AOL’s recent sale of Bebo was all over the news last week for all the wrong reasons. AOL has had an unenviable track record of killing acquisition value for quite some time. Bebo, bought for $850M a couple of years back, was sold last week for under $10M to Criterion Capital Partners. AOL may go around justifying this deal giving it a “meaningful tax deduction” but the ridiculousness of the value lost cannot be ignored.
For some reason, media companies have never done a great job of managing internet acquisitions in general and social networking sites in particular. Murdoch’s NewsCorp paid $580M for MySpace and ended up paying another $450M last year as impairment charges! Along similar lines, ITV (a British TV group) did an AOL when it sold off Friends Reunited for 25M pounds after acquiring it for 7 times that price. Acquisitions regularly destroy value across industries but one of the main reasons the success rate is that much lower with media companies acquiring internet companies is the inherent culture clash. Most internet startups, if bought early enough, are a group of T-shirt-and-shorts-sporting geeks-in-a-garage who iterate quickly, learn quickly and build quickly. Most media houses, on the other hand, are slow-moving, largely-family-owned with large stakes owned by which refuse to move without the customary bureaucracy and paperwork. The culture shock is immense, the bottleneck theory kicks in and the combined entity is only as fast as its slowest entity. One of the main reasons acquisitions in the social networking space, in particular, have killed value has been the lack of post-acquisition integration strategy. Social networking took the world by storm a few years back and every media and internet giant wanted to have it in their portfolio. No one was quite sure why! Some wanted to have a “social networking strategy”, others wanted to have a “Gen Y strategy” but no one was quite sure how they were going to integrate a social networking site with the rest of their products. A case in point is ebay’s acquisition of Skype. While Skype may not fall under the social networking umbrella, ebay ‘s acquisition of Skype wanted to fundamentally do what most social networks do… help its users connect and share information better, and of course, given Skype’s capabilities, add the voice channel. Though not an AOL-Bebo story in pure numerical terms, Skype left the ebay canvas without registering much change for ebay largely because ebay had no clue how to go about integrating its multiple online shopping platforms (many of them country-specific) with Skype. As for AOL, it remains to be seen how many value-destroyed acquisitions they have to spin off before they return to being a growth story!
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AOL’s recent sale of Bebo was all over the news last week for all the wrong reasons. AOL has had an unenviable track record of killing acquisition value for quite some time. Bebo, bought for $850M a couple of years back, was sold last week for under $10M to Criterion Capital Partners. AOL may go around justifying this deal giving it a “meaningful tax deduction” but the ridiculousness of the value lost cannot be ignored.
For some reason, media companies have never done a great job of managing internet acquisitions in general and social networking sites in particular. Murdoch’s NewsCorp paid $580M for MySpace and ended up paying another $450M last year as impairment charges! Along similar lines, ITV (a British TV group) did an AOL when it sold off Friends Reunited for 25M pounds after acquiring it for 7 times that price. Acquisitions regularly destroy value across industries but one of the main reasons the success rate is that much lower with media companies acquiring internet companies is the inherent culture clash. Most internet startups, if bought early enough, are a group of T-shirt-and-shorts-sporting geeks-in-a-garage who iterate quickly, learn quickly and build quickly. Most media houses, on the other hand, are slow-moving, largely-family-owned with large stakes owned by which refuse to move without the customary bureaucracy and paperwork. The culture shock is immense, the bottleneck theory kicks in and the combined entity is only as fast as its slowest entity. One of the main reasons acquisitions in the social networking space, in particular, have killed value has been the lack of post-acquisition integration strategy. Social networking took the world by storm a few years back and every media and internet giant wanted to have it in their portfolio. No one was quite sure why! Some wanted to have a “social networking strategy”, others wanted to have a “Gen Y strategy” but no one was quite sure how they were going to integrate a social networking site with the rest of their products. A case in point is ebay’s acquisition of Skype. While Skype may not fall under the social networking umbrella, ebay ‘s acquisition of Skype wanted to fundamentally do what most social networks do… help its users connect and share information better, and of course, given Skype’s capabilities, add the voice channel. Though not an AOL-Bebo story in pure numerical terms, Skype left the ebay canvas without registering much change for ebay largely because ebay had no clue how to go about integrating its multiple online shopping platforms (many of them country-specific) with Skype. As for AOL, it remains to be seen how many value-destroyed acquisitions they have to spin off before they return to being a growth story! Auto rickshaw advertising may have really captured the fancy of the masses with the innovative "Capacity - 3 Idiots" campaign painting the town towards the end of last year but the medium has been live for quite some time now and has helped build many brands in the process. Many of India's prominent start-up brands have been largely built using this medium.
The road so far Mouthshut and Tally were probably among the first technology brands to use this medium effectively to build a presence in the offline world. Mouthshut even claims to have received 30M PVs/month as a result of the initial phases of the campaign, an imposing number considering typical startup marketing budgets. Following the success of these brands, other home-grown tech companies like MapMyIndia and Zoho have leveraged auto-rickshaws well to create a presence for their brand. Till very recently, this space was largely unorganised. A company would get 100-200 autos, pay the rickshaw owners a couple of hundred rupees and paint the brand on the hood of the auto. To ensure that the auto rickshaw drivers are incentivized to retain the ad, some companies even pay the driver an amount if the ad is still present after 3-6 months. MapMyIndia has been following an incentive plan along those lines. What works Cost: The cost, without a doubt, is among the most attractive reasons for using this medium. Engagement: If you really think about it, auto rickshaw ads can engage the user longer than most other ad media. A person stuck in traffic, often, has little else to do than stare at the back of the vehicle in front. In fact, this is pretty much the same reason that billboards placed at bus traffic junctions charge higher than those along the road at non-junctions. Mobile coverage 24X7: The performance of the ad is inherently linked to the performance of the driver . The more the number of trips that the driver makes, the greater the visibility. The Road Ahead The potential of this advertising medium has always been immense and it is, of late, being recognized by various groups which are trying to organize the entire advertising process. Nyayabhoomi, a Delhi-based NCO which works on promoting auto-rickshaws and improving their services helped get the Municipal Corporation of Delhi (MCD), which holds advertising rights in Delhi, to approve advertising on auto-rickshaws on a revenue-sharing basis. Following the MCD approval, JKJS, an auto-rickshaw advertising company, has started providing out of the box ad solutions on 5000 autos in Delhi, making it the single-largest provider of this nature. Their service "Ad it on Auto" adds other VAS to the advertising including ensuring replacement of ads in case of wear and tear. Various models are being pursued to innovate in auto-rickshaw advertising:
Finally... Think wild and LED screens coupled with GPS capabilities on auto rickshaw hoods could, one day, vary the advertisement based on the locality the auto rickshaw is driving through. ;-) I would like to see the day when MNC's coming into India actively budget for marketing on the auto channel. ;-) As for now, I hope more startups benefit out of this cost-effective medium. | AuthorA curious cat, online at odd hours, trying to figure out why some companies don't suck and how to be one of them! ArchivesOctober 2010 CategoriesAll |
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