Revolutionary Measures

Why technology companies have to play by different rules now

In the 1970s and 1980s the business world was dominated by big oil companies, with energy giants becoming the largest corporations in terms of market capitalisation. These were followed by banks and financial services in the 1990s and early 2000s. All of this has changed – the world’s five largest public companies are now Apple, Google, Microsoft, Amazon and Facebook, with upstarts such as Uber leading the way when it comes to unlisted businesses.

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As they’ve grown these tech giants have expanded dramatically in what they do and the range of services they offer, demonstrated recently by Amazon buying offline upmarket grocery retailer Whole Foods. Essentially they’ve gone from being niche players, albeit in particular sectors such as search or retailing, to offering a panoply of interconnected services that constantly affect our daily lives – and in many markets they are essentially a monopoly, due to the power of network effects.

Much of what they do is invisible to the consumers that use their services – for example the majority of people don’t question why they are served particular search results, ads or news on Google or Facebook. Hence this week’s record $2.7bn fine imposed by the EU on Google for promoting its shopping comparison service to the top of search results.

Is fast too fast?
They’ve also often operated independently of existing rules, working to the Silicon Valley mantra “move fast and break things”. This has driven a huge amount of innovation, but has also led to behaviour that many find either reprehensible or even illegal. In 2014 Facebook’s UK operation paid considerably less corporation tax than my two person PR consultancy, for example.

Uber is a perfect case in point, with many countries banning its operations as its drivers don’t meet local taxi licensing regulations, set up to protect the public. Add in ongoing scandals around sexual harassment that have led to the departure of CEO Travis Kalanick and the overriding impression is of a company culture that focused on aggressive expansion at the expense of its people or the wider world. And Uber isn’t alone – the low number of Silicon Valley founders and VCs that are female or from ethnic minorities has raised eyebrows about the ethos behind the world’s largest tech firms.

Why does this matter now? Simply that the power of tech firms has increased dramatically at the same time as the complexity of their operations has deepened. At the same time, many people around the world feel left behind by the pace of technology and digital disruption, whether it is in the work or home lives, leading to a potential polarisation between the tech savvy and the tech illiterate. These worries haven’t driven people to populist politicians like Donald Trump on their own, but have added to a mood of not being in control amongst many citizens around the world.

Reading the papers, the number of bad things happening on the internet, from simple fraud to terrorist plotting, seems to be increasing exponentially, although whether this is true or is just the result of better reporting is a matter for debate. Whatever the cause it has led to calls for greater regulation and control by national governments over cyberspace.

Altogether this means that tech companies are facing an existential threat. While they are delivering record profits and driving ever-greater innovation they are now central to everyone’s lives and are therefore under ever increasing scrutiny, from governments and the public. Hence the call from Reid Hoffman, founder of LinkedIn for the tech community to sign a Decency Pledge, looking to stamp out sexist behaviour and sexual harassment, particularly amongst venture capitalists in relation to the founders of businesses that they fund. It is a start, but I think any Decency Pledge needs to go a lot further and cover all behaviour, and how it is communicated. Tech giants can’t hide behind complexity any more – they need to communicate openly and operate transparently if they want to win back public trust. Time for the old Google motto “Do no evil” to be resurrected…………

 

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June 28, 2017 Posted by | Creative, Marketing, PR | , , , , , , , , , , , , | 1 Comment

Google, tax and PR – do no evil?

On the PR side it has been a busy couple of weeks for Google. Firstly, it casually announced at Davos that it had agreed to pay £130m for ten years of UK corporate taxes, although obviously without any admission of guilt. Cue a storm of protest that this was nowhere near enough for a business that reputedly made £7.2 billion of profits over that period, essentially meaning it paid 3% corporation tax. Much of the vitriol came from other media companies, particularly newspapers, that have seen their own advertising revenues decimated by the search advertising giant.

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Then earlier this week Alphabet, Google’s holding company, became the world’s most valuable company by market capitalisation, helped by strong financial results and worries about previous number one Apple’s future growth prospects.

Given the closeness of these two events, it would be easy to draw the conclusion that ethically debatable behaviour leads directly to outstanding corporate success. But has it actually made any difference to Google’s reputation in the UK? I’d argue that overall it hasn’t affected its business in any way, for three main reasons:

1.The public doesn’t buy from Google
For the majority of people Google is a utility – providing them with the ability to browse or search the internet, watch videos, manage emails and documents or run their mobile phones, without charging them a penny directly. What people don’t understand is that the price of this free stuff is that they become the product – Google has built its very lucrative business on selling this data on our activities and preferences to advertisers. In contrast Starbucks, another perceived tax avoider, sells physical products direct to the public, giving consumers a vested interest in seeing the right levels of tax paid out.

2.Google does no evil
It will probably surprise a lot of people that Google is as enormous as it actually is. From its beginnings it has cultivated a laid-back, anti-establishment brand, epitomised by its corporate slogan “Do no evil” and heavy investment in moonshot projects such as self-driving cars and research into cures for cancer. Despite its growth, it is still seen as a Silicon Valley upstart successfully battling the likes of Microsoft (search, browsers, productivity applications, operating systems) and Apple (with Android).

3.Is there an alternative?
Obviously you can use different search/email/operating system providers, including those that make it clear that they won’t either track your online behaviour or use it to target adverts based on your browsing. But how many people actually make the effort to go out and switch, particularly when Google makes it so easy to just carry on using its services. The figures speak for themselves – it has nearly 86% of the UK search market, which hasn’t changed much since the first mention of its tax affairs.

So, while as a PR person I agree that it has handled the whole tax situation badly by trying to claim that it is doing the right thing when its activities are ethically dubious at best, I don’t think it will have a major impact on the corporate brand. This is echoed by an (admittedly small) poll in PR Week, where 51% of PR professionals said it would leave its reputation unchanged – and 11% thought the tax settlement would improve the brand.

However, where it may cause issues, is by attracting further attention from regulators at the European Union, which have previously shown that they have more teeth when dealing with tech giants than national governments. Time will tell, but with the media already setting its sights on Facebook for potential even larger tax avoidance, I think Google will feel that the £130 million it spent is worth every penny.

February 3, 2016 Posted by | Creative, Marketing, PR | , , , , , , , , , , , , , , | 1 Comment

How my consultancy is bigger than Facebook UK – and that’s a bad thing

 

I’ve been in business for five years now, and things are going well. I’ve seen revenues for my PR agency grow every year, thanks to loyal clients and (if I say so myself) some wonderful work. Yet it was only when I saw how much corporation tax Facebook paid last year in the UK, that I realised exactly how well I was doing. Comparing our two tax bills, I’ve paid considerably more than the £4,327 Facebook shelled out in 2014. Therefore it stands to reason I must have made much more money than the social network, even if globally its profits were $2.9 billion. Its UK business must just be lagging behind the rest of operations – after all very few people use Facebook in this country.

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Obviously this isn’t the case, and like companies from Starbucks to Google, Facebook has engineered its operations to minimise its tax bill. As a businessman myself I can understand this – but what I can’t understand is that it doesn’t take into account the reputational damage that results. After all, company filings are public documents that anyone can access, and there are enough people out there who know how to read a balance sheet and can therefore spot holes in a company’s story without needing to spend too much time investigating.

I even felt sorry for the poor PR spokesperson delegated to read out the anodyne statement that Facebook was compliant with UK law, and all staff paid income tax (how gracious!). Then I realised that the spokesperson was one of the 362 people that shared the £35.4m in bonuses that pushed Facebook’s corporation tax bill down so close to zero, and any sympathy evaporated.

On one hand companies talk about how important their brand, and brand values, are to their success, yet cheerfully spend their time undermining these very same values from within. Why? I think much of this comes from a fundamental disconnect between senior management and those responsible for public relations or brand reputation. They aren’t involved in senior-level decision making, meaning that no-one is pointing out the potential pitfalls of being seen as a poor corporate citizen. In an age of consumer power, the lack of a check on potential corporate skulduggery can prove fatal to a brand.

Ever since I’ve been in public relations, which is over 20 years, there have been calls for PR to have a seat on the board and to be more involved in setting strategy, rather than just delivering it. So why hasn’t it happened yet? Partly it comes down to PR’s own reputation, with the discipline seen as more Ab Fab than strategic, and limited in what it can achieve. The rise of digital and the increase in the importance of corporate reputation should have changed that, but my impression is that the overwhelming number of FTSE 100 companies still don’t have or seek senior level PR counsel until too late in the process.

It is therefore time for PR people to take a step up and build the business understanding that they need to communicate with other senior management. Talk their language, link campaigns and messages to business goals and objectives, and if necessary, scare the bejesus out of people by explaining the financial (and even judicial) consequences of not thinking through decisions or ignoring dubious practices. While Facebook’s tax policies haven’t hit its share price, just look at Volkswagen’s financial woes for an illustration of what happens when you cover up bad behaviour. Despite its US head admitting he was briefed on how the car maker could fool emissions tests in spring 2014, nothing was done to remedy the problem or to come clean.

Looking at the PR implications of business decisions shouldn’t just be limited to big companies with expensive communications departments. Every company has the potential to be caught out if it transgresses the brand values that it trumpets to the world. So whether you are an international social network or a local plumber, think through the PR consequences of your strategy, before you implement it, if you want to avoid potential long-lasting reputational damage.

October 14, 2015 Posted by | Creative, PR, Social Media | , , , , , , , , , , | 2 Comments

Starbucking up social media

Starbucks Logo

Even before their tax debacle I’ve never been a fan of Starbucks – bland coffee, relentless happiness and demanding my name before deigning to serve me have all driven me elsewhere.

But I was staggered at their ineptitude when it comes to social media. Despite being ranked as the best loved brand on social media in the US, they’ve not quite grasped that not paying millions in tax isn’t going to endear them to people here. Social media popularity fell dramatically when the true story of its tax affairs came out in October and a blog post from chairman, president and CEO, Howard Schultz, defending the company made little difference (a tip Howard – if you want British people to believe you are ‘honoured to serve them’, use the British spelling of the word.)

So what do you do if you’re at the centre of such a firestorm of criticism, particularly via social media? I’d recommend changing behaviour and reaching out to engage with people. Yet, instead the coffee giant decided to run a scheduled Twitter hashtag campaign #spreadthecheer. However, like McDonalds and Waitrose in the past, it failed to see how easily this could be hijacked and as I write #spreadthecheerPRFail is trending on Twitter. The more pleasant tweets push the merits of independent coffee shops, while the most aggressive demand that they ‘Pay your f*cking taxes’. And to make matters even worse the company installed an unmoderated Twitter wall at the Natural History Museum’s ice rink, leading to the automatic projection of abusive messages, allegedly through a malfunction of the profanity filter.

Starbucks has got its marketing, social media and ethical stance very, very wrong. And while it is facing a social media firestorm it has not helped its cause – in fact through #spreadthecheer and Howard Schultz’s blog it has soaked itself in petrol and handed matches to the mob.

But Starbucks isn’t the only brand to completely underestimate that if pushed far enough people will complain – and with social media complaints can reach critical mass very quickly and turn into a comprehensive campaign against an organisation.

This means it is time for brands (particularly ones that claim to be ethical and friendly) to re-adjust their marketing. The time of one way marketing to passive users is over. As my erstwhile colleagues Steve Earl and Stephen Waddington pointed out in their book Brand Anarchy, “Reputation is not just under siege, the ramparts have been utterly breached.” A chilling threat to some companies but also a wake up call to marketers and brands – now you need to listen, learn and engage with customers, not refuse to serve them if they won’t give you their name.

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December 19, 2012 Posted by | Marketing, PR, Social Media | , , , , , , , , , , , | 4 Comments