it might reveal regarding the Hanso Corporation and its activities on the island. Transmedia storytelling expands what can be known about a particular fictional world while dispersing that information, insuring that no one consumer knows everything and insure that they must talk about the series with others (see, for example, the hundreds of different species featured in Pokemon or Yu-Gi-O). Consumers become hunters and gatherers moving back across the various narratives trying to stitch together a coherent picture from the dispersed information.
It’s about getting that core group to germinate these seeds of intrigue into wider awareness, so that they continue to permeate through other communities. That said, it’s always hard to be certain how much wider it does permeate out. It’s a mistake to assume that by reaching that audience you’re going to reach the popcorn moviegoer. What a good transmedia campaign does achieve is that it anchors core fans in your campaign. At the same time you need to find ways to make it as accessible as possible to the mainstream.
Who’s done it?
Unsurprisingly, the best examples of transmedia storytelling for marketing purposes are campaigns for entertainment products.
- The New Frontiersman and other promotions for the movie Watchmen.
- Discovery Channel’s 22 year old Shark Week.
- Hand in hand with the TV series Lost, the Lost Experience.
If you have more good examples, please share them in comments.
We’re going to see our transmedia Mozart. We are going to see visionaries who understand the value of each media platform as if it’s a separate musical instrument, who’ll create symphonic narratives which leverage each of these multimedia platforms in a way that will create something we haven’t encountered yet. And it’s going to be magnificent.
- BBH Labs.
- JWT, especially their Transmedia Rising in-depth trend report.
- Henry Jenkins, who wrote the book on Transmedia Storytelling.
- Cautionary tales in transmedia storytelling.
This is one of a series of posts in our Nextness 101 series, aiming to set up working definitions of concepts oft-mentioned in ad-land and communications. Got any links, examples or a better definition? Do you think the definition should be widened to include any kind of audience participation, as in the Old Spice campaign?
The comments are open.
Earned, owned and paid (or “bought”) media is a phrase that drives home the complexity of modern marketing campaigns. It’s also tossed around very frequently in meetings and powerpoints.
That’s why we’re devoting this post, the second of our Nextness 101 series, to trying to define it very simply. This is just a first try- if you have a contribution, add your comments below (or reply to us on Twitter (@STWnextness).
Earned media. It’s called earned because it’s hard work.
Examples of earned media.
- Coverage by journalists and bloggers achieved through public relations. (This used to be called “free media.” But if you refer to it as free you’ll get a glare from the PRs who work 14 hour days to make it happen.)
- Social network buzz encouraged by social media managers.
- Quiet opposition and active, loud supporters on the ground thanks to stakeholder relations and community management.
Why earned media is necessary.
- The public is bombarded with so many messages every day, it’s easy to filter them out unless its your friends or a trusted entity talking about them. Information about, and endorsement of, a product, brand or organisation is most trusted when it come from an unpaid, objective third party. It’s more trusted than information a brand provides about itself, or that has been bought. An earned media strategy can help generate and spread positive word of mouth.
Why earned media shouldn’t work alone.
- You can’t control what people say about you. This is what makes a good review from a journalist, blogger or member of the public so valuable – but also so frustrating if they get it (in your opinion) wrong!
Owned media. You build it and control it yourself.
Examples of owned media.
- A website, whether it’s a corporate site, specific to the product or brand, or a ministe just for the campaign
- Some content (such as YouTube videos you’ve paid to make, downloads like PDFs and brochures, beautiful hi-res images of your product)
- An app or game.
- An event you put on such as a stall, product demonstration, or train station giveaway.
Why owned media is necessary.
- Today, having a website is vital. With a presence fragmented across social networks, free media like newspapers and paid media advertising, a website is a natural place to gather it together, appropriately organised, leading an interested consumer to take the next step with your brand – whether it’s follow you on Twitter or purchase your goods. Similarly, apps, content and events are things you control.
Why owned media shouldn’t work alone.
- How would people find it? If a website, app or an event falls in an empty forest, does anyone hear it? You need word of mouth (earned) or advertising (paid) to drive people to it.
Paid: You control the message, and you can take an educated guess who and how many people will see it.
Examples of paid media.
- Traditional advertising like TV, print, radio and outdoor.
- Online advertising like banner ads.
- Search engine marketing (SEM).
Why paid media is necessary.
- Nothing makes a huge emotional impact or delivers a knock out punch of on-strategy information like traditional advertising – that’s because you’re paying for complete control over what people will see, hear and read.
Why paid media shouldn’t work alone.
- The punch it packs can dissipate if, as many consumers do, you go online to search for information about the product or brand and find nothing. Or worse, you find a negative review.
What does this mean for communications campaigns?
Of course, there are well-documented exceptions to every rule! But in general, this means:
- Every campaign must start with a tight strategy – where you are now, where you want to be, and how you’ll get there. Only then do you start talking about the mix of earned, owned or paid that you’ll use.
- If you’re a client, your brand or company should be strategically active in each category.
- If you’re an agency working in just one of the categories, you should make sure you are working hand in glove with the teams overseeing the others, ensuring it’s an integrated campaign.
- Before you make an ad, or tweet, or place a story in a paper, make sure you know the entire lifecycle of that action. Create an ad. Put it on YouTube and the website. Put the media release about the new ad on the website. Tweet the link to the story and the ad. Retweet the praise. Repeat. Any one of those actions is good. Together, it’s magic.
How’s that for a definition? What did we miss out? (For example, where should SEO fit?) Let us know.
Restaurant deals, skydiving, manicures, theatre tickets, products: Groupon is a website that lets you buy one thing per day -- that you may or may not want -- at a very reduced price.
If you sign on, you get a daily email with an offer. It’s relevant, because Groupon only offers you things in your city. It’s cheap, because participating companies do you a good deal. If enough people take Groupon up on the offer, the cheap price is locked in.
You pay up front and get a great deal. Groupon takes a whopping 40-50%. The company takes the rest, along with a massive boost in interest and hopefully some repeat customers.
Everybody’s happy. And Groupon’s very, very rich.
What’s its scale?
In just over two years since its launch, Groupon has built up a list of 70 million subscribers around the world. It was valued at $1.4 billion last April, sought funding at a $3 billion valuation in November and snubbed a $6 billion offer from Google two months after that. Projected to generate $3 -- $4 billion in revenue this year, up from $750 million in 2010, the company has been meeting with bankers to discuss a potential initial public offering that would value it at up to $25 billion, according to Bloomberg Businessweek. There are a lot of “billions” in that paragraph. Suffice to say, it’s big.
On March 16, it opened up a presence in China, in a joint venture with the country’s biggest internet company, Tencent.
Why is it successful?
In the first instance, you get things very cheaply. That has always been the lure of coupons.
But the fact that every deal has to meet a minimum interest threshold is what puts the “group” in Groupon. You are incentivised to share the deal with friends and family because if not enough people opt in, the offer expires.
There’s also a time limit. Deals are available often for just hours at a time. You can’t trawl through the archives for a discount on something you need -- instead you get the email and must make a split second decision. You snooze, you lose.
The daily frenzy has already spawned a new phrase, “Groupon anxiety”—“the preoccupation and feeling of anxiousness and not being able to sleep knowing that a new Groupon will be released after 1am”, according to Urban Dictionary.
The last key to their success is humans. They have a veritable army of salespeople, personally calling businesses to get them on board -- and huddled masses of copywriters, both in house and freelance. Writers of the daily emails are encouraged to ham it up. ”Today’s Groupon is perfect for people who love a good massage, but hate how, unlike pie, they can’t take any of it home with them,” is one example of the company voice. You can read more at their leaked (and now public) Groupon editorial manual.
Groupon founder Andrew Mason has something special in the pipeline. A smart phone app called Groupon Now that has just two buttons: “I’m hungry.” And “I’m bored.”
Add your postcode, and you get real time offers available around you, like your own budget-conscious concierge mixed with the Yellow Pages. It’s going to launch and transform lunchtimes in April.
It’s not all smooth sailing for Groupon. Anyone can build the technology, and anyone can get customers the deals so long as they have salespeople to get local businesses on board. And competitors are lining up to do so. The “daily deal” industry will grow to $3.93 billion in 2015 from $873 million last year, according to a projection from BIA/Kelsey, a Chantilly, Virginia-based consulting firm.
There are some high profile entrants to the space. Facebook is planning to get in on the action with a service called Facebook Deals that will let consumers buy discounted one-time offers as it looks for new ways to boost sales and attract local business customers. The service will let people share discounted offers with their friends. And location-based app Foursquare has partnered with American Express to let users get credit-card bonuses when they check in at a store and spend money.
Groupon’s rapid growth has lead to some dropped balls.
Their 30 second Superbowl commercial cost them $3 million dollars -- but making light of repression in Tibet was widely viewed as an insensitive mistake.
And there’s the merchant backlash. Utpal Dholakia of Rice University interviewed 150 businesses that had done Groupon promotions. One-third said they did not make any money from them, and 42% said that they would not do another daily deal. [Download Rice's study as a PDF.] They also wonder if the deals lead to repeat business, or degrade the value of their non-discounted products.
What can we learn from Groupon?
Well, agencies should keep half an eye on it in case one day we find ourselves having to sell our wares on it. Already the site’s being tested as a venue for B2B deals.
As for clients, the keys to success behind Groupon’s business model are applicable to every product or campaign: have you incentivised sharing, or at least built-in a reason to do so? And Groupon’s device of a ticking countdown is compelling. Have you established an urgency for people to take action?
The last word.
It’s only fair to give the last word on Groupon to its founder, 30 year old Andrew Mason, who invented the daily deals site as a side project to fund his idea for a non-profit.
When consumers are buying these half-off deals, they don’t realize it, but they’re playing their part in revitalizing their local economy and reversing the trend of people spending a larger amount of time in front of the computer screen and forgetting what it means to go out and experience life. People just think they’re getting a deal, but they’re getting so much more. At least, we rationalize it that way.