Lawrence Gee | Marketing, Internet, Creativity, Strategy

The Power of the Internet

It’s funny how the power of the Internet is still a mystery to some in the corporate world.  Yes, it’s new.  Yes, it’s a change from traditional media such as television, print, and radio.  Yes, it’s still not fully understood.  Yes, it changes faster than other channels.  It’s also something that needs to be embraced and not taken for granted.  It has the ability to raise voices when you least expect it.  It also has a life of its on that would be extremely difficult for a large corporation to counteract.

We’ve all heard past stories of companies blissfully ignoring what’s going on the Internet while forum posts, user comments, and blog posts are being written about them and their products.  These days we are being taught these cautionary tales.  Whether it be in your business, through school, or your peers - it’s important to monitor what is being said out on the Internet.  Sadly, not all companies take this to heart and some are slow to adapt.

I tell a story of a chain of events where the power of the Internet is clear and apparent. 

Last week, I received my weekly newsletter email from the WOMMA (Word Of Mouth Marketing Association) and a headline catches my attention.  It reads CNN Blogger Fired for Having A Blog.  I immediately open it since I do blog and I will be employed somewhere after I complete my MBA this May.  The WOMMA posting leads me next to a blog post by Matthew Ingram, a Technical Writer for the Globe in Toronto.  Matthew writes a clear and concise posting on some of the issues surrounding Chez Pazienza, the fired CNN producer.  He links to other prominent bloggers and their postings and their opinions about the subject.  He also links to the Chez Pazienza’s own blog and his posting recalling his termination.

In short, Chez seems to have been fired for having his own blog, not disclosing it to his superiors, and becoming popular enough to be picked up on other websites.  The conflict of interest obviously lies in distribution of content however where are the lines drawn from what you do on the job to what you do in your free time?  Chez’s blog is a non-commercial entity that was written outside of his CNN producer position.  Sure, CNN has the right to investigate whether or not it is a conflict of interest but how many employees know about what really is a conflict of interest or not?  Should there be more explicit guidelines outlining what is acceptable and what is not? 

With the rampant trend of blogs popping up left and right, should companies have the right to terminate someone for expressing their opinion outside of the workplace?  I’m not sure of the answer to this but what I do know is that if someone at CNN didn’t like the fact that Chez Pazienza was blogging, firing him probably was not the best course of action.  The voice of one can quickly move around the Internet.  As apparent in this case, the viral nature of how far this story has spread is dramatic.  The voice that was created from one firing is now a linked collection of many voices around the Internet.  For a company like CNN that wants to embrace technology and blogs, it’s very interesting that they did not foresee this one firing developing into a much larger discussion.

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Betting on Cyberlattes

Starbucks announced today that it was switching its store wi-fi service from T-Mobile Hotspots to AT&T Broadband.  It will allow customers to have 2 free hours of access with a drink purchase.  Existing subscribers of AT&T Broadband or U-Verse will get unlimited access.  Alternatively, customers can purchase a two-hour session for $3.99 (might as well buy a latte) or a monthly membership would cost $19.99.  This is a substantila reduction from T-Mobile Hotspot pricing, which started at $9.99 per day and ranged between $19.99 and $39.99 per month.

Let’s examine some of the strategy behind their reasoning:

• To receive the free wi-fi, customers must purchase their drinks with a prepaid starbucks giftcard.  This will obviously increase the number of cards sold and tie customers to spend more of their “coffee dollars” at Starbucks.  Giftcards are basically forward selling future lattes — that is Starbucks gets cash upfront without having to deliver the goods until later.  The revenue generated from giftcards can be used as investments and Starbucks can benefit greatly from the interest.  Imagine if Starbucks sells a million gift cards with an average of $10 on each card.  That would give Starbucks $10M in capital to invest.  If they received a conservative annual return of 5%, that’s an instant $500,000 in added revenue.
• Starbucks is also builing on the Apple, iTunes, and now iPhone connection.  Everyone is probably aware that the iPhone is currently solely on the AT&T Wireless network.  Some tie-ins must be in the works.  Last fall, Starbucks had already given free wi-fi access to iTunes and offered customers the ability to instantly purchase music playing in Starbucks stores and other special Starbucks music collections.  With nearly 36 million unique users of iTunes, having a strong tie with the customer base is probably a good idea.  They target similar demographics and Starbucks desperately needs to gain some of its fashionable charm after going quite mass market.
• Starbucks is also hoping that free wi-fi also means that coffee house goers with sit on the couch longer and buy more lattes.  Maybe they’ll average 1.5 lattes a day versus 1.  This could add up to quite a nice bump in sales.

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And Then There Were Two? A Look at The Microyahoosoft

No, it will never really be called Microyahoosoft or Microsofthoo or even Yahoosoft but the proposed $44.6 billion bid by Microsoft for Yahoo! was definitely really big news last Friday.  It takes two huge Internet players and creates a beast of a company that just might have a chance at slowing down the Google machine.  So what’s the potential impact of such a merger?  Let’s take a look at some of the obvious and not so obvious synergies:

Search and Advertising Platforms

The most obvious outcome of the proposed merger would be to combine the #2 and #3 players in the U.S. Search Market.  According to a CNN article, Google holds approximately 58.4% of the U.S. search market, while Yahoo has 22.9% and Microsoft’s share is just 9.8%.  In terms of online display ads, combined Microsoft and Yahoo! would control around a 25% share.  This is big business especially since it’s projected that online advertising could reach $60 billion by 2010.  Both Microsoft and Yahoo! have been struggling to keep up with Google.  Both companies search marketing tools are inferior to Google’s on a variety of dimensions.  Combining forces could help both companies share existing research, development, and other resources. 

E-Mail and IM 

A Microsoft-Yahoo! marriage would combine to create a force in E-Mail and Instant Messaging.  Adding a strong Microsoft Hotmail to #1 Yahoo! Mail only creates an even more dominant player.  Combing both MSN Messenger and Yahoo! Messenger would allow more users to connect to one another.

Social Media

E-Mail and Instant Messaging creates instant networks that Microsoft-Yahoo! could tap into to use use to their advantage in the larger social network context. Also, a Microsoft-Yahoo! would have a much richer portfolio of web properties.  Combined you would have an interest in Facebook (which Microsoft has invested heavily in) and Yahoo! owned del.icio.us and Flickr.  Couldn’t you imagine a larger social network being developed that gets integrated with these web properties and overlayed by these e-mail and instant messaging networks? 

Mac vs. PC ads 

Yes,PC isn’t as cool as Mac.  But perhaps the proposed merger could give PC a flashy purple suit just as a shot of Yahoo! culture might be beneficial to Microsoft. 

All in all, just some food for thought.  We still have a bit of time to consider more effects of the proposed merger — if it does move forward, it probably won’t be finalized until the end of 2008.

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