Revolutionary Measures

Going direct – and the impact on marketing

The rise of the internet was meant to usher in a new, more direct way of communicating, including the removal of middlemen. We’d buy goods and services directly from their producers, rather than having to go through shops or brokers, cutting costs for consumers and opening up new opportunities for companies. It would be the end of the package holiday, the supermarket and the insurance broker, amongst other business types.

It is fair to say that things haven’t worked like that. While small companies can sell direct on the internet, the majority of goods and services are still bought from middlemen who bring products together, allowing consumers to compare them in a single place and then make their choice. Think of Amazon, ebay or insurance comparison sites, which are essentially old-style brokers with an updated business model.

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Why has this happened? Partly because people find it difficult to cope with too much choice – there is always the worry that you’ve made the wrong decision and also because these companies have ensured it is as easy as possible to buy from them. Amazon has one-click ordering, buttons to press that automatically send new stocks of household essentials, and voice ordering via Alexa.

However, this model is changing, at least in part, due to the rise of Direct to Consumer (D2C) brands. Companies like Dollar Shave Club, Harry’s and a plethora of mattress start-ups are all selling via the internet without any middlemen involved. They often use a subscription model – i.e. you get a delivery of shaving products, beer or food kits on a regular basis, backed up by generous introductory discounts and strong guarantees of quality (if you don’t like the mattress we’ll come and collect it and give you a full refund). They may be relatively small in the UK at present, but they tend to target younger, more affluent consumers and are therefore likely to continue to grow and spread.

These brands are also having an impact on marketing, particularly as many are start-ups that need to establish themselves before similar rivals appear.

1.Name recognition is all
It could just be that I’m their target demographic, but I see adverts for D2C shaving brands such as Harry’s everywhere I go online, in the podcasts I listen to and offline in the press. You need to create and sustain strong name recognition if you are to succeed – given the number of challengers in particular markets it is a question of first mover advantage. This impacts traditional brands, whether that is the likes of Gillette, Tesco or Amazon – they need to respond if they are to keep customers loyal.

2. Marketing is constant
Subscriptions do give some security when it consumer retention, particularly as there is an inertia effect when people don’t get round to cancelling them – look at the number of people who failed to cancel their free Amazon Prime trial before it started charging them. However, consumers, particularly of D2C brands, are savvy and are likely to be constantly checking that they are getting a good deal. So customer marketing has to be tailored, personalised and constant if you are to stay front of mind and engage with your existing consumers.

3. You need a story
You can’t create a D2C brand by just moving your product online or to a subscription model. Not only would that be likely to cannibalise existing revenues, but it wouldn’t generate the appeal of an exciting, new, internet-first brand. People want to get more than a product – they want the story behind it. That means highlighting your credentials, why you are different and what sets you apart. This could be that you buy the finest Japanese steel for your razor blades or donate mattresses to charity – whatever it is, it needs to be clear, differentiated and appealing to your target audience.

4. You need to build a tribe
Business guru Seth Godin pointed out the opportunities that the internet provides to build your own tribe – a group of people that follow your brand, understand what makes you different, act as ambassadors and ultimately buy from you. The most successful Kickstarter campaigns are those where someone with an existing following launches a product. Podcasts that spawn books or tours are another example. Essentially your tribe feels a personal connection to you, believes in your ethos and will both sign up for your new offering and spread the word to others. Building a tribe takes time, but creates a lasting customer base for your brand and all of its products.

None of these marketing tactics are new – and importantly none of them are out of the reach of traditional brands. If you want to protect your products against the rise of the D2C brand you need to look at how they are operating, what you can learn from them and how you can improve your marketing and engagement with customers and prospects.

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March 7, 2018 Posted by | Creative, Marketing, PR | , , , , , , , , , , , , , | Leave a comment

Making it work – the marketing challenge behind smart technology

We’re now in the midst of the Consumer Electronics Show (CES), which sees more than 170,000 people descend on Las Vegas to view and play with the latest technology. And with consumer electronics now covering everything from connected cars to smart appliances and household robots, it provides a real glimpse into the future of how we will live, work and play.

And if people think that this is hyperbole, just look at the speed at which innovations such as Amazon’s Alexa digital assistant and electric cars have entered the mainstream. Morgan Stanley predicts that 22 million Echo devices, which feature Alexa, were sold in 2017, while countries such as the UK and France have banned the sale of new petrol and diesel cars from 2040. You can even buy those sci-fi staples jetpacks and hover boots.samsung-ces-2018-7971

That’s why the issues tat LG’s new Cloi robot suffered at its CES debut should be a wake-up call to marketers. The device, which is designed to help consumers manage their smart homes, initially co-operated at an onstage demo, but then simply gave up and refused to do anything apart from blink when asked when the presenter’s washing would be ready and what was for dinner. As the owner of an Amazon Echo Dot, I know exactly how the poor chap feels, and have to commend him for not shouting abuse at Cloi in public.

But what this shows is that complicated technology is exactly that – complicated. It can be difficult to get it set up correctly in the first place, to then get the best out of it or link it to other devices in the home. Compare this to the analogue products that most people are used to interacting with, and you can see the problem. They work straight from the box and are designed to be simple to use and get value from.

In many ways this follows the classic framework set out in Geoffrey Moore’s Crossing the Chasm, setting out how new technology is adopted. This is the order it provides:

  • A small group who don’t care about things going wrong and have the skills and knowledge to fix them
  • Early Adopters – a bigger group that simply wants the latest thing and puts up with idiosyncrasies
  • Early Majority – pragmatists who adopt the technology when it is mature
  • Late Majority – conservatives who adopt the technology late on, perhaps within existing products that they are familiar with
  • Laggards – sceptics who will only adopt new technology when absolutely essential

This model worked in the past, but I think the acceleration of tech means it is no longer accurate. We all have constant exposure to technology, such as smartphones, and the falling cost of devices, and their omnipresence, means that the majority/laggards often don’t have a choice about adopting them. This potentially divides society into the technologically-skilled and the Luddites who cannot manage to stay on top of innovation, and consequently miss out on the advantages it brings. In turn this leads to resentment and, I believe, drives frustrations which can be manifested in concerns over the future and consequent support for populism and insularity.

What does this mean for marketing? Essentially, we need to stop just pitching technology at the Early Adopter, but make sure that it appeals to everyone. We have to be clear on the advantages, clear on how it used and provide the support to assist people in getting the most from it. And by support I don’t mean an impenetrable, jargon-filled manual or a premium rate phone number – I mean tailored assistance that shows how users can benefit.

No doubt CES 2018 will see a whole raft of wonderful technology innovations unveiled – but in order for them to be really successful companies have to address the fundamental marketing question of “What does it do for me?” in a much better, more understandable way.

January 10, 2018 Posted by | Creative, Marketing, Startup | , , , , , , , , , , , | Leave a comment

Why ARM’s acquisition shows that Cambridge is changing

The official logo for the ARM processor archit...

Like a lot of people I was initially shocked by the recent £24 billion takeover of ARM by Softbank of Japan. Not only was it the biggest acquisition ever of a European IT company, but it was also widely seen as the jewel in the crown of the Cambridge/UK tech scene.

A few years ago Cambridge had three stock market listed companies worth over a billion pounds each – ARM, Autonomy and Cambridge Silicon Radio (CSR). All have now been acquired, with varying degrees of success – HP, Autonomy’s purchaser is still suing the previous management about alleged overstating of accounts.

At the same time a large number of the next tier of Cambridge companies, such as Jagex, cr360 and Domino Printing Sciences, have also been bought, leaving many people wondering where the next tech superstar will come from. This is particularly true as an increasing number of earlier stage businesses in exciting markets have been acquired by tech giants – Internet of Things startup Neul was bought by Huawei, Evi by Amazon and Phonetic Arts by Google. And that’s just the acquisitions that were announced. I’m sure that in many cases promising technology has been snapped up without making it into the press, as the deal size has been relatively small.

So, as someone involved in the Cambridge tech scene, should we be worried? Is Silicon Fen going to turn into an offshoot of Silicon Valley – a bit like the tech towns around Heathrow, but with a bit more IP? Thinking about it more rationally, there are two main reasons for the flurry of acquisitions, particularly of smaller businesses.

1          Cambridge’s reputation
All of these acquisitions are actually recognition of the strength of the Cambridge tech sector. Big companies are attracted to the area because of the talent and innovation on show, and are increasingly willing to take a punt on earlier stage businesses to get in first and lay their hands on new technology and IP. They’ve realised that not every acquisition will work, but that the wins should outweigh the losses. So, Cambridge’s PR has worked in attracting the largest tech companies to the area.

2          Changing mix of companies
Traditionally, a lot of Cambridge startups were built on biotech, science and engineering, either from the University or the innovative consultancies that differentiate the city from many other clusters. As Cambridge grows, a greater number of companies are software-based, which means that developing their technology is faster than when trying to commercialise a product from an interesting piece of lab research. Therefore, they are likely to have a steeper growth curve, and potentially a shorter lifespan as they reach maturity (and acquisition) quicker.

A further reason for optimism is given by the new Cambridge Cluster Map, which lists the nearly 22,000 businesses based within 20 miles of the city centre. With a turnover of £33 billion, the map demonstrates the range of companies and the strength of the local economy. A third of this turnover is made up of knowledge-intensive businesses, employing nearly 60,000 people. That’s a lot of innovation, whoever ultimately owns the companies concerned.

Looking back, I think commentators will see that the ARM acquisition is part of a change in Cambridge as it matures and becomes a recognised part of the global tech sector. The economy will continue to grow, but more of the capital will come from outside the city. While this means we will have fewer ARMs and CSRs, and more outposts of Amazon, Apple and Google, it won’t stop growth and innovation, which means the Cambridge Phenomenon is likely to go from strength to strength.

July 27, 2016 Posted by | Cambridge, Startup | , , , , , , , , , , , , , , , | Leave a comment

Is there space for Google Spaces?

Google

Today our internet use is dominated by just a few tech giants – Google, Amazon, Facebook and Apple (GAFA) in the UK and US, with the likes of Baidu, Tencent and Alibaba leading the way in China.

What is particularly interesting is that generally each of these is good at one thing, or group of things. We turn to Google for search and email, Amazon for ecommerce, Facebook for social and Apple for mobile apps. There is obviously some competition – Google’s Android versus Apple iOS for example, but in general each giant has stuck to its knitting.

That’s not for want of trying – Google has tried to get into social media several times with projects such as Wave, Buzz and Google+, while Apple tried to launch Ping, a music-focused network. All failed, although Google+ limps on as everyone with a Google account automatically has a logon.

It isn’t all Google’s fault – the most successful social media networks tend to start small and grow from there, such as Facebook, Twitter, Instagram and WhatsApp. Users are attracted by the features, rather than the brand name, and then it grows exponentially through the network effect – essentially the more people who join, the more value everyone involved gains from being part of it. Social media starts at the grassroots, and that’s one of the reasons that people join particular networks. Mark Zuckerberg at Facebook understands this, hence splashing out on Instagram and WhatsApp rather than trying to develop clones of them from scratch. This neatly neutralises the competition while keeping users within your orbit when it comes to the time they spend online.

So that’s why Google’s latest attempt at a social media network, Spaces, looks like it is unlikely to take off in a big way. Described as a cross between WhatsApp and Slack, it allows users to have conversations and share information around specific topics with groups of people, avoiding, Google says, the need to hop between apps or cut and paste links. The trouble is it means installing/learning another app, and as far as I can see there’s no compelling reason for this to make it to the mainstream in its current form. Sure, people will use it to share information, such as when planning a holiday or big event, but it is hardly a threat to WhatsApp or Slack at present.

What would be more interesting is if Google used it as a basis for more complex, artificial intelligence driven services, such as bots that could be sent off to gain information. So, keeping with the holiday idea, you agree where you’d like to go and use Google to collect and sift relevant information, such as accommodation, weather and flight times, and present it in a single place. Given how long it can take to find all of this normally, that would attract users – and of course provide Google with much deeper data on what users are looking for, enabling them to sell more targeted advertising and hence boost overall revenues.

It is early days for Spaces, but it looks like it needs a bit more of a wow factor if people are going to use it seriously. Google has been burned before on social projects that have been well designed, but fallen short when it comes to getting consumers excited – so time will tell if Spaces joins the likes of Buzz and Wave in the failure column or carves out a loyal user base. However at the moment Spaces risks being seen as neat, but non-essential – hardly the best way to attract us from existing applications.

May 18, 2016 Posted by | Social Media, Startup | , , , , , , , , , , , , , , , , | 1 Comment

Has Twitter spawned Jeremy Corbyn?

Amidst all the column inches written about the election of Jeremy Corbyn as Labour leader, there are a couple of factors that people seem to be forgetting. True, he is probably now the most famous Jeremy in the country (according to an unscientific Google search I just carried out, links to stories about him outrank Clarkson and Kyle), but he is actually part of a wider protest movement across the Western world. Far left Greek party Syriza has just been re-elected, despite backtracking on its promises to free Greece from onerous bail-out terms. Spanish left wingers Podemos have also shown well in opinion polls while Catalan nationalists won a majority, albeit a slim one, in this week’s regional elections. Going back to the UK, look at the success of the Scottish Nationalists at the election and the continued high profile of Nigel Farage.

Jeremy Corbyn

Across the pond, non-politicians such as Donald Trump and Carly Fiorina have been leading polls amongst Republicans, while Bernie Sanders, who describes himself as “the only elected socialist in Congress”, is keeping Hillary Clinton honest in the Democratic contest.

So why are voters across Europe and the United States supporting mavericks on the right and left, even if in many cases there is little chance that they will be able to carry out their policies?

No dead pig bounce
The easy answer is that they are sick of career politicians who seem keener on hanging onto power than actually connecting with voters. Many people think politics itself is broken. Even David Cameron’s alleged assignation with a dead pig just makes us shrug and doesn’t really impact his ratings either way. At the same time many people still don’t see the good times coming back after the recession – real wages in the UK are still below those of before the crash for many people, hurting confidence. Globalisation and the rise of ever-more intelligent computers is eating into traditional middle class occupations, causing uncertainty for those with skills that can be potentially automated or offshored.

Obviously, any alternative to this combination of depression and drabness has a chance to stand out from the crowd. And challenger politicians can get away with half-baked policies or even, as in the case of Donald Trump, a promise that he’ll come up with some “really good ideas” when he is elected.

But I think there is a more fundamental force at work – the internet and social media has completely changed how we consume our news and form our opinions. We live in Andy Warhol’s era of everyone being famous for 15 minutes, from a man captured on camera abusing a motorcyclist to celebrities reciting music lyrics with a Shakespearean twist.

What the likes of Corbyn and Trump share, despite their radically different views, share is a combination of solidity, outsider status and an ability to come up with inspiring (or eyecatching) soundbites that suit social media. They don’t appear stage managed but at the same time are reassuring while not being part of the establishment.

Politics 2.0
In many ways they are the start-ups of the political world, promising radical change to shake up a traditional market, in the same way that the likes of Google, Amazon and Uber have changed the industries they operate in. Perhaps voters believe that politics can be re-invented, just like retail and telecoms.

What will be interesting to see is how traditional politicians respond – will they continue to operate as before, like many of the companies that digital start-ups displaced, or can they re-invent themselves successfully and build a brand that fits with the internet electorate? Or will we see a new generation of less radical, but more social media savvy, politicians come through to replace the likes of Corbyn and Trump? One thing is for certain, in politics as in every other sector, those that cope best with today’s social, mobile world will be those that engage with voters and ultimately win their loyalty and power.

September 30, 2015 Posted by | Creative, Marketing, PR, Social Media | , , , , , , , , , , , , , , , , | 2 Comments

The battle for banking – Amazon enters the fray

In a previous post I talked about how the big four internet companies Google, Apple, Facebook and Amazon (GAFA) had quickly developed their businesses. They’ve all moved beyond the sector they started in, extending what they offer to compete with each other in areas such as ecommerce, social networks, mobile devices and mapping.amazon_logo_wb_2328

How have they done this? They’ve used the four strengths that they each possess:

1. Agility
With the exception of Apple, GAFA was born on the internet meaning they aren’t burdened with long-established corporate structures compared to their traditional rivals. So they can make decisions quickly, unhindered by the warring departments and turf wars that characterise first and second generation technology companies.

2. Data
Rather than purely physical assets, GAFA’s USP is data and what it does with it. From selling our search histories to monetising our personal pages, the four companies have built up extremely detailed pictures of their users and their lives. This allows them to accurately predict future behaviour – how many times have you bought something suggested by Amazon even though you had no idea it existed until the recommendation popped into your inbox? The advent of even cheaper machine learning and potentially limitless cloud-based resources to crunch data means that this is understanding is only going to get more precise.

3. Focus on the customer experience
Even though the majority of interactions don’t offer the personal touch of a bricks and mortar shop, these companies have gone out of their way to create a simple to use customer experience. Compare the Apple iPhone to previous ‘smartphones’ – the only difficulty for users was unlearning the convoluted way you had to access information on Microsoft or Nokia devices. I know, I had one of the first Windows phones – the user experience was terrible. Innovations such as one click ordering, reviews and simple sharing all mark out internet companies from their rival.

4. Scale
The final differentiator is scale – and the speed at which it is possible to grow on the internet. Rather than taking 20 years to become dominant in an existing market, companies can create a sector of their own and expand globally within months. Part of this is down to the network effect, but scale has also been achieved by moving into adjacent markets and just adding them onto the offering for existing users. This lowers the cost of entry for the company with the user base and creates a barrier to entry to rivals.

Taking these four factors into account, banks should be worried about Amazon’s latest move as it builds on all four of these strengths. Amazon Lending will make loans to small businesses in the UK that sell through the company’s Marketplace platform, after the service was successfully launched in the US. The beauty of the scheme is that Amazon knows exactly how the small business is performing as it can track their sales, and then use this data to offer selected companies short term working capital to improve their business. As it handles all the billing and cash collection for Marketplace sellers it can even take repayments directly from their profits, before they it pays them, minimising risk.

Adding to this data advantage, it is also offering the same simple to use customer experience that sellers are already familiar with. Compared to faceless or unhelpful banks, this is just the sort of thing that expanding small businesses are looking for.

The ironic thing is that, on the face of it, there is nothing to stop banks offering something similar. Their merchant services arms handle online and offline debit and credit card transactions, so they have access to data that could be used to work out creditworthiness. They have a network of branches to provide loans through, as well as a significant online presence. But all of these are separate departments and banks don’t have the agility to bridge the silos and provide the one stop shop that businesses are looking for.

In the same way that Apple Pay is disrupting payment services, Amazon Lending will take another bite out of the traditional business of big banks. And, as more and more of such services launch that nibble away at banking profits, then they face being outmanoeuvred by nimbler, more customer-focused and cleverer competitors. It is therefore time for retail and business banks to get joined-up or face becoming low margin commodity businesses in the future.

July 1, 2015 Posted by | Marketing, Social Media, Startup | , , , , , , , , , , , , , | 2 Comments

Publish and be damned

The old saying is that everyone has a book in them – it is just a question of sitting down, writing it, finding a publisher, marketing and then selling it. That used to be the hard part but technology is changing this, making the whole process easier. No wonder that UK publishers released 184,000 new and revised titles in 2013 – the equivalent of 20 books an hour, which means the country published more books per inhabitant than any other nation. In the US 1.4m print books were released in 2013 – over five times as many as 2003. That figure excludes anything self-published, pushing the total up even further.

English: The second generation Amazon Kindle, ...

 

So, what is driving this growth – and what does it mean for publishers? There are essentially four ways technology is making the writing and publishing process easier:

1          Writing and editing
The platforms for editing and proofing manuscripts are now predominantly online. This makes it easier for a single editor at a publishing house to work with multiple authors, and also allows the different parts of the process to be subcontracted to copyeditors, designers and proof readers.

2          Publishing the book
The rise of ereaders like Amazon’s Kindle mean that books don’t physically need to be printed. This speeds up the publishing process as it removes the sole manual, mechanical and time consuming part of it – getting ink onto paper. Technology is also changing physical printing, with short runs a lot more feasible due to digital printing.

3          Distribution channels
The rise of ecommerce has decimated high street book shops, and has concentrated power in the hands of online retailers. Whatever the consequences for the public, this makes the job of authors easier as they can promote their book and simply direct potential buyers to Amazon. If they route them through their own website they can even collect affiliate fees. No need to keep an enormous box of books in the spare room and then laboriously pack and post each one to fulfil an order.

4          Marketing
With this increased competition from more and more new titles, the job of an author is now more about marketing than ever before. As this piece in The Economist points out, authors have to be much savvier about the different ways of promoting their tome, from gruelling book tours to ensuring that it is stocked/sold in the right stores to make particular bestseller lists. A lot of this comes down to brand – if you have built up a following and people know who you are, it gives you a headstart in shifting copies. Hence the enormous number of ghost written celebrity biographies released every Christmas and the high sales of books ‘written’ by Katie Price.

Social media gives the perfect opportunity to develop that brand, before putting pen to paper. Promotion of Ann Hawkins and Ed Goodman’s excellent New Business: Next Steps, a guide to developing your fledgling business, was helped by the community and following the authors had previously built on social media. Cambridge Marketing College (CMC) is self-publishing academic books, based on its existing reputation, large numbers of alumni and the shrinking costs of digital printing. Due to its ongoing courses, CMC knows where there are gaps in the market for textbooks, and can therefore exploit them. The key points here are that the brand and following were created first, rather than trying to launch a book and create a buzz from scratch at the same time.

The changing market also begs the question – do we need publishers anymore? After all, the costs to publish a book, either physically or digitally, are much lower than ever before. This means that publishers need to up their game, adding value across the entire process and embracing digital techniques to help find and promote authors, crowdsource ideas and use technology to push down their costs. Otherwise smaller publishers without a defined niche risk being pushed aside by well-developed brands that can use technology to find gaps, develop the right content and market it professionally. The publishing market is changing rapidly – the only sure thing is that the number of new titles will continue to rise.

February 25, 2015 Posted by | Cambridge, Marketing, Social Media | , , , , , , , , , , | 1 Comment

Campus vs College – creating the best environment for ideas

Everyone understands that the bigger a company gets, the more difficult it is to create and nurture ideas. There are a number of reasons. The sheer size of the organisation mitigates against change – it is incredibly difficult to get everyone to understand a game-changing idea and align themselves behind it. You get a fragmented approach and the whole thing can get mired down in bureaucracy and finger-pointing.

Emmanuel College, Cambridge

Large organisations are inherently conservative, with people not wanting to rock the boat, while there is fierce rivalry between different divisions/departments which can lead to ideas being squashed if they seem to tread on someone else’s turf. There’s also a fine line between a strong company culture and having too inward looking a focus. Even successful companies such as Facebook have been accused of a lack of perspective – because they solely use (and love) their own products they assume they everyone else believes they are equally awesome. Step outside the organisation and your obsession is just a minor part of the lives of your customers.

The good news is that the majority of organisations do understand the need for a stream of fresh ideas. After all, the world today is dominated by companies such as Google, Facebook and Amazon that either didn’t exist twenty years ago, or were considerably smaller. Competition in every market is increasing and no-one wants to go the way of Nokia or Woolworths.

So how do you align your company to create the best forum to create ongoing ideas? I’m no management consultant, but I’ve seen a few attempts over the last twenty years and it boils down to three broad types:

1              Innovation silos
In many industries (such as pharmaceuticals), where innovation relies on expensive capital equipment it makes sense to create separate, concentrated, research labs. These have the intellectual muscle and resources but can suffer from their sheer size and distance from the business. They can then hit the same problems as any other big organisation, with divisional rivalry and static corporate culture. Alternatively businesses have focused innovation in standalone business units – either skunkworks operations that are locked away from the rest of the organisation, incubators that support promising ideas at arms length or even smaller companies that have been bought and are run as ideas factories. All of these can work, provided management stay true to their word not to meddle or demand fast results, but there’s still no connection with the wider business and its needs.

2              The campus
You break up your monolithic organisation into a campus style environment, with different divisions occupying their own buildings, but close together. Splitting into smaller teams is good for creativity, and you get the economies of scale of having everyone on a single, but large, site. However the ability to cross-pollenate between groups can be limited – unless you happen to bump into someone over lunch you might be completely in the dark about what other sections of the company are working on.

3              The college
What I think is really interesting about the campus model is that it deliberately mimics the university campus structure. While this makes for a good working environment, it doesn’t help spread ideas. So I think companies need to look at a more collegiate model, similar to that of universities like Cambridge. You have two allegiances/bases – your division (essentially your college) and your actual project (your faculty). So you get the chance to mix with people from other divisions and collaborate on joint projects. Some people may find it disorienting, but if projects are scheduled to last 2-3 years the goal is never that far away.

Innovation is vital in every industry, and the size and structure depends on the sector and the market each company operates in. But I think it is time for more organisations to look at the college structure if they want to nurture and develop a stream of ideas that take their business forward over the long term.

 

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March 19, 2014 Posted by | Cambridge, Creative, Startup | , , , , , , , , , , , | Leave a comment

Taxing times for tech companies

English: Paying the Tax (The Tax Collector) oi...

Very few of us like paying tax, but there’s a fine line between legitimately reducing your tax bill and actively avoiding paying the tax that is due. And at a time of austerity where everyone is tightening their belts, there’s obviously a push by governments to close loopholes and maximise the revenues they receive.

Given their high profile and obvious success Starbucks and Amazon have both been the subject of widespread condemnation of their tax avoidance methods, and I’ve covered Starbucks inept PR response in a previous blog. Google was up before a House of Commons Select Committee last week (for the second time), backing up its claims that, despite revenue of £3 billion in the UK, all its advertising sales actually take place in the lower tax environment of Ireland. Google boss Eric Schmidt has countered that the company invests heavily in the UK with its profits, including spending £1 billion on a new HQ that he estimates will raise £80m per year in employment taxes and £50m in stamp duty.

Apple is the next company caught in the public spotlight, with CEO Tim Cook appearing before a US Senate committee that had accused it of ‘being among America’s largest tax avoiders’. Meanwhile, the loophole that sees Amazon and other big US ecommerce companies avoid paying local sales taxes is being challenged by a new law passing through Congress, with estimates of between $12 and $23 billion extra being collected.

Given the close links between Google and UK politicians (Ed Miliband is appearing at a Google event this week and Schmidt is expected to meet David Cameron on his current UK trip), the cynical view is that this is a lot of sound and fury, signifying nothing. But it does create an image problem for the companies involved, particularly at a time when we’re all meant to be in it together.

Obviously the most popular thing for companies to do would be to re-organise their tax affairs so that they meet the spirit as well as the letter of the law. But that’s not likely to happen given the enormous sums at stake. Instead expect increased calls for global tax reform (so that the organisations involved don’t have to operate the way they are currently ‘forced’ to) and a slew of feel good announcements that demonstrate the level of investment and support for the UK economy by the companies concerned. Being ultra cynical perhaps the whole tax situation explains the huge support by big tech companies for Tech City – it is simply an elaborate way of diverting attention from their financial affairs…………..

May 22, 2013 Posted by | Marketing, PR, Uncategorized | , , , , , , , , , , , , , | 1 Comment

A pocketful of Coins

English: Coins from Bosnia, Slovenia, Hungary,...

One of the early predictions from internet futurologists was that it would enable completely new ways of doing business. This included the creation of new corporate currencies that could be easily traded online, bypassing traditional pounds, dollars and euros. So you could swap your Tesco Clubcard points for Airmiles or buy goods directly on the web using your Nectar card.

Obviously some of this has happened, but the dream of virtual currencies have either remained niche (such as Bitcoin) or crashed and burned (Beenz). But this could be about to change with Amazon’s launch of Coins, a new currency/loyalty scheme aimed at users of its Kindle Fire. From May, consumers in the US will be able to buy apps and games using Coins, which have a face value of a cent. To stimulate the new currency Amazon is promising to give away ‘tens of millions’ of dollars worth of Coins to consumers, which they can spend on Kindle app content.

While it is early stages this is a smart move by Amazon. Firstly, it is likely to get consumers spending more. As casinos know if you can make people feel that the currency they are using isn’t real money (in their case gambling chips) then they treat it with less respect and are more willing to wager it. Secondly, it will attract more developers to create apps for the Kindle through Amazon specifically as they benefit from greater revenues.

But where it will potentially get really interesting is when (not if) Amazon extends Coins to the rest of its products and services. Pricing books, DVDs and the million and one other things Amazon sells in Coins, possibly at a slight discount to local currency, will stimulate a whole new economy that Amazon has a lot more control over. And given the thousands of independent merchants who sell goods via Amazon Marketplace the potential power of this new trading bloc will bring other retailers on board – for example offline shops offering the chance to buy goods in Coins rather than sterling.

At the very least Coins provides a powerful loyalty scheme for Amazon – it can’t be a coincidence that the retailer has just cut its long standing ties with Nectar in the UK. Tying in users means Amazon can learn even more about them and consequently offer more tailored products and services (Amazon Telecom perhaps?), enabling it to continue its expansion. Given the havoc Amazon has already wreaked on the High Street, rivals (and even banks) should make sure they are closely watching the next step in its plans………….

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February 6, 2013 Posted by | Marketing, Social Media | , , , , , , , , , , , , | 2 Comments