Stop The Dotcom Ad Madness!
With so many well-funded dotcoms running out of cash, you gotta wonder: Where’s all that money going? In many cases, expensive ad campaigns are the culprit.
APBnews, a crime-reporting news site that went under this month, spent nearly $10 million of its $25 million funding on advertising. Beyond.com, an e-tailer with net losses of $125 million last year, reportedly increased its sales and marketing budget from $1.7 million in 1997 to $81 million in 1999.
What were the executives of these companies thinking? We can’t know for sure, but from where we stand it looks like they thought the VC well would never run dry — at least not anytime soon.
To be fair, not every dotcom that invested in a splashy ad campaign is knocking at death’s door. Yahoo’s humorous commercials helped steer a lot of revenue-generating traffic to its site, as have Priceline’s spots featuring actor William Shatner hamming it up in a nightclub lounge act.
The problem, of course, is that for every Yahoo or Priceline, there are dozens of companies like APBnews, Beyond.com, and Theglobe.com, whose hefty advertising budgets haven’t helped them one bit.
Any dotcom contemplating a pricey ad campaign should consider the example of Slashdot, the flagship site of Andover.net. It has grown into the official website for the Linux development community with a near-zero advertising budget. Andover.net was purchased by VA Linux Systems in February in a cash and stock deal worth roughly $1.04 billion.
How did Slashdot do it? By building a truly useful site and then developing its audience slowly and carefully. It didn’t just charge into the Super Bowl with a cute ad and expect to be bigger than Cisco before the last touchdown.
No matter how clever the promo, if people have no reason to visit your site on a regular basis, you cannot make money. There’s simply no substitute for a product or service that makes people’s lives easier or serves a much-needed purpose. It’s not the plan, silly, but the execution.
OK, Slashdot isn’t your average dotcom — its audience is a devoted community of Net-savvy geeks. But, as Slashdot’s example shows, if you execute well, people might even fall so head over heels in love with your site that they not only will come back on a regular basis but will tell their friends to do the same. And before long — presto-chango — you might even turn a profit.
Now, we don’t mean to imply that an advertising embargo is the answer for every company. But why not trim the marketing budget in favor of spending money on developing good products that will sell themselves?
To do otherwise at this point seems like financial suicide.