Finance Matters

Archive for February 15th, 2010

Have you seen this image?

You’ve been screwed by NBC. Again.

NBC is putting some videos; like a full replay of the ice skating competition, and other features; behind a subscription wall.

Users will face a screen asking for a name and account number of a cable or satellite provider–which is not only a massive invasion of privacy, but also a ridiculous requirement. Even if we had a cable subscription, why would we carry it around with us?

Once again, NBC is using their exclusive rights to Olympics broadcasting and trying to make us pay for it.

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See Also:

• NBC Ruins Olympics Men’s Downhill For Millions Of Fans
• Doesn’t Suck To Work At NBC During The Olympics: Behind The Scenes At Grouse Mountain HQ
• NBC Is (Still!) Fighting A Losing Battle With Olympics Coverage

CHICAGO (AdAge.com) — Take your average seven-figure CEO and add a load of the company’s dirty laundry. Put him in a funny suit while he meets some of his best frontline workers — and screws up their jobs. At the end, he can give them raises, and address problems exposed along the way.

It’s a classic redemption story — the kind American TV viewers love — and the premise for CBS’s surprise hit “Undercover Boss,” which scored 38 million viewers after the Super Bowl. But is the exposure worth the risk?

Some PR pros and lawyers say no way. But the surprise hit has an impressive raft of executives lined up for first-season duty, among them, 7-Eleven, Waste Management, Churchill Downs and even Hooters. Producers sought only known brands, and a diversity of industries and personalities, such as self-made types and those who inherited their positions.

“On balance, it probably has greater potential to backfire,” said Gene Grabowski, senior VP at Levick Communications, noting that to be successful, it has to be entertaining, and therefore, “it just has too many problems for many companies.”

Of course, American big business is mired in a PR crisis as CEOs have historically struggled with credibility and sectors such as banking have been battered in the realm of public perception. Matthew Harrington, president-CEO of Edelman U.S., said he doesn’t see the series so much as a way to demonstrate contrition, but “hopefully a venue that will actually show that CEOs are really interested in their employees and what the customer service experience is like and to some degree foster transparency.” He added he’d “recommend clients do it even if they didn’t have a TV crew following them.”

‘Leap of faith’
“Undercover Boss” doesn’t accept buy-ins. Companies featured were approached to participate, and given assurance that the show wouldn’t damage the brand. While they’re able to suggest areas to highlight, producers pick the jobs CEOs will do, which employees they’ll be working with and, obviously, which incidents from the 12- to 14-hour taping to highlight in the hourlong episode. But the boss is always there when the cameras are rolling.

Documentarian and “Undercover” creator Stephen Lambert, who also created “Wife Swap” and “Secret Millionaire,” conceded that participants “were taking a leap of faith.” “They didn’t have editorial control or approve the cut in any way,” he said. “They had to trust us.”

So who would subject their brand, their employees, and themselves to so much risk? Most takers have unknown products, small ad budgets, are part of an industry in decline or have little to lose.

Chief marketer of 7-11 Rita Bargerhuff persuaded CEO Joseph DePinto to do the program because she sensed an opportunity to promote the chain’s higher-quality-coffee initiative and its bakery products. “A lot of people don’t realize our sandwiches are made fresh every day,” she said, adding that “Undercover Boss” will give her brand access to a broader audience than her ad budget can usually reach.

Still, Ms. Bargerhuff conceded fearing a Lucy-on-the-assembly-line moment. “Very few people can walk into plant job or bakery commissary and do it well,” she said. But the company, which has honored several employees with promotions, raises and even a commitment to raising organ-donor awareness, sees the experience as overwhelmingly positive. It didn’t hurt, either, that 7-Eleven and Waste Management were featured on the “Oprah Winfrey” show before the series’ premiere.

Donning disguises
Julie Koenig, VP-brand development and marketing at Churchill Downs, said putting Chief Operating Officer William Carstanjen on camera is part of a larger effort to remind fans that the company has more than one racetrack — filming took place when the flagship course was closed — and the company hosts more than just the Kentucky Derby. The company, which is battling sluggish attendance along with the rest of the racing industry, is trying to spin its product as entertainment rather than pure sport. Churchill chose Mr. Carstanjen in part because CEO Robert Evans would have been too easily recognizable. Seven-Eleven’s Mr. DePinto had to hide or duck out several times during filming, and grew a beard to avoid recognition.

Waste Management CEO Larry O’Donnell likely made the toughest decision. Bosses approached for subsequent episodes consulted with him and were able to see his pilot trailer. Mr. Lambert had already done the “Undercover Boss” for the U.K., and so Mr. O’Donnell had more than one conversation with Stephen Martin, who runs a British construction company called Clugstons.

When communications manager Lynn Brown approached him with the opportunity, “I told her she was crazy,” Mr. O’Donnell said. “I wasn’t going to do a reality TV show.” It took numerous conversations, but Mr. O’Donnell was finally swayed by the prospect of honoring “unsung heroes” within his ranks.

Even so, Waste Management was dinged in the episode for docking employees double time if they came back late from lunch. It proved to be a misunderstanding, Ms. Brown said. Employees were reading a 0.02 hour charge for being one minute late, and took that as a two-minute charge. But the cameras were off by the time it was understood. However, two days after the episode aired, Mr. O’Donnell said the company had received countless e-mails thanking him for his work, promising never to look at the garbage man the same, and wanting to do business with Waste Management. Not bad for a B-to-C pitch of a B-to-B product.

The Hooters episode, previewed during the premiere, had portents of disaster. While no one expects the breast-based chain to be a paragon of female empowerment, waitresses appeared to be participating in a hands-free eating contest at a manager’s behest. In a statement, Coby Brooks, CEO of the chain, which is currently for sale, described the program as a “great opportunity” to get back into the front lines and “an experience” he will “never forget.”

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See Also:

• Tim Tebow’s Ad Controversy Infests CBS’s Super Bowl
• CBS: NBC’s Foil
• Dan Rather’s $70 Million Lawsuit Against CBS Finally Dies

Just a moment ago we reported that Gawker Media was buying CityFile, and replacing editor-in-chief Gabriel Snyder with Remy Stern.

In Nick Denton’s memo, he speaks highly of Snyder and notes that he was offered a management position.

Anyway, here’s Snyder’s take, which he sent in memo to staff.

—-

Honesty is Gawker’s only virtue, so it seems inappropriate to engage in the usual corporate euphemisms of “wanting to explore new new opportunities” or “take a larger role in the company” or “spend more time with my family” (though eighteen-hour days and seven-day work weeks do take their toll on personal relationships), so I’ll put this as plainly as we’d report any other masthead ouster: I am being canned.

Building this website into what it is today — a big operation with 11 writers, a regular source of national news and a challenger to the mainstream media organizations that it once mocked — has been the best job of my career. Transitioning from print to online meant adopting an entirley new biorhythm. Transitioning from writer to editor has meant learning to bask in the reflected glory of the talented staff who contribute every day. I love Gawker and adore the crew that makes it happen.

You deserve all the credit; my role has been to push you to be yourselves: Alex Pareene’s incisive political commentary, John Cook’s dogged reporting and clear-headed analysis, Brian Moylan’s ability to enunciate conversation-starting ideas, Richard Lawson’s ability to produce dazzling copy at superhuman speeds, Ryan Tate’s cliche-free coverage of Silicon Valley, Hamilton Nolan’s workhorse ethic and humor, Doree Shafrir’s gimlet-eyed appraisals of the culture and society around her. Waking up each morning to the work of Adrian Chen, Maureen O’Connor and Ravi Somaiya is a pleasure. Watching Foster Kamer dance on the stage each weekend is a joy. You, without a doubt, make up the strongest staff Gawker’s ever had, and make the site the best it’s ever been.

Eighteen months ago, when I first sat down with Nick to discuss taking over the Gawker helm from him, I saw a huge opportunity to build a site from its roots as an intimate discussion among Manhattan’s power elite and build it into a national news brand (an aspiration that seems to come up every time there’s a masthead shakeup around here). Attaining those goals have been the biggest accomplishment of my career. As I saw it, Facebook, Twitter and smaller blogs had slowly encroached on the role Gawker once served. Among the most difficult, though most rewarding to the site, efforts was to take the site from a bankers’ hours schedule to publishing 24 hours around the clock, weekends included. I believed the site could be grown beyond its traditional audience by focusing on news from the nation’s four cultural capitals (New York, D.C., L.A. and San Francisco) — which became even more clear when I was given the task of integrating former standalone sites Defamer and Valleywag into the flagship. Oh, and then there have been the stories. It’s become common to see national newspapers and broadcasts cite Gawker on vast array of stories: the U.S. Kabul embassy security dudes behaving badly, the Hipster Grifter saga, leading the entire media for a weekend on the Balloon Boy fiasco, those pictures of Katie Couric dancing, pillorying Harold Ford through simple questions, Annie Leibovitz’s financial meltdown, the Late Night Wars, Facebook privacy, Anna Wintour … more than I can count. I was determined to compete with the biggest news sites on the internet. And today, I am glad to say it does.

But the history of Gawker Media careers shows that they tend to burn bright and fast. So it shouldn’t have come as a much of a surprise when our mercurial owner told me he’s hatched other plans for Gawker. He offered me a new, temporary position as an assistant managing editor of Gawker Media as a holding job, which I have declined. I can’t see how I’d be in a position to succeed at the role going into it with one foot literally out the door. I’ll be editing the site until Friday. After that, please stay in touch (gs@gabrielsnyder.com).  And needless to say, as of now I am on the market and will be beating the media bushes for my next opportunity.

I will miss you all.

Best,
Gabriel

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• Gawker Media Buys CityFile In Its First-Ever Acquisition

Gawker Media is making its first-ever acquisition, buying NYC-focused blog CityFile.

With the move, CityFile founder and editor Remy Stern will take over as editor-in-chief of Gawker.

Current editor-in-chief Gabriel Snyder is moving on, though according to a memo (below) he was asked to stay on in a management capacity. (Update: Snyder sees things a bit differently. See his memo here.)

CityFile will be folded into Gawker, a la Valleywag.

While CityFile’s readership isn’t enormous, the site boasts a top-notch readership, and a very clever database of over 2144 NYC notables. It’s the type of database we suspect Gawker will be able to get a lot of juice (SEO and otherwise) out of, with a lot of potential for expanding.

And it doesn’t sound as though this will be the company’s last deal. The company has been looking at other opportunities, and in the announcement, prospective sellers are invited to reach out to to them.

And here’s the full internal memo announcing the deal

—-

For the first few years of Gawker Media, the business press had one abiding preoccupation: when are you going to sell out? Today we’re giving the M&A gossips something else to talk about. The company is making its first acquisition: Cityfile, the New York news site founded by Remy Stern. The price is not being disclosed.

Cityfile will be the New York and media industry channel on Gawker, alongside Valleywag and Defamer, our tech and entertainment sub-sites. Cityfile’s 2,000-plus profiles of New York notables will be the centerpiece of our new topic and people pages. And Remy Stern, a former writer on several Gawker sites and editor at the now-legendary Radar magazine, will take over as editor-in-chief of Gawker. He starts on February 22nd.

We had hoped to persuade Gabriel Snyder to stay in a management role. But he’s moving on. With help from an awesomely strong team of writers and the new Gawker.tv operation, Gabriel doubled Gawker’s audience during his tenure (http://bit.ly/c6BXk8.) To anyone out there looking to build up an online property: pick him up quickly.

Does this mean Gawker is going on an acquisition spree?

Well, it’s a question of scale. Each of the Gawker titles does already have more than 1m US visitors a month — making them usually the largest or second largest blog title in their category. Nevertheless the threshold of advertising success does continue to rise and we’re increasingly competing online with TV and newspaper groups.

Moreover, we’ve long actively managed our portfolio of properties, selling Consumerist to Consumers Union last year, for instance — or closing down unsuccessful properties. To achieve critical mass in entertainment and tech, we have indeed looked at a few opportunities in the last few months. If online media is consolidating, we’d rather be a consolidator than consolidatee. And revenue growth of 22% in 2009 provides the resources. (Deal ideas? Contact Gaby Darbyshire.)

Don’t get too excited, however. The successful launches of Jezebel and io9 confirmed our belief that it’s usually more effective to build than buy. Lifted by the iPad launch and the late-night TV wars, our nine sites — all launched inhouse — drew a US audience of more than 14m in January. Our best investment continues to be the recruitment of great writers and producers on our own sites — and the pursuit of hot stories

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• Gawker Switches To Unique Visitors: The Advertisers’ Preferred Stat
• THE NEW JOURNALISM: Gawker’s Sports Blog Deadspin Promises More Pay-For-Sources To Crush Upstart TMZ Sports
• The Gawker Decade: How Gawker Media Defined The 2000s

Sachin Agarwal is operations lead at Oneforty, the Twitter App Store, and CEO at Dawdle, the gamer’s marketplace. This post was originally published on his blog, and is reprinted with permission.

While there are often investments that should be made upfront, often times new founders and new startups will waste money and time on things that they shouldn’t. I sure know I did during my first go-round. Don’t make my mistakes. Here are three things you should put off as long as possible:

Don’t incorporate until you’re playing with Other People’s Money.

There are two kinds of other people’s money. The first is Other People’s Money — investment dollars from outside sources: friends, family, angels, VCs, certain grants, and so forth. The second kind of other people’s money is even more important — paying customers.  

Any concern about your personal liability is misplaced; if your site has a bunch of Google AdSense ads, no one in their right mind is going to sue you. You’re going to need to be incorporated to deposit any investment (if you’re so lucky) and you’ll need to be incorporated to get an internet merchant account.  You can probably get by with a PayPal account (under the domain of the site; don’t use your personal PayPal account) for a while, as well.  And don’t worry about the intellectual property you create before incorporation; you can always assign it to the company later.  That’s what Google did when they got their first check before they were even incorporated. 

Don’t do any paid user acquisition until you can calculate your CAC and LTV.

It’s very, very tempting to “experiment” and “test” various paid customer acquisition channels. You start with AdWords, then do some cheapo banner ads on a couple of ad networks, and soon you’re hooked on some hard affiliate stuff and paying thousands of dollars a month to an Outsourced Program Manager.

AdWords are a gateway drug to unprofitable user acquisition. Only start throwing your dimes at paid acquisition when you’re damn well sure your dimes-into-dollars machine is humming nicely. And you only really know it’s humming nicely until you have enough metrics around your unit economics — what your costs are to serve every new customer, and how much she’s worth to you in revenue (if you’re rigorous, gross profit). These numbers have to come from real users using your real product; they cannot come from a financial model — that’s just guessing.  Get hard data.  Then and only then can you think about customer acquisition channels that have direct costs above zero. Until then, you’re much better off engaging in inbound marketing — making remarkable content (you blog regularly, right?) and a remarkable product — and really thinking about your on-site SEO. 

Don’t hire a PR agency, part-time sales force, or any other outside consultant.

You want to be focused on the product.  You get the market well from your industry background and you know you have your problem statement nailed from your in-depth customer development interviews.  You need to focus on building your product solution hypothesis and you just can’t be bothered to do the legwork of developing relationships with bloggers, press, potential customers that you don’t know, or potential business development partners.  You met some smooth business guy at some tech meetup who says he can do all this for you for a small amount of cash and equity.  Seems like a good deal, but it’s not.

Managing someone who isn’t a full-time employee and who isn’t as invested in the company’s success as you are is a path towards hurt feelings and wasted time, energy, and cash. There are certainly times and places for help in all these matters, but pre-launch isn’t it.  (The only exception is if you’ve raised millions of dollars in Other People’s Money and you can afford to pivot your product, positioning, and or price if your big splash fails.)

You probably won’t be as good as someone whose work life is dedicated to press, PR, sales, marketing, or whatever. But you’re going to be a lot cheaper and you may not be all that bad at it yourself.  A passionate and articulate founder can go a long way. I was able to do all of this myself, getting into TechCrunch, landing new customers from cold-calling, and striking business development deals.  You can too.

Sachin Agarwal is operations lead at Oneforty, the Twitter App Store, and CEO at Dawdle, the gamer’s marketplace. This post was originally published on his blog, and is reprinted with permission.

Join the conversation about this story »

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• New International Seed Fund Kima Ventures Wants To Invest In 100+ Startups
• Veoh Bust Should Be A Reminder That Execution And Focus Are More Important Than Vision
• How To Use YouTube To Drive Business