Web 1.0: You have a herd of cows. You slap banner ads on them and go public.
Web 2.0: You have a herd of purple cows that attracts people from all over. You care for and feed the cows, but your visitors take all the milk for free.
If you don’t have time to read today’s lengthy post, my playful little remix of the old joke about world economic systems above may be all you really need to ponder. If you have time, carry on reading for elaboration, a bit of music history, and hopefully, a point.
Customers Share the Love
Smart marketers are keying in on how success in today’s crowded marketplace requires a product that essentially lets the marketing just happen. A product so remarkable (in the terminology of Seth Godin’s Purple Cow) that it allows you to “flip the funnel” and have your loving customers market for you. According to Tara Hunt, you just have to get out of the way and allow the communal Pinko Marketing to work its magic.
Let’s be clear — neither Seth Godin nor Tara Hunt is advocating the abandonment of basic business fundamentals. You know, like revenue, profits, and other boring stuff.
What they are saying, quite well in fact, is that if what you offer is worth talking about, it will be talked about online. Word-of-mouth marketing has historically produced the most value for businesses, and on the Internet the viral results can be spectacular, but only if the product or service is exceptional.
It’s inevitable though, as with last time, that some well-meaning folks will declare that “everything is different now,” strive only for audience, and forget to focus on revenue and profitability.
Before we begin believing that a passionate community that absolutely loves you is all that’s necessary for business success, let’s look not to Web 1.0, but rather to the Manchester, England, music scene of the 1980s. There we’ll find a clear demonstration of passionate audiences embracing innovative offerings, coupled with the financial disaster that befalls those that forget about return on investment and viable business models when creating those communities.
A Very Blue Monday
Just days before the start of what would have been a pivotal US tour fueled by the success of the single Love Will Tear Us Apart, Joy Division lead singer Ian Curtis hung himself at his home outside Manchester. Since a band rarely survives the death of a lead singer, no one expected much when the remaining members decided to carry on a few months later.
And at first, those remaining members struggled to find their own voice. Renamed New Order, the band began experimenting with new technology and better drugs, and enjoyed the unwavering support of Factory Records head Tony Wilson, despite Wilson’s belief that the band was going nowhere.
In 1983, Wilson commissioned Factory graphic designer Peter Saville to create a record sleeve for the release of a new 12-inch single from the band. Inspired by New Order’s use of computers, Saville designed a beautiful floppy disc replica with an elaborate four-color bleed at the right edge.
Saville warned Wilson that the design was expensive to print, which another Factory partner confirmed after pricing it. The label would lose money on every single copy of the record, thanks to the sleeve! The more records sold, the more money lost, but Tony Wilson approved the design nonetheless, restating his belief that the sales would be inconsequential.
Blue Monday became the best-selling 12-inch single of all time at over one million copies sold.
The Happy Mondays and the Haçienda
The members of New Order were also involved as partners with Factory Records and Tony Wilson in the hugely popular Haçienda club, ground zero for the birth of rave culture and the Madchester music scene. Surely this would help soften the blow from that Blue Monday miscalculation?
Unfortunately, for all its popularity, the Haçienda was a money pit. Peter Hook once claimed that New Order would have been better off if they’d given ten pounds to everyone who ever came to the Haçienda, sent them home, and not bothered with the club at all. The band essentially subsidized the club’s expensive operations out of their record sales.
The reasons why the Haçienda was unprofitable have to do with what created the fanatical audience in the first place. The uber-serious, black-clad Factory crowd wasn’t enough to make the cavernous Haçienda a success. What the club needed was a breakthrough in the mainstream Manchester youth scene, and there were two catalysts that helped make that happen.
One spark was the Happy Mondays, a band name aptly derived from New Order’s Blue Monday. Tony Wilson signed the hedonistic group to Factory after the Mondays came in dead last in a Haçienda battle-of-the-bands contest. Wilson was convinced that Mondays lead singer Shawn Ryder was a genius, and that his unique musical style would catch on. After the group’s drug dealer Bez joined the stage show as an infectious dancer who got the crowd moving, the Haçienda DJs started remixing Mondays’ tunes, helping launch a distinctive blend of indie rock and dance music into the Manchester hipster stratosphere.
The more definitive spark was the drug Ecstasy (the reason why the Mondays were always happy). The feel-good glow of MDMA allowed both the intellectuals and the Manchester working class to join together as a synchronized collective, an audience that cheered not a band, not a record, but the DJ who mixed songs and sounds together into a seamless, thumping serenade. Ecstasy allowed those with little in common to coalesce around what Tony Wilson called the “beatification of the beat,” and the faithful arrived nightly to worship at the Haçienda.
So what was the problem? Well, clubs rely on alcohol sales for profits. At the Haçienda, people didn’t want alcohol, they wanted other drugs, with an occasional water or juice from the bar. The drug dealers got rich, while the Haçienda provided the marketplace and carried the overhead.
The crowd loved it.
Don’t Be Tony Wilson
Tony Wilson is a genius. But he didn’t care about money. He cared about art.
Wilson never got rich from Factory Records or the Haçienda, despite the huge popularity and cultural significance of both, because by his own admission he wasn’t interested in basic business fundamentals. Factory Records went bankrupt in 1992, and to this day Wilson still works for Granada TV, where he had worked since before starting Factory in 1978.
If you’re interested in actually making money, you need to know that having an audience is not enough. The new rules of marketing online must still be combined with the old rules of direct marketing, because as it’s been said, the Internet is the greatest direct marketing medium of all time.
Seth Godin is a direct marketer. So is Tara Hunt. The term “direct marketing” isn’t embraced because people associate it with junk mail and Ginsu Knives, but it’s more instructive to think about Dell Computer and Geico Insurance as direct marketing success stories instead.
No matter the terminology, the old rules still apply to new marketing manifestos, just like they applied to the independent music business in the 80s and the dot bombs of the late 90s. So here are the two most important rules of direct marketing:
Don’t sell something at a price that makes it impossible to make a profit, unless you have a tested, built-in, back-end revenue stream or a strong repeat sales model that will eventually lead to profits. Do the math, make sure there’s an acceptable return on investment, or don’t bother.
Focus on the Prospect’s Needs First
Find out what people want or need, then conceive a remarkable product or service that satisfies the need, then build the audience. Building an audience first and then hoping to find a way to monetize it (or hoping Google or Yahoo will do it for you) is folly. As in the case of the Haçienda, you might not be in a position to provide what the audience actually wants. Or like Friendster, you just might not sufficiently love your audience back.
So, by all means, create those purple cows. And watch people bring the love from all over.
But sell lots of premium-priced milk!
1. This post was inspired by my recent repeat viewing of 24 Hour Party People (2002), a brilliant film that chronicles the Manchester music scene starting with the night the Sex Pistols played to a tiny Manchester crowd populated with musical change agents in 1976, up to a fictional “final night” at the Haçienda. The film features a reproduction of the legendary club, which had been demolished in June of 1997.
2. It is very likely that Blue Monday did actually achieve profits due to adjustments made in subsequent printings of the sleeve, but regardless, neither New Order nor Factory ever saw a dime, thanks to the debts of the Haçienda.
3. Just before hanging himself, Joy Division’s Ian Curtis reportedly watched Stroszek, a film about an artist who commits suicide, in an eerie confirmation of the Werther Effect. Ian had long been influenced by Jim Morrison, and Curtis in turn had an important role in shaping the world view (musically and otherwise) of Kurt Cobain, who called Love Will Tear Us Apart “the greatest song ever written.” That song’s title was inscribed on Ian’s gravestone at the request of his wife.